<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 12, 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. 1 TO
FORM N-2
---------------
[_] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[X] PRE-EFFECTIVE AMENDMENT NO. 1
[_] POST-EFFECTIVE AMENDMENT NO.
AND
[_] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[X] AMENDMENT NO. 1
---------------
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- .
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF SECURITIES AMOUNT BEING OFFERING PRICE OFFERING REGISTRATION
BEING REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE(3)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trust Enhanced Dividend
Securities, no par val-
ue..................... 6,900,000 $22.625 156,112,500 $44,244(2)
</TABLE>
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(1) Includes an aggregate of 900,000 TrENDS that may be issued in connection
with the exercise of an over-allotment option.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c).
(3) A registration fee in the amount of $2,000 has already been paid in
connection with 271,187 TrENDS covered by this registration statement.
---------------
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 Untied
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 12, 1998
, 1998
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 guaranty (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 (the "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.
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.
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 11, 1998 was $23 3/8 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.
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<TABLE>
<CAPTION>
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 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 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 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.
The Trust is an "underwriter" of the Common Stock as defined in the
Securities Act of 1933, as amended (the "Securities Act"). As an underwriter of
the Common Stock, the Trust is subject to certain liabilities under the
Securities Act with respect to the accompanying prospectus of the Company
relating 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.
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. 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. 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 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, which 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 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.
The Trust is an "underwriter" of the Common Stock as defined in the
Securities Act, by its purchase and sale of the Common Stock owned by the
Seller, who is deemed an "affiliate" of the Company for purposes of the
Securities Act. As an underwriter of the Common Stock, the Trust is subject to
certain liabilities under the Securities Act with respect to the accompanying
prospectus of the Company relating 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.
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 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.
9
<PAGE>
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 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>
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."
10
<PAGE>
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 11, 1998)........................... $25 5/16 $21 1/4
</TABLE>
On May 11, 1998, the reported last sale price of the Common Stock on Nasdaq
was $23 3/8 per share. As of May 11, 1998, there were seven holders of record
of the Common Stock.
11
<PAGE>
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, who are not 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 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
12
<PAGE>
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
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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 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
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U.S. Government obligations having an aggregate market value when pledged and
at daily mark-to-market valuations thereafter of not less than 150% of the
Seller's Cash Delivery Obligations. The Seller's "Cash Delivery Obligations"
shall be the Transaction Value of any consideration other than Marketable
Securities received by the Seller in respect of the maximum number of shares
subject to the Contract at the time of the Adjustment Event. The number of
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 guaranty 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 a resident outside 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 its 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 of the Company, or
58.6% of the Common Stock outstanding. The Memorandum of Association of
Luckygold limits Luckygold from conducting operating activities and only
authorizes it to hold and deal in the Common
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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
contemplated in 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
from the 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 each 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 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 TrENDS will be issued (or 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).
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<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 an affiliate thereof] 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, which 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.
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,
26
<PAGE>
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.
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
27
<PAGE>
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 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.
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<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
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 as of , 1998 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 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.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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) Form of Tax Opinion and Consent of Counsel to the Trust (Consent contained
in Exhibit 2.l)
*2.n.(ii) Consent of Independent Public Accountants
*2.n.(iii) Consent of Conyers Dill & Peorman
*2.n.(iv) Consent of Richards Butler
</TABLE>
--------
* 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.................................................. $46,054
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; (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 11TH DAY OF MAY, 1998.
PEAK TrENDS TRUST
(REGISTRANT)
/s/ Donald J. Puglisi
By: _________________________________
DONALD J. PUGLISI AS TRUSTEE
/s/ William R. Latham III
By: _________________________________
WILLIAM R. LATHAM III AS TRUSTEE
/s/ James B. O'Neill
By: _________________________________
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 11, 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) Form of 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>
- --------
* 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(a)(i)
AMENDED AND RESTATED
DECLARATION OF TRUST OF
PEAK TrENDS TRUST
Dated as of , 1998
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS......................................................1
ARTICLE II TRUST DECLARATION; PURPOSES, POWERS
AND DUTIES OF THE TRUSTEES; ADMINISTRATION.......................7
SECTION 2.1 RATIFICATION AND APPROVAL OF ACTION OF
THE TRUSTEES.....................................................7
SECTION 2.2 DECLARATION OF TRUST; PURPOSES OF THE
TRUST............................................................7
SECTION 2.3 GENERAL POWERS AND DUTIES OF THE
TRUSTEES.........................................................7
SECTION 2.4 PORTFOLIO ACQUISITION............................................9
SECTION 2.5 PORTFOLIO ADMINISTRATION........................................10
SECTION 2.6 MANNER OF SALES ................................................13
SECTION 2.7 LIMITATIONS ON TRUSTEES' POWERS.................................13
ARTICLE III ACCOUNTS AND PAYMENTS...........................................15
SECTION 3.1 THE TRUST ACCOUNT...............................................15
SECTION 3.2 PAYMENT OF FEES AND EXPENSES....................................15
SECTION 3.3 DISTRIBUTIONS TO HOLDERS........................................15
SECTION 3.4 SEGREGATION.....................................................15
SECTION 3.5 INVESTMENTS.....................................................15
ARTICLE IV REDEMPTION......................................................16
SECTION 4.1 REDEMPTION......................................................16
ARTICLE V ISSUANCE OF CERTIFICATES; REGISTRY;
TRANSFER OF TrENDS..............................................17
SECTION 5.1 FORM OF CERTIFICATE.............................................17
SECTION 5.2 TRANSFER OF TrENDS; ISSUANCE, TRANSFER
AND INTERCHANGE OF CERTIFICATES.................................18
SECTION 5.3 REPLACEMENT OF CERTIFICATES.....................................19
ARTICLE VI ISSUANCE OF THE CONTRACT........................................19
SECTION 6.1 Execution of the Contract.......................................19
i
<PAGE>
ARTICLE VII TRUSTEES........................................................19
SECTION 7.1 Trustees........................................................19
SECTION 7.2 Vacancies.......................................................20
SECTION 7.3 POWERS..........................................................21
SECTION 7.4 MEETINGS........................................................21
SECTION 7.5 RESIGNATION AND REMOVAL.........................................21
SECTION 7.6 LIABILITY.......................................................22
SECTION 7.7 COMPENSATION....................................................22
ARTICLE VIII MISCELLANEOUS...................................................23
SECTION 8.1 MEETINGS OF HOLDERS.............................................23
SECTION 8.2 BOOKS AND RECORDS; REPORTS......................................24
SECTION 8.3 TERMINATION.....................................................25
SECTION 8.4 AMENDMENT AND WAIVER............................................26
SECTION 8.5 ACCOUNTANTS.....................................................27
SECTION 8.6 NATURE OF HOLDER'S INTEREST.....................................29
SECTION 8.7 DELAWARE LAW TO GOVERN..........................................29
SECTION 8.8 NOTICES.........................................................29
SECTION 8.9 SEVERABILITY....................................................30
SECTION 8.10 COUNTERPARTS....................................................30
ii
<PAGE>
AMENDED AND RESTATED DECLARATION OF TRUST
This Amended and Restated Declaration of Trust,
dated as of [***] , 1998 (the "Declaration of Trust"), by and between
, as sponsor (the "Sponsor"), and Donald J. Puglisi, William R.
Latham, III and James B. O'Neill, as trustees (the "Trustees"), constituting the
Peak TrENDS Trust (the "Trust").
W I T N E S S E T H:
WHEREAS, the Sponsor and the Trustees have previously
entered into a Declaration of Trust, dated as of March [*], 1998 (the "Original
Declaration of Trust"), creating the Trust under the name of Peak TrENDS Trust;
WHEREAS, the Trustees had previously filed in the State of
Delaware a Certificate of Trust dated March 24, 1998 and a Certificate of
Amendment to the Certificate of Trust on March 31, 1998 (as amended, the "Trust
Certificate"), for the creation of Peak TrENDS Trust;
WHEREAS, the parties hereto desire to amend and restate the
Original Declaration of Trust in certain respects;
NOW, THEREFORE, the parties hereto agree to amend and
restate the Original Declaration of Trust as provided herein. Upon the execution
and delivery of copies hereof by the parties hereto, the Original Declaration of
Trust will be automatically amended and restated in its entirety to read as
provided herein.
ARTICLE I
DEFINITIONS
Whenever used in this Declaration of Trust, the
following words and phrases shall have the meanings listed below. Any reference
to any agreement shall be a
1
<PAGE>
reference to such agreement as supplemented or amended from time to time.
"ACCELERATION AMOUNT NOTICE" - An Acceleration
Amount Notice as defined in the Contract.
"ACCELERATION VALUE" - The Acceleration Value
as defined in the Contract.
"ADDITIONAL CLOSING DATE" - The Additional
Closing Date as defined in the Underwriting Agreement.
"ADJUSTMENT EVENT" - An Adjustment Event as
defined in the Contract.
"ADMINISTRATION AGREEMENT" - The Administration
Agreement between the Administrator and the Trustees, and any substitute
agreement therefor entered into pursuant to Section 2.2(a) hereof.
"ADMINISTRATOR" - The Bank of New York or its
successor as permitted under Section 6.1 of the Administration Agreement or
appointed pursuant to Section 2.2(a) hereof.
"AGGREGATE ACCELERATION VALUE" - The Aggregate
Acceleration Value as defined in the Contract.
"BUSINESS DAY" - Any day on which commercial
banks are open for business in New York City and the New York Stock Exchange,
American Stock Exchange and Nasdaq National Market are not closed.
"CASH SETTLEMENT ALTERNATIVE" - The Cash
Settlement Alternative as defined in the Contract.
"CERTIFICATE" - Any certificate evidencing the ownership of
TrENDS substantially in the form of Exhibit A hereto.
"CLOSING DATE" - The Closing Date as defined in
the Underwriting Agreement.
2
<PAGE>
"CODE" - The Internal Revenue Code of 1986, as
amended from time to time; each reference herein to any section of the Code or
any regulation thereunder shall constitute a reference to any successor
provision thereto.
"COLLATERAL AGENT" - The Bank of New York or its successor
as permitted under the Collateral Agreement.
"COLLATERAL AGREEMENT" - The Collateral Agreement among the
Trustees, the Collateral Agent and the Seller, securing the Seller's obligations
under the Contract, substantially in the form of Exhibit B hereto.
"COLLATERAL EVENT OF DEFAULT" - A Collateral
Event of Default as defined in the Contract.
"COMMENCEMENT DATE" - The day on which the
Underwriting Agreement is executed.
"COMMISSION" - The United States Securities and
Exchange Commission.
"COMMON STOCK" - Ordinary shares of par value
$0.01 per share of Peak International Limited.
"COMPANY" - Peak International Limited, a
Bermuda corporation.
"CONTRACT" - The forward purchase contract
entered into by the Trustees, the Seller and the other parties thereto,
substantially in the form of Exhibit C hereto.
"CUSTODIAN" - The Bank of New York or its successor as
permitted under paragraph [*] of the Custodian Agreement or appointed pursuant
to Section 2.2(a) hereof.
"CUSTODIAN AGREEMENT" - The Custodian Agreement, dated as
of the date hereof, between the Custodian and the Trustees, and any substitute
agreement therefor entered into pursuant to Section 2.2(a) hereof.
3
<PAGE>
"DEPOSITARY" - The Depository Trust Company, or
any successor thereto.
"DISTRIBUTION DATE" - Each [*], [*], [*] and [*] of
each year commencing [*], 1998, to and including [*], 2001, or if any such
date is not a Business Day, then the first Business Day thereafter.
"EXCESS PURCHASE PAYMENT" - Excess Purchase
Payment as defined under the Contract.
"EXCHANGE ACT" - The Securities Exchange Act of
1934, as amended from time to time.
"EXCHANGE DATE" - [*], 2001.
"EXCHANGE RATE" - The Exchange Rate as defined
in the Contract.
"FIRM PURCHASE PRICE" - The Firm Purchase Price
as defined in the Contract.
"HOLDER" - The registered owner of any TrENDS
as recorded on the books of the Paying Agent.
"INDEPENDENT DEALERS" - Independent Dealers as
defined in the Contract.
"INDEMNITY AGREEMENT" - The Fund Indemnity
Agreement between the Trustees and the Sponsor substantially in the form of
Exhibit D hereto.
"INVESTMENT COMPANY ACT" - The Investment
Company Act of 1940, as amended from time to time; each reference herein to any
section of such Act or any rule or regulation thereunder shall constitute a
reference to any successor provision thereto.
"MANAGING TRUSTEE" - The Trustee designated the
Managing Trustee by resolution of the Trustees.
"MANDATORY EXCHANGE" - The delivery by the Trustees to the
Holders of Shares (or, if the seller elects the Cash Settlement Alternative
under the
4
<PAGE>
Contract, the amount in cash specified in the Contract as payable in respect
thereof) in mandatory exchange for the TrENDS on the Exchange Date.
"MARKETABLE SECURITIES" - Marketable Securities
as defined in the Contract.
"PARTICIPANT" - A Person having a book-entry
only system account with the Depositary.
"PAYING AGENT" - The Bank of New York or its
successor as permitted under Section [*] of the Paying Agent Agreement or
appointed pursuant to Section 2.2(a) hereof.
"PAYING AGENT AGREEMENT" - The Paying Agent
Agreement, dated as of the date hereof, between the Paying Agent and the
Trustees, and any substitute agreement therefor entered into pursuant to Section
2.2(a) hereof.
"PERSON" - An individual, a partnership, a
corporation, a trust, an unincorporated association, a joint venture or other
entity or a government or any agency or political subdivision thereof.
"PROSPECTUS" - The prospectus relating to the
Trust constituting a part of the Registration Statement, as filed with the
Commission pursuant to Rule 497(h) under the Securities Act, and as subsequently
amended or supplemented by the Trust.
"QUARTERLY DISTRIBUTION" - $[*] per TrENDS paid to
each Holder on each Distribution Date.
"RECORD DATE" - Each [*], [*], [*] and [*] of each year
commencing [*], 1998.
"REFERENCE MARKET PRICE" - Reference Market Price
as defined in the Contract.
"REGISTRATION STATEMENT" - Registration Statement on Form
N-2 (Registration No. 333-49535, 811-08735) of the Trust, as amended.
5
<PAGE>
"SECURITIES ACT" - The Securities Act of 1933, as
amended from time to time.
"SELLER" - The person named as Seller in the
Contract.
"SHARES" - Common Stock to be exchanged by the
Trustees for the TrENDS on the Exchange Date.
"TEMPORARY INVESTMENTS" - U.S. Treasury securities
and any other cash held by the Trust in direct short-term U.S. government
obligations, as specified from time to time by the Trustees or through standing
instructions from the Trustees to the Administrator or the Paying Agent.
"TrENDS" - Trust Enhanced Dividend Security of the
Trust evidencing a Holder's undivided interest in the Trust and right to receive
a pro rata distribution upon liquidation of the Trust Estate.
"TRANSFER AGENT AND REGISTRAR" - The Bank of New
York, as Transfer Agent and Registrar for the Common Stock.
"TREASURY SECURITIES" - The meaning specified in
Section 2.3(b) hereof.
"TRUST ACCOUNT" - The account created pursuant to
Section 3.1 hereof.
"TRUST ESTATE" - The Contract and the Treasury
Securities held at any time by the Trust, together with any Temporary
Investments held at any time pursuant to Section 3.5 hereof, and any proceeds
thereof or therefrom and any other moneys held at any time in the Trust Account.
"UNDERWRITERS" - The Underwriters named in the
Underwriting Agreement.
"UNDERWRITING AGREEMENT" - The Underwriting
Agreement among the Trust and the Underwriters relating to the proposed sale of
TrENDS to the Underwriters in a public offering.
6
<PAGE>
ARTICLE II
TRUST DECLARATION; PURPOSES, POWERS
AND DUTIES OF THE TRUSTEES; ADMINISTRATION
SECTION 2.1 RATIFICATION AND APPROVAL OF ACTION OF THE
TRUSTEES. The Sponsor hereby ratifies and approves any and all actions taken by
the Trustees on behalf of the Trust on or prior to the date hereof in connection
with the registration of the Trust under the Investment Company Act, in
connection with the registration of the offer and sale of the TrENDS under the
Securities Act, or otherwise incident to, or connected with, or necessary to
accomplish, the foregoing or the offer and sale of the TrENDS by the
Underwriters and the operation of the Trust as described in the Prospectus.
SECTION 2.2 DECLARATION OF TRUST; PURPOSES OF THE TRUST. The
Sponsor hereby creates the Trust in order that it may acquire the Treasury
Securities, enter into the Contract, issue and sell to the Underwriters the
TrENDS, hold the Trust Estate in trust for the use and benefit of all present
and future Holders and otherwise carry out the terms and conditions of this
Declaration of Trust, all for the purpose of achieving the investment objectives
set forth in the Prospectus. The Trustees hereby declare that they will accept
and hold the Trust Estate in trust for the use and benefit of all present and
future Holders. The Sponsor has deposited with the Trustees the sum of $1 to
accept and hold in trust hereunder until the issuance and sale of the TrENDS to
the Underwriters, whereupon such sum shall be donated to an organization
satisfying the requirements of Section 170(c)(2) of the Code selected by
unanimous consent of the Trustees.
SECTION 2.3 GENERAL POWERS AND DUTIES OF THE TRUSTEES. In
furtherance of the provisions of Section 2.1 hereof, the Sponsor authorizes and
directs the Trustees:
(a) to enter into and perform (and, in accordance
with Section 8.4(a) hereof, amend), the Contract, the Collateral
Agreement, the Underwriting Agreement, the Custodian Agreement, the
Administration
7
<PAGE>
Agreement, the Paying Agent Agreement, the Fund Indemnity Agreement,
the Fund Expense Agreement and the Reimbursement Agreement and to
perform all obligations of the Trustees (including the obligation to
provide indemnity hereunder and thereunder) and enforce all rights
and remedies of the Trust under each of such agreements; and if any
of the Collateral Agreement, the Custodian Agreement, the
Administration Agreement, and the Paying Agent Agreement terminates,
or the agent of the Trust thereunder resigns or is discharged, to
appoint a substitute agent and enter into a new agreement with such
substitute agent containing provisions substantially similar to those
contained in the agreement being terminated; provided that in any
such new agreement (i) the Custodian and the Paying Agent shall each
be a commercial bank or trust company organized and existing under
the laws of the United States of America or any state therein, shall
have full trust powers and shall have minimum capital, surplus and
retained earnings of not less than $100,000,000; and (ii) the
Administrator and the Collateral Agent shall each be a reputable
financial institution qualified in all respects to carry out its
obligations under the Administration Agreement or the Collateral
Agreement, as the case may be;
(b) to hold the Trust Estate in trust, to create
and administer the Trust Account, to direct payments received by the
Trust to the Trust Account and to make payments out of the Trust
Account as set forth in Article III hereof;
(c) to issue and sell to the Underwriters an
aggregate of up to [*] TrENDS (including those TrENDS subject to the
over-allotment option of the Underwriters provided for in the
Underwriting Agreement) pursuant to the Underwriting Agreement and as
contemplated by the Prospectus; [provided, however, that subsequent
to the determination of the public offering price per TrENDS and
related underwriting discount for the TrENDS to be sold to the
Underwriters but prior to the sale of the TrENDS to the Underwriters,
the TrENDS originally issued to the Sponsor shall be split into a
greater number of TrENDS
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so that immediately following such split the value of each TrENDS
held by the Sponsor will equal the aforesaid public offering price
less the related underwriting discount];
(d) to select independent public accountants and,
subject to the provisions of Section 8.5 hereof, to engage such
independent public accountants;
(e) to engage legal counsel and, to the extent
required by Section 2.4 hereof, to engage professional advisors and
pay reasonable compensation thereto;
(f) to defend any action commenced against the
Trustees or the Trust and to prosecute any action which the Trustees
deem necessary to protect the Trust and the rights and interests of
Holders, and to pay the costs thereof;
(g) to arrange for the bonding of officers and
employees of the Trust as required by Section 17(g) of the Investment
Company Act and the rules and regulations thereunder;
(h) to delegate any and all of its powers and
duties hereunder as contemplated by the Custodian Agreement, the
Paying Agent Agreement and the Administration Agreement, to the
extent permitted by applicable law; and
(i) to adopt and amend bylaws, and take any and
all other actions as necessary or advisable to carry out the purposes
of the Trust, to protect the Trust and the rights and interests of
Holders, subject to the provisions hereof and applicable law,
including, without limitation, the Investment Company Act.
SECTION 2.4 PORTFOLIO ACQUISITION. In
furtherance of the provisions of Section 2.1 hereof, the Sponsor further
specifically authorizes and directs the Trustees:
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(a) to enter into the Contract with respect to
the Shares subject thereto with the Seller on the Commencement Date
for settlement on the date or dates provided thereunder and, subject
to satisfaction of the conditions set forth in the Contracts, to pay
the Firm Purchase Price and the Additional Purchase Price, if any,
thereunder with the proceeds of the sale of the TrENDS, net of
underwriting commissions and other expenses payable in connection
with the public offering of the TrENDS as described in Section 3.2
hereof and net of the purchase price paid for the Treasury Securities
as provided in paragraph (b) below; and, subject to the adjustments
and exceptions set forth in the Contract, the Contract shall entitle
the Trust to receive from the Seller on the Exchange Date the Shares
subject thereto (or, if the Seller elects the Cash Settlement
Alternative under the Contract, the amount in cash specified in the
Contract in respect thereof) so that the Trust may execute the
Exchange with the Holders; and
(b) to purchase for settlement at the Closing
Date, and at the Additional Closing Date, as appropriate, with the
proceeds of the sale of the TrENDS, net of underwriting commissions
and other expenses payable in connection with the public offering of
the TrENDS, U.S. Treasury securities from such brokers or dealers as
the Trustees shall designate in writing to the Administrator having
the terms set forth on Schedule I hereto ("Treasury Securities").
SECTION 2.5 PORTFOLIO ADMINISTRATION. In furtherance of the
provisions of Section 2.1 hereof, the Sponsor further specifically authorizes
and directs the Trustees:
(a) DETERMINATION OF DILUTION OR MERGER
ADJUSTMENTS. Upon receipt of any notice pursuant to Section 5.4(b) of
the Contract of an event requiring an adjustment to the Exchange
Rate, or upon otherwise acquiring knowledge of such an event, to
calculate the required adjustment and furnish notice thereof to the
Collateral Agent and the Seller, or to request from the
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Seller such further information as may be necessary to
calculate or effect the required adjustment;
(b) SELECTION OF INDEPENDENT INVESTMENT BANK.
Upon receipt of notice of (i) the occurrence of an Adjustment Event
in which property other than cash or Marketable Securities is to be
received in respect of the Common Stock as described in Section 6.2
of the Contract or (ii) an Excess Purchase Payment in which the
Company has paid or will pay consideration other than cash as
described in Section 6.1(d) of the Contract, to select and retain a
nationally recognized investment banking firm to determine the market
value of such property as provided in the Contract, and to deliver to
the Seller notice pursuant to Section 8.1 of the Contract identifying
the firm proposed to be selected and retained, and to consult with
the Seller on such selection and retention as provided in such
Section 8.1;
(c) ACCELERATION. Upon receipt of any notice
pursuant to Section 5.4(a) of the Contract or pursuant to Section
6(a) of the Collateral Agreement that an Event of Default and/or a
Collateral Event of Default has occurred, or upon otherwise acquiring
notice that an Event of Default or a Collateral Event of Default has
occurred, to request quotations from Independent Dealers, compute
Acceleration Value and Aggregate Acceleration Value and deliver an
Acceleration Amount Notice, in each case with respect to the
Contract, all as described in Article VII of the Contract;
(d) DETERMINATION OF EXCHANGE DATE AMOUNTS. To
calculate, on the Exchange Date, the number of Shares (or, if the
Seller elects the Cash Settlement Alternative under the Contract, the
amount in cash) required to be delivered by the Seller under Section
1.1 of the Contract or, if an Adjustment Event shall have occurred,
the amount of cash required to be delivered by the Seller, and the
number of Marketable Securities permitted to be delivered by the
Seller in lieu of all or a portion of such cash, all as provided in
Section 6.2 of the Contract; and to furnish Notice
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of the amounts so determined to the Collateral Agent
and the Seller;
(e) DISTRIBUTION OF EXCHANGE CONSIDERATION.
Unless an Adjustment Event shall have occurred (in which event
distribution of proceeds shall be governed by Section 8.3 below) or
the Seller elects the Cash Settlement Alternative under the Contract
(in which event the cash received in respect thereof shall be
distributed pro rata to the Holders of TrENDS):
(i) DETERMINATION OF FRACTIONAL SHARES. To determine,
on the Exchange Date: (A) for each Holder of TrENDS, such
Holder's pro rata share of the total number of Shares
delivered to the Trustees under the Contract on the
Exchange Date; and (B) the number of fractional Shares
allocable to each Holder (including, in the case of the
Depositary, fractional shares allocable to beneficial
owners of TrENDS who own through Participants) and in the
aggregate;
(ii) CASH FOR FRACTIONAL SHARES. To sell, in the
Principal market therefor, on the Exchange Date, a number
of Shares equal to the aggregate number of fractional
Shares determined pursuant to clause (i) (B) above, rounded
down to the nearest integral number; and to determine the
difference between (A) the aggregate proceeds of such sale
(net of any brokerage or related expenses) and (B) the
product of the number of Shares so sold and the Reference
Market Price; and, in accordance with the Indemnity
Agreement, to pay such difference, if positive, to
Donaldson, Lufkin, Jenrette Securities Corporation, or to
request payment of such difference, if negative, from
Donaldson, Lufkin, Jenrette Securities Corporation;
(iii) DELIVERY OF SHARES. To deliver the remaining Shares
to the Transfer Agent and Registrar on the Exchange Date,
with instructions that such Shares be re-registered and re-
issued as follows: (A) for and in the name of each Holder
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(other than the Depositary) who holds TrENDS in definitive
form, the Transfer Agent and Registrar shall be instructed
to issue definitive certificates representing a number of
Shares equal to such Holder's pro rata share of the total
delivered to the Trustees under the Contract, rounded down
to the nearest integral number; (B) the Transfer Agent and
Registrar shall be instructed to transfer all remaining
Shares to the account of the Custodian held through the
Depositary, who shall then be instructed to transfer and
credit such Shares to each Participant who holds TrENDS,
with each Participant receiving its pro rata share of the
total Shares delivered to the Trust on the Exchange Date,
reduced by the aggregate fractional shares allocable to
such Participant;
(iv) DISTRIBUTION OF CASH IN RESPECT OF FRACTIONAL
SHARES. To distribute to each Holder of TrENDS cash in the
amount of: (A) the fraction of a Share, if any, allocable
to such Holder as determined pursuant to clause (i) (B)
above; times (B) the Reference Market Price; and
(v) RECORD DATE. The distributions described in this
paragraph (e) shall be made to Holders of record as of the
close of business on the Business Day preceding the
Exchange Date.
SECTION 2.6 MANNER OF SALES. Any sale of Trust property
permitted under Section 8.3(c) hereof shall be made through such executing
brokers or to such dealers as the Trustees, seeking best price and execution for
the Trust, shall designate in writing to the Paying Agent, taking into account
such factors as price, commission, size of order, difficulty of execution and
brokerage skill required.
SECTION 2.7 LIMITATIONS ON TRUSTEES' POWERS. The
Trustees are not permitted:
(a) to purchase or hold any securities or
instruments except for the Shares, the Contract, the Treasury
Securities, the Temporary Investments
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contemplated by Section 3.5 hereof and, in the event of
an Adjustment Event, Marketable Securities;
(b) to invest less than 70% of the Trust's total
assets in the Contract;
(c) to dispose of the Contract prior to the
Exchange Date;
(d) to authorize or issue any securities or
instruments except for the TrENDS, or to authorize or issue any
TrENDS other than the TrENDS to be sold pursuant to the Underwriting
Agreement and until such TrENDS have been so purchased and paid for
in full;
(e) to make short sales or purchases on
margin;
(f) to write put or call options;
(g) to borrow money;
(h) to underwrite securities;
(i) to purchase or sell real estate, commodities
or commodities contracts;
(j) to purchase restricted securities;
(k) to make loans; or
(l) to take any action, or direct or permit the
Administrator, the Paying Agent or the Custodian to take any action,
that would vary the investment of the Holders within the meaning of
Treasury Regulation Section 301.7701-4(c), or otherwise take any
action or direct or permit any action to be taken that would or could
cause the Trust not to be a "grantor trust" under the Code.
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ARTICLE III
ACCOUNTS AND PAYMENTS
SECTION 3.1 THE TRUST ACCOUNT. The Trustees shall, upon
issuance of the TrENDS, establish with the Paying Agent an account to be called
the "Trust Account". All moneys received by the Trustees in respect of the
Contract, the Treasury Securities and any Temporary Investments held pursuant to
Section 3.5 hereof, all moneys received from the sale of the TrENDS to the
Sponsor, and any proceeds from the sale to the Underwriters of the TrENDS after
the purchase of the Contract and the Treasury Securities and the payment of the
Trust's expenses described in Section 3.2 hereof shall be credited to the Trust
Account.
SECTION 3.2 PAYMENT OF FEES AND EXPENSES. The Sponsor
will pay the fees and expenses of the Trust incurred in the organization of the
Trust. The Seller will pay the fees and expenses of the Trust incurred in
connection with the initial registration and public offering of the TrENDS.
SECTION 3.3 DISTRIBUTIONS TO HOLDERS. On or shortly after
each Distribution Date the Trustees shall distribute to each Holder of record at
the close of business on the preceding Record Date, at the post office mailing
address of the Holder appearing on the books of the Trust or Paying Agent or by
any other means mutually agreed upon by the Holder and the Trustees, an amount
equal to such Holder's pro rata share of the Quarterly Distribution computed as
of the close of business on such Distribution Date.
SECTION 3.4 SEGREGATION. All moneys and other assets
deposited or received by the Trustees hereunder shall be held by them in trust
as part of the Trust Estate until required to be disbursed or otherwise disposed
of in accordance with the provisions of this Declaration of Trust, and the
Trustees shall handle such moneys and other assets in such manner as shall
constitute the segregation and holding in trust within the meaning of the
Investment Company Act.
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SECTION 3.5 INVESTMENTS. To the extent necessary to
enable the Paying Agent to make the next succeeding Quarterly Distribution, any
moneys deposited with or received by the Trustees in the Trust Account shall be
invested as soon as possible by the Paying Agent in Temporary Investments
maturing no later than the Business Day preceding the next following
Distribution Date. Except as otherwise specifically provided herein or in the
Paying Agent Agreement, the Paying Agent shall not have the power to sell,
transfer or otherwise dispose of any Temporary Investment prior to the maturity
thereof, or to acquire additional Temporary Investments. The Paying Agent shall
hold any Temporary Investments to its maturity and shall apply the proceeds
thereof upon maturity to the payment of the next succeeding Quarterly
Distribution. All such Temporary Investments shall be selected from time to time
by the Trustees or pursuant to standing instructions from the Trustees to the
Administrator, and the Administrator and/or Paying Agent shall have no liability
to the Trust or any Holder or any other Person with respect to any such
Temporary Investment. Any interest or other income received on any moneys in the
Trust Account shall, upon receipt thereof, be deposited into the Trust Account.
Notwithstanding the foregoing, not more than 5% of the assets of the Trust may
be held at any time in the form of cash and Temporary Investments, and the
Trustees shall distribute cash, or liquidate Temporary Investments and
distribute the proceeds thereof, if, when and to the extent needed to maintain
compliance with the foregoing restriction.
ARTICLE IV
REDEMPTION
SECTION 4.1 REDEMPTION. The Trustees shall have no right
or obligation to redeem TrENDS.
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ARTICLE V
ISSUANCE OF CERTIFICATES; REGISTRY;
TRANSFER OF TrENDS
SECTION 5.1 FORM OF CERTIFICATE. Each Certificate
evidencing TrENDS shall be countersigned manually or in facsimile by the
Managing Trustee and executed manually by the Paying Agent in substantially the
form of Exhibit A hereto with the blanks appropriately filled in, shall be dated
the date of execution and delivery by the Paying Agent and shall represent a
fractional undivided interest in the Trust, the numerator of which fraction
shall be the number of TrENDS set forth on the face of such Certificate and the
denominator of which shall be the total number of TrENDS outstanding at that
time. All TrENDS shall be issued in registered form and shall be numbered
serially.
Pending the preparation of definitive Certificates, the
Trustees may execute and the Paying Agent shall authenticate and deliver
temporary Certificates (printed, lithographed, typewritten or otherwise
reproduced, in each case in form satisfactory to the Paying Agent). Temporary
Certificates shall be issuable as registered Certificates substantially in the
form of the definitive Certificates but with such omissions, insertions and
variations as may be appropriate for temporary Certificates, all as may be
determined by the Trustees with the concurrence of the Paying Agent. Every
temporary Certificate shall be executed by the Managing Trustee and be
authenticated by the Paying Agent upon the same conditions and in substantially
the same manner, and with like effect, as the definitive Certificates. Without
unreasonable delay the Managing Trustee shall execute and shall furnish
definitive Certificates and thereupon temporary Certificates may be surrendered
in exchange therefor without charge at each office or agency of the Paying Agent
and the Paying Agent shall authenticate and deliver in exchange for such
temporary Certificates definitive Certificates for a like aggregate number of
TrENDS. Until so exchanged, the temporary Certificates shall be entitled to the
same benefits hereunder as definitive Certificates.
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SECTION 5.2 TRANSFER OF TrENDS; ISSUANCE, TRANSFER AND
INTERCHANGE OF CERTIFICATES. TrENDS may be transferred by the Holder thereof by
presentation and surrender of properly endorsed Certificates at the office of
the Paying Agent, accompanied by such documents executed by the Holder or his
authorized attorney as the Paying Agent deems necessary to evidence the
authority of the person making the transfer. Certificates issued pursuant to
this Declaration of Trust are interchangeable for one or more other Certificates
in an equal aggregate number of TrENDS and all Certificates issued as may be
requested by the Holder and deemed appropriate by the Paying Agent shall be
issued in denominations of one TrENDS or any multiple thereof. The Paying Agent
may deem and treat the person in whose name any TrENDS shall be registered upon
the books of the Paying Agent as the owner of such TrENDS for all purposes
hereunder and the Paying Agent shall not be affected by any notice to the
contrary. The transfer books maintained by the Paying Agent for the purposes of
this Section 5.2 hereof shall include the name and address of the record owners
of the TrENDS and shall be closed in connection with the termination of the
Trust pursuant to Section 8.3 hereof.
A sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any such transfer shall be paid to
the Paying Agent by the Holder. A Holder may be required to pay a fee for each
new Certificate to be issued pursuant to the preceding paragraph in such amount
as may be specified by the Paying Agent and approved by the Trustees.
All Certificates cancelled pursuant to this Declaration of
Trust may be voided by the Paying Agent in accordance with the usual practice of
the Paying Agent or in accordance with the instructions of the Trustees;
provided, however, that the Paying Agent shall not be required to destroy
cancelled Certificates.
The Paying Agent may adopt other reasonable rules and
regulations for the registration, transfer and tender of TrENDS as it may, in
its discretion, deem necessary.
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SECTION 5.3 REPLACEMENT OF CERTIFICATES. In case
any Certificate shall become mutilated or be destroyed, stolen or lost, the
Paying Agent shall execute and deliver a new Certificate in exchange and
substitution therefor upon the Holder's furnishing the Paying Agent with proper
identification and satisfactory indemnity, complying with such other reasonable
regulations and conditions as the Paying Agent may prescribe and paying such
expenses and charges, including any bonding fee, as the Paying Agent may incur
or reasonably impose; provided that if the Trust has terminated or is in the
process of terminating, the Paying Agent, in lieu of issuing such new
Certificate, may, upon the terms and conditions set forth herein, make the
distributions set forth in Section 8.3(c) hereof. Any mutilated Certificate
shall be duly surrendered and cancelled before any duplicate Certificate shall
be issued in exchange and substitution therefor. Upon issuance of any duplicate
Certificate pursuant to this Section 5.3 hereof, the original Certificate
claimed to have been lost, stolen or destroyed shall become null and void and of
no effect, and any bona fide purchaser thereof shall have only such rights as
are afforded under Article 8 of the Uniform Commercial Code to a Holder
presenting a Certificate for transfer in the case of an overissue.
ARTICLE VI
ISSUANCE OF THE CONTRACT
SECTION 6.1 Execution of the Contract. The Contract shall
be countersigned manually or in facsimile by the Managing Trustee and executed
manually by the Seller and shall be dated the date of execution and delivery by
the Seller.
ARTICLE VII
TRUSTEES
SECTION 7.1 Trustees. The Trust shall have three Trustees
who shall initially be elected by the Sponsor. One Trustee shall be the Managing
Trustee and, as such, is
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authorized to execute documents and instruments on behalf of the Trust. The
Managing Trustee will be appointed by resolution of the Trustees. Each Trustee
shall serve until the next [regular annual or] special meeting of Holders called
for the purpose of electing Trustees and, then, until such Trustee's successor
is duly elected and qualified. Holders may not cumulate their votes in the
election of Trustees. Each Trustee shall not be considered to have qualified for
the office unless such Trustee shall agree to be bound by the terms of this
Declaration of Trust and shall evidence his consent by executing this
Declaration of Trust or a supplement hereto.
SECTION 7.2 Vacancies. Any vacancy in the office of a
Trustee may be filled in compliance with Sections 10 and 16 of the Investment
Company Act by the vote, within thirty days, of the remaining Trustees; provided
that if required by Section 16 of the Investment Company Act, the Trustees shall
forthwith cause to be held as promptly as possible and in any event within sixty
days (unless the Commission by order shall extend such period) a meeting of
Holders for the purpose of electing Trustees in compliance with Sections 10 and
16 of the Investment Company Act. Until a vacancy in the office of any Trustee
is filled as provided above, the remaining Trustees in office, regardless of
their number, shall have the powers granted to the Trustees and shall discharge
all the duties imposed upon the Trustees by this Declaration of Trust. Election
shall be by the affirmative vote of Holders of a majority of the TrENDS entitled
to vote present in person or by proxy at a special meeting of Holders called for
the purpose of electing any Trustee. Each individual Trustee shall be at least
21 years of age and shall not be under any legal disability. No Trustee who is
an "interested person", as defined in the Investment Company Act, may assume
office if it would cause the composition of the Trustees of the Trust not to be
in compliance with the percentage limitations on interested persons in Section
10 of the Investment Company Act. Trustees need not be Holders. Notice of the
appointment or election of a successor Trustee shall be mailed promptly after
acceptance of such appointment by the successor Trustee to each Holder.
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SECTION 7.3 POWERS. The Trust will be managed
solely by the Trustees, who will, subject to the provisions of Article II
hereof, have complete and exclusive control over the management, conduct and
operation of the Trust's business, and shall have the rights, powers and
authority of a board of directors of a corporation organized under Delaware law.
The Trustees shall have fiduciary responsibility for the safekeeping and use of
all funds and assets of the Trust and shall not employ, or permit another to
employ, such funds or assets in any manner except for the exclusive benefit of
the Trust and except in accordance with the terms of this Declaration of Trust.
Subject to the continuing supervision of the Trustees and as permitted by
applicable law, the functions of the Trust shall be performed by the Custodian,
the Paying Agent, the Administrator and such other entities engaged to perform
such functions as the Trustees may determine, including, without limitation, any
or all administrative functions.
SECTION 7.4 MEETINGS. Meetings of the Trustees
shall be held from time to time upon the call of any Trustee on not less than 48
hours' notice (which may be waived by any or all of the Trustees in writing
either before or after such meeting or by attendance at the meeting unless the
Trustee attends the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting has not been lawfully
called or convened). The Trustees shall act either by majority vote of the
Trustees present at a meeting at which at least a majority of the Trustees then
in office are present or by a unanimous written consent of the Trustees without
a meeting. Except as otherwise required under the Investment Company Act, all or
any of the Trustees may participate in a meeting of the Trustees by means of a
conference telephone call or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and participation
in a meeting pursuant to such communications equipment shall constitute presence
in person at such meeting.
SECTION 7.5 RESIGNATION AND REMOVAL. Any Trustee may
resign and be discharged of the trust created by the Declaration of Trust by
executing an instrument in writing resigning as Trustee, filing the same with
the Administrator
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and sending notice thereof to the remaining Trustees, and such resignation shall
become effective immediately unless otherwise specified therein. Any Trustee may
be removed in the event of incapacity by vote of the remaining Trustees and for
any reason by written declaration or vote of the Holders of more than 66 2/3% of
the outstanding TrENDS, notice of which vote shall be given to the remaining
Trustees and the Administrator. The resignation, removal or failure to reelect
any Trustee shall not cause the termination of the Trust.
SECTION 7.6 LIABILITY. The Trustees shall not be
liable to the Trust or any Holder for any action taken or for refraining from
taking any action except in the case of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties of their office. Specifically,
without limitation, the Trustees shall not be responsible for or in respect of
the recitals herein or the validity or sufficiency of this Declaration of Trust
or for the due execution hereof by any other Person, or for or in respect of the
validity or sufficiency of TrENDS or certificates representing TrENDS and shall
in no event assume or incur any liability, duty or obligation to any Holder or
to any other Person, other than as expressly provided for herein. The Trustees
may employ agents, attorneys, administrators, accountants and auditors, and
shall not be answerable for the default or misconduct of any such Persons if
such Persons shall have been selected with reasonable care. Action in good faith
may include action taken in good faith in accordance with an opinion of counsel.
In no event shall any Trustee be personally liable for any expenses with respect
to the Trust. Each Trustee shall be indemnified from the Trust Account with
respect to any claim, liability, loss or expense incurred in acting as Trustee
of the Trust, including the costs and expenses of the defense against any such
claim or liability, except in the case of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties of his office.
SECTION 7.7 COMPENSATION. Each Trustee, other
than a Trustee who is a director, officer or employee of the Sponsor, any
Underwriter, or the Administrator or any affiliate thereof, shall receive a
one-time, up-front fee of $10,800, in respect of its annual fee and anticipated
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out-of-pocket expenses. In addition, the Managing Trustee shall receive an
additional one-time, up-front fee of $3,600 for serving in such capacity. The
Trustees will not receive any pension or retirement benefits. In the event of
the resignation or removal of a Trustee, such Trustee shall remit to the Trust
the portion of its fee ratable for the period from the day of such resignation
or removal through the Exchange Date.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 MEETINGS OF HOLDERS. The Trustees
shall not hold annual or regular meetings of Holders except as set forth herein.
A special meeting may be called at any time by the Trustees or upon petition of
Holders of not less than 51% of the TrENDS outstanding (unless substantially the
same matter was voted on during the preceding 12 months), and shall be called as
provided in Section 7.2 hereof (or as otherwise required by the Investment
Company Act and the rules and regulations thereunder, including, without
limitation, when requested by the Holders of not less than 10% of the TrENDS
outstanding for the purposes of voting upon the question of the removal of any
Trustee or Trustees). The Trustees shall establish, and notify the Holders in
writing of, the record date for each such meeting which shall be not less than
10 nor more than 50 days before the meeting date. Holders at the close of
business on the record date will be entitled to vote at the meeting. The
Administrator shall, as soon as possible after any such record date (or prior to
such record date if appropriate), mail by first class mail to each Holder a
notice of meeting and a proxy statement and form of proxy in the form approved
by the Trustees and complying with the Investment Company Act and the rules and
regulations thereunder. Except as otherwise specified herein or in any provision
of the Investment Company Act and the rules and regulations thereunder, any
action may be taken by vote of Holders of a majority of the TrENDS outstanding
present in person or by proxy if Holders of a majority of TrENDS outstanding on
the record date are so represented. Each TrENDS shall have one vote and may be
voted in person or by duly executed proxy.
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Any proxy may be revoked by notice in writing, by a subsequently dated proxy or
by voting in person at the meeting, and no proxy shall be valid after eleven
months following the date of its execution.
SECTION 8.2 BOOKS AND RECORDS; REPORTS. (a) The
Trustees shall keep a certified copy or duplicate original of this Declaration
of Trust on file at the office of the Trust and the office of the Administrator
available for inspection at all reasonable times during its usual business hours
by any Holder. The Trustees shall keep proper books of record and account for
all the transactions under this Declaration of Trust at the office of the Trust
and the office of the Administrator, and such books and records shall be open to
inspection by any Holder at all reasonable times during usual business hours.
The Trustees shall retain all books and records in compliance with Section 31 of
the Investment Company Act and the rules and regulations thereunder.
(b) With each payment to Holders the Paying Agent
shall set forth, either in the instruments by means of which payment
is made or in a separate statement, the amount being paid from the
Trust Account expressed as a dollar amount per TrENDS and the other
information required under Section 19 of the Investment Company Act
and the rules and regulations thereunder. The Trustees shall prepare
and file or distribute reports as required by Section 30 of the
Investment Company Act and the rules and regulations thereunder. The
Trustees shall prepare and file such reports as may from time to time
be required to be filed or distributed to Holders under any
applicable state or Federal statute or rule or regulation thereunder,
and shall file such tax returns as may from time to time be required
under any applicable state or Federal statute or rule or regulation
thereunder. One of the Trustees shall be designated by resolution of
the Trustees to make the filings and give the notices required by
Rule 17g-1 under the Investment Company Act.
(c) In calculating the net asset value of the
Trust as required by the Investment Company Act, (i) the Treasury
Securities will be valued at the mean
24
<PAGE>
between the last current bid and asked prices or, if quotations are
not available, as determined in good faith by the Trustees, (ii)
short-term investments having a maturity of 60 days or less will be
valued at cost with accrued interest or discount earned included in
interest receivable and (iii) the Contract will be valued at the mean
of the bid prices received by the Administrator from at least three
independent broker-dealer firms unaffiliated with the Trust to be
named by the Trustees who are in the business of making bids on
financial instruments similar to the Contract and with terms
comparable thereto.
SECTION 8.3 TERMINATION. (a) This Declaration
of Trust and the Trust created hereby shall terminate upon the earliest of (i)
the date 90 days after the execution of this Declaration of Trust if (x) the
TrENDS have not by that date been issued or (y) the net worth of the Trust is
not at least $[*] at such time, (ii) the date of the repayment, sale or other
disposition, as the case may be, of all of the Contract, the Treasury Securities
and any other securities held hereunder, (iii) the date 10 Business Days after
the Exchange Date (or, if the Contracts shall be accelerated pursuant to Article
VIII thereof, 10 Business Days after the date on which the Trust shall receive
the Shares then required to be delivered by the Seller, or the proceeds of any
sale of collateral pursuant to Section 8(c)) of the Collateral Agreement), and
(iv) the date which is 21 years less 91 days after the death of the last
survivor of all of the descendants of Joseph P. Kennedy living on the date
hereof. The Trust is irrevocable, the Sponsor has no right to withdraw any
assets constituting a portion of the Trust Estate, and the dissolution of the
Sponsor shall not operate to terminate the Trust. The death or incapacity of any
Holder shall not operate to terminate this Declaration of Trust, nor entitle his
legal representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of the Trust, and shall
not otherwise affect the rights, obligations and liabilities of the parties
hereto.
(b) Written notice of any termination shall be
sent to Holders specifying the record date for any distribution to
Holders and the date of termination as
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<PAGE>
determined by the Trustees, upon which the books maintained by the
Paying Agent pursuant to Section 5.2 hereof shall be closed.
(c) For purposes of termination under Sections
8.3(a)(ii), (iii) and (iv) hereof, within five Business Days after
such termination, the Trustees shall, subject to any applicable
provisions of law, effect the sale of any remaining property of the
Trust, and the Paying Agent shall distribute pro rata as soon as
practicable thereafter to each Holder, upon surrender for
cancellation of its Certificates, its interest in the Trust Estate.
Together with the distribution to the Holders, the Trustees shall
furnish the Holders with a final statement as of the date of the
distribution of the amount distributable with respect to each TrENDS.
SECTION 8.4 AMENDMENT AND WAIVER. (a) This
Declaration of Trust, and any of the agreements referred to in Section 2.2(a)
hereof, may be amended from time to time by the Trustees for any purpose prior
to the issuance and sale to the Underwriters of the TrENDS and thereafter
without the consent of any of the Holders (i) to cure any ambiguity or to
correct or supplement any provision contained herein or therein which may be
defective or inconsistent with any other provision contained herein or therein;
(ii) to change any provision hereof or thereof as may be required by applicable
law or the Commission or any successor governmental agency exercising similar
authority; or (iii) to make such other provisions in regard to matters or
questions arising hereunder or thereunder as shall not materially adversely
affect the interests of the Holders (as determined in good faith by the
Trustees, who may rely on an opinion of counsel).
(b) This Declaration of Trust may also be amended
from time to time by the Trustees (or the performance of any of the
provisions of the Declaration of Trust may be waived) with the
consent by the required vote of the Holders in accordance with
Section 8.1 hereof; provided that this Declaration of Trust may not
be amended (i) without the consent by vote of the Holders of all
TrENDS then outstanding, so as to
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<PAGE>
increase (1) the number of TrENDS issuable hereunder above, (2) the
number of TrENDS specified in Section 2.2(c) hereof or (3) such
lesser number as may be outstanding at any time during the term of
this Declaration of Trust, (ii) to reduce the interest in the Trust
represented by TrENDS without the consent of the Holders of such
TrENDS, (iii) if such amendment is prohibited by the Investment
Company Act or other applicable law, (iv) without the consent by vote
of the Holders of all TrENDS then outstanding, if such amendment
would effect a change in the Limitations on Trustees' powers set
forth in Section 2.7 hereof or the voting requirements set forth in
Section 8.1 hereof or this Section 8.4, or (v) without the consent by
vote of the Holders of the lesser of (x) 67% or more of the TrENDS
represented at a special meeting of Holders, if more than 50% of the
TrENDS outstanding are represented at such meeting, and (y) more than
50% of the TrENDS outstanding, if such amendment would effect a
change in Section 2.1 or 2.6 hereof.
(c) Promptly after the execution of any
amendment, the Trustees shall furnish written notification of the
substance of such amendment to each Holder.
(d) Notwithstanding subsections (a) and (b) of
this Section 8.4 no amendment hereof shall permit the Trust, the
Trustees, the Administrator, the Paying Agent or the Custodian to
take any action or direct or permit any Person to take any action
that (i) would vary the investment of Holders within the meaning of
Treasury Regulation Section 301.7701-4(c), or (ii) would or could
cause the Trust, or direct or permit any action to be taken that
would or could cause the Trust, not to be a "grantor trust" under the
Code.
SECTION 8.5 ACCOUNTANTS.
(a) The Trustees shall, in accordance with
Section 30 of the Investment Company Act, file annually with the
Commission such information, documents and reports as investment
companies having securities registered on a national securities
exchange are
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<PAGE>
required to file annually pursuant to Section 13(a) of the Exchange
Act and the rules and regulations issued thereunder. The Trustees
shall transmit to the Holders, at least semi-annually, the reports
required by Section 30(d) of the Investment Company Act and the rules
and regulations thereunder, including, without limitation, a balance
sheet accompanied by a statement of the aggregate value of
investments on the date of such balance sheet, a list showing the
amounts and values of such investments owned on the date of such
balance sheet, and a statement of income for the period covered by
the report. Financial statements contained in such annual reports
shall be accompanied by a certificate of independent public
accountants based upon an audit not less in scope or procedures than
that which independent public accountants would ordinarily make for
the purpose of presenting comprehensive and dependable financial
statements and shall contain such information as the Commission may
prescribe. Each such report shall state that such independent public
accountants have verified investments owned, either by actual
examination or by receipt of a certificate from the Custodian.
(b) The independent public accountants referred
to in subsection (a) above shall be selected at a meeting held within
thirty days before or after the beginning of the fiscal year by the
vote, cast in person, of a majority of the Trustees who are not
"interested persons" as defined in the Investment Company Act and
such selection shall be submitted for ratification at the first
meeting of Holders to be held as set forth in Section 8.1 hereof, and
thereafter as required by the Investment Company Act and the rules
and regulations thereunder. The employment of any independent public
accountant for the Trust shall be conditioned upon the right of the
Holders by a vote of the lesser of (i) 67% or more of the TrENDS
present at a special meeting of Holders, if Holders of more than 50%
of TrENDS outstanding are present or represented by proxy at such
meeting or (ii) more than 50% of the TrENDS outstanding to terminate
such employment at any time without penalty.
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<PAGE>
(c) The foregoing provisions of this Section 8.5
are in addition to any applicable requirements of the Investment
Company Act and the rules and regulations thereunder.
SECTION 8.6 NATURE OF HOLDER'S INTEREST. Each
Holder holds at any given time a beneficial interest in the Trust Estate, but
does not have any right to take title to or possession of any portion of the
Trust Estate. Each Holder expressly waives any right he may have under any rule
of law, or the provisions of any statute, or otherwise, to require the Trustees
at any time to account, in any manner other than as expressly provided in this
Declaration of Trust, for the Shares, the Contract, the Treasury Securities or
other assets or moneys from time to time received, held and applied by the
Trustees hereunder. No Holder shall have any right except as provided herein to
control or determine the operation and management of the Trust or the
obligations of the parties hereto. Nothing set forth herein or in the
certificates representing TrENDS shall be construed to constitute the Holders
from time to time as partners or members of an association.
SECTION 8.7 DELAWARE LAW TO GOVERN. This
Declaration of Trust is executed and delivered in the State of Delaware, and all
laws or rules of construction of the State of Delaware shall govern the rights
of the parties hereto and the Holders and the construction, validity and effect
of the provisions hereof.
SECTION 8.8 NOTICES. Any notice, demand,
direction or instruction to be given to the Sponsor hereunder shall be in
writing and shall be duly given if mailed or delivered to , Attention: [*], or
at such other address as shall be specified by the Sponsor to the other parties
hereto in writing. Any notice, demand, direction or instruction to be given to
the Trust and the Trustees hereunder shall be in writing and shall be duly given
if mailed or delivered to the Trust at Puglisi & Associates, 850 Library Avenue,
Suite 204, Newark, Delaware 19715, Attention: Donald J. Puglisi and to each
Trustee at such Trustee's address set forth beneath its signature below, or such
other address as shall be specified to the other parties hereto by such party in
writing. Any notice
29
<PAGE>
to be given to a Holder shall be duly given if mailed, first class postage
prepaid, or by such other substantially equivalent means as the Trustees may
deem appropriate, or delivered to such Holder at the address of such Holder
appearing on the registry of the Paying Agent.
SECTION 8.9 SEVERABILITY. If any one or more of
the covenants, agreements, provisions or terms of this Declaration of Trust
shall be for any reason whatsoever held invalid, then such covenants,
agreements, provisions or terms shall be deemed severable from the remaining
covenants, agreements, provisions and terms of this Declaration of Trust and
shall in no way affect the validity or enforceability of the other provisions of
this Declaration of Trust or of the Certificates, or the rights of the Holders
thereof.
SECTION 8.10 COUNTERPARTS. This Declaration of Trust may
be executed in counterparts, and as so executed will constitute one agreement,
binding on all of the parties hereto.
30
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Declaration of Trust to be duly executed.
SPONSOR:
-------------------------------------
Name:
Address:
TRUSTEES:
-------------------------------------
Name: Donald J. Puglisi
Address: 860 Library Avenue
Suite 204
Newark, Delaware 19715
-------------------------------------
Name: William R. Latham, III
Address: 860 Library Avenue
Suite 204
Newark, Delaware 19715
-------------------------------------
Name: James B. O'Neill
Address: 860 Library Avenue
Suite 204
Newark, Delaware 19715
31
<PAGE>
Schedule I
TREASURY SECURITIES
All terms specified are for stripped principal or
interest components of U.S. Treasury debt obligations.
MATURITY PAR AMOUNT CUSIP NO.
- -------- ---------- --------
32
<PAGE>
Exhibit A
THIS CERTIFICATE IS ISSUED UNDER AND IS SUBJECT TO THE TERMS, PROVISIONS AND
CONDITIONS OF THE TRUST AGREEMENT REFERRED TO BELOW TO WHICH THE HOLDER OF THIS
CERTIFICATE BY VIRTUE OF THE ACCEPTANCE HEREOF ASSENTS AND IS BOUND. $___. TRUST
ENHANCED DIVIDEND SECURITIES
PEAK TrENDS TRUST
CUSIP NO. [*]
NO. _____ _______ SHARES
THIS CERTIFIES THAT
_____________________________________________ IS THE RECORD OWNER OF
____________________ $___ TRUST ENHANCED DIVIDEND SECURITIES OF PEAK TrENDS
TRUST, CONSTITUTING FRACTIONAL UNDIVIDED INTERESTS IN PEAK TrENDS TRUST, A TRUST
CREATED UNDER THE LAWS OF THE STATE OF DELAWARE PURSUANT TO A DECLARATION OF
TRUST BETWEEN AND THE TRUSTEES NAMED THEREIN. THIS CERTIFICATE IS ISSUED UNDER
AND IS SUBJECT TO THE TERMS, PROVISIONS AND CONDITIONS OF THE DECLARATION OF
TRUST TO WHICH THE HOLDER OF THIS CERTIFICATE BY VIRTUE OF THE ACCEPTANCE HEREOF
ASSENTS AND IS BOUND, A COPY OF WHICH DECLARATION OF TRUST IS AVAILABLE AT THE
OFFICE OF THE TRUST'S ADMINISTRATOR AND PAYING AGENT, THE BANK OF NEW YORK, 101
BARCLAY STREET, NEW YORK, NEW YORK 10286. THIS CERTIFICATE IS TRANSFERABLE AND
INTERCHANGEABLE BY THE REGISTERED OWNER IN PERSON OR BY HIS DULY AUTHORIZED
ATTORNEY AT THE OFFICE OF THE PAYING AGENT UPON SURRENDER OF THIS CERTIFICATE
PROPERLY ENDORSED OR ACCOMPANIED BY A WRITTEN INSTRUMENT OF TRANSFER AND ANY
OTHER DOCUMENTS THAT THE PAYING AGENT MAY REQUIRE FOR TRANSFER, IN FORM
SATISFACTORY TO THE PAYING AGENT AND PAYMENT OF THE FEES AND EXPENSES PROVIDED
IN THE TRUST AGREEMENT.
THIS CERTIFICATE IS NOT VALID UNLESS MANUALLY COUNTERSIGNED
BY THE PAYING AGENT.
33
<PAGE>
WITNESS THE FACSIMILE SIGNATURE OF THE MANAGING TRUSTEE.
PEAK TrENDS TRUST
DATED: By
--------------------------
Managing Trustee
COUNTERSIGNED:
THE BANK OF NEW YORK,
as Paying Agent
By
-----------------------------
Authorized Signature
34
<PAGE>
CERTIFICATE OF TRUST OF PEAK TRENDS TRUST
This Certificate of Trust of PEAK TRENDS TRUST (the "Trust"), dated
March 23, 1998, is being duly executed and filed by the undersigned as trustees,
to form a business trust under the Delaware Business Trust Act (12 Del. C.
Section 3801, et seq.)
1. Name. The name of the business trust formed hereby is PEAK
TRENDS TRUST.
2. Registered offices; Registered Agent. The business address of
the registered office of the Trust in the State of Delaware is
Puglisi & Associates, 850 Library Avenue, Suite 204, Newark,
Delaware, 19715. The name of the Trust's registered agent at
such address is Donald J. Puglisi.
3. Effective Date. This Certificate of trust shall be effective
upon the date and time of filing.
4. The Trust is a Delaware business trust to be registered under
the Investment Company Act of 1940. Notice is hereby given that
the Trust shall consist of one or more series. The debts,
liabilities, obligations and expenses incurred, contracted for
or otherwise existing with respect to a particular series of the
Trust shall be enforceable against the assets of such series
only, and not against the assets of the Trust generally or any
other series.
<PAGE>
IN WITNESS WHEREOF, the undersigned, being the initial trustees of the
Trust, have executed this Certificate of Trust as of the date first above-
written.
/s/ Donald J. Puglisi
----------------------------------------------
Donald J. Puglisi
Managing Trustee
/s/ William R. Latham III
------------------------------------------
William R. Latham III
Trustee
/s/ James B. O'Neill
----------------------------------------------
James B. O'Neill
Trustee
2
<PAGE>
EXHIBIT (2)(d)
THIS CERTIFICATE IS ISSUED UNDER AND IS SUBJECT TO THE TERMS, PROVISIONS AND
CONDITIONS OF THE TRUST AGREEMENT REFERRED TO BELOW TO WHICH THE HOLDER OF THIS
CERTIFICATE BY VIRTUE OF THE ACCEPTANCE HEREOF ASSENTS AND IS BOUND.
TRUST ENHANCED DIVIDEND SECURITIES
PEAK TrENDS TRUST
CUSIP NO. __________
NO. 1 _____ SHARES
THIS CERTIFIES THAT DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION IS THE RECORD OWNER OF TRUST ENHANCED DIVIDEND SECURITIES OF PEAK
TrENDS TRUST, CONSTITUTING FRACTIONAL UNDIVIDED INTERESTS IN PEAK TrENDS TRUST,
A BUSINESS TRUST CREATED UNDER THE LAWS OF THE STATE OF DELAWARE PURSUANT TO A
TRUST AGREEMENT BETWEEN DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
AND THE TRUSTEES THEREOF. THIS CERTIFICATE IS ISSUED UNDER AND IS SUBJECT TO
THE TERMS, PROVISIONS AND CONDITIONS OF THE TRUST AGREEMENT TO WHICH THE HOLDER
OF THIS CERTIFICATE BY VIRTUE OF THE ACCEPTANCE HEREOF ASSENTS AND IS BOUND, A
COPY OF WHICH TRUST AGREEMENT IS AVAILABLE AT THE OFFICE OF THE TRUST'S
ADMINISTRATOR AND PAYING AGENT, THE BANK OF NEW YORK, 101 BARCLAY STREET, NEW
YORK, NEW YORK 10286. THIS CERTIFICATE IS TRANSFERABLE AND INTERCHANGEABLE BY
THE REGISTERED OWNER IN PERSON OR BY HIS DULY AUTHORIZED ATTORNEY AT THE OFFICE
OF THE PAYING AGENT UPON SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED OR
ACCOMPANIED BY A WRITTEN INSTRUMENT OF TRANSFER AND ANY OTHER DOCUMENTS THAT THE
PAYING AGENT MAY REQUIRE FOR TRANSFER, IN FORM SATISFACTORY TO THE
<PAGE>
PAYING AGENT AND PAYMENT OF THE FEES AND EXPENSES PROVIDED IN THE TRUST
AGREEMENT.
THIS CERTIFICATE IS NOT VALID UNLESS MANUALLY COUNTERSIGNED BY THE
PAYING AGENT.
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH
ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE TRUSTEES OF PEAK
TrENDS TRUST THAT SUCH REGISTRATION IS NOT REQUIRED.
WITNESS THE FACSIMILE SIGNATURE OF THE MANAGING TRUSTEE.
PEAK TrENDS TRUST
DATED: By
-----------------------------
Managing Trustee
COUNTERSIGNED:
THE BANK OF NEW YORK,
as Paying Agent
By_________________________
Authorized Signature
2
<PAGE>
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York Corporation ("DTC"), the Peak TrENDS Trust
or its agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of CEDE & Co. (or in such other
name as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL, inasmuch as the registered owner hereof, Cede & Co. has an interest
herein. This certificate may be exchanged by an authorized representative of
DTC in whole or in part for securities in definitive form, registered in the
names of such holders as such certificate will be issued in the name of Cede &
Co. (or in representative of DTC) representing the securities not issued in
definitive form.
THIS CERTIFICATE IS ISSUED UNDER AND IS SUBJECT TO THE TERMS, PROVISIONS AND
CONDITIONS OF THE TRUST AGREEMENT REFERRED TO BELOW TO WHICH THE HOLDER OF THIS
CERTIFICATE BY VIRTUE OF THE ACCEPTANCE HEREOF ASSENTS AND IS BOUND. TRUST
ENHANCED DIVIDEND SECURITIES
PEAK TrENDS TRUST
CUSIP NO. _______________
NO. 1 _____________ SHARES
THIS CERTIFIES THAT CEDE & CO. IS THE RECORD OWNER OF TRUST
ENHANCED DIVIDEND SECURITIES OF PEAK TrENDS TRUST, CONSTITUTING FRACTIONAL
UNDIVIDED INTERESTS IN PEAK TrENDS TRUST, A TRUST CREATED UNDER THE LAWS OF THE
STATE OF DELAWARE PURSUANT TO A TRUST AGREEMENT BETWEEN AND
THE TRUSTEES NAMED THEREIN. THIS CERTIFICATE IS ISSUED UNDER AND IS SUBJECT TO
THE TERMS, PROVISIONS AND CONDITIONS OF THE TRUST AGREEMENT TO WHICH THE HOLDER
OF THIS CERTIFICATE BY VIRTUE OF THE ACCEPTANCE HEREOF ASSENTS AND IS BOUND, A
COPY OF WHICH TRUST AGREEMENT IS AVAILABLE AT THE OFFICE OF THE TRUST'S
ADMINISTRATOR AND PAYING AGENT, THE BANK OF NEW YORK, 101 BARCLAY STREET, NEW
YORK, NEW YORK 10286. THIS CERTIFICATE IS TRANSFERABLE AND INTERCHANGEABLE BY
THE REGISTERED OWNER IN PERSON OR BY HIS DULY AUTHORIZED ATTORNEY AT THE OFFICE
OF THE PAYING AGENT UPON SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED OR
ACCOMPANIED BY A WRITTEN
<PAGE>
INSTRUMENT OF TRANSFER AND ANY OTHER DOCUMENTS THAT THE PAYING AGENT MAY REQUIRE
FOR TRANSFER, IN FORM SATISFACTORY TO THE PAYING AGENT AND PAYMENT OF THE FEES
AND EXPENSES PROVIDED IN THE TRUST AGREEMENT.
THIS CERTIFICATE IS NOT VALID UNLESS MANUALLY
COUNTERSIGNED BY THE PAYING AGENT.
2
<PAGE>
WITNESS THE FACSIMILE SIGNATURE OF THE MANAGING TRUSTEE.
PEAK TrENDS TRUST
DATED: By _______________________
Managing Trustee
COUNTERSIGNED:
THE BANK OF NEW YORK,
as Paying Agent
By_________________________
Authorized Signature
3
<PAGE>
CUSTODIAN AGREEMENT
This CUSTODIAN AGREEMENT dated as of this _th day of May, 1998 by
and between The Bank of New York, a New York banking corporation (the
"Custodian"), and Peak TrENDS Trust (the "Trust"), a business trust organized
under the laws of the State of Delaware, under and by virtue of a Declaration of
Trust, dated as of , 1998, as amended and restated as of , 1998 (the "Trust
Agreement").
W I T N E S S E T H
WHEREAS, the Trust is a non-diversified, closed-end management
investment company, as defined in the Investment Company Act of 1940 (the
"Investment Company Act"), formed to purchase and hold certain U.S. treasury
securities (the "Treasury Securities"), to enter into and hold a forward
contract with an existing shareholder of Peak International Limited (the
"Contract"), and to issue Trust Enhanced Dividend Securities (the "TrENDS") in
accordance with the terms and conditions of the Trust Agreement;
WHEREAS, the Trust desires to engage the services of the
Custodian to perform certain custodial duties for the Trust; and
WHEREAS, the Custodian is willing to assume such duties, on the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties agree as follows:
1. DEFINITIONS. Capitalized terms not otherwise defined
herein shall have the respective meanings specified in the Trust Agreement.
2. APPOINTMENT OF CUSTODIAN; TRANSFER OF ASSETS. The Trust
hereby constitutes and appoints the Custodian, and the Custodian accepts such
appointment, as agent of the Trust and as custodian of all of the property at
any time owned or held by the Trust (collectively, the "Assets"). The Trust
hereby deposits the Assets with the Custodian and the Custodian hereby accepts
such into its custody and the Trustees shall deliver to the Custodian all of the
Assets, including all monies, securities and other property received by the
Trust at any time during the
1
<PAGE>
period of this Agreement, subject to the following terms and conditions. The
Custodian hereby agrees that it shall hold the Assets in a segregated custody
account, separate and distinct from all other accounts, in accordance with
Section 17(f) of, and in such manner as shall constitute the segregation and
holding in trust within the meaning of, the Investment Company Act and the rules
and regulations thereunder. The Trustees authorize the Custodian, for any Assets
held hereunder, to use the services of any United States securities depository
permitted to perform such services for registered investment companies and their
custodians under Rule 17f-4 under the Investment Company Act and which have been
approved by the Trustees, including but not limited to, The Depository Trust
Company and the Federal Reserve Book Entry System. The Custodian shall be under
no duty or obligation to inspect, review or examine any Assets to determine that
they are genuine, enforceable, or appropriate for the represented purpose or
that they are other than what they purport to be on their face.
3. ASSET DISPOSITION; EXAMINATIONS. The Custodian shall have no
power or authority to assign, hypothecate, pledge or otherwise dispose of the
Assets, except pursuant to a written direction in accordance with paragraph 4
below and then only for the account of the Trust. The Assets shall be subject to
no lien or charge of any kind in favor of the Custodian for itself or for any
other person claiming through the Custodian. The Custodian shall permit actual
examination of the Assets by the Trust's independent public accountant at the
end of each annual and semi-annual fiscal period of the Trust and at least one
other time during the fiscal year of the Trust chosen by such independent public
accountant and shall permit the inspection of the Assets by the Commission
through its employees or agents during the normal business hours of the
Custodian upon reasonable request.
4. AUTHORIZED ACTIONS. The Custodian shall take such actions with
respect to the Assets as directed in writing by any two Trustees or officers of
the Administrator duly authorized by the Trustees to give written instructions
on behalf of the Trustees and named in such resolutions of the Trustees,
certified by a Trustee, as may be received by the Custodian from time to time.
5. CUSTODIAN'S ACTIONS TAKEN IN GOOD FAITH. In connection with
the performance of its duties under this Agreement, the Custodian shall have no
duties or obligations other than those specifically set forth herein or in the
Trust Agreement or as may subsequently be agreed in writing by the parties
hereto and shall be under no liability to the Trust or any Holder for any action
taken in good faith in reliance on any paper, order, certification, list,
demand, request, consent, affidavit,
2
<PAGE>
notice, opinion, direction, endorsement, assignment, resolution, draft or other
document, prima facie properly executed, or for the disposition of the Assets
pursuant to the Trust Agreement or in respect of any action taken or suffered
under the Trust Agreement in good faith, in accordance with an opinion of
counsel or at the direction of the Trustees pursuant hereto; provided that this
provision shall not protect the Custodian against any liability to which it
would otherwise be subject by reason of its willful misfeasance, bad faith or
gross negligence in the performance of its duties hereunder or its negligence or
reckless disregard of its obligations and duties hereunder. Notwithstanding any
other provision of this Agreement, the Custodian shall under no circumstances be
liable for any punitive, exemplary, indirect or consequential damages.
6. TRUST AGREEMENT VALIDITY. The Custodian shall not be
responsible for the validity or sufficiency of the Trust Agreement or the due
execution thereof, or for the form, character, genuineness, sufficiency, value
or validity of any of the Assets and the Custodian shall in no event assume or
incur any liability, duty or obligation to any Holder or to the Trustees, other
than as expressly provided for herein. The Custodian shall not be responsible
for or in respect of the validity of any signature by or on behalf of the
Trustees.
7. LITIGATION OBLIGATIONS, COSTS AND INDEMNITY. The Custodian
shall not be under any obligation to appear in, prosecute or defend any action
which in its opinion may involve it in expense or liability, unless it shall be
furnished with such reasonable security and indemnity against such expense or
liability as it may require, and any pecuniary costs of the Custodian from such
actions shall be expenses which are reimbursable pursuant to paragraph 13
hereof.
8. TAXES; TRUST EXPENSES. In no event shall the Custodian be
personally liable for any taxes or other governmental charges imposed upon or in
respect of the Assets or upon the monies, securities or other properties
included therein. The Custodian shall be reimbursed and indemnified by the Trust
for all such taxes and charges, for any tax or charge imposed against the Trust
and for any expenses, including counsel fees, interest, penalties and additions
to tax which the Custodian may sustain or incur with respect to such taxes or
charges.
9. CUSTODIAN RESIGNATION, SUCCESSION. (a) The Custodian may
resign by executing an instrument in writing resigning as Custodian and
delivering the same to the Trustees, not less than 60 days before the date
specified in such instrument when, subject to clause (b) of this paragraph 9,
such resignation is to take effect. Upon receiving such notice of resignation,
the Trustees shall use their
3
<PAGE>
reasonable efforts promptly to appoint a successor Custodian in the manner and
meeting the qualifications provided in the Trust Agreement, by written
instrument or instruments delivered to the resigning Custodian and the successor
Custodian.
(b) In case no successor Custodian shall have been appointed
within 30 days after notice of resignation has been received by the Trust, the
resigning Custodian may forthwith apply to a court of competent jurisdiction for
the appointment of a successor Custodian and shall not resign until a successor
Custodian has been appointed. Such court may thereupon, after such notice, if
any, as it may deem proper and prescribed, appoint a successor Custodian.
10. CUSTODIAN REMOVAL. The Trust may remove the Custodian upon 60
days' prior written notice to the Custodian and appoint a successor Custodian.
In case at any time the Custodian shall not meet the requirements set forth in
the Trust Agreement or shall become incapable of acting or if a court having
jurisdiction shall enter a decree or order for relief in respect of the
Custodian in an involuntary case, or the Custodian shall commence a voluntary
case, under any applicable bankruptcy, insolvency, or other similar law now or
hereafter in effect, or any receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) for the Custodian or for any substantial part
of its property shall be appointed, or the Custodian shall make any general
assignment for the benefit of creditors, or shall generally fail to pay its
debts as they become due, the Trust may remove the Custodian immediately and
appoint a successor Custodian. The termination of the Administration Agreement
or the Paying Agent Agreement shall cause the removal of the Custodian
simultaneously therewith, unless otherwise agreed by both parties in writing.
11. TRANSFERS TO SUCCESSOR CUSTODIAN. Upon the
request of any successor Custodian, the Custodian hereunder shall, upon
payment of all amounts due it under this Agreement, execute and deliver an
instrument acknowledged by it transferring to such successor Custodian all the
rights and powers of the resigning Custodian; and the resigning Custodian shall
promptly transfer, deliver and pay over to the successor Custodian the Assets at
the time held by it hereunder, if any, together with all necessary instruments
of transfer and assignment or other documents properly executed necessary to
effect such transfer and such of the records or copies thereof maintained by the
resigning Custodian in the administration hereof as may be requested by the
successor Custodian, and the resigning Custodian shall unless it has been guilty
of wilful misfeasance, bad faith or gross negligence in the performance of its
duties hereunder or its negligence or reckless disregard of its obligations and
duties hereunder thereupon be discharged from all duties and responsibilities
hereunder. Any
4
<PAGE>
resignation or removal of the Custodian shall become effective upon such
acceptance of appointment by the successor Custodian. The indemnification of the
resigning Custodian provided for hereunder shall survive any resignation,
discharge or removal of the Custodian hereunder.
12. CUSTODIAN MERGER, CONSOLIDATION. Any corporation into which
the Custodian may be merged or converted or with which it may be consolidated,
or any corporation resulting from any merger, conversion or consolidation to
which the Custodian shall be a party, shall be the successor custodian hereunder
and under the Trust Agreement without the execution or filing of any paper,
instrument or further act to be done on the part of the parties hereto, provided
that such corporation meets the requirements set forth in the Trust Agreement
and provided further that the Trust has given its prior written consent to the
Custodian with respect to any new successor Custodian.
13. COMPENSATION; EXPENSES. The Custodian shall receive
compensation for performing the usual, ordinary, normal and recurring services
under this Custodian Agreement and, with the prior written approval of the
Trustees, reimbursement for any and all expenses and disbursements incurred
hereunder, as provided in Section 3.1 of the Administration Agreement.
14. SECTION 17(f) QUALIFICATION. The Custodian hereby represents
that it is, and will at all times for the term of its appointment hereunder be,
qualified to act as a custodian under Section 17(f) of the Investment Company
Act.
15. CUSTODIAN'S LIMITED LIABILITY. The Trust shall indemnify and
hold the Custodian harmless from and against any loss, damages, cost or expense
(including the reasonable costs of investigation, preparation for and defense of
legal and/or administrative proceedings related to a claim against it and
reasonable attorneys' fees and disbursements), liability or claim incurred by
reason of any inaccuracy in information furnished to the Custodian by the
Trustees, or any act or omission in the course of, connected with or arising out
of any services to be rendered hereunder, provided that the Custodian shall not
be indemnified and held harmless from and against any such loss, damages, cost,
expense, liability or claim arising from its willful misfeasance, bad faith or
negligence in the performance of its duties, or its reckless disregard of its
duties and obligations hereunder. Neither the Federal Reserve Book Entry System
nor the Depository Trust Company shall be deemed to be agents of the Custodian.
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16. RIGHTS OF SET-OFF; BANKER'S LIEN. The Custodian hereby waives
all rights of set-off or banker's lien it may have with respect to the Assets
held by it as Custodian hereunder.
17. TERMINATION. This Agreement shall terminate upon the earlier
of the termination of the Trust or the appointment of a successor Custodian.
18. CHOICE OF LAW. This Agreement is executed and delivered in
the State of New York, and all laws or rules of construction of the State of New
York shall govern the right of the parties hereto and the interpretation of the
provisions hereof.
19. NOTICES. Any notice to be given to the Trust hereunder shall
be in writing and shall be duly given if mailed or delivered to Peak TrENDS
Trust, c/o Donald J. Puglisi, Managing Trustee, 850 Liberty Avenue, Suite 204,
Newark, Delaware 19715, and to the Custodian if mailed or delivered to The Bank
of New York, 101 Barclay Street, Floor 12E, New York, New York 10286, Attention:
Joseph Ernst or at such other address as shall be specified by the addressee to
the other party hereto in writing.
20. NO THIRD PARTY BENEFICIARIES. Nothing herein, express or
implied, shall give to any person, other than the Trustees, the Custodian and
their respective successors and assigns, any benefit of any legal or equitable
right, remedy or claim hereunder.
21. AMENDMENTS; TRUST AGREEMENT CHANGES; WAIVER. This Agreement
shall not be deemed or construed to be modified, amended, rescinded, cancelled
or waived, in whole or in part, except by a written instrument signed by a duly
authorized representative of the party to be charged. The Trustees shall notify
the Custodian of any change in the Trust Agreement prior to the effective date
of any such change. Failure of either party hereto to exercise any right or
remedy hereunder in the event of a breach hereof by the other party shall not
constitute a waiver of any such right or remedy with respect to any subsequent
breach.
22. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
several counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the day and year first above written.
PEAK TRENDS TRUST
----------------------------
as Trustee
----------------------------
as Trustee
----------------------------
as Trustee
THE BANK OF NEW YORK
By: _________________________
Name:
Title:
7
<PAGE>
EXHIBIT (2)(k)(i)
ADMINISTRATION AGREEMENT
This ADMINISTRATION AGREEMENT dated as of this ____ day of May,
1998 by and between The Bank of New York, a New York banking corporation (the
"Administrator"), and Peak TrENDS Trust (the "Trust"), a business trust
organized under the laws of the State of Delaware under and by virtue of a
Declaration of Trust, dated as of ________, 1998, as amended and restated as of
________, 1998 (the "Trust Agreement").
W I T N E S S E T H
WHEREAS, the Trust is a non-diversified, closed-end management
investment company, as defined in the Investment Company Act of 1940 (the
"Investment Company Act"), formed to purchase and hold certain U.S. treasury
securities (the "Treasury Securities"), to enter into and hold a forward
contract with an existing shareholder (the "Seller") of Peak International
Limited (the "Contract") and to issue Trust Enhanced Dividend Securities (the
"TrENDS") in accordance with the terms and conditions of the Trust Agreement;
WHEREAS, the Trust desires to engage the services of the
Administrator to assume certain duties and responsibilities of the trustees of
the Trust (the "Trustees") under the Trust Agreement and the Investment Company
Act and to undertake certain services on behalf of and subject to the
supervision of the Trustees as provided herein; and
WHEREAS, the Administrator is qualified and willing to assume
such duties and responsibilities and to undertake to render such services,
subject to the supervision of the Trustees, on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. Capitalized terms not otherwise defined herein
shall have the respective meanings specified in the Trust Agreement.
ARTICLE II
ENGAGEMENT OF ADMINISTRATOR
2.1 ENGAGEMENT. The Trust hereby engages the Administrator, and
the Administrator hereby agrees to be so engaged, to provide or cause the
provision of the services hereinafter enumerated.
2.2 SERVICES OF ADMINISTRATOR. Subject to the supervision of the
Trustees, the Administrator shall on behalf of the Trust take the actions set
forth in Sections 2.3, 2.4 and 2.5 of the Trust Agreement, to the extent such
responsibilities can lawfully be delegated to the Administrator, and to
effectuate the terms of the Contract; provided, however, that the Administrator
shall not (i) render investment advisory services to the Trust as defined in the
Investment Company Act or the Investment Advisers Act of 1940; (ii) have the
power of the Trustees to sell the Contract or the Treasury Securities except as
provided in Sections 2.5 of the Trust Agreement; or (iii) have the power to
select the independent public accountants or counsel for the Trust.
Additionally, the Administrator shall be responsible for rendering the following
services:
(a) pay out of the monies paid to the Administrator pursuant to
the Fund Expense Agreement all ongoing fees and expenses of the Trust as
specified on Schedule A hereto;
(b) instruct the Paying Agent on behalf of the Trust to take the
actions set forth in Sections 2.3, 2.4 and 2.5 of the Trust Agreement and to
otherwise perform the duties of the Paying Agent referred to in the Trust
Agreement and the Paying Agent Agreement and coordinate, monitor and supervise
the activities of those providing services to the Trust;
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(c) with the approval of the Trustees, engage legal and other
professional advisors, other than the Trust's independent accountants as
provided in clause 2.2 (iii) above;
(d) receive all demands, bills and invoices for expenses incurred
by or on behalf of the Trust and pay the same, or cause the Paying Agent to pay
the same, out of moneys paid to the Administrator pursuant to the Fund Expense
Agreement but in no event out of any assets of the Trust, and give notice to
Donaldson, Lufkin & Jenrette Securities Corporation pursuant to the Fund
Indemnity Agreement of any claim for Indemnification Expenses (as defined in the
Fund Indemnity Agreement) or any threatened claim for Indemnification Expenses;
(e) (i) keep or cause to be kept all the books and records of the
Trust (other than those to be kept by the Paying Agent), and (ii) cause the
legal and other professional advisors engaged pursuant to Section 2.2(c) to
prepare and, as necessary, file any and all reports, returns and other
documents as required under the Investment Company Act, the Securities Exchange
Act of 1934, or the Internal Reve nue Code of 1986 as amended, or, as reasonably
requested by the Trustees, under any other applicable laws, rules or regulations
or otherwise;
(f) at the request of the Trustees and upon being furnished with
such reasonable security and indemnity against any related expense or liability
as the Administrator may require, institute and prosecute, in accordance with
the instructions of the Trustees, legal or other appropriate proceedings to
enforce any and all rights and remedies of the Trust;
(g) prepare, receive and review on behalf of the Trust all
notices, reports, certificates and other documents regarding the Contract and
the Treasury Securities;
(h) make or cause to be made all necessary arrangements with
respect to meetings of Trustees and meetings of Holders, including, without
limitation, the preparation of notices, proxies and minutes, subject to the
approval of Trustees;
(i) respond to inquiries by Holders;
(j) in conjunction with the Trustees, determine and publish, in
such manner as the Trustees shall direct in writing, the Trust's net asset value
in accordance with Section 8.2(c) of the Trust Agreement and the Trust's policy.
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2.3 CERTAIN RIGHTS OF THE ADMINISTRATOR. In connection with the
performance of its duties under this Agreement, the Administrator shall not be
liable to the Trust, the Trustees or any Holder (i) for any action taken or for
refraining from taking any action hereunder except in the case of its willful
misfeasance, bad faith, gross negligence or the reckless disregard of its duties
hereunder, (ii) with respect to any action taken or omitted to be taken by it in
good faith in accordance with the directions of the Trustees or of any Trustee
or (iii) in connection with the performance of its duties under Section 2.2(j)
hereof, for good faith reliance upon information furnished by third parties
selected by the Administra tor with due care. The Administrator shall under no
circumstances be liable for any punitive, exemplary, indirect or consequential
damages. The Administrator may consult with counsel and the written advice of
such counsel shall be full and complete authorization and protection in respect
of any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon. The Administrator may perform its duties and exercise its
rights hereunder either directly or by or through agents or attorneys appointed
with due care by it but shall be liable for the acts and omissions of such
persons to the same extent as if the functions had been performed by the
Administrator itself (except to the extent that the Trustees shall have directed
the Administrator to retain such persons, in which event the Administrator shall
not be liable for such persons' acts or omissions). Without limiting the
generality of the preceding sentence, the Administrator (i) may select and
employ independent accoun tants acceptable to the Trustees (other than the
independent accountants referred to in clause (iii) of Section 2.2 of this
Agreement and Section 8.5 of the Trust Agreement) to keep the financial books
and records of the Trust, to prepare the financial state ments of the Trust and
to prepare Trust tax returns, and (ii) may select and engage attorneys
acceptable to the Trustees to prepare annual, semi-annual and periodical
reports, notices of meetings and proxy statements, annual reports to holders of
the Securities and other documents required under the Investment Company Act or
the Securities Exchange Act of 1934. The Administrator shall not be liable and
shall be fully protected in acting upon any writing or document reasonably
believed by it to be genuine and to have been given, signed or made by the
proper person or persons and shall not be held to have any notice of any change
of authority of any person until receipt of written notice thereof from a
Trustee.
2.4 POWER OF ATTORNEY. The Trust hereby appoints the
Administrator, acting through any duly appointed officer, the attorney-in-fact
and agent of the Trust for the purpose of performing the duties prescribed in
Sections 2.2(e)(ii) and 2.2(h).
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2.5 DELIVERY OF CERTAIN DOCUMENTS. The Trust will deliver to the
Administrator, promptly following the execution hereof: (a) a complete conformed
copy of the registration statement of the Trust under the Securities Act and the
Investment Company Act, including all amendments, exhibits and schedules
thereto; and (b) the EDGAR access codes (Central index Key, CIK Confirmation
Code, Password and Password Modification Access Code) employed to file such
registration statement.
ARTICLE III
COMPENSATION OF ADMINISTRATOR
3.1 COMPENSATION. For services to be rendered by the
Administrator pursuant to this Agreement, as custodian under the Custodian
Agreement, dated as of , 1998, between the Administrator, as custodian, and the
Trust, as paying agent under the Paying Agent Agreement, dated as of , 1998,
between the Administrator, as paying agent, and the Trust, and as collateral
agent under the Collateral Agreement, dated as of , 1998, among the Adminis
trator, as collateral agent, the Seller and the Trust, and for the payment of
Trust expenses pursuant to Section 2.2(d) hereof, the Administrator shall
receive only such fees and expense as shall be paid to it pursuant to the Fund
Expense Agreement and shall have no recourse to the assets of the Trust for the
payment of any such amounts.
3.2 ADDITIONAL SERVICES. If and to the extent that the Trustees
shall request the Administrator to render services for the Trust, other than
those to be rendered by the Administrator hereunder, and if the Administrator
agrees to render such services, such additional services shall be compensated
separately on terms to be agreed upon between the Administrator and the Trustees
from time to time.
5
<PAGE>
ARTICLE IV
TERMINATION
4.1 TERMINATION.
(a) This Agreement shall terminate immediately upon written
notice of termination from the Trust to the Administrator if any of the
following events shall occur:
(i) If the Administrator shall violate any provision of
this Agreement, the Trust Agreement, or the Investment Company Act, and after
notice of such violation, shall not cure such default within 30 days; or
(ii) If the Administrator shall be adjudged bankrupt or
insolvent by a court, agency or other entity of competent jurisdiction, or an
order shall be made by a court, agency or other entity of competent jurisdiction
for the appointment of a receiver, liquidator, trustee or a person of similar
function of the Administrator, or of all or substantially all of its property by
reason of the foregoing, or approving any petition filed against the
Administrator for its reorganization, rehabilitation, liquidation or similar
relief and such adjudication or order shall remain in force or unstayed for a
period of 30 days; or
(iii) If the Administrator shall institute proceedings for
voluntary bankruptcy, or shall file a petition seeking reorganization under the
Federal bankruptcy laws, or for relief under any law for the relief of debtors,
or commence or become subjected to similar proceedings applicable to banks, or
shall consent to the appointment of a receiver of the Administrator or of all or
substantially all of its property, or shall make a general assignment for the
benefit of its creditors, or shall admit in writing its inability to pay its
debts generally as they become due; or
(iv) Upon the voluntary or involuntary dissolution or
liquidation of the Administrator, or unless the Trust shall have given its prior
written consent thereto, the merger or consolidation of the Administrator with
any other entity.
If any of the events specified in clauses (ii), (iii) or (iv) of
this Section 4.1(a) shall occur, the Administrator shall give immediate written
notice thereof to the Trust.
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(b) Notwithstanding anything to the contrary contained herein,
this Agreement shall terminate immediately (i) upon termination of the Trust
Agreement, (ii) upon termination of the Paying Agent Agreement, (iii) upon
termination of the Collateral Agreement, (iv) upon termination of the Custodian
Agreement or (v) upon the resignation or removal of the Custodian.
(c) The Trust may remove the Administrator, or the Administrator
may resign, and thereby terminate this Agreement without penalty upon 60 days'
prior written notice to the other party hereto; provided that neither party
hereto may terminate this Agreement pursuant to this Section 4.1(c) unless a
successor Admin istrator shall have been appointed and shall have accepted the
duties of the Administrator. If, within 30 days after notice by the
Administrator to the Trust of termination of this Agreement, no successor
Administrator shall have been selected and accepted the duties of the
Administrator, the Administrator may apply to a court of competent jurisdiction
for the appointment of a successor Administrator.
4.2 EFFECT OF TERMINATION. The Administrator shall forthwith upon
termination of this Agreement deliver to the Trust any records or other property
of the Trust then in the possession or custody of the Administrator. The
Administration shall pay over to any successor administrator any remaining
portion of the one-time, up-front amount paid to the Administrator at the
closing of the offering of the TrENDS with respect to its ongoing fees and
anticipated expenses of the Trust. Any obligation to indemnify the Administrator
pursuant to Section 6.6 shall survive the termination of this Agreement.
ARTICLE V
RECORDS AND REPORTS
5.1 BOOKS AND RECORDS; INSPECTION AND COPYING. The Administrator
shall keep, or cause to be keep, appropriate, and reasonably detailed and
accurate, books and records of all its activities pursuant to this Agreement.
The Trustees and their representatives shall have the right to inspect such
books and records during the Administrator's normal business hours upon
reasonable request, and to make copies of the same at the expense of the Trust.
7
<PAGE>
5.2 ACCESS TO INFORMATION. The Administrator shall make available
to each of the Trustees all information it generates, receives or compiles with
respect to the Contract and the Treasury Securities, the moneys available to the
Trust, the financial condition of the Trust and all other relevant matters
concerning the Trust.
ARTICLE VI
MISCELLANEOUS
6.1 BINDING EFFECT. Any corporation into which the Administrator
may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Administrator shall be a party, shall be the successor Administrator hereunder
and under the Trust Agreement without the execution or filing of any paper,
instrument or further act to be done on the part of the parties hereto, provided
that such corporation meets the requirements set forth in the Trust Agreement
and provided further that the Trustees have given their prior written consent to
the Administrator with respect to any such merger, conversion or consolidation.
This Agreement shall be binding on and inure to the benefit of the parties
hereto and their respective successors and per mitted assigns.
6.2 ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties with respect to the matters contained herein and
supersedes all prior agreements or understandings, whether oral or written. This
Agreement shall not be amended, changed, modified, or discharged, in whole or in
part, except by an instrument in writing signed by both parties hereto, or their
respective successors or permitted assigns.
6.3 NOTICES. Any notice, report or other communication required
or permitted to be given hereunder shall be in writing, and shall, unless some
other method of giving such notice, report or other communication is accepted by
the party to whom it is to be given or is required by the Trust Agreement or the
Invest ment Company Act, be given by being mailed by U.S. first class mail,
certified or registered, return receipt requested, postage prepaid, to the
following addresses of the parties hereto:
The Trust: Peak TrENDS Trust
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c/o Donald J. Puglisi, Managing
Trustee
850 Library Avenue
Newark, Delaware 19715
Telephone: (302) 738-6680
Telecopier: (302) 738-7210
The Administrator: The Bank of New York
101 Barclay Street
New York, New York 10286
Attn: Joseph Ernst
Telephone: (212) 815-5732
Telecopier: (212) 815-5999
Any party may at any time give written notice to the other party
that it wishes to change its address for the purposes of this Section 6.3.
6.4 APPLICABLE LAW. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect except to the extent such law is preempted by federal
law without giving effect to the principles of conflicts of law.
6.5 NON-ASSIGNABILITY. This Agreement and the rights and
obligations of the parties hereunder may not be assigned or delegated by either
party without the prior written consent of the other party.
6.6 INDEMNIFICATION. The Trust shall indemnify and hold the
Administrator harmless from and against any loss, damages, cost or expense
(includ ing the reasonable costs of investigation, preparation for and defense
of legal and/or administrative proceedings related to a claim against it and
reasonable attorneys' fees and disbursements), liability or claim incurred by
reason of any inaccuracy in informa tion furnished to the Administrator by the
Trustees, or any act or omission in the course of, connected with or arising out
of any services to be rendered hereunder, provided that the Administrator shall
not be indemnified and held harmless from and against any such loss, damages,
cost, expense, liability or claim incurred by reason of its willful misfeasance,
bad faith, or gross negligence in the performance of its duties, or its reckless
disregard of its duties and obligations hereunder.
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6.7 PROVISIONS OF LAW TO CONTROL. This Agreement shall be subject
to the applicable provisions of the Investment Company Act and the rules and
regulations of the Commission thereunder. To the extent that any provisions
herein contained conflict with any applicable provisions of the Investment
Company Act or of such rules and regulations, the latter shall control.
6.8 COUNTERPARTS. This Agreement may be signed in counterparts
with all counterparts constituting one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF the parties have hereunto executed this
Administration Agreement as of the day and year first above written.
PEAK TrENDS TRUST
------------------------------
as Trustee
------------------------------
as Trustee
------------------------------
as Trustee
THE BANK OF NEW YORK
By
----------------------------
Name:
Title:
11
<PAGE>
ADMINISTRATION AGREEMENT
SCHEDULE A
Accountants Expenses $
Miscellaneous Ongoing
Expenses $
Miscellaneous BONY
Expenses $
Fidelity Bond Coverage $
Legal Expenses $
Trustees' Fees $
BONY Fees $
<PAGE>
EXHIBIT (2)(k)(ii)
PAYING AGENT AGREEMENT
This PAYING AGENT AGREEMENT dated as of this ___ th day of May,
1998, by and between The Bank of New York, a New York banking corporation (the
"Paying Agent"), and Peak TrENDS Trust (the "Trust"), a business trust organized
under the laws of the State of Delaware under and by virtue of a Declaration of
Trust, dated as of ________, 1998, as amended and restated as of ________, 1998
(the "Trust Agreement").
W I T N E S S E T H
WHEREAS, the Trust is a non-diversified, closed-end management
investment company, as defined in the Investment Company Act of 1940, as amended
(the "Investment Company Act"), formed to purchase and hold certain U.S.
treasury securities (the "Treasury Securities"), to enter into and hold a
forward contract with an existing shareholder of Peak International Limited (the
"Contract") and to issue Trust Enhanced Dividend Securities (the "TrENDS") to
the public in accordance with the terms and conditions of the Trust Agreement;
WHEREAS, the Trust desires to engage the services of the Paying
Agent to assume certain responsibilities and to perform certain duties as the
transfer agent, registrar and paying agent with respect to the TrENDS upon the
terms and conditions of this Agreement; and
WHEREAS, the Paying Agent is qualified and willing to assume such
responsibilities and to perform such duties, subject to the supervision of the
trustees of the Trust (the "Trustees"), on the terms and conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. Capitalized terms not otherwise defined herein
shall have the respective meanings specified in the Trust Agreement.
ARTICLE II
PAYING AGENT
2.1 APPOINTMENT OF PAYING AGENT AND ACCEPTANCE. The Trust
Agreement provides that The Bank of New York shall act as the initial Paying
Agent. The Bank of New York accepts such appointment and agrees to act in
accordance with its standard procedures and the provisions of the Trust
Agreement and the provisions set forth in this Article II as Paying Agent with
respect to the TrENDS. Without limiting the generality of the foregoing, The
Bank of New York, as Paying Agent, agrees that it shall establish and maintain
the Trust Account, subject to the provisions of Section 2.3 hereof.
2.2 CERTIFICATES AND NOTICES. The Trustees shall deliver to the
Paying Agent the certificates and notices required to be delivered to the Paying
Agent pursuant to the Trust Agreement, and the Paying Agent shall mail or
publish such certificates or notices as required by the Trust Agreement, but the
Paying Agent shall have no responsibility to confirm or verify the accuracy of
certificates or notices of the Trustees so delivered.
2.3 PAYMENTS AND INVESTMENTS. The Paying Agent shall make
payments out of the Trust Account as provided for in Section 3.2 of the Trust
Agreement. The Paying Agent, on behalf of the Trust, shall effect the
transactions set forth in Sections 2.3, 2.4, 2.5, 3.5 and 8.3 of the Trust
Agreement upon instructions to do so from the Administrator (except that with
respect to its obligations under Section 8.3 of the Trust Agreement, the Paying
Agent shall act without instructions from the Administrator) and shall invest
moneys on deposit in the Trust Account in Temporary Investments in accordance
with Section 3.5 of the Trust Agreement. Except as otherwise specifically
provided herein or in the Trust Agree ment, the Paying Agent shall not have the
power to sell, transfer or otherwise dispose of any Temporary Investment prior
to the maturity thereof, or to acquire additional
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Temporary Investments. The Paying Agent shall hold any Temporary Investment to
its maturity and shall apply the proceeds thereof paid upon maturity to the
payment of the next succeeding Quarterly Distribution. All such Temporary
Investments shall be selected by the Trustees from time to time or pursuant to
standing instructions from the Trustees, and the Paying Agent shall have no
liability to the Trust or any Holder or any other Person with respect to any
such Temporary Investment.
2.4 INSTRUCTIONS FROM ADMINISTRATOR. The Paying Agent shall
receive and execute all instructions from the Administrator, except to the
extent they conflict with or are contrary to the terms of the Trust Agreement or
this Agreement.
ARTICLE III
TRANSFER AGENT AND REGISTRAR
3.1 ORIGINAL ISSUE OF CERTIFICATES. On the date TrENDS sold
pursuant to the Underwriting Agreement are originally issued, certificates for
the TrENDS shall be issued by the Trust, and, at the request of the Trustees,
registered in such names and such denominations as the underwriters shall have
previously requested of the Trustees, executed manually or in facsimile by the
Managing Trustee and countersigned by the Paying Agent. At no time shall the
aggregate number of TrENDS represented by such countersigned certificates exceed
the number of then outstanding TrENDS, except as permitted by Section 3.4.
3.2 REGISTRY OF HOLDERS. The Paying Agent shall maintain
a registry of the Holders of the TrENDS.
3.3 REGISTRATION OF TRANSFER OF THE TrENDS. The TrENDS shall be
registered for transfer or exchange, and new certificates shall be issued, in
the name of the designated transferee or transferees, upon surrender of the old
certificates in form deemed by the Paying Agent properly endorsed for transfer
with (a) all necessary endorsers' signatures guaranteed in such manner and form
as the Paying Agent may require by a guarantor reasonably believed by the Paying
Agent to be responsible, (b) such assurances as the Paying Agent shall deem
necessary or appropriate to evidence the genuineness and effectiveness of each
necessary endorsement and (c) satisfactory evidence of compliance with all
applicable laws relating to the collection of taxes or funds necessary for the
payment of such taxes.
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3.4 LOST CERTIFICATES. If there shall be delivered to the Paying
Agent (i) evidence to its satisfaction of the destruction, loss or theft of any
certificate for TrENDS and (ii) such security or indemnity as may be required by
it to hold it and any of its agents harmless, then, in the absence of notice to
the Paying Agent that such certificate has been acquired by a bona fide
purchaser, the Managing Trustee shall execute and upon its request the Paying
Agent shall countersign and deliver, in lieu of any such destroyed, lost or
stolen certificate, a new certificate of like tenor bearing a number not
contemporaneously outstanding. Any request by the Managing Trustee to the Paying
Agent to issue a replacement or new certificate pursuant to this Section 3.4
shall be deemed to be a representation and warranty by the Trustees to the
Paying Agent that such issuance will comply with provisions of law, the Trust
Agreement and the resolutions adopted by the Trustees with respect to lost
securities. If, after the delivery of such new certificate, a bona fide
purchaser of the original certificate in lieu of which such new certificate was
issued presents for payment such original certificate, the Trustees and the
Paying Agent shall be entitled to recover such new certificate from the person
to whom it was delivered or any transferee thereof, except a bona fide
purchaser, and shall be entitled to recover upon the security or indemnity
provided therefor to the extent of any loss, damage, cost or expense incurred by
the Trustees or the Paying Agent in connection therewith. Upon the issuance of
any new certificate under this Section 3.4, the Trustees and the Paying Agent
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Paying Agent) connected
therewith.
3.5 TRANSFER BOOKS. The Paying Agent shall maintain the transfer
books listing the Holders of the TrENDS. In case of any written request or
demand for the inspection of the transfer books of the Trust or any other books
in the possession of the Paying Agent, the Paying Agent will notify the Trustees
and secure instructions as to permitting or refusing such inspection. The Paying
Agent reserves the right, however, to exhibit the transfer books or other books
to any person in case it is advised by its counsel that its failure to do so
would be unlawful.
3.6 DISPOSITION OF CANCELLED CERTIFICATES; RECORDS. The Paying
Agent shall retain certificates which have been cancelled in transfer or in
exchange and accompanying documentation in accordance with applicable rules and
regulations of the Commission for six calendar years from the date of such
cancellation, and shall make such records available during this period at any
time, or from time to time, for reasonable periodic, special, or other
examinations by representatives of the Commission and the Board of Governors of
the
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Federal Reserve System. Thereafter such records shall not be destroyed by the
Paying Agent but will be safely stored for possible future reference. In case of
any request or demand for the inspection of the register of the Trust or any
other books in the possession of the Paying Agent, the Paying Agent will notify
the Trustees and seek to secure instructions as to permitting or refusing such
inspection. The Paying Agent reserves the right, however, to exhibit the
register or other records to any person in case it is advised by its counsel
that its failure to do so would (i) be unlawful, or (ii) expose it to liability,
unless the Trustees shall have offered indemnification satisfactory to the
Paying Agent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE TRUST
The Trust represents and warrants to the Paying Agent that:
(a) the Trust is a validly existing trust under the laws of the
State of Delaware and has full power under the Trust Agreement to execute and
deliver this Agreement and to authorize, create and issue the TrENDS;
(b) this Agreement has been duly and validly authorized, executed
and delivered by the Trust and constitutes the valid and binding agreement of
the Trust, enforceable against the Trust in accordance with its terms, subject
as to such enforceability to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors' rights and to
general equitable principles;
(c) the form of the certificate evidencing the TrENDS complies
with all applicable laws of the State of Delaware;
(d) the TrENDS have been duly and validly authorized, executed
and delivered by the Trust and are validly issued;
(e) the offer and sale of the TrENDS has been registered under
the Securities Act of 1933, as amended and the Trust has been registered under
the Investment Company Act and no further action by or before any governmental
body or authority of the United States or of any state thereof is required in
connection with the execution and delivery of this Agreement or the issuance of
the TrENDS;
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(f) the execution and delivery of this Agreement and the issuance
and delivery of the TrENDS do not and will not conflict with, violate, or result
in a breach of, the terms, conditions or provisions of, or constitute a default
under, the Trust Agreement, any law or regulation, any order or decree of any
court or public authority having jurisdiction over the Trust, or any mortgage,
indenture, contract, agreement or undertaking to which the Trust is a party or
by which it is bound; and
(g) no taxes are payable upon or in respect of the execution of
this Agreement or the issuance of the TrENDS.
ARTICLE V
DUTIES AND RIGHTS
5.1 DUTIES. (a) The Paying Agent is acting solely as agent for
the Trust hereunder and owes no fiduciary duties to any other Person by reason
of this Agreement.
(b) In the absence of bad faith, gross negligence or willful
misfeasance on its part in the performance of its duties hereunder or its
reckless disregard of its duties and obligations hereunder, the Paying Agent
shall not be liable for any action taken, suffered, or omitted in the
performance of its duties under this Agreement or in accordance with any
direction or request of the Managing Trustee not inconsistent with the
provisions of this Agreement. The Paying Agent shall under no circumstances be
liable for any punitive, exemplary, indirect or consequential damages
hereunder.
5.2 RIGHTS. (a) The Paying Agent may rely and shall be protected
in acting or refraining from acting upon any communication authorized hereby and
upon any written instruction, notice, request, direction, consent, report,
certificate, share certificate or other instrument, paper or document reasonably
believed by it to be genuine. The Paying Agent shall not be liable for acting
upon any telephone communication authorized hereby which the Paying Agent
believes in good faith to have been given by the Trustees.
(b) The Paying Agent may consult with legal counsel and the
advice of such counsel shall be full and complete authorization and protection
in
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respect of any action taken, suffered or omitted by it hereunder in good faith
and in reliance thereon.
(c) The Paying Agent shall not be required to advance, expend or
risk its own funds or otherwise incur or become exposed to financial liability
in the performance of its duties hereunder.
(d) The Paying Agent may perform its duties and exercise its
rights hereunder either directly or by or through agents or attorneys appointed
with due care by it hereunder.
5.3 DISCLAIMER. The Paying Agent makes no representation as to
(a) the first two recitals of this Agreement or (b) the validity or adequacy of
the TrENDS.
5.4 COMPENSATION, EXPENSES AND INDEMNIFICATION. (a) The Paying
Agent shall receive for all services rendered by it under this Agreement and,
upon the prior written approval of the Trust, for all expenses, disbursements
and advances incurred or made by the Paying Agent in accordance with any
provision of this Agreement (including the reasonable compensation and the
expenses and disbursements of its agents and counsel), the compensation set
forth in Section 3.1 of the Administration Agreement.
(b) The Trust shall indemnify the Paying Agent for and hold it
harmless against any loss, liability, claim or expense (including the reasonable
costs of investigation, preparation for and defense of legal and/or
administrative proceedings relating to a claim against it and reasonable
attorneys' fees and disbursements) arising out of or in connection with the
performance of its obligations under this Agreement, provided such loss,
liability or expense is not the result of gross negli gence, willful misfeasance
or bad faith on its part in the performance of its duties hereunder or its
reckless disregard of its duties or obligations hereunder, including the
reasonable costs and expenses of defending itself against any claim or liability
in connection with its exercise or performance of any of its duties or
obligations hereunder and thereunder. The indemnification provided by this
Section 5.4(b) shall survive the termination of this Agreement.
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ARTICLE VI
MISCELLANEOUS
6.1 TERM OF AGREEMENT. (a) The term of this Agreement is
unlimited unless terminated as provided in this Section 6.1 or unless the Trust
is terminated, in which case this Agreement shall terminate ten days after the
date of termination of the Trust. This Agreement may be terminated by either
party hereto without penalty upon 60 days' prior written notice to the other
party hereto; provided that neither party hereto may terminate this Agreement
pursuant to this Section 6.1(a) unless a successor Paying Agent shall have been
appointed and shall have accepted the duties of the Paying Agent. The
termination of the Trust Agreement, the Collateral Agreement, the Administration
Agreement or the Custodian Agreement or the resignation or removal of the
Custodian shall cause the termination of this Agreement simultaneously
therewith. If, within 30 days after notice by the Paying Agent of termination of
this Agreement, no successor Paying Agent shall have been selected and accepted
the duties of the Paying Agent, the Paying Agent may apply to a court of
competent jurisdiction for the appointment of a successor Paying Agent.
(b) Except as otherwise provided in this paragraph (b), the
respective rights and duties of the Trust and the Paying Agent under this
Agreement shall cease upon termination of this Agreement. The Trust's
representations, warranties, covenants and obligations to the Paying Agent under
Article IV and Section 5.4 hereof shall survive the termination hereof. Upon
termination of this Agreement, the Paying Agent shall, at the Trust's request,
promptly deliver to the Trust or to any successor Paying Agent as requested by
the Trust (i) copies of all books and records maintained by it and (ii) any
funds deposited with the Paying Agent by the Trust.
6.2 COMMUNICATIONS. Except for communications authorized to be
made by telephone pursuant to this Agreement, all notices, requests and other
communications to any party hereunder shall be in writing (including telecopy or
similar writing) and given to such person at its address or telecopy number set
forth below:
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If to the Trust,
addressed: Peak TrENDS Trust
c/o Donald J. Puglisi, Managing
Trustee
850 Library Avenue
Newark, Delaware 19715
Telephone: (302) 738-6680
Telecopier: (302) 738-7210
with a copy to the Administrator if the duties of the Administrator are being
performed by a Person other than the Person performing the obligations of the
Paying Agent.
If to the Paying Agent,
addressed: The Bank of New York
101 Barclay Street
New York, New York 10286
Attn: Joseph Ernst
Telephone: (212) 815-5732
Telecopier: (212) 815-5999
or such other address or telecopy number as such party may hereafter specify for
such purpose by notice to the other party. Each such notice, request or
communication shall be effective when delivered at the address specified
herein. Communications shall be given on behalf of the Trust by the Trustees
(or by the Administrator, provided that the Trustees shall not have delivered to
the Paying Agent an instrument in writing revoking the authorization of the
Administrator to act for it pursuant hereto) and on behalf of the Paying Agent
by a Senior Vice President or Vice President of the Paying Agent assigned to its
Corporate Trust Department.
6.3 ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties relating to the subject matter hereof, and there
are no other representations, endorsements, promises, agreements or
understandings, oral, written or inferred, between the parties relating to the
subject matter hereof.
6.4 NO THIRD PARTY BENEFICIARIES. Nothing herein, express or
implied, shall give to any Person, other than the Trust, the Paying Agent
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and their respective successors and assigns, any benefit of any legal or
equitable right, remedy or claim hereunder.
6.5 AMENDMENT; WAIVER. (a) This Agreement shall not be deemed or
construed to be modified, amended, rescinded, cancelled or waived, in whole or
in part, except by a written instrument signed by a duly authorized
representative of the party to be charged. The Trust shall notify the Paying
Agent of any change in the Trust Agreement prior to the effective date of any
such change.
(b) Failure of either party hereto to exercise any right or
remedy hereunder in the event of a breach hereof by the other party shall not
constitute a waiver of any such right or remedy with respect to any subsequent
breach.
6.6 SUCCESSORS AND ASSIGNS. Any corporation into which the Paying
Agent may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Paying Agent shall be a party, shall be the successor Paying Agent hereunder and
under the Trust Agreement without the execution or filing of any paper,
instrument or further act to be done on the part of the parties hereto, provided
that such corporation meets the requirements set forth in the Trust Agreement,
provided further that the Trustees have given their prior written consent to the
Paying Agent with respect to any such merger, conversion or consolidation. This
Agreement shall be binding upon, inure to the benefit of, and be enforceable by,
the respective successors of each of the Trust and the Paying Agent. This
Agreement shall not be assignable by either the Trust or the Paying Agent,
without the prior written consent of the other party.
6.7 SEVERABILITY. If any clause, provision or section hereof
shall be ruled invalid or unenforceable by any court of competent jurisdiction,
the invalidity or unenforceability of such clause, provision or section shall
not affect any of the remaining clauses, provisions or sections hereof.
6.8 EXECUTION IN COUNTERPARTS. This Agreement may be executed in
several counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
6.9 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to principles of conflicts of law.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered as of the date first above written.
PEAK TrENDS TRUST
-----------------------------,
as Trustee
-----------------------------,
as Trustee
-----------------------------,
as Trustee
THE BANK OF NEW YORK
By:
--------------------------
Name:
Title:
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EXHIBIT 2(k)(iv)
COLLATERAL AGREEMENT
Among
Luckygold 18A Limited, As Pledgor,
The Bank of New York, As Collateral Agent
and
Peak TrENDS Trust
Dated as of
, 1998
<PAGE>
The following Table of Contents has been inserted for
convenience of reference only and does not constitute a part of the Collateral
Agreement.
TABLE OF CONTENTS
SECTION PAGE
1. The Security Interests...................................................1
2. Definitions..............................................................2
3. Representations and Warranties of the Pledgor............................7
4. Representations and Warranties of the
Collateral Agent.........................................................8
5. Certain Covenants of the Pledgor.........................................8
6. Administration of the Collateral and Valuation
of the Securities.......................................................10
7. Income and Voting Rights on Collateral..................................17
8. Remedies upon Events of Default.........................................18
9. The Collateral Agent....................................................21
10. Miscellaneous...........................................................25
11. Termination of Collateral Agreement.....................................26
12. No Personal Liability of Trustees.......................................26
Exhibit A - Certificate for Substituted Collateral
Exhibit B - Certificate for Additional Collateral
ii
<PAGE>
COLLATERAL AGREEMENT
THIS COLLATERAL AGREEMENT (the "Agreement"), dated as of [May] ,
1998, among Luckygold 18A Limited, a company incorporated in the British Virgin
Islands ("Pledgor"), The Bank of New York, a New York banking corporation, as
collateral agent and securities intermediary (the "Collateral Agent") hereunder
for the benefit of Peak TrENDS Trust, a trust duly created under the laws of the
State of Delaware (such trust and the trustees thereof acting in their capacity
as such being referred to herein as the "Trust" or "Purchaser"), and the Trust;
W I T N E S S E T H :
WHEREAS, pursuant to the Purchase Agreement, dated as of [May] ,
1998, between the Pledgor and Purchaser (the "Purchase Agreement"), the Pledgor
has agreed to sell and Purchaser has agreed to purchase ordinary issued shares,
$.01 par value per share ("Common Stock"), of Peak International Limited, a
Bermuda holding company (the "Company"), subject to the terms and conditions of
the Purchase Agreement; and
NOW, THEREFORE, to secure the observance and performance of the
performance by the Pledgor of its obligations under the Purchase Agreement and
to secure the observance and performance of the covenants and agreements
contained herein and in the Purchase Agreement, the parties hereto agree as
follows:
1. THE SECURITY INTERESTS.
In order to secure the observance and Performance of all of the
Pledgor's obligations herein and in the Purchase Agreement:
(a) The Pledgor hereby grants, sells, conveys, assigns, transfers
and pledges unto the Trust, a security interest in and to, and a lien upon and
right of set-off against, all of its right, title and interest in and to (i)
Eligible Collateral having a Pledge Value equal to or greater than the Pledge
Value Requirement; (ii) account number ____________ in the name of the Trust, as
secured party [under the Agreement dated [May _____, 1998] maintained at The
Bank of New York, and any successor account
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(the "Collateral Account"); (iii) all Eligible Collateral, securities,
financial assets, investment property, instruments, cash and any other property
held in or credited to the Collateral Account, and all security entitlements
with respect to any and all of the foregoing; (iv) any certificates or other
evidence of ownership representing the foregoing; (v) all additions to and
substitutions for any of the foregoing; (vi) proceeds and products of any of the
foregoing including, without limitation, all income, distributions, collections,
investment property, financial assets, security entitlements and any other
property received or to be received, or derived or to be derived, distributed or
distributable, now or any time hereafter from or in connection with any of the
foregoing, whether held in or credited to the Collateral Account or otherwise;
and (vii) all powers and rights now owned or hereafter acquired under or with
respect to any of the foregoing (collectively, the "Collateral").
The Trust shall have all of the rights, remedies and
recourses with respect to the Collateral afforded a secured party by the UCC and
all rights now or hereafter existing under all other applicable laws, in
addition to, and not in limitation of, the other rights, remedies and recourses
afforded to the Trust by this Agreement.
(b) On the Payment Date, the Pledgor shall deliver or transfer to
the Trust in pledge hereunder, for credit to the Collateral Account or as
otherwise agreed by the parties, Eligible Collateral having a Pledge Value equal
to or greater than the Pledge Value Requirement on such date.
(c) Effective upon and subject to the receipt by the Pledgor of
the Additional Purchase Price, on the Option Closing Date, the Pledgor shall
deliver to the Trust and pledge hereunder additional Eligible Collateral such
that the Pledge Value of all Collateral pledged hereunder is equal to or greater
than the Pledge Value Requirement on such date.
2. DEFINITIONS.
Capitalized terms used and not otherwise defined herein shall
have the meanings ascribed to them in
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the Purchase Agreement. Capitalized terms used herein shall have the meanings as
follows:
"Authorized Representative" of the Pledgor means any officer of
the Pledgor as to whom the Pledgor shall have delivered notice to the Collateral
Agent that such officer or other representative is authorized to act hereunder
on behalf of the Pledgor.
"Bankruptcy Code" shall mean Title 11 of the United States Code,
as amended.
"Business Day" means any day except a Saturday, Sunday or other
day on which banking institutions in New York City are authorized or obligated
by law or regula tion to close or a day on which the New York Stock Ex change,
the American Stock Exchange or the Nasdaq National Market is closed.
"Cash Delivery Obligations" means, at any time (A) if no
Adjustment Event shall have occurred prior to such time, zero, and (B) from and
after any Adjustment Event, the Transaction Value of any property other than
Marketable Securities received by the Pledgor in such Adjustment Event in
respect of the maximum number of Contract Shares at the time of such Adjustment
Event.
"Collateral" has the meaning specified in Section 1(a).
"Collateral Agent" means the financial institution identified as
such in the preliminary paragraph hereof, or any successor appointed in
accordance with Section 9.
"Collateral Agreement" means this Collateral Agreement and any
exhibits hereto.
"Collateral Event of Default" has the meaning specified in
Section 6(e).
"Collateral Requirement" means, as of any date and with respect
to: (i) any Common Stock, 100%; (ii) any Marketable Securities, 100%; (iii) any
U.S. Government Securities pledged in respect of Cash Delivery Obligations,
105%; and (iv) any other U.S. Government Securities, 150%, provided that upon
and after any failure to
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cure an Insufficiency Determination by 4:00 p.m. New York City time on the tenth
Business Day following telephonic notice of such Insufficiency Determination as
described in Section 6(e), which insufficiency shall be continuing on such tenth
business day, the Collateral Requirement relating to any U.S. Government
Securities (other than in respect of Cash Delivery Obligations) shall be 200%.
The portion of any pledged U.S. Government Securities that shall be deemed at
any time to be in respect of Cash Delivery Obligations shall be as provided in
Section 6(e).
"Eligible Collateral" means (i) Common Stock, (ii) U.S.
Government Securities, and (iii) from and after any Adjustment Event, Marketable
Securities, provided, in each case, that the Pledgor has good and marketable
title thereto, free of all Liens (other than the Liens created by this
Collateral Agreement) and Transfer Restrictions and that the Trust has a valid,
first priority perfected security interest therein and first lien thereon, and
provided further that to the extent the number of Mar ketable Securities pledged
hereunder exceeds at any time the Maximum Deliverable Number thereof, such
excess shares shall not be Eligible Collateral.
"Event of Default" means the occurrence of: (i) an event
described in clause (a) or (b) of Article VII of the Purchase Agreement, (ii) a
Collateral Event of Default, (iii) a failure by Pledgor to have caused the
Collateral to meet the requirements described in Section 5(d) on the Exchange
Date, or (iv) if an Adjustment Event shall have occurred prior to the Exchange
Date, failure by Pledgor to cause to be delivered to Purchaser on the Exchange
Date the consideration then required to be delivered pursuant to Section 6.2 of
the Purchase Agreement.
"Ineligible Collateral" means Collateral that does not constitute
"Eligible Collateral".
"Insufficiency Determination" has the meaning specified in
Section 6(e)(1).
"Lien" means any lien, mortgage, security interest, pledge,
charge or encumbrance of any kind.
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"Market Value" means, as of any date: (a) with respect to any
Common Stock (except as otherwise provided in Section 6(e)(2)), the Closing
Price of the Common Stock on such date; (b) with respect to any U.S. Government
Security, the product of (x)(i) the average unit bid price for such security as
published on the Trading Day prior to such date in the New York edition of The
Wall Street Journal or The New York Times or, if not so published, (ii) the
lower bid price quoted (which quotation shall be evidenced in writing) on the
Trading Day prior to such date by either of two nationally recognized dealers
making a market in such security which are members of the National Association
of Securities Dealers, Inc. and (y) the number of such units comprised in the
outstanding principal amount of such security; and (c) with respect to any
Marketable Securities, the Closing Price thereof on the Trading Day prior to
such date; provided that the "Market Value" of any Ineligible Collateral shall
be zero.
"Maximum Deliverable Number" means, on any date, with respect to
the Common Stock, the product of the Firm Share Base Amount plus the Additional
Share Base Amount (if any), multiplied successively by each number by which the
Exchange Rate shall have been multiplied on or prior to such date pursuant to
the adjustments provided for under Section 6.1 of the Purchase Agreement. The
Maximum Deliverable Number of Marketable Securities means, on any date, the
product of (i) the Firm Share Base Amount plus the Additional Share Base Amount
(if any) and (ii) the number of Marketable Securities received by the Pledgor
in the Adjustment Event for each share of Common Stock, multiplied successively
by each number by which the Exchange Rate shall have been multiplied on or
prior to such date and after the date of such Adjustment Event pursuant to the
adjustments provided for under Article VI of the Purchase Agreement.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Pledge Value" means, as of any date and with respect to any
particular type of Collateral, an amount equal to the aggregate Market Value of
such Collateral
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divided by the Collateral Requirement for such Collateral.
"Pledge Value Requirement" means, as of any date, (a) the
aggregate Market Value on such date of the Maximum Deliverable Number of shares
of Common Stock on such date or, from and after an Adjustment Event, Marketable
Securities, plus (b) from and after an Adjustment Event, the Cash Delivery
Obligations.
"Pledged Items" means, as of any date, any and all securities and
instruments delivered by the Pledgor to be held by the Collateral Agent under
this Collateral Agreement as Collateral, whether Eligible Collateral or
Ineligible Collateral.
"Prior Collateral" has the meaning specified in Section 6(b)(1).
"Responsible Officer" means, when used with respect to the
Collateral Agent, any vice president, assistant vice president, assistant
treasurer or assistant secretary located in the division or department of the
Collateral Agent responsible for performing the obligations of the Collateral
Agent under this Collateral Agreement, or in any other division or department of
the Collateral Agent performing operations substantially equivalent to those
performed by such division or department pursuant hereto, or any other officer
of the Collateral Agent or any successor Collateral Agent customarily
performing functions similar to those performed by any of the aforesaid
officers, and also means, with respect to any matter relating to this Collateral
Agreement or the Collateral, any other officer to whom such matter is referred
because of his or her knowledge of and familiarity with the particular subject.
"Transfer Restriction" means, with respect to any item of
Collateral, any condition to or restriction on the ability of the holder thereof
to sell, assign or otherwise transfer such item of Collateral or to enforce the
provisions thereof or of any document related thereto whether set forth in such
item of Collateral itself or in any document related thereto, including, without
limitation, (i) any requirement that any sale, assignment or other transfer or
enforcement of such item of Collateral be consented to or approved by any
Person, including,
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without limitation, the issuer thereof or any other obligor thereon, (ii) any
limitations on the type or status, financial or otherwise, of any purchaser,
pledgee, assignee or transferee of such item of Collateral, (iii) any
requirement of the delivery of any certificate, consent, agreement, opinion of
counsel, notice or any other document of any Person to the issuer of, any other
obligor on or any registrar or transfer agent for, such item of Collateral,
prior to the sale, pledge, assignment or other transfer or enforcement of such
item of Collateral and (iv) any registration or qualification requirement for
such item of Collateral pursuant to any federal or state securities law;
provided that (x) the required delivery of any assignment from the seller,
pledgor, assignor or transferor of such item of Collateral, together with any
evidence of the corporate or other authority of such Person, or (y) any
registration or qualification requirement for such item of Collateral pursuant
to any Federal or state securities law which is generally applicable to all
holders of such item of Collateral shall not constitute a "Transfer
Restriction."
"Trustee" or "Trustees" means any trustee or trustees of the
Trust identified on the signature pages hereto, or any successor as such trustee
or trustees.
"UCC" means the Uniform Commercial Code as in effect in the State
of New York at the applicable date.
"U.S. Government Securities" means direct obligations of the
United States of America that mature on a date that is one year or less from the
date such obliga tions are pledged hereunder, but in any event prior to the
Exchange Date.
3. REPRESENTATIONS AND WARRANTIES OF
THE PLEDGOR.
The Pledgor hereby represents and warrants to the Collateral
Agent and the Trust that:
(a) No Transfer Restrictions. No Transfer Restrictions exist with
respect to or otherwise apply to the assignment of, or transfer by the Pledgor
of possession of, any items of Collateral to the Trust hereunder, or the
subsequent sale or transfer of such items of Collateral by the Trust pursuant to
the terms hereof.
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(b) Title to Collateral; Perfected Security Interest. The Pledgor
has good and marketable title to the Pledged Items, free of all Liens (other
than the Lien created by this Collateral Agreement) and Transfer Restrictions.
Upon delivery of the Collateral to the Trust hereunder, the Trust will obtain a
valid, first priority perfected security interest in, and a first lien upon,
such Collateral subject to no other Lien; none of such Collateral is or shall be
pledged by the Pledgor as collateral for any other purpose.
4. REPRESENTATIONS AND WARRANTIES OF THE
COLLATERAL AGENT.
The Collateral Agent represents and warrants to the Pledgor and
the Trust that:
(a) Corporate Existence and Power. The Collateral Agent is a
trust company, duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, and has all corporate powers
and all material governmental licenses, authorizations, consents and approvals
required to enter into, and perform its obligations under, this Collateral
Agreement.
(b) Authorization and Non-Contravention. The execution,
delivery and performance by the Collateral Agent of this Collateral Agreement
have been duly authorized by all necessary corporate action on the part of the
Collateral Agent (no action by the shareholders of the Collateral Agent being
required) and do not and will not violate, contravene or constitute a default
under any provision of applicable law or regulation or of the charter or by-laws
of the Collateral Agent or of any material agreement, judgment, injunction,
order, decree or other instrument binding upon the Collateral Agent.
(c) Binding Effect. This Collateral Agreement constitutes a
legal, valid and binding agreement of the Collateral Agent enforceable against
the Collateral Agent in accordance with its terms.
5. CERTAIN COVENANTS OF THE PLEDGOR.
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The Pledgor agrees that, so long as any of its obligations under
the Purchase Agreement remain outstanding:
(a) Title to Collateral. The Pledgor shall at all times hereafter
have good and marketable title to the Collateral pledged by him, free of all
Liens (other than the Liens created by this Collateral Agreement) and Transfer
Restrictions, and, subject to the terms of this Collateral Agreement, will at
all times hereafter have good, right and lawful authority to assign, transfer
and pledge such Collateral and all such additions thereto and substitutions
therefor under this Collateral Agreement.
(b) Pledge Value Requirement. The Pledgor shall cause the
aggregate Pledge Value of the Collateral to be equal to or greater than the
Pledge Value Requirement at all times, and shall pledge additional Collateral
in the manner described in Section 6(d) as necessary to cause such requirement
to be met.
(c) Pledge upon Adjustment Event. Upon the occurrence of an
Adjustment Event, the Pledgor shall immediately cause to be delivered to the
Trust, in the manner provided in Section 6(d): (i) U.S. Government Securities
having an aggregate Market Value at least equal to 105% of the Cash Delivery
Obligations; and (ii) Marketable Securities in an amount at least equal to the
Maximum Deliverable Number thereof, or, at Pledgor's election, U.S. Government
Securities having an aggregate Market Value at least equal to 150% of such
Maximum Deliverable Number of Marketable Securities; in each case to be held as
substitute Collateral hereunder.
(d) Pledge of Purchase Agreement Consideration. Notwithstanding
the Pledgor's right to substitute Collateral pursuant to Section 6(b), the
Pledgor shall cause the Collateral to include, on the Exchange Date, unless an
Adjustment Event shall have occurred or unless the Pledgor shall have elected
the Cash Settlement Alternative, a number of shares of Common Stock at least
equal to the number of shares of Common Stock required to be delivered under the
Purchase Agreement on the Exchange Date. If the Pledgor shall have elected the
Cash Settlement Alternative, the Pledgor shall cause the Collateral to include,
on the Exchange Date, cash in an amount at least equal to 105% of the
Then-Reference Market Price of the Contract Shares.
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(e) Further Assurances. The Pledgor shall, at its expense and in
such manner and form as the Trust or the Collateral Agent may require, give,
execute, deliver, file and record any financing statement, notice, instrument,
document, agreement or other papers or take any other action that may be
necessary or desirable in order (i) to create, preserve, perfect, substantiate
or validate any security interest granted pursuant hereto, (ii) to enable the
Collateral Agent to credit any and all Collateral to the Collateral Account or
(iii) to enable the Trust, directly or through the Collateral Agent, to exercise
and enforce its rights hereunder with respect to such security interest. To the
extent permitted by applicable law, the Pledgor hereby authorizes the Trust or
the Collateral Agent to execute and file, in the name of the Pledgor or
otherwise, Uniform Commercial Code financing or continuation statements or
similar documents (which may be carbon, photographic, photostatic or other
reproductions of this Agreement or of a financing statement relating to this
Agreement) which the Trust or the Collateral Agent, each in its sole discretion
may deem necessary or appropriate to further perfect, or maintain the perfection
of the security interests granted hereby.
(f) Notice of Event of Default. The Pledgor shall give the Trust
and the Collateral Agent the notice of Event of Default immediately upon the
occurrence of such Event of Default, by telecopier and by overnight, next
business day delivery service.
6. ADMINISTRATION OF THE COLLATERAL AND
VALUATION OF THE SECURITIES.
(a) Valuation of Collateral. The Collateral Agent shall determine
on each Business Day whether the Pledge Value is at least equal to the Pledge
Value Requirement and whether an Insufficiency Determination or Collateral
Event of Default shall have occurred and, from and after any substitution of
U.S. Government Securities for pledged Common Stock or Marketable Securities
pursuant to paragraph (b) of this Section 6, shall determine the Pledge Value
on each Business Day and shall provide written notice of the Pledge Value to the
Pledgor.
(b) Substitution of Collateral. The Pledgor may substitute
Collateral in accordance with the following provisions:
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(1) Unless an Event of Default or a failure by the
Pledgor to meet any of its obligations under Section 5(b), (c) or (d)
hereof has occurred and is continuing, the Pledgor shall have the right
at any time and from time to time to deposit Eligible Collateral with
the Collateral Agent in substitution for Pledged Items previously
deposited here under ("Prior Collateral") and to obtain the release from
the Lien hereof of such Prior Collateral.
(2) If the Pledgor wishes to deposit Eligible Collateral
with the Collateral Agent for the benefit of the Trust in substitution
for Prior Collateral, it shall (i) give written notice to the Collateral
Agent identifying the Prior Collateral to be released from the Lien
hereof, (ii) deliver to the Collateral Agent concurrently with such
Eligible Collateral a certificate of an Authorized Officer of the
Pledgor substantially in the form of Exhibit A and dated the date of
such delivery, (A) identifying the items of Eligible Collateral being
substituted for the Prior Collateral and the Prior Collateral that is to
be transferred to the Pledgor and (B) certifying that the
representations and warranties contained in such Exhibit A are true and
correct on and as of the date thereof and (iii) deliver to the
Collateral Agent concurrently with such Eligible Collateral an opinion
(dated the date of such delivery) of counsel (who may be an employee of
the Pledgor) addressed to the Trust confirming the representations
contained in the second sentence of paragraph 3(b) of Exhibit A. The
Pledgor hereby covenants and agrees to take all actions required under
Section 6(d) and any other actions necessary to create for the benefit
of the Trust a valid, first priority perfected security interest in, and
a first lien upon, such Eligible Collateral deposited with the
Collateral Agent in substitution for Prior Collateral.
(3) No such substitution shall be made unless and until
the Collateral Agent shall have determined without undue or unreasonable
delay that the aggregate Pledge Value of all of the Collateral at the
time of such proposed substitution, after giving effect to the proposed
substitution, shall at least equal the Pledge Value Requirement.
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(c) Additional Collateral. The Pledgor may pledge additional
Collateral hereunder at any time. Concurrently with the delivery of any
additional Eligible Collateral, the Pledgor shall deliver (i) a certificate of
an Authorized Officer of the Pledgor substantially in the form of Exhibit B and
dated the date of such delivery, (A) identifying the additional items of
Eligible Collateral being pledged and (B) certifying that with respect to such
items of additional Eligible Collateral the representations and warranties
contained in such Exhibit B are true and correct on and as of the date thereof
and (ii) an opinion (dated the date of such delivery) of counsel (who may be an
employee of the Pledgor) addressed to the Trust confirming the representations
contained in the second sentence of paragraph 2(b) of Exhibit B. The Pledgor
hereby covenants and agrees to take all actions required under Section 6(d) and
any other actions necessary to create for the benefit of the Trust a valid,
first priority perfected security interest in, and a first lien upon, such
additional Eligible Collateral.
(d) Delivery of Collateral. The Pledgor shall deliver any and all
Collateral to the Trust by causing any and all such Collateral to be credited to
the Collateral Account.
Upon delivery of any Pledged Item under this Collateral
Agreement, the Collateral Agent shall examine such Pledged Item and any opinions
and certificates delivered pursuant to Sections 6(b) or (c) or otherwise
pursuant to the terms hereof in connection therewith to determine that they
comply as to form with the requirements for Eligible Collateral.
(e) Insufficiency Determination.
(1) If on any Business Day the Collateral Agent determines
that the aggregate Pledge Value of the Collateral is less than the
Pledge Value Requirement (any such determination, an "Insufficiency
Determination"), the Collateral Agent shall promptly notify the Pledgor
of such determination by telephone call to an Authorized Representative
of the Pledgor followed by a written confirmation of such call.
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(2) If, by 4:00 p.m., New York City time on the tenth
Business Day following the day on which telephonic notice shall have
been given pursuant to the preceding paragraph (e)(1), the Pledgor shall
have failed to deliver, in the manner set forth in paragraphs (c) and
(d) of this Section 6, sufficient additional Eligible Collateral so
that, after giving effect to such delivery, the aggregate Pledge Value
of the Collateral, as of such tenth Business Day, is at least equal to
the Pledge Value Requirement, then (x) the Collateral Requirement with
respect to any U.S. Government Securities pledged hereunder (other than
in respect of Cash Delivery Obligations) shall be increased from 150% to
200%, and (y) unless a Collateral Event of Default shall have occurred
and be continuing, the Collateral Agent for the benefit of the Trust
shall:
(i) commence sales, in the manner described in paragraph (3)
below, of such portion of the Collateral consisting of U.S. Government
Securities as may be required to be sold in order to generate proceeds suffi-
cient to purchase Common Stock or, after an Adjustment Event, Marketable
Securities, as described in the following clause (ii); and (ii) commence
purchases using the proceeds of such sales, in the manner described in para-
graph (3) below, of Common Stock or, after an Adjustment Event, Marketable
Securities, in an amount sufficient to cause the aggregate Pledge Value of the
Collateral to be at least equal to the Pledge Value Requirement.
Notwithstanding the foregoing, the Collateral Agent for the
benefit of the Trust shall discontinue sales and purchases pursuant to the
preceding clauses (i) and (ii), respectively, if at any time a Collateral Event
of Default shall have occurred and be continuing. The Collateral Agent shall
determine the Market Value and the Pledge Value of the Collateral after each
purchase of Common Stock or Marketable Securities pursuant to the preceding
clause (ii) in order to determine whether the Pledge Value Requirement is met
and whether a Collateral Event of Default has occurred. Solely for purposes of
such calculation, the Market Value of the Common Stock or Marketable Securities
shall be: (A) the most recent sales price as reported in the composite
transactions for the principal securities exchange on which the Common Stock or
Marketable Securities, as the case may be, are then
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listed or, if such securities are not so listed, the last quoted ask price for
such securities in the over-the-counter market as reported by The Nasdaq Na-
tional Market or, if not so reported, by the National Quotation Bureau or a
similar organization; or (B) if higher, in the case of Common Stock, the most
recent available Closing Price.
A "Collateral Event of Default" shall mean, at any time, the
occurrence of any of the following: (A) failure of the aggregate Market Value of
the Collateral to equal or exceed the Pledge Value Requirement; (B) failure of
the Market Value of any U.S. Government Securities pledged at such time (not
including any U.S. Government Securities pledged in respect of Cash Delivery
Obligations at such time) to have an aggregate Market Value of at least 105% of
the Market Value of a number of shares of Common Stock (or, from and after any
Adjustment Event, Marketable Securities) equal to (x) the Maximum Deliverable
Number thereof minus (y) the number thereof pledged as Collateral hereunder at
such time; or (C) from and after any Adjustment Event, failure of the U.S. Gov-
ernment Securities pledged in respect of Cash Delivery Obligations to have an
aggregate Market Value at least equal to 105% of the Cash Delivery Obligations
at such time, if, in the case of a failure described in this clause (C), such
failure shall continue to be in effect at 4:00 p.m., New York City time, on the
tenth Business Day following the day on which telephonic notice in respect
thereof shall have been given pursuant to paragraph (e)(1) above. For purposes
of this Agreement, the portion of any pledged U.S. Government Securities that
shall be deemed to be in respect of Cash Delivery Obligations at any time shall
be a portion having a Market Value equal to 105% of the Cash Delivery
Obligations at such time (or, if less, the aggregate Market Value of all U.S.
Government Securities pledged at such time).
(3) Collateral sold and Common Stock or Marketable
Securities purchased by the Collateral Agent for the benefit of the
Trust pursuant to the preceding paragraphs (e)(2)(i) and (ii) may be
sold and purchased on any securities exchange or in any over-the-counter
market or in any private purchase transaction, and at such price or
prices (after having used its best endeavors to sell or purchase at a
price or prices of at least Market Value), in
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each case as the Collateral Agent may deem satis factory. The Pledgor
covenants and agrees that it will execute and deliver such documents and
take such other action as the Collateral Agent reasonably deems
necessary or advisable in order that any such sales and purchases may be
made in compliance with law.
(f) Release of Excess Collateral. If on any Business Day the
Collateral Agent determines that the aggregate Pledge Value of the Pledgor's
Eligible Collateral exceeds the Pledge Value Requirement and no Event of
Default or failure by the Pledgor to meet any of its obligations under Sections
5 or 6 hereof has occurred and is continuing, the Pledgor may obtain the release
from the Lien hereof of any Collateral having an aggregate Pledge Value on such
Business Day less than or equal to such excess Pledge Value, upon delivery to
the Collateral Agent of a written notice from an Authorized Representative of
the Pledgor indicating the items of Collateral to be released. Such Collateral
shall be released only after the Collateral Agent shall have determined without
undue and unreasonable delay that the aggregate Pledge Value of all of the
Collateral remaining after such release as determined on such Business Day is at
least equal to the Pledge Value Requirement.
(g) Delivery of Purchase Agreement Consideration. On the
Exchange Date, unless an Adjustment Event shall have occurred prior thereto or
the Pledgor shall have elected the Cash Settlement Alternative, the Collateral
Agent shall deliver to the Trust, pursuant to the instructions of the Trust,
Common Stock then held by it hereunder representing the number of shares of
Common Stock then required to be delivered under the Purchase Agreement. If an
Adjustment Event shall have occurred prior to the Exchange Date, then, if so
instructed by the Pledgor by the close of business on the Business Day preceding
the Exchange Date, the Collateral Agent shall deliver to the Trust, pursuant to
the instructions of the Trust, to the extent permitted to be delivered in lieu
of cash required to be delivered on such date under Section 6.2 of the Purchase
Agreement, the Marketable Securities then held by the Collateral Agent for the
benefit of the Trust, including such securities held in the Collateral Account
hereunder. Upon such delivery, the Trust shall hold such Common Stock or
Marketable Securities, as the
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case may be, absolutely and free from any claim or right whatsoever. If the
Pledgor shall have elected the Cash Settlement Alternative and shall have
delivered Collateral to the Trust as required by Section 6(d), the Collateral
Agent shall deliver to the Trust the amount of cash required to satisfy the
Pledgor's obligations under the Cash Settlement Alternative.
(h) Investment of Cash Collateral. The Collateral Agent for the
benefit of the Trust shall invest any cash received by it pursuant to Section
6.2 of the Purchase Agreement in U.S. Treasury Securities maturing on or
before , 2001.
7. INCOME AND VOTING RIGHTS ON COLLATERAL.
(a) Unless an Event of Default or failure by the Pledgor to meet
any of its obligations under Section 5(b) or (c) has occurred and is continuing,
the Pledgor shall be entitled to receive for its own account all dividends,
interest and, if any, principal and premium relating to all of the Collateral,
unless the payment thereof to the Pledgor would reduce the aggregate Pledge
Value of the Collateral below the Pledge Value Requirement. The Collateral
Agent agrees to remit to the Pledgor on the Business Day received or the first
Business Day thereafter all such payments received by it. If an Event of Default
or failure by the Pledgor to meet any of its obligations under Section 5(b) or
(c) has occurred and is continuing, all such payments made or accrued after and
during the continuance of such default or failure shall be retained by the
Trust, directly or indirectly through the Collateral Agent, and any such
payments which are received by the Pledgor shall be received in trust for the
benefit of the Trust, shall be segregated from other funds of the Pledgor and
shall forthwith be paid over to the Trust, directly or indirectly through the
Collateral Agent. Any such payments so retained by, or paid over to, the
Collateral Agent shall be held by the Collateral Agent as Collateral hereunder.
(b) Unless an Event of Default has occurred and is continuing,
the Pledgor shall have the right, from time to time, to vote and to give
consents, ratifications and waivers with respect to the Collateral, and the
Collateral Agent shall, forthwith upon receiving a written request from the
Pledgor, deliver to the Pledgor or
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as specified in such request such proxies, powers of attorney, consents,
ratifications and waivers in respect of any of the Collateral which is
registered in the name of the Trust, the Collateral Agent or its nominee as
shall be specified in such request and be in form and substance satisfactory to
the Collateral Agent.
If an Event of Default shall have occurred and be continuing, the
Trust shall have the right to the extent permitted by law, and the Pledgor shall
take all such action as may be necessary or appropriate to give effect to such
right, to vote and to give consents, ratifications and waivers, and take any
other action with respect to any or all of the Collateral with the same force
and effect as if the Trust were the absolute and sole owner thereof.
8. REMEDIES UPON EVENTS OF DEFAULT.
(a) If any Event of Default shall have occurred and be
continuing, the Trust may exercise, through the Collateral Agent or otherwise,
all the rights of a secured party under the Uniform Commercial Code (whether or
not in effect in the jurisdiction where such rights are exercised) and all
rights now or hereafter existing under all other applicable laws and, in
addition, without being required to give any notice, except as herein provided
or as may be required by mandatory provisions of law, shall: (i) deliver all
Collateral consisting of Common Stock or Marketable Securities (but not, in
either case, in excess of the number of shares thereof deliverable under the
Purchase Agreement at such time) to the Trust on the date of the Acceleration
Amount Notice relating to such Event of Default (or, in the case of an Event of
Default described in clause (iii) or (iv) of the definition thereof, on the
Exchange Date) (in either case, the "Delivery Date"), whereupon the Trust shall
hold such Common Stock or Marketable Securities absolutely free from any claim
or right of whatsoever kind, including any equity or right of redemption of the
Pledgor which may be waived, and the Pledgor, to the extent permitted by law,
hereby specifically waives all rights of redemption, stay or appraisal which it
has or may have under any law now existing or hereafter adopted; and (ii) if
such delivery shall be insufficient to satisfy in full all of the obligations of
Pledgor under the Purchase Agreement, sell all of the remaining Collateral, or
such
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lesser portion thereof as may be necessary to generate proceeds sufficient to
satisfy in full all of the obligations of Pledgor under the Purchase Agreement,
at public or private sale or at any broker's board or on any securities
exchange, for cash, upon credit or for future delivery, and at such price or
prices as the Trust acting through the Collateral Agent or otherwise may deem
satisfactory. The Pledgor covenants and agrees that it will execute and deliver
such documents and take such other action as the Collateral Agent deems
necessary or advisable in order that any such sale may be made in compliance
with law. Upon any such sale the Trust acting through the Collateral Agent or
otherwise shall have the right to deliver, assign and transfer to the purchaser
thereof the Collateral so sold. Each purchaser at any such sale shall hold the
Collateral so sold absolutely and free from any claim or right of whatsoever
kind, including any equity or right of redemption of the Pledgor which may be
waived, and the Pledgor, to the extent permitted by law, hereby specifically
waives all rights of redemption, stay or appraisal which it has or may have
under any law now existing or hereafter adopted. The notice (if any) of such
sale required by Article 9 of the UCC shall (1) in case of a public sale, state
the time and place fixed for such sale, (2) in case of sale at a broker's board
or on a securities exchange, state the board or exchange at which such sale is
to be made and the day on which the Collateral, or the portion thereof so being
sold, will first be offered for sale at such board or exchange, and (3) in the
case of a private sale, state the day after which such sale may be consummated.
Any such public sale shall be held at such time or times within ordinary
business hours and at such place or places as the Trust acting through the
Collateral Agent or otherwise may fix in the notice of such sale. At any such
sale the Collateral may be sold in one lot as an entirety or in separate
parcels, as the Collateral Agent may determine. The Trust acting through the
Collateral Agent or otherwise shall not be obligated to make any such sale
pursuant to any such notice. The Trust acting through the Collateral Agent or
otherwise may, without notice or publication, adjourn any public or private sale
or cause the same to be adjourned from time to time by announcement at the time
and place fixed for the sale, and such sale may be made at any time or place to
which the same may be so adjourned. If any notice of a proposed sale or other
disposition of Collateral shall
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be required by law, such notice shall be deemed reasonable and proper if given
at least [10] days before such sale or other disposition. In case of any sale of
all or any part of the Collateral on credit or for future delivery, the
Collateral so sold may be retained by the Trust acting through the Collateral
Agent or otherwise until the selling price is paid by the purchaser thereof, but
the Collateral Agent shall not incur any liability in case of the failure of
such purchaser to take up and pay for the Collateral so sold and, in case of any
such failure, such Collateral may again be sold upon like notice. The Trust
acting through the Collateral Agent or otherwise, instead of exercising the
power of sale herein conferred upon it, may proceed by a suit or suits at law or
in equity to foreclose the security interests and sell the Collateral, or any
portion thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
(b) Power of Attorney. Upon any delivery or sale of all or any
part of any Collateral made either under the power of delivery or sale given
hereunder or under judgment or decree in any judicial proceedings for
foreclosure or otherwise for the enforcement of this Collateral Agreement, the
Trust and the Collateral Agent are each hereby irrevocably appointed the true
and lawful attorney of the Pledgor, in the name and stead of the Pledgor, to
make all necessary deeds, bills of sale and instruments of assignment, transfer
or conveyance of the property thus delivered or sold. For that purpose the Trust
or the Collateral Agent may execute all such documents and instruments. This
power of attorney shall be deemed coupled with an interest, and the Pledgor
hereby ratifies and confirms all that its attorneys acting under such power, or
such attorneys' successors or agents, shall lawfully do by virtue of this
Collateral Agreement. If so requested by the Collateral Agent, by the Trustees
or by any purchaser of the Collateral or a portion thereof, the Pledgor shall
further ratify and confirm any such delivery or sale by executing and delivering
to the Collateral Agent, to the Trustees or to such purchaser or purchasers at
the expense of the Pledgor all proper deeds, bills of sale, instruments of
assignment, conveyance of transfer and releases as may be designated in any
such request.
(c) Application of Collateral and Proceeds. In the case of an
Event of Default, the Trust, directly
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or through the Collateral Agent may proceed to realize upon the security
interest in the Collateral against any one or more of the types of Collateral,
at any one time, as the Collateral Agent shall determine in its sole discretion
subject to the foregoing provisions of this Section 8. The proceeds of any sale
of, or other realization upon, or other receipt from, any of the remaining
Collateral shall be applied by the Trust acting through the Collateral Agent or
otherwise in the following order of priorities:
first, to the payment to the Trust of an amount equal to:
(A) the aggregate Market Value of a number of shares of Common Stock
equal to (1) the number of shares of Common Stock required to be
delivered under the Purchase Agreement on the Delivery Date minus (2)
the number of shares of Common Stock delivered by the Collateral Agent
to the Trust on the Delivery Date as described above; or (B) from and
after an Adjustment Event, the sum of (1) the Cash Delivery Obligations
on the Delivery Date and (2) the aggregate Market Value on the Delivery
Date of a number of Marketable Securities equal to (x) the number
thereof permitted to be delivered on the Delivery Date under Section
6(b) of the Purchase Agreement minus (y) the number thereof delivered by
the Collateral Agent to the Trust on the Delivery Date as described
above;
second, to the payment to the Collateral Agent of the
expenses of such sale or other realization, including reasonable
compensation to the Collateral Agent and its agents and legal counsel,
and all expenses, liabilities and advances incurred or made by the
Collateral Agent in connection therewith, including brokerage fees in
connection with the sale by the Collateral Agent of any Pledged Item;
and
finally, if all of the obligations of the Pledgor
hereunder and under the Purchase Agreement have been fully discharged or
sufficient funds have been set aside by the Collateral Agent at the
request of the Pledgor for the discharge thereof, any remaining proceeds
shall be released to the Pledgor without undue delay.
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(d) If the Event of Default shall result from the Pledgor
becoming a debtor under the Bankruptcy Code or a debtor or insolvent under
bankruptcy or insolvency laws in effect in the British Virgin Islands as of the
date of any such Event of Default, and if the Collateral Agent shall fail
promptly to exercise the rights and remedies granted by this Section 8, the
Trust shall use its best efforts to obtain an opinion of a nationally recognized
United States law firm and a British Virgin Islands law firm, each reasonably
acceptable to the Collateral Agent, to the effect that as a result of the
Pledgor's being a debtor or similar status in such bankruptcy case, the
Collateral Agent will not be prohibited from exercising the rights and remedies
granted by this Section 8, and shall deliver such opinions to the Collateral
Agent within __ days after the occurrence of such an Event of Default. If the
Trust shall be unable to obtain such opinions, or the Collateral Agent shall
continue, after delivery of such opinions, to refuse to exercise the rights and
remedies granted by this Section 8, then the Trust may, to the extent its legal
counsel finds such course of action proper, well founded and advisable, commence
the appropriate action or proceeding seeking an order directing or authorizing
the Collateral Agent to exercise the rights and remedies granted by this
Section 8.
9. THE COLLATERAL AGENT.
The Collateral Agent accepts its duties and responsibilities
hereunder as agent for the Trust, on and subject to the following terms and
conditions:
(a) Performance of Duties. The Collateral Agent undertakes to
perform such duties and only such duties as are expressly set forth herein and,
beyond the exercise of reasonable care in the performance of such duties, no
implied covenants or obligations shall be read into this Collateral Agreement
against the Collateral Agent. No provision hereof shall be construed to relieve
the Collateral Agent from liability for its own grossly negligent action,
grossly negligent failure to act or its own wilful misconduct, subject to the
following:
(1) The Collateral Agent may consult with counsel, and the
advice or opinion of such counsel shall be full and complete
authorization and pro-
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tection in respect of an action taken or suffered hereunder in good
faith and in accordance with such advice or opinion of counsel.
(2) The Collateral Agent shall not be liable with respect
to any action taken, suffered or omitted by it in good faith (i)
reasonably believed by it to be authorized or within the discretion or
rights or powers conferred on it by this Collateral Agreement or (ii) in
accordance with any direction or request of the Trustees.
(3) The Collateral Agent shall not be liable for any error
of judgment made in good faith by any of its officers, unless the
Collateral Agent was grossly negligent in ascertaining the pertinent
facts.
(4) In the absence of bad faith on its part, the
Collateral Agent may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
any note, notice, resolution, consent, certificate, affidavit, letter,
telegram, teletype message, statement, order or other document
reasonably believed by it to be genuine and correct and to have been
signed or sent by the proper Person or Persons.
(5) No provision of this Collateral Agreement shall
require the Collateral Agent to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights or powers, if
it shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(6) The Collateral Agent may perform any duties hereunder
either directly or by or through agents or attorneys, provided that the
Collateral Agent shall remain liable to fulfill all of such duties to
the same extent, and with the same protections, as if the Collateral
Agent was performing them itself. In furtherance thereof, any subsidiary
owned or controlled by the Collateral Agent, or its successors, as agent
for the Collateral Agent, may
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perform any or all of the duties of the Collateral Agent relating to the
valuation of securities and other instruments constituting Collateral
hereunder.
(7) In no event shall the Collateral Agent be personally
liable for any taxes or other governmental charges imposed upon or in
respect of (i) the Collateral or (ii) the income or other distributions
thereon.
(8) Unless and until the Collateral Agent shall have
received notice from the Pledgor, or unless and until a Responsible
Officer of the Collateral Agent shall have actual knowledge to the
contrary, the Collateral Agent shall be entitled to deem and treat all
Collateral delivered to it hereunder as Eligible Collateral hereunder,
provided that the Collateral Agent has carried out the duties specified
in Section 6 with respect to such Collateral at the time of delivery
thereof.
The Collateral Agent shall not be responsible for the correctness of the
recitals and statements herein which are made by the Pledgor or for any
statement or certificate delivered by the Pledgor pursuant hereto. Except as
specifically provided herein, the Collateral Agent shall not be responsible for
the validity, sufficiency, collectibility or marketability of any Collateral
given to or held by it hereunder or for the validity or sufficiency of the
Purchase Agreement or the Lien on the Collateral purported to be created hereby.
(b) Knowledge. The Collateral Agent shall not be deemed to have
knowledge of any Event of Default (except a Collateral Event of Default), unless
and until a Responsible Officer of the Collateral Agent shall have actual
knowledge thereof or shall have received written notice thereof.
(c) Merger. Any corporation or association into which the
Collateral Agent may be converted or merged, or with which it may be
consolidated, or to which it may sell or transfer its agency business and assets
as a whole or substantially as a whole, or any corporation or association
resulting from any such conversion, sale, merger, consolidation or transfer to
which it is a party, shall, subject to the prior written consent of the Trust,
23
<PAGE>
be and become a successor Collateral Agent hereunder and vested with all of the
title to the Collateral and all of the powers, discretions, immunities,
privileges and other matters as was its predecessor without, except as provided
above, the execution or filing of any instrument or any further act, deed or
conveyance on the part of any of the parties hereto, anything herein to the
contrary notwithstanding.
(d) Resignation. The Collateral Agent and any successor
Collateral Agent may at any time resign by giving thirty days' written notice by
registered or certified mail to the Pledgor and notice to the Trust in
accordance with the provisions of Section 10(d) hereof. Such resignation shall
take effect upon the appointment of a successor Collateral Agent by the Trust.
(e) Removal. The Collateral Agent may be removed at any time by
an instrument or concurrent instruments in writing delivered to the Collateral
Agent and to the Pledgor and signed by the Trust.
(f) Appointment of Successor.
(1) If the Collateral Agent hereunder shall resign or be
removed, or be dissolved or shall be in the course of dissolution or
liquidation or otherwise become incapable of action hereunder, or if it
shall be taken under the control of any public officer or officers or of
a receiver appointed by a court, a successor may be appointed by the
Trust by an instrument or concurrent instruments in writing signed by
the Trust or by its attorneys in fact fully authorized. A copy of such
instrument or concurrent instruments shall be sent by registered mail to
the Pledgor without undue delay.
(2) Every such temporary or permanent successor Collateral
Agent appointed pursuant to the provisions hereof shall be a trust
company or bank in good standing, having a reported capital and surplus
of not less than $100,000,000 and capable of holding the Collateral in
the State of New York, if there be such an institution willing,
qualified and able to accept the duties of the Collateral Agent
hereunder upon customary terms.
24
<PAGE>
(g) Acceptance by Successor. Every temporary or permanent
successor Collateral Agent appointed hereunder shall execute, acknowledge and
deliver to its predecessor and also to the Pledgor and the Trust an instrument
in writing accepting such appointment hereunder, whereupon such successor,
without any further act, deed or conveyance, shall become fully vested with all
the estates, properties, rights, powers, duties and obligations of its
predecessors. Such predecessor shall, nevertheless, on the written request of
its successor or the Pledgor, execute and deliver an instrument transferring to
such successor all the estates, properties, rights and powers of such
predecessor hereunder. Every predecessor Collateral Agent shall deliver all
Collateral held by it as the Collateral Agent hereunder to its successor. Should
any instrument in writing from the Pledgor be reasonably required by a successor
Collateral Agent for more fully and certainly vesting in such successor the
estates, properties, rights, powers, duties and obligations hereby vested or
intended to be vested in the predecessor, any and all such instruments in
writing shall, at the request of the temporary or permanent successor Collateral
Agent, be executed, acknowledged and delivered by the Pledgor; provided that any
costs and expenses incurred by the Pledgor in doing so are reimbursed to the
Pledgor by such temporary or permanent successor Collateral Agent.
(h) Cost and Expenses. the Pledgor shall not be liable for any
costs or expenses arising under subclauses (c), (d), (e), (f) or (g) of this
Section 9.
10. MISCELLANEOUS.
(a) Benefit of Agreement; Successors and Assigns. Whenever any
of the parties hereto is referred to, such reference shall be deemed to include
the successors and assigns of such party. All the covenants and agreements
herein contained by or on behalf of the Pledgor and the Collateral Agent shall
bind, and inure to the benefit of, their respective successors and assigns
whether so expressed or not, and shall be enforceable by and inure to the
benefit of the Trust and its successors and assigns.
(b) Separability. To the extent permitted by law, the
unenforceability or invalidity of any provision
25
<PAGE>
or provisions of this Collateral Agreement shall not render any other provision
or provisions herein contained unenforceable or invalid.
(c) Amendments and Waivers. Any term, covenant, agreement or
condition of this Collateral Agreement may be amended or compliance therewith
may be waived (either generally or in a particular instance and either
retrospectively or prospectively) but only by a writing signed by the Collateral
Agent, the Pledgor and the Trust.
(d) Notices.
(1) Any notice provided for herein, unless otherwise
specified, shall be in writing (including transmittals by telex or
telecopier) and shall be given to a party at the address set forth
opposite such party's name on the signature pages hereto or at such
other address as may be designated by notice duly given in accordance
with this Section 10(d) to each other party hereto.
(2) Each such notice given pursuant to paragraph (1) shall
be effective (i) if sent by certified mail (return receipt requested),
72 hours after being deposited in the United States mail, postage
prepaid; (ii) if given by telex or telecopier, when such telex or
telecopied notice is transmitted, or (iii) if given by any other means,
when delivered at the address specified in this Section 10(d).
(e) Governing Law; Submission to Jurisdictions. This Collateral
Agreement shall be governed by and construed in accordance with the laws of the
State of New York, without giving effect to any principles of conflicts of laws;
provided that as to Pledged Items located in any jurisdiction other than the
State of New York, the Collateral Agent on behalf of the Trust shall have all of
the rights to which a secured party is entitled under the laws of such other
jurisdiction. Pledgor hereby submits to the non-exclusive jurisdiction of the
United States 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 transaction
26
<PAGE>
contemplated hereby. Pledgor 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.
(f) Counterparts. This Collateral Agreement may be executed,
acknowledged and delivered in any number of counterparts and such counterparts
taken together shall constitute one and the same instrument.
11. TERMINATION OF COLLATERAL AGREEMENT.
This Collateral Agreement and the rights hereby granted by the
Pledgor in the Collateral shall terminate upon fulfillment of all of the
obligations of the Pledgor under the Purchase Agreement and the Collateral Agent
under this Agreement. The Pledgor shall have no further liability hereunder upon
such termination. Any Collateral remaining at the time of such termination
shall be fully released and discharged from the Lien hereof and delivered to the
Pledgor by the Collateral Agent, all at the expense of the Pledgor.
12. NO PERSONAL LIABILITY OF TRUSTEES.
By executing this Collateral Agreement none of the Trustees
assumes any personal liability hereunder.
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<PAGE>
IN WITNESS WHEREOF, the Pledgor has caused this Collateral
Agreement to be duly executed on its behalf, and the Collateral Agent has caused
this Collateral Agreement to be duly executed on its behalf, as of the date
hereof.
PLEDGOR:
LUCKYGOLD 18A LIMITED
By_____________________________
Name:
Title:
Address for Notices:
[ ]
[ ]
[Telecopier: ]
Attention: General Counsel
COLLATERAL AGENT:
THE BANK OF NEW YORK,
as Collateral Agent
By_____________________________
Name:
Title:
Address for Notices:
The Bank of New York
101 Barclay Street
Floor 12 East
New York, NY 10286
[Telecopier: ]
Attention:
<PAGE>
THE TRUST:
PEAK TrENDS TRUST
-------------------------------
as Trustee
-------------------------------
as Trustee
-------------------------------
as Trustee
Address for Notices:
850 Library Avenue
Suite 204
Newark, Delaware 19715
Attention: Donald J. Puglisi
29
<PAGE>
Exhibit A
to
Collateral Agreement
CERTIFICATE FOR SUBSTITUTED COLLATERAL
The undersigned, Luckygold 18A Limited (the "Pledgor"), hereby
certifies, pursuant to Section 6(b) of the Collateral Agreement dated as of
[May] , 1998 among the Pledgor, The Bank of New York, as Collateral Agent, and
Peak TrENDS Trust (the "Collateral Agreement"; terms defined in the Collateral
Agreement being used herein as defined therein), that:
1. The Pledgor is delivering the following securities to the
Collateral Agent to be held by the Collateral Agent as substituted Collateral
(the "Substituted Collateral"):
2. The Pledgor requests that the Collateral Agent on behalf of
the Trust transfer to the Pledgor the following Prior Collateral, pursuant to
Section 6(b) of the Collateral Agreement:
3. The Pledgor hereby represents and warrants to the Collateral
Agent and the Trust that:
(a) Consents to Transfer. No Transfer Restrictions exist with
respect to or otherwise apply to the assignment of, or transfer by the Pledgor
of possession of, any items of Substituted Collateral to the Trust the
Collateral Agent under the Collateral Agreement, or the subsequent sale or
transfer of such items of Substituted Collateral by the Collateral Agent
pursuant to the terms of the Collateral Agreement.
(b) Title to Collateral; Perfected Security Interest. The Pledgor
has good and marketable title to the Substituted Collateral, free of all Liens
(other than the Lien created by the Collateral Agreement) and Transfer
Restrictions. Upon delivery of the Substituted Collateral to the Trust, the
Trust will obtain a valid, first priority perfected security interest in, and a
first lien upon, such Substituted Collateral subject to no other Lien. None of
such Substituted Collateral is or
30
<PAGE>
shall be pledged by the Pledgor as collateral for any other purpose.
This Certificate may be relied upon by the Trust as fully and to
the same extent as if this Certificate had been specifically addressed to the
Trust.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate this _____ day _______________.
-------------------------------
Name:
Title:
31
<PAGE>
Exhibit B
to
Collateral Agreement
CERTIFICATE FOR ADDITIONAL COLLATERAL
The undersigned, Luckygold 18A Limited (the "Pledgor"), hereby
certifies, pursuant to Section 6(c) of the Collateral Agreement, dated as of
[May] , 1998, among the Pledgor, The Bank of New York, as Collateral Agent and
Peak TrENDS Trust (the "Collateral Agreement"; terms defined in the Collateral
Agreement being used herein as defined therein), that:
1. The Pledgor is delivering the following securities to the
Collateral Agent to be held by the Collateral Agent as additional Collateral
(the "Additional Collateral"):
2. The Pledgor hereby represents and warrants to the Collateral
Agent that:
(a) Consents to Transfer. No Transfer Restrictions exist with
respect to or otherwise apply to the assignment of, or transfer by the Pledgor
of possession of, any items of Additional Collateral to the Trust under the
Collateral Agreement, or the subsequent sale or transfer of such items of
Additional Collateral by the Collateral Agent pursuant to the terms of the
Collateral Agreement.
(b) Title to Collateral; Perfected Security Interest. The Pledgor
has good and marketable title to the Additional Collateral, free of all Liens
(other than the Lien created by the Collateral Agreement) and Transfer
Restrictions. Upon delivery of the Additional Collateral to the Trust, the
Trust will obtain a valid, first priority perfected security interest in, and a
first lien upon, such Additional Collateral subject to no other Lien. None of
such Additional Collateral is or shall be pledged by the Pledgor as collateral
for any other purpose.
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<PAGE>
This Certificate may be relied upon by the Trust as fully and to
the same extent as if this Certificate had been specifically addressed to the
Trust.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate this ______________ day of _______________________.
__________________________________
Name:
Title:
33
<PAGE>
EXHIBIT 2.K.(v)
PERSONAL GUARANTY
THIS GUARANTY ("Guaranty") dated as of this _____th day of
__________, 1998, executed and delivered by T.L. Li, an individual residing in
the Hong Kong Special Administrative Region of the People's Republic of China
("Guarantor"), in favor of Peak TrENDS Trust, a business trust organized under
the laws of the State of Delaware (such trust and the trustees thereof acting in
their capacity as such being referred to herein as the "Trust"), in light of the
following:
All terms not otherwise defined herein shall have for the
purposes hereof the meanings set forth in the Purchase Agreement dated as of
__________, 1998, between the Trust and Luckygold 18A Limited, a company
incorporated in the British Virgin Islands (the "Seller") as amended,
supplemented or otherwise modified from time to time (the "Purchase
Agreement").
WHEREAS, the Trust and the Seller have entered into the Purchase
Agreement, with respect to a certain number of shares of common stock, $.01 par
value per share (the "Common Stock"), of Peak International Limited, a Bermuda
holding company (the "Company");
WHEREAS, the Trust, the Company, the Seller, Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ") and BancAmerica Robertson Stephens have
entered into the Underwriting Agreement dated as of [ ], relating to the
issuance and sale of the TrENDS;
WHEREAS, the Trust, Seller and The Bank of New York, a New York
banking corporation as collateral agent, have entered into a Collateral
Agreement (the "Collateral Agreement") dated as of _____________, 1998, to grant
to the Trust a security interest in a specified amount of U.S. Treasury
securities and/or shares of Common Stock and in certain other circumstances
certain other collateral to secure the obligations of the Seller thereunder;
WHEREAS, Guarantor is the legal and beneficial owner of all of
the issued and outstanding shares of common stock of the Seller; and
WHEREAS, in order to induce the Trust to enter into the Purchase
Agreement and the Collateral Agreement, and in consideration of the payments to
be made to Seller by the Trust pursuant to the Purchase Agreement, Guarantor has
<PAGE>
agreed to personally guaranty the performance of the Purchase Agreement and
Collateral Agreement by the Seller.
NOW, THEREFORE, in consideration of the foregoing, Guarantor
hereby agrees, in favor of the Trust, as follows:
1. GUARANTEED OBLIGATIONS. (a) Guarantor hereby irrevocably and
unconditionally guarantees, as of the date hereof and hereafter, to the Trust,
as and for (a) the representations and warranties and covenants made by Seller
as set forth in the Purchase Agreement, the Reimbursement Agreement and the
Collateral Agreement; and (b) the punctual and faithful performance, keeping,
observance, and fulfillment by Seller of all of the agreements, conditions,
covenants and obligations of Seller contained in the Purchase Agreement and the
Collateral Agreement, and any amendments thereto (the "Guaranteed Obligations")
in each case, for so long as any of the Guaranteed Obligations remain
outstanding or unfulfilled.
[(b) Guarantor agrees that its obligations hereunder are
irrevocable, continuing, absolute, independent and unconditional and shall not
be affected by any circumstance whatsoever (other than the indefeasible payment
in full and the complete performance of the Guaranteed Obligations) which may
constitute a defense or a legal or equitable discharge (whether in whole or in
part) of a guarantor or surety, whether foreseen or unforeseen and whether
similar or dissimilar to any circumstance described in this Guaranty.]
2. CONTINUING GUARANTY. (a) This Guaranty includes Guaranteed
Obligations arising under successive transactions continuing, compromising,
extending, increasing, modifying, releasing, or renewing the Guaranteed
Obligations changing the other terms and conditions thereof, or creating new or
additional Guaranteed Obligations after prior Guaranteed Obligations have been
satisfied in whole or in part. To the maximum extent permitted by law, Guarantor
hereby waives any right to revoke this Guaranty as to future representations and
warranties. If such a revocation is effective notwithstanding the foregoing
waiver, Guarantor acknowledges and agrees that (a) no such revocation shall be
effective until written notice thereof has been received by the Trust, (b) no
such revocation shall apply to any Guaranteed Obligations in existence on such
date (including any subsequent continuation, extension, or renewal thereof, or
change in the terms and conditions thereof) and (c) no such revocation shall
apply to any Guaranteed Obligations made or created after such date to the
extent made or created pursuant to a legally binding commitment of the Trust in
existence on the date of such revocation.
2
<PAGE>
(b) This Guaranty shall remain in full force and effect until all
of the Guaranteed Obligations have been completely performed, notwithstanding
that from time to time prior thereto Guarantor may be free from any of the
Guaranteed Obligations. Any payment by Guarantor of a portion, but not all, of
the Guaranteed Obligations shall in no way limit, affect, modify or abridge
Guarantor's liability for any portion of the Guaranteed Obligations that has not
been completely performed or indefeasibly paid in full.
3. ABSOLUTE AND UNCONDITIONAL GUARANTY. This Guaranty and the
obligations of Guarantor hereunder are not subject to any reduction, limitation,
impairment, discharge or termination for any reason (other than the complete
performance and the indefeasible payment in full of the Guaranteed Obligations),
including, without limitation, the occurrence of any one or more of the
following, whether or not the Guarantor shall have had notice or knowledge of
any of them:
(a) any change in the manner, place or terms of payment
(including the currency thereof) of any of the Guaranteed Obligations;
(b) any settlement, compromise, release or discharge of,
or acceptance or refusal of any offer of performance with respect to, or
substitutions for, the Guaranteed Obligations or any agreement relating thereto
or any subordination of the payment of the Guaranteed Obligations to the payment
of any other obligations;
(c) any rescission, waiver, extension, renewal,
alteration, amendment or modification of, or any consent to departure from, any
of the terms or provisions (including without limitation provisions relating to
Events of Default under the Purchase Agreement or the Collateral Agreement) of
the Guaranteed Obligations or any agreement relating thereto, or any other
guaranties or security for the Guaranteed Obligations, in each case whether or
not in accordance with the terms thereof;
(d) any request or acceptance of other guaranties of the
Guaranteed Obligations or the taking and holding of any security for the payment
of the Guaranteed Obligations, this Guaranty, or any other guaranty of the
Guaranteed Obligations or any release, impairment, surrender, exchange,
substitution, compromise, settlement, recision or subordination thereof;
3
<PAGE>
(e) any change in or reorganization of the corporate
structure of the Company or any of its subsidiaries or any dissolution,
termination, consolidation or merger or sale or other disposition, whether or
not for fair consideration, of all or substantially all of the assets of any of
the foregoing or to any restructuring of the Guaranteed Obligations; or
4. WAIVERS OF NOTICES AND DEFENSES. Guarantor hereby waives:
(a) any defense arising by reason of the incapacity, lack
of authority or any disability of the Guarantor;
(b) any notice of the creation, renewal, extension or
accrual of any of the Guaranteed Obligations and notice of or proof of reliance
by the Trust upon this Guaranty or acceptance of this Guaranty (the Guaranteed
Obligations and all dealings between the Company and Guarantor, on the one hand,
and the Trust, on the other hand, being conclusively deemed to have been
created, incurred or conducted in reliance upon this Guaranty);
(c) any setoff or counterclaim, any demand for
performance, notice of nonperformance, diligence, presentment, protest, notice
of protest, notice of dishonor, notice of defaults or Events of Default under
the Purchase Agreement or the Collateral Agreement, notice of any amendment,
renewal, extension or modification of the Guaranteed Obligations or any
agreement related thereto, notice that any portion of the Guaranteed Obligations
is due, notice of any collection proceedings, and notice of any other fact which
might increase the risk of Guarantor.
5. CERTAIN COVENANTS OF GUARANTOR. (a) Guarantor agrees that, so
long as any of obligations of Seller under the Purchase Agreement or the
Collateral Agreement remain outstanding:
(b) Except as specifically set forth below or elsewhere in the
Purchase Agreement or the Collateral Agreement, Guarantor shall not, directly or
indirectly, permit, give consent for, or vote for, whether as shareholder or a
member of the Board of Directors or an officer of the Seller or otherwise,
Seller to engage in any business activity or undertake any other activities,
except for (i) any activity permitted under its Memorandum and Articles of
Association and (ii) any activity relating to the exercise of its rights as
owner of shares of Common Stock of the Company or other property distributed
with respect to such shares of Common Stock
4
<PAGE>
of the Company and distributing the proceeds thereof to its shareholders as
permitted under the laws of the British Virgin Islands.
(b) Guarantor shall not, directly or indirectly, permit, give
consent for, or vote for, whether as shareholder or a member of the Board of
Directors or an officer of the Seller or otherwise, Seller to authorize or
effect any change in its Memorandum and Articles of Association or pass further
regulations or resolutions without the prior written consent of the trustees of
the Trust;
(c) Guarantor shall not, directly or indirectly, permit, give
consent for, or vote for, whether as shareholder or a member of the Board of
Directors or an officer of the Seller or otherwise, Seller to create, incur or
assume, 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, the Purchase Agreement and the
Collateral Agreement and the transactions contemplated hereby and thereby;
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, including
by means of any guarantee;
(d) Guarantor shall not, directly or indirectly, permit, give
consent for, or vote for, whether as shareholder or a member of the Board of
Directors or an officer of the Seller or otherwise, Seller to 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 as provided in the Collateral Agreement and the transaction
contemplated in the Secured Loan Agreement dated as of March 2, 1998, between
Guarantor and Donaldson, Lufkin & Jenrette Securities Corporation, as amended.
For purposes of this paragraph, "Lien" means any lien, mortgage, hypothecation,
pledge, security interest (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);
5
<PAGE>
(e) Guarantor shall not, directly or indirectly, permit, give
consent for, or vote for, whether as shareholder or a member of the Board of
Directors or an officer of the Seller or otherwise, Seller to make any loan to
any other person;
(f) Guarantor shall not, directly or indirectly, permit, give
consent for, or vote for, whether as shareholder or a member of the Board of
Directors or an officer of the Seller or otherwise, Seller, prior to the
Exchange Date, to consolidate or merge with or into any other person in a
transaction in which Seller is not the surviving entity, or convey, transfer or
lease all or substantially all its assets to any person, or agree to any of the
foregoing; and
(g) Without prior written consent of the Trustees, Guarantor
shall not, directly or indirectly, issue, cause to be issued, sell, or cause to
be sold, any equity interest in Seller to a third party except for the
transactions contemplated by the Purchase Agreement, the Collateral Agreement
and the Underwriting Agreement.
(h) Guarantor's execution and delivery of this Guaranty does not
and will not (i) violate or contravene any provisions of applicable law or
regulation, (ii) violate or contravene any provisions of any judgment,
injunction, order or decree of any court or public authority having jurisdiction
over Guarantor, (iii) violate or contravene any provision of any mortgage,
indenture, security agreement, contract, undertaking or other agreement or
instrument to which Guarantor is a party or by which Guarantor is bound.
(i) Guarantor shall not, directly or indirectly, buy shares of
Common Stock for its own account during the 60 days prior to the Exchange Date.
6. BANKRUPTCY EVENT OF DEFAULT. If an Event of Default shall have
occurred as a result of the Seller becoming a debtor under the United States
Bankruptcy Code, or subject to any other bankruptcy, insolvency, liquidation,
reorganization, receivership or similar proceedings, whether under United States
laws or otherwise ("Bankruptcy Proceedings"), the Guarantor agrees, consents and
acknowledges that the Trust shall be entitled to enforce this Guaranty
notwithstanding the pendency of Bankruptcy Proceedings respective the Seller,
whether or not (i) the exercise of the Trust's rights and remedies against the
Seller is stayed by operation of law, court order or otherwise, and (ii) the
resulting Event of Default as against the Seller is void, voided, avoidable or
otherwise not given effect due to the unenforceability of bankruptcy termination
clauses or otherwise.
6
<PAGE>
7. NO ELECTION. The Trust shall have the right to seek recourse
against Guarantor to the fullest extent provided for herein and no election by
the Trust to proceed in one form of action or proceeding, or against any party,
or any obligation, shall constitute a waiver of the Trust's right to proceed in
any other form of action or proceeding or against other parties unless the Trust
has expressly waived such right in writing. Specifically, but without limiting
the generality of the foregoing, no action or proceeding by the Trust under any
document or instrument evidencing the Guaranteed Obligations shall serve to
diminish the liability of Guarantor under this Guaranty except to the extent
that the Trust finally and unconditionally shall have realized indefeasible
payment by such action or proceeding.
8. CUMULATIVE REMEDIES. No remedy under this Guaranty, the
Purchase Agreement or the Collateral Agreement is intended to be exclusive of
any other remedy, but each and every remedy shall be cumulative and in addition
to any and every other remedy given under this Guaranty, the Purchase Agreement
or the Collateral Agreement, and those provided by law. No delay or omission by
the Trust or exercise any right under this Guaranty shall impair any such right
not be construed to be a waiver thereof. No failure on the part of the Trust to
exercise , and no delay in exercising, any right under this Guaranty shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right under this Guaranty preclude any other or further exercise thereof or the
exercise of any other right.
9. GOVERNING LAW AND SUBMISSION TO JURISDICTION. This Guaranty
shall be construed in accordance with and governed by the laws of the State of
New York without regard to principles of conflicts of laws. Guarantor shall
hereby submits to the jurisdiction of the United States District Court for the
Southern District of New York and any New York state court sitting in New York
City for purpose of all legal proceedings arising out of or relating to this
Guaranty. Guarantor hereby irrevocably waives, to the fullest extent permitted
by law, any objection which he may now or hereafter have to the laying of the
venue of any such proceeding brought in such a court and any claim that any
such proceeding brought in such a court has been brought in an inconvenient
forum. Guarantor hereby irrevocably waives any and all right to trial by jury in
any legal proceeding arising out of or relating to this Guaranty. Guarantor
agrees that (i) the service of process in any such proceeding may be effected by
mailing a copy thereof by registered or certified mail (of any substantially
similar form of mail), postage prepaid, to _________________ as its agent in New
York City for service of process at its address at ___________________ New York,
New York _______ , and (ii) nothing herein
7
<PAGE>
shall affect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction.
10. SEVERABILITY. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.
11. CERTAIN EXPENSES. The Guarantor agrees to pay, or cause to be
paid, on demand, and to save the Trust harmless against liability for, any and
all costs and expenses (including, without limitation, fees, costs and expenses
of counsel and fees, costs and expenses incurred in connection with any
bankruptcy case or proceeding) incurred or expended by the Trust in connection
with the enforcement, amendment, modification or waiver of or preservation of
any rights under the Purchase Agreement, the Collateral Agreement and this
Guaranty and the collection of amounts payable hereunder and obtaining advice of
counsel in respect hereof, and until so paid, such fees, costs, disbursements
and expenses shall be added to, and constitute, Guaranteed Obligations. [In
addition, the Guarantor agrees to reimburse DLJ for its reasonable expenses in
connection with the transactions contemplated by the Purchase Agreement and the
Underwriting Agreement, including any costs of indemnification, but not
including any expenses relating to the initial organization of the Trust.]
12. FURTHER ASSURANCES. The Guarantor shall execute such
documents and perform such further acts (including, without limitation,
obtaining any consents, exemptions, authorizations, or other actions by, or
giving any notices to, or making any filing with, any governmental authority or
any other person) as may be reasonably required or desirable to carry out or to
perform the provisions of this Guaranty.
8
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed and delivered
this Guaranty as of the ___ th day of ________, 1998.
----------------------
T. L. Li
9
<PAGE>
FUND EXPENSE AGREEMENT
Agreement dated as of _________________, 1998 between ________________
("____") and The Bank of New York (the "Service Provider"), in its capacities as
administrator, custodian and paying agent and collateral agent for Peak TrENDS
Trust (the "Trust").
WHEREAS, the Trust is a business trust formed under the laws of the
State of Delaware pursuant to a Trust Agreement dated as of _________________,
1998, as amended and restated as of _________________, 1998 (the "Trust
Agreement"); and
WHEREAS, ____, as sponsor under the Trust Agreement, desires to make
provision for the payment of certain initial and ongoing expenses of the Trust;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, the parties agree as follows.
1. Definitions. (a) Capitalized terms used herein and not defined
-----------
herein shall have the meanings ascribed thereto in the Trust Agreement.
(b) The following terms shall have the following meanings.
"Additional Expense" means an Ordinary Expense the incurring of which
will require the Service Provider to provide the Additional Expense Notice
pursuant to Section 3(a) hereof and any Ordinary Expense incurred thereafter.
"Additional Expense Notice" means the notice required to be given by
the Service Provider to ____ pursuant to Section 3(a)(i) hereof.
"Closing Date" shall have the meaning ascribed thereto in the
Underwriting Agreement.
"Ordinary Expense" of the Trust means any expense of the Trust other
than any expense of the Trust arising under Section 6.6 of the Administration
Agreement, Section 15 of the Custodian Agreement, Section 5.4(b) of the Paying
Agent Agreement and Section [7.6] of the Trust Agreement.
<PAGE>
"Up-front Fee Amount" means the amount set forth as such on Schedule I
hereto payable as a one-time payment to the Service Provider in respect of its
collective services as Administrator, Custodian and Paying Agent and Collateral
Agent for the entire term of the Trust.
"Up-front Expense Amount" means the amount set forth as such on
Schedule I hereto payable as a one-time payment to the Service Provider in
respect of Ordinary Expenses anticipated to be incurred by the Administrator on
behalf of the Trust, pursuant to the Administration Agreement, during the term
of the Trust.
2. Agreement to Pay Up-front Fees and Expenses. ____ agrees to pay
-------------------------------------------
to the Service Provider in New York Clearing House funds on the Closing Date (as
defined in the Underwriting Agreement) the Up-front Fee Amount and the Up-front
Expense Amount.
3. Agreement to Pay Additional Expenses. (a) Prior to incurring any
------------------------------------
Ordinary Expense on behalf of the Trust that, together with all prior ordinary
expenses incurred by the Administrator on behalf of the Trust, would cause the
aggregate amount of Ordinary Expenses of the Trust to exceed the Up-front
Expense Amount, the Administrator shall provide to ____ (i) prompt written
notice to the effect that the aggregate amount of Ordinary Expenses of the Trust
will exceed the Up-front Expense Amount, and (ii) an accounting, in such detail
as shall be reasonably acceptable to ____, of all Ordinary Expenses incurred on
behalf of the Trust through the date of the Additional Expense Notice.
(b) From and after the date of the Additional Expense Notice, the
Service Provider agrees that it will not, without the prior written consent of
____, incur on behalf of the Trust (i) any single expense in excess of
$__________ or (ii) in any calendar [period], expenses aggregating in excess of
$__________. Subject to the foregoing, the Service Provider shall give notice
to ____ in writing promptly following the incurring of any Additional Expense.
Such notice shall be accompanied by any demand, bill, invoice or other similar
document in respect of such Additional Expense.
(c) Subject to the first sentence of paragraph (b) of this Section 3,
____ agrees to pay to the Service Provider from time to time the amount of any
Additional Expense. Payment by ____ of any Additional Expense shall be made in
New York Clearing House funds by the later of (i) five Business Days after the
receipt by ____ of written notice from the Service Provider of the incurring
thereof or (ii) the due date for the payment of such Additional Expense.
(d) ____ may contest in good faith the reasonableness of Additional
Expense and the parties shall attempt to resolve amicably the disagreement;
provided that if the parties cannot resolve the dispute by the due date
hereunder with
2
<PAGE>
respect to such Additional Expense, subject to the first sentence of paragraph
(b) of this Section 3, ____ shall pay the amount of such Additional Expense
subject to later adjustment and credit if such dispute is resolved in favor of
____.
4. Condition to Payment. ____'s obligations under paragraphs 2 and
--------------------
3 hereof shall be subject to the condition that the Trust Enhanced Dividend
Securities shall have been issued and paid for on the Closing Date.
5. Trust Termination; Refund of Unused Expense Funds. If at the
-------------------------------------------------
termination of the Trust in accordance with Section [8.3] of the Trust Agreement
the aggregate amount of Ordinary Expenses incurred by the Service Provider on
behalf of the Trust through the date of termination shall be less than the Up-
front Expense Amount, the Service Provider shall, promptly following the date of
such termination, pay to ____ in New York Clearing House funds the amount of
such excess.
6. Termination of Administration Agreement. In the event of the
---------------------------------------
termination of the Administration Agreement in accordance with Section 4.1
thereof, the Service Provider shall promptly pay to ____ the portion of its Up-
front Fee Amount ratable for the period from the date of the termination of the
Administration Agreement to the Exchange Date together with any unexpended
portion of the Up-front Expense Amount.
7. Statements and Reports. The Service Provider shall collect and
----------------------
safekeep all demands, bills, invoices or other written communications received
from third parties in connection with any Ordinary Expenses and shall prepare
and maintain adequate books and records showing all receipts and disbursements
of funds in connection therewith. ____ shall have the right to inspect and to
copy, at its expense, all such documents, books and records at all reasonable
times and from time to time during the term of this Agreement.
8. Term of Contract. This Agreement, shall continue in effect until
----------------
the termination of the Trust in accordance with Section [8.3] of the Trust
Agreement.
9. No Assignment. No party to this Agreement may assign its rights
-------------
or delegate its duties hereunder without the prior written consent of the other
party.
10. Amendments. The Service Provider agrees that it will not consent
----------
to any amendment to any of the Administration Agreement, the Custodian Agreement
or the Paying Agent Agreement or the Collateral Agreement without the prior
written consent of ____.
3
<PAGE>
11. Entire Agreement. This Agreement contains the entire agreement
----------------
among the parties with respect to the matters contained herein and supersedes
all prior agreements or understandings. No amendment or modification of this
Agreement shall be valid unless the amendment or modification is in writing and
is signed by all the parties to this Agreement.
12. Notices. All notices, demands, reports, statements, approvals or
-------
consents given by any party under this Agreement shall be in writing and shall
be delivered in person or by telecopy or other facsimile communication or sent
by first-class U.S. mail, registered or certified, postage prepaid, to the
appropriate party at its address on the signature pages hereof or at such other
address subsequently notified to the other parties hereto. Any party may change
its address for purposes hereof by delivering a written notice of the change to
the other parties. All notices given under this Agreement shall be deemed
received (a) in the case of hand delivery, on the day of delivery, (b) in the
case of telecopy or other facsimile communication, on the day of transmission,
and (c) in the case of mailing, on the third day after such notice was deposited
in the mail.
13. Binding Effect. This Agreement shall be binding upon and inure
--------------
to the benefit of the parties hereto and their respective successors and
permitted assigns.
14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND BE
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
15. Counterparts. This Agreement may be signed in counterparts with
------------
all of such counterparts constituting one and the same instrument.
4
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their authorized representatives the date first above written.
____________________
By:_________________________________
Name:
Title:
Address:
Attention:
THE BANK OF NEW YORK
By:_________________________________
Name:
Title:
Address: 101 Barclay Street
New York, New York 10286
Attention:
5
<PAGE>
SCHEDULE I
Up-front Fee Amount .................... $
Up-front Expense Amount ................ $
6
<PAGE>
FUND INDEMNITY AGREEMENT
Agreement dated as of _________________, 1998 between __________ and
Peak TrENDS Trust (the "Trust").
WHEREAS, the Trust is a business trust formed under the laws of the
State of Delaware and pursuant to a Trust Agreement dated as of
________________, 1998 and amended and restated as of _____________________,
1998 (the "Trust Agreement"); and
WHEREAS, _______, as sponsor under the Trust Agreement, desires to
make provision for the payment of certain indemnification expenses of the Trust;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, the parties agree as follows:
1. Definitions. Capitalized terms used herein and not defined
-----------
herein shall have the meanings ascribed thereto in the Trust Agreement.
2. Agreement to Pay Expenses. ________ agrees to pay to the Trust,
-------------------------
and hold the Trust harmless from, any expenses of the Trust arising under
Sections 2.2(f) and 6.6 of the Administration Agreement, Section 15 of the
Custodian Agreement, Section 5.4(b) of the Paying Agent Agreement and Section
[7.6] of the Trust Agreement (collectively, "Indemnification Expenses").
Subject to paragraph 4 hereof, payment hereunder by _______ shall be made in New
York Clearing House funds no later than five Business Days after the receipt by
________, pursuant to paragraph 3 hereof, of written notice of any claim for
Indemnification Expenses.
3. Notice of Receipt of Claim. The Trustees shall give notice to,
--------------------------
or cause notice to be given to, _______ in writing of any claim for
Indemnification Expenses or any threatened claim for Indemnification Expenses
immediately upon their acquiring knowledge thereof. Such written notice shall
be accompanied by any demand, bill, invoice or other communication received from
any third party claimant (a "Claimant") in respect of such Indemnification
Expense.
4. Right to Contest. The Trust agrees that ________ may, and ______
----------------
is authorized on behalf of the Trustees and the Trust to, contest in good faith
with any Claimant any amount contained in any claim for Indemnification Expense,
provided, that if, within such time period as _______ shall determine to be
reasonable,
<PAGE>
_______________ and such Claimant are unable to resolve amicably any
disagreement regarding such claim for Indemnification Expense, ________ shall
retain counsel reasonably satisfactory to the Trustees to represent the Trustees
in any resulting proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding. It is understood that _______ shall not, in
respect of the legal expenses of any indemnified party in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm (in addition to any local
counsel). ________ shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the Claimant, _______ agrees to indemnify the
Trustees and the Trust from and against any loss or liability by reason of such
settlement or judgment.
5. Statements and Reports. The Trustees shall collect and safekeep
----------------------
all demands, bills, invoices or other written communications received from third
parties in connection with any claim for Indemnification Expenses and shall
prepare and maintain adequate books and records showing all receipts and
disbursements of funds in connection therewith. _______ shall have the right to
inspect and to copy, at its expense, all such documents, books and records at
all reasonable times and from time to time during the term of this Agreement.
6. Term of Contract. This Agreement shall continue in effect until
----------------
the termination of the Trust in accordance with Section [8.3] of the Trust
Agreement.
7. No Assignment. No party to this Agreement may assign its rights
-------------
or delegate its duties hereunder without the prior written consent of the other
parties, except that the Trust may delegate any and all duties hereunder to the
Administrator to the extent permitted by law.
8. Entire Agreement. This Agreement contains the entire agreement
----------------
among the parties with respect to the matters contained herein and supersedes
all prior agreements or understandings. No amendment or modification of this
Agreement shall be valid unless the amendment or modification is in writing and
is signed by all parties to this Agreement.
9. Notices. All notices, demands, reports, statements, approvals or
-------
consents given by any party under this Agreement shall be in writing and shall
be delivered in person or by telecopy or other facsimile communication or sent
by first-class U.S. mail, registered or certified, postage prepaid, to the
appropriate party at its address on the signature pages hereof or at such other
address subsequently notified to the other parties hereto. A copy of any
communication to _______ shall be furnished to Paul, Weiss, Rifkind, Wharton &
Garrison, Hong Kong Club Building, 13th Floor, 3A Chater Road, Central, Hong
Kong, Attention: John E. Lange, Esq., provided that
2
<PAGE>
the failure to furnish such copy shall not affect the effectiveness of any such
communication. Any party may change its address for purposes hereof by
delivering a written notice of the change to the other parties. All notices,
given under this Agreement shall be deemed received (a) in the case of hand
delivery, on the day of delivery, (b) in the case of telecopy or other facsimile
communication, on the day of transmission, and (c) in the case of mailing, on
the third day after such notice was deposited in the mail.
10. Binding Effect. This Agreement shall be binding upon and inure
--------------
to the benefit of the parties hereto and their respective successors and
permitted assigns.
11. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND BE
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
12. Counterparts. This Agreement may be signed in counterparts with
------------
all of such counterparts constituting one and the same instrument.
3
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their authorized representatives the date first above written.
___________________
By:_________________________________
Name:
Title:
Address: 277 Park Avenue
New York, New York 10172
Attention:
PEAK TrENDS TRUST
By:_________________________________
Donald J. Puglisi, as Managing Trustee
Address: 850 Library Avenue
Suite 204
Newark, Delaware 19715
4
<PAGE>
EXHIBIT 2(k)(viii)
REIMBURSEMENT AGREEMENT
This REIMBURSEMENT AGREEMENT is entered into as of the ___ th day
of ________, 1998, between Luckygold 18A Limited (the "Seller") and ___________
(the "Sponsor"). All terms not herein defined shall have the meanings set forth
in the registration statement on Form N-2 (File No. 333-49535 and File No. 811-
08735), including a prospectus relating to the public offering of the Trust
Enhance Dividend Securities (the "TrENDS"), (the "Prospectus").
WHEREAS, ___________ is Sponsor of Peak TrENDS Trust, a statutory
business trust organized under the laws of the State of Delaware pursuant to
Declaration of Trust dated as of ________, 1998, as amended and restated as of
________, 1998 (the "Trust Agreement") (such Trust and the trustees thereof
acting in their capacity as such being referred to herein as the "Trust"); and
WHEREAS, the Seller is entering into a forward contract with the
Trust pursuant to which it will sell to the Trust certain ordinary shares in
Peak International Limited; and
WHEREAS, the Seller and the Sponsor desire to make provision for
the payment of certain indemnification, organization and other expenses of the
Trust, and for that purpose, the Sponsor is entering into a Fund Indemnity
Agreement dated the date hereof between the Sponsor and the Trust (the "Fund
Indemnity Agree ment") and a Fund Expense Agreement dated the date hereof
between the Sponsor and The Bank of New York in its capacities as administrator,
custodian, paying agent and collateral agent for the Trust (the "Fund Expense
Agreement");
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties agree as follows:
1. AGREEMENT TO REIMBURSE FOR PAYMENTS MADE. The Seller agrees to reimburse the
Sponsor from time to time for the amount of (a) any Indemnification Expenses (as
defined in the Fund Indemnity Agreement) properly paid by the Sponsor pursuant
to paragraph [2] or [4] of the Fund Indemnity Agreement, (b) any Addi tional
Expenses (as defined in the Fund Expense Agreement) properly paid by the Sponsor
pursuant to paragraph [3(c)] of the Fund Expense Agreement and (c) all amounts
properly paid by the Sponsor in connection with the offering of the TrENDS
pursuant to Section 3.2 of the Trust Agreement (all amounts referred to in (a),
(b) or
<PAGE>
(c), "Reimbursable Expenses"). The Sponsor shall be reimbursed for any such
amounts in New York Clearing House (next day) funds no later than five Business
Days after the receipt by the Seller of written notice of such amounts due.
2. AGREEMENT TO REFUND AMOUNTS. The Sponsor will promptly refund
to the Seller any amounts refunded to the Sponsor under Section 5 or (to the
extent not paid to a successor Service Provider) Section 6 of the Fund Expense
Agreement.
3. STATEMENTS AND REPORTS. The Sponsor shall retain copies of all
demands, bills, invoices or other written communications received from the Trust
in connection with any claim for Reimbursable Expenses and shall maintain
adequate records of all disbursements of funds in connection therewith. The
Seller shall have the right to inspect and to copy, at its expense, all such
documents and records at all reasonable times and from time to time during the
term of this Agreement.
4. NOTICES. All notices, demands, reports, statements, approvals
or consents given by any party under this Agreement shall be in writing and
shall be delivered in person or by telecopy or other facsimile communication or
sent by first-class mail, registered or certified, postage prepaid, to the
appropriate party at its address on the signature pages hereof or at such other
address subsequently notified to the other parties hereto. Any party may change
its address for purposes hereof by delivering a written notice of the change to
the other parties. All notices given under this Agreement shall be deemed
received (a) in the case of hand delivery, on the day of delivery, (b) in the
case of telecopy or other facsimile communication, on the day of transmission,
and (c) in the case of mailing, on the third day after such notice was deposited
in the mail. The Sponsor shall promptly forward to the Seller all notices it
receives from the Service Provider pursuant to Section [3] of the Fund Expense
Agreement or from the Trust pursuant to Section [3] of the Fund Indemnity Agree
ment. The Sponsor will not consent to any Additional Expense as defined in the
Fund Expense Agreement without the consent of the Seller and will cooperate with
the Seller in contesting any claim for Additional Expenses or Indemnification
Expenses if directed to do so by the Seller.
5. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties relating to the subject matter hereof, and there are no
2
<PAGE>
other representations, endorsements, promises, agreements or understandings,
oral, written or inferred, between the parties relating to the subject matter
hereof.
6. NO THIRD PARTY BENEFICIARIES. Nothing herein, express or
implied, shall give to any Person, other than the Seller and the Sponsor, and
their respective successors and assigns, any benefit of any legal or equitable
right, remedy or claim hereunder.
7. AMENDMENT; WAIVER. This Agreement shall not be deemed or
construed to be modified, amended, rescinded, cancelled or waived, in whole or
in part, except by a written instrument signed by a duly authorized
representative of the party to be charged. Failure of either party hereto to
exercise any right or remedy hereunder in the event of a breach hereof by the
other party shall not constitute a waiver of any such right or remedy with
respect to any subsequent breach.
8. SEVERABILITY. If any clause, provision or section hereof shall
be ruled invalid or unenforceable by any court of competent jurisdiction, the
invalidity or unenforceability of such clause, provision or section shall not
affect any of the remaining clauses, provisions or sections hereof.
9. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
several counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
10. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to principles of conflicts of law.
3
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto executed this
Reimbursement Agreement as of the day and year first above written.
LUCKYGOLD 18A LIMITED
By:
-----------------------
Name:
Title:
-----------------------
By:
------------------------
Name:
Title:
4
<PAGE>
EXHIBIT (2)(l)
May __, 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 __, 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,
<PAGE>
EXHIBIT 2(n)(i)
May _____, 1998
Peaks TrENDS Trust
850 Library Avenue
Newark, Delaware 19715
Ladies and Gentlemen:
We have acted as special United States tax counsel to Peaks
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. 33-49535, 811-08735) on Form N-2, which was filed by Peak
Interna-tional 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 conclu sions. 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>
Peaks TrENDS Trust
May _______, 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,
