<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 18, 1998
SECURITIES ACT REGISTRATION NO. 333-49535
INVESTMENT COMPANY ACT FILE NO. 811-08735
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- -------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
---------------
AMENDMENT NO. 3 TO
FORM N-2
---------------
[_] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[X] PRE-EFFECTIVE AMENDMENT NO. 3
[_] POST-EFFECTIVE AMENDMENT NO.
AND
[_] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[X] AMENDMENT NO. 3
---------------
PEAK TRENDS TRUST
(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)
(302) 738-6680
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
---------------
DONALD J. PUGLISI
PUGLISI & ASSOCIATES
850 LIBRARY AVENUE, SUITE 204
NEWARK, DELAWARE 19715
(NAME AND ADDRESS OF AGENT FOR SERVICE)
WITH COPIES TO:
MICHAEL V. GISSER, ESQ. JOHN E. LANGE, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP PAUL, WEISS, RIFKIND, WHARTON &
30TH FLOOR, TOWER II, LIPPO CENTRE GARRISON
89 QUEENSWAY HONG KONG CLUB BUILDING, 13TH FLOOR
CENTRAL, HONG KONG 3A CHATER ROAD
CENTRAL, HONG KONG
---------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after
the effective date of the Registration Statement. If any securities on this
form are to be offered on a delayed or continuous basis in reliance on Rule
415 under the Securities Act of 1933, other than securities offered in
connection with a dividend reinvestment plan, check the following box: [_]
If appropriate, check the following box:
[_]This [post-effective] amendment designates a new effective date for a
previously filed [post-effective amendment] [registration statement]
[_]This form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act and the Securities Act
registration statement number of the earlier effective registration
statement for the same offering is 33- .
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8 (A)
OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATES AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
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<PAGE>
PEAK TRENDS TRUST
CROSS REFERENCE SHEET
(PURSUANT TO RULE 404(c) UNDER THE SECURITIES ACT OF 1933)
PARTS A & B OF PROSPECTUS*
<TABLE>
<C> <C> <S>
Item 1. Outside Front Cover................... Front Cover Page; Inside
Front Cover page
Item 2. Inside Front and Outside Back Cover Front Cover Page; Inside
Page.................................. Front Cover Page; Outside
Back Cover Page
Item 3. Fee Table and Synopsis................ Prospectus Summary; Fee Table
Item 4. Financial Highlights.................. Not Applicable
Item 5. Plan of Distribution.................. Front Cover Page; Prospectus
Summary; Underwriting
Item 6. Selling Shareholders.................. Not Applicable
Item 7. Use of Proceeds....................... Use of Proceeds; Investment
Objective and Policies
Item 8. General Description of the Front Cover Page; Prospectus
Registrant............................ Summary; The Trust;
Investment Objective and
Policies; Risk Factors
Item 9. Management............................ Management and Administration
of the Trust
Item 10. Capital Stock, Long-Term Debt, and
Other Securities...................... Description of the TrENDS;
Investment Objective and
Policies; Certain United
States Federal Income Tax
Considerations
Item 11. Defaults and Arrears on Senior
Securities............................ Not Applicable
Item 12. Legal Proceedings..................... Not Applicable
Item 13. Table of Contents of the Statement of
Additional Information................ Not Applicable
Item 14. Cover Page............................ Not Applicable
Item 15. Table of Contents..................... Not Applicable
Item 16. General Information and History....... The Trust
Item 17. Investment Objective and Policies..... Investment Objective and
Policies
Item 18. Management............................ Management and Administration
of the Trust
Item 19. Control Persons and Principal Holders Management and Administration
of Securities......................... of the Trust
Item 20. Investment Advisory and Other Management and Administration
Services.............................. of the Trust; Prospectus
Summary
Item 21. Brokerage Allocation and Other Investment Objective and
Practices............................. Policies
Item 22. Tax Status............................ Certain United States Federal
Income Tax Considerations
Item 23. Financial Statements.................. Statements of Assets and
Liabilities
</TABLE>
* Pursuant to the General Instructions of Form N-2, all information required
to be set forth in Part B: Statement of Additional Information has been
included in Part A: The Prospectus. Information required to be included in
Part C is set forth under the appropriate item, so numbered in Part C of
this Registration Statement.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS SUBJECT TO COMPLETION, DATED MAY 13, 1998
, 1998
6,000,000 TRENDS
PEAK TRENDS TRUST
TRUST ENHANCED DIVIDEND SECURITIES
(EXCHANGEABLE FOR SHARES OF COMMON STOCK OF PEAK INTERNATIONAL LIMITED)
Each of the Trust Enhanced Dividend Securities (the "TrENDS") of Peak TrENDS
Trust (the "Trust") represents the right to receive an annual distribution of
$ , and will be exchanged for between shares and 1 ordinary share,
$ par value per share (the "Common Stock"), of Peak International Limited
(the "Company") on (the "Exchange Date"), subject to a cash settlement
feature. The annual distribution of $ per TrENDS is payable quarterly on
each , , and , commencing . The TrENDS are not subject to
early redemption.
The Trust is a newly organized, finite-term trust established to purchase and
hold a portfolio of stripped U.S. Treasury securities maturing on a quarterly
basis through the Exchange Date, and a forward purchase contract relating to
the Common Stock (the "Contract") with Luckygold 18A Limited, a company
incorporated in the British Virgin Islands ("Luckygold" or the "Seller") and an
existing shareholder of the Company. Mr. T.L. Li, the sole shareholder of
Luckygold, will guarantee (the "Guaranty") the delivery of shares of Common
Stock covered by the Contract on the Exchange Date and the maintenance of
collateral pursuant to the Collateral Agreement (as defined herein). See
"Investment Objective and Policies--The Contract--The Guaranty." The Trust's
investment objective is to provide each holder of TrENDS (a "Holder") with a
quarterly distribution of $ per TrENDS and, on the Exchange Date, a number
of shares of Common Stock per TrENDS equal to the Exchange Rate. The "Exchange
Rate" is equal to (i) if the Reference Market Price (as defined below) on the
Exchange Date is less than $ (the "Threshold Appreciation Price") but equal
to or greater than the Price to Public as shown below (the "Floor Price"), a
number (or fractional number) of shares of Common Stock per TrENDS which, when
multiplied by the Reference Market Price, is equal to the Floor Price, (ii) if
the Reference Market Price on the Exchange Date is equal to or greater than the
Threshold Appreciation Price, shares of Common Stock per TrENDS and (iii)
if the Reference Market Price on the Exchange Date is less than the Floor
Price, 1 share of Common Stock per TrENDS, subject in each case to adjustment
in certain events. The "Reference Market Price" means the average Closing Price
(as defined herein) per share of Common Stock for the 20 Trading Days (as
defined herein) immediately prior to, but not including, the Exchange Date. In
lieu of delivery of the Common Stock, the Seller may elect under the Contract
to pay cash on the Exchange Date in an amount equal to the Reference Market
Price times the number of shares of Common Stock determined under the above
formula (the "Cash Settlement Alternative"). If the Seller elects the Cash
Settlement Alternative, holders of TrENDS will receive cash instead of shares
of Common Stock on the Exchange Date. Holders otherwise entitled to receive
fractional shares in respect of their aggregate holdings of TrENDS will receive
cash in lieu thereof.
Holders of TrENDS will receive quarterly distributions whereas the Company
does not currently pay dividends on the Common Stock. However, the Company
could commence at any time paying dividends on the Common Stock, to which the
Holders of TrENDS would not be entitled, and there is no assurance that the
yield on the TrENDS will be higher than the dividend yield on the Common Stock
over the term of the Trust. In addition, the opportunity for equity
appreciation afforded by an investment in the TrENDS is less than that afforded
by an investment in the Common Stock because holders of the TrENDS will realize
no equity appreciation unless the Reference Market Price of the Common Stock on
the Exchange Date exceeds the Threshold Appreciation Price. Moreover, because a
Holder will only receive shares of Common Stock per TrENDS if the
Reference Market Price on the Exchange Date exceeds the Threshold Appreciation
Price, Holders will only be entitled to receive upon exchange % of any
appreciation of the value of the Common Stock in excess of the Threshold
Appreciation Price. Holders of TrENDS will realize the entire decline in equity
value if the Reference Market Price on the Exchange Date is less than the Floor
Price. Accordingly, the value of the Common Stock or cash equivalent received
by a Holder may be less than the amount paid by such Holder for its TrENDS.
Application has been made to list the TrENDS on the American Stock Exchange
(the "ASE") under the symbol "PTT". Prior to this offering there has been no
public market for the TrENDS. The Common Stock is traded on the Nasdaq National
Market under the symbol "PEAKF". The reported last sale price of the Common
Stock on the Nasdaq National Market on May 12, 1998 was $23 1/4 per share.
SEE "RISK FACTORS" COMMENCING ON PAGE 19 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN FACTORS RELEVANT TO AN INVESTMENT IN THE TRENDS.
THESE TRENDS 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>
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PRICE TO PUBLIC SALES LOAD(1) PROCEEDS TO THE TRUST(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per TrENDS............... $ $ $
Total (3)................ $ $ $
- --------------------------------------------------------------------------------
</TABLE>
(1) The Seller has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Underwriting." In light of the fact
that the proceeds of the sale of the TrENDS will be used in part by the
Trust to purchase the Contract from the Seller, the Underwriting Agreement
provides that the Seller will pay to the Underwriters as compensation
("Underwriters' Compensation") $ per TrENDS. See "Underwriting."
(2) Expenses of the offering, which are payable by the Seller, are estimated
to be approximately $ .
(3) The Trust has granted to the Underwriters an option, exercisable within 30
days of the date hereof, to purchase up to 900,000 additional TrENDS at the
Price to Public per TrENDS, solely to cover over-allotments, if any. If the
Underwriters exercise such option, the total Price to Public, Sales Load
and Proceeds to the Trust will be $ , $ and $ , respectively. See
"Underwriting."
The TrENDS are being offered hereby by the several Underwriters, subject to
prior sale, when, as and if delivered to and accepted by the Underwriters and
subject to various prior conditions, including their right to reject orders in
whole or in part. It is expected that delivery of the TrENDS will be made
through the facilities of The Depository Trust Company on or about 1998.
DONALDSON, LUFKIN & JENRETTE BANCAMERICA ROBERTSON STEPHENS
SECURITIES CORPORATION
<PAGE>
The Company is not affiliated with the Trust, will not receive any of the
proceeds from the sale of the TrENDS and will have no obligations with respect
to the TrENDS. This Prospectus relates only to the TrENDS offered hereby and
does not relate to the Company or the Common Stock.
The Trust has adopted a fundamental policy that the Contract may not be
disposed of during the term of the Trust. The Trust will continue to hold the
Contract despite any significant decline in the market price of the Common
Stock or adverse changes in the financial condition of the Company.
The TrENDS may be a suitable investment for those investors who are able to
understand the unique nature of the Trust and the economic characteristics of
the Contract and the U.S. Treasury securities held by the Trust.
The Trust will be a grantor trust for United States federal income tax
purposes and each holder of TrENDS will be treated as the owner of its pro
rata portions of the stripped U.S. Treasury securities and the Contract. For a
discussion of the principal United States federal income tax consequences of
the purchase, ownership and disposition of the TrENDS, see "Certain United
States Federal Income Tax Considerations."
This Prospectus sets forth concisely the 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.
ENFORCEMENT OF CIVIL LIABILITIES
LUCKYGOLD IS ORGANIZED UNDER THE LAWS OF THE BRITISH VIRGIN ISLANDS AND MR.
T.L. LI IS A RESIDENT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION ("HONG
KONG") AND ALL OR A SUBSTANTIAL PORTION OF THEIR ASSETS ARE OR MAY BE LOCATED
OUTSIDE THE UNITED STATES. IN CONNECTION WITH THE OFFERING AND THE
TRANSACTIONS CONTEMPLATED IN CONNECTION WITH THE OFFERING, LUCKYGOLD HAS
APPOINTED AND MR. T.L. LI HAS APPOINTED TO ACCEPT SERVICE OF
PROCESS WITHIN THE UNITED STATES. IT MAY NOT BE POSSIBLE FOR INVESTORS,
HOWEVER, TO ENFORCE AGAINST LUCKYGOLD OR MR. T.L. LI JUDGMENTS OBTAINED IN
UNITED STATES COURTS PREDICATED UPON THE CIVIL LIABILITY PROVISIONS OF THE
FEDERAL SECURITIES LAWS OR CIVIL LIABILITIES ARISING FROM THE TRANSACTIONS
CONTEMPLATED IN THE OFFERING. LUCKYGOLD HAS BEEN ADVISED BY ITS BRITISH VIRGIN
ISLANDS COUNSEL, CONYERS DILL & PEARMAN, AND MR. T.L. LI HAS BEEN ADVISED BY
HIS HONG KONG COUNSEL, RICHARDS BUTLER, THAT IN THE OPINION OF SUCH COUNSEL
THERE IS DOUBT AS TO THE ENFORCEABILITY IN THE BRITISH VIRGIN ISLANDS AND HONG
KONG, RESPECTIVELY, IN ORIGINAL ACTIONS OR IN ACTIONS FOR ENFORCEMENT OF
JUDGMENTS OF UNITED STATES COURTS, OF CIVIL LIABILITIES PREDICATED UPON THE
UNITED STATES FEDERAL SECURITIES LAWS OR CIVIL LIABILITIES ARISING FROM THE
TRANSACTIONS CONTEMPLATED IN THE OFFERING.
THE TRUST IS A NEWLY ORGANIZED CLOSED-END INVESTMENT COMPANY WITH NO
PREVIOUS HISTORY OF PUBLIC TRADING. TYPICAL CLOSED-END FUND SHARES FREQUENTLY
TRADE AT A PREMIUM TO OR DISCOUNT FROM NET ASSET VALUE. THIS CHARACTERISTIC OF
INVESTMENTS IN A CLOSED-END INVESTMENT COMPANY IS A RISK SEPARATE AND DISTINCT
FROM THE RISK THAT THE TRUST'S NET ASSET VALUE WILL DECREASE. THE TRUST CANNOT
PREDICT WHETHER ITS SHARES WILL TRADE AT, BELOW OR ABOVE NET ASSET VALUE. THE
RISK OF PURCHASING INVESTMENTS IN A CLOSED-END INVESTMENT COMPANY THAT MIGHT
TRADE AT A DISCOUNT MAY BE GREATER FOR INVESTORS WHO WISH TO SELL THEIR
INVESTMENTS SOON AFTER COMPLETION OF AN INITIAL PUBLIC OFFERING.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT, IMPOSE
PENALTY BIDS OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN OR OTHERWISE
AFFECT THE MARKET PRICE OF THE TRENDS OR THE COMMON STOCK AT LEVELS ABOVE
THOSE THAT MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY
BE EFFECTED ON THE AMERICAN STOCK EXCHANGE, THE NASDAQ NATIONAL MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
This summary of the provisions relating to the TrENDS does not purport to be
complete and is qualified in its entirety by the detailed information appearing
elsewhere in this Prospectus. Certain terms used in this summary are defined
elsewhere in this Prospectus.
THE TRUST
GENERAL
The Trust is a newly organized, finite-term trust. The Trust will be
registered as a non-diversified, closed-end management investment company under
the Investment Company Act of 1940, as amended (the "Investment Company Act").
Consistent with certain provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), and the regulations thereunder applicable to grantor
trusts, the Trustees will not have the power to vary the investments held by
the Trust.
Pursuant to the Contract, the Trust may be deemed an "underwriter" of the
Common Stock as defined in the Securities Act in connection with its purchase
of the Common Stock owned by the Seller, which is deemed an "affiliate" of the
Company for purposes of the Securities Act, and the delivery of the Common
Stock to Holders of TrENDS on the Exchange Date or upon earlier dissolution of
the Trust. In such an event, the Trust may be subject to certain liabilities
under the Securities Act with respect to the Company Prospectus which is
attached hereto and is being delivered to prospective purchasers of the TrENDS
together with this Prospectus for convenience of reference only. The Company
Prospectus does not constitute a part of this Prospectus, nor is it
incorporated by reference herein. See "The Trust" and "Investment Policies and
Objectives--The Company."
INVESTMENT OBJECTIVE AND POLICIES
The Trust will purchase and hold a portfolio of stripped U.S. Treasury
securities maturing on a quarterly basis through the Exchange Date and a
forward purchase contract with the Seller relating to shares of Common Stock.
The Trust's investment objective is to provide the Holders with a quarterly
distribution of $ per TrENDS (which amount equals a pro rata portion of the
fixed quarterly cash distributions from the proceeds of the maturing U.S.
Treasury securities held by the Trust) and, on the Exchange Date, a number of
shares of Common Stock per TrENDS equal to the Exchange Rate or, if the Seller
elects the Cash Settlement Alternative, which election must be made not later
than 20 trading days prior to but not including the Exchange Date, an amount in
cash equal to the Reference Market Price of that number of shares. The Exchange
Rate is equal to (i) if the Reference Market Price is less than the Threshhold
Appreciation Price but equal to or greater than the Floor Price, a number (or
fractional number) of shares of Common Stock per TrENDS, which when multiplied
by the Reference Market Price, is equal to the Floor Price, (ii) if the
Reference Market Price is equal to or greater than the Threshhold Appreciation
Price, shares of Common Stock per TrENDS and (iii) if the Reference
Market Price is less than the Floor Price, 1 share of Common Stock per TrENDS,
subject in each case to adjustment in certain events. This provides the Trust
with the potential for a portion of any capital appreciation above the
Threshhold Appreciation Price on the Common Stock, but no protection from
depreciation of the Common Stock and no participation in appreciation through
the Threshhold Appreciation Price. Holders otherwise entitled to receive
fractional shares in respect of their aggregate holdings of TrENDS will receive
cash in lieu thereof. See "Investment Objective and Policies--Trust
Termination."
STRUCTURE
The purchase price under the Contract is equal to $ per share of Common
Stock initially subject thereto and $ ( shares of Common Stock) in the
aggregate (exclusive of the Underwriters' over-allotment option) and is payable
to the Seller by the Trust at the closing of the offering of the TrENDS (the
"Closing"). The obligations of the Seller under the Contract will be secured by
a pledge of Common Stock or, at the election of the Seller, by substitute
collateral consisting of short-term, direct obligations of the U.S. Government
and will be subject to the Guaranty. See "Investment Objective and Policies--
The Contract--Collateral Arrangements; Acceleration" and "Investment Objective
and Policies--The Contract--The Guaranty."
3
<PAGE>
THE OFFERING
The Trust is offering 6,000,000 TrENDS to the public at a purchase price of
$ per TrENDS (which is equal to the reported last sale price of the Common
Stock on the date of the offering) through the Underwriters. In addition, the
Trust has granted to the Underwriters an option, exercisable within 30 days of
the date hereof, to purchase up to 900,0000 additional TrENDS, solely to cover
over-allotments, if any. See "Underwriting."
THE TRENDS
GENERAL
The TrENDS are designed to provide investors with a quarterly distribution at
the annual rate of $ per share of TrENDS. The Company does not currently pay
dividends on its Common Stock. Any decision to commence paying dividends on the
Common Stock by the Company and the amount of any such dividends would be
discretionary with its Board of Directors and subject to legal and other
factors, including the Company's future earnings, cash flow, financial
condition and capital requirements. Quarterly distributions on the TrENDS will
consist solely of the cash received from the U.S. Treasury securities held by
the Trust. The Trust will not be entitled to any dividends that may be declared
on the Common Stock because the Common Stock will not be transferred to the
Trust until the Exchange Date.
There is no assurance that the yield on the TrENDS will be higher than the
dividend yield on the Common Stock over the term of the Trust. In addition, the
opportunity for equity appreciation afforded by an investment in the TrENDS is
less than that afforded by an investment in the Common Stock because Holders
will realize no equity appreciation if, on the Exchange Date, the Reference
Market Price of the Common Stock is below the Threshold Appreciation Price
(which represents an appreciation of % of the Floor Price). Moreover,
because a Holder will only receive shares of Common Stock per TrENDS (or
cash in an amount equal to the Reference Market Price times shares of
Common Stock) if the Reference Market Price exceeds the Threshold Appreciation
Price, Holders will only be entitled to receive upon exchange % of any
appreciation of the value of the Common Stock in excess of the Threshold
Appreciation Price. Holders of TrENDS will realize the entire decline in equity
value if the Reference Market Price is less than the Floor Price. Accordingly,
the value of the Common Stock or cash equivalent received by a Holder may be
less than the amount paid by such Holder for its TrENDS.
DISTRIBUTIONS
Holders are entitled to receive distributions at the rate per TrENDS of $
per annum or $ per quarter, payable quarterly on each , , and
or, if any such date is not a business day, on the next succeeding
business day, to Holders of record as of each , , and ,
respectively. The first distribution, in respect of the period from Closing
until , will be payable on to Holders of record as of and will equal
$ per TrENDS. See "Investment Objective and Policies--General."
MANDATORY EXCHANGE
On the Exchange Date, each outstanding TrENDS will be exchanged automatically
for between of a share and 1 share of Common Stock, subject to adjustment
in the event of certain dividends or distributions, subdivisions, splits,
combinations, issuances of certain rights or warrants or distributions of
certain assets with respect to the Common Stock. Further, in lieu of delivering
the Common Stock, the Seller may elect under the Contract to pay cash on the
Exchange Date in an amount equal to the then applicable Reference Market Price
times such number of shares of the Common Stock deliverable pursuant to the
Contract (the "Cash Settlement
4
<PAGE>
Alternative"). If the Seller elects the Cash Settlement Alternative, which
election shall be made not later than 20 Trading Days prior to but not
including the Exchange Date, Holders will receive cash instead of Common Stock
on the Exchange Date. In addition, in the event of a merger of the Company into
another entity, or the liquidation of the Company, or in certain related
events, Holders would receive consideration in the form of cash or Marketable
Securities (as defined below under the caption "Investment Objective and
Policies --The Contract-- Dilution Adjustments") rather than shares of Common
Stock. Further, the occurrence of certain defaults by the Seller under the
Contract or the collateral arrangements would cause the acceleration of the
Contract and the early exchange of each TrENDS for an amount of shares of
Common Stock (or Marketable Securities), cash, or a combination thereof, in
respect of the shares of Common Stock and the U.S. Treasury securities. See
"Investment Objective and Policies--The Contract--Collateral Arrangements;
Acceleration," "--The U.S. Treasury Securities" and "--Trust Termination."
VOTING RIGHTS
Holders will have the right to vote on matters affecting the Trust, as
described under the caption "Description of the TrENDS," but will have no
voting rights with respect to the Common Stock prior to receipt of shares of
Common Stock by the Holders upon the mandatory exchange of the TrENDS on the
Exchange Date or upon earlier dissolution of the Trust. See "Description of the
TrENDS."
THE COMPANY
Reference is made to the accompanying prospectus of the Company with respect
to the shares of Common Stock which may be received by a Holder of TrENDS on
the Exchange Date or upon earlier dissolution of the Trust. THE COMPANY
PROSPECTUS IS BEING ATTACHED HERETO AND DELIVERED TO PROSPECTIVE PURCHASERS OF
THE TRENDS TOGETHER WITH THIS PROSPECTUS FOR CONVENIENCE OF REFERENCE ONLY. THE
COMPANY PROSPECTUS DOES NOT CONSTITUTE A PART OF THIS PROSPECTUS, NOR IS IT
INCORPORATED BY REFERENCE HEREIN.
The Company is not affiliated with the Trust, will not receive any of the
proceeds from the sale of the TrENDS and will have no obligations with respect
to the TrENDS. This Prospectus relates only to the TrENDS offered hereby and
does not relate to the Company or the Common Stock.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The Trust will be treated as a grantor trust for United States federal income
tax purposes, and accordingly, each Holder will be treated, for United States
federal income tax purposes, as the owner of its pro rata portions of the U.S.
Treasury securities and the Contract. Each Holder will have to include in its
gross income for United States federal income tax purposes its allocable share
of the income received by the Trust and the original issue discount ("OID")
accrued on the U.S. Treasury securities. The U.S. Treasury securities held by
the Trust will be treated for United States federal income tax purposes as
having "OID" that will accrue over the term of the U.S. Treasury securities and
each Holder must recognize its pro rata portion of such discount as income
regardless of its method of accounting. 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 such Holders' investment in the U.S. Treasury
securities and therefore will not be considered current income for United
States federal income tax purposes. A Holder will have taxable gain or loss
upon receipt of cash distributed on the Exchange Date. Each Holder's tax basis
in its Common Stock or Marketable Securities distributed on the Exchange Date
will be equal to its tax basis in its pro rata portion of the Contract less the
portion of such tax basis allocable to any shares of Common Stock for which
cash is received. See "Certain United States Federal Income Tax
Considerations."
5
<PAGE>
ALTERNATIVE FEDERAL INCOME TAX CHARACTERIZATIONS
Holders should also be aware that there are alternative characterizations of
the assets of the Trust which could require Holders to include more interest in
income than they would include in income under the analysis set out above. See
"Certain United States Federal Income Tax Considerations."
MANAGEMENT AND ADMINISTRATION OF THE TRUST
The Trust will be internally managed and will not have an investment adviser.
The administration of the Trust will be overseen by three Trustees. The day-to-
day administration of the Trust will be carried out by The Bank of New York (or
its successor) as trust administrator (the "Administrator"). The Bank of New
York (or its successor) will also act as custodian (the "Custodian") for the
Trust's assets and as paying agent (the "Paying Agent"), registrar and transfer
agent with respect to the TrENDS. Except as aforesaid, The Bank of New York has
no other affiliation with, and is not engaged in any other transaction with,
the Trust. See "Management and Administration of the Trust."
LIFE OF THE TRUST
The Trust will terminate automatically on or shortly after the Exchange Date.
Promptly after the Exchange Date, the shares of Common Stock or cash, as the
case may be, to be exchanged for the TrENDS and other remaining net assets of
the Trust, if any, will be distributed pro rata to Holders. See "Investment
Objective and Policies-- Trust Termination."
RISK FACTORS
The Trust will not be managed in the traditional sense. The Trust has adopted
a fundamental policy that the Contract may not be disposed of during the term
of the Trust and that the U.S. Treasury securities held by the Trust may not be
disposed of prior to the earlier of their respective maturities and the
termination of the Trust. The foregoing policies are fundamental policies of
the Trust that may not be changed without the approval of 100% in interest of
the Holders. The Trust will continue to hold the Contract despite any
significant decline in the market price of the Common Stock or adverse changes
in the financial condition of the Company. See "Risk Factors--Internal
Management; No Portfolio Management" and "Management and Administration of the
Trust--Trustee."
Holders of TrENDS will receive quarterly distributions, whereas the Company
does not currently pay dividends on the Common Stock. However, the Company
could commence paying dividends on its Common Stock at any time and there is no
assurance that the yield on the TrENDS will be higher than the dividend yield
on the Common Stock over the term of the Trust. In addition, the opportunity
for equity appreciation afforded by an investment in the TrENDS is less than
that afforded by an investment in the Common Stock because Holders of TrENDS
will realize no equity appreciation unless the Reference Market Price of the
Common Stock on the Exchange Date exceeds the Threshold Appreciation Price,
(which represents an appreciation of % of the Floor Price). Moreover,
because a Holder will only receive shares of Common Stock per TrENDS (or
an amount of cash equal to the Reference Market Price times shares of
Common Stock) if the Reference Market Price on the Exchange Date exceeds the
Threshold Appreciation Price, Holders will only be entitled to receive upon
exchange % of any appreciation of the value of the Common Stock in excess of
the Threshold Appreciation Price. Holders of TrENDS will realize the entire
decline in equity value if the Reference Market Price is less than the Floor
Price. Accordingly, the value of the Common Stock or cash equivalent received
by a Holder may be less than the amount paid by such Holder for its TrENDS. In
addition, because the Reference Market Price generally is determined on a 20-
Trading Day average, the value of a share of Common Stock distributed on the
Exchange Date may be more or less than the Reference Market Price used to
determine the amount receivable at the Exchange Date.
6
<PAGE>
The Trust is classified as a "non-diversified" investment company under the
Investment Company Act. Consequently, the Trust is not limited by the
Investment Company Act in the proportion of its assets that may be invested in
the securities of a single issuer. Since the only securities held by the Trust
will be the U.S. Treasury securities and the Contract, the Trust may be subject
to greater risk than would be the case for an investment company with
diversified investments. See "Investment Objective and Policies" and "Risk
Factors--Non- Diversified Status."
The trading prices of the TrENDS in the secondary market will be directly
affected by the trading prices of the Common Stock in the secondary market.
Trading prices of Common Stock will be influenced by the Company's operating
results and prospects and by economic, financial and other factors and market
conditions.
A bankruptcy of the Seller or Mr. T.L. Li could adversely affect the timing
of exchange or, as a result, the amount received by the Holders in respect of
the TrENDS. See "Risk Factors--Risk Relating to Bankruptcy of Seller or Mr.
T.L. Li."
HOLDERS OF THE TRENDS WILL NOT BE ENTITLED TO ANY RIGHTS WITH RESPECT TO THE
COMMON STOCK (INCLUDING, WITHOUT LIMITATION, VOTING RIGHTS AND RIGHTS TO
RECEIVE ANY DIVIDENDS OR OTHER DISTRIBUTIONS IN RESPECT THEREOF) UNLESS AND
UNTIL SUCH TIME, IF ANY, AS THE SELLER SHALL HAVE DELIVERED SHARES OF COMMON
STOCK PURSUANT TO THE CONTRACT AT THE EXCHANGE DATE OR UPON EARLIER DISSOLUTION
OF THE TRUST. THE SELLER MAY TAKE ACTIONS AS THE CONTROLLING SHAREHOLDER OF THE
COMPANY THAT ARE NOT IN THE BEST INTEREST OF HOLDERS OF THE TRENDS.
LISTING
Application has been made to list the TrENDS on the American Stock Exchange
under the symbol "PTT".
FEES AND EXPENSES
In light of the fact that the proceeds of the sale of the TrENDS will be used
in part by the Trust to purchase the Contract from the Seller, the Underwriting
Agreement provides that the Seller will pay Underwriters' Compensation to the
Underwriters of $ per TrENDS. See "Underwriting." Estimated organization
costs of the Trust in the amount of $ have been paid by Donaldson, Lufkin &
Jenrette Securities Corporation or an affiliate thereof and estimated costs of
the Trust in connection with the initial registration and public offering of
the TrENDS in the amount of $ will be paid by the Seller. Each of the
Administrator, the Custodian and the Paying Agent, and each Trustee will be
paid by the Underwriters out of the Underwriters' Compensation at the closing
of the offering of the TrENDS a one-time, up-front amount in respect of its
ongoing fees and, in the case of the Administrator, anticipated expenses of the
Trust over the term of the Trust (estimated to be $ in the aggregate). Any
on-going expenses of the Trust in excess of these estimated amounts and certain
indemnification expenses of the Trust will be paid by Donaldson, Lufkin &
Jenrette Securities Corporation or an affiliate thereof and will be reimbursed
by the Seller. See "Management and Administration of the Trust--Estimated
Expenses" and "Management and Administration of the Trust--Indemnification.
Regulations of the Commission applicable to closed-end investment companies
designed to assist investors in understanding the costs and expenses that an
investor will bear directly or indirectly require the presentation of Trust
expenses in the following format. Because the Trust will not bear any fees or
expenses, investors will not bear any direct expenses. The expenses that an
investor might be considered to be bearing indirectly are (i) the proportion of
the Sales Load payable by the Seller to the Underwriters with respect to such
investor's TrENDS; and (ii) the organizational and offering expenses of the
Trust, an estimated $ of which would
7
<PAGE>
be allocable to each year of the Trust's existence, and the ongoing expenses of
the Trust (including fees of the Administrator, Custodian, Paying Agent and
Trustees), estimated at $ per year payable by Donaldson, Lufkin & Jenrette
Securities Corporation or an affiliate thereof at the Closing and reimbursed by
the Seller.
INVESTOR TRANSACTION EXPENSES
<TABLE>
<S> <C>
Sales Load (as a percentage of Price to Public).................. %
Dividend Reinvestment and Cash Purchase Plan Fees................ Not Applicable
</TABLE>
ANNUAL EXPENSES
<TABLE>
<S> <C>
Management Fees............................................................. 0%
Other Expenses (after prepayment)........................................... 0%*
Total Annual Expenses....................................................... 0%*
</TABLE>
* Absent prepayment by the Underwriters out of their underwriting
compensation, the Trust's "total annual expenses" would be equal to
approximately % of the Trust's average net assets.
Commission regulations also require that closed-end investment companies
present an illustration of cumulative expenses (both direct and indirect) that
an investor would bear. The example is required to factor in the applicable
Sales Load and to assume, in addition to a 5% annual return, the reinvestment
of all distributions at net asset value.
INVESTORS SHOULD NOTE THAT THE ASSUMPTION OF A 5% ANNUAL RETURN DOES NOT
ACCURATELY REFLECT THE FINANCIAL TERMS OF THE TRUST. SEE "INVESTMENT OBJECTIVE
AND POLICIES--GENERAL." ADDITIONALLY, THE TRUST DOES NOT PERMIT THE
REINVESTMENT OF DISTRIBUTIONS.
<TABLE>
<CAPTION>
1 3
EXAMPLE YEAR YEARS
<S> <C> <C>
You would bear the following expenses (i.e., the applicable sales
load and allocable portion of ongoing expenses paid by the Under-
writers) on a $1,000 investment, assuming a 5% annual return..... $30 $30
</TABLE>
8
<PAGE>
THE TRUST
The Trust is a newly organized Delaware trust and is registered as a non-
diversified closed-end investment company under the Investment Company Act.
The Trust was formed on March 24, 1998 and operates pursuant to a trust
agreement, as amended and restated on . The Trust is located at 850 Library
Avenue, Newark, Delaware 19715, and its telephone number is (302) 738-6680.
Pursuant to the Contract, the Trust may be deemed an "underwriter" of the
Common Stock as defined in the Securities Act in connection with its purchase
of the Common Stock owned by the Seller, which is deemed an "affiliate" of the
Company for purposes of the Securities Act, and the delivery of the Common
Stock to Holders to TrENDS on the Exchange Date or upon earlier dissolution of
the Trust. In such an event, the Trust may be subject to certain liabilities
under the Securities Act with respect to the Company Prospectus which is
attached hereto and is being delivered to prospective purchasers of the TrENDS
together with this Prospectus for convenience of reference only. The Company
Prospectus does not constitute a part of this Prospectus, nor is it
incorporated by reference herein. See "The Investment Policies and
Objectives--The Company."
USE OF PROCEEDS
The net proceeds of this offering will be used on or shortly after the date
on which this offering is completed to purchase a fixed portfolio comprised of
stripped U.S. Treasury securities with face amounts and maturities
corresponding to the quarterly distributions payable with respect to the
TrENDS and the payment dates thereof, and to pay the purchase price under the
Contract to the Seller.
INVESTMENT OBJECTIVE AND POLICIES
GENERAL
The Trust will purchase and hold a portfolio of stripped U.S. Treasury
securities maturing on a quarterly basis through the Exchange Date and the
Contract relating to the Common Stock of the Company. The Trust's investment
objective is to provide each Holder with a quarterly cash distribution of $
per TrENDS (which amount equals the portion of the fixed quarterly
distributions from the proceeds of the maturing U.S. Treasury securities held
by the Trust) and, on the Exchange Date, a number of shares of Common Stock
per TrENDS equal to the Exchange Rate or, if the Seller elects the Cash
Settlement Alternative, an amount in cash equal to the Reference Market Price
times such number of shares. The Exchange Rate is equal to (i) if the
Reference Market Price is less than the Threshold Appreciation Price but equal
to or greater than the Floor Price, a number (or fractional number) of shares
of Common Stock per TrENDS which when multiplied by the Reference Market Price
is equal to the Floor Price, (ii) if the Reference Market Price is equal to or
greater than the Threshold Appreciation Price, shares of Common Stock
per TrENDS and (iii) if the Reference Market Price is less than the Floor
Price, 1 share of Common Stock per TrENDS, subject in each case to adjustment
in certain events. See "--The Contract--Dilution Adjustments." For purposes of
the preceding clause (i) the Exchange Rate will be rounded upward or downward
to the nearest 1/10,000 (or if there is not a nearest 1/10,000, to the next
lower 1/10,000). Holders otherwise entitled to receive fractional shares in
respect of their aggregate holdings of TrENDS will receive cash in lieu
thereof. The Reference Market Price per share of Common Stock means the
average Closing Price of a share of Common Stock on the 20 Trading Days (as
defined below) immediately prior to, but not including, the Exchange Date. The
"Closing Price" of the Common Stock on any date of determination means the
daily closing sale price (or, if no closing sale price is reported, the last
reported sale price) of the Common Stock as reported on the Nasdaq National
Market on such date of determination or, if the Common Stock is not listed for
trading on the Nasdaq National Market on any such date, as reported in the
composite transactions for the principal United States securities exchange on
which the Common Stock is so listed, or if the Common Stock is not so listed
on a United States national or regional securities exchange, as reported by
the Nasdaq National Market or, if the Common Stock is not so reported, the
last quoted bid-price for the Common Stock in the over-the-counter market as
reported by the National Quotation Bureau or similar
9
<PAGE>
organization, provided that if any event that results in an adjustment to the
number of shares of Common Stock deliverable under the Contract as described
under "--The Contract-- Dilution Adjustments" occurs prior to the Exchange
Date, the Closing Price as determined pursuant to the foregoing will be
appropriately adjusted to reflect the occurrence of such event. A "Trading
Day" means a day on which the Common Stock (A) is not suspended from trading
on any national or regional securities exchange or association or over-the-
counter market at the close of business and (B) has traded at least once on
the national or regional securities exchange or association or over-the-
counter market that is the primary market for the trading of such security.
A fundamental policy of the Trust is to invest at least 70% of its total
assets in the Contract. The Contract will comprise approximately % of the
Trust's initial assets. As a consequence, the Trust's investments will be
concentrated in the industry or industries in which the Company does business.
The Trust has also adopted a fundamental policy that the Contract may not be
disposed of during the term of the Trust and that the U.S. Treasury securities
held by the Trust may not be disposed of prior to the earlier of their
respective maturities and the termination of the Trust. The foregoing policies
are fundamental policies of the Trust that may not be changed without the
approval of 100% in interest of the Holders.
The value of the Common Stock (or cash or Marketable Securities received in
lieu thereof) that will be received by Holders in respect of the TrENDS on the
Exchange Date or upon earlier dissolution of the Trust may be more or less
than the amount paid for the TrENDS offered hereby.
For illustrative purposes only, the following chart shows the number of
shares of Common Stock that a Holder would receive for each TrENDS at various
Reference Market Prices. The chart assumes that there would be no adjustments
to the number of shares of Common Stock deliverable under the Contract by
reason of the occurrence of any of the events described under "--The
Contract--Dilution Adjustments." There can be no assurance that the Reference
Market Price will be within the range set forth below. Given the Floor Price
of $ per TrENDS and the Threshold Appreciation Price of $ , a Holder
would receive in connection with the exchange of TrENDS on the Exchange Date
the following number of shares of Common Stock:
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
REFERENCE MARKET PRICE OF COMMON STOCK COMMON STOCK AMOUNT OF CASH
<S> <C> <C>
$ $
</TABLE>
The following table sets forth information regarding the distributions to be
received on the U.S. Treasury securities, the portion of each year's
distributions that will constitute a return of capital for United States
federal income tax purposes and the amount of original issue discount accruing
on the U.S. Treasury securities, assuming a yield-to-maturity accrual election
with respect to any short-term U.S. Treasury securities (i.e., any U.S.
Treasury security with a maturity date of one year or less from the date of
its issue), with respect to a Holder who acquires its TrENDS at the issue
price from an Underwriter pursuant to the original offering. See "Certain
United States Federal Income Tax Considerations--Recognition of Interest on
the U.S. Treasury Securities."
<TABLE>
<CAPTION>
ANNUAL GROSS
ANNUAL GROSS DISTRIBUTIONS ANNUAL INCLUSION
DISTRIBUTIONS FROM ANNUAL RETURN OF ORIGINAL ISSUE
FROM U.S. TREASURIES OF CAPITAL DISCOUNT IN
YEAR U.S. TREASURIES PER TRENDS PER TRENDS INCOME PER TRENDS
<S> <C> <C> <C> <C>
1998........... $ $ $ $
1999...........
2000...........
2001...........
</TABLE>
10
<PAGE>
The annual distribution of $ per TrENDS is payable quarterly on each ,
, and , commencing , 1998. Quarterly distributions on the TrENDS
will consist solely of the cash received from the U.S. Treasury securities.
The first distribution, in respect of the period from Closing until , will
be payable to Holders of record as of and will equal $ per TrENDS.
The Trust will not be entitled to any dividends that may be declared on the
Common Stock. See "Management and Administration of the Trust--Distributions."
ENHANCED YIELD; LESS POTENTIAL APPRECIATION THAN COMMON STOCK; NO DEPRECIATION
PROTECTION
Holders will receive quarterly distributions, whereas the Company does not
currently pay dividends on the Common Stock. However, the Company could
commence paying dividends on its Common Stock at any time and there is no
assurance that the yield on the TrENDS will be higher than the dividend yield
on the Common Stock over the term of the Trust. In addition, the opportunity
for equity appreciation afforded by an investment in the TrENDS is less than
that afforded by an investment in the Common Stock because Holders will
realize no equity appreciation if, on the Exchange Date, the Reference Market
Price of the Common Stock is below the Threshold Appreciation Price (which
represents an appreciation of % of the Floor Price). Moreover, because
Holders will only receive shares of Common Stock (or cash in an amount
equal to the Reference Market Price times shares of Common Stock) if the
Reference Market Price exceeds the Threshold Appreciation Price, Holders will
only be entitled to receive upon exchange % (the percentage equal to the
Floor Price divided by the Threshold Appreciation Price) of any appreciation
of the value of the Common Stock in excess of the Threshold Appreciation
Price. Holders of TrENDS will realize the entire decline in equity value if
the Reference Market Price is less than the Floor Price. Accordingly, the
value of the Common Stock or cash equivalent received by a Holder may be less
than the amount paid by such Holder for its TrENDS.
THE COMPANY
The Company is a leading supplier of precision engineered packaging products
for the storage, transportation and automated handling of semiconductor
devices and other electronic components.
The Company is not affiliated with the Trust, will not receive any of the
proceeds from the sale of the TrENDS and will have no obligations with respect
to the TrENDS. This Prospectus relates only to the TrENDS offered hereby and
does not relate to the Company or the Common Stock.
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Accordingly, the
Company files reports, proxy and information statements and other information
with the Securities and Exchange Commission (the "Commission"). Copies of such
material can be inspected and copied at the public reference facilities
maintained by the Commission at the address specified under "Further
Information."
Effective October 31, 1997, the Common Stock began to trade on Nasdaq under
the symbol "PEAKF". Prior to October 31, 1997, the Common Stock traded on
Nasdaq under the symbol "PITLF". Public trading of the Common Stock commenced
on June 20, 1997. Prior to that time, there was no public market for the
Common Stock. The following table sets forth the high and low sale prices for
the Common Stock as reported by Nasdaq for the periods indicated:
<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK
----------------
HIGH LOW
<S> <C> <C>
Year Ending March 31, 1998:
1st Quarter (from June 20, 1997)............................. $12 3/4 $11 7/8
2nd Quarter.................................................. 26 1/8 10 7/8
3rd Quarter.................................................. 31 1/2 15 1/8
4th Quarter.................................................. 25 7/8 18 1/2
Year Ending March 31, 1999:
1st Quarter (through May 12, 1998)........................... $25 5/16 $21 1/4
</TABLE>
11
<PAGE>
On May 12, 1998, the reported last sale price of the Common Stock on Nasdaq
was $23 1/4 per share. As of May 11, 1998, there were seven holders of record
of the Common Stock.
The Company has filed a registration statement on Form F-1 with the
Commission with respect to the shares of Common Stock that may be received by
a Holder of TrENDS on the Exchange Date or upon earlier dissolution of the
Trust. The Company Prospectus constituting a part of such registration
statement includes information relating to the Company and the Common Stock,
including certain risk factors relevant to an investment in the Common Stock.
THE COMPANY PROSPECTUS IS BEING ATTACHED HERETO AND DELIVERED TO PROSPECTIVE
PURCHASERS OF THE TRENDS TOGETHER WITH THIS PROSPECTUS FOR CONVENIENCE OF
REFERENCE ONLY. THE COMPANY PROSPECTUS DOES NOT CONSTITUTE A PART OF THIS
PROSPECTUS, NOR IS IT INCORPORATED BY REFERENCE HEREIN.
THE CONTRACT
GENERAL
The Trust will enter into the Contract with the Seller obligating the Seller
to deliver to the Trust on the Exchange Date a number of shares of Common
Stock equal to the product of the Exchange Rate times the initial number of
shares of Common Stock subject to the Contract, adjusted as described below.
The aggregate initial number of shares of Common Stock under the Contract will
equal the aggregate number of TrENDS offered hereby (subject to increase in
the event the Underwriters exercise their over-allotment option). The Contract
also provides that the Seller may deliver to the Trust on the Exchange Date,
at the Seller's option, an amount of cash equal to the value of the Common
Stock deliverable pursuant to the Contract (the "Cash Settlement
Alternative"). If the Seller elects to deliver cash in lieu of shares of
Common Stock, it would be required to deliver cash in respect of all shares
deliverable pursuant to the Contract. Mr. T.L. Li, the sole shareholder of
Luckygold, will guarantee the delivery of shares of Common Stock or the cash
equivalent of such shares subject to the Contract on the Exchange Date and the
maintenance of collateral pursuant to the Collateral Agreement (as defined
herein). See "--The Contract--The Guaranty."
The purchase price of the Contract was arrived at by arms-length negotiation
between the Trustees of the Trust, none of whom is affiliated with the Seller,
and the Seller taking into consideration factors including the price, expected
dividend level and volatility of the Common Stock, current interest rates, the
term of the Contract, current market volatility generally, the collateral
security pledged by the Seller, the value of other similar instruments and the
costs and anticipated proceeds of the offering of the TrENDS. All matters
relating to the administration of the Contract will be the responsibility of
either the Administrator or the Custodian.
DILUTION ADJUSTMENTS
The Exchange Rate is subject to adjustment if the Company shall (i) pay a
stock dividend or make a distribution with respect to the Common Stock in
shares of such stock, (ii) subdivide or split its outstanding shares of Common
Stock, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares, or (iv) issue by reclassification of its shares of Common
Stock any shares of other common stock of the Company. In any such event, the
Exchange Rate shall be multiplied by a dilution adjustment equal to the number
of shares of Common Stock (or, in the case of a reclassification referred to
in clause (iv) above, the number of shares of other common stock of the
Company issued pursuant thereto), or fraction thereof, that a shareholder who
held one share of Common Stock immediately prior to such event would be
entitled solely by reason of such event to hold immediately after such event.
In addition, if the Company shall issue rights or warrants to all holders of
Common Stock entitling them to subscribe for or purchase shares of Common
Stock at a price per share less than the Then-Reference Market Price (as
defined below) of the Common Stock (other than rights to purchase Common Stock
pursuant to a plan for the reinvestment of dividends or interest) then the
Exchange Rate shall be multiplied by a dilution adjustment
12
<PAGE>
equal to a fraction, of which the numerator shall be the number of shares of
Common Stock outstanding immediately prior to the time (determined as
described below) the adjustment is calculated by reason of the issuance of
such rights or warrants plus the number of additional shares offered for
subscription or purchase pursuant to such rights or warrants, and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately prior to the time as of which such adjustment is calculated plus
the number of additional shares that the aggregate Price to Public of the
shares so offered for subscription or purchase would purchase at the Then-
Reference Market Price. To the extent that, after expiration of such rights or
warrants, the shares offered thereby shall not have been delivered, the
Exchange Rate shall be further adjusted to equal the Exchange Rate that would
have been in effect had the foregoing adjustment been made upon the basis of
delivery of only the number of shares of Common Stock actually delivered. The
"Then-Reference Market Price" of the Common Stock means the average Closing
Price per share of Common Stock for a Calculation Period of five Trading Days
immediately prior to the time such adjustment is calculated (or, in the case
of an adjustment calculated at the opening of business on the business day
following a record date, as described below, immediately prior to the earlier
of the time such adjustment is calculated and the related "ex-date" on which
the shares of Common Stock first trade regular way on their principal market
without the right to receive the relevant dividend, distribution or issuance);
provided, however, that if no Closing Price for the Common Stock is determined
for one or more (but not all) of such Trading Days, such Trading Day shall be
disregarded in the calculation of the Then-Reference Market Price (but no
additional Trading Days shall be added to the Calculation Period). If no
Closing Price for the Common Stock is determined for any of such Trading Days,
the most recently available Closing Price for the Common Stock prior to such
five Trading Days shall be the Then-Reference Market Price.
If, after the date hereof, the Company makes an Excess Purchase Payment (as
defined below), then the Exchange Rate will be multiplied by a fraction of
which the numerator shall be the Then-Reference Market Price of the Common
Stock, and of which the denominator shall be such Then-Reference Market Price
less the amount of such distribution applicable to one share of Common Stock
which would not be a Permitted Dividend (as defined below) (or in the case of
an Excess Purchase Payment, less the aggregate amount of such Excess Purchase
Payments for which adjustment is being made at such time divided by the number
of outstanding shares of Common Stock on the date the adjustment is effected).
For purposes of these adjustments, the term "Excess Purchase Payment" means
the excess, if any, of (x) the cash and the value (as determined by a
nationally recognized independent investment banking firm retained for this
purpose by the Trust) of all other consideration paid by the Company with
respect to one share of Common Stock acquired in any share repurchase
(excluding share repurchases by the Company effected in compliance with Rule
10b-18 under the Exchange Act) whether made by the Company in the open market,
by private purchase, by tender offer, by exchange offer or otherwise, over (y)
the Then-Reference Market Price of the Common Stock. Notwithstanding the
foregoing, the Company may pay up to $ in aggregate consideration in
respect of share repurchases without any adjustment being required, provided
that no such repurchase involves an Excess Purchase Payment of more than 5% of
the Then-Reference Market Price of the Common Stock on the date an adjustment
therefor would otherwise be required to be effected.
If any adjustment in the Exchange Rate is required to be calculated as
described above, corresponding adjustments to the Threshold Appreciation Price
and the Floor Price, as previously adjusted, shall be calculated.
Dilution adjustments shall be effected: (i) in the case of any dividend,
distribution or issuance described above, at the opening of business on the
business day following the record date for determination of holders of Common
Stock entitled to receive such dividend, distribution or issuance or, if the
announcement of any such dividend, distribution or issuance is after such
record date, at the time such dividend, distribution or issuance shall be
announced by the Company; (ii) in the case of any subdivision, split,
combination or reclassification described above, on the effective date of such
transaction; (iii) in the case of any Excess Purchase Payment for which the
Company shall announce, at or prior to the time it commences the relevant
share repurchase, the repurchase price per share for shares proposed to be
repurchased, on the date of such announcement; and (iv) in the case of any
other Excess Purchase Payment, on the date that the holders of the repurchased
shares become
13
<PAGE>
entitled to payment in respect thereof. There will be no adjustment under the
Contract in respect of any dividends, distributions or issuances that may be
declared or announced after the Exchange Date. If any announcement or
declaration of a record date in respect of a dividend, distribution or
issuance shall subsequently be cancelled by the Company, or such dividend,
distribution or issuance shall fail to receive requisite approvals or shall
fail to occur for any other reason, then the Exchange Rate shall be further
adjusted to equal the Exchange Rate that would have been in effect had the
adjustment for such dividend, distribution or issuance not been made. All
adjustments described herein shall be rounded upward or downward to the
nearest 1/10,000 (or if there is not a nearest 1/10,000, to the next lower
1/10,000). No adjustment in the Exchange Rate shall be required unless such
adjustment would require an increase or decrease of at least one percent
therein; provided, however, that any adjustments which by reason of the
foregoing are not required to be made shall be carried forward and taken into
account in any subsequent adjustment.
In the event of (i) any dividend or distribution by the Company to all
holders of Common Stock of evidences of its indebtedness or other assets
(excluding (1) dividends or distributions referred to in clause (i) of the
first paragraph under this caption "--Dilution Adjustments," (2) any common
shares issued pursuant to a reclassification referred to in clause (iv) of
such paragraph and (3) Permitted Dividends made by the Company) or any
issuance by the Company to all holders of Common Stock of rights or warrants
(other than rights or warrants referred to in the second paragraph under this
caption "--Dilution Adjustments"), (ii) any consolidation or merger of the
Company with or into another entity (other than a merger or consolidation in
which the Company is the continuing corporation and in which the Common Stock
outstanding immediately prior to the merger or consolidation is not exchanged
for cash, securities or other property of the Company or another entity),
(iii) any sale, transfer, lease or conveyance to another entity of the
property of the Company as an entirety or substantially as an entirety, (iv)
any statutory exchange of securities of the Company with another entity (other
than in connection with a merger or acquisition) or (v) any liquidation,
dissolution or winding up of the Company (any such event, an "Adjustment
Event"), each holder of a TrENDS will receive on the Exchange Date, in lieu of
or (in the case of an Adjustment Event described in clause (i) above) in
addition to, Common Stock as described above, cash in an amount equal to the
product of the initial number of shares of Common Stock subject to the
Contract and (A) if the Reference Market Price is greater than or equal to the
Threshold Appreciation Price, multiplied by the Transaction Value (as
defined below), (B) if the Reference Market Price is less than the Threshold
Appreciation Price but is equal to or greater than the Floor Price, the
product of (x) the Floor Price divided by the Reference Market Price
multiplied by (y) the Transaction Value and (C) if the Reference Market Price
is less than the Floor Price, the Transaction Value. Following an Adjustment
Event, the Reference Market Price, as such term is used in this paragraph and
throughout the definition of Exchange Rate, shall be deemed to equal (A) the
Reference Market Price of the Common Stock, as adjusted pursuant to the method
set forth in the preceding paragraph, plus (B) the Transaction Value. For
purposes of these provisions, the term "Permitted Dividend" means any cash
dividend in respect of the Common Stock, other than a cash dividend that,
together with any other cash dividends during the preceding 12 months, exceeds
10% of the average of the Closing Prices during such 12-month period.
Notwithstanding the foregoing, with respect to any securities received in an
Adjustment Event that (A) are (i) listed on a United States national
securities exchange, (ii) reported on a United States national securities
system subject to last sale reporting, (iii) traded in the over-the-counter
market and reported on the National Quotation Bureau or similar organization
or (iv) for which bid and ask prices are available from at least three
nationally recognized investment banking firms and (B) are either (x)
perpetual equity securities or (y) non-perpetual equity or debt securities
with a stated maturity after the stated maturity of the TrENDS ("Marketable
Securities"), the Seller may, at its option, in lieu of delivering the amount
of cash deliverable in respect of Marketable Securities received in an
Adjustment Event, as determined in accordance with the previous paragraph,
deliver a number of such Marketable Securities with a value equal to such cash
amount, as determined in accordance with clause (iii) of the definition of
Transaction Value, as applicable, but not exceeding, as a percentage of the
total consideration required to be delivered, the percentage of the total
transaction attributable to such Marketable Securities; provided, however,
that (i) if such option is exercised, the Seller shall deliver Marketable
Securities in respect of all, but not less than all, cash amounts that would
otherwise be deliverable in
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respect of Marketable Securities received in an Adjustment Event, (ii) the
Seller may not exercise such option if the Seller has elected to deliver cash
in lieu of the Common Stock, if any, deliverable upon the Exchange Date or if
such Marketable Securities have not yet been delivered to the holders entitled
thereto following such Adjustment Event or any record date with respect
thereto, and (iii) subject to clause (ii) of this proviso, the Seller must
exercise such option if the Seller does not elect to deliver cash in lieu of
Common Stock, if any, deliverable upon the Exchange Date. If the Seller elects
to deliver Marketable Securities, each Holder will be responsible for the
payment of any and all brokerage and other transaction costs upon the sale of
such Marketable Securities. If, following any Adjustment Event, any Marketable
Security ceases to qualify as a Marketable Security, then (x) the Seller may
no longer elect to deliver such Marketable Security in lieu of an equivalent
amount of cash and (y) notwithstanding clause (iii) of the definition of
Transaction Value, the Transaction Value of such Marketable Security shall
mean the fair market value of such Marketable Security on the date such
security ceases to qualify as a Marketable Security, as determined by a
nationally recognized investment banking firm retained for this purpose by the
Seller.
"Transaction Value" means the sum of (i) for any cash received in any such
Adjustment Event, the amount of cash received per share of Common Stock, (ii)
for any property other than cash or Marketable Securities received in any such
Adjustment Event, an amount equal to the market value on the date the
Adjustment Event is consummated of such property received per share of Common
Stock as determined by a nationally recognized independent investment banking
firm retained for this purpose by the Administrator and (iii) for any
Marketable Securities received in any such Adjustment Event, an amount equal
to the average Closing Price per Marketable Security for the 20 Trading Days
immediately prior to the Exchange Date multiplied by the number of such
securities received for each share of Common Stock; provided that if no
Closing Price for such Marketable Securities is determined for one or more
(but not all) of such Trading Days, such Trading Days shall be disregarded in
the calculation of such average Closing Price (but no additional Trading Days
shall be added to the Calculation Period). If no Closing Price for the
Marketable Securities is determined for all such Trading Days, the calculation
in the preceding clause (iii) shall be based on the most recently available
Closing Price for the Marketable Securities prior to such 20 Trading Days. The
number of Marketable Securities included in the calculation of Transaction
Value for purposes of the preceding clause (iii) shall be subject to
adjustment if a dilution event of the type described above shall occur with
respect to the issuer of the Marketable Securities between the time of the
Adjustment Event and the Exchange Date.
No dilution adjustments will be made for events other than those described
above, such as offerings of Common Stock (other than through the issuance of
rights or warrants described above) for cash or in connection with
acquisitions.
COLLATERAL ARRANGEMENTS; ACCELERATION
The Seller's obligations under the Contract will be secured by a security
interest in the maximum number of shares of Common Stock subject to the
Contract or short-term, direct obligations of the U.S. Government pursuant to
a Collateral Agreement and a Securities Account Control Agreement between the
Seller, the Trust and The Bank of New York, as collateral agent and securities
intermediary (the "Collateral Agent"). Unless the Seller is in default in its
obligations under the Collateral Agreement, the Seller will be permitted to
substitute for any pledged shares of Common Stock collateral consisting of
short-term, direct obligations of the U.S. Government. Any U.S. Government
obligations pledged as substitute collateral will be required to have an
aggregate market value at the time of substitution and at daily mark-to-market
valuations thereafter of not less than 150% (or, from and after any
Insufficiency Determination that shall not be cured by the close of business
on the tenth business day thereafter, as described below, 200%) of the product
of the market price of the Common Stock at the time of each valuation times
the number of shares of Common Stock for which such obligations are being
substituted. The Collateral Agreement will provide that, in the event of an
Adjustment Event, the Seller will pledge as alternative collateral any
Marketable Securities received by it in respect of the maximum number of
shares of Common Stock subject to the Contract at the time of the Adjustment
Event, plus U.S. Government obligations having an aggregate market value when
pledged and at daily mark-to-market
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valuations thereafter of not less than 150% of the Seller's Cash Delivery
Obligations. The Seller's "Cash Delivery Obligations" shall be the Transaction
Value of any consideration other than Marketable Securities received by the
Seller in respect of the maximum number of shares subject to the Contract at
the time of the Adjustment Event. The number of Marketable Securities required
to be pledged shall be subject to adjustment if any event requiring a dilution
adjustment under the Contract shall occur. The Seller will be permitted to
substitute U.S. Government obligations for Marketable Securities pledged at
the time of or after any Adjustment Event. Any U.S. Government obligations so
substituted will be required to have an aggregate market value at the time of
substitution and at daily mark-to-market valuations thereafter of not less
than 150% (or, from and after any Insufficiency Determination that shall not
be cured by the close of business on the tenth business day thereafter, as
described below, 200%) of the product of the market price per Marketable
Security at the time of each valuation times the number of Marketable
Securities for which such obligations are being substituted. The Collateral
Agent on behalf of the Trust will promptly pay over to the Seller any
dividends, interest, principal or other payments received by the Trust,
directly or indirectly through the Collateral Agent in respect of any
collateral, including any substitute collateral, unless the Seller is in
default of its obligations under the Collateral Agreement, or unless the
payment of such amount to the Seller would cause the collateral to become
insufficient under the Collateral Agreement. The Seller shall have the right
to vote any pledged shares of Common Stock or Marketable Securities for so
long as such shares are owned by it and pledged under the Collateral
Agreement, including after an event of default under the Contract or the
Collateral Agreement.
If the Collateral Agent shall determine that U.S. Government obligations
pledged as substitute collateral shall fail to meet the foregoing requirements
at any valuation (an "Insufficiency Determination"), or that the Seller has
failed to pledge additional collateral required as a result of a dilution
adjustment increasing the maximum number of shares of Common Stock or
Marketable Securities subject to the Contract, and such failure shall not be
cured by the close of business on the tenth business day after such
determination, then, unless a Collateral Event of Default (as defined below)
under the Collateral Agreement shall have occurred and be continuing, the
Collateral Agent on behalf of the Trust shall commence (i) sales of the
collateral consisting of U.S. Government obligations and (ii) purchases, using
the proceeds of such sales, of shares of Common Stock or Marketable
Securities, in an amount sufficient to cause the collateral to meet the
requirements under the Collateral Agreement. The Collateral Agent on behalf of
the Trust shall discontinue such sales and purchases if at any time a
Collateral Event of Default under the Collateral Agreement shall have occurred
and be continuing. A "Collateral Event of Default" under the Collateral
Agreement shall mean, at any time, (A) if no U.S. Government obligations shall
be pledged as substitute collateral at such time, failure of the collateral to
consist of at least the maximum number of shares of Common Stock subject to
the Contract at such time (or, if an Adjustment Event shall have occurred at
or prior to such time, failure of the collateral to include the maximum number
of any Marketable Securities required to be pledged as described above); (B)
if any U.S. Government obligations shall be pledged as substitute collateral
for shares of Common Stock (or Marketable Securities) at such time, failure of
such U.S. Government obligations to have a market value at such time of at
least 105% of the market price per share of Common Stock (or the then-current
market price per Marketable Security, as the case may be) times the difference
between (x) the maximum number of shares of Common Stock (or Marketable
Securities) subject to the Contract at such time and (y) the number of shares
of Common Stock (or Marketable Securities) pledged as collateral at such time;
and (C) at any time after an Adjustment Event in which consideration other
than Marketable Securities shall have been delivered, failure of the U.S.
Government obligations pledged in respect of the Cash Delivery Obligations to
have a market value at such time of at least 105% of the Cash Delivery
Obligations, if such failure shall not be cured within ten business days after
notice thereof is delivered to the Seller.
The occurrence of a Collateral Event of Default under the Collateral
Agreement, or the bankruptcy or insolvency of the Seller, will cause an
automatic acceleration of the Seller's obligations under the Contract. In any
such event, the Seller will become obligated to deliver shares of Common Stock
(or, after an Adjustment Event, Marketable Securities or cash or a combination
thereof) having an aggregate value equal to the "Aggregate Acceleration Value"
under the Contract. The Aggregate Acceleration Value will be based on an
"Acceleration Value," determined by the Administrator on the basis of
quotations from up to four nationally
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recognized independent investment banking firms (each, an "Independent
Dealer"). Each quotation will be for the amount that would be paid to the
relevant Independent Dealer in consideration of an agreement between the Trust
and such dealer that would have the effect of preserving the Trust's rights to
receive Common Stock (or, after an Adjustment Event, the alternative
consideration provided under the Contract) under a portion of the Contract
that corresponds to an initial number of shares of Common Stock equal to
1,000. The Administrator will request quotations from four Independent Dealers
on or as soon as reasonably practicable following the date of acceleration. If
four quotations are provided, the Acceleration Value will be the arithmetic
mean of the two quotations remaining after disregarding the highest and lowest
quotations. If two or three quotations are provided, the Acceleration Value
will be the arithmetic mean of such quotations. If one quotation is provided,
the Acceleration Value will be equal to such quotation. The Aggregate
Acceleration Value will be computed by multiplying the Acceleration Value by
the quotient obtained by dividing the initial number of shares of Common Stock
subject to the Contract by 1,000; except that, if no quotations are provided,
the Aggregate Acceleration Value will be (A) the closing price per share of
Common Stock on the acceleration date times the number of shares of Common
Stock that would be required to be delivered on such date under the Contract
if the Exchange Date were redefined to be the acceleration date or (B) after
an Adjustment Event, the value of the alternative consideration that would be
required to be delivered on such date under the Contract if the Exchange Date
were redefined to be the acceleration date. Upon the occurrence of a
Collateral Event of Default or the bankruptcy or insolvency of the Seller, the
Common Stock (or, after an Adjustment Event, Marketable Securities or cash or
a combination thereof) deliverable for each TrENDS will be based solely on the
Aggregate Acceleration Value described above for the Contract. From time to
time, as determined in good faith by the Trustees of the Trust, the Trust may
also engage third parties to provide additional valuations.
Upon any acceleration, the Collateral Agent will distribute to the Trust,
for distribution pro rata to the Holders, the Aggregate Acceleration Value in
the form of shares of Common Stock then pledged, or cash generated from the
liquidation of U.S. Government obligations then pledged, or a combination
thereof (or, after an Adjustment Event, in the form of Marketable Securities
then pledged, cash generated from the liquidation of U.S. Government
obligations then pledged, or a combination thereof). In addition, in the event
that by the Exchange Date any substitute collateral has not been replaced by
Common Stock (or, after an Adjustment Event, cash or Marketable Securities)
sufficient to meet the obligations under the Contract, the Collateral Agent
will distribute to the Trust for distribution pro rata to the Holders the
market value of the Common Stock required to be delivered thereunder, in the
form of any shares of Common Stock then pledged by the Seller plus cash
generated from the liquidation of U.S. Government obligations then pledged by
the Seller (or, after an Adjustment Event, the market value of the alternative
consideration required to be delivered thereunder, in the form of any
Marketable Securities then pledged, plus any cash then pledged, plus cash
generated from the liquidation of U.S. Government obligations then pledged).
THE GUARANTY
Under the Guaranty, Mr. T.L. Li will guarantee the delivery of shares of
Common Stock or the cash equivalent of such shares subject to the Contract on
the Exchange Date. Mr. T.L. Li will also guarantee the maintenance of
collateral pursuant to the Collateral Agreement and the obligations of the
Seller to reimburse Donaldson, Lufkin & Jenrette Securities Corporation or an
affiliate thereof for certain on-going expenses of the Trust and certain
expenses described herein under "Management and Administration of the Trust--
Indemnification." Mr. T.L. Li is not affiliated with the Trust, the
Administrator or the Underwriters.
Mr. T.L. Li is not a resident of the United States and all or substantial
portion of his assets may be located outside the United States. Mr. T.L. Li
has been advised by his Hong Kong counsel that there is doubt as to whether
the Guaranty may be enforced against Mr. T.L. Li in Hong Kong. See
"Enforcement of Civil Liabilities."
DESCRIPTION OF SELLER
The Seller is Luckygold 18A Limited ("Luckygold"), a company incorporated in
the British Virgin Islands. Mr. T.L. Li owns all of the outstanding shares of
Luckygold. Luckygold owns 7,888,038 shares of Common Stock
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of the Company, or 58.6% of the Common Stock outstanding. The Memorandum of
Association of Luckygold prohibits Luckygold from conducting operating
activities and only authorizes it to hold and deal in the Common Stock and
interests in the capital of the Company. Luckygold does not have any
indebtedness. Luckygold is organized under the laws of the British Virgin
Islands and except for the shares of Common Stock pledged to the Trust in
connection with the offering, all or a substantial portion of Luckygold 's
other assets are or may be located outside the United States. Luckygold has
been advised by its British Virgin Islands counsel that there is doubt as to
whether the Contract, the Collateral Agreement or other agreements relating to
the offering may be enforced against Luckygold in the British Virgin Islands.
See "Enforceability of Civil Liabilities." Reference is made to the caption
"Principal Shareholders and Selling Shareholder" in the Company Prospectus for
further information about the Seller and Mr. T.L. Li.
THE U.S. TREASURY SECURITIES
The Trust will purchase and hold a series of zero-coupon ("stripped") U.S.
Treasury securities with face amounts and maturities corresponding to the
distributions payable with respect to the TrENDS and the payment dates
thereof. The Trust may invest up to 30% of its total assets in such U.S.
Treasury Securities. In the event that the Contract is accelerated or disposed
of as described under the caption "Management Administration of the Trust--
Trustees," then any such U.S. Treasury securities then held in the Trust shall
be liquidated by the Administrator and distributed pro rata to the Holders,
together with the amounts distributed upon acceleration or any consideration
received by the Trust upon disposition of the Contract. See "--Collateral
Arrangements; Acceleration" and "--Trust Termination."
TEMPORARY INVESTMENTS
For cash management purposes, the Trust may invest the proceeds of the U.S.
Treasury securities and any other cash held by the Trust in short-term
obligations of the U.S. Government maturing no later than the business day
preceding the next following distribution date. Not more than 5% of the
Trust's total assets will be invested in such short-term obligations or held
in cash at any one time.
INVESTMENT RESTRICTIONS
As a matter of fundamental policy, the Trust may not purchase any securities
or instruments other than the U.S. Treasury securities, the Contract and the
Common Stock or other assets received pursuant to the Contract and, for cash
management purposes, short-term obligations of the U.S. Government; issue any
securities or instruments except for the TrENDS; make short sales or purchase
securities on margin; write put or call options; borrow money; underwrite
securities; purchase or sell real estate, commodities or commodities contracts
including futures contracts; or make loans. The Trust has also adopted a
fundamental policy that the Contract may not be disposed of during the term of
the Trust and that the U.S. Treasury securities held by the Trust may not be
disposed of prior to the earlier of their respective maturities and the
termination of the Trust. The foregoing policies are fundamental policies of
the Trust that may not be changed without the approval of 100% in interest of
the Holders.
TRUST TERMINATION
The Trust will terminate automatically on or shortly after the Exchange
Date. Alternatively, in the event that the Contract is accelerated, any U.S.
Treasury securities then held in the Trust shall be liquidated by the
Administrator and distributed pro rata to the Holders, together with the
amounts distributed upon acceleration, and the Trust shall be terminated. See
"--Collateral Arrangements; Acceleration" and "--The U.S. Treasury
Securities."
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RISK FACTORS
INTERNAL MANAGEMENT; NO PORTFOLIO MANAGEMENT
The Trust will be internally managed by its Trustees and will not have any
separate investment adviser. It is a fundamental policy of the Trust that the
Contract may not be disposed of during the term of the Trust and that the U.S.
Treasury securities held by the Trust may not be disposed of prior to the
earlier of their respective maturities and the termination of the Trust. As a
result, the Trust will continue to hold the Contract despite significant
declines in the market price of the Common Stock or adverse changes in the
financial condition of the Company (or, after an Adjustment Event, comparable
developments affecting any Marketable Securities or the issuer thereof). The
Trust will not be managed like a typical closed-end investment company.
LIMITED APPRECIATION POTENTIAL; COMMON STOCK DEPRECIATION RISK
The Trust anticipates that on the Exchange Date it will receive the Common
Stock deliverable pursuant to the Contract, which it will then distribute to
Holders. There is no assurance that the yield on the TrENDS will be higher
than the dividend yield on the Common Stock over the term of the Trust. In
addition, because the Contract calls for the Seller to deliver less than the
full number of shares of Common Stock subject to the Contract where the
Reference Market Price exceeds the Floor Price (and therefore less than one
full share of Common Stock for each outstanding TrENDS), the TrENDS have more
limited appreciation potential than the Common Stock. Therefore, the TrENDS
may trade below the value of the Common Stock if the Common Stock appreciates
in value. The value of the Common Stock to be received by Holders on the
Exchange Date (and any cash received in lieu thereof) may be less than the
amount paid by them for their TrENDS. Holders of TrENDS will realize the
entire decline in equity value if the Reference Market Price is less than the
Floor Price. In addition, because the Reference Market Price generally is
determined based on a 20-Trading Day average, the value of a share of Common
Stock distributed on the Exchange Date may be less than the Reference Market
Price used to determine the amount receivable at the Exchange Date.
DILUTION ADJUSTMENTS; SHAREHOLDER RIGHTS
The number of shares of Common Stock that Holders are entitled to receive at
the termination of the Trust is subject to adjustment for certain events
arising from stock splits and combinations, stock dividends and certain other
actions of the Company that modify its capital structure. See "Investment
Objective and Policies--The Contract--Dilution Adjustments." The number of
shares to be received by Holders may not be adjusted for other events, such as
offerings of Common Stock for cash or in connection with acquisitions, that
may adversely affect the price of the Common Stock and, because of the
relationship of the amount to be received pursuant to the Contract to the
price of the Common Stock, such other events may adversely affect the trading
price of the TrENDS. There can be no assurance that the Company will not take
any of the foregoing actions, or that it will not make offerings of, or that
major shareholders will not sell any, Common Stock in the future, or as to the
amount of any such offerings or sales. In addition, until the receipt of the
Common Stock by Holders as a result of the exchange of the TrENDS for the
Common Stock, Holders will not be entitled to any rights with respect to the
Common Stock (including without limitation voting rights and the rights to
receive any dividends or other distributions in respect thereof).
The Seller is not responsible for the determination or calculation of the
amount receivable by Holders of the TrENDS at the Exchange Date. The Contract
between the Trust and the Seller is a commercial transaction and does not
create any rights in, or for the benefit of, any third party, including any
Holder of the TrENDS. The Seller may take actions as the controlling
shareholder of the Company that are not in the best interest of Holders of the
TrENDS.
TRADING VALUE; LISTING; NEED FOR QUALIFIED INDEPENDENT UNDERWRITER
The Trust is a newly organized closed-end investment company with no
previous operating history and the TrENDS are innovative securities. It is not
possible to predict how the TrENDS will trade in the secondary
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market. The trading price of the TrENDS may vary considerably prior to the
Exchange Date due to, among other things, fluctuations in the price of the
Common Stock (which may occur due to changes in the Company's financial
condition, results of operations or prospects, or because of complex and
interrelated political, economic, financial and other factors that can affect
the capital markets generally, the stock exchanges or quotation systems on
which the Common Stock is traded and the market segment of which the Company
is a part) and fluctuations in interest rates and other factors that are
difficult to predict and beyond the Trust's control. The Trust believes,
however, that because of the yield on the TrENDS and the formula for
determining the number of shares of Common Stock to be delivered on the
Exchange Date, the TrENDS will tend to trade at a premium to the market value
of the Common Stock to the extent the Common Stock price falls, and at a
discount to the market value of the Common Stock to the extent the Common
Stock price rises.
Shares of closed-end investment companies frequently trade at a premium to
or discount from net asset value. This characteristic of investments in a
closed-end investment company is a risk separate and distinct from the risk
that the Trust's net asset value will decrease. The Trust cannot predict
whether its shares will trade at, below or above net asset value. The risk of
purchasing investments in a closed-end company that might trade at a discount
may be greater for investors who wish to sell their investments soon after
completion of an initial public offering because for those investors,
realization of a gain or loss on their investments is likely to be more
dependent upon the existence of a premium or discount than upon portfolio
performance.
The Underwriters currently intend, but are not obligated, to make a market
in the TrENDS. There can be no assurance that a secondary market will develop
or, if a secondary market does develop, that it will provide the Holders with
liquidity of investment or that it will continue for the life of the TrENDS.
Application has been made to list the TrENDS on the ASE, but there can be no
assurance that, if listed, the TrENDS will not later be delisted or that
trading in the TrENDS on the ASE will not be suspended. In the event of a
delisting or suspension of trading on such exchange the Trust will apply for
listing of the securities on another national securities exchange or for
quotation on another trading market. If the TrENDS are not listed or traded on
any securities exchange or trading market, or if trading of the TrENDS is
suspended, pricing information for the TrENDS may be more difficult to obtain,
and the price and liquidity of the TrENDS may be adversely affected.
Approximately % of the net proceeds of this offering will be used on or
shortly after the Closing to pay the purchase price under the Contract to
Luckygold. Luckygold will, in turn, distribute as a dividend the net proceeds
it receives from this offering to its sole shareholder, Mr. T.L. Li.
Approximately $ of such distribution will be used by Mr. T.L. Li to
partially repay amounts outstanding under a personal loan owed to an affiliate
of Donaldson, Lufkin & Jenrette Securities Corporation. Donaldson, Lufkin and
Jenrette Securities Corporation is a member of the National Association of
Securities Dealers, Inc. (the "NASD") and one of its affiliates will receive
more than 10% of the net proceeds from the offering as a result of such
repayment. Accordingly, under the Conduct Rules of the NASD, the price at
which the TrENDS are distributed to the public must be no higher than that
recommended by a "qualified independent underwriter" meeting certain
standards. BancAmerica Robertson Stephens has agreed to act as the qualified
independent underwriter in connection with the offering.
NON-DIVERSIFIED STATUS
The Trust is considered non-diversified under the Investment Company Act,
which means that the Trust is not limited in the proportion of its assets that
may be invested in the obligations of a single issuer. Since the only
securities or instruments held or received by the Trust will be U.S. Treasury
securities and the Contract or other assets consistent with the terms of the
Contract, the Trust may be subject to greater risk than would be the case for
an investment company with diversified investments.
RISK RELATING TO BANKRUPTCY OF SELLER AND MR. T.L. LI
The right of the Trust to (i) realize on the collateral held by the
Collateral Agent to secure the Seller's obligations under the Contract or (ii)
enforce the Guaranty upon the bankruptcy or insolvency of the Seller or
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Mr. T.L. Li may be significantly impaired by British Virgin Islands, Hong
Kong, and United States bankruptcy or similar laws, as well as other foreign
bankruptcy or similar laws which may apply to Mr. T.L. Li or the Seller.
Mr. T.L. Li is domiciled in Hong Kong and the Seller is incorporated in the
British Virgin Islands and is not engaged in business in the United States.
Consequently, if the Seller were to become insolvent, the Seller would most
likely not be subject to Title 11 of the United States Bankruptcy Code (the
"Bankruptcy Code"). However, it is possible that the Seller could become a
debtor under the Bankruptcy Code.
In the event the Seller were to become a debtor under the Bankruptcy Code or
subject to an ancillary proceeding case, the Trust believes that the Contract
would constitute a "securities contract" for purposes of the Bankruptcy Code,
performance, termination or liquidation of which may not be subject to the
automatic stay provisions of the Bankruptcy Code as well as the provisions
voiding the effect of bankruptcy termination clauses, and should not be stayed
by an order of a United States bankruptcy court. It is, however, possible that
the Contract will be determined not to qualify as a "securities contract" for
this purpose, or not to be covered by the exemption from the automatic stay
provisions and bankruptcy termination clauses granted to a "securities
contract", in which event, if the Seller becomes subject to a case, including
an ancillary case, under the Bankruptcy Code, there could be a delay in
settlement of the Contract, including the risk that the Contract may continue
to its full term, which would adversely affect the time of exchange or, as a
result, the amount received by the Holders in respect of the TrENDS.
Investors should be aware that the bankruptcy or insolvency of the Seller
or, Mr. T.L. Li could give rise to concurrent bankruptcy, insolvency or other
legal proceedings in different countries, including the British Virgin
Islands, Hong Kong or Bermuda. There can be no assurance that any of the
courts involved in the proceedings would recognize the jurisdiction, orders
and judgments of the others, or respect the applicable law followed by any
other court. Under these circumstances, it is difficult to predict whether or
when the Trust would be able to enforce its rights against the collateral held
by the Collateral Agent or enforce the Guaranty following commencement, during
the pendency, or as a result of bankruptcy, insolvency or similar proceedings
with respect to the Seller or Mr. T.L. Li.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The law regarding the treatment of the TrENDS for United States federal
income tax purposes is subject to some uncertainty. Although the Trust and the
Seller will take the position that, for United States federal income tax
purposes, a Holder will be treated as the owner of its pro rata portions of
the stripped U.S. Treasury securities and the Contract, and the Contract
should be treated as a prepaid forward contract, there are other conceivable
alternative characterizations of the TrENDS which could require Holders to
include more interest in income than would be includable in income under the
analysis set forth herein under "Certain United States Federal Income Tax
Considerations." Accordingly, prospective investors should consult their tax
advisors with respect to the tax consequences to them of the purchase,
ownership and disposition of the TrENDS in light of their particular
circumstances and the tax risks associated with possible alternative
characterizations of the TrENDS. See "Certain United States Federal Income Tax
Considerations."
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DESCRIPTION OF THE TRENDS
Each TrENDS represents an equal proportional interest in the Trust, and a
total of 6,000,000 TrENDS will be issued (or 6,900,000 TrENDS if the
Underwriters' over-allotment option is exercised in full). Upon liquidation of
the Trust, Holders are entitled to share pro rata in the net assets of the
Trust available for distribution. The TrENDS have no preemptive, redemption or
conversion rights. The TrENDS are fully paid and nonassessable by the Trust.
The only securities that the Trust is authorized to issue are the TrENDS
offered hereby and those sold to the initial Holders referred to below.
Holders are entitled to a full vote for each TrENDS 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 Donaldson, Lufkin & Jenrette Securities Corporation or an affiliate thereof
as the initial Holder of TrENDS of the Trust. The Trust intends to hold annual
meetings as required by the rules of the ASE. The Trustees may call special
meetings of Holders for action by Holder vote as may be required by either the
Investment Company Act or the Trust Agreement. The Holders have the right,
upon the declaration in writing or vote of more than two-thirds of the
outstanding TrENDS, to remove a Trustee. The Trustees will call a meeting of
Holders to vote on the removal of a Trustee upon the written request of the
Holders of record of 10% of the TrENDS or to vote on other matters upon the
written request of the Holders of record of 51% of the TrENDS (unless
substantially the same matter was voted on during the preceding 12 months).
The Trust will also assist Holders in communications with other Holders as
required by the Investment Company Act.
BOOK-ENTRY ONLY ISSUANCE
The Depository Trust Company ("DTC") will act as securities depository for
the TrENDS. The information in this section concerning DTC and DTC's book-
entry system is based upon information obtained from DTC. The TrENDS offered
hereby will initially be issued only as fully-registered securities registered
in the name of DTC's nominee. One or more fully-registered global TrENDS
certificates will be issued, representing in the aggregate the total number of
TrENDS, and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). Access
to the DTC system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly
("Indirect Participants").
Purchases of TrENDS within the DTC system must be made by or through Direct
Participants, which will receive a credit for the TrENDS on DTC's records. The
ownership interest of each actual purchaser of a TrENDS ("Beneficial Owner")
is in turn to be recorded on the Direct or Indirect Participants' records.
Beneficial Owners will not receive written confirmation from DTC of their
purchases, but Beneficial Owners are expected to receive written confirmations
providing details of the transactions, as well as periodic statements of their
holdings, from the Direct or Indirect Participants through which the
Beneficial Owners purchased TrENDS. Transfers of ownership interests in TrENDS
are to be accomplished by entries made on the books of Participants acting on
behalf of Beneficial Owners.
Beneficial Owners will receive certificates representing their ownership
interests in TrENDS, upon a resignation of DTC, or upon request delivered to
the Administrator.
22
<PAGE>
DTC has no knowledge of the actual Beneficial Owners of the TrENDS; DTC's
records reflect only the identity of the Direct Participants to whose accounts
such TrENDS are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
In connection with payments on the TrENDS, DTC's practice is to credit
Direct Participants' accounts on the relevant payment date in accordance with
their respective holdings shown on DTC's records unless DTC has reason to
believe that it will not receive payments on such payment date. Payments by
Participants to Beneficial Owners will be governed by standing instructions
and customary practices and will be the responsibility of such Participant and
not of DTC or the Trust, subject to any statutory or regulatory requirements
as may be in effect from time to time. Payment of dividends to DTC is the
responsibility of the Trust, disbursement of such payments to Direct
Participants is the responsibility of DTC, and disbursement of such payments
to the Beneficial Owners is the responsibility of Direct and Indirect
Participants.
DTC may discontinue providing its services as securities depository with
respect to the TrENDS at any time by giving reasonable notice to the Trust.
Under such circumstances, in the event that a successor securities depository
is not obtained, certificates representing the TrENDS will be printed and
delivered.
23
<PAGE>
MANAGEMENT AND ADMINISTRATION OF THE TRUST
TRUSTEES
The Trust will be internally managed by three Trustees and will not have any
separate investment adviser. Consistent with provisions of the Code applicable
to grantor trusts, the Trustees will not have the power to vary the
investments held by the Trust. It is a fundamental policy of the Trust that
the Contract may not be disposed of during the term of the Trust and that the
U.S. Treasury securities held by the Trust may not be disposed of prior to the
earlier of their respective maturities and termination of the Trust.
The names of the persons who have been elected by Donaldson, Lufkin &
Jenrette Securities Corporation or an affiliate thereof, the initial Holder of
the Trust, and who will serve as the Trustees are set forth below. The
positions and the principal occupations of the individual Trustees during the
past five years are also set forth below. The Trustee who is deemed to be an
"interested person" of the Trust, as defined in the Investment Company Act, is
indicated by an asterisk.
<TABLE>
<CAPTION>
NAME, AGE AND ADDRESS TITLE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
<S> <C> <C>
*Donald J. Puglisi, 52 Managing Trustee Professor of Finance, University of Delaware
Department of Finance
University of Delaware
Newark, DE 19176
William R. Latham III, Trustee Professor of Economics, University of Delaware
53
Department of Economics
University of Delaware
Newark, DE 19176
James B. O'Neill, 58 Trustee Professor of Economics, University of Delaware
Center for Economic Ed-
ucation &
Entrepreneurship
University of Delaware
Newark, DE 19176
</TABLE>
Each Trustee who is not a director, officer or employee of any Underwriter
or the Administrator, or of any affiliate thereof, will be paid by the
Underwriters, on behalf of the Trust, in respect of his annual fee and
anticipated out-of-pocket expenses, a one-time, up-front fee of $10,800. The
Trust's Managing Trustee will also receive an additional up-front fee of
$3,600 for serving in that capacity. The Trustees will not receive, either
directly or indirectly, any compensation, including any pension or retirement
benefits, from the Trust. None of the Trustees receives any compensation for
serving as a trustee or director of any other affiliated investment company.
ADMINISTRATOR
The day-to-day affairs of the Trust will be managed by The Bank of New York
as Administrator pursuant to an Administration Agreement. Under the
Administration Agreement, the Trustees have delegated most of their
operational duties to the Administrator, including without limitation, the
duties to: (i) receive invoices for expenses incurred by the Trust; (ii) with
the approval of the Trustees, engage legal and other professional advisors
(other than the independent public accountants for the Trust); (iii) instruct
the Paying Agent to pay distributions on TrENDS as described herein; (iv)
prepare and mail, file or publish all notices, proxies, reports, tax returns
and other communications and documents, and keep all books and records, for
the Trust; (v) at the direction of the Trustees, institute and prosecute legal
and other appropriate proceedings to enforce the rights and remedies of the
Trust; and (vi) make all necessary arrangements with respect to meetings of
Trustees and any meetings of Holders. The Administrator, however, will not
select the independent public accountants for the Trust or sell or otherwise
dispose of the Trust assets (except in connection with an acceleration of the
Contract or the settlement of the Contract at the Exchange Date and upon
termination of the Trust).
24
<PAGE>
The Administration Agreement may be terminated by either the Trust or the
Administrator upon 60 days prior written notice, except that no termination
shall become effective until a successor Administrator has been chosen and has
accepted the duties of the Administrator.
Except for its roles as Administrator, Custodian, Paying Agent, registrar
and transfer agent for the Trust, The Bank of New York has no other
affiliation with, and is not engaged in any other transactions with, the
Trust.
The address of the Administrator is 101 Barclay Street, New York, New York
10286.
CUSTODIAN
The Trust's Custodian is The Bank of New York pursuant to a custodian
agreement (the "Custodian Agreement"). In the event of any termination of the
Custodian Agreement by the Trust or the resignation of the Custodian, the
Trust must engage a new Custodian to carry out the duties of the Custodian as
set forth in the Custodian Agreement. Pursuant to the Custodian Agreement, all
net cash received by the Trust will be invested by the Custodian in short-term
U.S. Treasury securities maturing on or shortly before the next quarterly
distribution date. The Custodian will also act as collateral agent under the
Collateral Agreement.
PAYING AGENT
The transfer agent, registrar and Paying Agent for the TrENDS is The Bank of
New York pursuant to a paying agent agreement (the "Paying Agent Agreement").
In the event of any termination of the Paying Agent Agreement by the Trust or
the resignation of the Paying Agent, the Trust will use its best efforts to
engage a new Paying Agent to carry out the duties of the Paying Agent.
INDEMNIFICATION
The Trust will indemnify each Trustee, the Paying Agent, the Administrator
and the Custodian with respect to any claim, liability, loss or expense
(including the costs and expenses of the defense against any claim or
liability) that it may incur in acting as Trustee, Paying Agent, Administrator
or Custodian as the case may be, except in the case of willful misfeasance,
bad faith, gross negligence or reckless disregard of their respective duties
or where applicable law prohibits such indemnification. Donaldson, Lufkin &
Jenrette Securities Corporation or an affiliate thereof has agreed to
reimburse the Trust for any amounts it may be required to pay as
indemnification to any Trustee, the Administrator, the Custodian or the Paying
Agent. The Seller has agreed to reimburse Donaldson, Lufkin & Jenrette
Securities Corporation or such affiliate for any such amounts.
DISTRIBUTIONS
The Trust intends to distribute to Holders on a quarterly basis an amount
equal to $ per TrENDS (which amount equals the pro rata portion of the
fixed quarterly cash distributions from the proceeds of the maturing U.S.
Treasury securities held by the Trust). The first distribution, in respect of
the period from the Closing until , will be payable on to Holders of
record as of and will equal $ per TrENDS. Thereafter, distributions
will be made on , , and of each year to Holders of record as of
each , , and , respectively. A portion of each such distribution
will be treated as a tax-free return of the Holder's investment, which will
not be subject to tax. See "Investment Objective and Policies--General," and
"Certain United States Federal Income Tax Considerations--Recognition of
Interest on the U.S. Treasury Securities."
Upon termination of the Trust, as described under the caption "Investment
Objective and Policies--Trust Termination," each Holder will receive its pro
rata portion of any remaining net assets of the Trust.
The Trust does not permit the reinvestment of distributions.
25
<PAGE>
ESTIMATED EXPENSES
At the Closing, the Underwriters out of the Underwriters' Compensation 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, TrENDS certificates and Holder reports,
expenses of the Trustees, fidelity bond coverage, stock exchange listing fees
and regulatory filings. Organization costs of the Trust in the amount of $
will be paid by Donaldson, Lufkin & Jenrette Securities Corporation or an
affiliate thereof and estimated costs of the Trust in connection with the
initial registration and public offering of the TrENDS in the amount of $
will be paid by the Seller.
The amount payable to the Administrator in respect of ongoing expenses of
the Trust was determined based on estimates made in good faith on the basis of
information currently available to the Trust, including estimates furnished by
the Trust's agents. There cannot, however, be any assurance that actual
operating expenses of the Trust will not be substantially more than this
amount. Any on-going expenses of the Trust in excess of these estimated
amounts will be paid by Donaldson, Lufkin & Jenrette Securities Corporation or
an affiliate thereof and will be reimbursed by the Seller.
YEAR 2000 COMPLIANCE
As the year 2000 approaches, an issue has emerged regarding how existing
application software programs and operating systems can accommodate the 2000
date value. Like other investment companies, financial and business
organizations and individuals around the world, the Trust could be adversely
affected if the computer systems used by the Trust's service providers do not
properly process and calculate date-related information and data from and
after January 1, 2000. Failure to adequately address this issue could have
potentially serious repercussions on the Trust's managing and administrative
functions. The Trust is in the process of working with its service providers
to prepare for the year 2000. Based on information currently available, the
Trust does not expect that it will incur significant operating expenses or be
required to incur material costs to be year 2000 compliant. At this time,
however, there can be no assurances that the Trust's efforts will be
sufficient to avoid any adverse impact on the Trust.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain of the principal United States federal
income tax consequences of the purchase, ownership and disposition of the
TrENDS. It deals only with TrENDS held as capital assets by a Holder who
acquires its TrENDS at the issue price from an Underwriter pursuant to the
original offering, and not with special classes of Holders, such as dealers in
securities or currencies, banks, life insurance companies, persons who are not
United States Holders (as defined below), persons who hold TrENDS that are
part of a straddle, hedging or conversion transaction, or persons whose
functional currency is not the U.S. dollar. The summary is based on the Code,
its legislative history, existing and proposed Treasury regulations
thereunder, Internal Revenue Service (the "IRS") rulings and pronouncements
and court decisions, all as currently in effect and all subject to change at
any time, perhaps with retroactive effect.
For purposes of this summary, a "United States Holder" is (i) a person who
is a citizen or resident of the United States, (ii) a corporation or
partnership created or organized in or under the laws of the United States or
any state thereof or the District of Columbia, (iii) an estate the income of
which is subject to United States federal income taxation, regardless of its
source, or (iv) a trust if a court within the United States is able to
exercise primary supervision over the administration of such trust and one or
more United States persons have the authority to control all substantial
decisions of such trust.
26
<PAGE>
Holders should also be aware that there are alternative characterizations of
the assets of the Trust which could result in different United States federal
income tax consequences. See "Alternative Characterizations" below. While
these alternative characterizations should not apply for United States federal
income tax purposes, there can be no assurance in this regard. The following
discussion assumes that no such alternative characterizations will apply.
Prospective investors should consult their tax advisors with respect to the
tax consequences to them of the purchase, ownership and disposition of the
TrENDS in light of their particular circumstances, including the tax
consequences under state, local, foreign and other tax laws and the possible
effects of changes in the United States federal or other tax laws. Holders
should also consult their tax advisors regarding the tax risks associated with
possible alternative characterizations of the TrENDS.
TAX STATUS OF THE TRUST
The Trust will be treated as a grantor trust for United States federal
income tax purposes, and, accordingly, each Holder will be considered the
owner of its pro rata portions of the stripped U.S. Treasury securities and
the Contract held by the Trust. Income received by the Trust will be treated
as income of the Holders in the manner set forth below.
RECOGNITION OF INTEREST ON THE U.S. TREASURY SECURITIES
The U.S. Treasury securities in the Trust will consist of stripped U.S.
Treasury securities. Each Holder will be required to treat its pro rata
portion of each U.S. Treasury security as an interest in a bond that was
originally issued on the date the Holder purchased its TrENDS and that has OID
equal to the excess of such Holder's pro rata portion of the amount payable on
such U.S. Treasury securities and the Holder's tax basis therefor (determined
as described below). Each Holder, regardless of its method of tax accounting,
must accrue OID in income (other than OID on short-term U.S. Treasury
securities as defined below) over the life of the U.S. Treasury securities on
a constant yield to maturity basis. The amount of such excess will constitute
only a portion of the total amounts payable in respect of the Treasury
securities. Consequently, a portion of each scheduled interest payment to
Holders will be treated as a return of such Holders' investment in the
Treasury securities, which will not be subject to tax. A Holder's tax basis in
its pro rata portion of a U.S. Treasury security will be increased by the
amount of OID included in income by the Holder with respect to such U.S.
Treasury security (including any OID accrued on a short-term U.S. Treasury
security, determined as described below).
In the case of any U.S. Treasury security with a maturity of one year or
less from the date of its issue (a "short-term U.S. Treasury security"), in
general only accrual basis taxpayers will be required to include OID in income
as it accrues. Unless such an accrual basis Holder elects to accrue the OID on
a short-term U.S. Treasury security according to the constant-yield-to-
maturity method, such OID will be accrued on a straight-line basis.
TAX BASIS OF THE U.S. TREASURY SECURITIES AND THE CONTRACT
A Holder's initial tax basis in the Contract and the U.S. Treasury
securities, respectively, will equal its pro rata portions of the amounts paid
for them by the Trust. It is currently anticipated that % and % of the
proceeds of the offering will be used by the Trust to purchase the U.S.
Treasury securities and as payments for the Contract, respectively.
TREATMENT OF THE CONTRACT
Each Holder will be treated as having entered into a pro rata portion of the
Contract and, at the Exchange Date, as having received a pro rata portion of
the Common Stock, cash, Marketable Securities or combination thereof delivered
to the Trust.
27
<PAGE>
DELIVERY OF THE COMMON STOCK
The delivery of Common Stock pursuant to the Contract will not be taxable to
the Holders. Each Holder's tax basis in its Common Stock will be equal to its
tax basis in its pro rata portion of the Contract less the portion of such
basis allocable to any fractional share of Common Stock for which cash is
received. A Holder will recognize capital gain or loss upon receipt of cash in
lieu of a fractional share of Common Stock in an amount equal to the
difference between the amount of cash received and the tax basis of such
fractional share. A Holder's holding period for the Common Stock will begin on
the date following the date it is acquired by the Trust.
DELIVERY OF CASH AND MARKETABLE SECURITIES OR OTHER PROPERTY
If the Seller elects the Cash Settlement Alternative or, as a result of an
Adjustment Event, cash, Marketable Securities or a combination thereof is
delivered pursuant to the Contract, a Holder will recognize capital gain or
loss upon receipt in an amount equal to the difference between the amount of
cash received and its tax basis in its pro rata portion of the Contract
allocable to any Common Stock for which such cash was received. Such gain or
loss will be long-term capital gain or loss if the Holder has held the TrENDS
for more than one year immediately prior to such receipt of cash. Net capital
gain (i.e., generally capital gain in excess of capital loss) recognized by an
individual upon the sale of a capital asset that has been held for more than
18 months will generally be subject to tax at a rate not to exceed 20% and net
capital gain recognized from the sale of an asset held for more than 12 months
but less than 18 months will be subject to tax at a rate not to exceed 28%.
Net capital gain derived from the sale of assets held for 12 months or less
will be subject to tax at ordinary income tax rates. Capital gain derived by
corporations is subject to ordinary income tax rates applicable to
corporation. The deductibility of capital losses is subject to limitations.
A Holder's tax basis in any Marketable Securities received will be equal to
its tax basis in its pro rata portion of the Contract less the portion of such
tax basis allocable to any Common Stock for which cash was received. A
Holder's holding period for the Marketable Securities will begin on the date
following the date such Marketable Securities are acquired by the Trust. See
"Investment Objective and Policies--The Contract."
SALE OF TRENDS
Upon a sale, exchange or other taxable disposition of all or some of a
Holder's TrENDS, a Holder will be treated as having sold its pro rata portions
of the U.S. Treasury securities and the Contract underlying the TrENDS. Such
selling Holder will recognize capital gain or loss in an amount equal to the
difference between the amount realized and the Holder's aggregate tax bases in
its pro rata portions of the U.S. Treasury securities and the Contract. Such
capital gain or loss will be long-term capital gain or loss if the Holder has
held the TrENDS for more than one year immediately prior to such sale,
exchange or disposition. Capital gain and loss will be subject to tax in the
manner described under "--Delivery of Cash and Marketable Securities or Other
Property."
ALTERNATIVE CHARACTERIZATIONS
Although the Trust and the Seller will take the position that the Contract
should be treated for United States federal income tax purposes as a prepaid
forward contract for the purchase of a variable number of shares of Common
Stock, the IRS could conceivably take the view that the Contract should be
treated as a loan to the Seller in exchange for a contingent debt obligation
of the Seller. If the IRS were to prevail in making such an assertion, a
Holder would be required to include OID in income over the life of the TrENDS
at a market rate of interest for the Seller, taking account of all the
relevant facts and circumstances. In addition, a Holder might be required to
treat any gain realized on the sale, exchange, or redemption of the TrENDS as
ordinary income to the extent that such gain is allocable to the Contract. Any
loss realized on such sale, exchange or redemption that is allocable to the
Contract would be treated as an ordinary loss to the extent of the Holder's
OID inclusions with respect to the Contract, and as capital loss to the extent
in excess of such inclusions. The IRS could also conceivably take the view
that a Holder should simply include in income as interest the amount of cash
actually received each year in respect of the TrENDS.
28
<PAGE>
UNDERWRITING
Subject to the terms and conditions contained in the Underwriting Agreement
(the "Underwriting Agreement"), the underwriters named below (the
"Underwriters") have severally agreed to purchase from the Trust and the Trust
has agreed to sell to each of the Underwriters, the number of TrENDS set forth
opposite each Underwriter's name in the table below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS TRENDS
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation..................
BancAmerica Robertson Stephens.......................................
---------
Total................................................................
</TABLE>
The Underwriting Agreement provides that the obligation of the several
Underwriters to purchase and accept delivery of the TrENDS offered hereby are
subject to approval of certain legal matters by counsel and to certain other
conditions. If any of the TrENDS are purchased by the Underwriters pursuant to
the Underwriting Agreement, the Underwriters are obligated to purchase all
such TrENDS (other than the TrENDS covered by the over-allotment option
described below).
The Underwriting Agreement contains covenants of indemnity among the
Underwriters, the Company, the Trust and the Seller against certain
liabilities, including liabilities under the Securities Act. The Underwriters
have agreed to pay certain expenses of the Trust.
The Underwriters have advised the Company and the Seller that they propose
to offer the TrENDS to the public initially at the price set forth on the
cover page of this Prospectus and to certain dealers (who may include the
Underwriters) at such price, less a concession not to exceed $ per TrENDS.
The Underwriters may allow, and such dealers may re-allow, discount not in
excess of $ per TrENDS to any other Underwriter and certain other dealers.
After the offering, the offering price and other selling terms may be changed
by the Underwriters. The Sales load of $ per TrENDS is equal to 3% of the
initial offering price set forth on the cover page of this Prospectus.
Investors must pay for any TrENDS purchased in the Offering on or before ,
1998.
In light of the fact that the proceeds of the sale of the TrENDS will be
used in part by the Trust to purchase the Contract from the Seller, the
Underwriting Agreement provides that the Seller will pay to the Underwriters
as Underwriters' Compensation $ per TrENDS.
The Trust has granted the Underwriters an option, exercisable for 30
calendar days after the date of this Prospectus, to purchase up to an
aggregate of 900,000 TrENDS, solely to cover over-allotments, if any. If the
Underwriters exercise their over-allotment option, they will receive the
Underwriters' Compensation referred to above for each TrENDS so purchased. In
addition, in connection with any such exercise, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of the TrENDS to be purchased by each
of them, as shown in the foregoing table, bears to the TrENDS initially
offered.
Subject to certain exceptions, each of the Company, the Seller, Mr. T.L. Li
and the executive officers and directors of the Company has agreed not to
offer, sell, contract to sell, grant any option to purchase or otherwise
dispose of any Common Stock of the Company or any securities convertible into
or exercisable or exchangeable for such Common Stock or in any other manner
transfer all or a portion of the economic consequences associated with the
ownership of any such Common Stock, except to the Underwriters pursuant to the
Underwriting Agreement, for a period of 90 days after the date hereof without
the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation.
29
<PAGE>
The TrENDS will be a new issue of securities with no established trading
market. Application has been made to list the TrENDS on the ASE under the
symbol "PTT". The Underwriters have advised the Company that they intend to
make a market in the TrENDS, but they are not obligated to do so and may
discontinue market making at any time without notice. No assurance can be
given as to the liquidity of the trading market for the TrENDS.
The TrENDS have not been and must not be offered or sold in the United
Kingdom, by means of any document, except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their business or otherwise in
circumstances which do not constitute an offering to the public in the United
Kingdom within the meaning of the Public Offers of Securities Regulations
1995. This document may only be issued or passed on to a person who is of a
kind described in Article 11(3) of the Financial Services Act of 1986
(Investment Advertisements) (Exemptions) Order 1996 or is a person to whom
such document may otherwise lawfully be issued or passed on under the
Financial Services Act of 1986.
Other than in the United States, no action has been taken by the Company,
the Seller or the Underwriters that would permit a public offering of the
TrENDS offered hereby in any jurisdiction where action for that purpose is
required. The TrENDS offered hereby may not be offered or sold, directly or
indirectly, nor may this Prospectus or any other offering material or
advertisements in connection with the offer and sale of any such TrENDS be
distributed or published in any jurisdiction, except under circumstances that
will result in compliance with the applicable rules and regulations of such
jurisdiction. Persons into whose possession this Prospectus comes are advised
to inform themselves about and to observe any restrictions relating to the
offering and the distribution of this Prospectus. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any TrENDS
offered hereby in any jurisdiction in which such an offer or solicitation is
unlawful.
Until distribution of the TrENDS is completed, rules of the Commission may
limit the ability of the Underwriters and any selling group members to bid for
and purchase the TrENDS or shares of Common Stock. As an exception to these
rules, the Underwriters are permitted to engage in certain transactions to
stabilize the price of the TrENDS or the Common Stock. Such transactions
consist of bids or offers for the purpose of pegging, fixing or maintaining
the price of the TrENDS or the Common Stock.
If the Underwriters create a short position in the TrENDS in connection with
the offering, i.e., if it sells more TrENDS than are set forth on the cover
page of this Prospectus, the Underwriters may reduce that short position by
purchasing TrENDS in the open market. The Underwriters may also elect to
reduce any short position by exercising all or part of the over-allotment
option described above.
The Underwriters may also impose a penalty bid on certain Underwriters and
selling group members. This means that if the Underwriters purchase TrENDS in
the open market to reduce the Underwriters' short position or to stabilize the
price of the TrENDS, they may reclaim the amount of the selling concession to
the Underwriters and any selling group members who sold those TrENDS as part
of the offering.
The purchase of a TrENDS for the purpose of stabilization or to reduce a
short position could cause the price of the security to be higher than it
might be in the absence of such purchases. The imposition of a penalty might
also have an effect on the price of a security to the extent that it were to
discourage resales of such securities.
Neither the Trust nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the TrENDS or on the
Common Stock. In addition, neither the Trust nor any of the Underwriters makes
any representation that the Underwriters will engage in such transactions or
that such transactions, once commenced, will not be discontinued without
notice.
30
<PAGE>
Approximately % of the net proceeds of this offering will be used on or
shortly after the Closing to pay the purchase price under the Contract to
Luckygold. Luckygold will, in turn, distribute as a dividend the net proceeds
it receives from this offering to its sole shareholder, Mr. T.L. Li.
Approximately $ of such distribution will be used by Mr. T.L. Li to
partially repay amounts outstanding under a personal loan owed to an affiliate
of Donaldson, Lufkin & Jenrette Securities Corporation. Donaldson, Lufkin &
Jenrette Securities Corporation is a member of the NASD and one of its
affiliates will receive more than 10% of the net proceeds from the offering as
a result of such repayment. Accordingly, under the Conduct Rules of the NASD,
the price at which the TrENDS are distributed to the public must be no higher
than that recommended by a "qualified independent underwriter" meeting certain
standards. BancAmerica Robertson Stephens has agreed to act as the qualified
independent underwriter in connection with the offering, has participated in
the preparation of this Prospectus and of the Registration Statement of which
this Prospectus forms a part and has exercised the usual standard of due
diligence with respect thereto. The price of the TrENDS when sold will be no
higher than that recommended by BancAmerica Robertson Stephens.
Certain of the Underwriters render investment banking and other financial
services to the Company and/or the Seller from time to time.
VALIDITY OF TRENDS
The validity of the TrENDS will be passed upon for the Trust by its counsel,
Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York
10022, and certain legal matters will be passed upon for the Underwriters by
Paul, Weiss, Rifkind, Wharton & Garrison, 13/F, Hong Kong Club Building, 3A
Chater Road, Central, Hong Kong.
EXPERTS
The financial statement included in this Prospectus has been audited by
Deloitte, Touche & Tohmatsu, independent auditors, as stated in their opinion
appearing herein, and has been so included in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
FURTHER INFORMATION
The Trust has filed with the Securities and Exchange Commission, Washington,
D.C. 20549, a Registration Statement under the Securities Act with respect to
the TrENDS offered hereby. Further information concerning the TrENDS and the
Trust may be found in the Registration Statement of which this Prospectus
constitutes a part. The Registration Statement may be inspected without charge
at the Commission's office in Washington, D.C., and copies of all or any part
thereof may be obtained from such office after payment of the fees prescribed
by the Commission. In addition, the Registration Statement may be accessed
electronically at the Commission's site on the World Wide Web located at
http://www.sec.gov.
31
<PAGE>
INDEPENDENT AUDITORS' REPORT
32
<PAGE>
PEAK TRENDS TRUST
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<S> <C>
ASSETS
Cash.................................................................... $
------
Total Assets............................................................ $
======
LIABILITIES
Total Liabilities....................................................... $
------
Net Assets.............................................................. $
------
Balance applicable to $ TrENDS issued and outstanding................ $
======
Net Asset Value......................................................... $
======
</TABLE>
NOTE 1. ORGANIZATION
The Trust was established on March 24, 1998 and is registered as a non-
diversified, closed-end management investment company under the Investment
Company Act of 1940.
NOTE 2. ISSUANCE OF TRUST ENHANCED DIVIDEND SECURITIES ("TRENDS")
The Trust proposes to sell Trust Enhanced Dividend Securities ("TrENDS") to
the public pursuant to a Registration Statement on Form N-2 under the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended, as initially filed on April 7, 1998. The Trust intends to use the
proceeds to purchase a portfolio comprised of stripped U.S. Treasury
securities and to pay the purchase price of forward contracts relating to
shares of common stock of Peak International Limited, a company incorporated
in Bermuda. The proceeds of the Public Offering will be recorded as
shareholders' equity upon receipt of such proceeds by the Trust. All offering
costs of the Trust will be paid by the seller of the forward contract.
Organizational costs have been paid by Donaldson, Lufkin & Jenrette Securities
Corporation or an affiliate thereof.
33
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY ANY TRENDS OTHER THAN THE TRENDS TO WHICH IT
RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY SUCH
TRENDS IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary......................................................... 3
The Trust.................................................................. 9
Use of Proceeds............................................................ 9
Investment Objective and Policies.......................................... 9
Risk Factors............................................................... 19
Description of the TrENDS.................................................. 22
Management and Administration of the Trust................................. 24
Certain United States Federal Income Tax Considerations.................... 26
Underwriting............................................................... 29
Validity of TrENDS......................................................... 31
Experts.................................................................... 31
Further Information........................................................ 31
Independent Auditors' Report............................................... 32
Statement of Assets and Liabilities........................................ 33
</TABLE>
----------------
UNTIL (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE TRENDS, 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.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
6,000,000 TRENDS
PEAK TRENDS TRUST
TRUST ENHANCED DIVIDEND SECURITIES
(EXCHANGEABLE FOR SHARES OF COMMON STOCK OF PEAK INTERNATIONAL LIMITED)
-------------
PROSPECTUS
-------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BANCAMERICA ROBERTSON STEPHENS
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
*Part A -- Report of Independent Accountants.
Statement of Assets and Liabilities.
Part B -- None.
(b) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
*2.a.(i) Form of Amended and Restated Declaration of Trust
*2.a.(ii) Certificate of Trust
*2.d Form of Specimen Certificate of Trust Enhanced Dividend Securities
2.h Form of Underwriting Agreement
*2.j Form of Custodian Agreement
*2.k.(i) Form of Administration Agreement
*2.k.(ii) Form of Paying Agent Agreement
2.k.(iii) Form of Purchase Agreement
*2.k.(iv) Form of Collateral Agreement
*2.k.(v) Form of Guaranty
*2.k.(vi) Form of Fund Expense Agreement
*2.k.(vii) Form of Fund Indemnity Agreement
*2.k.(viii) Form of Reimbursement Agreement
2.l Opinion and Consent of Counsel to the Trust
2.n.(i) Tax Opinion and Consent of Counsel to the Trust
**2.n.(ii) Consent of Independent Public Accountants
2.n.(iii) Consent of Conyers Dill & Pearman
2.n.(iv) Consent of Richards Butler
</TABLE>
--------
* Previously filed.
** To be filed by amendment.
ITEM 25. MARKETING ARRANGEMENTS
See the form of Underwriting Agreement to be filed as Exhibit 2.h to this
Registration Statement.
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses to be incurred in
connection with the offering described in this Registration Statement:
<TABLE>
<S> <C>
Registration fees.................................................. $46,244
American Stock Exchange listing fee................................ 30,000
Printing (other than certificates)................................. *
Engraving and printing certificates................................ *
Fees and expenses of qualification under state securities laws
(excluding fees of counsel)....................................... *
Accounting fees and expenses....................................... 10,000
Legal fees and expenses............................................ *
NASD fee........................................................... *
Miscellaneous...................................................... *
Total............................................................ $ *
</TABLE>
II-1
<PAGE>
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 TRENDS
<TABLE>
<CAPTION>
NUMBER OF
TITLE OF CLASS RECORD HOLDERS
-------------- --------------
<S> <C>
TrENDS........................................................ 1
</TABLE>
There will be one record holder of the TrENDS as of the effective date of
this Registration Statement.
ITEM 29. INDEMNIFICATION
The Underwriting Agreement, filed as Exhibit 2.h to this Registration
Statement, provides for indemnification to the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Act").
The Amended and Restated Declaration of Trust filed as Exhibit 2.a(i) 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(i) and 2.k(ii) to this Registration Statement provide for indemnification
to the Custodian, Administrator and Paying Agent against any loss or expense
incurred in the loss or expense is due to willful misfeaseance, bad faith,
gross negligence or reckless disregard of their obligations. The Fund
Indemnity Agreement filed as Exhibit 2.k(vi) to this Registration Statement
provides that Donaldson, Lufkin & Jenrette Securities Corporation or an
affiliate thereof will indemnify the Trust for certain indemnification
expenses incurred under the Administration Agreement and the Paying Agent
Agreement.
Insofar as indemnification for liabilities arising under the Act, may be
permitted to trustees, officers and controlling persons of the Registrant,
pursuant to the foregoing provisions or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by
such trustee, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The Trust is internally managed and does not have an investment adviser.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
The Trust's accounts, books and other documents are currently located at the
offices of the Registrant, c/o Donald J. Puglisi, Puglisi & Associates, 850
Library Avenue, Suite 294, Newark, Delaware 19715 and at the offices of The
Bank of New York, 101 Barclay Street, New York, New York 10286, the
Registrant's Administrator, Custodian, Paying Agent, transfer agent and
registrar.
ITEM 32. MANAGEMENT SERVICES
Not Applicable.
II-2
<PAGE>
ITEM 33. UNDERTAKINGS
(a) The Registrant hereby undertakes to suspend offering of the shares
covered hereby until it amends its prospectus if (1) subsequent to the
effective date of its Registration Statement, the net asset value declines
more than 10 percent from its net asset value as of the effective date of the
Registration Statement or (2) the net asset value increases to an amount
greater than its net proceeds as stated in the prospectus.
(b) The Registrant hereby undertakes that (i) for the purpose of determining
any liability under the Act, the information omitted from the form of
prospectus filed as part of this registration statement in reliance upon Rule
430A and contained in a form of prospectus filed by the Registrant under Rule
497(h) under the Act shall be deemed to be part of this registration statement
as of the time it was declared effective; and (ii) for the purpose of
determining any liability under the Act, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial bona fide offering
thereof.
II-3
<PAGE>
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE
INVESTMENT COMPANY ACT OF 1940, THE REGISTRANT HAS DULY CAUSED THIS
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEWARK, AND STATE OF DELAWARE, ON
THE 18TH DAY OF MAY, 1998.
PEAK TrENDS TRUST
(REGISTRANT)
By: /s/ Donald J. Puglisi
---------------------------------
DONALD J. PUGLISI AS TRUSTEE
By: /s/ William R. Latham III
---------------------------------
WILLIAM R. LATHAM III AS TRUSTEE
By: /s/ James B. O'Neill
---------------------------------
JAMES B. O'NEILL AS TRUSTEE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATE INDICATED.
NAME TITLE DATE
/s/ Donald J. Puglisi Managing Trustee
- ------------------------------------- May 18, 1998
DONALD J. PUGLISI
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------- ----------- ----------
<S> <C> <C>
*2.a.(i) Form of Amended and Restated Trust Agreement
*2.a.(ii) Certificate of Trust
*2.d Form of Specimen Certificate of Trust Enhanced Dividend Securities
2.h Form of Underwriting Agreement
*2.j Form of Custodian Agreement
*2.k.(i) Form of Administration Agreement
*2.k.(ii) Form of Paying Agent Agreement
2.k.(iii) Form of Purchase Agreement
*2.k.(iv) Form of Collateral Agreement
*2.k.(v) Form of Guaranty
*2.k.(vi) Form of Fund Expense Agreement
*2.k.(vii) Form of Fund Indemnity Agreement
*2.k.(viii) Form of Reimbursement Agreement
2.l Opinion and Consent of Counsel to the Trust
2.n.(i) Tax Opinion and Consent of Counsel to the Trust
**2.n.(ii) Consent of Independent Public Accountants
2.n.(iii) Consent of Conyers Dill & Pearman
2.n.(iv) Consent of Richards Butler
</TABLE>
- --------
* Previously filed.
** To be filed by amendment.
<PAGE>
THE FOLLOWING PROSPECTUS OF PEAK INTERNATIONAL LIMITED IS ATTACHED AND
DELIVERED FOR CONVENIENCE OF REFERENCE ONLY. THE PROSPECTUS OF PEAK
INTERNATIONAL LIMITED DOES NOT CONSTITUTE A PART OF THE FOREGOING PROSPECTUS
OF PEAK TRENDS TRUST, NOR IS IT INCORPORATED BY REFERENCE THEREIN.
<PAGE>
EXHIBIT 2.h
6,000,000 TrENDS
PEAK TrENDS TRUST
Trust Enhanced Dividend Securities
Form
of
UNDERWRITING AGREEMENT
----------------------
May __, 1998
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BANCAMERICA ROBERTSON STEPHENS
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Sirs:
Peak TrENDS Trust, a Delaware business trust (such trust and the
trustees thereof acting in their capacities as such being referred to herein as
the "Trust"), on the date hereof, proposes to issue and sell an aggregate of
6,000,000 (the "Firm Securities") of its Trust Enhanced Dividend Securities (the
"TrENDS") to you (the "Underwriters"). The Trust also proposes to sell to the
Underwriters not more than 900,000 additional Trust Enhanced Dividend Securities
(the "Additional Securities") if requested by the Underwriters as provided in
Section 2 hereof. The Firm Securities and the Additional Securities are herein
collectively called the Securities.
Each TrENDS will be exchangeable for a specified number of ordinary
shares, par value US$.01 per share (the "Common Stock"), of Peak International
Limited, a company organized under the laws of Bermuda (the "Company"), or for
cash pursuant to the Cash Settlement Alternative (as such term is defined in the
Trust Prospectus (as defined below)), upon conclusion of the term of the Trust
on ________, 2001 (the "Exchange Date") to be delivered pursuant to the forward
purchase contract (the "Contract"), dated May __, 1998, between the Trust and
<PAGE>
2
Luckygold 18A Limited, a company incorporated in the British Virgin Islands and
the legal and beneficial owner of a majority of the issued Common Stock
("Luckygold"). All of the issued and outstanding share capital of Luckygold is
owned by Mr. T.L. Li ("Mr. Li"). Mr. Li and Luckygold each shall be jointly and
severally responsible for the obligations of the other hereunder. The Trust has
entered into the Contract with Luckygold pursuant to which Luckygold has agreed
to deliver to the Trust on the Exchange Date a number of shares of Common Stock
equal to the product of the Exchange Rate (as such term is defined in the Trust
Prospectus) times the initial number of shares of Common Stock subject to such
Contract. Luckygold's obligation under the Contract will be secured by a pledge
of collateral pursuant to the terms of a collateral agreement, dated as of May
__, 1998 (the "Collateral Agreement"), among Luckygold, the Trust and The Bank
of New York ("BONY"), as collateral agent (in such capacity, the "Collateral
Agent"). In addition, pursuant to a personal guaranty dated as of May __, 1998
(the "Guaranty"), Mr. Li will guarantee the delivery of shares of Common Stock
or the cash equivalent of such shares subject to the Contract on the Exchange
Date and the maintenance of collateral pursuant to the Collateral Agreement.
1. Registration Statements and Prospectuses.
----------------------------------------
1.1 The Trust has prepared and filed with the Securities and Exchange
Commission (the "Commission") in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission promulgated thereunder (collectively, the "Act") a notification on
Form N-8A (the "Notification") of registration of the Trust as an investment
company and a registration statement on Form N-2 (File No. 333-49535 and File
No. 811-08735), including a prospectus, relating to the Securities. The
registration statement as amended at the time when it becomes effective,
including the information (if any) deemed to be part of the registration
statement at the time of effectiveness pursuant to Rule 430A and 497(h) under
the Act, is hereinafter referred to as the "Trust Registration Statement;" and
the prospectus in the form first used to confirm sales of Securities is
hereinafter referred to as the "Trust Prospectus." If the Company has filed or
is required pursuant to the terms hereof to file a registration statement
pursuant to Rule 462(b) under the Act registering additional Securities (a "Rule
462(b) Trust Registration Statement"), then, unless otherwise specified, any
reference herein to the term "Trust Registration Statement" shall be deemed to
include such Rule 462(b) Trust Registration Statement.
1.2 The Company has prepared and filed with the Commission in
accordance with the provisions of the Act, a registration statement on Form F-1
(File No. 333-49533), including a prospectus, relating to the shares of Common
Stock to be delivered to holders of the TrENDS pursuant to the Contract on the
Exchange Date. The registration statement as amended at the time when it
becomes effective, including the information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A under
the Act, is hereinafter referred
<PAGE>
3
to as the "Company Registration Statement;" and the prospectus in the form first
used in connection with the confirmation of sales of Securities is hereinafter
referred to as the "Company Prospectus." If the Company has filed or is
required pursuant to the terms hereof to file a registration statement pursuant
to Rule 462(b) under the Act registering additional shares of Common Stock (a
"Rule 462(b) Company Registration Statement"), then, unless otherwise specified,
any reference herein to the term "Company Registration Statement" shall be
deemed to include such Rule 462(b) Company Registration Statement.
The Trust Registration Statement and the Company Registration
Statement are hereinafter collectively referred to as the "Registration
Statements," and the Trust Prospectus and the Company Prospectus are hereinafter
collectively referred to as the "Prospectuses."
2. Agreements to Sell and Purchase; Lock-up Agreements; QIU. On the
--------------------------------------------------------
basis of the representations and warranties contained in this Agreement, and
subject to its terms and conditions, (i) the Trust agrees to sell 6,000,000 Firm
Securities and (ii) each Underwriter agrees, severally and not jointly, to
purchase from the Trust, at a price per TrENDS of US$____ (the "Purchase
Price"), the number of Firm Securities set forth opposite the name of such
Underwriter in Schedule I hereto.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, (i) the Trust agrees to sell
up to 900,000 Additional Securities and (ii) the Underwriters shall have the
right to purchase, severally and not jointly, up to an aggregate of 900,000
Additional Securities from the Trust at the Purchase Price. Additional
Securities may be purchased solely for the purpose of covering over-allotments
made in connection with the offering of the Firm Securities. The Underwriters
may exercise their right to purchase Additional Securities in whole or in part
from time to time by giving written notice thereof to the Trust within 30 days
after the date of this Agreement. Such notice shall specify the aggregate
number of Additional Securities to be purchased pursuant to such exercise and
the date for payment and delivery thereof. The date specified in any such
notice shall be a business day (i) no earlier than the Closing Date (as
hereinafter defined), (ii) no later than ten business days after such notice has
been given and (iii) no earlier than two business days after such notice has
been given. If any Additional Securities are to be purchased, each Underwriter,
severally and not jointly, agrees to purchase from the Trust the number of
Additional Securities (subject to such adjustments to eliminate fractional
shares as you may determine) which bears the same proportion to the total number
of Additional Securities to be purchased from the Trust as the number of Firm
Securities set forth opposite the name of such Underwriter in Schedule I bears
to the total number of Firm Securities.
The Company, Luckygold and Mr. Li hereby agree, severally and not
jointly, and the Company shall, concurrently with the execution of this
Agreement,
<PAGE>
4
deliver an agreement executed by each of the directors and executive officers of
the Company, pursuant to which each such person agrees, not to offer, sell,
contract to sell, grant any option to purchase, or otherwise dispose of any
Common Stock or any securities convertible into or exercisable or exchangeable
for such Common Stock or in any other manner transfer all or a portion of the
economic consequences associated with the ownership of any such Common Stock,
except to the Underwriters pursuant to this Agreement, for a period of 90 days
after the date of the Prospectuses without the prior written consent of
Donaldson, Lufkin & Jenrette Securities Corporation. Notwithstanding the
foregoing, during such period the Company may grant stock options pursuant to
the Peak International Limited 1997 Share Option Plan, the Peak International
Limited Share Option Plan and the Peak International Limited Employee Stock
Purchase Plan (and may issue shares of Common Stock upon the exercise thereof,
which shares will be subject to the restrictions contained in the foregoing
sentence).
As compensation to the Underwriters for their commitments hereunder,
and in view of the fact that the proceeds of the sale of the Securities will be
used by the Trust as specified in the Contract, Luckygold, on the Closing Date
and any Option Closing Date will pay to Donaldson, Lufkin & Jenrette Securities
Corporation, for the accounts of the several Underwriters, an amount equal to
$___ per Security for the Securities to be delivered on such date.
Alternatively, as a matter of convenience, Donaldson, Lufkin & Jenrette
Securities Corporation may deduct such amount from the purchase price of the
Securities and, in such event, Luckygold shall be deemed to have paid the same.
The Trust hereby confirms its engagement of BancAmerica Robertson
Stephens ("RS") as, and RS hereby confirms its agreement with the Trust to
render services as, a "qualified independent underwriter," within the meaning of
Section (b)(15) of Rule 2720 of the National Association of Securities Dealers,
Inc. (the "NASD") with respect to the offering and sale of the Securities. RS,
solely in its capacity as the qualified independent underwriter and not
otherwise, is referred to herein as the "QIU." As compensation for the services
of the QIU hereunder, the Trust agrees to pay the QIU $___ on the Closing Date.
The price at which the Securities will be sold to the public shall not be higher
than the maximum price recommended by the QIU.
3. Terms of Public Offering. The Trust is advised by you that the
------------------------
Underwriters propose (i) to make a public offering of their respective portions
of the Securities as soon after the effective date of the Registration
Statements as in your judgment is advisable and (ii) initially to offer the
Securities upon the terms set forth in the Trust Prospectus.
4. Delivery and Payment. Delivery to the Underwriters of and payment
--------------------
for the Securities shall be made at 10:00 A.M., New York City time, on the date
(the "Closing Date") that is the third business day (unless otherwise permitted
by
<PAGE>
5
the Commission pursuant to Rule 15c6-1 of the Securities Exchange Act of 1934,
as amended (collectively with the rules and regulations of the Commission
promulgated thereunder, the "Exchange Act")) following the date of the offering,
at the offices of counsel to the Underwriters, Paul, Weiss, Rifkind, Wharton &
Garrison, 1285 Avenue of the Americas, New York, New York 10019. The Closing
Date and the location of delivery of and the form of payment for the Securities
may be varied by agreement between you and the Trust.
Delivery to the Underwriters of and payment for any Additional
Securities to be purchased by the Underwriters shall be made at such place as
you shall designate at 10:00 A.M., New York City time, on the date specified in
the applicable exercise notice given by you pursuant to Section 2 (an "Option
Closing Date"). Any such Option Closing Date and the location of delivery of
and the form of payment for such Additional Securities may be varied by
agreement between you and the Trust.
Certificates for the Securities shall be registered in such names and
issued in such denominations as you shall request in writing not later than two
full business days prior to the Closing Date or an Option Closing Date, as the
case may be. Such certificates shall be made available to you for inspection
not later than 9:30 A.M., New York City time, on the business day next preceding
the Closing Date or an Option Closing Date, as the case may be. Certificates in
definitive form evidencing the Securities shall be delivered to you on the
Closing Date or an Option Closing Date, as the case may be, with any transfer
taxes thereon duly paid by the Trust for the respective accounts of the several
Underwriters, against payment of the Purchase Price therefor by wire transfer of
immediately available funds to the order of the Trust.
5. Agreements of the Trust. The Trust agrees with you:
-----------------------
5.1 To use its best efforts to cause the Trust Registration
Statement to become effective at the earliest possible time.
5.2 To advise you promptly and, if requested by you, to confirm
such advice in writing, (i) when the Trust Registration Statement has become
effective and when any post-effective amendment to it becomes effective, (ii) of
any request by the Commission for amendments to the Trust Registration Statement
or amendments or supplements to the Trust Prospectus or for additional
information, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Trust Registration Statement or of the
suspension of qualification of the Securities for offering or sale in any
jurisdiction, or of the initiation of any proceeding for such purposes, (iv) if
the Trust is required to file a Rule 462(b) Trust Registration Statement after
the effectiveness of this Agreement, when the Rule 462(b) Trust Registration
Statement has become effective and (v) of the happening of any event during the
period referred to in Section 5.5 below which makes any statement
<PAGE>
6
of a material fact made in the Trust Registration Statement or the Trust
Prospectus untrue or which requires the making of any additions to or changes in
the Trust Registration Statement or the Trust Prospectus in order to make the
statements therein not misleading. If at any time the Commission shall issue
any stop order suspending the effectiveness of the Trust Registration Statement,
the Trust will use its best efforts to obtain the withdrawal or lifting of such
order at the earliest possible time.
5.3 To furnish to you, without charge, three signed copies of the
Trust Registration Statement as first filed with the Commission and of each
amendment to it, including all exhibits, and to furnish to you and each
Underwriter designated by you such number of conformed copies of the Trust
Registration Statement as so filed and of each amendment to it, without
exhibits, as you may reasonably request.
5.4 To prepare the Trust Prospectus, the form and substance of which
shall be satisfactory to you, and to file the Trust Prospectus in such form with
the Commission within the applicable period specified in Rule 424(b) under the
Act; during the period specified in Section 5.5 below, not to file any amendment
or supplement to the Trust Registration Statement, whether before or after the
time when it becomes effective, or to make any amendment or supplement to the
Trust Prospectus of which you shall not previously have been advised or to which
you shall reasonably object; and, during such period, to prepare and file with
the Commission, promptly upon your reasonable request, any amendment to the
Trust Registration Statement or supplement to the Trust Prospectus which may be
necessary or advisable in connection with the distribution of the Securities by
you, and to use its best efforts to cause the same to become promptly effective.
5.5 Promptly after the Trust Registration Statement becomes
effective, and from time to time thereafter for such period as in the opinion of
counsel for the Underwriters a prospectus is required by law to be delivered in
connection with sales of Securities by an Underwriter or a dealer, to furnish to
each Underwriter and dealer as many copies of the Trust Prospectus (and of any
amendment or supplement to the Trust Prospectus) as such Underwriter or dealer
may reasonably request.
5.6 If during the period specified in Section 5.5 any event shall
occur as a result of which, in the judgment of the Trust or in the opinion of
counsel for the Underwriters or the Trust, it becomes necessary to amend or
supplement the Trust Prospectus in order to make the statements therein, in the
light of the circumstances when the Trust Prospectus is delivered to a
purchaser, not misleading, or if, in the judgment of the Trust or in the opinion
of counsel for the Underwriters or the Trust, it is necessary to amend or
supplement the Trust Prospectus to comply with any law, forthwith to prepare and
file with the Commission an appropriate amendment or supplement to the Trust
Prospectus so that the statements in the Trust Prospectus, as so amended or
supplemented, will not in
<PAGE>
7
the light of the circumstances when it is so delivered, be misleading, or so
that the Trust Prospectus will comply with law, and to furnish to each
Underwriter and to such dealers as you shall specify, such number of copies
thereof as such Underwriter or dealers may reasonably request.
5.7 Prior to any public offering of the Securities, to cooperate with
you and counsel for the Underwriters in connection with the registration or
qualification of the Securities for offer and sale by the several Underwriters
and by dealers under the state securities or Blue Sky laws of such jurisdictions
as you may request, to continue such qualification in effect so long as required
for distribution of the Securities and to file such consents to service of
process or other documents as may be necessary in order to effect such
registration or qualification.
5.8 To mail and make generally available to its security holders as
soon as reasonably practicable, but no later than when it is required by the
rules of the Commission, an earnings statement covering a period of at least 12
months after the effective date of the Trust Registration Statement (but in no
event commencing later than 90 days after such date) which shall satisfy the
provisions of Section 11(a) of the Act, and to advise you in writing when such
statement has been so made available.
5.9 During the period of three years from the effective date of the
Trust Registration Statement, to furnish to the record holders of its Securities
such financial and other reports of the Trust as are required to be so furnished
by the Act, the Exchange Act, the Investment Company Act of 1940, as amended,
and the rules and regulations of the Commission promulgated thereunder
(collectively, the "1940 Act").
5.10 During the period referred to in Section 5.9, to furnish to you
as soon as available a copy of each report or other publicly available
information of the Trust mailed to the holders of Securities, filed with the
Commission or furnished to or filed with any national securities exchange on
which the Securities are listed and such other publicly available information
concerning the Trust as you may reasonably request.
5.11 To use its best efforts to cause the Securities to be listed on
the American Stock Exchange (or another national securities exchange or
automated quotation system) and to maintain the listing of the Securities on
such exchange or automated quotation system for the duration of the life of the
Trust.
5.12 To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by the Trust prior to
the Closing Date or any Option Closing Date, as the case may be, and to satisfy
all conditions precedent to the delivery of the Securities.
<PAGE>
8
5.13 If the Trust Registration Statement at the time of the
effectiveness of this Agreement does not cover all of the Securities, to file a
Rule 462(b) Trust Registration Statement with the Commission registering the
Securities not so covered in compliance with Rule 462(b) by 10:00 P.M., New York
City time, on the date of this Agreement and to pay the Commission the filing
fee for such Rule 462(b) Trust Registration Statement at the time of the filing
thereof or to give irrevocable instructions for the payment of such fee pursuant
to Rule 111(b) under the Act.
5.14 To apply the net proceeds from the sale of the Securities in the
manner described under "Use of Proceeds" in the Prospectus.
6. Agreements of the Company. The Company agrees with you:
-------------------------
6.1 To use its best efforts to cause the Company Registration
Statement to become effective at the earliest possible time.
6.2 To advise you promptly and, if requested by you, to confirm
such advice in writing, (i) when the Company Registration Statement has become
effective and when any post-effective amendment to it becomes effective, (ii) of
any request by the Commission for amendments to the Company Registration
Statement or amendments or supplements to the Company Prospectus or for
additional information, (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Company Registration Statement or of
the suspension of qualification of the Common Stock for offering or sale in any
jurisdiction, or the initiation of any proceeding for such purposes, (iv) if the
Company is required to file a Rule 462(b) Company Registration Statement after
the effectiveness of this Agreement, when the Rule 462(b) Company Registration
Statement has become effective and (v) of the happening of any event during the
period referred to in Section 6.5 below which makes any statement of a material
fact made in the Company Registration Statement or the Company Prospectus untrue
or which requires the making of any additions to or changes in the Company
Registration Statement or the Company Prospectus in order to make the statements
therein not misleading. If at any time the Commission shall issue any stop
order suspending the effectiveness of the Company Registration Statement, the
Company will use its best efforts to obtain the withdrawal or lifting of such
order at the earliest possible time.
6.3 To furnish to you, without charge, three signed copies of the
Company Registration Statement as first filed with the Commission and of each
amendment to it, including all exhibits, and to furnish to you and each
Underwriter designated by you such number of conformed copies of the Company
Registration Statement as so filed and of each amendment to it, without
exhibits, as you may reasonably request.
<PAGE>
9
6.4 To prepare the Company Prospectus, the form and substance of
which shall be satisfactory to you, and to file the Company Prospectus in such
form with the Commission within the applicable period specified in Rule 424(b)
under the Act; during the period specified in Section 6.5 below, not to file any
amendment or supplement to the Company Registration Statement, whether before or
after the time when it becomes effective, or to make any amendment or supplement
to the Company Prospectus of which you shall not previously have been advised or
to which you shall reasonably object; and, during such period, to prepare and
file with the Commission, promptly upon your reasonable request, any amendment
to the Company Registration Statement or supplement to the Company Prospectus
which may be necessary or advisable in connection with the distribution of the
Securities by you, and to use its best efforts to cause the same to become
promptly effective.
6.5 Promptly after the Company Registration Statement becomes
effective, and from time to time thereafter for such period as in the opinion of
counsel for the Underwriters a prospectus is required by law to be delivered in
connection with sales of Securities by an Underwriter or a dealer, to furnish to
each Underwriter and dealer as many copies of the Company Prospectus (and of any
amendment or supplement to the Company Prospectus) as such Underwriter or dealer
may reasonably request.
6.6 If during the period specified in Section 6.5 any event shall
occur as a result of which, in the judgment of the Company or in the opinion of
counsel for the Underwriters, it becomes necessary to amend or supplement the
Company Prospectus in order to make the statements therein, in the light of the
circumstances when the Company Prospectus is delivered to a purchaser of
Securities, not misleading, or if it is necessary to amend or supplement the
Company Prospectus to comply with any law, forthwith to prepare and file with
the Commission an appropriate amendment or supplement to the Company Prospectus
so that the statements in the Company Prospectus, as so amended or supplemented,
will not in the light of the circumstances when it is so delivered, be
misleading, or so that the Company Prospectus will comply with law, and to
furnish to each Underwriter and to such dealers as you shall specify, such
number of copies thereof as such Underwriter or dealers may reasonably request.
6.7 Prior to any public offering of the Securities, to cooperate with
you and counsel for the Underwriters in connection with the registration or
qualification of the Common Stock for offer and sale by the several Underwriters
and by dealers under the state securities or Blue Sky laws of such jurisdictions
as you may request, to continue such qualification in effect so long as required
for distribution of the Securities and the related distribution of Common Stock
and to file such consents to service of process or other documents as may be
necessary in order to effect such registration or qualification.
<PAGE>
10
6.8 To mail and make generally available to its stockholders and to
holders of the Securities as soon as reasonably practicable, but no later than
when it is required by the rules of the Commission, an earnings statement
covering a period of at least 12 months after the effective date of the Company
Registration Statement (but in no event commencing later than 90 days after such
date) which shall satisfy the provisions of Section 11(a) of the Act, and to
advise you in writing when such statement has been so made available.
6.9 During the period of five years after the date of this Agreement,
to furnish to the record holders of Common Stock and to holders of the
Securities such financial and other reports of the Company and its subsidiaries
as are required to be so furnished by the Act, the Exchange Act, and the rules
and regulations of the Commission promulgated thereunder.
6.10 During the period referred to in Section 6.9, to furnish to you
as soon as available a copy of each report or other publicly available
information of the Company mailed to the holders of Common Stock, filed with the
Commission or furnished to or filed with any national securities exchange or
automated quotation system on which the Common Stock is listed and such other
publicly available information concerning the Company and its subsidiaries as
you may reasonably request.
6.11 To use its best efforts to maintain the inclusion of the Common
Stock on the Nasdaq National Market (or on a national securities exchange) and
to maintain the listing of the Common Stock on the Nasdaq National Market (or on
a national securities exchange) for the duration of the life of the Trust.
6.12 To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by the Company prior to
the Closing Date or any Option Closing Date, as the case may be, and to satisfy
all conditions precedent to the delivery of the Securities.
6.13 If the Company Registration Statement at the time of the
effectiveness of this Agreement does not cover all of the Common Stock, to file
a Rule 462(b) Company Registration Statement with the Commission registering the
Common Stock not so covered in compliance with Rule 462(b) by 10:00 P.M., New
York City time, on the date of this Agreement and to pay the Commission the
filing fee for such Rule 462(b) Company Registration Statement at the time of
the filing thereof or to give irrevocable instructions for the payment of such
fee pursuant to Rule 111(b) under the Act.
7. Representations and Warranties of the Trust. The Trust represents
-------------------------------------------
and warrants to and agrees with each of the Underwriters, the Company, Luckygold
and Mr. Li that:
<PAGE>
11
7.1 (i) Each part of the Trust Registration Statement, as amended or
supplemented, if applicable, when such part becomes effective, 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, (ii) the Trust Registration Statement, the Trust Prospectus and the
Notification comply and, as amended or supplemented, if applicable, will comply
in all material respects with the Act and the 1940 Act and (iii) the Trust
Prospectus does not contain and, as amended or supplemented, if applicable, will
not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the representations and
warranties set forth in this Section 7.1 do not apply to statements or omissions
in the Trust Registration Statement, the Trust Prospectus or the Notification
based upon information relating to any Underwriter, Luckygold or Mr. Li
furnished to the Trust in writing by or on behalf of such Underwriter, Luckygold
or Mr. Li through you expressly for use therein.
7.2 Each preliminary prospectus filed as part of the Trust
Registration Statement as originally filed or as part of any amendment thereto,
or filed pursuant to Rule 424 or Rule 497 under the Act, and each Trust
Registration Statement filed pursuant to Rule 462(b) under the Act, if any,
complied when so filed in all material respects with the Act, and did not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
7.3 The Trust has been duly created and otherwise duly organized, is
validly existing as a business trust in good standing under the laws of the
State of Delaware, and has the power and authority to carry on its business as
it is currently being conducted and as described in the Trust Prospectus, to
own, lease and operate its properties and to enter into and perform its
obligations under this Agreement, the Contract and the Trust Agreement dated as
of _____________, 1998 among the trustees of the Trust (the "Trustees") and
Donaldson, Lufkin & Jenrette Securities Corporation, as Sponsor (the "Trust
Agreement"). The Trust is duly qualified and in good standing as a foreign
corporation in each jurisdiction in which the character or location of its
properties (owned, leased or licensed) or the nature or conduct of its business
makes such qualification necessary, except for those failures to be so qualified
or in good standing which will not in the aggregate have a material adverse
effect on the Trust. The Trust is and will, under current law, be classified
for federal income tax purposes as a grantor trust and not as an association
taxable as a corporation. The Trust has no subsidiaries.
7.4 The Trust is registered with the Commission as a non-diversified
closed-end management investment company under the 1940 Act, and no order of
suspension or revocation of such registration has been issued or proceedings
therefor initiated or, to the knowledge of the Trust, threatened by the
Commission.
<PAGE>
12
No person is serving or acting as an officer or trustee of the Trust, except in
accordance with the provisions of the 1940 Act.
7.5 Each of the Contract, the Collateral Agreement, the
Administration Agreement, to be dated as of ________, 1998, between the Trust
and BONY, as administrator (the "Administration Agreement"), the Custodian
Agreement, to be dated as of _______, 1998, between the Trust and BONY, as
custodian (the "Custodian Agreement"), the Paying Agent Agreement, to be dated
as of _____, 1998, between the Trust and BONY, as paying agent (the "Paying
Agent Agreement"), the Fund Indemnity Agreement, to be dated as of ____, 1998,
between the Trust and Donaldson, Lufkin & Jenrette Securities Corporation (the
"Fund Indemnity Agreement") and the Fund Expense Agreement, to be dated as of
___________, 1998, between Donaldson, Lufkin & Jenrette Securities Corporation
and BONY (the "Fund Expense Agreement") (the Contract, the Collateral Agreement,
the Administration Agreement, the Custodian Agreement, the Paying Agent
Agreement, the Fund Indemnity Agreement and the Fund Expense 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 (i) such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or similar laws
affecting creditors rights generally and (ii) the availability of equitable
remedies may be limited by equitable principles of general applicability. This
Agreement has been duly authorized, executed and delivered by the Trust and is a
valid, binding agreement of the Trust enforceable in accordance with its terms,
except as rights to indemnification and contribution hereunder may be limited by
applicable law.
7.6 None of (A) the execution and delivery by the Trust of, and the
performance by the Trust of its obligations under, this Agreement and each
Fundamental Agreement to which it is a party, or (B) the issue and sale by the
Trust of the Securities as contemplated by this Agreement contravenes or will
contravene any provision of applicable law or the Trust Agreement or any
agreement or any judgment, order or decree of any governmental body, agency or
court having jurisdiction over the Trust, whether foreign or domestic, and no
consent, approval, authorization or other order of any court, regulatory body,
administrative agency or other governmental body, whether foreign or domestic,
is required for the performance by the Trust of its obligations under this
Agreement or any of the Fundamental Agreements (except as such may be required
under the securities or Blue Sky laws of the various states and foreign
jurisdictions in connection with the offer and sale of the Securities by the
Underwriters).
7.7 The Trust Agreement and the Fundamental Agreements comply with
all applicable provisions of the Acts, and all approvals of such
<PAGE>
13
documents required under the 1940 Act, by the holders of the Securities of the
Trust and the Trustees have been obtained and are in full force and effect.
7.8 The Securities have been duly authorized and, when issued and
delivered in accordance with the terms of this Agreement, will be validly
issued, fully paid and non-assessable, and not subject to any preemptive or
similar rights. There are no authorized securities of the Trust other than the
Securities.
7.9 The Securities conform as to legal matters to the descriptions
thereof contained in the Trust Registration Statement and the Trust Prospectus,
and the Trust Agreement and the Fundamental Agreements conform in all material
respects to the descriptions thereof contained in the Trust Prospectus.
7.10 The Fundamental Agreements are in full force and effect. The
Trust is not in default in the observance of any obligation, agreement or
condition thereunder, under the Trust Agreement at any other agreement or
instrument to which it is a party or by which it or any of its properties may be
bound and, to the knowledge of the Trust, no event has occurred which with the
passage of time or the giving of notice or both would constitute such a default.
7.11 The Securities have been approved for listing on the American
Stock Exchange, subject to notice of issuance. The Trust Registration Statement
has become effective; no stop order suspending the effectiveness of the Trust
Registration Statement is in effect, and no proceedings for such purpose are
pending before or have been threatened by the Commission.
7.12 Except as otherwise set forth in the Trust Prospectus, there are
no legal or governmental proceedings pending to which the Trust is a party or of
which its property is the subject, and, to the best of the Trust's knowledge, no
such proceedings are threatened or contemplated. No contract or document of a
character required to be described in the Trust Registration Statement or the
Trust Prospectus or to be filed as an exhibit to the Trust Registration
Statement is not so described or filed as required.
7.13 The Trust has all necessary consents, permits, authorizations,
approvals, orders (including exemptive orders), licenses, franchises and
certificates ("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 as
may be required by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Securities; the Trust has fulfilled
and performed all of its obligations with respect to such Permits; and to the
knowledge of the Trust, no event has occurred which allows, or after notice or
lapse of time would allow, revocation or
<PAGE>
14
termination or could result in any other impairment of the rights of the Trust
thereunder.
7.14 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.
7.15 Deloitte Touche Tohmatsu are independent public accountants with
respect to the Trust within the meaning the Act and the rules and regulations
promulgated thereunder.
7.16 The financial statements, together with related schedules and
notes forming part of the Trust Registration Statement and the Trust Prospectus
(and any amendment or supplement thereto), present fairly the financial position
and changes in financial position of the Trust on the basis stated in the Trust
Registration Statement at the respective dates or for the respective periods to
which they apply; such statements and related schedules and notes have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as disclosed
therein.
7.17 The Trust has not taken, and will not take, directly or
indirectly, any action designed to, or which might reasonably be expected to,
cause or result in stabilization or manipulation of the price of any security of
the Trust to facilitate the sale or resale of the Common Stock pursuant to the
distribution contemplated by this Agreement, and other than as permitted by the
Act, the Trust has not distributed and will not distribute any prospectus or
other offering material in connection with the offering and sale of the Shares.
7.18 The Trust has complied with all provisions of Section 517.075,
Florida Statutes (Chapter 92-198, Laws of Florida).
7.19 Except as disclosed in the Trust Prospectus, there are no
business relationships or related party transactions required to be disclosed
therein by Form N-2 under the Act, and all material transactions between the
Trust, on the one hand, and any trustee or affiliate of the Trust, on the other
hand, are on terms at least as favorable to the Trust, as the case may be, as
could be obtained with an unaffiliated third party.
7.20 The Trust has full power and authority to enter into and perform
its obligations of indemnification and contribution set forth in Section 10 of
this Agreement.
8. Representations and Warranties of the Company, Luckygold and Mr.
----------------------------------------------------------------
Li. The Company, Luckygold and Mr. Li, jointly and severally, represent and
- --
warrant to each Underwriter and the Trust that:
<PAGE>
15
8.1 (i) Each part of the Company Registration Statement, as amended
or supplemented, if applicable, when such part becomes effective, 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, (ii) the Company Registration Statement and the Company Prospectus
comply and, as amended or supplemented, if applicable, will comply in all
material respects with the Act and (iii) the Company Prospectus does not contain
and, as amended or supplemented, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, except that the representations and warranties set forth
in this Section 8.1 do not apply to statements or omissions in the Company
Registration Statement or the Company Prospectus based upon information relating
to any Underwriter furnished to the Company in writing by or on behalf of such
Underwriter through you expressly for use therein.
8.2 Each preliminary prospectus filed as part of the Company
Registration Statement as originally filed or as part of any amendment thereto,
or filed pursuant to Rule 424 under the Act, and each Company Registration
Statement filed pursuant to Rule 462(b) under the Act, if any, complied when so
filed in all material respects with the Act, and did not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
8.3 The Company and each of its subsidiaries listed on Annex 1 hereto
(the "Material Subsidiaries") has been duly incorporated and otherwise duly
organized, is validly existing as a corporation in good standing (if applicable)
under the laws of its jurisdiction of incorporation and has the corporate power
and authority to carry on its business as it is currently being conducted and as
described in the Company Prospectus and to own, lease and operate its
properties, and each is duly qualified and is in good standing (if applicable)
as a foreign corporation authorized to do business in each jurisdiction in which
the nature of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the Company and its subsidiaries, taken as a whole.
All of the Company's subsidiaries required to be listed on Exhibit 21.1 to the
Company Registration Statement are listed thereon.
8.4 All of the outstanding shares of capital stock of, or other
ownership interests in, each of the Company's Material Subsidiaries have been
duly authorized and validly issued and are fully paid and non-assessable, and
are owned by the Company, free and clear of any security interest, claim, lien,
encumbrance or adverse interest of any nature.
<PAGE>
16
8.5 All the outstanding shares of capital stock of the Company
(including shares of Common Stock to be delivered to holders of TrENDS pursuant
to the Contract on the Exchange Date) have been duly authorized and validly
issued and are fully paid, non-assessable and not subject to any preemptive or
similar rights.
8.6 The authorized capital stock of the Company, including the Common
Stock, conforms as to legal matters to the description thereof contained in the
Prospectus.
8.7 Neither the Company nor any of its Material Subsidiaries is in
violation of its respective memorandum of association or bye-laws (or
certificate of incorporation or by-laws or memorandum and articles of
association or other organizational documents, if applicable) or in default in
the performance of any obligation, agreement or condition contained in any bond,
debenture, note or any other evidence of indebtedness or in any other agreement,
indenture or instrument to which the Company or any of its subsidiaries is a
party or by which it or any of its subsidiaries or their respective property is
bound and which is material to the conduct of the business of the Company and
its subsidiaries taken as a whole.
8.8 The Company has full corporate power and authority to enter into
this Agreement. This Agreement has been duly authorized, executed and delivered
by the Company and, assuming due authorization, execution and delivery by the
other parties thereto, is a valid, binding agreement of the Company enforceable
in accordance with its terms, except as rights to indemnification and
contribution hereunder may be limited by applicable law. [Other than the
permission of the Bermuda Monetary Authority for the delivery of Common Stock to
holders of TrENDS pursuant to the Contract on the Exchange Date which has been
obtained and which is in full force and effect,] the (i) execution, delivery and
performance of this Agreement, (ii) compliance by the Company with all the
provisions hereof and (iii) consummation of the transactions contemplated hereby
will not require any consent, approval, authorization or other order of any
court, regulatory body, administrative agency or other governmental body (except
as such may be required under the securities or Blue Sky laws of the various
states) and will not conflict with or constitute a breach of any of the terms or
provisions of, or a default under, the memorandum of association or bye-laws (or
certificate of incorporation or by-laws or memorandum and articles of
association or other organizational documents, if applicable) of the Company or
any of its subsidiaries or any agreement, indenture or other instrument to which
it or any of its subsidiaries is a party or by which it or any of its
subsidiaries or their respective property is bound, or violate or conflict with
any laws, administrative regulations or rulings or court decrees applicable to
the Company, any of its subsidiaries or their respective property.
8.9 Except as otherwise set forth in the Company Prospectus, there
are no material legal or governmental proceedings pending to which the
<PAGE>
17
Company or any of its Material Subsidiaries is a party or of which any of their
respective property is the subject, and, to the best of the Company's knowledge,
no such proceedings are threatened or contemplated. No contract or document of
a character required to be described in the Company Registration Statement or
the Company Prospectus or to be filed as an exhibit to the Company Registration
Statement is not so described or filed as required.
8.10 Neither the Company nor any of its Material Subsidiaries has
violated any law or regulation relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes, pollutants
or contaminants ("Environmental Laws"), including Environmental Laws of the
People's Republic of China (the "PRC"), any law relating to discrimination in
the hiring, promotion or pay of employees nor any applicable federal or state
wages and hours laws, or any provisions of the Employee Retirement Income
Security Act or the rules and regulations promulgated thereunder, which in each
case could reasonably be expected to result in any material adverse change in
the business, prospects, financial condition or results of operation of the
Company and its subsidiaries, taken as a whole.
8.11 The Company and each of its Material Subsidiaries has such
Permits of and from, and has made all declarations and filings with, all
governmental authorities, self-regulatory organizations and courts and other
tribunals, including, without limitation, under any applicable Environmental
Laws, as are necessary to own, lease and operate its respective properties and
to conduct its business as it is currently conducted and as described in the
Company Prospectus; the Company and each of its Material Subsidiaries has
fulfilled and performed all of its material obligations with respect to such
Permits; no event has occurred which allows, or after notice or lapse of time
would allow, revocation or termination thereof or could result in any other
material impairment of the rights of the holder of any such Permit; and, except
as described in the Company Prospectus, such Permits contain no restrictions
that are materially burdensome to the Company or any of its Material
Subsidiaries.
8.12 In the ordinary course of its business, the Company conducts a
periodic review of the effect of Environmental Laws on the business, operations
and properties of the Company and its subsidiaries, in the course of which it
identifies and evaluates associated costs and liabilities (including, without
limitation, any capital or operating expenditures required for clean-up, closure
of properties or compliance with Environmental Laws or any Permit, any related
constraints on operating activities and any potential liabilities to third
parties). On the basis of such review, the Company has reasonably concluded
that such associated costs and liabilities would not, singly or in the
aggregate, have a material adverse effect on the Company and its subsidiaries,
taken as a whole.
<PAGE>
18
8.13 Except as otherwise set forth in the Company Prospectus or such
as are not material to the business, financial condition or results of operation
of the Company and its subsidiaries, taken as a whole, the Company and each of
its Material Subsidiaries has good and marketable title, free and clear of all
liens, claims, encumbrances and restrictions, except liens for taxes not yet due
and payable, to all property and assets described in the Company Registration
Statement as being owned by it. Except as described in the Company Prospectus,
all leases to which the Company or any of its Material Subsidiaries is a party
are valid and binding and no default has occurred or is continuing thereunder,
which might result in any material adverse change in the business, financial
condition or results of operation of the Company and its subsidiaries taken as a
whole, and there are no adverse possession or other claims with respect to any
of such leases to which the Company or any of its Material Subsidiaries is a
party as lessee with such exceptions as do not materially interfere with the use
made by the Company or such subsidiary.
8.14 The Company and each of its Material Subsidiaries maintains
reasonably adequate insurance with respect to events customarily insured against
by companies similar to the Company that are in the Company's industry and
operate in the same jurisdictions.
8.15 BDO Binder are independent public accountants with respect to
the Company within the meaning the Act and the rules and regulations promulgated
thereunder.
8.16 Deloitte Touche Tohmatsu are independent public accountants with
respect to the Company within the meaning of the Act and the rules and
regulations promulgated thereunder.
8.17 The financial statements, together with related schedules and
notes forming part of the Company Registration Statement and the 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 and its consolidated subsidiaries on the basis stated in
the Company Registration Statement at the respective dates or for the respective
periods to which they apply; such statements and related schedules and notes
have been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as disclosed
therein; and the other financial and statistical information and data set forth
in the Company Registration Statement and the Company Prospectus (and any
amendment or supplement thereto) is, in all material respects, accurately
presented and, to the extent derived from the financial statements or the books
and records of the Company, prepared on a basis consistent with such financial
statements and books and records.
8.18 (i) Since the date of the latest balance sheet included in the
Company Registration Statement and the Company Prospectus (exclusive of any
<PAGE>
19
amendments or supplements thereto subsequent to the date of this Agreement),
there shall not have been any material adverse change, or any development
involving a prospective material adverse change, in the condition, financial or
otherwise, or in the earnings, affairs or business prospects, whether or not
arising in the ordinary course of business, of the Company and its subsidiaries,
taken as a whole, (ii) since the date of the latest balance sheet included in
the Company Registration Statement and the Company Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement),
there shall not have been any change, or any development involving a prospective
material adverse change, in the capital stock or material increase in the long-
term debt of the Company from that set forth in the Company Registration
Statement and the Company Prospectus and (iii) the Company and its subsidiaries
has no liability or obligation, direct or contingent, which is material to the
Company and its subsidiaries, taken as a whole, other than those reflected in
the Company Registration Statement and the Company Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement).
8.19 The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the 1940 Act.
8.20 No holder of any security of the Company has any right to
require registration of the shares of Common Stock or any other security of the
Company, except for the shares of Common Stock to be registered pursuant to the
Company Registration Statement.
8.21 The Company has complied with all provisions of Section 517.075,
Florida Statutes (Chapter 92-198, Laws of Florida).
8.22 There are no outstanding subscriptions, rights, warrants,
options, calls, convertible securities, commitments of sale or liens related to
or entitling any person to purchase or otherwise to acquire any shares of the
capital stock of, or other ownership interest in, the Company or any of its
subsidiaries, except as otherwise disclosed in the Registration Statements.
8.23 Except as disclosed in the Company Prospectus, there are no
business relationships or related party transactions required to be disclosed
therein by Form F-1 under the Act, and all material transactions between the
Company or any of its subsidiaries, on the one hand, and any shareholder or
affiliate of the Company, on the other hand, are on terms at least as favorable
to the Company or such subsidiary, as the case may be, as could be obtained with
an unaffiliated third party.
8.24 Neither the Company nor any of its Material Subsidiaries (i) has
experienced any labor disputes or any strikes or work stoppages by its
<PAGE>
20
employees, (ii) has any employees who are covered by a collective bargaining
agreement or (iii) has any unfair labor practice complaint pending against it
or, to the best knowledge of the Company, threatened against it, which has had
or could reasonably be expected to have a material adverse impact on the
business, financial condition or results of operation of the Company or any of
its Material Subsidiaries.
8.25 The Company and each of its Material Subsidiaries 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 authorizations; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (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 the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
8.26 All material tax returns required to be filed by the Company and
each of its Material Subsidiaries in any jurisdiction have been filed, other
than those filings being contested in good faith, and all material taxes,
including withholding taxes, penalties and interest, assessments, fees and other
charges due pursuant to such returns or pursuant to any assessment received by
the Company or any of its Material Subsidiaries have been paid, other than those
being contested in good faith and for which adequate reserves have been
provided.
8.27 The shares of Common Stock, including the shares of Common Stock
to be delivered to holders of the Securities pursuant to the Contract, are
listed on the Nasdaq National Market.
8.28 Except as described in the Company Prospectus or the Trust
Prospectus, no taxes, imposts or duties of any nature (including, without
limitation, stamp or other issuance or transfer taxes or duties and capital
gains, income, withholding or other taxes) are payable by or on behalf of the
Underwriters or any of their respective subsidiaries to any political
subdivision or taxing authority of Bermuda or Hong Kong in connection with (1)
the allotment, issuance and initial sale of the Securities; (2) the initial sale
of the Securities to the Underwriters in the manner contemplated herein; or (3)
the resale and delivery of Securities by the Underwriters in the manner
contemplated in this Agreement or the Prospectuses.
8.29 The Company is subject to civil and commercial law with respect
to its obligations under this Agreement. The execution and delivery by the
Company and the performance by the Company of its obligations hereunder
constitute private and commercial acts rather than governmental or public acts,
and neither the Company nor any of its properties enjoys any right of immunity
in any jurisdiction from suit, judgment, execution on a judgment or attachment
(whether before judgment or in aid of execution) in respect of such obligations.
<PAGE>
21
8.30 The Company has full corporate power and authority to enter into
and perform its obligations of indemnification and contribution set forth in
Section 10 of this Agreement, and neither the indemnification nor the
contribution provisions of such Section 10 contravene Bermuda public policy or
law.
8.31 The Agreement, dated May 28, 1987, between the Baoan County
Shenzhen Foreign Trade Company in association with Henggang Peak General
Manufacturing Plant and Hong Kong Peak Technology Limited, as amended and
extended on May 24, 1994 and December 12, 1996, and the Agreement, dated October
8, 1995, between Shenzhen Longgang District Henggang Joint Stock Company and
Peak Plastic & Metal Products (International) Limited (collectively, the
"Processing Agreements"), are valid and binding and enforceable in accordance
with their terms. The Company has received all required permits, licenses or
other approvals in connection with the Processing Agreements and the operation
of its existing and planned production facilities (the "Facilities") in
Shenzhen, China as contemplated therein, and no default has occurred or is
continuing under either Processing Agreement. The Land Use Rights Granting
Contracts, copies of which are incorporated by reference as Exhibits 10.5 and
10.6, respectively, to the Company Registration Statement, relating to the
Facilities are valid, binding and enforceable in accordance with their terms,
and no default has occurred or is continuing under either of such contracts.
8.32 The Company has been designated as non-resident of Bermuda for
exchange control purposes by the Bermuda Monetary Authority, whose permission
for the transfer of the Common Stock has been obtained and is in full force and
effect. The transfer of Common Stock between persons regarded by the Bermuda
Monetary Authority as non-resident of Bermuda for exchange control purposes and
the sale of the Common Stock after completion of the transactions contemplated
by this Agreement and the Fundamental Agreements to or by such persons may be
effected without specific consent under the Exchange Control Act 1972 for so
long as the Common Stock is listed on the Nasdaq National Market. The transfer
of Common Stock to and between any person regarded as resident in Bermuda for
exchange control purposes requires specific prior approval of the Bermuda
Monetary Authority under the Exchange Control Act of 1972.
8.33 Under the current laws and regulations of Bermuda, any dividends
and other distributions declared and payable on the shares of capital stock of
the Company may be paid to the holders of the Common Stock in U.S. dollars, and
all such dividends and other distributions will not be subject to withholding or
other taxes under the laws and regulations of Bermuda and may be so paid without
the necessity of obtaining any consent, approval, authorization or other order
of or with any court, regulatory body, administrative agency or other
governmental body or other authority in Bermuda. No Material Subsidiary of the
Company is currently prohibited or otherwise restricted, directly or indirectly,
from paying dividends to the Company or to the subsidiary of the Company that is
its parent company, from
<PAGE>
22
making any other distribution on such Material Subsidiary's capital stock, from
repaying to the Company or any other subsidiary of the Company or from
transferring any of such Material Subsidiary's property or assets to the Company
or any other subsidiary of the Company, except as described in the Company
Prospectus.
8.34 The Company has validly and irrevocably submitted to the
jurisdiction of any New York State or Federal court sitting in The City of New
York, has validly and irrevocably waived any objection to the venue of a
proceeding in any such court, and has validly and irrevocably appointed CT
Corporation System as its authorized agent for service of process, in each case,
to the extent set forth in Section 15.3.
8.35 The Company has timely filed all reports and other documents it
is required to file pursuant to the Exchange Act and the rules and regulations
of the Commission promulgated thereunder.
9. Additional Representations and Warranties of Luckygold and Mr. Li.
-----------------------------------------------------------------
Luckygold and Mr. Li, jointly and severally and, solely with respect to Sections
9.5 and 9.6, Mr. Li individually, represents and warrants to each Underwriter
and the Trust that:
9.1 Luckygold is the lawful owner of the Common Stock to be pledged
to the Collateral Agent pursuant to the Collateral Agreement and delivered to
the Trust pursuant to the Contract and has, and on the Closing Date, the Option
Closing Date, if applicable, and the Exchange Date, Luckygold will have, good
and valid title to the shares of Common Stock to be pledged and assigned by it
under the Collateral Agreement, free and clear of all restrictions on transfer,
liens, encumbrances, security interests and claims whatsoever, other than those
provided for under the bye-laws of the Company or created pursuant to the
Collateral Agreement; all consents, approvals, authorizations and orders
necessary for Luckygold to pledge and assign the shares of Common Stock to be
pledged and assigned by Luckygold pursuant to the Collateral Agreement have been
obtained; Luckygold has full right, power and authority to pledge and assign the
shares of Common Stock to be pledged and assigned by Luckygold pursuant to the
Collateral Agreement; and, upon delivery of such shares of Common Stock pursuant
to the Contract, good and valid title to such shares of Common Stock, free and
clear of all restrictions on transfer, liens, encumbrances, security interests
and claims, will [, subject to the provisions of the bye-laws of the Company,]
pass to the Trust.
9.2 Each of Luckygold and Mr. Li has, and on the Closing Date, the
Option Closing Date, if applicable, and the Exchange Date, will have, full legal
right, power and authority to enter into this Agreement, and this Agreement has
been duly authorized, executed and delivered by each of Luckygold and Mr. Li and
is a valid and binding agreement of each of Luckygold and Mr. Li enforceable in
<PAGE>
23
accordance with its terms, except as rights to indemnity and contribution
hereunder may be limited by applicable law.
9.3 Each of the Fundamental Agreements to which Luckygold or Mr. Li
is a party and the Reimbursement Agreement, to be dated as of ______, 1998,
between Luckygold and Donaldson, Lufkin & Jenrette Securities Corporation (the
"Reimbursement Agreement") has been duly authorized, executed and delivered by
Luckygold and/or Mr. Li, as the case may be, and, assuming due authorization,
execution and delivery by the other party thereto, constitutes a valid and
legally binding agreement of Luckygold, enforceable in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting creditor's rights
and to general equity principles.
9.4 Luckygold is prohibited in its [Articles of Association,
Memorandum of Association and By-Laws] from engaging in, and has not at any time
since its incorporation engaged in, any business other than the ownership of the
Common Stock of the Company. The audited financial statements of Luckygold as
of ___________, 1998 heretofore provided by Luckygold and Mr. Li to the
Underwriters (the "Luckygold Financial Statements") have been prepared in
accordance with generally accepted accounting principles and present fairly the
financial position, results of operations and changes in financial position of
Luckygold at _________, 1998 and for the twelve month period then ended.
Luckygold has no liabilities of any nature, whether actual or contingent, except
as reflected in the Luckygold Financial Statements or the notes thereto.
9.5 The Guaranty has been duly executed and delivered by Mr. Li and
constitutes a valid and legally binding agreement of Mr. Li, enforceable in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability relating to
or affecting creditor's rights and to general equity principles.
9.6 Mr. Li will not sell any shares of capital stock of Luckygold
prior to the conclusion of the term of the Trust on the Exchange Date.
9.7 Each of Luckygold and Mr. Li has not taken, and will not take,
directly or indirectly, any action designed to, 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 Common Stock
pursuant to the distribution contemplated by this Agreement, and other than as
permitted by the Act, each of Luckygold and Mr. Li has not distributed and will
not distribute any prospectus or other offering material in connection with the
offering and sale of the Shares.
<PAGE>
24
9.8 The execution, delivery and performance of this Agreement by each
of Luckygold and Mr. Li, compliance by each of Luckygold and Mr. Li with all the
provisions hereof and the consummation by each of Luckygold and Mr. Li of the
transactions contemplated hereby will not require any consent, approval,
authorization or other order of any court, regulatory body, administrative
agency or other governmental body (except as such may be required under the Act,
state securities laws or Blue Sky laws) and will not conflict with or constitute
a breach of any of the terms or provisions of, or a default under, the articles
of association, memorandum of association or other organizational documents of
Luckygold, or any agreement, indenture or other instrument to which Luckygold or
Mr. Li is a party or by which Luckygold or Mr. Li or property of Luckygold or
Mr. Li is bound, or violate or conflict with any law, administrative regulation
or ruling or court decree applicable to Luckygold or Mr. Li or property of
Luckygold or Mr. Li.
9.9 If at any time during the periods described in Section 5.5 and
6.5 hereof, there is any change in the information in the Registration
Statements or the Prospectuses, Luckygold or Mr. Li will immediately notify you
of such change.
9.10 Each of Mr. Li and Luckygold has validly and irrevocably
submitted to the jurisdiction of any New York State or Federal court sitting in
The City of New York, has validly and irrevocably waived any objection to the
venue of a proceeding in any such court, and has validly and irrevocably
appointed CT Corporation System as his or its authorized agent for service of
process, in each case, to the extent set forth in Section 15.
10. Indemnification.
---------------
10.1 The Company, Luckygold and Mr. Li, jointly and severally, agree
to indemnify and hold harmless each Underwriter, the Trust and each person, if
any, who controls any Underwriter or the Trust within the meaning of Section 15
of the Act or Section 20 of the Exchange Act from and against any and all
losses, claims, damages, liabilities and judgments caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Company Registration Statement or the Company Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) or any preliminary prospectus, or caused by any 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 will reimburse each
Underwriter and the Trust for any legal or other expenses reasonably incurred by
such Underwriter or the Trust in connection with investigating or defending any
such loss, claim, damage, liability or judgment as such expenses are incurred,
except insofar as such losses, claims, damages, liabilities or judgments are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to any Underwriter furnished
<PAGE>
25
in writing to the Company by or on behalf of any Underwriter through you
expressly for use therein; provided, however, that the foregoing indemnity
-------- -------
agreement with respect to any preliminary prospectus shall not inure to any
Underwriter from whom the person asserting any such losses, claims, damages,
liabilities and judgments purchased Securities, or any person controlling such
Underwriter, if a copy of the Company Prospectus (as then amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) was not sent or given by or on behalf of such Underwriter to such
person, if required by law so to have been delivered, at or prior to the written
confirmation of the sale of the Securities to such person, and if the Company
Prospectus (as so amended and supplemented) would have cured the defect giving
rise to such loss, claim, damage, liability or judgment.
10.2 Luckygold and Mr. Li, jointly and severally, agrees to indemnify
and hold harmless each Underwriter and the Trust and each person, if any, who
controls any Underwriter or the Trust within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act from and against any and all losses,
claims, damages, liabilities and judgments caused by any untrue statement or
alleged untrue statement of a material fact contained in the Trust Registration
Statement or the Trust Prospectus (as amended or supplemented if the Trust shall
have furnished any amendments or supplements thereto) or any preliminary
prospectus, or caused by any 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 will reimburse each Underwriter and the Trust for
any legal or other expenses reasonably incurred by such Underwriter or the Trust
in connection with investigating or defending any such loss, claim, damage,
liability or judgment as such expenses are incurred, except insofar as such
losses, claims, damages, liabilities or judgments are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information (i) relating to such Underwriter furnished in writing to the Trust
by or on behalf of such Underwriter through you expressly for use therein or
(ii) relating to the Company furnished in writing to the Trust by the Company
expressly for use therein.
10.3 In case any action shall be brought against any Underwriter, the
Trust or any person controlling such Underwriter or the Trust, based upon any
preliminary prospectus, the Registration Statements or the Prospectuses or any
amendment or supplement thereto and with respect to which indemnity may be
sought against the Company, Luckygold and/or Mr. Li pursuant to Section 10.1 or
10.2, such Underwriter or the Trust, as the case may be, shall promptly notify
the Company, Luckygold and/or Mr. Li, as the case may be, in writing and the
Company, Luckygold and/or Mr. Li, as the case may be, shall assume the defense
thereof, including the employment of counsel reasonably satisfactory to such
indemnified party, and payment of all fees and expenses. Any Underwriter, the
Trust or any such controlling person shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Underwriter, the
Trust or such controlling person unless (i) the employment of such counsel has
been specifically authorized in
<PAGE>
26
writing by the Company, Luckygold and/or Mr. Li, as the case may be, (ii) the
Company, Luckygold and/or Mr. Li, as the case may be, shall have failed to
assume the defense and employ counsel or (iii) the named parties to any such
action (including any impleaded parties) include both such Underwriter, the
Trust or such controlling person and the Company, Luckygold and/or Mr. Li, as
the case may be, and such Underwriter, the Trust or such controlling person
shall have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the Company, Luckygold and/or Mr. Li, as the case may be (in which
case the Company, Luckygold and/or Mr. Li shall not have the right to assume the
defense of such action on behalf of such Underwriter, the Trust or such
controlling person, it being understood, however, that the Company, Luckygold
and/or Mr. Li, as the case may be, shall not, in connection with any one such
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for all such Underwriters, the Trust and
controlling persons, which firm shall be designated in writing by Donaldson,
Lufkin & Jenrette Securities Corporation and that all such fees and expenses
shall be reimbursed as they are incurred). The Company, Luckygold and/or Mr. Li
shall not be liable for any settlement of any such action effected without the
written consent of the Company, Luckygold and/or Mr. Li, as the case may be, but
if settled with the written consent of the Company, Luckygold and/or Mr. Li, as
the case may be, the Company, Luckygold and/or Mr. Li, as the case may be, agree
to indemnify and hold harmless any Underwriter, the Trust and any such
controlling person from and against any loss or liability by reason of such
settlement. Notwithstanding the immediately preceding sentence, if in any case
where the fees and expenses of counsel are at the expense of the indemnifying
party and an indemnified party shall have requested the indemnifying party to
reimburse the indemnified party for such fees and expenses of counsel as
incurred, such indemnifying party agrees that it shall be liable for any
settlement of any action effected without its written consent if (i) such
settlement is entered into more than 30 days after the receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall have failed to reimburse the indemnified party in accordance with such
request for reimbursement prior to the date of such settlement. No indemnifying
party shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
10.4 Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the Company
Registration Statement, any person controlling the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, the Trust, its trustees
and any person controlling the Trust within the meaning of Section 15 of the
<PAGE>
27
Act or Section 20 of the Exchange Act, Luckygold and Mr. Li and each person, if
any, controlling Luckygold within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from the Company, Luckygold and/or Mr. Li in Sections 10.1 and 10.2 to each
Underwriter and the Trust but only with reference to information relating to
such Underwriter furnished in writing by or on behalf of such Underwriter
through you expressly for use in the Registration Statements, the Prospectuses
or any preliminary prospectus. In case any action shall be brought against the
Company, any of its directors, any such officer or any person controlling the
Company, the Trust, any of its trustees or any person controlling the Trust, or
Luckygold or any person controlling Luckygold based on the Registration
Statements, the Prospectuses or any preliminary prospectus and in respect of
which indemnity may be sought against any Underwriter, the Underwriter shall
have the rights and duties given to the Company, Luckygold and/or Mr. Li in
Section 10.3 (except that if the Company, the Trust, Luckygold and/or Mr. Li
shall have assumed the defense thereof, such Underwriter shall not be required
to do so, but may employ separate counsel therein and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Underwriter), and the Company, its directors, any such officers and any
person controlling the Company, the Trust, its trustees and any person
controlling the Trust, and Luckygold and/or Mr. Li and any person controlling
Luckygold shall have the rights and duties given to the Underwriters and the
Trust by Section 10.3 hereof.
10.5 If the indemnification provided for in this Section 10 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liabilities or judgments referred to therein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities and judgments (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company, the Trust, Luckygold and
Mr. Li on one hand and the Underwriters on the other hand from the offering of
the Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company, the Trust, Luckygold and Mr. Li on the one hand and the
Underwriters on the other hand in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or judgments, as
well as any other relevant equitable considerations. The relative benefits
received by the Company, the Trust, Luckygold and Mr. Li on the one hand and the
Underwriters on the other hand shall be deemed to be in the same proportion as
the total net proceeds from the offering (before deducting expenses) received by
the Trust, Luckygold and Mr. Li and the total underwriting discounts and
commissions received by the Underwriters, bear to the total price to the public
of the Securities, in each case as set forth in the table on the cover page of
the Prospectus. The relative fault of the Company, the Trust, Luckygold and Mr.
Li on the one hand and the Underwriters on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the
<PAGE>
28
omission to state a material fact relates to information supplied by the
Company, the Trust, Luckygold and Mr. Li or the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company, Luckygold, Mr. Li, the Trust and the Underwriters agree
that it would not be just and equitable if contribution pursuant to this Section
10.5 were determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, liabilities or judgments
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 10, no Underwriter shall be required to contribute any amount in excess
of the amount by which the total price at which the Securities underwritten by
it and distributed to the public were offered to the public exceeds the amount
of any damages which such Underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. 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. The Underwriters'
obligations to contribute pursuant to this Section 10.5 are several in
proportion to the respective number of Securities purchased by each of the
Underwriters hereunder and not joint.
11. Indemnification of the QIU.
--------------------------
11.1 The Company, Luckygold and Mr. Li, jointly and severally, agree
to indemnify and hold harmless the QIU and each person, if any, who controls the
QIU within the meaning of Section 15 of the Act or Section 20 of the Exchange
Act from and against any and all losses, claims, damages, liabilities and
judgments (including, without limitation, any legal or other expenses incurred
in connection with investigating or defending any matter, including any action,
that could give rise to such losses, claims, damages, liabilities or judgements)
caused by (i) any untrue statement or alleged untrue statement of a material
fact contained in the Company Registration Statement or the Company Prospectus
(as amended or supplemented if the Company shall have furnished any amendments
or supplements thereto) or any preliminary prospectus, or caused by any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading or (ii) the
QIU's activities as QIU under its engagement pursuant to Section 2 hereof,
except in the case of this clause (ii) insofar as any such losses, claims,
damages, liabilities or judgments are found in a final judgment by a court of
competent jurisdiction, not subject to further appeal, to have resulted solely
from the willful misconduct or gross negligence of the QIU, and will
<PAGE>
29
reimburse the QIU for any legal or other expenses reasonably incurred by such
QIU in connection with investigating or defending any such loss, claim, damage,
liability or judgment as such expenses are incurred, except insofar as such
losses, claims, damages, liabilities or judgments are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to the QIU furnished in writing to the Company by or on
behalf of the QIU through you expressly for use therein.
11.2 Luckygold and Mr. Li agree to indemnify and hold harmless the
QIU and each person, if any, who controls the QIU within the meaning of Section
15 of the Act or Section 20 of the Exchange Act from and against any and all
losses, claims, damages, liabilities and judgments (including, without
limitation, any legal or other expenses incurred in connection with
investigating or defending any matter, including any action, that could give
rise to such losses, claims, damages, liabilities or judgements) caused by any
untrue statement or alleged untrue statement of a material fact contained in the
Trust Registration Statement or the Trust Prospectus (as amended or supplemented
if the Trust shall have furnished any amendments or supplements thereto) or any
preliminary prospectus, or caused by (i) any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading or (ii) the QIU's activities as QIU under
its engagement pursuant to Section 2 hereof, except in the case of this clause
(ii) insofar as any such losses, claims, damages, liabilities or judgments are
found in a final judgment by a court of competent jurisdiction, not subject to
further appeal, to have resulted solely from the willful misconduct or gross
negligence of the QIU, and will reimburse the QIU for any legal or other
expenses reasonably incurred by such QIU in connection with investigating or
defending any such loss, claim, damage, liability or judgment as such expenses
are incurred, except insofar as such losses, claims, damages, liabilities or
judgments are caused by any such untrue statement or omission or alleged untrue
statement or omission based upon information relating to the QIU furnished in
writing to the Trust by or on behalf of the QIU through you expressly for use
therein.
11.3 In case any action shall be brought against the QIU or any
person controlling such QIU, based upon any preliminary prospectus, the
Registration Statements or the Prospectuses or any amendment or supplement
thereto and with respect to which indemnity may be sought against the Company,
Luckygold and/or Mr. Li pursuant to Section 11.1 or 11.2, the QIU shall promptly
notify the Company, Luckygold and/or Mr. Li , as the case may be, in writing and
the Company, Luckygold and/or Mr. Li, as the case may be, shall assume the
defense thereof, including the employment of counsel reasonably satisfactory to
such indemnified party, and payment of all fees and expenses. The QIU or any
such controlling person shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of such QIU or such controlling person
unless (i) the employment of such counsel has been specifically authorized in
writing by the Company, Luckygold
<PAGE>
30
and/or Mr. Li, as the case may be, (ii) the Company, Luckygold and/or Mr. Li, as
the case may be, shall have failed to assume the defense and employ counsel or
(iii) the named parties to any such action (including any impleaded parties)
include both the QIU or such controlling person and the Company, Luckygold
and/or Mr. Li, as the case may be, and the QIU or such controlling person shall
have been advised by such counsel that there may be one or more legal defenses
available to it which are different from or additional to those available to the
Company, Luckygold and/or Mr. Li, as the case may be (in which case the Company,
Luckygold and/or Mr. Li shall not have the right to assume the defense of such
action on behalf of such Underwriter, the Trust or such controlling person, it
being understood, however, that the Company, Luckygold and/or Mr. Li, as the
case may be, shall not, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) for the QIU and controlling persons, which firm shall be designated in
writing by the QIU and that all such fees and expenses shall be reimbursed as
they are incurred). The Company, Luckygold and/or Mr. Li shall not be liable
for any settlement of any such action effected without the written consent of
the Company, Luckygold and/or Mr. Li, as the case may be, but if settled with
the written consent of the Company, Luckygold and/or Mr. Li, as the case may be,
the Company, Luckygold and/or Mr. Li, as the case may be, agree to indemnify and
hold harmless the QIU and any such controlling person from and against any loss
or liability by reason of such settlement. Notwithstanding the immediately
preceding sentence, if in any case where the fees and expenses of counsel are at
the expense of the indemnifying party and an indemnified party shall have
requested the indemnifying party to reimburse the indemnified party for such
fees and expenses of counsel as incurred, such indemnifying party agrees that it
shall be liable for any settlement of any action effected without its written
consent if (i) such settlement is entered into more than 30 days after the
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall have failed to reimburse the indemnified party in
accordance with such request for reimbursement prior to the date of such
settlement. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
11.4 If the indemnification provided for in this Section 11 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liabilities or judgments referred to therein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities and judgments (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company, Luckygold and Mr. Li on
the one hand and the QIU on the
<PAGE>
31
other hand from the offering of the Securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company, Luckygold and
Mr. Li on the one hand and the QIU on the other hand in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative benefits received by the Company, Luckygold and
Mr. Li on the one hand and the QIU on the other hand shall be deemed to be in
the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Trust, Luckygold and Mr. Li, and the total
underwriting discounts and commissions received by the Underwriters, bear to the
total price to the public of the Securities, in each case as set forth in the
table on the cover page of the Prospectus. The relative fault of the Company,
Luckygold and Mr. Li on the one hand and the QIU on the other hand shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Company, Luckygold, Mr. Li or the QIU and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
The Company, Luckygold, Mr. Li and the QIU agree that it would not be
just and equitable if contribution pursuant to this Section 11.4 were determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 11, the QIU shall not be required
to contribute any amount in excess of the amount of the fee it received to serve
as QIU set forth in Section 2. 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.
12. Conditions of Underwriters' Obligations. The several obligations
---------------------------------------
of the Underwriters are subject to the satisfaction of each of the following
conditions:
12.1 All the representations and warranties of the Trust, the
Company, Luckygold and Mr. Li contained in this Agreement shall be true and
correct on the Closing Date with the same force and effect as if made on and as
of the Closing Date.
12.2 The Registration Statements shall have become effective not
later than 5:00 P.M. (and in the case of a Registration Statement filed under
<PAGE>
32
Rule 462(b) under the Act, not later than 10:00 P.M.), New York City time, on
the date of this Agreement or at such later date and time as you may approve in
writing, and at the Closing Date no stop order suspending the effectiveness of
either of the Registration Statements shall have been issued and no proceedings
for that purpose shall have been commenced or shall be pending before or
contemplated by the Commission.
12.3 (i) Since the date of the latest balance sheet included in the
Registration Statements and the Prospectuses (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement), there shall not
have been any material adverse change, or any development involving a
prospective material adverse change, in the condition, financial or otherwise,
or in the earnings, affairs or business prospects, whether or not arising in the
ordinary course of business, of either the Trust or the Company and its
subsidiaries, taken as a whole, (ii) since the date of the latest balance sheet
included in the Registration Statements and the Prospectuses, there shall not
have been any change, or any development involving a prospective material
adverse change, in the capital stock or material increase in the long-term debt
of the Trust or the Company from that set forth in the applicable Registration
Statement and Prospectus (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement), (iii) neither the Trust nor the
Company and its subsidiaries shall have liability or obligation, direct or
contingent, which is material to the Trust or the Company and its subsidiaries,
taken as a whole, respectively, other than those reflected in the applicable
Registration Statement and Prospectus (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement) and (iv) on the
Closing Date you shall have received (A) a certificate dated the Closing Date,
signed by the Managing Trustee of the Trust, confirming, to such person's
knowledge, the matters set forth in Section 12.1, Section 12.2 and Section 12.3,
to the extent the matters set forth in such Sections apply to the Trust, and (B)
a certificate dated the Closing Date, signed by T.L. Li and Jerry Mo in their
capacities as the Chairman and Chief Executive Officer and the Chief Financial
Officer and Controller, respectively, of the Company, confirming the matters set
forth in Section 12.1, Section 12.2 and Section 12.3, to the extent the matters
set forth in such Sections apply to the Company.
12.4 All the representations and warranties of Luckygold and Mr. Li
contained in this Agreement shall be true and correct on the Closing Date with
the same force and effect as if made on and as of the Closing Date and you shall
have received a certificate to such effect, dated the Closing Date, from each of
Luckygold and Mr. Li.
12.5 Each Fundamental Agreement and the Reimbursement Agreement shall
have been executed and delivered by all parties thereto, and Luckygold shall
have delivered to the Collateral Agent the number of shares of Common Stock or
substitute collateral required by the Collateral Agreement to be
<PAGE>
33
initially pledged thereunder in accordance with the requirements of the
Collateral Agreement.
12.6 The Guaranty shall have been executed and delivered by Mr. Li.
12.7 You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriters), dated the Closing Date,
of (i) Skadden, Arps, Slate, Meagher & Flom LLP, United States counsel for the
Trust, to the effect set forth in Exhibit A-1 hereto, (ii) [any foreign counsel
to Trust], to the effect set forth in Exhibit A-2 hereto, (iii) Skadden, Arps,
Slate, Meagher & Flom LLP, United States counsel for the Company, Luckygold and
Mr. Li, to the effect set forth in Exhibit A-3 hereto, (iv) Conyers Dill &
Pearman, Bermuda counsel for the Company, Luckygold and Mr. Li, to the effect
set forth in Exhibit A-5 hereto, (v) Richards Butler, Hong Kong counsel for the
Company, Luckygold and Mr. Li, to the effect set forth in Exhibit A-6 hereto,
(vi) Conyers Dill & Pearman, British Virgin Islands counsel for the Company,
Luckygold and Mr. Li, to the effect set forth in Exhibit A-7 hereto, and (vii)
Shen Zhen Jin Di Law Office, People's Republic of China counsel for the Company,
Luckygold and Mr. Li, to the effect set forth in Exhibit A-8 hereto.
12.8 You shall have received on the Closing Date an opinion, dated
the Closing Date, of Paul, Weiss, Rifkind, Wharton & Garrison, counsel for the
Underwriters, as to the matters referred to in paragraphs [__, __ (but only with
respect to the statements under the caption "Underwriting") and __ of Exhibit A-
1]. In giving such opinion with respect to the matters covered by paragraph [___
of Exhibit A-1], such counsel may state that their opinion and belief are based
upon their participation in the preparation of the Registration Statements and
Prospectuses and any amendments or supplements thereto and review and discussion
of the contents thereof, but are without independent check or verification
except as specified.
12.9 You shall have received a letter on and as of the Closing Date,
in form and substance satisfactory to you, from each of BDO Binder and Deloitte
Touche Tohmatsu, independent public accountants, with respect to the financial
statements and certain financial information contained in the Company
Registration Statement and the Company Prospectus and substantially in the form
and substance of the letters delivered to you by BDO Binder and Deloitte Touche
Tohmatsu, respectively, on the date of this Agreement.
12.10 You shall have received a letter on and as of the Closing Date,
in form and substance satisfactory to you, from Deloitte Touche Tohmatsu,
independent public accountants, with respect to the financial statements and
certain financial information contained in the Trust Registration Statement and
the Trust Prospectus and substantially in the form and substance of the letters
delivered to you by Deloitte Touche Tohmatsu on the date of this Agreement.
<PAGE>
34
12.11 The Trust, the Company, Luckygold and Mr. Li shall not have
failed at or prior to the Closing Date to perform or comply with any of the
agreements herein contained and required to be performed or complied with by the
Trust, the Company, Luckygold or Mr. Li at or prior to the Closing Date.
12.12 The Trust, the Company, Luckygold and Mr. Li shall have
furnished to you such other documents and certificates as you may reasonably
request, including documents and certificates relating to the accuracy and
completeness of any statement in the Registration Statements or Prospectuses.
The several obligations of the Underwriters to purchase any
Additional Securities hereunder are subject to the delivery to you on the
applicable Option Closing Date of such documents as you may reasonably request
with respect to the good standing of the Trust, the due authorization and
issuance of such Additional Securities and other matters related to the issuance
of such Additional Securities.
13. Effective Date of Agreement and Termination. This Agreement
-------------------------------------------
shall become effective upon the later of (i) execution of this Agreement and
(ii) when notification of the effectiveness of the Registration Statements has
been released by the Commission.
This Agreement may be terminated at any time on or prior to the
Closing Date by you by written notice to the Trust, the Company, Luckygold and
Mr. Li if any of the following has occurred: (i) since the respective dates as
of which information is given in the Registration Statements and the
Prospectuses (exclusive of any amendments or supplements thereto subsequent to
the date of this Agreement), any change or development involving a prospective
change in the condition, financial or otherwise, of the Trust or the Company and
its subsidiaries, taken as a whole, or the earnings, affairs, or business
prospects of the Trust or the Company and its subsidiaries, taken as a whole,
whether or not arising in the ordinary course of business, that, in our judgment
is material and adverse and would, in your judgment, make it impracticable to
market the Securities on the terms and in the manner contemplated in the
Prospectuses, (ii) any outbreak or escalation of hostilities or other national
or international calamity or crisis or change in economic conditions or in the
financial markets of the United States or elsewhere that, in your judgment, is
material and adverse and would, in your judgment, make it impracticable to
market the Securities on the terms and in the manner contemplated in the
Prospectuses, (iii) the suspension or material limitation of trading in
securities on the New York Stock Exchange, the American Stock Exchange or the
Nasdaq National Market or limitation on prices for securities on any such
exchange or National Market, (iv) the declaration of a banking moratorium by
either federal or New York State authorities or (v) the taking of any action by
any federal, state or local government or agency in respect of its monetary or
fiscal affairs which in your judgment has a material adverse effect on the
financial markets in the United States.
<PAGE>
35
If on the Closing Date or on an Option Closing Date, as the case may
be, any one or more of the Underwriters shall fail or refuse to purchase the
Firm Securities or Additional Securities, as the case may be, which it or they
have agreed to purchase hereunder on such date and the aggregate number of Firm
Securities or Additional Securities, as the case may be, which such defaulting
Underwriter or Underwriters, as the case may be, agreed but failed or refused to
purchase is not more than one-tenth of the total number of TrENDS to be
purchased on such date by all Underwriters, each non-defaulting Underwriter
shall be obligated severally, in the proportion which the number of Firm
Securities set forth opposite its name in Schedule I bears to the total number
of Firm Securities which all the non-defaulting Underwriters, as the case may
be, have agreed to purchase, or in such other proportion as you may specify, to
purchase the Firm Securities or Additional Securities, as the case may be, which
such defaulting Underwriter or Underwriters, as the case may be, agreed but
failed or refused to purchase on such date; provided that in no event shall the
--------
number of Firm Securities or Additional Securities, as the case may be, which
any Underwriter has agreed to purchase pursuant to Section 2 hereof be increased
pursuant to this Section 13 by an amount in excess of one-ninth of such number
of Firm Securities or Additional Securities, as the case may be, without the
written consent of such Underwriter. If on the Closing Date or on an Option
Closing Date, as the case may be, any Underwriter or Underwriters shall fail or
refuse to purchase Firm Securities, or Additional Securities, as the case may
be, and the aggregate number of Firm Securities or Additional Securities, as the
case may be, with respect to which such default occurs is more than one-tenth of
the aggregate number of TrENDS to be purchased on such date by all Underwriters
and arrangements satisfactory to you and Luckygold for purchase of such TrENDS
are not made within 48 hours after such default, this Agreement will terminate
without liability on the part of any non-defaulting Underwriter, Luckygold or
Mr. Li . In any such case which does not result in termination of this
Agreement, either you, Luckygold or Mr. Li shall have the right to postpone the
Closing Date or the applicable Option Closing Date, as the case may be, but in
no event for longer than seven days, in order that the required changes, if any,
in the Registration Statements and the Prospectuses or any other documents or
arrangements may be effected. Any action taken under this paragraph shall not
relieve any defaulting Underwriter from liability in respect of any default of
any such Underwriter under this Agreement.
14. Agreements of Luckygold and Mr. Li. Luckygold and Mr. Li,
----------------------------------
jointly and severally, agree with you, the QIU, the Trust and the Company:
14.1 To pay or to cause to be paid (a) all taxes, if any, on the
transfer and sale of the shares of Common Stock being sold or pledged by
Luckygold and Mr. Li and (b) all costs and expenses incident to the performance
of the obligations of Luckygold and Mr. Li and the Company under this Agreement,
including, but not limited to, the fees and expenses of counsel and consultants
for Luckygold and Mr. Li and the Company.
<PAGE>
36
14.2 To take all reasonable actions in cooperation with the Company,
Luckygold, Mr. Li and the Underwriters to cause the Registration Statements to
become effective at the earliest possible time, do and perform all things to be
done and performed by Luckygold and Mr. Li under this Agreement prior to the
Closing Date and satisfy all conditions precedent to the delivery of the
Securities pursuant to this Agreement.
14.3 To reimburse (a) Donaldson, Lufkin & Jenrette Securities
Corporation upon request for on-going expenses and indemnification and other
expenses of the Trust incurred by Donaldson, Lufkin & Jenrette Securities
Corporation pursuant to the Fund Indemnity Agreement or the Fund Expense
Agreement, (b) Donaldson, Lufkin & Jenrette Securities Corporation for any other
amounts paid by Donaldson, Lufkin & Jenrette Securities Corporation in
connection with the offering of the Securities pursuant to the Trust Agreement
and (c) the Underwriters upon request all of the fees and expenses of counsel
for the Underwriters.
14.4 Whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, (a) to pay all costs, expenses,
fees and taxes incident to (i) the preparation, printing, filing and
distribution under the Act of the Registration Statements (including financial
statements and exhibits) and under the 1940 Act of the Trust Registration
Statement (including financial statements and exhibits) and the Notification,
each preliminary prospectus and all amendments and supplements to any of them
prior to or during the periods specified in Section 5.5 and Section 6.5, (ii)
the printing and delivery of the Prospectuses and all amendments or supplements
to it during the periods specified in Section 5.5 and Section 6.5 but not
exceeding nine months after the effective date of the Registration Statements,
(iii) the printing and delivery of this Agreement, the Preliminary and
Supplemental Blue Sky Memoranda and all other agreements, memoranda,
correspondence and other documents printed and delivered in connection with the
offering of the Securities and with respect to the Common Stock (including in
each case any disbursements of counsel for the Underwriters relating to such
printing and delivery), (iv) the registration or qualification of the Securities
and the Common Stock for offer and sale under the securities or Blue Sky laws of
the several states (including in each case the reasonable fees and disbursements
of counsel for the Underwriters relating to such registration or qualification
and memoranda relating thereto), (v) the listing of the Securities on the
American Stock Exchange, (vi) filings and clearance with the National
Association of Securities Dealers, Inc. in connection with the offering of the
Securities and the shares of Common Stock to be delivered to holders of the
Securities on the Exchange Date pursuant to the Contract, (vii) the listing of
the shares of Common Stock to be delivered to holders of the Securities on the
Exchange Date pursuant to the Contract on the Nasdaq National Market, (ix)
furnishing such copies of the Registration Statements, the Prospectuses and all
amendments and supplements thereto as may be requested for use in connection
with the offering or sale of the Securities by the Underwriters or by dealers to
whom
<PAGE>
37
Securities may be sold, (x) the fees and expenses of the QIU, (xi) the
preparation of the Fundamental Agreements and the Reimbursement Agreement, (xii)
all costs and expenses incurred in connection with the roadshow relating to the
offering contemplated by this Agreement and (xiii) the performance by the Trust,
the Company, Luckygold and Mr. Li of their other obligations under this
Agreement.
15. Judicial Proceedings.
--------------------
15.1 Each of the Trust, the Company, Mr. Li and Luckygold irrevocably
submits to the non-exclusive jurisdiction of any New York State or Federal court
sitting in The City of New York over any suit, action or proceeding arising out
of or relating to this Agreement, the Securities or the shares of Common Stock
to be exchanged for the Securities. To the fullest extent each of the Trust,
the Company, Luckygold and Mr. Li may effectively do so under applicable law,
each such person irrevocably waives and agrees not to assert, by way of motion,
as a defense or otherwise, any claim that such person is not subject to the
jurisdiction of any such court, any objection that such person may now or
hereafter have to the laying of the venue of any such suit, action or proceeding
brought in any such court and any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.
15.2 Each of the Trust, the Company, Luckygold and Mr. Li agrees, to
the fullest extent such person may effectively do so under applicable law, that
a judgment in any suit, action or proceeding of the nature referred to in
Section 15.1 brought in any such court shall be conclusive and binding upon such
person subject to rights of appeal, as the case may be, and may be enforced in
the courts of the United States of America or the State of New York (or any
other court the jurisdiction of which such person is or may be subject) by a
suit upon such judgment.
15.3 Each of the Trust, the Company, Luckygold and Mr. Li has
irrevocably designated and appointed CT Corporation System, 1633 Broadway, New
York, New York 10019, for a period of six years from the date hereof, as its or
his authorized agent, upon whom process may be served in any suit, action or
proceeding of the nature referred to in Section 15.1 by mailing a copy thereof
by registered or certified mail, postage prepaid, return receipt requested, to
the agent at the address of such person specified in Section 18. The Trust, the
Company, Luckygold and Mr. Li each agrees that such service (i) shall be deemed
in every respect effective service of process upon it or him in any such suit,
action or proceeding and (ii) shall, to the fullest extent permitted by law, be
taken and held to be valid personal service upon and personal delivery to such
person. Notices hereunder shall be conclusively presumed received as evidenced
by a delivery receipt furnished by the United States Postal Service or any
commercial delivery service.
<PAGE>
38
15.4 Nothing in this Section 15 shall affect the right of any
Underwriter to serve process in any manner permitted by law, or limit any right
to bring proceedings against the Trust, the Company, Luckygold or Mr. Li in the
courts of any jurisdiction or to enforce in any lawful manner a judgment
obtained in one jurisdiction in any other jurisdiction.
16. Judgment Currency. If for the purpose of obtaining judgment in
-----------------
any court it is necessary to convert a sum due hereunder into any currency other
than United States dollars, the parties hereto agree, to the fullest extent that
they may effectively do so, that the rate of exchange used shall be the rate at
which in accordance with normal banking procedures an Underwriter could purchase
United States dollars with such other currency in New York City on the business
day preceding that on which final judgment is given. The obligation of the
Company, Luckygold or Mr. Li, as the case may be, in respect of any sum due from
the Company, Luckygold or Mr. Li to any Underwriter, the Trust or the QIU shall,
notwithstanding any judgment in a currency other than United States dollars, be
discharged only if and to the extent that on the first business day following
receipt by such Underwriter, the Trust or the QIU of any sum adjudged to be so
due in such other currency, such Underwriter, the Trust or the QIU may in
accordance with normal banking procedures purchase United States dollars with
such other currency as it would have purchased on the business day preceding
that on which the final judgment is rendered; if the United States dollars so
purchased are less than the sum originally due to such Underwriter, the Trust or
the QIU hereunder, each of the Company, Luckygold and Mr. Li (on behalf of
itself and the Trust) agrees, as a separate obligation and notwithstanding any
such judgment, to indemnify such Underwriter, the Trust and the QIU, as the case
may be, against such loss.
17. Payments Free and Clear of Withholding Tax. All amounts payable
------------------------------------------
by the Company, Luckygold and Mr. Li to the Underwriters and the QIU hereunder
(including payment of selling concessions and underwriting commissions to, and
reimbursement of expenses of, the Underwriters and expenses of the QIU pursuant
to this Agreement) shall be made free and clear of, and without deduction for,
any taxes, duties, assessments or governmental charges of whatever nature
imposed, levied, collected, withheld or assessed by any tax authority of Bermuda
or Hong Kong unless such withholding or deduction is required by law or by
regulation or governmental policy having the force of law.
In the event that any such withholding or deduction is so required,
the Company, Luckygold and Mr. Li will pay such additional amounts as will
result in the receipt by the Underwriters, the Trust and the QIU of such amount
as would have been received by the Underwriters, the Trust or the QIU had no
such withholding or deduction been required.
18. Miscellaneous. Notices given pursuant to any provision of this
-------------
Agreement shall be addressed as follows: (a) if to the Trust, to Peak TrENDS
Trust,
<PAGE>
39
c/o Puglisi & Associates, 850 Library Street, Suite 204, Newark, Delaware 19715,
with a copy to Michael Gisser, Skadden, Arps, Slate, Meagher & Flom LLP, 30/F
Tower Two, Lippo Centre, 89 Queensway, Central, Hong Kong, (b) if to the
Company, to Peak International Limited, Units 3, 4, 5 and 7, 37th Floor, Wharf
Cable Tower, 9 Hoi Shing Road, Tsuen Wan, New Territories, Hong Kong, (c) if to
Mr. Li, to Mr. T.L. Li c/o Units 3, 4, 5 and 7, 37th Floor, Wharf Cable Tower, 9
Hoi Shing Road, Tsuen Wan, New Territories, Hong Kong, (d) if to Luckygold 18A
Limited, to Luckygold 18A Limited, c/o Peak International Limited, Units 3, 4, 5
and 7, 37th Floor, Wharf Cable Tower, 9 Hoi Shing Road, Tsuen Wan, New
Territories, Hong Kong, Attention: Mr. T.L. Li, and (e) if to any Underwriter or
to you, to you c/o Donaldson, Lufkin & Jenrette Securities Corporation, 277 Park
Avenue, New York, New York 10172, Attention: Syndicate Department, or in any
case to such other address as the person to be notified may have requested in
writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Trust, Luckygold, Mr. Li, the Company,
its officers and directors and of the several Underwriters set forth in or made
pursuant to this Agreement shall remain operative and in full force and effect,
and will survive delivery of and payment for the Securities, regardless of (i)
any investigation, or statement as to the results thereof, made by or on behalf
of any Underwriter or the QIU, the officers or directors of any Underwriter or
the QIU or any controlling person of any Underwriter or the QIU, by or on behalf
of the Trust, the trustees or any controlling person of the Trust or the
Company, Luckygold or Mr. Li or the officers or directors of the Company or
Luckygold or any controlling person of the Company or Luckygold, (ii) acceptance
of the Securities and payment for them hereunder and (iii) termination of this
Agreement.
If this Agreement shall be terminated by the Underwriters because of
any failure or refusal on the part of the Company, Luckygold or Mr. Li to comply
with the terms or to fulfill any of the conditions of this Agreement, the
Company, Luckygold and Mr. Li agree to reimburse the several Underwriters for
all out-of-pocket expenses (including the fees and disbursements of counsel)
reasonably incurred by them.
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Trust, the Company,
Luckygold, Mr. Li, the Underwriters, the QIU, any controlling persons referred
to herein and their respective successors and assigns, all as and to the extent
provided in this Agreement, and no other person shall acquire or have any right
under or by virtue of this Agreement. The term "successors and assigns" shall
not include a purchaser of any of the Securities or shares of Common Stock
delivered to holders of Securities pursuant to the Contract merely because of
such purchase or delivery.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW
<PAGE>
40
YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY IN SUCH STATE.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
<PAGE>
41
Please confirm that the foregoing correctly sets forth the agreement
between the Trust, the Company, Luckygold, Mr. Li and the several Underwriters.
Very truly yours,
PEAK TrENDS TRUST
By_____________________________
Name: Donald J. Puglisi
Title: Managing Trustee
PEAK INTERNATIONAL LIMITED
By_____________________________
Name:
Title:
LUCKYGOLD 18A LIMITED
By_____________________________
Name:
Title:
_______________________________
T.L. Li
<PAGE>
42
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BANCAMERICA ROBERTSON STEPHENS
Acting severally on behalf of
themselves and the several
Underwriters named in
Schedule I hereto
By DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By________________________________
Name:
Title:
By BANCAMERICA ROBERTSON STEPHENS
By________________________________
Name:
Title:
BANCAMERICA ROBERTSON STEPHENS
as Qualified Independent Underwriter
By________________________________
Name:
Title:
<PAGE>
SCHEDULE I
----------
Number of Firm
Underwriters Securities to be Purchased
- ------------ --------------------------
Donaldson, Lufkin & Jenrette Securities Corporation
BancAmerica Robertson Stephens
------------
TOTAL
<PAGE>
Annex 1 to
-------
Underwriting Agreement
Material Subsidiaries of the Company
------------------------------------
Peak Plastic & Metal Products (International) Limited
AJMS Peak Sdn Bhd
Warden Development Limited
Peak Resources Singapore Pte. Limited
SemiCycle Hong Kong Limited
Peak International, Inc.
<PAGE>
Exhibit 2.k.3
FORM OF
PURCHASE AGREEMENT
THIS AGREEMENT is made as of this __day of May, 1998 between Luckygold
18A Limited, a company incorporated in the British Virgin Islands ("Seller"),
and Peak TrENDS Trust (such trust and the trustees thereof acting in their
capacity as such being referred to herein as the "Trust" or "Purchaser").
WHEREAS, Purchaser has filed with the Securities and Exchange
Commission a registration statement contemplating the offering of up to
[6,900,000] Trust Enhanced Dividend Securities (the "TrENDS"), the terms of
which contemplate delivery by Purchaser to the holders thereof of a number of
ordinary shares, $.01 par value per share (the "Common Stock"), of Peak
International Limited, a Bermuda holding company (the "Company")(or, at the
option of the Seller, the equivalent in cash equal to the Reference Market
Price), on ________, 2001 (the "Exchange Date");
WHEREAS, Seller has agreed, pursuant to the Collateral Agreement (the
"Collateral Agreement") dated as of May ___, 1998, among Purchaser, Seller and
The Bank of New York, as collateral agent (the "Collateral Agent"), to grant
Purchaser a security interest in a specified amount of Common Stock and/or U.S.
Treasury securities and in certain other circumstances certain other collateral
to secure the obligations of the Seller hereunder;
WHEREAS, Purchaser has agreed, pursuant to an underwriting
agreement, dated May ____, 1998 (the "Underwriting Agreement"), among
Purchaser, Seller, and Donaldson, Lufkin & Jenrette Securities Corporation and
BancAmerica Robertson Stephens, on behalf of themselves and the several
underwriters named therein (the "Underwriters"), to issue and sell to the
Underwriters an aggregate of [6,000,000] TrENDS ("the Initial TrENDS") and, at
the Underwriters' option, all or any part of [900,000] additional TrENDS (the
"Additional TrENDS") to cover overallotments;
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:
<PAGE>
DEFINITIONS
As used herein, the following words and phrases shall have the
following meanings:
"Acceleration Amount" has the meaning provided in Article VII.
"Acceleration Amount Notice" has the meaning provided in Article VII.
"Acceleration Date" has the meaning provided in Article VII.
"Acceleration Value" has the meaning provided in Article VII.
"Additional Purchase Price" has the meaning provided in Section
1.2(b).
"Additional Share Base Amount" means the number of Additional TrENDS
that the Underwriters shall elect to purchase under the Underwriting Agreement.
"Additional Shares" has the meaning provided in Section 1.1(b).
"Additional STRIPS" means the U.S. Treasury obligations purchased by
Purchaser for settlement on the Option Closing Date.
"Adjustment Event" has the meaning provided in Section 6.2.
"Administrator" means The Bank of New York, administrator for
Purchaser under the Administration Agreement dated as of [May] ____, 1998, or
any successor thereto.
"Aggregate Acceleration Value" has the meaning provided in Article
VII.
"Business Day" means: (i) as used in Article VI, any day on which
commercial banks are open for business in New York City and (ii) as used in
Article VII, any day on which commercial banks are open for business in New York
City and none of the New York Stock Exchange, American Stock Exchange or Nasdaq
National Market is closed.
2
<PAGE>
"Calculation Period" means any period of Trading Days for which an
average security price must be determined pursuant to this Agreement.
"Cash Settlement Alternative" has the meaning provided in Section
1.3(d).
"Closing Price" means, for any security on any Trading Day, (i) the
last reported executed trade price (regular way) of such security on the
principal trading market for such security on such date; (ii) if no regular way
executed trade price for such security is reported on the principal trading
market for such security on such date, the average of the closing bid and
offered prices for such security as reported by the principal trading market for
such security on such date; (iii) if no regular way executed traded price or
closing bid and offered prices for such security are reported on the principal
trading market for such security on such date, the Closing Price (as determined
in accordance with clauses (i) or (ii)) for the next succeeding Trading Day (if
any) within the relevant Calculation Period on which the Closing Price may be so
determined; or (iv) if such security is no longer listed or admitted to trading
on any exchange or in the over-the-counter market, the average of the closing
bid and offered prices for such day as furnished by a member firm of the most
recent principal trading market for such security. The Closing Price shall be
subject to adjustment in certain events as provided in Section 6.1(d).
"Contract Shares" has the meaning provided in Section 1.1(b).
"Custodian" means The Bank of New York, custodian for Purchaser under
the Custodian Agreement dated as of [May] ____, 1998, or any successor thereto.
"Dilution Adjustment" means any fraction or number by which the
Exchange Rate shall be multiplied pursuant to Section 6.1(a), (b) or (c).
"Event of Default" has the meaning provided in Article VII.
"Excess Purchase Payment" has the meaning provided in Section 6.1(c).
"Exchange Rate" has the meaning provided in Section 1.1(c).
3
<PAGE>
"Firm Share Base Amount" has the meaning provided in Section 1.1(a).
"Firm Shares" has the meaning provided in Section 1.1(a).
"Firm Purchase Price" has the meaning provided in Section 1.2(a).
"Floor Price" has the meaning provided in Section 1.1(c).
"Independent Dealer" has the meaning provided in Article VII.
"Marketable Securities" has the meaning provided in Section 6.2.
"Option Closing Date" has the meaning provided in Article IV of the
Underwriting Agreement.
"Payment Date" has the meaning provided in Section 1.3(a).
"Permitted Dividend" has the meaning provided in Section 6.2.
"Purchase Price" means the sum of the Firm Purchase Price and the
Additional Purchase Price (if any).
"Reference Market Price" means the average Closing Price per share of
the Common Stock for a Calculation Period of 20 Trading Days immediately prior
to (but not including) the Exchange Date, provided that if no Closing Price
may be determined for one or more (but not all) of such Trading Days, such
Trading Day shall be disregarded in the calculation of the Reference Market
Price (but no additional Trading Day shall be added to the Calculation Period).
If no Closing Price may be determined for any of such Trading Days, the
Reference Market Price shall be the Closing Price per share of the Common Stock
for the most recent Trading Day prior to such 20 Trading Days for which a
Closing Price for the Common Stock may be determined.
"Then-Reference Market Price" of the Common Stock, for the purpose of
applying any adjustment pursuant to Section 6.1, means the average Closing Price
per share of the Common Stock for the Calculation Period of five Trading Days
immediately prior to
4
<PAGE>
the time such adjustment is calculated (or, in the case of an adjustment
calculated at the opening of business on the Business Day next following a
record date as described in Section 6.1(e)(i), immediately prior to the earlier
of the time such adjustment is calculated and the related "ex-date"); provided
that if no Closing Price for the Common Stock is determined for one or more (but
not all) of such Trading Days, such Trading Day shall be disregarded in the
calculation of the Then-Reference Market Price (but no additional Trading Days
shall be added to the Calculation Period). If no Closing Price for the Common
Stock may be determined for any of such Trading Days, the Then-Reference Market
Price shall be the Closing Price for the Common Stock for the most recent
Trading Day prior to such five Trading Days for which a Closing Price for the
Common Stock may be determined. The "ex-date" with respect to any dividend,
distribution or issuance shall mean the first date on which the Common Stock
trade regular way on their principal market without the right to receive such
dividend, distribution or issuance.
"Threshold Appreciation Price" has the meaning provided in Section
1.1(c).
"Trading Day" means, with respect to any security, a day on which the
principal trading market for such security is open for trading or quotation.
"Transaction Value" has the meaning provided in Section 6.2.
"Trust Agreement" means the Declaration of Trust of the Peak TrENDS
Trust dated as of _____________, 1998, as amended and restated as of
____________, 1998.
I.
SALE AND PURCHASE
1.1 Sale and Purchase. (a) Firm Shares. Upon the terms and subject
to the conditions of this Agreement, Seller agrees to sell to Purchaser, and
Purchaser agrees to purchase and acquire from Seller on the Exchange Date (as
defined herein), the amount of Common Stock (the "Firm Shares") equal to the
product of _________ (the "Firm Share Base Amount") and the Exchange Rate.
5
<PAGE>
(b) Additional Shares. Upon the terms and subject to the conditions
of this Agreement, Seller agrees to sell to Purchaser, and Purchaser shall have
a right to purchase, a number of additional Shares (the "Additional Shares")
equal to the product of the Exchange Rate and the Additional Share Base Amount.
If the Underwriters exercise their option to purchase Additional TrENDS pursuant
to the Underwriting Agreement, Purchaser shall forthwith upon such exercise
notify Seller in writing that Purchaser will purchase the Additional Shares,
which notice shall specify the Additional Share Base Amount and the date on
which Purchaser shall deliver the purchase price for the Additional Shares,
which shall be the Option Closing Date. The Firm Shares and the Additional
Shares (if any) are collectively referred to herein as the "Contract Shares".
(c) Exchange Rate. The "Exchange Rate" shall be determined in
accordance with the following formula, subject to adjustment as a result of
certain events relating to the Common Stock as provided in Article VI: (i) if
the Reference Market Price is less than $_____ (the "Threshold Appreciation
Price") but equal to or greater than $______ (the "Floor Price"), a number or
fractional number (rounded upward or downward to the nearest 1/10,000th or, if
there is not a nearest 1/10,000th, to the next lower 1/10,000th) which when
multiplied by the Reference Market Price is equal to the Floor Price, (ii) if
the Reference Market Price is equal to or greater than the Threshold
Appreciation Price, ______ and (iii) if the Reference Market Price is less than
the Floor Price, 1.0.
1.2 Purchase Price. (a) Firm Purchase Price. The purchase price
for the Firm Shares (the "Firm Purchase Price") shall be $___________ in the
aggregate in cash in U.S. dollars (approximately $_____ per share initially
subject hereto ).
(b) Additional Purchase Price. The purchase price for the Additional
Shares (the "Additional Purchase Price") shall be an amount in U.S. dollars
equal to the difference between: (i) the aggregate proceeds to Purchaser from
the sale of the Additional TrENDS; and (ii) the aggregate purchase cost to
Purchaser of the Additional STRIPS, as notified by Purchaser to Seller on the
Option Closing Date by way of a written notice giving reasonable details of the
Additional STRIPS.
6
<PAGE>
1.3 Payment for and Delivery of Contract Shares. (a) Payment Date.
Upon the terms and subject to the conditions of this Agreement, Purchaser shall
deliver to Seller the Firm Purchase Price on __________, 1998 (the "Payment
Date") at the offices of Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue
of the Americas, New York, N.Y. 10019-6064, or at such other place as shall be
agreed upon by Purchaser and Seller, paid by wire transfer to an account
designated by Seller, in New York Clearing House Funds (i.e., next-day funds).
(b) Option Closing Date. Upon the terms and subject to the
conditions of this Agreement, Purchaser shall deliver to Seller the Additional
Purchase Price on the Option Closing Date at the offices of Paul, Weiss,
Rifkind, Wharton & Garrison, 1285 Avenue of the Americas, New York, N.Y. 10019-
6064, or at such other place as shall be agreed upon by Purchaser and Seller,
paid by wire transfer to an account designated by Seller, in New York Clearing
House Funds.
(c) Delivery of Contract Shares. On the Exchange Date, Seller
shall, subject to the Purchaser having complied with its obligations under
Section 1.3(a) and, if applicable, Section 1.3(b), deliver the Contract Shares
to Purchaser. Delivery shall be effected by delivery by the Collateral Agent to
the Custodian, for the account of Purchaser, of Common Stock then held by the
Collateral Agent as collateral under the Collateral Agreement, in an amount
representing a number of shares equal to the number of Contract Shares, rounded
down to the nearest whole number. Instead of any fractional share that would
otherwise be deliverable to Purchaser at the Exchange Date, Seller shall make a
cash payment in respect of such fractional share in an amount equal to the value
thereof at the Reference Market Price. Notwithstanding the foregoing, if an
Adjustment Event shall have occurred prior to the Exchange Date then, in lieu of
the foregoing, delivery shall be effected as follows: (i) in the case of any
cash required to be delivered on the Exchange Date as provided in Section 6.2,
by wire transfer of immediately available funds to an account designated by
Purchaser; or (ii) in the case of any shares of Marketable Securities elected by
Seller to be delivered in lieu of cash as provided in Section 6.2, at Seller's
election, by instruction to the Collateral Agent to deliver to the Custodian,
for the account of Purchaser, a specified number of shares of Marketable
Securities then held as collateral under the Collateral Agreement, as provided
in Section 6(g) of the Collateral Agreement.
7
<PAGE>
(d) Cash Settlement Alternative. At its option, Seller may
deliver to Purchaser on the Exchange Date, in lieu of the Contract Shares, an
amount in cash equal to the product of the Reference Market Price and the
Contract Shares (the "Cash Settlement Alternative"), paid by wire transfer to an
account designated by Custodian, in New York Clearing House Funds. Seller may
elect the Cash Settlement Alternative in respect of all, but not less than all,
Contract Shares by notice to Purchaser, the Collateral Agent and the Custodian
not less than 20 Trading Days immediately prior to (but not including) the
Exchange Date.
II.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
(a) Seller has been duly incorporated and is validly existing as
a company under the laws of the British Virgin Islands.
(b) This Agreement has been duly authorized, executed and
delivered by Seller and, assuming due authorization, execution and delivery by
Purchaser, is a legal, valid and binding agreement of Seller, enforceable under
New York law against Seller in accordance with its terms except as (i) such
enforceability may be limited by applicable bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (ii) the availability of
equitable remedies may be limited by equitable principles of general
applicability.
(c) The execution and delivery by Seller of, and the performance
by Seller of its obligations under, this Agreement will not contravene any
provision of applicable law or memorandum or articles of association of Seller
or any agreement or other instrument binding upon Seller or any judgment, order
or decree of any governmental body, agency or court having jurisdiction over
Seller as at the date hereof, whether foreign or domestic, and no consent,
approval, authorization, order of, or qualification with, any governmental body,
agency, self-regulatory organization or court or other tribunal, whether foreign
or domestic is or will be required as at the date hereof for the execution,
delivery and performance by Seller of this Agreement.
8
<PAGE>
(d) As of the date hereof, the Seller has good and valid title to
_______________ shares of Common Stock of the Company, free and clear of all
liens, encumbrances, equities, restrictions, legends or claims other than those
provided for under the bylaws of the Company or created pursuant to the
Collateral Agreement; all consents, approvals, authorizations and orders
necessary for the Seller to pledge and assign the Common Stock to be pledged and
assigned by the Seller pursuant to this Agreement and the Collateral Agreement
have been obtained; and upon delivery of such Common Stock on the Exchange Date,
good and valid title to such Common Stock, free and clear of all liens,
encumbrances, equities, restrictions, legends or claims will, subject to the
provisions of the bylaws of the Company, pass to the Purchaser.
(e) Immediately prior to the Payment Date, the Seller has no
creditors and debts, whether or not such debts are liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, legal or equitable.
(f) Since its incorporation, the Seller did not engage in any
business activity except any activity relating to (i) the issuance of shares of
the Seller and appointment of directors, (ii) the acquisition and disposal of
the Common Stock, (iii) the exercise of its rights as the owner of the Common
Stock or other property distributed with respect to the Common Stock, and (iv)
the offering of the TrENDS.
(g) Since its incorporation, the Seller has maintained corporate
records and books of account which at all times were, and will continue to be
separate from those of any other person or entity.
(h) Since its incorporation up to the date hereof, the Seller has and
will continue to observe all applicable corporate formalities in the conduct of
its affairs and with respect to the ownership, encumbrances or transfer of any
material assets or the incurrence of any material indebtedness.
(i) Both immediately before and after the Payment Date (a) the fair
value of the Seller's assets will exceed its liabilities, (b) the present fair
saleable value of the Seller's assets would be greater than its probable
liability on its existing debts as such debts become absolute and matured, (c)
the Seller would be able to pay its debts as they fall due, and (d) the Seller's
remaining capital would not be unreasonably small for the business in which it
is engaged.
9
<PAGE>
(j) Since its incorporation, the Seller has and will continue to
conduct its business solely in its own name or through its authorized agents, in
a manner which is not likely to mislead any third party as to the legal entity
with which they are dealing.
(k) Since its incorporation, the Seller's assets have not been
presented in consolidated financial statements or otherwise, as available for
distribution to creditors of any other person or entity, and such practice will
continue through and including the Exchange Date.
(l) The Seller's funds and assets, at all times since its
incorporation, have not been and will continue not to be commingled with those
of any other person or entity, and shall be clearly and properly accounted for
and traceable at all times and in all transactions.
(m) Since its incorporation, the Seller has and will continue to use
stationary and other business forms containing its name identifiably separate
and distinct from those of any other person or entity.
III.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
(a) Purchaser has been duly created and is validly existing as a
statutory business trust under the laws of the State of Delaware.
(b) This Agreement has been duly authorized, executed and delivered
by Purchaser and, assuming due authorization, execution and delivery by Seller,
is a legal, valid and binding agreement of Purchaser, enforceable against
Purchaser in accordance with its terms except as (i) such enforceability may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (ii) the availability of equitable remedies may
be limited by equitable principles of general applicability.
(c) The execution and delivery by Purchaser of, and the performance
by Purchaser of its obligations under, this
10
<PAGE>
Agreement will not contravene any provision of applicable law or the Trust
Agreement, Administration Agreement, Paying Agent Agreement, Custodian Agreement
or any other agreement or other instrument binding upon Purchaser or any
judgment, order or decree of any governmental body, agency or court having
jurisdiction over Purchaser, whether foreign or domestic, and no consent,
approval, authorization, order of, or qualification with, any governmental body
or agency, self-regulatory organization or court or other tribunal, whether
foreign or domestic is or will be required for the execution, delivery and
performance by Purchaser of this Agreement.
IV.
CONDITIONS TO PURCHASER'S OBLIGATIONS
(a) The obligation of Purchaser to deliver the Purchase Price
on the Payment Date is subject to the satisfaction of the following conditions:
(i) the purchase by the Underwriters of the Initial TrENDS
pursuant to the Underwriting Agreement shall have been consummated as
contemplated therein; and
(ii) the representations and warranties of Seller contained in
Article II hereof shall be true and correct as of the Payment Date.
(b) The obligation of Purchaser to deliver the Additional
Purchase Price on the Option Closing Date is subject to the condition that the
purchase by the Underwriters of the Additional TrENDS pursuant to the
Underwriting Agreement shall have been consummated as contemplated therein.
(c) If the conditions in this Article IV are not fulfilled or
waived by the Purchaser by the Exchange Date (or such later date as the parties
hereto may agree in writing), all rights, obligations and liabilities of the
parties hereunder shall be terminated and no party hereto will have any further
claim against any other party except claims, if any, in respect of any
antecedent breach hereof.
11
<PAGE>
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, Marketable
Securities and any other property pursuant hereto.
5.2 Forward Contract. Seller hereby agrees that: (i) it will not
treat this Agreement, any portion of this Agreement, or any obligation
hereunder as giving rise to any interest income or other inclusions of ordinary
income; (ii) it will not treat the delivery of any portion of the Contract
Shares or cash or, if an Adjustment Event shall have occurred, Marketable
Securities or cash to be delivered pursuant to this Agreement as the payment of
interest or ordinary income; (iii) it will treat this Agreement in its entirety
as a forward contract for the delivery of such Contract Shares or cash or, if an
Adjustment Event shall have occurred, Marketable Securities or cash; and (iv) it
will not take any action (including filing any tax return or form or taking any
position in any tax proceeding) that is inconsistent with the obligations
contained in (i) through (iii). Notwithstanding the preceding sentence, Seller
may take any action or position required by law, provided that Seller delivers
to Purchaser an unqualified opinion of counsel, nationally recognized as expert
in United States federal tax matters, to the effect that such action or position
is required by a statutory change, United States Treasury regulation or
applicable court decision published after the date of this Agreement.
5.3 Limitations on Trading During Certain Days. Seller hereby agrees
that it will not buy Common Stock for its own account during the 60 days prior
to the Exchange Date; provided, however, that if any adjustment is made to the
Exchange Rate pursuant to Section 6.1(c) during the 65 days prior to the
Exchange Date the Seller may buy a maximum number of shares of Common Stock
equal to the increase in the number of Contract Shares deliverable by the Seller
on the Exchange Date solely as a result of such adjustment; provided, further,
that in no event may the Seller buy Common Stock for its own account on and
after the date on which the Seller has elected the Cash Settlement Alternative.
5.4 Notices. Seller will cause to be delivered to Purchaser:
12
<PAGE>
(a) Promptly upon the occurrence of any Event of Default
hereunder or under the Collateral Agreement, or upon Seller obtaining knowledge
that any of the conditions or events described in paragraph (a) or (b) of
Article VII shall have occurred with respect to the Seller, notice of such
occurrence; and
(b) In case at any time prior to the Exchange Date Seller
receives notice, or obtains knowledge, that any event requiring that an
adjustment be effected pursuant to Article VI hereof shall have occurred or will
occur, 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 or has occurred and, if applicable, the record date relating
to such event. Seller shall cause further notices to be delivered to Purchaser
if Seller subsequently receives notice, or obtains knowledge, of any further or
revised information regarding the terms or timing of such event or any record
date relating thereto.
5.5 Additional Covenants.
(a) The Seller shall not incur, directly or indirectly, any Debt
other than Debt existing as of the date hereof; provided, however, that the
Seller may incur reasonable fees and expenses in connection with this Agreement
and the transactions contemplated hereby; provided further that the Seller may
declare and distribute dividends to its shareholders, with the Purchase Price
paid by the Purchaser, in accordance with the laws of the British Virgin
Islands. For purposes of this paragraph, "Debt" means the principal of and
premium (if any) in respect of (i) any indebtedness of the Seller for money
borrowed, (ii) indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which the Seller is responsible or liable
and (iii) all obligations of the type referred to in (i) and (ii) above of other
person of which Seller is responsible or liable, directly or indirectly, as
obligor, guarantor or otherwise [and (iv) any other indebtedness].
(b) The Seller will not create or suffer to exist, or enter into
any agreement, issue any power of attorney or otherwise confer on any person the
power to create or suffer to exist, any Lien upon any of its property or assets
now owned or hereafter acquired by it securing any obligation, except for (i)
the Lien existing as of the date hereof listed on Schedule ______ attached
hereto and (ii) the Lien created pursuant to the Collateral Agreement. For
purposes of this paragraph, "Lien" means any lien, mortgage, hypothecation,
pledge, security inter-
13
<PAGE>
est (including, without limitation, a fiduciary transfer or assignment),
conditional sale or other title retention agreement or other similar lien (other
than those arising solely by operation of law).
(c) The Seller will not engage in any business activity or
undertake any other activity, except any activity (i) contemplated by this
Agreement, (ii) permitted under its memorandum and articles of association,
which shall not be amended prior to the Exchange Date without the prior written
consent of the trustees of the Purchaser or (iii) any activity relating to the
exercise of its rights as owner of the Common Stock of the Company or other
property distributed with respect to such shares of the Company.
(d) Nothing contained in this Article shall limit or effect in
any way the representations and warranties of Seller contained in Article II of
this Agreement.
5.6 Further Assurances. From time to time on and after the date
hereof through the Exchange Date, each of the parties hereto shall use its
reasonable best efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper and advisable to consummate and
make effective as promptly as practicable the transactions contemplated by
this Agreement in accordance with the terms and conditions hereof, including (i)
using reasonable best efforts to remove any legal impediment to the consummation
of such transactions and (ii) the execution and delivery of all such deeds,
agreements, assignments and further instruments of transfer and conveyance
necessary, proper or advisable to consummate and make effective the transactions
contemplated by this Agreement in accordance with the terms and conditions
hereof.
5.7 Survival of Representations and Warranties. The Seller's
representations and warranties contained in this Agreement, including but not
limited to Article II of this Agreement, shall survive the Payment Date and the
Option Closing Date.
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<PAGE>
VI.
ADJUSTMENT OF EXCHANGE RATE, THRESHOLD PRICES,
INITIAL VALUE AND CLOSING PRICE
6.1 Dilution Adjustments. The Exchange Rate, Threshold
Appreciation Price, Floor Price and the Initial Value shall be subject to
adjustment from time to time as follows:
(a) Stock Dividends, Splits, Reclassifications, etc. If the
Company shall, after the date hereof,
(i) pay a stock dividend or make a distribution with respect
to Common Stock in such Common Stock;
(ii) subdivide or split the outstanding Common Stock into a
greater number of shares in the capital of the Company;
(iii) combine the outstanding Common Stock into a smaller number
of shares in the capital of the Company; or
(iv) issue by reclassification of Common Stock any shares in
the capital of the Company;
then, in each such case, the Exchange Rate shall be multiplied by a Dilution
Adjustment equal to the number of shares of Common Stock (or in the case of a
reclassification referred to in clause (iv) above, the number of shares in the
capital of the Company issued pursuant thereto) (or the fraction thereof) that a
holder who held one Common Stock immediately prior to such event would be
entitled solely by reason of such event to hold immediately after such event.
Upon any such adjustment the Threshold Appreciation Price and Floor Price
shall also be adjusted in the manner described in Section 6.1(d).
(b) Right or Warrant Issuances. If the Company shall, after the date
hereof, issue, or declare a record date in respect of an issuance of, rights or
warrants to all holders of Common Stock entitling them to subscribe for or
purchase Common Stock (other than rights to purchase Common Stock pursuant to a
plan for the reinvestment of dividends or interest) at a price per share less
than the Then-Reference Market Price of the Common Stock, then, in each such
case, the Exchange Rate shall be multiplied by the following Dilution
Adjustment: a fraction of which the numerator shall be the number of shares of
Common Stock outstanding immediately prior to the time the adjustment is
15
<PAGE>
effected, plus the number of additional shares of Common Stock offered for
subscription or purchase pursuant to such rights or warrants, and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately prior to the time as of which the adjustment is effected plus the
number of additional shares of Common Stock which the aggregate offering price
of the total number of shares of Common Stock so offered for subscription or
purchase pursuant to such rights or warrants would purchase at the Then-
Reference Market Price of the Common Stock, which shall be determined by
multiplying the total number of shares so offered for subscription or purchase
by the exercise price of such rights or warrants and dividing the product so
obtained by such Then-Reference Market Price. To the extent that, after
expiration of such rights and warrants, shares of Common Stock are not delivered
in connection with exercises of such rights or warrants, the Exchange Rate shall
be readjusted to the Exchange Rate which would then be in effect had such
adjustments for the issuance of such rights or warrants been made upon the basis
of delivery of only the number of shares of Common Stock actually delivered.
Upon any such adjustment the Threshold Appreciation Price and Floor Price shall
also be adjusted in the manner described in Section 6.1(d).
(c) Excess Purchase Payments. If, after the date hereof, the Company
makes an Excess Purchase Payment, then the Exchange Rate will be multiplied by a
fraction of which the numerator shall be the Then-Reference Market Price of the
Common Stock, and of which denominator shall be such Then-Reference Market Price
less the amount of such distribution applicable to one share of Common Stock
which would not be a Permitted Dividend (as defined below), (or in the case of
an Excess Purchase Payment, less the aggregate amount of such Excess Purchase
Payments for which adjustment is being made at such time divided by the number
of outstanding shares of Common Stock on the date the adjustment is effected).
For purposes of this Agreement, "Excess Purchase Payment" means the excess, if
any, of (x) the cash and the value (as determined by a nationally recognized
independent investment banking firm retained for this purpose by Purchaser) of
all other consideration paid by the Company with respect to one share of Common
Stock acquired in any share repurchase (excluding share repurchases by the
Company effected in compliance with Rule 10b-18 under the Securities Exchange
Act of 1934, as amended) whether made by the Company in the open market, by
private purchase, by tender offer, by exchange offer or otherwise, over (y)
the Then-Reference Market Price of the Common Stock. Notwithstanding the
foregoing, the Company may pay up to $____________ in aggregate consideration in
respect of share
16
<PAGE>
repurchases without any adjustment pursuant to this Section 6.1(c) being
required, provided that no such repurchase involves an Excess Purchase Payment
of more than five percent of the Then-Reference Market Price of the Common Stock
on the date an adjustment therefor would otherwise be required to be effected.
Upon any such adjustment the Threshold Appreciation Price and Floor Price shall
also be adjusted in the manner described in Section 6.1(d).
(d) Corresponding Adjustments to Initial Value, Threshold
Appreciation Price, Floor Price and Closing Price.
(i) If any adjustment is made to the Exchange Rate pursuant to
Section 6.1 (a), (b) or (c), an adjustment shall also be made to the
Threshold Appreciation Price and the Floor Price. The required adjustment
shall be made by dividing each of the Threshold Appreciation Price and the
Floor Price by the relevant Dilution Adjustment.
(ii) If, during any Calculation Period used in calculating the
Reference Market Price, the Then-Reference Market Price or the Transaction
Value, there shall occur any event requiring an adjustment to be effected
pursuant to this Section 6.1, then the Closing Price for each Trading Day
in the Calculation Period occurring prior to the day on which such
adjustment is effected shall be adjusted by being divided by the relevant
Dilution Adjustment.
(e) Timing of Dilution Adjustments. Each Dilution Adjustment
required hereunder shall be effected:
(i) in the case of any dividend, distribution or issuance, at
the opening of business on the Business Day next following the record date
for determination of holders of Common Stock entitled to receive such
dividend, distribution or issuance or, if the announcement of any such
dividend, distribution or issuance is after such record date, at the time
such dividend, distribution or issuance shall be announced by the Company;
(ii) in the case of any subdivision, split, combination or
reclassification, on the effective date of such transaction;
(iii) in the case of any Excess Purchase Payment for which the
Company shall announce, at or prior to the time it commences the relevant
share repurchase, the repur-
17
<PAGE>
chase price per share for shares proposed to be repurchased, on the date of
such announcement; and
(iv) in the case of any other Excess Purchase Payment, on the
date that the holders of the repurchased shares become entitled to payment
in respect thereof.
(f) General; Failure of Dilution Event to Occur. All Dilution
Adjustments shall be rounded upward or downward to the nearest 1/10,000th or if
there is not a nearest 1/10,000th to the next lower 1/10,000th). No adjustment
in the Exchange Rate shall be required unless such adjustment would require an
increase or decrease of at least one percent therein; provided, however, that
any adjustments which by reason of this sentence are not required to be made
shall be carried forward and taken into account in any subsequent adjustment. If
any announcement or declaration of a record date in respect of a dividend,
distribution, issuance or repurchase requiring an adjustment pursuant to this
Section 6.1 shall subsequently be cancelled by the Company, or such dividend,
distribution, issuance or repurchase shall fail to receive requisite approvals
or shall fail to occur for any other reason, then, upon such cancellation,
failure of approval or failure to occur, the Exchange Rate shall be readjusted
to the Exchange Rate which would then have been in effect had adjustment for
such event not been made. If 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 (i) any dividend or distribution by the Company to all holders
of Common Stock of evidences of its indebtedness or other assets (excluding (i)
dividends or distributions referred to in Section 6.1(a)(i), (ii) any shares of
other common stock of the Company issued in a reclassification referred to in
Section 6.1(a)(iv) and (iii) Permitted Dividends), or any issuance by the
Company to all holders of Common Stock of rights and warrants (other than rights
or warrants referred to in Section 6(b)), (ii) any consolidation or merger of
the Company, or any surviving entity or subsequent surviving entity of the
Company (a "Company Successor"), with or into another entity (other than a
merger or consolidation in which the Company is the continuing corporation and
in which the Common Stock outstanding immediately prior to the merger or
consolidation is not exchanged for cash, securities or other property of the
Company or another
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<PAGE>
entity), (iii) any sale, transfer, lease or conveyance to another entity of the
property of the Company or any Company Successor as an entirety or substantially
as an entirety, (iv) any statutory exchange of securities of the Company or any
Company Successor with another entity (other than in connection with a merger or
acquisition) or (v) any liquidation, dissolution or winding up of the Company or
any Company Successor (any such event described in clause (i), (ii), (iii), (iv)
or (v), an "Adjustment Event"), the Exchange Rate shall be adjusted so that on
the Exchange Date Purchaser shall receive, in lieu of, or (in the case of an
Adjustment Event described in Section 6.2(i)) in addition to, the Contract
Shares, cash in an amount equal to the product of (x) the Firm Share Base Amount
plus the Additional Share Base Amount (if any) and (i) if the Reference Market
Price is greater than or equal to the Threshold Appreciation Price, [______]
multiplied by the Transaction Value, (ii) if the Reference Market Price is less
than the Threshold Appreciation Price but is equal to or greater than the Floor
Price, the product of (A) the Floor Price divided by the Reference Market Price
multiplied by (B) the Transaction Value and (iii) if the Reference Market Price
is less than the Floor Price, the Transaction Value. Following an Adjustment
Event, the Reference Market Price, as such term is used herein, shall be deemed
to equal (A) the Reference Market Price of the Common Stock, as adjusted
pursuant to Section 6.1(d); plus (B) the Transaction Value. Notwithstanding the
foregoing, if any Marketable Securities are received in such Adjustment Event,
Seller may, at its option, in lieu of delivering cash as described above,
deliver an equivalent amount (based on the value determined in accordance with
clause (z) of the following paragraph) of Marketable Securities, but not
exceeding, as a percentage of the total consideration required to be delivered,
the percentage of the total Transaction Value attributable to such Marketable
Securities; provided, however, that (i) if such option is exercised, the Seller
shall deliver Marketable Securities in respect of all, but not less than all,
cash amounts that would otherwise be deliverable in respect of Marketable
Securities received in an Adjustment Event, (ii) the Seller may not exercise
such option if the Seller has elected to deliver cash in lieu of the Common
Stock, if any, deliverable upon the Exchange Date or if such Marketable
Securities have not yet been delivered to the holders entitled thereto following
such Adjustment Event or any record date with respect thereto, and (iii) subject
to clause (ii) of this proviso, the Seller must exercise such option if the
Seller does not elect to deliver cash in lieu of Common Stock, if any,
deliverable upon the Exchange Date. If the Seller elects to deliver Marketable
Securities, each holder of a TrENDS will be responsible for the payment of any
and all brokerage and other
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<PAGE>
transaction costs upon the sale of such Marketable Securities. If, following any
Adjustment Event, any Marketable Security ceases to qualify as a Marketable
Security, then (x) the Seller may no longer elect to deliver such Marketable
Security in lieu of an equivalent amount of cash and (y) notwithstanding clause
(z) of the definition of Transaction Value, the Transaction Value of such
Marketable Security shall mean the fair market value of such Marketable Security
on the date such security ceases to qualify as a Marketable Security, as
determined by a nationally recognized investment banking firm retained for this
purpose by the Seller.
"Permitted Dividend" means any cash dividend in respect of the Common
Stock, other than a cash dividend that, together with any other cash dividends
during the preceding 12 months, exceeds 10% of the average of the Closing Prices
during such 12-month period.
"Transaction Value" means the sum of: (x) for any cash received in
any such Adjustment Event, the amount of cash received per share of Common
Stock; (y) for any property other than cash or Marketable Securities received in
any such Adjustment Event, an amount equal to the market value on the date the
Adjustment Event is consummated of such property received per share of Common
Stock, as determined by a nationally recognized independent investment banking
firm retained for this purpose by the Administrator; and (z) for any Marketable
Securities received in any such Adjustment Event, an amount equal to the average
Closing Price per share of such Marketable Securities for the Calculation Period
of 20 Trading Days immediately prior to the Exchange Date multiplied by the
number of such shares received for each share of Common Stock; provided that if
no Closing Price for such Marketable Securities may be determined for one or
more (but not all) of such Trading Days, such Trading Day shall be disregarded
in the calculation of such average Closing Price (but no additional Trading Days
shall be added to the Calculation Period). If no Closing Price for the
Marketable Securities may be determined for all such Trading Days, the
calculation in the preceding clause (z) shall be based on the most recently
available Closing Price for the Marketable Securities prior to such 20 Trading
Days.
"Marketable Securities" means any securities that (A) are (i) listed
on a United States national securities exchange, (ii) reported on a United
States national securities system subject to last sale reporting, (iii) traded
in the over-the-counter market and reported on the National Quotation Bureau or
20
<PAGE>
similar organization or (iv) for which bid and ask prices are available from at
least three nationally recognized investment banking firms and (B) are either
(x) perpetual equity securities or (y) non-perpetual equity or debt securities
with a stated maturity after the stated maturity of the TrENDS. The number of
such Marketable Securities included in the calculation of Transaction Value
pursuant to the clause (z) of the preceding paragraph, and the Threshold
Appreciation Price, Floor Price and Initial Value, shall be subject to
adjustment if any event that would, had it occurred with respect to the Common
Stock or the Company, have required an adjustment pursuant to Section 6.1, shall
occur with respect to such Marketable Securities or the issuer thereof
subsequent to the date the 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.
VII
ACCELERATION
If one or more of the following events (each an "Event of Default")
shall occur:
(a) Seller shall commence a voluntary case or other proceeding
seeking a liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or hereafter
in effect or in that connection seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, or shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against it, or shall take any corporate action to authorize
any of the foregoing;
(b) an involuntary case or other proceeding shall be commenced
against Seller seeking liquidation, reorganization or other relief with respect
to it or its debts under any bankruptcy, insolvency or other similar law now
or hereafter in effect or in that connection seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or
any substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of 60 days
following the Company becoming aware of it (at the end of which a Collateral
Event of Default
21
<PAGE>
for the purposes of section (c) below shall be deemed to have occurred; or
(c) a Collateral Event of Default within the meaning of the
Collateral Agreement;
then, upon the occurrence of any such event, an Acceleration Date shall occur,
and Seller shall become obligated to deliver immediately upon receipt of the
Acceleration Amount Notice (as defined below), the Acceleration Amount. The
"Acceleration Amount" means that number of shares of Common Stock determined by
dividing: (i) the Aggregate Acceleration Value by (ii) the Closing Price of the
Common Stock on the Acceleration Date. If an Adjustment Event shall have
occurred on or before the Acceleration Date, then in lieu of the Acceleration
Amount, Seller shall deliver cash, Marketable Securities or a combination
thereof, as the case may be, having an aggregate value, based on the Closing
Price per share or the value of a debt security of the Marketable Securities
on the Acceleration Date, equal to the Aggregate Acceleration Value; provided
that the percentage of such aggregate value that may be delivered in the form of
Marketable Securities shall not exceed the percentage of the Transaction Value
that would be attributable to Marketable Securities if the Exchange Date were
the Acceleration Date.
The "Aggregate Acceleration Value" means the product obtained by
multiplying (i) the Acceleration Value (as defined below) by (ii) the quotient
obtained by dividing (A) the sum of the Firm Share Base Amount and the
Additional Share Base Amount (if any) by (B) 1,000; except that, if no
quotations for the determination of the Acceleration Value are obtained as
described below, the Aggregate Acceleration Value shall be (x) the Closing Price
on the Acceleration Date times the number of shares of Common Stock that would
be required to be delivered by Seller on such date under this Agreement if the
Exchange Date were the Acceleration Date or (y) after an Adjustment Event, the
value of the alternative consideration that would be required to be delivered on
such date under the Agreement if the Exchange Date were the Acceleration Date.
The "Acceleration Value" means an amount determined on the basis of
quotations from up to four Independent Dealers, as defined below. Each
quotation will be for the amount that would be paid to the relevant Independent
Dealer in consideration of an agreement between Purchaser and such Independent
Dealer that would have the effect of preserving for Purchaser the economic
equivalent of the payments and deliveries that Purchaser would,
22
<PAGE>
but for the occurrence of the Acceleration Date, have been entitled to receive
after the Acceleration Date under Article I hereof (taking into account any
adjustments to the Exchange Rate that may have been effected on or prior to the
Acceleration Date) provided that, for purposes of determining the payments and
deliveries to which Purchaser is entitled under Article I hereto, the Additional
Share Base Amount shall be redefined to be zero and the Firm Share Base Amount
shall be redefined to be 1,000. On or as soon as reasonably practicable
following the date on which Purchaser receives notice, or obtains knowledge of,
such Acceleration Date, Purchaser will request each Independent Dealer to
provide its quotation as soon as reasonably practicable, but in any event within
two Business Days. Purchaser shall compute Acceleration Value upon receipt of
each Independent Dealer's quotation, provided that if, at the close of business
on the fourth Business Day following the date on which Purchaser receives
notice, or obtains knowledge of, such Acceleration Date, Purchaser shall have
received quotations from fewer than four of the Independent Dealers, Purchaser
shall compute the Acceleration Value using the quotations, if any, it shall have
received at or prior to such time. If four quotations are provided, the
Acceleration Value will be the arithmetic mean of the two quotations remaining
after disregarding the highest and lowest quotations. (For this purpose, if more
than one quotation has the same highest or lowest value, then one of such
quotations shall be disregarded.) If two or three quotations are provided, the
Acceleration Value will be the arithmetic mean of such quotations. If one
quotation is provided, the Acceleration Value will be equal to such quotation.
If no quotations are provided, the Acceleration Value will not be determined and
the Aggregate Acceleration Value will be determined as provided above.
"Independent Dealer" means a nationally recognized independent
investment banking firm selected in good faith by Purchaser.
As promptly as reasonably practicable after receipt of the quotations
on which the Acceleration Value is based (or, as the case may be, after failure
to receive any such quotations within the time period prescribed above,
Purchaser shall deliver to Seller a notice (the "Acceleration Amount Notice")
specifying the Acceleration Amount of Shares required to be delivered by Seller.
Purchaser and Seller agree that the Aggregate Acceleration Value is
a reasonable pre-estimate of loss and not a penalty. Such amount is payable for
the loss of bargain and
23
<PAGE>
Purchaser will not be entitled to recover additional damages as a consequence of
loss resulting from an Event of Default.
VIII.
MISCELLANEOUS
8.1 Adjustments of Exchange Rate; Selection of Independent Investment
Banking Firm. Purchaser shall be responsible for effectuating and calculating or
obtaining the calculation of any adjustment pursuant to Article VI hereof and
shall furnish Seller notice of any such adjustment and shall provide Seller
reasonable opportunity to review the calculations pertaining to any such
adjustment. If, pursuant to the terms and conditions hereof, Purchaser shall be
required to retain a nationally recognized independent investment banking firm
for any purpose provided herein, such nationally recognized independent
investment banking firm shall be selected and retained by Purchaser only after
consultation with Seller. Purchaser may delegate the selection of any such firm,
or the effectuation and calculation of any such adjustments, to the
Administrator. The Administrator may retain a nationally recognized firm of
independent certified public accountants (which may be the independent auditors
of the Company), selected after consultation with Seller, to calculate any
dilution adjustments to the Exchange Rate required by Article VI hereof. The
fees and expenses of any such nationally recognized independent investment
banking firm or firm of nationally recognized independent auditors retained by
the Administrator shall be borne by Seller.
8.2 Notices. Any notice provided for herein, unless otherwise
specified, shall be in writing (including transmittal by telex or telecopier)
and shall be given to a party at the address set forth opposite such party's
name on the signature pages hereto or at such other address as may be designated
by notice duly given in accordance with this Section 8.2 to each other party
hereto. Any notice to the Seller of legal process in the United States should
be sent to CT Corporation, the registered agent of the Seller in the United
States, at 1633 Broadway, New York, New York 10019.
8.3 Governing Law; Submission to Jurisdictions; Severability. This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York, without regard to its principles of conflicts of laws. The
Seller hereby submits to the non-exclusive jurisdiction of the United States
24
<PAGE>
District Court for the Southern District of New York and any New York state
court sitting in New York City for the purposes of all legal proceedings arising
out of or relating to this Agreement or the transactions contemplated hereby.
The Seller hereby irrevocably waives, to the fullest extent permitted by
applicable law, any objection that it may now or hereafter have to laying of the
venue of any such proceedings brought in such a court and any claim that any
such proceeding brought in such a court has been brought in an inconvenient
forum. 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. [The Seller
hereby irrevocably waives, to the fullest extent permitted by applicable law,
trial by jury].
8.4 Entire Agreement. Except as expressly set forth herein, this
Agreement constitutes the entire agreement among the parties with respect to the
subject matter hereof and supersedes all prior agreements, understandings and
negotiations, both written and oral, among the parties with respect to the
subject matter of this Agreement.
8.5 Amendments; Waivers. Any provision of this Agreement may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by Purchaser and Seller or, in the case of
a waiver, by the party against whom the waiver is to be effective. No failure
or delay by either party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law.
8.6 No Third Party Rights; Successors and Assigns. This Agreement is
not intended and shall not be construed to create any rights in any person other
than Seller and Purchaser and their respective successors and assigns and no
person shall assert any rights as third party beneficiary hereunder. Whenever
any of the parties hereto is referred to, such reference shall be deemed to
include the successors and assigns of such party. All the covenants and
agreements herein contained by or on behalf of Seller and Purchaser shall bind,
and inure to the benefit of, their respective successors and assigns whether so
expressed or not, and shall be enforceable by and inure to the benefit of
Purchaser and its successors and assigns.
25
<PAGE>
8.7 Counterparts. This Agreement may be executed acknowledged and
delivered in any number of counterparts, and such counterparts taken together
shall constitute one and the same instrument.
26
<PAGE>
IN WITNESS WHEREOF, the parties have signed this Agreement as of the
date and year first above written.
SELLER:
LUCKYGOLD 18A LIMITED
By
--------------------------------------
Address for Notices:
CT Corporation
Attention:
-------------------------------
PURCHASER:
-----------------------------------------
as Trustee
-----------------------------------------
as Trustee
-----------------------------------------
as Trustee
each as trustee of PEAK TrENDS TRUST
Address for Notices:
850 Library Avenue
Suite 204
Newark, DE 19715
Attention: Donald J. Puglisi
27
<PAGE>
[LETTERHEAD OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP]
EXHIBIT (2)(l)
May 13, 1998
Peak TrENDS Trust
c/o The Bank of New York
850 Library Avenue
Newark, Delaware 19715
Gentlemen:
We have acted as counsel for Peak TrENDS Trust (the "Trust") in
connection with the preparation and filing of a Registration Statement on Form
N-2 (Registration Nos. 333-49535 and 811-08735) initially filed with the
Securities and Exchange Commission on April 7, 1998, and amended thereafter,
relating to the sale of Trust Enhanced Dividend Securities (the "TrENDS"),
pursuant to an Underwriting Agreement relating thereto (the "Underwriting
Agreement").
We have examined such records, certificates and other documents
and such questions of law as we have considered necessary and appropriate for
the purposes of this opinion. Based on the foregoing, we are of the opinion
that:
1. The Trust has been duly created and is validly existing as a
trust under the laws of the State of Delaware.
2. The TrENDS to be sold by the Trust pursuant to the
Underwriting Agreement have been duly authorized and, when sold in accordance
with the Underwriting Agreement, will be validly issued, fully paid and
nonassessable.
Members of our firm are admitted to the Bar in the State of
Delaware, and we do not express an opinion as to the laws of any other
jurisdiction other than the
<PAGE>
Peak TrENDS Trust
May 13, 1998
Page 2
federal laws of the United States of America to the extent specifically referred
to herein.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and consent to the references to our firm in the
Registration Statement and in the Prospectus of the Trust included therein.
Very truly yours,
/s/ SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
<PAGE>
[LETTERHEAD OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP]
EXHIBIT 2(n)(i)
May 13, 1998
Peak TrENDS Trust
850 Library Avenue
Newark, Delaware 19715
Ladies and Gentlemen:
We have acted as special United States tax counsel to Peak
TrENDS Trust, a statutory business trust formed under the laws of the State of
Delaware (the "Trust"), in connection with the preparation of a Registration
Statement (Nos. 333-49535, 811-08735) on Form N-2, which was initially filed by
Peak International Limited and the Trust with the Securities and Exchange
Commission (the "Commission") on April 7, 1998, under the Securities Act of
1933, as amended (the "Act") (such Registration Statement, as amended, being
hereinafter referred to as the "Registration Statement") relating to the
registration under the Act of the Trust Enhanced Dividend Securities (the
"TrENDS") to be issued by the Trust.
In connection with this opinion, we have examined originals or
copies, certified or otherwise identified to our satisfaction of the
Registration Statement and such other documents, certificates, and records as we
have deemed necessary or appropriate as a basis for the opinion set forth
herein.
In rendering our opinion, we have considered the current provisions
of the Internal Revenue Code of 1986, as amended, Treasury regulations
promulgated thereunder, judicial decisions, and Internal Revenue Service (the
"IRS") rulings, all of which are subject to change, which changes may be
retroactively applied. A change in the authorities upon which our opinion is
based could affect our conclusions. There can be no assurances, moreover, that
any of the opinions expressed herein will be accepted by the IRS or, if
challenged, by a court.
<PAGE>
Peak TrENDS Trust
May 13, 1998
Page 2
Although the discussion set forth in the prospectus
included as part of the Registration Statement under the caption "CERTAIN UNITED
STATES FEDERAL INCOME TAX CONSIDERATIONS" does not purport to discuss all
possible United States federal income tax consequences of the purchase,
ownership and disposition of the TrENDS, in our opinion such discussion
constitutes, in all material respects, a fair and accurate summary of the United
States federal income tax consequences of the purchase, ownership and
disposition of the TrENDS under current law.
We hereby consent to the filing of this opinion with the
Commission as part of Exhibit 2.(n).(i) to the Registration Statement. In giving
this consent, we do not thereby admit that we are within the category of persons
whose consent is required under Section 7 of the Act or the rules and
regulations of the Commission promulgated thereunder. This opinion is expressed
as of the date hereof unless otherwise expressly stated, and we disclaim any
undertaking to advise you of any subsequent changes of the facts stated or
assumed herein or any subsequent changes in applicable law.
Very truly yours,
/s/ Skadden, Arps, Slate,
Meagher & Flom LLP
<PAGE>
[LETTERHEAD OF CONYERS DILL & PEARMAN]
Exhibit 2(n)(iii)
BY HAND
- -------
Peak International Limited
Units 4, 5 and 7, 37/F Wharf Cable Tower
9 Hoi Shing Road
Tsuen Wan, New Territories
Hong Kong
Attn: Mr. Jerry Mo
- ------------------
13th May, 1998
Dear Sirs,
Peak International Limited - Registration Statement - Consent
- -------------------------------------------------------------
We refer to the registration statement on Form N-2 of Peak TrENDS Trust dated
13th May, 1998 (Securities Act Registration No. 333-49535 and Investment Company
Act File No. 811-08735), as amended (the "Registration Statement").
We hereby consent to the filing of this consent as an exhibit to the
Registration Statement and to the use of our name under the caption "Enforcement
of Civil Liabilities" in the prospectus contained in the Registration Statement.
In giving such consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the United States
Securities Act of 1933, as amended.
Yours faithfully,
/s/ CONYERS DILL & PEARMAN
<PAGE>
[LETTERHEAD OF RICHARDS BUTLER]
Exhibit 2(n)(iv)
BY HAND
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Peak International Limited
Units 4, 5 and 7, 37/F Wharf Cable Tower
9 Hoi Shing Road
Tsuen Wan, New Territories
Hong Kong
Attn: Mr. Jerry Mo
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13th May, 1998
Dear Sirs,
Peak International Limited - Registration Statement - Consent
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We refer to the registration statement on Form N-2 of Peak TrENDS Trust dated
13th May, 1998 (Securities Act Registration No. 333-49535 and Investment
Company Act File No. 811-08735), as amended (the "Registration Statement").
We hereby consent to the filing of this consent as an exhibit to the
Registration Statement and to the use of our name under the caption "Enforcement
of Civil Liabilities" in the prospectus contained in the Registration Statement.
In giving such consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the United States
Securities Act of 1933, as amended.
Yours faithfully,
/s/ RICHARDS BUTLER
