<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 6, 1998
SECURITIES ACT FILE NO. 333-
INVESTMENT COMPANY ACT FILE NO. 811-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-2
(Check appropriate box or boxes)
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. / /
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. / /
PIES TRUST II
(Exact name of Registrant as specified in Charter)
C/O LEHMAN BROTHERS INC.
3 WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10285
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (212) 526-7000
------------------------------
JENNIFER MARRE
LEHMAN BROTHERS INC.
3 WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10285
(Name and address of Agent for Service)
WITH COPIES TO:
GARY S. SCHPERO, ESQ.
RAYMOND W. WAGNER, ESQ.
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 455-2000
------------------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: AS SOON AS PRACTICABLE AFTER THE
EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If any securities being registered on this form will be offered on a delayed
or continuous basis in reliance on Rule 415 under the Securities Act of 1933, as
amended, other than securities offered in connection with a dividend
reinvestment plan, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
------------------------
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SECURITIES AMOUNT BEING OFFERING PRICE AGGREGATE REGISTRATION
BEING REGISTERED REGISTERED(1) PER SHARE(1) OFFERING PRICE(1) FEE
<S> <C> <C> <C> <C>
PIES representing shares of beneficial
interest....................................... 1,000,000 Shares $10.00 $10,000,000 $2,950
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PIES TRUST II
CROSS-REFERENCE SHEET
PARTS A AND B OF PROSPECTUS*
<TABLE>
<CAPTION>
ITEM NO. CAPTION PROSPECTUS CAPTION
- --------- --------------------------------------------------- ---------------------------------------------------
<C> <S> <C>
1. Outside Front Cover................................ Front Cover Page
2. Inside Front and Outside Back Cover Page........... Front Cover Page; Inside Front Cover Page
3. Fee Table and Synopsis............................. Prospectus Summary; Fees and Expenses
4. Financial Highlights............................... Not Applicable
5. Plan of Distribution............................... Front Cover Page; Prospectus Summary; Underwriting
6. Selling Shareholders............................... Not Applicable
7. Use of Proceeds.................................... Use of Proceeds; Investment Objectives and Policies
8. General Description of the Registrant.............. Front Cover Page; Prospectus Summary: The Trust;
Investment Restrictions; Investment Objectives and
Policies; Risk Factors Relating to PIES
9. Management......................................... Management and Administration of the Trust
10. Capital Stock, Long-Term Debt and Other
Securities....................................... Description of PIES; Federal Income Tax
Considerations
11. Defaults and Arrears on Senior Securities.......... Not Applicable
12. Legal Proceedings.................................. Not Applicable
13. Table of Contents of the Statement of Additional
Information...................................... Not Applicable
14. Cover Page......................................... Not Applicable
15. Table of Contents.................................. Not Applicable
16. General Information and History.................... The Trust
17. Investment Objective and Policies.................. Investment Objectives and Policies; Investment
Restrictions
18. Management......................................... Management and Administration of the Trust
19. Control Persons and Principal Holders of
Securities....................................... Management and Administration of the Trust
20. Investment Advisory and Other Services............. Management and Administration of the Trust
21. Brokerage Allocation and Other Practices........... Investment Objectives and Policies
22. Tax Status......................................... Certain United States Federal Income Tax
Considerations
23. Financial Statements............................... Statement of Assets, Liabilities and Capital
</TABLE>
- ------------------------
* Pursuant to the General Instructions to Form N-2, all information required
to be set forth in Part B: Statement of Additional Information has been
included in Part A: The Prospectus. Information required to be included in
Part C is set forth under the appropriate item, so numbered, in Part C of
the N-2 Registration Statement.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION
APRIL 6, 1998
PROSPECTUS
PIES-SM- **
PIES TRUST II
(SUBJECT TO EXCHANGE INTO SHARES OF COMMON STOCK,
PAR VALUE $ PER SHARE, OF COMPANY)
---------------------
The issue price (the "Initial Price") of each of the PIES (each, a "PIES")
of the PIES Trust II (the "Trust") being offered hereby will be $ (the last
sale price of the common stock, par value $ per share (the "Common Stock"),
of {name of company to be inserted here} (the "Company") on , 1998,
as reported on the New York Stock Exchange Composite Tape).
Each of the PIES represents the right to receive:
- an annual distribution of $ , payable quarterly on each ,
, and , during the term of the Trust,
beginning , 1998; and
- between and 1.0 shares of Common Stock or cash with an
equivalent value, upon the conclusion of the term of the Trust on
, 20 (the "Exchange Date").
The PIES are not subject to redemption prior to the Exchange Date or the
earlier termination of the Trust.
The Trust is a newly organized Delaware business trust that is registered as
a closed-end investment company and was established to purchase and hold (a) a
series of zero-coupon U.S. Treasury securities maturing on a quarterly basis
during the term of the Trust (the "Treasury Securities") and (b) one or more
forward purchase contracts (the "Contracts") with one or more stockholders (the
"Sellers") of the Company relating to the Common Stock.
The Trust's investment objectives are (a) over the term of the Trust, to
provide holders of PIES with a quarterly distribution of $ per PIES and
(b) at the Exchange Date, to provide holders with a number of shares of Common
Stock at the Exchange Rate (as defined below). If some or all of the Sellers
exercise their cash settlement option in the Contracts under the circumstances
described in this Prospectus, holders will receive the cash equivalent of all or
part of the shares of Common Stock to which they are entitled at the Exchange
Rate. The "Exchange Rate" is equal to, subject to certain adjustments:
- if the Exchange Price (as defined below) is greater than $ per share of
Common Stock (the "Threshold Appreciation Price"), shares of Common
Stock per PIES;
- if the Exchange Price is less than or equal to the Threshold Appreciation
Price but is greater than the Initial Price, a fraction equal to the
Initial Price divided by the Exchange Price of one share of Common Stock
per PIES; in that case, the value (determined at the Exchange Price) of
the Common Stock delivered at the Exchange Date would equal the Initial
Price; and
- if the Exchange Price is less than or equal to the Initial Price, one
share of Common Stock per PIES.
The "Exchange Price" means the average Closing Price (as defined herein) per
share of Common Stock on the 20 Trading Days (as defined herein) immediately
prior to the Exchange Date, except as otherwise described herein. Accordingly,
the value of the Common Stock to be received by holders of the PIES at the
Exchange Date will not necessarily equal the Initial Price. If the Exchange
Price is less than the Initial Price, the value of the Common Stock to be
received at the Exchange Date will generally be less than the price paid for the
PIES. See "Investment Objectives and Policies."
--------------------------
SEE "RISK FACTORS RELATING TO PIES" BEGINNING ON PAGE 23 FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CAREFULLY CONSIDERED BY PROSPECTIVE PURCHASERS.
THE COMPANY IS NOT AFFILIATED WITH THE TRUST, WILL NOT RECEIVE ANY OF THE
PROCEEDS FROM THE SALE OF THE PIES AND WILL HAVE NO OBLIGATIONS WITH RESPECT TO
THE PIES OR THE CONTRACTS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
(CONTINUED ON NEXT PAGE)
<TABLE>
<CAPTION>
PRICE TO SALES PROCEEDS TO
PUBLIC LOAD (1) THE TRUST (2)
<S> <C> <C> <C>
Per PIES................................................. $ $ (3) $
Total(4)................................................. $ $ (3) $
</TABLE>
(1) The Sellers and the Company have agreed to indemnify the Underwriter against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended. See "Underwriting."
(2) Before deducting estimated expenses of $ , payable by Lehman
Brothers Inc. ("Lehman Brothers"), which will be reimbursed by the Sellers.
(3) In light of the fact that the proceeds of the sale of the PIES will be used
in part by the Trust to purchase the Contracts from the Sellers, the
Underwriting Agreement provides that the Sellers will pay to the
Underwriters as compensation $ per PIES. See "Underwriting."
(4) The Trust has granted to the Underwriter a 30-day option to purchase up to
an additional PIES on the same terms and conditions as set forth
above solely to cover over-allotments, if any. If such option is exercised
in full, the total Price to Public, Sales Load and Proceeds to the Trust
will be $ , $ , and $ , respectively. See
"Underwriting."
--------------------------
The PIES offered by this Prospectus are offered by the Underwriter subject
to prior sale, to withdrawal, cancellation or modification of the offer without
notice, to delivery to and acceptance by the Underwriter and to certain future
conditions. It is expected that delivery of the PIES will be made through the
Depository Trust Company, New York, New York, on or about , 1998.
--------------------------
LEHMAN BROTHERS
, 1998
- --------------------------
** PIES is a service mark of Lehman Brothers Inc.
<PAGE>
(Continued from previous page)
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE PIES. SUCH
TRANSACTIONS MAY INCLUDE THE PURCHASE OF PIES PRIOR TO THE PRICING OF THE
OFFERING FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE PIES, THE PURCHASE OF
PIES FOLLOWING THE PRICING OF THE OFFERING TO COVER A SHORT POSITION IN THE PIES
OR FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE PIES AND THE IMPOSITION OF
PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
------------------------
In the event of certain Adjustment Events (as defined herein), holders may
receive property other than (or in addition to) Common Stock or a combination of
such property and cash. See "Investment Objectives and Policies--The
Contracts--Dilution Adjustments; Adjustment Events." In addition, holders
otherwise entitled to receive fractional shares in respect of their aggregate
holdings of PIES will receive cash in lieu thereof.
It is the Trust's policy that the Contracts may not be disposed of during
the term of the Trust. The Trust will continue to hold the Contracts despite any
significant decline in the market price of the Common Stock or adverse changes
in the financial condition of the Company.
This Prospectus sets forth information about the Trust that a prospective
investor ought to know before investing. Potential investors are advised to read
this Prospectus and to retain it for future reference.
PIES may be a suitable investment for those investors who are capable of
evaluating the risks involved in making an investment in the Common Stock of the
Company and the advantages and disadvantages of doing so in a manner which will
give investors in the PIES a potentially higher yield but a lesser opportunity
for equity appreciation than would be afforded by a direct investment in the
Common Stock. There is no assurance that the yield on the PIES will be higher
than the dividend yield on the Common Stock measured over the term of the Trust.
See "Investment Objectives and Policies."
Attached to this Prospectus for convenience of reference is a separate
prospectus of the Company relating to the shares of Common Stock that may be
received by holders of PIES at the Exchange Date. The Company is not affiliated
with the Trust, will not receive any of the proceeds from the sale of the PIES
and will have no obligations with respect to the PIES or the Contracts. The
outstanding Common Stock is listed for trading on the {New York} Stock Exchange
{("NYSE")} under the symbol " ."
The Trust will be a treated as grantor trust for United States federal
income tax purposes and each holder will be treated as the owner of its pro rata
portion of the assets of the Trust. See "Certain United States Federal Income
Tax Considerations."
THE TRUST IS A NEWLY ORGANIZED CLOSED-END INVESTMENT COMPANY WITH NO
PREVIOUS HISTORY OF PUBLIC TRADING. APPLICATION WILL BE MADE TO LIST THE PIES ON
THE NYSE UNDER THE SYMBOL " ." TYPICAL CLOSED-END FUND SHARES FREQUENTLY
TRADE AT A DISCOUNT FROM NET ASSET VALUE. THIS CHARACTERISTIC OF INVESTMENTS IN
A CLOSED-END INVESTMENT COMPANY IS A RISK SEPARATE AND DISTINCT FROM THE RISK
THAT THE TRUST'S NET ASSET VALUE WILL DECREASE. THE TRUST CANNOT PREDICT WHETHER
THE PIES WILL TRADE AT, BELOW OR ABOVE NET ASSET VALUE. THE RISK OF PURCHASING
INVESTMENTS IN A CLOSED-END COMPANY THAT MIGHT TRADE AT A DISCOUNT IS MORE
PRONOUNCED FOR INVESTORS WHO WISH TO SELL THEIR INVESTMENTS SOON AFTER
COMPLETION OF AN INITIAL PUBLIC OFFERING.
The address of the Trust is 3 World Financial Center, New York, New York
10285, and the Trust's telephone number is (212) 526-7000.
2
<PAGE>
<TABLE>
<S> <C>
INDEX TO KEY TERMS
Acceleration Value..................................................... 21
Adjustment Event....................................................... 17
Administration Agreement............................................... 28
Administrator.......................................................... 8; 28
Amount Receivable at the Exchange Date................................. 8
Business Day........................................................... 11
Cash Delivery Option................................................... 15
clearing agency........................................................ 27
clearing corporation................................................... 26
Closing Price.......................................................... 12
Code................................................................... 28
Collateral Agent....................................................... 19
Collateral Agreement................................................... 19
Collateral Event of Default............................................ 20
Commission............................................................. 10
Common Stock........................................................... Front Cover Page; 5
Company................................................................ Front Cover Page; 5
comparable yield....................................................... 32
Contracts.............................................................. Front Cover Page; 6
Custodian.............................................................. 8; 29
Custodian Agreement.................................................... 29
Declaration of Trust................................................... 11
Depositary............................................................. 26
Distribution Date...................................................... 5
Exchange Date.......................................................... Front Cover Page; 5
Front Cover Page;
Exchange Price......................................................... 12
Front Cover Page;
Exchange Rate.......................................................... 11
Global Securities...................................................... 26
Holders................................................................ 5
Initial Price.......................................................... Front Cover Page; 5
Insufficiency Determination............................................ 20
interested person...................................................... 28
Investment Company Act................................................. 5
Lehman Brothers........................................................ Front Cover Page; 5
majority in interest of the Holders.................................... 12
Market Price........................................................... 16
non-diversified........................................................ 8
non-U.S. Holder........................................................ 30
NYSE................................................................... 2; 9
Ordinary Cash Dividend................................................. 18
original issue discount................................................ 7
other expenses......................................................... 10
participants........................................................... 27
Paying Agent........................................................... 8; 29
Paying Agent Agreement................................................. 29
PIES................................................................... Front Cover Page; 5
Reported Securities.................................................... 17
Securities Act......................................................... 21
securities contracts................................................... 25
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
Sellers................................................................ Front Cover Page; 6
Share Components....................................................... 11
straddle............................................................... 30
street name............................................................ 27
Threshold Appreciation Price........................................... Front Cover Page; 6
total annual expenses.................................................. 10
Trading Day............................................................ 12
Transaction Value...................................................... 18
Treasury Securities.................................................... Front Cover Page; 6
Trust.................................................................. Front Cover Page; 5
Trustees............................................................... 8
U.S. Holder............................................................ 30
Underwriter............................................................ 5; 33
Underwriting Agreement................................................. 33
Withholding Agent...................................................... 33
</TABLE>
4
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED
INFORMATION INCLUDED ELSEWHERE IN THIS PROSPECTUS. FOR A LISTING OF DEFINED
TERMS WHICH ARE USED THROUGHOUT THIS PROSPECTUS, SEE "INDEX TO KEY TERMS."
THE TRUST
PIES Trust II (the "Trust") is a newly organized Delaware business trust. It
is registered as a non-diversified closed-end management investment company
under the Investment Company Act of 1940, as amended (the "Investment Company
Act"). The term of the Trust will expire on or shortly after , 20
(the "Exchange Date"), unless the Trust is dissolved prior to such date under
certain limited circumstances. The Trust will be treated as a grantor trust for
U.S. federal income tax purposes.
THE OFFERING
PIES representing shares of beneficial interest in the Trust (the
"PIES") are being offered for sale by Lehman Brothers Inc. ("Lehman Brothers" or
the "Underwriter") to the public at a purchase price of $ per PIES (the
"Initial Price"). The Initial Price is equal to the last sale price of the
common stock, par value $ per share (the "Common Stock"), of {name of
company to be inserted here} (the "Company") on , 1998, as reported on the
{New York Stock Exchange Composite Tape}. In addition, the Underwriter has been
granted an option to purchase up to an additional PIES to cover
over-allotments, if any. See "Underwriting."
PURPOSE OF THE TRUST
The PIES are designed to provide investors (the "Holders") with a higher
yield than the current dividend yield paid on the Common Stock, while also
providing the opportunity for Holders to share in the appreciation, if any, of
the Common Stock above the Threshold Appreciation Price (as defined herein). The
annual calendar year distribution on the PIES is $ per PIES. The annual
dividend currently paid per share of Common Stock is $ .
DISTRIBUTIONS PRIOR TO EXCHANGE DATE
The Holders are entitled to receive distributions at the rate per PIES of
$ per annum or $ per quarter. Distributions are payable
quarterly on each , , and or, if any such date is not a
Business Day (as defined herein), on the next succeeding Business Day (each a
"Distribution Date"). Distributions are payable to Holders of record as of each
, , and , respectively. The first distribution will be
payable on , 1998 to Holders of record as of , 1998. See "Investment
Objectives and Policies--Trust Assets."
DISTRIBUTIONS ON EXCHANGE DATE
At the Exchange Date, in respect of each outstanding PIES, Holders will have
the right to receive between and 1.0 shares 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.
If the Company merges into another entity, or liquidates, or certain related
events occur, Holders would receive consideration consisting of cash, Reported
Securities (as defined under "Investment Objectives and Policies--The
Contracts--Dilution Adjustments; Adjustment Events"), or a combination of cash
and Reported Securities instead of or in addition to shares of Common Stock. If
some or all of the Sellers exercise their cash settlement option, Holders would
receive cash in lieu of all or part of the Common Stock or Reported Securities
that would otherwise be deliverable. See "Investment Objectives and
Policies--The Contracts--General."
5
<PAGE>
The occurrence of certain defaults by a Seller under its Contract or the
related collateral arrangements would cause the acceleration of such Contract
and the distribution to the Trust for distribution to Holders of all or a
portion of the Common Stock, Reported Securities, cash or a combination thereof
subject to such Contract and of a portion of the Treasury Securities (as defined
below) then held by the Trust. See "Investment Objectives and Policies--The
Contracts--Collateral Requirements of the Contracts; Acceleration" and "--The
Treasury Securities."
VOTING RIGHTS
Holders will not have voting rights with respect to the Common Stock unless
and until the Sellers have delivered shares of Common Stock to the Trust
pursuant to the Contracts and the Trust has distributed such shares to the
Holders. See "Investment Objectives and Policies--The Company." The Holders have
the right to vote on matters affecting the Trust, as described under
"Description of PIES."
ASSETS OF THE TRUST; INVESTMENT OBJECTIVES AND POLICIES
The Trust will purchase and hold:
- a series of zero-coupon U.S. Treasury securities (the "Treasury
Securities") maturing on a quarterly basis during the term of the Trust
and representing in the aggregate approximately % of the initial assets
of the Trust; and
- one or more forward purchase contracts (the "Contracts") with certain
existing stockholders (the "Sellers") of the Company relating to the
Common Stock and representing approximately % of the initial assets of
the Trust.
The Trust's investment objectives are (a) over the term of the Trust, to
provide each Holder with a quarterly distribution of $ per PIES equal to
the pro rata portion of the quarterly distributions from the Treasury Securities
and (b) at the Exchange Date, to provide each Holder with a number of shares of
Common Stock at the Exchange Rate. If some or all of the Sellers exercise their
cash settlement option in the Contracts under the circumstances described in
this Prospectus, Holders will receive the cash equivalent of all or part of the
shares of Common Stock to which they are entitled at the Exchange Rate.
The Exchange Rate is equal to, subject to certain adjustments:
- if the Exchange Price (as defined below) is greater than $ per share
of Common Stock (the "Threshold Appreciation Price"), shares of
Common Stock per PIES;
- if the Exchange Price is less than or equal to the Threshold Appreciation
Price but is greater than the Initial Price, a fraction equal to the
Initial Price divided by the Exchange Price of one share of Common Stock
per PIES; in that case, the value (determined at the Exchange Price) of
the Common Stock delivered at the Exchange Date would equal the Initial
Price; and
- if the Exchange Price is less than or equal to the Initial Price, one
share of Common Stock per PIES.
Holders otherwise entitled to receive fractional shares of Common Stock or
Reported Securities in respect of their aggregate holdings of PIES will receive
cash in lieu thereof. See "Investment Objectives and Policies--The Contracts"
and "--Delivery of Common Stock and Reported Securities; No Fractional Shares of
Common Stock or Reported Securities."
The Trust will enter into Contracts with the Sellers obligating the Sellers,
severally and not jointly, at the Exchange Date, to deliver to the Trust
shares of Common Stock in the aggregate (excluding Shares required to be
delivered in respect of PIES issued to cover the Underwriter's over-allotment
option), except that:
6
<PAGE>
- if the Exchange Price per share of Common Stock is greater than the
Threshold Appreciation Price, each Seller will be obligated to deliver a
number of shares of Common Stock equal to the product of times the
initial number of shares of Common Stock subject to such Seller's
Contract;
- if the Exchange Price per share of Common Stock is less than or equal to
the Threshold Appreciation Price but greater than the Initial Price, each
Seller will be obligated to deliver a number of shares of Common Stock
equal to the product of (i) the Initial Price divided by the Exchange
Price multiplied by (ii) the initial number of shares of Common Stock
subject to such Seller's Contract; and
- if the Exchange Price per share of Common Stock is less than or equal to
the Initial Price, each Seller will be obligated to deliver a number of
shares of Common Stock equal to the initial number of shares of Common
Stock subject to such Seller's Contract.
This provides the Trust with the opportunity to share in the appreciation, if
any, of the Common Stock above the Threshold Appreciation Price. Each Seller has
the right to deliver cash in lieu of all (but not part) of its Common Stock
delivery obligation. The purchase price under the Contracts is equal to
$ per share of Common Stock and $ in the aggregate and is
payable to the Sellers by the Trust on the closing of this offering.
Each Seller will secure its obligations under its Contract by a pledge of
one share of Common Stock for each share subject to the Contract or, at the
election of such Seller, by a pledge of substitute collateral consisting of U.S.
Government securities. The Collateral Agent (as defined herein) will evaluate
whether the substitute collateral meets minimum valuation requirements for such
collateral and will be responsible for administering sales of collateral, or in
some cases, acceleration of such Seller's obligations, in the event that a
valuation deficiency of the collateral continues. See "Investment Objectives and
Policies--The Contracts--Collateral Requirements of the Contracts;
Acceleration."
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The Trust will be treated as a grantor trust for federal income tax
purposes. As a result, each Holder will be considered the owner of its pro rata
portions of the Treasury Securities and the Contracts in the Trust. Under such
characterization, income received (including original issue discount treated as
received) by the Trust will generally be treated as income of the Holders. The
Treasury Securities held by the Trust will be treated for federal income tax
purposes as having "original issue discount" which Holders will be required to
include in income as it accrues. Actual receipts of cash in respect of the
Treasury Securities will not be included in income, however, but rather will
reduce the aggregate tax bases of the PIES. A Holder will have taxable gain or
loss upon receipt of cash in lieu of Common Stock distributed upon termination
of the Trust. Holders should be aware that there are alternative
characterizations which could adversely affect the timing and character of
income recognized by the Holders. See "Certain United States Federal Income Tax
Considerations."
THE COMPANY
The Company is {description}.
Attached to this Prospectus is a separate prospectus of the Company which
describes the Company and the Common Stock that may be delivered to the Trust by
the Sellers, and by the Trust to the Holders, at the Exchange Date or upon
earlier acceleration of a Contract. The Company is not affiliated with the
Trust, will not receive any of the proceeds from the sale of the PIES and will
have no obligations with respect to the PIES or the Contracts. THE PROSPECTUS OF
THE COMPANY IS BEING ATTACHED TO THIS PROSPECTUS AND DELIVERED TO PROSPECTIVE
PURCHASERS OF PIES TOGETHER WITH THIS PROSPECTUS FOR CONVENIENCE OF REFERENCE
ONLY. THE PROSPECTUS OF
7
<PAGE>
THE COMPANY DOES NOT CONSTITUTE A PART OF THIS PROSPECTUS, NOR IS IT
INCORPORATED BY REFERENCE HEREIN.
MANAGEMENT AND ADMINISTRATION OF THE TRUST
The Trust will be internally managed and will not have an investment
adviser. Three trustees (the "Trustees") will oversee the administration of the
Trust. (or its successor) will act as trust administrator (the
"Administrator"). (or its successor) will also act as custodian for the
Trust's assets (the "Custodian") and as paying agent, registrar and transfer
agent (the "Paying Agent") with respect to the PIES. Except as aforesaid, and
except for its role as Collateral Agent under the Collateral Agreements (as
defined herein) between each Seller, the Trust and the Collateral Agent (see
"Investment Objectives and Policies--The Contracts--Collateral Requirements of
the Contracts; Acceleration"), has no other affiliation with, and is not
engaged in any other transaction with, the Trust.
RISK FACTORS
It is the Trust's policy that the Contracts may not be disposed of during
the term of the Trust and that the Treasury Securities held by the Trust may not
be disposed of prior to the earlier of their respective maturities and the
termination of the Trust except upon the acceleration of one or more Contracts
as described in this Prospectus. The Trust will continue to hold the Contracts
despite any significant decline in the market price of the Common Stock or
adverse changes in the financial condition of the Company.
The yield on the PIES is higher than the current dividend yield on the
Common Stock. However, there is no assurance that the yield on the PIES will be
higher than the dividend yield on the Common Stock measured over the term of the
Trust.
The value of the Common Stock to be received by Holders of the PIES at the
Exchange Date (the "Amount Receivable at the Exchange Date") is not fixed, but
is based on the market price of the Common Stock as reflected in the Exchange
Rate. There can be no assurance that the Amount Receivable at the Exchange Date
will be equal to or greater than the Initial Price of the PIES. If the Exchange
Price is less than the Initial Price, the Amount Receivable at the Exchange Date
will generally be less than the amount paid for the PIES, in which case an
investment in PIES will result in a loss. In addition, if the Company became
insolvent or bankrupt, an investment in PIES could result in a total loss.
Holders of the PIES, therefore, bear the full risk of a decline in the value of
the Common Stock prior to the Exchange Date.
In addition, the opportunity for equity appreciation from an investment in
the PIES is less than the opportunity for equity appreciation from a direct
investment in the Common Stock for two reasons. First, the Amount Receivable at
the Exchange Date will generally exceed the Initial Price only if the Exchange
Price exceeds the Threshold Appreciation Price of $ per share of Common
Stock. The Threshold Appreciation Price represents an appreciation of % over
the Initial Price. Second, Holders will be entitled to receive, at the Exchange
Date, only % of any appreciation of the value of the Common Stock in excess
of the Threshold Appreciation Price. Because the market price of the Common
Stock is subject to market fluctuations, the Amount Receivable at the Exchange
Date may be more or less than the Initial Price of the PIES. In addition,
because the Exchange Price is generally determined based 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 Exchange Price used to determine the Amount
Receivable at the Exchange Date.
The Trust is classified as a "non-diversified" investment company under the
Investment Company Act. Consequently, the Trust is not limited by the Investment
Company Act in the proportion of its assets that may be invested in the
securities of a single issuer. Since the only securities held by the Trust will
be the Treasury Securities and the Contracts, the Trust may be subject to
greater risk than would be the case for an investment company with more
diversified investments.
8
<PAGE>
The trading prices of the PIES in the secondary market will be directly
affected by the trading prices of the Common Stock in the secondary market.
Trading prices of the Common Stock will be influenced by the Company's operating
results and prospects and by economic, financial and other factors and market
conditions.
Holders of the PIES will not be entitled to any rights with respect to the
Common Stock, including, without limitation, voting rights (including voting
rights in respect of Company transactions, such as an acquisition of the
Company, rights to respond to tender offers and rights to receive any dividends
or other distributions in respect thereof, unless and until such time, if any,
as the Sellers deliver shares of Common Stock to the Trust pursuant to the
Contracts and the Trust has distributed such shares to the Holders.
A bankruptcy of a Seller could adversely affect the timing of settlement
and, as a result, the amount received by the Holders in respect of the PIES.
LISTING
The Trust will apply to list the PIES on the New York Stock Exchange
("NYSE") under the symbol " ."
9
<PAGE>
FEES AND EXPENSES
Because proceeds from the sale of the PIES will be used by the Trust to
purchase the Contracts from the Sellers, the Underwriting Agreement provides
that the Sellers will pay to the Underwriter as compensation $ per PIES.
See "Underwriting." Lehman Brothers will pay estimated organization costs of the
Trust in the amount of $ and estimated costs of the Trust in connection
with the initial registration and public offering of the PIES in the amount of
$ at the closing of this offering. In addition, each of the
Administrator, the Custodian and the Paying Agent, and each Trustee will be paid
by Lehman Brothers at the closing of this offering a one-time, up-front amount
in respect of its ongoing fees and, in the case of the Administrator,
anticipated expenses of the Trust (estimated to be $ in the aggregate)
over the term of the Trust. Lehman Brothers has agreed to pay any ongoing
expenses of the Trust in excess of these estimated amounts and to reimburse the
Trust for any amounts it may be required to pay as indemnification to any
Trustee, the Administrator, the Custodian or the Paying Agent. Lehman Brothers
will be reimbursed by the Sellers for expenses of the Trust and reimbursements
of indemnifications paid by it as provided in the Underwriting Agreement. See
"Management and Administration of the Trust--Estimated Expenses."
Regulations of the Securities and Exchange Commission (the "Commission")
applicable to closed-end investment companies designed to assist investors in
understanding the costs and expenses that an investor will bear directly or
indirectly require the presentation of Trust expenses in the following format.
Because the Trust will not bear any ongoing fees or expenses, investors will not
bear any direct expenses. The only expenses that an investor might be considered
to be bearing indirectly are (a) the Underwriter's compensation payable by the
Sellers with respect to such investor's PIES and (b) the ongoing expenses of the
Trust (including fees of the Administrator, Custodian, Paying Agent and
Trustees), estimated at $ per year in the aggregate, payable by Lehman
Brothers at the closing of the offering.
Investor Transaction Expenses
<TABLE>
<S> <C>
Sales Load (as a percentage of offering price)...................................... %
--
--
Annual Expenses
Management Fees..................................................................... 0%
Other Expenses (after reimbursement by the Sellers)*................................ 0%
--
Total Annual Expenses*............................................................ 0%
--
--
</TABLE>
- ------------------------
* Absent the reimbursement, the Trust's "other expenses" would be equal to
approximately % of the Trust's average net assets and the Trust's "total
annual expenses" would be equal to approximately % of the Trust's average
net assets.
Commission regulations also require that closed-end investment companies
present an illustration of cumulative expenses (both direct and indirect) that
an investor would bear. The example is required to factor in the applicable
sales load and to assume, in addition to a 5% annual return, the reinvestment of
all distributions at net asset value. INVESTORS SHOULD NOTE THAT THE ASSUMPTION
OF A 5% ANNUAL RETURN DOES NOT ACCURATELY REFLECT THE FINANCIAL TERMS OF THE
TRUST. SEE "INVESTMENT OBJECTIVES AND POLICIES--TRUST ASSETS." ADDITIONALLY, THE
TRUST DOES NOT PERMIT THE REINVESTMENT OF DISTRIBUTIONS.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
--------- ---------
<S> <C> <C>
You would pay the following expenses (i.e., the applicable sales load and allocable portion
of ongoing expenses paid by Lehman Brothers and the Sellers) on a $1,000 investment,
assuming a 5% annual return............................................................... $ $
</TABLE>
10
<PAGE>
THE TRUST
PIES Trust II is a newly organized Delaware business trust that is
registered as a closed-end management investment company under the Investment
Company Act. The Trust was formed on April 1, 1998 pursuant to a Declaration of
Trust dated as of April 1 , 1998 (the "Declaration of Trust"). The term of the
Trust will expire on or shortly after , 20 , unless the Trust dissolves
prior to such date under certain limited circumstances. The address of the Trust
is c/o Lehman Brothers Inc., 3 World Financial Center, New York, New York 10285
(telephone number: (212) 526-7000).
USE OF PROCEEDS
The net proceeds of this offering will be used on or shortly after the date
on which this offering is completed (a) to purchase a fixed portfolio comprised
of a series of zero-coupon U.S. Treasury securities maturing quarterly during
the term of the Trust and (b) to pay the purchase price under the Contracts to
the Sellers.
INVESTMENT OBJECTIVES AND POLICIES
TRUST ASSETS
The Trust's investment objectives are (a) over the term of the Trust, to
provide each Holder with a quarterly distribution of $ per PIES equal to
the pro rata portion of the quarterly distributions from the Treasury Securities
and (b) at the Exchange Date, to provide each Holder with a number of shares of
Common Stock at the Exchange Rate (as defined below). If some or all of the
Sellers elect the Cash Delivery Option (as defined below), Holders will receive
an amount in cash equal to the Exchange Price (as defined below) of all or part
thereof. On or prior to the 25th Business Day prior to the Exchange Date, each
of the Sellers will be obligated to notify the Trust concerning its exercise of
the Cash Delivery Option, and the Trust in turn will notify The Depository Trust
Company and publish a notice in a daily newspaper of national circulation
stating whether Holders of PIES will receive shares of Common Stock, cash or a
combination thereof and, if a combination of Common Stock and cash, the relative
proportion of each. See "--The Contracts--General" below. "Business Day" means
any day that is not a Saturday, a Sunday or a day on which the NYSE or banking
institutions or trust companies in The City of New York are authorized or
obligated by law or executive order to close.
The "Exchange Rate" is equal to, subject to certain adjustments:
- if the Exchange Price (as defined below) is greater than the Threshold
Appreciation Price, shares of Common Stock per PIES;
- if the Exchange Price is less than or equal to the Threshold Appreciation
Price but is greater than the Initial Price, a fraction equal to the
Initial Price divided by the Exchange Price of one share of Common Stock
per PIES; in that case, the value (determined at the Exchange Price) of
the Common Stock delivered at the Exchange Date equals the Initial Price;
and
- if the Exchange Price is less than or equal to the Initial Price, one
share of Common Stock per PIES.
Accordingly, the value of the Common Stock to be received by Holders of the PIES
(or, as discussed below, the cash equivalent to be received in lieu of such
Common Stock) at the Exchange Date will not necessarily equal the Initial Price
of the PIES. The numbers of shares of Common Stock per PIES specified with
respect to the three provisions of the Exchange Rate definition are hereinafter
referred to as the "Share Components." Any shares of Common Stock delivered by
the Trust to the Holders of the PIES that are not affiliated with the Company
will be free of any transfer restrictions and the Holders of the PIES will be
responsible for the payment of any and all brokerage costs upon the subsequent
sale of such shares. Holders otherwise entitled to receive fractional shares in
respect of their aggregate holdings of
11
<PAGE>
PIES will receive cash in lieu thereof. See "--Delivery of Common Stock and
Reported Securities; No Fractional Shares of Common Stock or Reported
Securities" below. Notwithstanding the foregoing, (i) in the case of certain
dilution events, the Exchange Rate will be subject to adjustment and (ii) in the
case of certain adjustment events, the consideration received by Holders at the
Exchange Date will be cash or Reported Securities (as defined herein), or a
combination of cash and Reported Securities, instead of or in addition to shares
of Common Stock. See "--The Contracts--Dilution Adjustments; Adjustment Events"
below.
It is a fundamental policy of the Trust to invest at least 65% of its
portfolio in the Contracts. The Contracts will comprise approximately % of
the Trust's initial assets. It is also a fundamental policy of the Trust that
the Contracts may not be disposed of during the term of the Trust and that the
Treasury Securities held by the Trust may not be disposed of prior to the
earlier of their respective maturities and the termination of the Trust except
for the partial liquidation of Treasury Securities following acceleration of any
Contract as described below under "--The Treasury Securities." The foregoing
fundamental policies of the Trust may not be changed without the vote of a
majority in interest of the Holders. A "majority in interest of the Holders"
means the lesser of (i) 67% of the PIES represented at a meeting at which more
than 50% of the outstanding PIES are represented and (ii) more than 50% of the
outstanding PIES.
The "Exchange Price" means the average Closing Price per share of Common
Stock on the 20 Trading Days immediately prior to (but not including) the
Exchange Date; provided, however, that if there are not 20 Trading Days for the
Common Stock occurring later than the 60th calendar day immediately prior to,
but not including, the Exchange Date, the Exchange Price shall be defined as the
market value per share of the Common Stock as of the Exchange Date as determined
by a nationally recognized independent investment banking firm retained for this
purpose by the Administrator. The "Closing Price" of any security on any date of
determination means (i) the closing sale price (or, if no closing price is
reported, the last reported sale price) of such security (regular way) on the
NYSE on such date, (ii) if such security is not listed for trading on the NYSE
on any such date, as reported in the composite transactions for the principal
United States securities exchange on which such security is so listed, (iii) if
such security is not so listed on a United States national or regional
securities exchange, as reported by The Nasdaq Stock Market, (iv) if such
security is not so reported, the last quoted bid price for such security in the
over-the-counter market as reported by the National Quotation Bureau or similar
organization or (v) if such security is not so quoted, the average of the
mid-point of the last bid and ask prices for such security from at least three
nationally recognized investment banking firms selected by the Administrator for
such purpose. A "Trading Day" is defined as a day on which the security the
Closing Price of which is being determined (A) is not suspended from trading on
any national or regional securities exchange or association or over-the-counter
market at the close of business and (B) has traded at least once on the national
or regional securities exchange or association or over-the-counter market that
is the primary market for the trading of such security.
For illustrative purposes only, the following chart shows the number of
shares of Common Stock or the amount of cash that a Holder would receive for
each PIES at various Exchange Prices. The chart assumes that there would be no
adjustments to the Exchange Rate by reason of the occurrence of any of the
events described under "--The Contracts--Dilution Adjustments; Adjustment
Events" below, that no Contracts will be accelerated and that either no Sellers
exercise the Cash Delivery Option or all Sellers do. There can be no assurance
that the Exchange Price will be within the range set forth below. Given the
Initial Price of $ per PIES and the Threshold Appreciation Price of
$ , a Holder
12
<PAGE>
would receive at the Exchange Date the following number of shares of Common
Stock or amount of cash (if all Sellers exercise the Cash Delivery Option) per
PIES:
<TABLE>
<CAPTION>
EXCHANGE PRICE NUMBER OF SHARES
OF COMMON STOCK OF COMMON STOCK AMOUNT OF CASH
- ------------------------------------ ------------------------------------ ------------------------------------
<S> <C> <C>
</TABLE>
As the foregoing chart illustrates, if at the Exchange Date, the Exchange
Price is greater than $ , the Trust will be obligated to deliver
shares of Common Stock per PIES, resulting in the PIES Holder receiving
only percent of the appreciation in market value above $ . If at
the Exchange Date, the Exchange Price is greater than $ and less than or
equal to $ , the Trust will be obligated to deliver only a fraction of a
share of Common Stock having a value at the Exchange Price equal to $ ,
resulting in the PIES Holder receiving none of the appreciation in market value.
If at the Exchange Date, the Exchange Price is less than or equal to $ ,
the Trust will be obligated to deliver one share of Common Stock per PIES,
regardless of the market price of such share, resulting in the PIES Holder
realizing the entire loss on the decline in market value of the Common Stock.
The following table sets forth information regarding the distributions to be
received on the Treasury Securities held by the Trust, the portion of each
year's distributions that will constitute a return of capital for U.S. federal
income tax purposes and the amount of original issue discount accruing on the
Treasury Securities with respect to a Holder who acquires its PIES at the issue
price from the Underwriter in the original offering. See "Certain United States
Federal Income Tax Considerations."
<TABLE>
<CAPTION>
ANNUAL GROSS
ANNUAL GROSS DISTRIBUTIONS
DISTRIBUTIONS FROM
FROM TREASURY
TREASURY SECURITIES
YEAR SECURITIES PER PIES
- --------------------------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
1998....................................................................... $ $
1999.......................................................................
2000.......................................................................
2001.......................................................................
</TABLE>
<TABLE>
<CAPTION>
ANNUAL GROSS
INCLUSION OF
ORIGINAL
ANNUAL RETURN OF ISSUE DISCOUNT IN
YEAR CAPITAL PER PIES INCOME PER PIES
- --------------------------------------------------------------------------- ---------------- -------------------
<S> <C> <C>
1998....................................................................... $ $
1999.......................................................................
2000.......................................................................
2001.......................................................................
</TABLE>
The annual distribution of $ per PIES is payable quarterly on each
, , and (or, if any such date is not a Business Day, on
the next succeeding Business Day), commencing , 1998. Quarterly
distributions on the PIES will consist solely of the cash received from the
Treasury Securities. The Trust will not be entitled to any dividends that may be
declared on the Common Stock.
13
<PAGE>
ENHANCED YIELD; LESS POTENTIAL FOR EQUITY APPRECIATION THAN COMMON STOCK; NO
DEPRECIATION PROTECTION
The yield on the PIES is higher than the current dividend yield on the
Common Stock. However, there is no assurance that the yield on the PIES will be
higher than the dividend yield on the Common Stock measured over the term of the
Trust. In addition, the opportunity for equity appreciation from an investment
in the PIES is less than the opportunity for equity appreciation from a direct
investment in the Common Stock for two reasons. First, the Amount Receivable at
the Exchange Date will generally exceed the Initial Price only if the Exchange
Price exceeds the Threshold Appreciation Price of $ per share of Common
Stock. The Threshold Appreciation Price represents an appreciation of % over
the Initial Price. Second, Holders will be entitled to receive, at the Exchange
Date, only % of any appreciation of the value of the Common Stock in excess of
the Threshold Appreciation Price. Moreover, if the Exchange Price is less than
the Initial Price, the value of the Common Stock which Holders will receive at
the Exchange Date will generally be less than the price paid for the PIES. In
addition, because the Exchange Price is generally determined based 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 Exchange Price used to determine the
Amount Receivable at the Exchange Date.
THE COMPANY
{description of the Company}
Holders will not be entitled to rights with respect to the Common Stock
(including, without limitation, voting rights and rights to receive dividends or
other distributions in respect thereof) unless and until such time, if any, as
the Sellers deliver shares of Common Stock to the Trust pursuant to the
Contracts and the Trust has distributed such shares to the Holders.
Attached to this Prospectus is a separate prospectus of the Company which
describes the Company and the Common Stock that may be delivered to the Trust by
the Sellers, and by the Trust to the Holders, at the Exchange Date or upon
earlier acceleration of a Contract.
The shares of Common Stock are traded on the {NYSE}. The following table
sets forth, for the indicated periods, the reported high and low sales prices of
the shares of Common Stock on the {NYSE Composite Tape} and the cash dividends
per share of Common Stock.
<TABLE>
<CAPTION>
PRICE RANGE
----------------------
HIGH LOW DIVIDEND PER SHARE
---------- ---------- ------------------
<S> <C> <C> <C>
1995 $ $ $
1st Quarter.........................................................
2nd Quarter.........................................................
3rd Quarter.........................................................
4th Quarter.........................................................
1996
1st Quarter.........................................................
2nd Quarter.........................................................
3rd Quarter.........................................................
4th Quarter.........................................................
1997
1st Quarter.........................................................
2nd Quarter.........................................................
3rd Quarter.........................................................
4th Quarter.........................................................
</TABLE>
14
<PAGE>
The Company is not affiliated with the Trust, will not receive any of the
proceeds from the sale of the PIES and will have no obligations with respect to
the PIES or the Contracts. This Prospectus relates only to the PIES offered
hereby and does not relate to the Company or the Common Stock. The Company has
filed a registration statement on Form with the Commission with respect to
the shares of Common Stock that may be delivered to the Trust by the Sellers,
and by the Trust to the Holders of PIES, at the Exchange Date or upon earlier
acceleration of a Contract. The prospectus of the Company constituting a part of
such registration statement includes information relating to the Company and
Common Stock, including certain risk factors relevant to an investment in Common
Stock. THE PROSPECTUS OF THE COMPANY IS BEING ATTACHED TO THIS PROSPECTUS AND
DELIVERED TO PROSPECTIVE PURCHASERS OF PIES TOGETHER WITH THIS PROSPECTUS FOR
CONVENIENCE OF REFERENCE ONLY. THE PROSPECTUS OF THE COMPANY DOES NOT CONSTITUTE
A PART OF THIS PROSPECTUS, NOR IS IT INCORPORATED BY REFERENCE HEREIN.
THE CONTRACTS
GENERAL
The Trust will enter into one or more Contracts with the Sellers obligating
each Seller, severally and not jointly, at the Exchange Date to deliver to the
Trust a number of shares of Common Stock equal to the initial number of shares
of Common Stock subject to such Seller's Contract multiplied by the Exchange
Rate.
The purchase price under the Contracts is equal to $ per share of
Common Stock and $ in the aggregate and is payable to the Sellers by the
Trust on the closing of this offering. The purchase price of the Contracts was
arrived at by arm's length negotiations between the Trust and the Sellers taking
into consideration factors including the price, expected dividend level and
volatility of the Common Stock, current interest rates, the term of the
Contracts, current market volatility generally, the collateral security pledged
by the Sellers, the value of other similar instruments and the costs and
anticipated proceeds of the offering of the PIES. All matters relating to the
administration of the Contracts will be the responsibility of either the Trust's
Administrator or Custodian.
Although it is the Sellers' current intention to deliver shares of Common
Stock at the Exchange Date, each Seller may, at its option, deliver cash in lieu
of delivering all, but not less than all, of the shares of Common Stock
otherwise deliverable by it on the Exchange Date (the "Cash Delivery Option"),
except where such delivery would violate applicable state law. The amount of
cash deliverable by a Seller upon the exercise of the Cash Delivery Option will
be equal to the product of the number of shares of Common Stock otherwise
deliverable by such Seller on the Exchange Date multiplied by the Exchange
Price. On or prior to the 25th Business Day prior to the Exchange Date, each of
the Sellers will be obligated to notify the Trust concerning its exercise of the
Cash Delivery Option, and the Trust in turn will notify The Depository Trust
Company and publish a notice in a daily newspaper of national circulation
stating whether the Holders of PIES will receive shares of Common Stock, cash or
a combination thereof and, if a combination of Common Stock and cash, the
relative proportion of each.
DILUTION ADJUSTMENTS; ADJUSTMENT EVENTS
The Exchange Rate is subject to adjustment if the Company shall:
(i) pay a stock dividend or make a distribution, in either case, with
respect to 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;
15
<PAGE>
(iv) issue by reclassification (other than a reclassification pursuant to
clause (ii), (iii), (iv) or (v) of the definition of Adjustment Event
below) of its shares of Common Stock any other shares of Common Stock of
the Company; or
(v) issue rights or warrants (other than rights to purchase Common Stock
pursuant to a plan for the reinvestment of dividends or interest) 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 Market Price
(as defined below) of the Common Stock on the Business Day next following
the record date for the determination of holders of Common Stock entitled
to receive such rights or warrants.
In the case of the events referred to in clauses (i), (ii), (iii) and (iv)
above, the Exchange Rate shall be adjusted by adjusting each of the Share
Components of the Exchange Rate in effect immediately prior to such event so
that the Trust will be entitled to receive at the Exchange Date, with respect to
each Contract, the number of shares of Common Stock (or, in the case of a
reclassification referred to in clause (iv) above, the number of shares of other
shares of common stock of the Company issued pursuant thereto) which it would
have owned or been entitled to receive immediately following such event had the
Exchange Date occurred immediately prior to such event or any record date with
respect thereto.
In the case of the event referred to in clause (v) above, the Exchange Rate
shall be adjusted by multiplying each of the Share Components of the Exchange
Rate in effect on the record date for the issuance of the rights or warrants
referred to in clause (v) above, by a fraction, of which the numerator shall be
(A) the number of shares of Common Stock outstanding on the record date for the
issuance of such rights or warrants plus (B) the number of additional shares of
Common Stock offered for subscription or purchase pursuant to such rights or
warrants, and of which the denominator shall be (x) the number of shares of
Common Stock outstanding on the record date for the issuance of such rights or
warrants plus (y) the number specified in clause (B) above multiplied by the
quotient of the exercise price of such rights or warrants divided by the Market
Price of the Common Stock on the Business Day next following the record date for
the determination of holders of Common Stock entitled to receive such rights or
warrants. To the extent that such rights or warrants expire prior to the
Exchange Date of the PIES and shares of Common Stock are not delivered pursuant
to such rights or warrants prior to such expiration, the Exchange Rate shall be
readjusted to the Exchange Rate which would then be in effect had such
adjustments for the issuance of such rights or warrants been made upon the basis
of delivery of only the number of shares of Common Stock actually delivered
pursuant to such rights or warrants. For purposes of this paragraph, dividends
will be deemed to be paid as of the record date for such dividend.
"Market Price" means, as of any date of determination, the average Closing
Price per share of Common Stock on the 20 Trading Days immediately prior to (but
not including) the date of determination; provided, however, that if there are
not 20 Trading Days for the Common Stock occurring later than the 60th calendar
day immediately prior to, but not including, such date, the Market Price shall
be determined as the market value per share of Common Stock as of such date as
determined by a nationally recognized investment banking firm retained for such
purpose by the Administrator.
All adjustments to the Exchange Rate will be calculated to the nearest
1/10,000th of a share of Common Stock (or, if there is not a nearest 1/10,000th
of a share, to the next higher 1/10,000th of a share). No adjustment in the
Exchange Rate shall be required unless such adjustment would require an increase
or decrease of at least one percent therein; provided, however, that any
adjustments which by reason of the foregoing are not required to be made shall
be carried forward and taken into account in any subsequent adjustment.
If an adjustment is made to the Exchange Rate pursuant to clauses (i), (ii),
(iii), (iv) or (v) above, an adjustment will also be made to the Exchange Price
as such term is used to determine which of the clauses (a), (b) or (c) of the
Exchange Rate definition will apply at maturity and for purposes of calculating
the fraction in subclause (b)(i) of the definition of Exchange Rate. The
required adjustment to the Exchange Price shall be made at the Exchange Date by
multiplying the Exchange Price by the cumulative number or
16
<PAGE>
fraction determined pursuant to the Exchange Rate adjustment procedure described
above. In the case of the reclassification of any shares of Common Stock into
any shares of common stock of the Company other than the Common Stock, such
common stock shall be deemed shares of Common Stock for all purposes. Each such
adjustment to the Exchange Rate and the Exchange Price shall be made
successively.
In the event of:
(i) any dividend or distribution by the Company to all holders of Common
Stock of evidences of its indebtedness or other assets (excluding (1) any
dividends or distributions referred to in clause (i) of the first
paragraph under the caption "--Dilution Adjustments; Adjustment Events,"
(2) any common stock issued pursuant to a reclassification referred to in
clause (iv) of such paragraph and (3) any Ordinary Cash Dividends (as
defined below)) or any issuance by the Company to all holders of Common
Stock of rights or warrants to subscribe for or purchase any of its
securities (other than rights or warrants referred to in clause (v) of
the first paragraph under such caption;
(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
corporation);
(iii) any sale, transfer, lease or conveyance to another corporation of the
property of the Company as an entirety or substantially as an entirety;
(iv) any statutory exchange of securities of the Company with another
corporation (other than in connection with a merger or acquisition); or
(v) any liquidation, dissolution or winding up of the Company (any such
event, an "Adjustment Event"),
each Seller will be obligated to deliver at the Exchange Date, in lieu of or (in
the case of an Adjustment Event described in clause (i) above) in addition to,
shares of Common Stock as described above, cash in an amount equal to (A) if the
Exchange Price is greater than the Threshold Appreciation Price, 0.
multiplied by the Transaction Value (as defined below), (B) if the Exchange
Price is less than or equal to the Threshold Appreciation Price but is greater
than the Initial Price, the product of (x) the Initial Price divided by the
Exchange Price multiplied by (y) the Transaction Value and (C) if the Exchange
Price is less than or equal to the Initial Price, the Transaction Value.
Following an Adjustment Event, the Exchange Price, as such term is used in this
paragraph and throughout the definition of Exchange Rate, shall be deemed to
equal (A) if shares of Common Stock are outstanding at the Exchange Date, the
Exchange Price of the Common Stock, as adjusted pursuant to the method set forth
in the preceding paragraph, otherwise zero, plus (B) the Transaction Value.
Notwithstanding the foregoing, with respect to any securities received in an
Adjustment Event that:
(A) are (i) listed on a United States national securities exchange, (ii)
reported on a United States national securities system subject to last
sale reporting, (iii) traded in the over-the-counter market and reported
on the National Quotation Bureau or similar organization or (iv) for
which bid and ask prices are available from at least three nationally
recognized investment banking firms; and
(B) are either (x) perpetual equity securities or (y) non-perpetual equity
or debt securities with a stated maturity after the Exchange Date of the
PIES ("Reported Securities"), each Seller is obligated, in lieu of
delivering cash in respect of such Reported Securities received in an
Adjustment Event, to deliver a number of such Reported Securities with a
value equal to all cash amounts that would otherwise be deliverable in
respect of Reported Securities received in such Adjustment Event, as
determined in accordance with clause (ii) of the definition of
Transaction Value, unless such Seller has made an election to exercise
the Cash Delivery Option or such
17
<PAGE>
Reported Securities have not yet been delivered to the holders entitled
thereto following such Adjustment Event or any record date with respect
thereto.
If a Seller delivers any Reported Securities, upon distribution thereof by the
Trust to Holders of PIES, each Holder of a PIES will be responsible for the
payment of any and all brokerage and other transaction costs upon the sale of
such Reported Securities. If, following any Adjustment Event, any Reported
Security ceases to qualify as a Reported Security, then (x) the Sellers shall
not deliver such Reported Security but instead shall deliver an equivalent
amount of cash and (y) notwithstanding clause (ii) of the definition of
Transaction Value, the Transaction Value of such Reported Security shall mean
the fair market value of such Reported Security on the date such security ceases
to qualify as a Reported Security, as determined by a nationally recognized
investment banking firm retained for this purpose by the Administrator.
Because each PIES represents the Holder's right to receive a pro rata
portion of the Common Stock or other assets delivered by the Sellers pursuant to
the Contracts, the amount of cash and/or the kind and number of securities which
the Holders of PIES are entitled to receive after an Adjustment Event shall be
subject to adjustment following the date of such Adjustment Event in the same
manner and upon the occurrence of the same type of events as described under
this caption "--Dilution Adjustments; Adjustment Events" with respect to Common
Stock and the Company.
For purposes of the foregoing, the term "Ordinary Cash Dividend" means, with
respect to any consecutive 365-day period, any dividend with respect to Common
Stock paid in cash to the extent that the amount of such dividend, together with
the aggregate amount of all other dividends on the Common Stock paid in cash
during such 365-day period, does not exceed on a per share basis % of the
average of the Closing Prices of the Common Stock over such 365-day period.
The term "Transaction Value" means:
(i) for any cash received in any Adjustment Event, the amount of cash
received per share of Common Stock;
(ii) for any Reported Securities received in any Adjustment Event, an amount
equal to (x) the average Closing Price per security of such Reported
Securities on the 20 Trading Days immediately prior to (but not
including) the Exchange Date multiplied by (y) the number of such
Reported Securities (as adjusted pursuant to the second preceding
paragraph) received per share of Common Stock; and
(iii) for any property received in any Adjustment Event other than cash or
such Reported Securities, an amount equal to the fair market value of the
property received per share of Common Stock on the date such property is
received, as determined by a nationally recognized investment banking
firm retained for this purpose by the Administrator;
provided, however, that in the case of clause (ii), (x) with respect to
securities that are Reported Securities by virtue of only clause (iv) of the
definition of Reported Securities above, Transaction Value with respect to any
such Reported Security means the average of the mid-point of the last bid and
ask prices for such Reported Security as of the Exchange Date from each of at
least three nationally recognized investment banking firms retained for such
purpose by the Administrator multiplied by the number of such Reported
Securities (as adjusted pursuant to the method set forth in the third preceding
paragraph) received per share of Common Stock and (y) with respect to all other
Reported Securities, if there are not 20 Trading Days for any particular
Reported Security occurring after the 60th calendar day immediately prior to,
but not including, the Exchange Date, Transaction Value with respect to such
Reported Security means the market value per security of such Reported Security
as of the Exchange Date as determined by a nationally recognized investment
banking firm retained for such purpose by the Administrator multiplied by the
number of such Reported Securities (as adjusted pursuant to the method set forth
in the third preceding paragraph) received per share of Common Stock. For
purposes of calculating the Transaction Value, any cash, Reported Securities or
other property receivable in an Adjustment Event shall be deemed to have
18
<PAGE>
been received immediately prior to the close of business on the record date for
such Adjustment Event or, if there is no record date for such Adjustment Event,
immediately prior to the close of business on the effective date of such
Adjustment Event.
No adjustments will be made for certain other events, such as offerings of
Common Stock by the Company for cash or in connection with acquisitions.
Likewise, no adjustments will be made for any sales of Common Stock by the
Sellers.
Each Seller is required under its Contract to notify the Trust promptly upon
becoming aware that an event that requires an adjustment to the Exchange Rate or
an Adjustment Event is pending or has occurred. The Trust is required, within
ten Business Days following the occurrence of an event that requires an
adjustment to the Exchange Rate or the occurrence of an Adjustment Event (or, in
either case, if the Trust is not aware of such occurrence, as soon as
practicable after becoming so aware), to provide written notice to each Holder
of PIES of the occurrence of such event including a statement in reasonable
detail setting forth the method by which the adjustment to the Exchange Rate or
change in the consideration to be received by Holders of PIES following the
Adjustment Event was determined and setting forth the revised Exchange Rate or
consideration, as the case may be. In respect of any adjustment to the Exchange
Price, such notice will only disclose the factor by which the Exchange Price is
to be multiplied in order to determine which clause of the Exchange Rate
definition will apply at the Exchange Date.
COLLATERAL REQUIREMENTS OF THE CONTRACTS; ACCELERATION
Each Seller's obligations under its Contract will be secured by a security
interest in one share of Common Stock for each share of Common Stock subject to
such Contract (subject to adjustment in accordance with the dilution provisions
of such Contract), pursuant to a collateral agreement (each, a "Collateral
Agreement") among such Seller, the Trust and , as collateral agent (the
"Collateral Agent").
Unless a Seller is in default in its obligations under the Collateral
Agreement, the Seller will be permitted to substitute for the pledged 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 for
shares of Common Stock will be required to have an aggregate market value at the
time of substitution and at daily mark-to-market valuations thereafter of not
less than 150% (or, from and after any Insufficiency Determination that shall
not be cured by the close of business on the next Business Day thereafter, as
described below, 200%) of the product of the market price of the Common Stock at
the time of each valuation times the number of shares of Common Stock for which
such obligations are being substituted. Each Collateral Agreement will provide
that, in the event of an Adjustment Event, the relevant Seller will pledge as
alternative collateral any Reported Securities, plus cash in an amount at least
equal to the Transaction Value of any consideration other than Reported
Securities, received by it in respect of the maximum number of shares of Common
Stock subject to such Seller's Contract at the time of the Adjustment Event. The
number of Reported Securities required to be pledged shall be subject to
adjustment if any event requiring a dilution adjustment under the Contracts
shall occur. Each Seller will be permitted to substitute U.S. Government
obligations for Reported Securities or cash pledged after any Adjustment Event.
Any U.S. Government obligations so substituted will be required to have an
aggregate market value at the time of substitution and at daily mark-to-market
valuations thereafter of: (A) in the case of obligations substituted for pledged
Reported Securities, not less than 150% (or, from and after any Insufficiency
Determination that shall not be cured by the close of business on the next
Business Day thereafter, as described below, 200%) of the product of the market
price per security of Reported Securities at the time of each valuation times
the number of Reported Securities for which such obligations are being
substituted; and (B) in the case of obligations substituted for pledged cash,
not less than 105% of the amount of cash for which such obligations are being
substituted. The Collateral Agent will promptly pay over to each Seller any
dividends, interest, principal or other payments received by the Collateral
19
<PAGE>
Agent in respect of any collateral, including any substitute collateral, unless
the relevant Seller is in default of its obligations under its Collateral
Agreement, or unless the payment of such amount to the relevant Seller would
cause the collateral to become insufficient under the Collateral Agreement.
If the Collateral Agent shall determine (an "Insufficiency Determination")
that U.S. Government obligations pledged by any Seller as substitute collateral
fail to meet the foregoing requirements at any valuation, or that such Seller
has failed to pledge additional collateral required as a result of a dilution
adjustment increasing the maximum number of shares of Common Stock or Reported
Securities subject to such Contract, and such failure shall not be cured by the
close of business on the next Business Day after such Seller has been notified
in writing of such determination, then, unless a Collateral Event of Default (as
defined below) under such Collateral Agreement shall have occurred and be
continuing, the Collateral Agent shall commence (i) sales of the collateral
consisting of U.S. Government obligations and (ii) purchases, using the proceeds
of such sales, of shares of Common Stock or Reported Securities, in an amount
sufficient to cause the collateral to meet the requirements under such
Collateral Agreement. The Collateral Agent shall discontinue such sales and
purchases if at any time the Collateral Event of Default under such Collateral
Agreement shall have occurred and be continuing.
The occurrence of a Collateral Event of Default (as defined below) under any
Collateral Agreement, or the bankruptcy or insolvency of any Seller, will cause
an automatic acceleration of such Seller's obligations under its Contract. A
"Collateral Event of Default" under any Collateral Agreement shall mean, at any
time, (A) if no U.S. Government obligations shall be pledged as substitute
collateral at such time, failure of the collateral to consist of at least the
maximum number of shares of Common Stock subject to the relevant Seller's
Contract at such time (or, if an Adjustment Event shall have occurred at or
prior to such time, failure of the collateral to include the amount of cash and
the maximum number of any Reported Securities required to be pledged as
described above); (B) if any U.S. Government obligations shall be pledged as
substitute collateral for shares of Common Stock (or Reported Securities) at
such time, failure of such U.S. Government obligations to have a market value at
such time of at least 105% of the market price of the Common Stock (or the
then-current market price per security of Reported Securities, as the case may
be) times the difference between (x) the maximum number of shares of Common
Stock (or Reported Securities) subject to the relevant Seller's Contract at such
time and (y) the number of shares of Common Stock (or Reported Securities)
pledged as collateral at such time; and (C) if any U.S. Government obligations
shall be pledged as substitute collateral for any cash at such time, failure of
such U.S. Government obligations to have a market value at such time of at least
105% of such cash, if such failure shall not be cured within one Business Day
after notice thereof is delivered to the relevant Seller.
Except as described below, upon acceleration of any Seller's Contract, the
Collateral Agent will to the extent permitted by law distribute to the Trust for
distribution pro rata to the Holders, with respect to such Seller's Contract,
the maximum number of shares of Common Stock subject to such Contract, in the
form of the shares of Common Stock then pledged by that Seller, or cash
generated from the liquidation of U.S. Government obligations then pledged by
that Seller, or a combination thereof (or, after an Adjustment Event, in the
form of Reported Securities then pledged, cash then pledged, cash generated from
the liquidation of U.S. Government obligations then pledged, or a combination
thereof). In addition, in the event that by the Exchange Date any substitute
collateral has not been replaced by shares of Common Stock (or, after an
Adjustment Event, cash or Reported Securities) sufficient to meet the
obligations under any Contract, the Collateral Agent will distribute to the
Trust for distribution pro rata to the Holders, with respect to such Contract,
the market value of the shares of Common Stock required to be delivered
thereunder, in the form of any shares of Common Stock then pledged by the
relevant Seller plus cash generated from the liquidation of U.S. Government
obligations then pledged by such Seller (or, after an Adjustment Event, the
market value of the alternative consideration required to be delivered
thereunder, in the form of any Reported Securities then pledged, plus any cash
then pledged, plus cash generated from the liquidation of U.S. Government
obligations then pledged).
20
<PAGE>
If upon acceleration of a Seller's Contract, such Seller is the subject of a
proceeding under the U.S. Bankruptcy Code or similar proceeding, the Collateral
Agent will, to the extent permitted by law, distribute to the Trust for
distribution pro rata to the Holders, with respect to such Seller's Contract, a
number of shares of Common Stock, in the form of the shares of Common Stock then
pledged by that Seller, or cash generated from the liquidation of U.S.
Government obligations then pledged by that Seller, or a combination thereof
(or, after an Adjustment Event, in the form of Reported Securities then pledged,
cash then pledged, cash generated from the liquidation of U.S. Government
obligations then pledged, or a combination thereof), with an aggregate value
equal to such Seller's "Acceleration Value." The Acceleration Value will be
determined by the Administrator on the basis of quotations from independent
dealers. Each quotation will be for an amount that would be paid to the relevant
dealer in consideration of an agreement that would have the effect of preserving
the Trust's rights to receive the number of shares of Common Stock (or, after an
Adjustment Event, Reported Securities, cash or a combination thereof) subject to
such Seller's Contract on the Exchange Date. The Administrator will request
quotations from four nationally recognized independent dealers on or as soon as
reasonably practicable following the date of acceleration. If four quotations
are provided, the Acceleration Value will be the arithmetic mean of the two
quotations remaining after disregarding the highest and lowest quotations. If
two or three quotations are provided, the Acceleration Value will be the
arithmetic mean of such quotations. If one quotation is provided, the
Acceleration Value will be such quotation. If no quotations are provided, the
Acceleration Value will be the aggregate value of the number of shares of Common
Stock (or, after an Adjustment Event, Reported Securities, cash or a combination
thereof) that would be required to be delivered under such Seller's Contract on
the date of acceleration if the Exchange Date were redefined to be the date of
acceleration.
DESCRIPTION OF SELLERS
The Sellers may be institutional investors or individuals or trusts,
foundations or other entities through which such individuals hold their shares
of Common Stock. A brief description of the Sellers will be added by amendment.
Specific information on the holdings of the Sellers, as required by the
Securities Act of 1933, as amended (the "Securities Act"), will be included in
the prospectus of the Company attached hereto.
THE TREASURY SECURITIES
The Trust will purchase and hold a series of zero-coupon ("stripped") U.S.
Treasury securities with such face amounts and maturities as will provide
Holders with a quarterly distribution of $ per PIES on each Distribution
Date during the term of the Trust. Up to % of the Trust's total assets may be
invested in these Treasury Securities. If any Contract is accelerated, a
proportionate amount of the Treasury Securities of each maturity then held in
the Trust will be liquidated by the Administrator and the proceeds thereof
distributed pro rata to the Holders, together with proceeds from the
acceleration of such Contract. See "--The Contracts--Collateral Requirements of
the Contracts; Acceleration" above and "-- Trust Termination" below.
TEMPORARY INVESTMENTS
For cash management purposes, the Trust may invest the proceeds of the
Treasury Securities held by the Trust and any other cash held by the Trust in
short-term obligations of the U.S. Government maturing no later than the
Business Day preceding the next following Distribution Date.
TRUST TERMINATION
The Trust will terminate automatically on or shortly after the Exchange Date
or following the distribution of all Trust assets to the Holders, if earlier.
21
<PAGE>
If all of the Contracts remaining in effect at any time are accelerated,
then any Treasury Securities then held by the Trust will be liquidated by the
Administrator and the proceeds thereof distributed pro rata to the Holders,
together with all shares of Common Stock subject to each Seller's Contract that
are pledged by each Seller, or cash generated from the liquidation of U.S.
Government obligations then pledged by each Seller, or a combination thereof
(or, after an Adjustment Event, in the form of Reported Securities then pledged,
cash then pledged, cash generated from the liquidation of U.S. Government
obligations then pledged, or a combination thereof) or in certain cases, the
Acceleration Value of a Seller's Contract. In such event, the term of the Trust
will expire. See "--The Contracts--Collateral Requirements of the Contracts;
Acceleration" above.
DELIVERY OF COMMON STOCK AND REPORTED SECURITIES; NO FRACTIONAL SHARES OF COMMON
STOCK OR REPORTED SECURITIES
Common Stock and Reported Securities delivered under the Contracts at the
Exchange Date are expected to be distributed by the Trust to the Holders pro
rata shortly after the Exchange Date, except that no fractional shares of Common
Stock or Reported Securities will be distributed. If more than one PIES shall be
surrendered at one time by the same Holder, the number of full shares of Common
Stock or Reported Securities which shall be delivered upon termination of the
Trust, in whole or in part, as the case may be, shall be computed on the basis
of the aggregate number of PIES so surrendered at the Exchange Date. In lieu of
delivering any fractional share or security, the Trust will sell a number of
shares or securities equal to the total of all fractional shares or securities
that would otherwise be delivered to Holders of all PIES, and each such Holder
will be entitled to receive an amount in cash equal to the pro rata portion of
the proceeds of such sale (which may be at a price lower than the Exchange
Price).
INVESTMENT RESTRICTIONS
It is a fundamental policy of the Trust that the Trust may not:
- purchase any securities or instruments other than the Treasury Securities,
the Contracts and the Common Stock or other assets received pursuant to
the Contracts and, for cash management purposes, short-term obligations of
the U.S. Government;
- issue any securities or instruments except for the PIES;
- make short sales or purchase securities on margin;
- write put or call options;
- borrow money;
- underwrite securities;
- purchase or sell real estate, commodities or commodities contracts; or
- make loans.
It is also a fundamental policy of the Trust that the Contracts may not be
disposed of during the term of the Trust and that (except for a partial
liquidation of Treasury Securities following acceleration of any Contract as
described above under "Investment Objectives and Policies--The Treasury
Securities") the Treasury Securities may not be disposed of prior to the earlier
of their respective maturities and the termination of the Trust.
22
<PAGE>
RISK FACTORS RELATING TO PIES
INTERNAL MANAGEMENT; NO PORTFOLIO MANAGEMENT
The Trust will be internally managed by its Trustees and will not have any
separate investment adviser. It is a fundamental policy of the Trust that the
Contracts may not be disposed of during the term of the Trust and that the
Treasury Securities held by the Trust may not be disposed of prior to the
earlier of their respective maturities and the termination of the Trust, except
for a partial liquidation of Treasury Securities following acceleration of any
Contract. As a result, the Trust will continue to hold the Contracts despite any
significant decline in the market price of the Common Stock or adverse changes
in the financial condition of the Company (or, after an Adjustment Event,
comparable developments affecting any Reported Securities or the issuer
thereof). The Trust will not be managed like a typical closed-end investment
company.
FIXED YIELD
The yield on the PIES is higher than the current dividend yield on the
Common Stock. However, there is no assurance that the yield on the PIES will be
higher than the dividend yield on the Common Stock measured over the term of the
Trust.
AMOUNT RECEIVABLE AT THE EXCHANGE DATE BASED ON COMMON STOCK PRICE; NO
DEPRECIATION PROTECTION
The Amount Receivable at the Exchange Date is not fixed, but is based on the
market price of the Common Stock as reflected in the Exchange Rate. There can be
no assurance that the Amount Receivable at the Exchange Date will be equal to or
greater than the Initial Price of the PIES. If the Exchange Price is less than
the Initial Price, the Amount Receivable at the Exchange Date will generally be
less than the amount paid for the PIES. In that case an investment in PIES will
result in a loss and, if the Company became insolvent or bankrupt, could result
in a total loss. Holders of the PIES, therefore, bear the full risk of a decline
in the value of the Common Stock prior to the Exchange Date.
OPPORTUNITY FOR EQUITY APPRECIATION LESS THAN COMMON STOCK
The opportunity for equity appreciation from an investment in the PIES is
less than the opportunity for equity appreciation from a direct investment in
the Common Stock for two reasons. First, the Amount Receivable at the Exchange
Date will generally exceed the Initial Price only if the Exchange Price exceeds
the Threshold Appreciation Price of $ per share of Common Stock. The
Threshold Appreciation Price represents an appreciation of % over the Initial
Price. Second, Holders will be entitled to receive, at the Exchange Date, only
% of any appreciation of the value of the Common Stock in excess of the
Threshold Appreciation Price. See "Investment Objectives and Policies--Trust
Assets" for an illustration of the Amount Receivable at the Exchange Date that a
PIES Holder would receive at various Exchange Prices. Because the market price
of the Common Stock is subject to market fluctuations, the Amount Receivable at
the Exchange Date may be more or less than the Initial Price of the PIES. In
addition, because the Exchange Price is generally 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 Exchange Price used to determine the Amount
Receivable at the Exchange Date.
UNPREDICTABILITY OF MARKET PRICE FOR COMMON STOCK
The market price of the PIES at any time will be affected primarily by
changes in the price of the Common Stock. It is impossible to predict whether
the price of the Common Stock will rise or fall. Trading prices of the Common
Stock will be influenced by the Company's financial condition, results of
operations and prospects and by complex and interrelated political, economic,
financial and other factors that can affect the capital markets generally, the
stock exchange on which the Common Stock is traded and the market segment of
which the Company is a part. See the prospectus relating to the Company and to
the
23
<PAGE>
Common Stock attached to this Prospectus. Any market that develops for the PIES
is likely to influence and be influenced by the market for Common Stock. For
example, the price of the Common Stock could become more volatile and could be
depressed by investors' anticipation of the potential distribution into the
market of substantial additional amounts of Common Stock at the termination of
the Trust, by possible sales of the Common Stock by investors who view the PIES
as a more attractive means of equity participation in the Company and by hedging
or arbitrage trading activity that may develop involving the PIES and the Common
Stock. Trading prices of the Common Stock also may be influenced if any of the
Sellers or another principal shareholder of the Company hereafter issues
securities with terms similar to those of the PIES or otherwise transfers shares
of the Common Stock. As of the date hereof, the Sellers held an aggregate of
shares of Common Stock, shares of which ( shares if the
Underwriter's over allotment option is exercised in full) the Sellers may
deliver to the Trust at the Exchange Date.
POTENTIAL DILUTION OF COMMON STOCK
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, certain other actions of
the Company that modify its capital structure and certain other transactions
involving the Company. See "Investment Objectives and Policies--The
Contracts--Dilution Adjustments; Adjustment Events." Such number of shares to be
received by Holders will 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. Because of the relationship of the number
of shares of Common Stock to be received pursuant to the Contracts to the price
of the Common Stock, such other events may adversely affect the trading price of
the PIES. There can be no assurance that the Company will not make offerings of
Common Stock or as to the amount of such offerings, if any, nor that the Company
will not take such other action in the future.
NO RIGHTS AS STOCKHOLDERS OF THE COMPANY
Holders of the PIES will not be entitled to any rights with respect to the
Common Stock (including, without limitation, voting rights (including voting
rights in respect of Company transactions, such as an acquisition of the
Company), rights to respond to tender offers and rights to receive any dividends
or other distributions in respect thereof) unless and until such time, if any,
as the Sellers deliver shares of Common Stock to the Trust pursuant to the
Contracts and the Trust has distributed such shares to the Holders.
NO OBLIGATIONS ON THE PART OF THE COMPANY WITH RESPECT TO THE PIES OR THE
CONTRACTS
The Company has no obligations with respect to the PIES, the Contracts or
the Amount Receivable at the Exchange Date, including any obligation to take the
needs of the Trust or of Holders of the PIES into consideration for any reason.
The Company will not receive any of the proceeds of the offering of the PIES
made hereby and is not responsible for, and has not participated in, the
determination of the time of sale of, quantities of or prices for the PIES to be
issued or the determination or calculation of the Amount Receivable at the
Exchange Date. The Company is not involved with the administration or trading of
the PIES.
NO PRIOR MARKET FOR THE PIES
The PIES are innovative securities and have no trading history. It is not
possible to predict how the PIES will trade in the secondary market or whether
such market will be liquid. The Underwriter currently intends, but is not
obligated, to make a market in the PIES and any such market-making may be
discontinued at any time in the sole discretion of the Underwriter without
notice. There can be no assurance that a secondary market will develop or, if a
secondary market does develop, that it will provide the Holders of the PIES with
liquidity of investment or that it will continue for the life of the PIES.
24
<PAGE>
The Trust will make application to list the PIES on the NYSE. Assuming the
acceptance of such application, there can be no assurance that the PIES will not
later be delisted or that trading in the PIES on the NYSE 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 PIES on another national securities exchange or
for quotation on another trading market. If the PIES are not listed or traded on
any securities exchange or trading market, or if trading of the PIES is
suspended, pricing information for the PIES may be more difficult to obtain, and
the price and liquidity of the PIES may be adversely affected.
NET ASSET VALUE
The Trust is a newly organized closed-end investment company with no
previous operating history. Shares of closed-end investment companies frequently
trade at a discount from their net asset value, which is a risk separate and
distinct from the risk that the Trust's net asset value will decrease. The Trust
cannot predict whether the PIES will trade at, below or above their net asset
value. The risk of purchasing investments that might trade at a discount is more
pronounced for investors who wish to sell their investments in a relatively
short period of time after completion of the Trust's initial public offering
because for those investors realization of a gain or loss on their investments
is likely to be more dependent upon the existence of a premium or discount than
upon portfolio performance. The PIES are not subject to redemption prior to the
Exchange Date or the earlier termination of the Trust.
NON-DIVERSIFIED STATUS
The Trust is considered non-diversified under the Investment Company Act,
which means that the Trust is not limited in the proportion of its assets that
may be invested in the obligations of a single issuer. Because the only
securities held or received by the Trust will be the Treasury Securities and the
Contracts or other assets subject to the Contracts, the Trust may be subject to
greater risk than would be the case for an investment company with more
diversified investments.
UNCERTAINTY OF FEDERAL INCOME TAX CONSEQUENCES
No statutory, judicial or administrative authority directly addresses the
characterization of the PIES or instruments similar to the PIES for United
States federal income tax purposes. As a result, significant aspects of the
United States federal income tax consequences of an investment in the PIES are
not certain. No ruling is being requested from the Internal Revenue Service with
respect to the PIES and no assurance can be given that the Internal Revenue
Service will agree with the conclusions expressed under "Certain United States
Federal Income Tax Considerations."
RISK FACTORS RELATING TO THE COMPANY
Investors in the PIES should carefully consider the information in the
prospectus of the Company attached hereto, including the information contained
therein under "Risk Factors."
RISK RELATING TO BANKRUPTCY OF THE SELLERS
It is possible that the Sellers would be the subject of proceedings under
the U.S. Bankruptcy Code. The Trust believes that the Contracts constitute
"securities contracts" for purposes of the U.S. Bankruptcy Code, liquidation of
which in accordance with section 555 thereof would not be subject to such code's
automatic stay provisions in the event of the bankruptcy of the Sellers. It is,
however, possible that the liquidation of the Contracts will be determined not
to qualify for section 555 treatment. Proceedings under the U.S. Bankruptcy Code
in respect of a Seller may thus cause a delay in settlement of such Seller's
Contract, or otherwise subject such Contract to such proceedings, which could
adversely affect the timing of settlement and could impair the Trust's ability
to distribute the Common Stock or other assets subject to such Contract and the
related Collateral Agreement to the Holders on a timely basis and, as a result,
could adversely affect the amount received by the Holders in respect of the PIES
and/or timing of such receipt.
25
<PAGE>
NET ASSET VALUE
The net asset value of the portfolio will be calculated by the Administrator
no less frequently than quarterly by dividing the value of the net assets of the
Trust (the value of its assets less its liabilities) by the total number of PIES
outstanding. The Trust's net asset value will be published semi-annually as part
of the Trust's semi-annual report to Holders and at such other times as the
Trustees may determine. The Treasury Securities held by the Trust will be valued
at the mean between the last current bid and asked prices or, if quotations are
not available, as determined in good faith by the Trustees. Short-term
investments having a maturity of 60 days or less will be valued at cost with
accrued interest or discount earned included in interest to be received. The
Contracts will be valued at the mean of the bid prices received by the Trust
from at least three independent broker-dealer firms unaffiliated with the Trust
who are in the business of making bids on financial instruments similar to the
Contracts and with terms comparable thereto. In the event that the Trust (acting
through the Administrator) is unable to obtain valuations from three independent
broker-dealer firms, as required by the preceding sentence, on a timely basis or
without unreasonable effort or expense, the Contracts shall be valued at the
median of bid prices received from two such broker-dealer firms. In the event
that the Trust (acting through the Administrator) is unable to obtain a
valuation for the Contracts that it believes to be reasonable through the above
method, valuation shall be established at a level deemed to be fair and
reflective of the market value for the Contracts based on all appropriate
factors relevant to the value of the Contracts as set forth in pricing
guidelines adopted by the Trustees.
DESCRIPTION OF THE PIES
Each PIES represents an equal proportional interest in the Trust. Upon
liquidation of the Trust, Holders are entitled to share pro rata in the net
assets of the Trust available for distribution. PIES have no preemptive,
redemption or conversion rights. The PIES, when issued and outstanding, will be
fully paid and nonassessable. The only securities that the Trust is authorized
to issue are the PIES offered hereby and those sold to the initial Holder
referred to below. See "Underwriting."
Holders are entitled to one vote for each PIES 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 Lehman
Brothers as the initial Holder of the Trust. The Trust intends to hold annual
meetings as required by the rules of the NYSE. The Trustees may call special
meetings of Holders for action by Holder vote as may be required by either the
Investment Company Act or the Declaration of Trust. The Holders have the right,
upon the declaration in writing or vote of more than two-thirds of the
outstanding PIES, to remove a Trustee. The Trustees will call a meeting of
Holders to vote on the removal of a Trustee upon the written request of the
record Holders of 10% of the PIES or to vote on other matters upon the written
request of the record Holders of 51% of the PIES (unless substantially the same
matter was voted on during the preceding 12 months). The Trustees shall
establish, and notify the Holders in writing of, the record date for each such
meeting, which shall be not less than 10 nor more than 50 days before the
meeting date. Holders at the close of business on the record date will be
entitled to vote at the meeting. The Trust will also assist in communications
with other Holders as required by the Investment Company Act.
BOOK-ENTRY SYSTEM
The PIES will be issued in the form of one or more global securities (the
"Global Securities") deposited with The Depository Trust Company (the
"Depositary") and registered in the name of a nominee of the Depositary.
The Depositary has advised the Trust and the Underwriter as follows: The
Depositary is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code
26
<PAGE>
and a "clearing agency" registered pursuant to Section 17A of the Exchange Act.
The Depositary was created to hold securities of persons who have accounts with
the Depositary ("participants") and to facilitate the clearance and settlement
of securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of certificates. Such participants
include securities brokers and dealers, banks, trust companies and clearing
corporations. Indirect access to the Depositary's book-entry system is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly.
Upon the issuance of a Global Security, the Depositary or its nominee will
credit the respective PIES represented by such Global Security to the accounts
of participants. The accounts to be credited shall be designated by the
Underwriter. Ownership of beneficial interests in such Global Securities will be
limited to participants or persons that may hold interests through participants.
Ownership of beneficial interests by participants in such Global Securities will
be shown on, and the transfer of those ownership interests will be effected only
through, records maintained by the Depositary or its nominee for such Global
Securities. Ownership of beneficial interests in such Global Securities by
persons that hold through participants will be shown on, and the transfer of
that ownership interest within such participant will be effected only through,
records maintained by such participant. The laws of such jurisdictions require
that certain purchasers of securities take physical delivery of such securities
in definitive form. Such limits and such laws may impair the ability to transfer
beneficial interests in a Global Security.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the PIES. Except
as set forth below, owners of beneficial interests in such Global Securities
will not be entitled to have the PIES registered in their names and will not
receive or be entitled to receive physical delivery of the PIES in definitive
form and will not be considered the owners or holders thereof.
Shares of Common Stock or other assets deliverable in respect of, and any
quarterly distributions on, PIES registered in the name of or held by the
Depositary or its nominee will be made to the Depositary or its nominee, as the
case may be, as the registered owner or the holder of the Global Security. None
of the Trust, any Trustee, the Paying Agent, the Administrator or the Custodian
for the PIES will have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interests in a Global Security or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
The Trust expects that the Depositary, upon receipt of any payment in
respect of a permanent Global Security, will credit immediately participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Security as shown on the
records of the Depositary. The Trust also expects that payments by participants
to owners of beneficial interests in such Global Security held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in "street name," and will be the responsibility of such
participants.
A Global Security may not be transferred except as a whole by the Depositary
to a nominee or a successor of the Depositary. If the Depositary is at any time
unwilling or unable to continue as depositary and a successor depositary is not
appointed by the Trust within ninety days, the Trust will issue PIES in
definitive registered form in exchange for the Global Security representing such
PIES. In that event, an owner of a beneficial interest in a Global Security will
be entitled to physical delivery in definitive form of PIES represented by such
Global Security equal in number to that represented by such beneficial interest
and to have such PIES registered in its name.
27
<PAGE>
MANAGEMENT AND ADMINISTRATION OF THE TRUST
TRUSTEES
The Trust will be internally managed by the Trustees, none of whom is an
"interested person" of the Trust as defined in the Investment Company Act, and
will not have an investment adviser. Under the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), applicable to grantor trusts, the
Trustees will not have the power to vary the investments held by the Trust. It
is a fundamental policy of the Trust that the Contracts may not be disposed of
during the term of the Trust and that the Treasury Securities held by the Trust
may not be disposed of prior to the earlier of their respective maturities and
the termination of the Trust, except for a partial liquidation of Treasury
Securities following acceleration of any Contract.
The names of the persons who have been elected by Lehman Brothers, the
initial Holder of the Trust, to serve as the Trustees are set forth below. The
positions and the principal occupations of the individual Trustees during the
past five years are also set forth below.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME, AGE AND ADDRESS TITLE DURING PAST FIVE YEARS
- ------------------------------------ ------------------------------------ ------------------------------------
<S> <C> <C>
</TABLE>
Each Trustee who is not a director, officer or employee of the Underwriter
or the Administrator, or of any affiliate thereof, will be paid by Lehman
Brothers (which will be reimbursed by the Sellers), in respect of its annual fee
and anticipated out-of-pocket expenses, a one-time, up-front fee of $ .
The Trust's Managing Trustee will also receive an additional up-front fee of
$ 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 , as Trust
administrator (the "Administrator") pursuant to an administration agreement (the
"Administration Agreement"). Under the Administration Agreement, the Trustees
have delegated most of their operational duties to the Administrator, including
without limitation, the duties to: (i) receive invoices for and pay, or cause to
be paid, all expenses incurred by the Trust; (ii) with the approval of the
Trustees, engage legal and other professional advisors (other than the
independent public accountants for the Trust); (iii) instruct the Paying Agent
to pay distributions on PIES as described herein; (iv) prepare and mail, file or
publish all notices, proxies, reports, tax returns and other communications and
documents, and keep all books and records, for the Trust; (v) at the direction
of the Trustees, institute and prosecute legal and other appropriate proceedings
to enforce the rights and remedies of the Trust; and (vi) make all necessary
arrangements with respect to meetings of Trustees and any meetings of holders of
PIES. The Administrator will not, however, select the independent public
accountants for the Trust or sell or otherwise dispose of the Trust assets
(except in connection with an acceleration of the Contracts, or the settlement
of the Contracts at the Exchange Date, and upon termination of the Trust).
The Administration Agreement may be terminated by either the Trust or the
Administrator upon 60 days' prior written notice, except that no termination
shall become effective until a successor Administrator has been chosen and has
accepted the duties of the Administrator.
28
<PAGE>
Except for its roles as Administrator, custodian, paying agent, registrar
and transfer agent of the Trust, and except for its role as Collateral Agent
under the Collateral Agreements, has no other affiliation with, and is not
engaged in any other transactions with, the Trust.
The address of the Administrator is .
CUSTODIAN
The Trust's custodian (the "Custodian") is pursuant to a custodian
agreement (the "Custodian Agreement"). In the event of any termination of the
Custodian Agreement by the Trust or the resignation of the Custodian, the Trust
must engage a new Custodian to carry out the duties of the Custodian as set
forth in the Custodian Agreement. Pursuant to the Custodian Agreement, all net
cash received by the Trust will be invested by the Custodian in short-term U.S.
Government securities maturing on or shortly before the next quarterly
distribution date. The Custodian will also act as Collateral Agent under the
Collateral Agreements and will hold a perfected security interest in the Common
Stock and U.S. Government obligations or other assets consistent with the terms
of the Contracts and the Collateral Agreements.
PAYING AGENT
The transfer agent, registrar and paying agent (the "Paying Agent") for the
PIES is pursuant to a paying agent agreement (the "Paying Agent
Agreement"). In the event of any termination of the Paying Agent Agreement by
the Trust or the resignation of the Paying Agent, the Trust will use its best
efforts to engage a new Paying Agent to carry out the duties of the Paying
Agent.
INDEMNIFICATION
The Trust will indemnify each Trustee, the Administrator, the Custodian and
the Paying Agent with respect to any claim, liability, loss or expense
(including the costs and expenses of the defense against any claim or liability)
which it may incur in acting as Trustee, Administrator, Custodian or Paying
Agent, as the case may be, except in the case of willful misfeasance, bad faith,
gross negligence or reckless disregard of their respective duties or where
applicable law prohibits such indemnification. Lehman Brothers 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. Lehman
Brothers will in turn be reimbursed by the Sellers for all such reimbursements
paid by it.
DISTRIBUTIONS
The Trust intends to distribute to Holders on a quarterly basis the proceeds
of the Treasury Securities held by the Trust. The first distribution, reflecting
the Trust's operations from the date of the offering, will be made on ,
1998 to Holders of record as of , 1998. Thereafter, distributions will be
made on , , and or, if any such date is not a Business
Day, on the next succeeding Business Day, of each year to Holders of record as
of each , , and , respectively. A portion of each such
distribution should be treated as a tax-free return of the Holder's investment.
See "Investment Objectives and Policies--Trust Assets" and "Certain United
States Federal Income Tax Considerations." If any Contract is accelerated as
described in "Investment Objectives and Policies--The Contracts--Collateral
Requirements of the Contracts; Acceleration," each Holder will receive its pro
rata share of the proceeds from the acceleration of such Contract and from the
liquidation of a proportionate amount of the Treasury Securities then held in
the Trust. Upon termination of the Trust as described in "Investment Objectives
and Policies--Trust Termination," each Holder will receive its pro rata share of
any remaining net assets of the Trust.
The Trust does not permit the reinvestment of distributions.
29
<PAGE>
ESTIMATED EXPENSES
At the closing of this offering Lehman Brothers 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, PIES certificates and Holder reports, expenses of the
Trustees, fidelity bond coverage, stock exchange listing fees and expenses of
qualifying the PIES for sale in the various states. The aggregate of the
one-time, up-front payments described above will be in the amount of $ .
Lehman Brothers will also pay estimated organization costs of the Trust in the
amount of $ and estimated costs of the Trust in connection with the
initial registration and public offering of the PIES in the amount of $
at the closing of the offering. Lehman Brothers will be reimbursed by the
Sellers for such payments as provided in the Underwriting Agreement.
The amount payable to the Administrator in respect of ongoing expenses of
the Trust was determined based on estimates made in good faith on the basis of
information currently available to the Trust, including estimates furnished by
the Trust's agents. There cannot, however, be any assurance that actual
operating expenses of the Trust will not be substantially more than this amount.
Any excess expenses will be paid by Lehman Brothers or, in the event of its
failure to pay such amounts, the Sellers, or, in the event of the failure of
either Lehman Brothers or the Sellers to pay such amounts, the Trust. Lehman
Brothers will be reimbursed by the Sellers for expenses of the Trust paid by it
as provided in the Underwriting Agreement.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States federal income tax
consequences of the purchase, ownership and disposition of the PIES is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (including changes in effective dates) or possible differing
interpretations. It deals only with initial purchasers who hold PIES as capital
assets and does not purport to deal with persons in special tax situations, such
as financial institutions, tax-exempt organizations, insurance companies,
regulated investment companies, dealers in securities or currencies, persons
holding PIES as a hedge against currency risk or as a position in a "straddle"
for tax purposes, or persons whose functional currency is not the U.S. dollar.
PERSONS CONSIDERING THE PURCHASE OF PIES SHOULD CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE APPLICATION OF UNITED STATES FEDERAL INCOME TAX LAWS TO THEIR
PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE PIES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION.
As used herein, the term "U.S. Holder" means a beneficial owner of a PIES
that is for United States federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof (other than a partnership that is not treated as a United
States person under any applicable Treasury regulations), (iii) an estate whose
income is subject to United States federal income tax regardless of its source,
(iv) a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
persons have the authority to control all substantial decisions of the trust, or
(v) any other person whose income or gain in respect of a PIES is effectively
connected with the conduct of a United States trade or business. As used herein,
the term "non-U.S. Holder" means a beneficial owner of a PIES that is not a U.S.
Holder.
There are no regulations, published rulings or judicial decisions addressing
the characterization for federal income tax purposes of securities with terms
substantially the same as the PIES. The Trust intends to treat a PIES for United
States federal income tax purposes as a beneficial interest in a trust that
holds zero-coupon U.S. Treasury securities and Contracts, and to report Holders'
income to the Internal
30
<PAGE>
Revenue Service in accordance with this treatment. The tax consequences under
this approach are described below. However, prospective investors in the PIES
should be aware that the Internal Revenue Service might take a different view as
to the proper characterization of the PIES and of the tax consequences to a
Holder.
TAX STATUS OF THE TRUST
The Trust will be treated as a grantor trust for federal income tax
purposes, and each Holder will be considered the owner of its pro rata portions
of the stripped U.S. Treasury securities and the Contracts in the Trust under
the grantor trust rules of the Code. Income received by the Trust will be
treated as income of the Holders in the manner set forth below, and
distributions from the Trust will not be separately taxable.
TAX CONSEQUENCES TO U.S. HOLDERS
TAX BASIS OF THE TREASURY SECURITIES AND THE CONTRACTS
A Holder's initial tax basis in the Contracts and the Treasury Securities,
respectively, will equal its pro rata portion of the amounts paid for them by
the Trust. It is currently anticipated that % and % of the net proceeds of
the offering will be used by the Trust to purchase the Treasury Securities and
as payments for the Contracts, respectively. A Holder's tax basis in the
Treasury Securities will be increased by the amounts of original issue discount
included in income in respect of Treasury Securities and decreased by each
amount of cash received in respect of Treasury Securities.
RECOGNITION OF ORIGINAL ISSUE DISCOUNT ON THE TREASURY SECURITIES
The Treasury Securities in the Trust will consist of zero-coupon U.S.
Treasury securities. A Holder will be required to treat its pro rata portion of
each Treasury Security in the Trust as a bond that was originally issued on the
date the Holder purchased its PIES and at an original issue discount equal to
the excess of the Holder's pro rata portion of the amounts payable on such
Treasury Security over the Holder's tax basis therefor as discussed above. The
Holder (whether on the cash or accrual method of tax accounting) is required to
include original issue discount (other than original issue discount on
short-term Treasury Securities as described below) in income for federal income
tax purposes as it accrues, in accordance with a constant yield method, prior to
the receipt of cash attributable to such income. The Trust expects that more
than 20% of the Holders will be accrual basis taxpayers, in which case original
issue discount on any short-term Treasury Security (i.e., any Treasury Security
with a maturity of one year or less from the date it is purchased) held by the
Trust will also be required to be included in income by the Holders as it is
accrued. Unless a Holder elects to accrue the original issue discount on a
short-term Treasury Security according to a constant yield method based on daily
compounding, such original issue discount will be accrued on a straight-line
basis.
TREATMENT OF THE CONTRACTS
Each Holder will be treated as having entered into a pro rata portion of the
Contracts and, at the Exchange Date, as having received a pro rata portion of
the Common Stock (or cash, Reported Securities or combination thereof) delivered
to the Trust.
DISTRIBUTION OF THE COMMON STOCK
The delivery of Common Stock (or Reported Securities) pursuant to the
Contracts will not be taxable to the Holders. Each Holder's basis in its Common
Stock (or Reported Securities) will be equal to its basis in its pro rata
portion of the Contracts less the portion of such basis allocable to any
fractional shares of Common Stock (or Reported Securities) for which cash is
received. A Holder will recognize short-term capital gain or loss upon receipt
of cash in lieu of fractional shares of Common Stock (or Reported
31
<PAGE>
Securities) distributed upon termination of the Trust equal to the difference
between the amount of cash received and the basis of such fractional share. The
holding period for the Common Stock (or Reported Securities) will begin on the
day after it is acquired by the Trust.
DISTRIBUTION OF CASH
If the Trust receives cash upon settlement of the Contracts, a Holder will
recognize capital gain or loss equal to the difference between the amount of
cash received and the basis of the Contracts attributable to such cash. Any gain
or loss will be capital gain or loss and, if the Holder has held the PIES for
more than one year, such gain or loss will be long-term capital gain or loss.
Capital gains of individuals derived in respect of PIES held for more than one
year are eligible for reduced rates of taxation which may vary depending upon
the holding period of such PIES.
SALE OF PIES
A Holder who sells PIES will be treated as having sold its pro rata portions
of the Treasury Securities and the Contracts underlying the PIES. The Holder
will therefore recognize gain or loss equal to the difference between the amount
realized and the Holder's aggregate tax bases in its pro rata portions of the
Treasury Securities and the Contracts. Any gain or loss will be long-term
capital gain or loss if the Trust has held the relevant property for more than
one year.
FEES AND EXPENSES OF THE TRUST
The Trust intends to treat amounts paid by Lehman Brothers and the Sellers
as expenses attributable to them and as not affecting the Holders. It is
possible the Internal Revenue Service could assert that the amounts paid by
Lehman Brothers and the Sellers are income to U.S. Holders. A Holder may be
limited on deductions allocable to such Holder in connection with the operation
of the Trust.
ALTERNATIVE CHARACTERIZATIONS
The above characterization of the PIES and the Contracts is not binding on
the Internal Revenue Service, and it is possible that the Internal Revenue
Service could assert a characterization that could adversely affect the timing
and character of income recognized by Holders. For example, the Internal Revenue
Service might assert that the Contracts should be treated as contingent debt
obligations of the Sellers that are subject to Treasury regulations governing
contingent debt instruments. If the Internal Revenue Service were to prevail in
making such an assertion, interest would accrue with respect to each Contract at
a "comparable yield" for the Seller under that Contract, determined at the time
the Contract is entered into. A Holder's pro rata portion of interest in respect
of the Contracts and original issue discount in respect of the Treasury
Securities might exceed the aggregate amount of the quarterly cash distributions
to a Holder. In addition, under the contingent debt regulations, a Holder would
be required to treat any gain realized on the sale, exchange or redemption of
the PIES as ordinary income to the extent that such gain is allocable to the
Contracts, and any loss realized on such sale, exchange or redemption allocable
to the Contracts as an ordinary loss to the extent of inclusions with respect to
the Contracts, and as capital loss to the extent of loss in excess of such
inclusions. Alternatively, the Internal Revenue Service might assert that a
Holder should include in income the amount of cash actually received each year
in respect of the PIES, or that the PIES as a whole constitute a contingent
payment debt instrument subject to the rules described above.
NON-U.S. HOLDERS
In the case of a Holder of the PIES that is not a U.S. Holder, payments of
interest (including original issue discount) made with respect to the Treasury
Securities will not be subject to United States withholding tax, provided that
such non-U.S. Holder complies with applicable certification requirements.
32
<PAGE>
In general, for a non-U.S. Holder to qualify for this exemption from taxation,
the last United States payor in the chain of payment prior to payment to a
non-U.S. Holder (the "Withholding Agent") must have received in the year in
which a payment of interest or principal occurs, or in either of the two
preceding calendar years, a statement that (i) is signed by the beneficial owner
of the Treasury Securities under penalties of perjury, (ii) certifies that such
owner is not a U.S. Holder and (iii) provides the name and address of the
beneficial owner. The statement may be made on an IRS Form W-8 or a
substantially similar form, and the beneficial owner must inform the Withholding
Agent of any change in the information on the statement within 30 days of such
change. If the PIES is held through a securities clearing organization or
certain other financial institutions, the organization or institution may
provide a signed statement to the Withholding Agent. However, in such case, the
signed statement must be accompanied by a copy of the IRS Form W-8 or the
substitute form provided by the beneficial owner of the organization or
institution.
Any capital gain realized in respect of PIES by a non-U.S. Holder will
generally not be subject to United States federal income tax if (i) such gain is
not effectively connected with a United States trade or business of such
non-U.S. Holder and (ii) in the case of an individual non-U.S. Holder, such
individual is not present in the United States for 183 days or more in the
taxable year of the sale or other disposition, or the gain is not attributable
to a fixed place of business maintained by such individual in the United States.
BACKUP WITHHOLDING AND INFORMATION REPORTING
The payments of principal and interest (including original issue discount)
on, and the proceeds received from the sale of, PIES may be subject to United
States backup withholding tax at the rate of 31% if the Holder thereof fails to
supply an accurate taxpayer identification number or otherwise to comply with
applicable United States information reporting or certification requirements.
Any amounts so withheld will be allowed as a credit against such Holder's United
States federal income tax liability and may entitle such Holder to a refund,
provided that the required information is furnished to the Internal Revenue
Service.
After the end of each calendar year, the Trust will furnish to each record
Holder of PIES an annual statement containing information relating to the
payments on the Treasury Securities received by the Trust. The Trust will also
furnish annual information returns to each record Holder of the PIES and to the
Internal Revenue Service.
UNDERWRITING
Lehman Brothers Inc., as underwriter of the offering (the "Underwriter"),
has agreed, subject to the terms and conditions of the underwriting agreement
(the "Underwriting Agreement") among the Trust, the Company, each of the Sellers
and the Underwriter, the form of which is filed as an exhibit to the
Registration Statement of which this Prospectus is a part, to purchase from the
Trust, and the Trust has agreed to sell to the Underwriter, the aggregate number
of PIES set forth below:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF PIES
- ----------------------------------------------------------------------------- -----------------------
<S> <C>
Lehman Brothers Inc.
</TABLE>
The Underwriting Agreement provides that the obligation of the Underwriter
to purchase PIES is subject to certain conditions, and that, if any of the
foregoing PIES are purchased by the Underwriter pursuant to the Underwriting
Agreement, all the PIES agreed to be purchased by the Underwriter must be so
purchased.
The Company and the Sellers have been advised by the Underwriter that the
Underwriter proposes to offer the PIES directly to the public at the public
offering price set forth on the cover page of this
33
<PAGE>
Prospectus and to certain selected dealers at such initial public offering price
less a selling concession not in excess of $ per PIES. The Underwriter
may allow, and such dealers may reallow, a concession not in excess of
$ per PIES to certain brokers and dealers. After the initial public
offering, the public offering price, the concession to selected dealers and the
reallowance may be changed by the Underwriter.
The Company, its directors and executive officers, and the Principal and
Selling Shareholders listed under the caption "Principal and Selling
Shareholders" in the prospectus of the Company attached hereto, including the
Sellers, have agreed not to offer for sale, sell or contract to sell, or
otherwise dispose of, or announce the offering of, or file or cause the filing
of any registration statement under the Securities Act with respect to, without
the prior written consent of the Underwriter, any shares of Common Stock or any
securities convertible into or exchangeable for, or warrants to acquire, Common
Stock for a period of days after the date of this Prospectus; provided,
however, that such restriction shall not effect the ability of (i) the Company
or the Sellers to take any such actions in connection with the offering of the
PIES made hereby or pursuant to the terms of the Contracts and the Collateral
Agreements or (ii) the Company to take any such actions in connection with any
employee stock option plan, stock ownership plan or dividend reinvestment plan
of the Company in effect at the date of this Prospectus.
In light of the fact that proceeds from the sale of the PIES will be used by
the Trust to purchase the Contracts from the Sellers, the Underwriting Agreement
provides that the Sellers will pay to the Underwriter as compensation $
per PIES.
The Trust has granted to the Underwriter an option to purchase up to an
additional PIES at the price to public less the aggregate underwriting
discount, solely to cover over-allotments, if any. Such option may be exercised
at any time up to 30 days after the date of this Prospectus. To the extent that
this option is exercised, the Underwriter will be committed, subject to certain
conditions, to purchase up to an additional PIES.
The Company and the Sellers have agreed to indemnify the Underwriter against
certain liabilities, including liabilities under the Securities Act, and to
contribute to payments that the Underwriter may be required to make in respect
thereof.
In connection with the formation of the Trust, Lehman Brothers subscribed
for and purchased PIES for a purchase price of $ . Lehman Brothers
sponsored the formation of the Trust for purposes of this offering, including
selecting its initial Trustees.
Until the distribution of the PIES is completed, rules of the Securities and
Exchange Commission may limit the ability of the Underwriter and certain selling
group members to bid for and purchase PIES. As an exception to these rules, the
Underwriter is permitted to engage in certain transactions that stabilize the
price of the PIES. Such transactions may consist of bids or purchases for the
purpose of pegging, fixing or maintaining the price of the PIES.
If the Underwriter creates a short position in the PIES in connection with
the offering, (I.E., if it sells more PIES than are set forth on the cover page
of this Prospectus), the Underwriter may reduce that short position by
purchasing PIES in the open market. The Underwriter also may elect to reduce any
short position by exercising all or part of the over-allotment option described
herein.
The Underwriter also may impose a penalty bid on certain selling group
members. This means that if the Underwriter purchases shares of Common Stock in
the open market to reduce the Underwriter's short position or to stabilize the
price of the Common Stock, it may reclaim the amount of the selling concession
from the selling group members who sold those shares as part of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might otherwise be in the absence of such purchases.
34
<PAGE>
The imposition of a penalty bid might have an effect on the price of a security
to the extent that it were to discourage resales of the security by purchasers
in the offering.
In the ordinary course of their business, including without limitation in
connection with their market making activities, the Underwriter and its
affiliates may effect transactions for their own account or for the account of
their customers, and hold long or short positions, in the Common Stock. In
addition, in connection with the offering of the PIES, the Underwriter or its
affiliates may enter into one or more hedging transactions with respect to the
Common Stock. In connection with such hedging or market-making activities or
with respect to proprietary or other trading activities by the Underwriter and
its affiliates, the Underwriter or its affiliates may enter into transactions in
the Common Stock which may affect the market price, liquidity or value of the
PIES and which could be deemed to be adverse to the interests of the holders of
the PIES.
{The Underwriter has from time to time performed various investment banking
and financial advisory services for the Company and its affiliates, for which
customary compensation has been received.}
The address of the Underwriter is 3 World Financial Center, New York, New
York 10285.
LEGAL MATTERS
Certain legal matters will be passed upon for the Trust and the Underwriter
by Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New York 10017.
Certain matters of Delaware law will be passed upon for the Trust by .
Certain legal matters will be passed upon for the Sellers by .
EXPERTS
The statement of assets, liabilities and capital included in this
Registration Statement has been audited by , independent public
accountants, as indicated in their report with respect thereto, and is included
herein in reliance upon the authority of said firm as experts in auditing and
accounting in giving said report.
ADDITIONAL INFORMATION
The Trust has filed with the Securities and Exchange Commission, Washington,
D.C. 20549, a Registration Statement under the Securities Act with respect to
the PIES offered hereby. Further information concerning the PIES and the Trust
may be found in the Registration Statement, of which this Prospectus constitutes
a part. The Registration Statement may be inspected without charge at the
Commission's office in Washington, D.C., and copies of all or any part thereof
may be obtained from such office after payment of the fees prescribed by the
Commission. Such Registration Statement is also available on the Commission's
website (http://www.sec.gov).
35
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Trustees of PIES Trust II:
{We have audited the accompanying statement of assets, liabilities and
capital of PIES Trust II (a Delaware trust) as of 199 . This financial
statement is the responsibility of the Trustees of the Trust. Our responsibility
is to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of assets, liabilities and
capital is free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the statement of
assets, liabilities and capital. An audit also includes assessing the accounting
principles used and significant estimates made by the Trustees of the Trust, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the statement of assets, liabilities and capital referred to
above presents fairly, in all material respects, the financial position of PIES
Trust II as of , 199 , in conformity with generally accepted accounting
principles.}
{New York, New York}
, 199
36
<PAGE>
PIES TRUST II
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
, 1998
<TABLE>
<S> <C>
ASSETS
Cash............................................................................... $
---------
Total Assets................................................................... $
---------
---------
LIABILITIES
Total Liabilities.............................................................. $
---------
---------
NET ASSETS......................................................................... $
---------
---------
CAPITAL
PIES, 1 PIES issued and outstanding.............................................. $
---------
---------
</TABLE>
The accompanying notes are an integral part of this statement.
37
<PAGE>
NOTE 1. ORGANIZATION
PIES Trust II (the "Trust") was established as a Delaware business trust on
April 1, 1998, and has had no operations to date other than matters relating to
its organization and registration as a non-diversified, closed-end management
investment company under the Investment Company Act of 1940, as amended, and the
sale and issuance of PIES (excluding the over-allotment option) for
$ to Lehman Brothers Inc. ("Lehman Brothers"). The costs incurred in
connection with the organization of the Trust and this offering will be paid by
certain stockholders of the Company.
38
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE TRUST OR THE UNDERWRITER. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT
RELATES OR AN OFFER TO SELL TO, OR A SOLICITATION OF AN OFFER TO BUY FROM, ANY
PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION
HEREIN CONTAINED IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Index to Key Terms........................................................ 3
Prospectus Summary........................................................ 5
Fees and Expenses......................................................... 10
The Trust................................................................. 11
Use of Proceeds........................................................... 11
Investment Objectives and Policies........................................ 11
Investment Restrictions................................................... 22
Risk Factors Relating to PIES............................................. 23
Net Asset Value........................................................... 26
Description of the PIES................................................... 26
Management and Administration of the Trust................................ 28
Certain United States Federal Income Tax Considerations................... 30
Underwriting.............................................................. 33
Legal Matters............................................................. 35
Experts................................................................... 35
Additional Information.................................................... 35
Report of Independent Public Accountants.................................. 36
Statement of Assets, Liabilities and Capital.............................. 37
</TABLE>
--------------------------
UNTIL , 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE PIES,
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.
PIES-SM-
PIES TRUST II
---------------------
PROSPECTUS
, 1998
--------------------------
LEHMAN BROTHERS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
1. FINANCIAL STATEMENTS
<TABLE>
<S> <C> <C>
Part A-- (i) Report of Independent Public Accountants
(ii) Statement of Assets, Liabilities and Capital
Part B-- None.
</TABLE>
2. EXHIBITS
<TABLE>
<S> <C>
(a)(1)(A) --Declaration of Trust dated as of April 1, 1998
(a)(1)(B) --Amended and Restated Declaration of Trust dated as of , 1998/*/
(a)(2)(A) --Certificate of Trust dated April 1, 1998
(a)(2)(B) --Restated Certificate of Trust dated , 1998/*/
(b) --Not applicable
(c) --Not applicable
(d)(1) --Form of specimen certificate of PIES (included in Exhibit 2(a)(1)(B))/*/
(d)(2) -- Portions of the Amended and Restated Declaration of Trust defining the rights
of Holders of PIES (included in Exhibit 2(a)(1)(B))/*/
(e) --Not applicable
(f) --Not applicable
(g) --Not applicable
(h) --Form of Underwriting Agreement/*/
(i) --Not applicable
(j) --Form of Custodian Agreement/*/
(k)(1) --Form of Administration Agreement/*/
(k)(2) --Form of Paying Agent Agreement/*/
(k)(3) --Form of Forward Purchase Agreement/*/
(k)(4) --Form of Collateral Agreement/*/
(k)(5) --Form of Fund Expense Agreement/*/
(k)(6) --Form of Fund Indemnity Agreement/*/
(l) --Opinion and Consent of Counsel to the Trust/*/
(m) --Not applicable
(n)(1) --Tax Opinion of Counsel to the Trust (Consent contained in Exhibit 2(l))/*/
(n)(2) --Consent of Independent Public Accountants/*/
(n)(3) --Consents to being named as Trustee/*/
(o) --Not applicable
(p) --Form of Subscription Agreement/*/
(q) --Not applicable
(r) --Financial Data Schedule/*/
(s) --Power of Attorney/*/
</TABLE>
- ------------------------
/*/ To be filed by amendment.
C-1
<PAGE>
ITEM 25. MARKETING ARRANGEMENTS
See 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................................................... $ 2,950
New York Stock Exchange listing fee................................. *
Printing (other than certificates).................................. *
Engraving and printing certificates................................. *
Fees and expenses of qualification under state securities laws
(including fees of counsel)....................................... *
Accounting fees and expenses........................................ *
Legal fees and expenses............................................. *
NASD fees........................................................... *
Miscellaneous....................................................... *
---------
Total............................................................... $ *
---------
---------
</TABLE>
- ------------------------
* To be furnished by amendment.
ITEM 27. PERSON CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
The Trust will be internally managed and will not have an investment
adviser. The information in the Prospectus under the caption "Management and
Administration of the Trust" is incorporated herein by reference.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
As of the effective date of this Registration Statement:
<TABLE>
<CAPTION>
TITLE OF CLASS NUMBER OF RECORD HOLDERS
- -------------------------------------------------------------------- -------------------------------
<S> <C>
Shares of beneficial interest....................................... 1
</TABLE>
ITEM 29. INDEMNIFICATION
The Underwriting Agreement (Exhibit 2(h) to this Registration Statement)
provides for indemnification.
The Amended and Restated Declaration of Trust filed as Exhibit 2(a)(1)(B) to
this Registration Statement provides for indemnification to each Trustee against
any claim or liability incurred in acting as Trustee of the Trust, except in the
case of willful misfeasance, bad faith, gross negligence or reckless disregard
of the Trustee's duties. The Custodian Agreement, Administration Agreement and
Paying Agent Agreement filed as Exhibits 2(j), 2(k)(1) and 2(k)(2) to this
Registration Statement provide for indemnification to the Custodian,
Administrator and Paying Agent against any loss or expense incurred in the
performance of their obligations under the respective agreements, unless such
loss or expense is due to willful misfeasance, bad faith, gross negligence or
reckless disregard of their obligations. The Fund Indemnity Agreement filed as
Exhibit 2(k)(6) to this Registration Statement provides that Lehman Brothers
Inc. will indemnify the Trust for certain indemnification expenses incurred
under the Amended and Restated Declaration of Trust, the Custodian Agreement,
the Administration Agreement and the Paying Agent Agreement.
C-2
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant, pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Not applicable.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books and other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the Rules thereunder are
maintained as follows: journals, ledgers, securities records and other original
records are maintained principally at the offices of the Registrant, c/o Lehman
Brothers Inc., 3 World Financial Center, New York, New York 10285 and at the
offices of , the Registrant's Administrator, Custodian, paying agent,
transfer agent and registrar. All other records so required to be maintained are
maintained at the offices of the Registrant, c/o Lehman Brothers Inc., 3 World
Financial Center, New York, New York 10285.
ITEM 32. MANAGEMENT SERVICES
Not applicable.
ITEM 33. UNDERTAKINGS
(a) The Registrant hereby undertakes to suspend the offering of the shares
covered hereby until it amends its prospectus contained herein if (1) subsequent
to the effective date of this Registration Statement, its net asset value per
share declines more than ten percent from its net asset value per share as of
the effective date of this Registration Statement or (2) the net asset value per
share increases to an amount greater than its net proceeds as stated in its
prospectus contained herein.
(b) The Registrant hereby undertakes that (i) for the purpose of determining
any liability under the Securities Act, the information omitted from the form of
prospectus filed as part of this Registration Statement in reliance upon Rule
430A and contained in a form of prospectus filed by the registrant under Rule
497(h) under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective; (ii) for the purpose of
determining any liability under the Securities Act, each post-effective
amendment that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of the securities at that time shall be deemed to be the initial bona
fide offering thereof.
C-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on the 6th day of April,
1998.
<TABLE>
<S> <C> <C>
PIES TRUST II
By: /s/ Jennifer Marre
-----------------------------------------
Jennifer Marre, Trustee
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following person, in the
capacities and on the date indicated.
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ Jennifer Marre Principal Executive April 6, 1998
- ------------------------------ Officer,
Jennifer Marre Principal Financial
Officer,
Principal Accounting
Officer and Trustee
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NAME OF EXHIBIT
- ------------ ----------------------------------------------------------------------------------------------
<S> <C>
(a)(1)(A) Declaration of Trust dated as of April 1, 1998
(a)(1)(B) Amended and Restated Declaration of Trust dated as of , 1998/*/
(a)(2)(A) Certificate of Trust dated April 1, 1998
(a)(2)(B) Restated Certificate of Trust dated , 1998/*/
(b) Not applicable
(c) Not applicable
(d) (1) Form of specimen certificate of PIES (included in Exhibit 2(a)(1)(B))/*/
(d) (2) Portions of the Amended and Restated Declaration of Trust defining the rights of Holders of
PIES (included in Exhibit 2(a)(1)(B))/*/
(e) Not applicable
(f) Not applicable
(g) Not applicable
(h) Form of Underwriting Agreement/*/
(i) Not applicable
(j) Form of Custodian Agreement/*/
(k) (1) Form of Administration Agreement/*/
(k) (2) Form of Paying Agent Agreement/*/
(k) (3) Form of Forward Purchase Agreement/*/
(k) (4) Form of Collateral Agreement/*/
(k) (5) Form of Fund Expense Agreement/*/
(k) (6) Form of Fund Indemnity Agreement/*/
(l) Opinion and Consent of Counsel to the Trust/*/
(m) Not applicable
(n) (1) Tax Opinion of Counsel to the Trust (Consent contained in Exhibit 2(l))/*/
(n) (2) Consent of Independent Public Accountants/*/
(n) (3) Consents to being named as Trustee/*/
(o) Not applicable
(p) Form of Subscription Agreement/*/
(q) Not applicable
(r) Financial Data Schedule/*/
(s) Power of Attorney/*/
</TABLE>
- ------------------------
/*/ To be filed by amendment.
<PAGE>
Exhibit (a)(1)(A)
DECLARATION OF TRUST OF PIES TRUST II
Declaration of Trust, dated as of April 1, 1998, between Steven
Berkenfeld, as sponsor (the "Sponsor"), and Jennifer Marre, as trustee (the
"Trustee"). The Sponsor and the Trustee hereby agree as follows:
1. The trust created hereby shall be known as "PIES Trust II", in which
name the Trustee, or the Sponsor to the extent provided herein, may conduct
the business of the Trust, make and execute contracts, and sue and be sued.
2. The Sponsor hereby assigns, transfers, conveys and sets over to the
Trustee the sum of $1. The Trustee hereby acknowledges receipt of such amount
in trust from the Sponsor, which amount shall constitute the initial trust
estate. The Trustee hereby declares that it will hold the trust estate in
trust for the Sponsor. It is the intention of the parties hereto that the
Trust created hereby constitute a business trust under Chapter 38 of Title 12
of the Delaware Code, 12 Del. C. ss. 3801 et seq. and that this document
constitute the governing instrument of the Trust. The Trustee is hereby
authorized and directed to execute and file a certificate of trust with the
Secretary of State of the State of Delaware in such form as the Trustee
may approve.
3. The Sponsor and the Trustee will enter into an amended and restated
Declaration of Trust, satisfactory to each such party, to provide for the
contemplated operation of the Trust created hereby. Prior to the execution and
delivery of such amended and restated Declaration of Trust, the Trustee shall
not have any duty or obligation hereunder or with respect to the trust
estate, except as otherwise required by applicable law or as may be necessary
to obtain prior to such execution and delivery any licenses, consents or
approvals required by applicable law or otherwise.
4. This Declaration of Trust may be executed in one or more counterparts.
5. The Trustee may resign upon thirty days prior notice to the Sponsor.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Declaration of
Trust to be duly executed as of the date first above written.
SPONSOR
By: /s/ Steven Berkenfeld
-----------------------------
Steven Berkenfeld,
as Sponsor
TRUSTEE
By: /s/ Jennifer Marre
-----------------------------
Jennifer Marre,
as Trustee
<PAGE>
EXHIBIT (a)(2)(A)
CERTIFICATE OF TRUST OF PIES TRUST II
This Certificate of Trust of PIES Trust II (the "Trust"), dated
April 1, 1998, is being duly executed and filed by Jennifer Marre, as
trustee, to form a business trust under the Delaware Business Trust Act (12
Del. C. ss. 3801, et seq.).
1. Name. The name of the business trust formed hereby is PIES Trust II.
2. Registered Office; Registered Agent. The business address of the
registered office of the Trust in the State of Delaware is 1209 Orange
Street, Wilmington, Delaware 19801. The name of the Trust's registered agent
at such address is The Corporation Trust Company.
3. Effective Date. This Certificate of Trust shall be effective upon
the date and time of filing.
4. The Trust is to be registered under the Investment Company Act of
1940, as amended, prior to the issuance of beneficial interests in the Trust.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust as of the date first above
written.
/s/ Jennifer Marre
---------------------------
Jennifer Marre,
as Sole Trustee
