AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 7, 1998
SECURITIES ACT FILE NO. 333-
INVESTMENT COMPANY ACT FILE NO. 811-
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-2
Registration Statement Under the Securities Act of 1933 <checked-box>
Pre-Effective Amendment No. ___ <square>
Post-Effective Amendment No. ___ <square>
Registration Statement Under The Investment Company Act of 1940 <checked-box>
Amendment No. ____ <square>
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REDSS TRUST I
(Exact Name of Registrant as Specified in Charter)
c/o CIBC Oppenheimer Corp.
CIBC Oppenheimer Tower
World Financial Center
New York, New York 10281
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: 212-667-7000
Robert A. Blum
CIBC Oppenheimer Tower
World Financial Center
New York, New York 10281
(Name and Address of Agent for Service)
With copies to:
Thomas A. McGavin, Jr.
Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
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. <square>
---------
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF SECURITIES AMOUNT BEING MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
BEING REGISTERED REGISTERED (1) PRICE PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
REDSS representing shares 1,150,000 shares $10.00 $11,500,000 $3,393.00
of beneficial
interest
</TABLE>
[FN]
(1) Includes an aggregate of 150,000 REDSS that (i) may be issued in
connection with the exercise of an over-allotment option and (ii) were
subscribed for and purchased by CIBC Oppenheimer Corp. in connection with
the formation of REDSS Trust I.
(2) Estimated solely for the purpose of calculating the registration fee.
</FN>
----------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A)
MAY DETERMINE.
===============================================================================
<PAGE>
REDSS TRUST I
CROSS-REFERENCE SHEET
PARTS A AND B OF PROSPECTUS*
<TABLE>
<CAPTION>
ITEM
NO. CAPTION PROSPECTUS CAPTION
- ---- ------- ------------------
<S> <C> <C>
1. Outside Front Cover............................ Front Cover Page
2. Inside Front and Outside Back Cover Page....... Not Applicable
3. Fee Table and Synopsis......................... Prospectus Summary
4. Financial Highlights........................... Not Applicable
5. Plan of Distribution........................... 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; Risk
Factors Relating to REDSS; The Trust;
Investment Restrictions; Investment Objectives
and Policies
9. Management..................................... Management and Administration of the Trust
10. Capital Stock, Long-Term Debt and Other
Securities;................................. Description of the Securities; Certain United
States 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 and Liabilities
<FN>
_____________________
* 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.
</FN>
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED [ ], 1998
PROSPECTUS
1,000,000 REDSS<service-mark>
REDSS TRUST I
(SUBJECT TO EXCHANGE INTO SHARES OF COMMON STOCK,
PAR VALUE $___ PER SHARE, OF [COMPANY])
This is an initial public offering of trust securities referred to
as REDSS. There is currently no public market for the REDSS. Application has
been made to list the REDSS on the [ ] under the symbol "_____."
As an owner of REDSS you will receive an annual distribution of
__% of the Initial Price of your REDSS, payable quarterly. You will also
receive on _______, 2001, between _____ and 1.0 shares of Common Stock of
__________, or cash with an equivalent value. The number of shares of Common
Stock you will receive depends on the market value of the shares at that time:
the higher the market value, the fewer shares you will receive. The REDSS are
not subject to optional redemption prior to the Exchange Date.
For your convenience, you may refer to the attached prospectus of
________ for the shares of Common Stock exchangeable for the REDSS. The Common
Stock is quoted on the [ ] under the symbol "_______."
INVESTING IN SECURITIES EXCHANGEABLE FOR COMMON STOCK INVOLVES
CERTAIN RISKS. SEE "RISK FACTORS RELATING TO REDSS" BEGINNING ON PAGE __.
<TABLE>
<CAPTION>
PER REDSS TOTAL
<S> <C> <C>
Public offering price
Underwriting discount or commission
Proceeds to the Trust
The public offering price will equal the last sale price of the
Common Stock on the day before the offering. The Trust has granted the
Underwriter an option to acquire an additional ________ REDSS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The Underwriter is offering the REDSS subject to various
conditions and may reject all or part of any order.
CIBC OPPENHEIMER CORP.
__________ ___, 1998
REDSS<service-mark> is a service mark of Canadian Imperial Bank of
Commerce.
The information contained in this Prospectus is not complete and may be
amended. These securities may not be sold until the related registration
statement filed with the Securities and Exchange Commission or any applicable
State securities commission becomes effective. The Prospectus is not an offer
to sell nor is it seeking an offer to buy these securities in any State where
the offer or sale is not permitted.
<PAGE>
TABLE OF CONTENTS
PAGE PAGE
---- ----
Prospectus Summary.............. 3 Investment Restrictions.......... 25
Risk Factors Relating to REDSS.. 10 Net Asset Value.................. 25
Internal Management; Description of the REDSS......... 26
No Portfolio Management....... 10 Book-Entry System.............. 26
Relationship to Common Stock; Management and Administration
Limitations on Opportunity of the Trust................... 28
for Equity Appreciation; Trustees....................... 28
Potential Losses............ 10 Administrator.................. 28
Market Price of REDSS......... 10 Custodian...................... 29
Trading Value; Listing Impact Paying Agent................... 29
of the REDSS on the Market Indemnification................ 29
for the Common Stock........ 11 Distributions.................. 29
Dilution Adjustments; Estimated Expenses............. 30
Stockholders Rights......... 12 Certain United States Federal
No Obligation on the Part of Income Tax Considerations........ 30
the Company with respect to Tax Status of the Trust........ 31
the REDSS or the Contracts.. 12 Tax Consequences to United
Net Asset Value............... 12 States Holders............... 31
Non-Diversified Status........ 12 Non-United States Persons...... 33
Uncertainty of Federal Income Back-up Withholding and
Tax Consequences............ 12 Information Reporting........ 34
Risk Factors Relating to Underwriting..................... 34
the Company................. 13 Legal Matters.................... 36
Risk Relating to Bankruptcy of Experts.......................... 36
the Selling Shareholders.... 14 Additional Information........... 36
The Trust....................... 14 Report of Independent
Use of Proceeds................. 14 Accountants to the Trustees
Investment Objectives and of REDSS Trust I............... 38
Policies Trust Assets......... 14 Statement of Assets, Liabilities
Enhanced Yield; Less Potential and Capital.................... 39
for Equity Appreciation Notes to Statement of Assets,
than Common Stock; No Liabilities and Capital........ 40
Depreciation Protection..... 17
The Company................... 17
The Contracts................. 18
The Treasury Securities....... 24
Temporary Investments......... 25
Trust Termination............. 25
Delivery of Common Stock
and Marketable Securities;
No Fractional Shares of
Common Stock or Marketable
Securities.................. 25
------------
This Prospectus contains cross-references to captions where you can find
further related discussions. This Table of Contents provides the pages where
you will find these captions.
2
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS. IT IS NOT COMPLETE AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT
YOU SHOULD CONSIDER BEFORE INVESTING IN THE REDSS. YOU SHOULD READ THE ENTIRE
PROSPECTUS CAREFULLY, INCLUDING THE "RISK FACTORS RELATING TO REDSS" SECTION.
THE TRUST
REDSS Trust I (the "Trust") is a newly organized Delaware business trust
that is registered as a non-diversified closed-end management investment
company under the Investment Company Act of 1940, as amended. The Trust will
dissolve on or shortly after _______, 2001 (the "Exchange Date"), but may
dissolve earlier under limited circumstances.
THE OFFERING
The REDSS evidence ownership of proportionate shares of the assets of the
Trust. By this prospectus, CIBC Oppenheimer Corp. (the "Underwriter") is
offering to the public _______ REDSS at an "Initial Price" of $_____ per REDSS.
In addition, the Trust has granted the Underwriter an option to purchase up to
an additional ________ REDSS to cover over-allotments, if any. The Initial
Price equals the last sale price of the common stock, par value $_____ per
share (the "Common Stock"), of ______ (the "Company") on ______, 1998, as
reported in the _______.
ASSETS OF THE TRUST; INVESTMENT OBJECTIVES AND POLICIES
The assets of the Trust will consist solely of:
<circle> A portfolio of stripped U.S. Treasury Securities maturing
quarterly through the Exchange Date and representing in the
aggregate approximately __% of the initial assets of the Trust
(the "Treasury Securities"), and
<circle> One or more forward purchase contracts (the "Contracts") between
the Trust and a current shareholder of the Company (the "Selling
Shareholders").
The Treasury Securities will represent approximately __% of the initial
assets of the Trust. The Contracts will represent the balance of the Trust
assets.
PURPOSE OF THE TRUST
The REDSS provide investors with a higher yield than the current dividend
yield paid on the Common Stock. The annual calendar year distribution on the
REDSS is $_______ per REDSS. The dividend paid per share of the Company's
Common Stock for its fiscal year ended _________, 199_ was $____.
The REDSS also provide you the opportunity to share in the appreciation
and depreciation of the Common Stock. However, while you will bear all of the
depreciation of the Common Stock, you will benefit from the appreciation of the
Common Stock only if it appreciates above $____ per share, the "Threshold
Appreciation Price." In addition, you will realize a smaller amount of any
appreciation in the value of the Common Stock over the Threshold Appreciation
Price by investing in REDSS than if you invested directly in the Common Stock.
3
<PAGE>
DISTRIBUTIONS PRIOR TO EXCHANGE DATE
You will receive distributions at the rate per REDSS of $_____ per annum
or $_______ per quarter, payable quarterly on each ______ , _______, ________
and ________ (each a "Distribution Date"). If any payment date is not a
"Business Day," you will receive payments on the next succeeding Business Day.
Distributions will begin on ______, 1998. See "Investment Objectives and
Policies -- Trust Assets."
DISTRIBUTIONS ON EXCHANGE DATE
On the Exchange Date, you will receive between ______ and 1.0 shares of
Common Stock. Alternately, in lieu of shares of Common Stock you may receive
cash with a value equal to that number of shares. The number of shares you
will receive may be adjusted to account for certain dividends or distributions,
subdivisions, splits, combinations, issuances of certain rights or warrants or
distributions of assets with respect to the Common Stock. If the Company
merges into another entity, or liquidates, or in certain other events, you may
also receive consideration in the form of cash or "Marketable Securities." You
will also receive cash in lieu of any fractional shares of Common Stock or
"Marketable Securities."
THE CONTRACTS
DELIVERY OF COMMON STOCK OR CASH
The Trust will enter into a separate Contract with each Selling
Shareholder. Each Contract obligates the Selling Shareholder to deliver a
number of shares of Common Stock to the Trust on the Exchange Date. In
addition, each Selling Shareholder may elect to deliver cash in an amount equal
to the value of the Common Stock it is required to deliver instead of
delivering shares of Common Stock. The Selling Shareholders' obligations under
the Contracts will be several not joint.
The Contracts require the Selling Shareholders to deliver the following
number of shares of Common Stock per REDSS:
<circle> if the value of the Common Stock is between the Threshold
Appreciation Price and the Initial Price, a number of shares
of Common Stock having a value equal to the Initial Price;
<circle> if the value of the Common Stock is equal to or greater than the
Threshold Appreciation Price, _______ shares of Common Stock;
and
<circle> if the value of the Common Stock is less than the Initial Price,
one share of Common Stock.
4
<PAGE>
[CHART]
The value of the Common Stock on the Exchange Date will equal the
"Exchange Price" which means the average "Closing Price" per share of the
Common Stock on the 20 "Trading Days" immediately prior to, but not including,
the Exchange Date.
PURCHASE PRICE OF THE COMMON STOCK
At the time of the closing of this offering, the Trust will pay each
Selling Shareholder a purchase price equal to $______ per share of Common Stock
initially subject to the Contract.
COLLATERAL SECURITY
The obligations of each Selling Shareholder under its Contract will be
secured by a pledge of one share of Common Stock for each share subject to the
Contract or, at the election of such Selling Shareholder, by substitute
collateral consisting of U.S. Government securities.
ACCELERATION OF CONTRACT UPON DEFAULT
If a Selling Shareholder defaults under its Contract or the related
collateral arrangements, the Trust may accelerate the Contract and distribute
to investors all or a portion of the Common Stock, Marketable Securities or
cash subject to the Contract and related Treasury Securities then held by the
Trust.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
There are no regulations, published rulings or judicial decisions
addressing the characterization for federal income tax purposes of securities
with terms substantially the same as the REDSS. You should be aware that the
Internal Revenue Service might take a different view from that described in
this Prospectus of the proper characterization of the REDSS and of your tax
consequences. See "Risk Factors Relating to REDSS" and "Certain United States
Federal Income Tax Considerations."
5
<PAGE>
TRUST IS A "GRANTOR TRUST."
The Trust will treat the REDSS for U.S. federal income tax purposes as
beneficial interests in a grantor trust owned solely by the holders of REDSS.
The Trust will follow this treatment in reporting your income from the Trust to
the Internal Revenue Service.
"ORIGINAL ISSUE DISCOUNT" ON TREASURY SECURITIES.
The Trust will purchase the Treasury Securities at an "original issue
discount." This original issue discount will accrue over the term of the
Treasury Securities. You must recognize your share of this original issue
discount as income for federal income tax purposes as it accrues. However, you
will receive a substantial portion of each quarterly cash distribution as a
tax-free return of your cost for the Treasury Securities.
GAIN OR LOSS ON CONTRACTS.
You will not recognize taxable income, gain or loss when the Trust enters
into the Contracts and should not recognize taxable income, gain or loss with
respect to the Contracts over their term. However, you should be aware that it
is possible that the Internal Revenue Service will assert that you should
include certain amounts in income over the term of the Contracts. These
amounts, together with your share of the original issue discount from the
Treasury Securities, may exceed the aggregate amount of your quarterly cash
distributions.
You also will not recognize taxable income, gain or loss on the delivery
of Common Stock to the Trust or on the distribution of the Common Stock upon
the termination of the Trust. However, you will have taxable gain or loss if
you receive cash upon dissolution of the Trust for any reason or if you
receive cash in lieu of fractional shares of Common Stock distributed upon
termination of the Trust.
Your aggregate basis in your shares of Common Stock will equal your basis
in your pro rata portion of the Contracts less the portion of such basis
allocable to pay any fractional shares of Common Stock for which you received a
cash payment.
THE COMPANY
The Company is [description].
You will find attached to this Prospectus a prospectus of the Company
which describes the Company and the Common Stock. The Company is not
affiliated with the Trust, will not receive any of the proceeds of the REDSS
and will have no obligations with respect to the REDSS or the Contracts. The
prospectus of the Company is being delivered to prospective purchasers of REDSS
for convenience of reference only. The prospectus of the Company is not a part
of this Prospectus, and this Prospectus does not incorporate the Company's
prospectus by reference.
MANAGEMENT AND ADMINISTRATION OF THE TRUST
The Trust will be internally managed and will not have an investment
adviser. Three trustees will oversee the administration of the Trust. The
Bank of New York, as trust administrator (the "Administrator"), will carry out
the day-to-day administration of the Trust. The Bank of New York will also act
as custodian for the Trust's assets (the "Custodian") and as paying agent (the
"Paying Agent"), registrar and transfer agent with respect to the REDSS.
6
<PAGE>
RISK FACTORS
NO SALE OF TRUST ASSETS The Trust has adopted a policy that it
will not dispose of any Contract during the
term of the Trust, or any of the Treasury
Securities before their maturities, except
upon the acceleration of a Contract. 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.
CURRENT RETURN The yield on the REDSS is higher than
the current dividend yield on the Common
Stock. However, there is no assurance that
the yield on the REDSS will exceed the
dividend yield on the Common Stock over the
term of the Trust.
AMOUNT PAID AT The amount you will receive at the
MATURITY WILL FLUTUATE Exchange Date will fluctuate with the market
WITH THE VALUE OF THE price of the Common Stock and may be less
COMMON STOCK than or may be greater than the Initial Price
of the REDSS. You bear the full risk of a
decline in the value of the Common Stock
prior to the Exchange Date. If the Exchange
Price is less than the Initial Price, you
will receive at the Exchange Date less than
the amount you paid for the REDSS and your
investment in REDSS will result in a loss.
If the Company becomes insolvent or bankrupt,
you could lose your entire investment.
LIMITED OPPORTUNITY
FOR EQUITY APPRECIATION You will realize a smaller amount of
any appreciation in the value of the Common
Stock by investing in REDSS than if you
invested directly in the Common Stock because:
<circle> The value of the Common Stock you may
receive at the Exchange Date will
exceed the Initial Price only if the
shares appreciate above the Threshold
Appreciation Price, which represents
an appreciation of __% over the
Initial Price.
<circle> You are entitled to receive only
_____% of any appreciation of the
value of the Common Stock in excess
of the Threshold Appreciation Price.
In addition, because the Exchange Price is
generally 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 you will receive at the
Exchange Date.
NO DIVERSIFICATION The Trust is classified as a "non-
OF ASSETS diversified" investment company under the
Investment Company Act of 1940, as amended
("Investment Company Act") and is not limited
in the proportion of its assets that may be
invested in the securities of a single
7
<PAGE>
issuer. Because the Trust will hold only the
Treasury Securities and the Contracts, you
may incur greater risk than would be the case
for an investment company with more diversified
investments.
TRADING PRICE OF REDSS The trading prices of the REDSS in the
VARIES WITH TRADING secondary market will be directly affected by
PRICE OF COMMON STOCK the trading prices of the Common Stock in the
secondary market. The Company's operating
results and prospects, economic, financial and
other factors and market conditions will
influence the trading prices of the Common
Stock.
BANKRUPTCY OF SELLING A bankruptcy of a Selling Shareholder
SHAREHOLDER could adversely affect the timing of settlement
of the REDSS and, as a result, the amount you
receive on the REDSS.
LISTING
The trust has applied to list the REDSS on the [ ]
under the symbol "_____."
FEES AND EXPENSES
Because the Trust will use the proceeds of the sale of the REDSS to
purchase the Contracts, the Selling Shareholders will pay to the Underwriter
compensation of $ per each REDSS sold by the Trust. See "Underwriting."
At the closing of this offer, the Underwriter will pay the costs of organizing
the Trust, estimated to be $ , and of the initial registration and public
offering of the REDSS, estimated to be $ . At that time the Underwriter
will also make a one-time payment of the estimated ongoing fees of the
Administrator, the Custodian, the Paying Agent and each Trustee. The
Underwriter will also pay any ongoing expenses of the Trust in excess of these
estimated amounts and will reimburse the Trust for any amounts that the Trust
will have to pay as indemnification to any Trustee, the Administrator, the
Custodian or the Paying Agent. The Selling Shareholders will reimburse the
Underwriter for fees and expenses paid by the Underwriter and for any eventual
indemnification. Neither you nor the Trust will bear any direct fees or
expenses. You might be indirectly responsible for the compensation that the
Underwriter will receive on the sale of the REDSS and for the ongoing expenses
of the Trust. These ongoing expenses of the Trust are estimated to be
$ per year.
8
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Investor Transaction Expense
Sales Load (as a percentage of offering price). . . . . . . . . . __%
Annual Expense
Management Fees. . . . . . . . . . . . . . . . . . . . . . . . . 0%
Other Expenses (after reimbursement by the Selling Shareholder). . 0%
--
Total Annual Expenses 0%
</TABLE>
Absent the reimbursement, the Trust's "total annual expenses" would be
equal to approximately _____% of the Trust's average net assets.
Below is an illustration of the direct and indirect expenses that you will
bear. You should note that the 5% annual return in the illustration below, does
not reflect the financial terms of the Trust in an accurate manner.
<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 Underwriter and the Selling
Shareholder) on a $1,000 investment, assuming a 5%
annual return.............................................. $_____ $_____
</TABLE>
9
<PAGE>
RISK FACTORS RELATING TO REDSS
INTERNAL MANAGEMENT; NO PORTFOLIO MANAGEMENT
The Trust will be internally managed by its Trustees and will not have
any separate investment adviser. The Trust has adopted a fundamental policy
that it will not dispose of any Contract during the term of the Trust or any of
the Treasury Securities held by the Trust prior to the earlier of its maturity
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 comparable developments affecting any Marketable Securities that
may be substituted for the Common Stock, or the issuer thereof). The Trust
will not be managed like a typical closed-end investment company.
RELATIONSHIP TO COMMON STOCK; LIMITATIONS ON OPPORTUNITY FOR EQUITY
APPRECIATION; POTENTIAL LOSSES
RELATIONSHIP OF CURRENT YIELDS. The yield on the REDSS is higher than
the current dividend yield on the Common Stock. However, there is no assurance
that the yield on the REDSS will be higher than the dividend yield on the
Common Stock over the term of the Trust.
POTENTIAL LOSS ON FLUCTUATION OF VALUE OF COMMON STOCK. The amount you
will receive at the Exchange Date is not fixed, but will be determined at the
Exchange Date on the basis of the market price of the Common Stock at that
time. The amount you will receive at the Exchange Date may be less than or may
be greater than the Initial Price of the REDSS. You bear the full risk of a
decline in the value of the Common Stock prior to the Exchange Date. If the
Exchange Price is less than the Initial Price, the amount you will receive at
the Exchange Date will generally be less than the amount you paid for the
REDSS, and your investment in REDSS will result in a loss. If the Company
became insolvent or bankrupt, you could lose your entire investment.
LIMITED OPPORTUNITY FOR EQUITY APPRECIATION. Your opportunity for equity
appreciation from investing in REDSS is less than your opportunity for equity
appreciation from a direct investment in the Common Stock because:
<circle> The amount you will receive at the Exchange Date will generally
exceed the Initial Price only if the Exchange Price exceeds the
Threshold Appreciation Price (which represents an appreciation
of ____% over the Initial Price).
<circle> You will 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 you will receive at the Exchange Date at various Exchange Prices.
In addition, because the Exchange Price is generally 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 you
will receive at the Exchange Date.
MARKET PRICE OF REDSS
The market price of the REDSS at any time will change primarily in
response to changes in the price of Common Stock. It is impossible to predict
whether the price of the Common Stock will rise or fall. See the prospectus
relating to the Company and to the Common Stock attached hereto. Any of the
following factors may influence trading prices of Common Stock:
<circle> The Company's operational results and prospects.
10
<PAGE>
<circle> Complex and interrelated political, economic, financial and
other factors that can affect the capital markets generally,
the stock exchange or quotation system on which Common
Stock is traded or listed and the market segment of which the
Company is a part.
The sale by the Selling Shareholders or another principal shareholder of
the Company of securities with terms similar to those of the REDSS or of the
Common Stock may also influence trading prices of the Common Stock. As of the
date hereof the Selling Shareholders held an aggregate of _______ shares of
Common Stock of which ______ shares of Common Stock (assuming the Underwriter's
over-allotment option is exercised in full) may be delivered by the Selling
Shareholders to the Trust at the Exchange Date.
TRADING VALUE; LISTING
The REDSS are innovative securities and have no trading history, and it
is not possible to predict how they will trade in the secondary market. The
trading price of the REDSS may vary considerably prior to the Exchange Date due
to, among other things, fluctuations in the price of the Common Stock and
fluctuations in interest rates and other factors that are difficult to predict
and beyond the Trust's control.
Each Underwriter currently intends, but is not obligated, to make a
market in the REDSS. Any Underwriter may discontinue any market-making at any
time in its sole discretion without notice. There can be no assurance that a
secondary market will develop or, if a secondary market does develop, that it
will provide you with liquidity of investment or that it will continue for the
life of the REDSS.
The Trust has applied to list the REDSS on the [ ]. Assuming the
acceptance of such application, there can be no assurance that the REDSS will
not later be delisted or that trading in the REDSS on the [ ] will
continue without suspension. In the event of a delisting or suspension of
trading on such exchange, the Trust will apply for listing of the REDSS on
another national securities exchange or for quotation on another trading
market. If the REDSS are not listed or traded on any securities exchange or
trading market, or if trading of the REDSS is suspended, pricing information
for the REDSS may be more difficult to obtain, which may adversely affect the
price and liquidity of the REDSS.
IMPACT OF THE REDSS ON THE MARKET FOR THE COMMON STOCK
It is not possible to predict accurately how or whether the REDSS will
trade in the secondary market or whether such market will be liquid. Any
market that develops for the REDSS is likely to influence and be influenced by
the market for the Common Stock. For example, the price of the Common Stock
could become more volatile and could be depressed by:
<circle> Investors' anticipation of the potential distribution into the
market of substantial additional amounts of Common Stock at the
termination of the Trust.
<circle> Possible sales of the Common Stock by investors who view the
REDSS as a more attractive means of equity participation in
the Company.
<circle> Hedging or arbitrage trading activity that may develop involving
the REDSS and the Common Stock.
11
<PAGE>
DILUTION ADJUSTMENTS; STOCKHOLDERS RIGHTS
The number of shares of Common Stock that you will receive at the
termination of the Trust may be adjusted for certain events arising from stock
splits and combinations, stock dividends and certain other actions of the
Company that modify its capital structure. See "Investment Objectives and
Policies -- The Contracts -- Dilution Adjustments; Adjustment Events."
However, no adjustment will occur 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 the number of shares of the Common
Stock you will receive at the Exchange Date depends upon the price of the
Common Stock, these other events may adversely affect the trading price of the
REDSS. There can be no assurance that the Company will not take any of the
foregoing actions, or that it will not make offerings of, or that major
shareholders will not sell any, Common Stock in the future, or as to the amount
of any such offerings or sales. In addition, until you receive Common Stock
upon a distribution by the Trust, you will not be entitled to any rights to the
Common Stock, including voting rights or rights to receive dividends or other
distributions on the Common Stock.
NO OBLIGATION ON THE PART OF THE COMPANY WITH RESPECT TO THE REDSS OR THE
CONTRACTS
The Company has no obligations with respect to the REDSS, the Contracts
or the amount you receive at the Exchange Date, including any obligation to
take your needs or the needs of the Trust into consideration for any reason.
The Company will not receive any of the proceeds of the offering of the REDSS
and is not responsible for, and has not participated in, the determination of
the time of sale of, quantities of or prices for the REDSS to be issued or the
determination or calculation of the amount you will receive at the Exchange
Date. The Company is not involved with the administration or trading of the
REDSS.
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 REDSS 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 the 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 REDSS
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
it may invest in the obligations of a single issuer. Because the Trust will
hold or receive only 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 REDSS or instruments similar to the REDSS for U.S.
federal income tax purposes. As a result, significant aspects of the U.S.
federal income tax consequences of an investment in the REDSS are not certain.
The Trust has not requested a ruling from the Internal Revenue Service for the
REDSS and cannot provide any assurance that the Internal Revenue Service will
12
<PAGE>
agree with the conclusions expressed under "Certain United States Federal
Income Tax Considerations."
RISK FACTORS RELATING TO THE COMPANY
Investors in the REDSS 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 SELLING SHAREHOLDERS
The Trust believes that the Contracts constitute "securities contracts"
for purposes of the Bankruptcy Code. Liquidation of "securities contracts"
would not be subject to the automatic stay provisions of the Bankruptcy Code in
the event of the bankruptcy of a Selling Shareholder. It is, however, possible
that a court would determine that the Contracts do not qualify as "securities
contracts" for this purpose, in which case a Selling Shareholder's bankruptcy
may cause a delay in settlement of the Selling Shareholder's Contract, or
otherwise subject the Contract to bankruptcy 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 you on a timely basis and, as a result, could
adversely affect the amount you receive on the REDSS and/or the timing of such
receipt. It is also possible, even if the Contracts are "securities
contracts," that a Bankruptcy court could exercise its equitable powers to stay
the Trust's exercise of its remedies, which could similarly adversely affect
the amount received by the Holders in respect of the REDSS and/or the timing of
such receipt.
13
<PAGE>
THE TRUST
REDSS Trust I 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 July 6, 1998 pursuant to a
Declaration of Trust dated as of July 7, 1998, (the "Declaration of
Trust"). The term of the Trust will expire on or shortly after _______ __,
2001, except that the Trust may be dissolved prior to such date under certain
limited circumstances. The address of the Trust is c/o CIBC Oppenheimer Corp.,
CIBC Oppenheimer Tower, World Financial Center, New York, New York 10281
(telephone number: (212) 667-7000).
USE OF PROCEEDS
The net proceeds of this offering will be used on or shortly after the
date on which this offering is completed to purchase a fixed portfolio
comprised of a series of zero-coupon U.S. Treasury securities with face amounts
and maturities corresponding to the amounts and payment dates of the
distributions payable with respect to the REDDS and to pay the purchase price
under the Contracts to the Selling Shareholders.
INVESTMENT OBJECTIVES AND POLICIES
TRUST ASSETS
The Trust will acquire and hold a portfolio of stripped U.S. Treasury
securities maturing on a quarterly basis through the Exchange Date and the
Contracts relating to the Common Stock of the Company. The Trust's investment
objective is to provide each Holder with a quarterly cash distribution of
$____________ per REDSS (which amount equals the pro rata portion of the fixed
quarterly distributions from the proceeds of the maturing U.S. Treasury
securities held by the Trust) and, on the Exchange Date, a number of shares of
Common Stock per REDSS equal to the Exchange Rate (as defined herein) or, to
the extent that some or all of the Selling Shareholders elect, a value in cash
equal to the number of shares of Common Stock (the "Cash Delivery Option"). On
or prior to the 25th Business Day prior to the Exchange Date, each of the
Selling Shareholders 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 REDSS 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 New York Stock Exchange ("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 will vary in accordance with a formula, depending on
the Exchange Price of the Common Stock on the Exchange Date:
- if the Exchange Price is less than the Threshold Appreciation Price
but equal to or greater than the Initial Price, the Exchange Rate
will be the number of shares of Common Stock having a value
(determined at the Exchange Price) equal to the Initial Price;
- if the Exchange Price is equal to or greater than the Threshold
Appreciation Price, the Exchange Rate will be __________ shares of
Common Stock; and
- if the Exchange Price is less than the Initial Price, the Exchange
Rate will be one share of Common Stock.
14
<PAGE>
The value of the Common Stock to be received by Holders of the REDSS (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
REDSS. The numbers of shares of Common Stock per REDSS specified above are
hereinafter referred to as the "Share Components." Any shares of Common Stock
delivered by the Trust to the Holders of the REDSS that are not affiliated with
the Company will be free of any transfer restrictions and the Holders of the
REDSS 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 REDSS will receive
cash in lieu thereof. See " -- Delivery of Common Stock and Marketable
Securities; No Fractional Shares of Common Stock or Marketable 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 Marketable Securities (as defined herein) or a
combination thereof, rather than (or in addition to) shares of Common Stock.
See "-- The Contracts -- Dilution Adjustments; Adjustment Events" below.
The Trust has adopted a fundamental policy to invest at least 65% of its
portfolio in the Contracts. The Contracts will comprise approximately __% of
the Trust's initial assets. The Trust has also adopted a fundamental policy
that the Contracts may not be disposed of during the term of the Trust and that
the Treasury Securities held by the Trust may not be disposed of prior to the
earlier of their respective maturities and the termination of the Trust except
for the partial liquidation of Treasury Securities following acceleration of
any Contract as described below under "-- The Treasury Securities." The
foregoing fundamental policies of the Trust may not be changed without the vote
of a majority in interest of the Holders. A "majority in interest of the
Holders" means the lesser of (i) 67% of the REDSS represented at a meeting at
which more than 50% of the outstanding REDSS are represented and (ii) more than
50% of the outstanding REDSS.
The "Exchange Price" per share of Common Stock means the average Closing
Price (as defined below) of a share of Common Stock on the 20 Trading Days (as
defined below) 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 (as defined herein). The formula will be subject
to adjustment in certain events. See "-- The Contracts-Dilution Adjustments;
Adjustment Events." For purposes of the first part of the formula, the
Exchange Rate will be rounded upward or downward to the nearest 1/10,000 (or if
there is not a nearest 1/10,000, to the next lower 1/10,000). Holders
otherwise entitled to receive fractional shares in respect of their aggregate
holdings of Securities will receive cash in lieu thereof. See "-Trust
Termination."
The "Closing Price" of any security on any date of determination means
(i) the closing sale price (or, if no closing sale price is reported, the last
reported sale price) of such security (regular way) on the NYSE on such date of
determination, (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, as reported in the composite transactions for the
principal United States regional securities exchange on which such security is
so listed, (v) if such security is not so listed on a United States regional
securities exchange, the last quoted bid price for such security in the over-
the-counter market as reported by the National Quotation Bureau or similar
organization, or (vi) if such security is not so quoted, the average of the
mid-point of the last bid and ask prices for such security from at least three
nationally recognized investment banking firms selected by the Administrator
for this purpose; provided that if any event that results in an adjustment to
the number of shares of Common Stock deliverable under the Contracts as
described under "-The Contracts-Dilution Adjustments; Adjustment Events" occurs
15
<PAGE>
prior to the Exchange Date, the Closing Price as determined pursuant to the
foregoing of the Common Stock will be appropriately adjusted to reflect the
occurrence of such event.
A "Trading Day" means 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 REDSS 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 Selling
Shareholders exercise the Cash Delivery Option or all Selling Shareholders do.
There can be no assurance that the Exchange Price will be within the range set
forth below. Given the Initial Price of $___ per REDSS and the Threshold
Appreciation Price of $____, a Holder would receive at the Exchange Date the
following number of shares of Common Stock or amount of cash (if all Selling
Shareholders exercise the Cash Delivery Option) per REDSS:
<TABLE>
<CAPTION>
Exchange Price of Common Number of Shares of Common Amount of Cash
Stock Stock
<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 REDSS, resulting in the REDSS 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 REDSS 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 REDSS, regardless of
the market price of such share, resulting in the REDSS 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 REDSS at the
issue price from the Underwriter in the original offering. See "Certain United
States Federal Income Tax Considerations."
<TABLE>
<CAPTION>
Year Annual Gross Distributions Annual Gross Annual Cash
From Treasury Securities Distributions From Distribution in Excess
Treasury Securities of Original Issue
Per Reds Discount Income
Per Reds
<S> <C> <C> <C>
1998 $________ $_______ $_______
1999 _______ _______ _______
2000 _______ _______ _______
2001 _______ _______ _______
</TABLE>
16
<PAGE>
The anticipated annual distribution of $______ per REDSS 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 REDSS will consist solely of the
cash received from the maturing Treasury Securities held by the Trust. The
Trust will not be entitled to any dividends that may be declared on the Common
Stock.
ENHANCED YIELD; LESS POTENTIAL FOR EQUITY APPRECIATION THAN COMMON STOCK; NO
DEPRECIATION PROTECTION
The yield on the REDSS is higher than the current dividend yield on the
Common Stock. However, there is no assurance that the yield on the REDSS will
be higher than the dividend yield on the Common Stock over the term of the
Trust. In addition, the opportunity for equity appreciation afforded by an
investment in the REDSS is less than the opportunity for equity appreciation
afforded by a direct investment in the Common Stock because the value of the
Common Stock to be received by the Holders of the REDSS at the Exchange Date
(the "Amount Receivable at the Exchange Date") will generally exceed the
Initial Price only if the Exchange Price exceeds the Threshold Appreciation
Price (which represents an appreciation of _____% over the Initial Price) and
because Holders will be entitled to receive at the Exchange Date only _____%
(the percentage equal to the Initial Price divided by the Threshold
Appreciation Price) of any appreciation of the value of the Common Stock in
excess of the Threshold Appreciation Price. Moreover, Holders of REDSS will
realize the entire decline in value if the Exchange Price on the Exchange Date
is less than the Initial Price. Additionally, because the Exchange Price is
generally determined based on a 20 Trading Day average, the value of a 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 Selling Shareholders deliver shares of Common Stock to the Trust
pursuant to the Contracts and the Trust has distributed such shares to the
Holders.
Attached hereto is a prospectus of the Company which describes the
Company and the Common Stock that may be delivered to the Trust by the Selling
Shareholders, 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 ___________ under the
symbol "_____." The following table sets forth, for the indicated periods, the
high and low sales prices of the Common Stock as reported on the ___________,
and the cash dividends per share of Common Stock. As of ________, 1998, there
were _____ record holders of the Common Stock, including The Depository Trust
Company, which holds shares of Common Stock on behalf of an indeterminate
number of beneficial owners.
17
<PAGE>
Adjustment
High Low Dividend Per Share
1996
First Quarter $ $ $
Second Quarter
Third Quarter
Fourth Quarter
1997
First Quarter $ $ $
Second Quarter
Third Quarter
Fourth Quarter
1998
First Quarter $ $ $
Second Quarter
The Company is not affiliated with the Trust, will not receive any of the
proceeds from the sale of the REDSS and will have no obligations with respect
to the REDSS or the Contracts. This Prospectus relates only to the REDSS
offered hereby and does not relate to the Company or the Common Stock. The
Company has filed a registration statement on Form S-3 with the Commission with
respect to the shares of Common Stock that may be delivered to the Trust by the
Selling Shareholders, and by the Trust to the Holders of REDSS, 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 HERETO AND DELIVERED TO PROSPECTIVE PURCHASERS OF REDSS 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
Selling Shareholders obligating each Selling Shareholder, 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 Selling Shareholder's Contract multiplied by the Exchange Rate. Each
Selling Shareholder 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, except where such delivery would violate applicable
state law. The amount of cash deliverable by a Selling Shareholder 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 Selling Shareholder 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 Selling Shareholders 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 REDSS 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.
The purchase price of the Contracts was arrived at by arm's-length
negotiation between the Trust and the Selling Shareholders 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 Selling Shareholders, the value of other similar instruments and the
costs and anticipated proceeds of the offering of the Securities. All matters
relating to the administration of the Contracts will be the responsibility of
either the Administrator or the Custodian.
18
<PAGE>
DILUTION ADJUSTMENTS; ADJUSTMENT EVENTS. The Exchange Rate is subject to
adjustment if the Company (i) pays a stock dividend or makes a distribution
with respect to the Common Stock in shares of such stock, (ii) subdivides or
splits its outstanding shares of Common Stock, (iii) combines its outstanding
shares of Common Stock into a smaller number of shares, or (iv) issues 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 shares of other common stock of the Company. In any such
event, the Exchange Rate shall be adjusted as follows: for each share of
Common Stock that would have been issuable upon exchange prior to the
adjustment, the Holder will receive the number of shares of Common Stock (or,
in the case of a reclassification referred to in clause (iv) above, the number
of shares of other common stock of the Company issued pursuant thereto), or
fraction thereof, that a shareholder who held one share of Common Stock
immediately prior to such event would be entitled, solely by reason of such
event, to hold immediately after such event.
In addition, if the Company issues rights or warrants to all holders of
Common Stock entitling them to subscribe for or purchase shares of Common Stock
(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, then 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 such rights or
warrants by the following fraction:
Adjusted Exchange Rate = ER x OS + AS
-------
OS + PS
where
ER = the Exchange Rate prior to the adjustment;
OS = the number of shares of Common Stock outstanding on the record date
for the issuance of such rights or warrants;
AS = the number of additional shares offered for subscription or
purchase pursuant to such rights or warrants; and
PS = the number of additional shares that the aggregate offering price
of the shares so offered for subscription or purchase would
purchase at 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, after expiration of such rights or warrants, the shares
offered thereby shall not have been delivered, the Exchange Rate shall be
further adjusted to equal the Exchange Rate that would have been in effect had
the foregoing adjustment been made upon the basis of delivery of only the
number of shares of Common Stock actually delivered. 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 as
determined by a nationally recognized investment banking firm retained for such
purpose by the Administrator. If an adjustment is made to the Exchange Rate for
any of the foregoing reasons, an adjustment will also be made to the Exchange
Price as such term is used throughout the definition of Exchange Rate. The
required adjustment to the Exchange Price shall be made at the Exchange Date by
19
<PAGE>
multiplying the Exchange Price by the cumulative number or fraction determined
pursuant to the Exchange Rate adjustment procedure described above. In the
case of the reclassification of any shares of Common Stock into any equity
securities of the Company other than the Common Stock, such equity securities
shall be deemed to be shares of Common Stock for all purposes. Each such
adjustment to the Exchange Rate and the Exchange Price shall be made
successively.
Dilution adjustments shall be effected: (i) in the case of any dividend,
distribution or issuance described above, at the opening of business on the
business day following the record date for determination of holders of Common
Stock entitled to receive such dividend, distribution or issuance or, if the
announcement of any such dividend, distribution or issuance is after such
record date, at the time such dividend, distribution or issuance shall be
announced by the Company; and (ii) in the case of any subdivision, split,
combination or reclassification described above, on the effective date of such
transaction. There will be no adjustment under the Contracts in respect of any
dividends, distributions or issuances that may be declared or announced after
the Exchange Date. If any announcement or declaration of a record date in
respect of a dividend, distribution or issuance shall subsequently be canceled
by the Company, or such dividend, distribution or issuance shall fail to
receive requisite approvals or shall fail to occur for any other reason, then
the Exchange Rate shall be further adjusted to equal the Exchange Rate that
would have been in effect had the adjustment for such dividend, distribution or
issuance not been made. All adjustments described herein shall be rounded
upward or downward to the nearest 1/10,000 (or if there is not a nearest
1/10,000 to the next lower 1/10,000). No adjustment in the Exchange Rate shall
be required unless such adjustment would require an increase or decrease of at
least one percent therein; provided, however, that any adjustments which by
reason of the foregoing are not required to be made shall be carried forward
and taken into account in any subsequent adjustment.
In addition, 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 any dividends or distributions referred to in clause
(i) of the first paragraph under the caption "-- Dilution Adjustments;
Adjustment Events," any equity securities issued pursuant to a reclassification
referred to in clause (iv) of such paragraph and any Ordinary Cash Dividends
(as defined below)) or any issuance by the Company to all holders of Common
Stock of rights or warrants to subscribe for or purchase any of its securities
(other than rights or warrants referred to in the second paragraph under the
caption "-- Dilution Adjustments; Adjustment Events"), (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 Selling Shareholder 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:
- if the Exchange Price is greater than the Threshold Appreciation
Price, ______ multiplied by the Transaction Value (as defined
below),
- 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
- if the Exchange Price is less than or equal to the Initial Price,
the Transaction Value.
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<PAGE>
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 first paragraph under the caption "-- Dilution Adjustments;
Adjustment Events," otherwise zero, plus (B) the Transaction Value.
Notwithstanding the foregoing, with respect to any securities received by
holders of Common Stock 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 REDSS ("Marketable
Securities"), each Selling Shareholder is obligated, in lieu of delivering cash
in respect of such Marketable Securities received in an Adjustment Event, to
deliver a number of such Marketable Securities with a value equal to all cash
amounts that would otherwise be deliverable in respect of Marketable Securities
received in such Adjustment Event, as determined in accordance with clause (ii)
of the definition of Transaction Value, unless such Selling Shareholder has
made an election to exercise the Cash Delivery Option or such Marketable
Securities have not yet been delivered to the holders entitled thereto
following such Adjustment Event or any record date with respect thereto. If a
Selling Shareholder delivers any Marketable Securities, upon distribution
thereof by the Trust to Holders of REDSS, each Holder of a REDSS will be
responsible for the payment of any and all brokerage and other transaction
costs upon the sale of such Marketable Securities. If, following any
Adjustment Event, any Reported Security ceases to qualify as a Reported
Security, then (x) the Selling Shareholders 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 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 REDSS represents a Holder's right to receive a pro rata
portion of the Common Stock or other assets delivered by the Selling
Shareholders pursuant to the Contracts, the amount of cash and/or the kind and
number of securities which the Holders of REDSS 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 Marketable Securities received in any Adjustment Event, an amount equal
to (x) the average Closing Price per security of such Marketable Securities on
the 20 Trading Days immediately prior to (but not including) the Exchange Date
multiplied by (y) the number of such Marketable 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 Marketable 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 Marketable
Securities by virtue of only clause (iv) of the definition of Marketable
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
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<PAGE>
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 Marketable 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 Marketable
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 Marketable 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, Marketable Securities or other
property receivable in an Adjustment Event shall be deemed to have been
received immediately prior to the close of business on the record date for such
Adjustment Event or, if there is no record date for such Adjustment Event,
immediately prior to the close of business on the effective date of such
Adjustment Event.
No adjustments will be made for certain other events, such as offerings
of 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 any of
the Selling Shareholders.
Each Selling Shareholder 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 REDSS 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 REDSS
following the Adjustment Event was determined and setting forth the revised
Exchange Rate or consideration, as the case may be; provided, however, that, in
respect of any adjustment to the Exchange Price, such notice will only disclose
the factor by which the Exchange Price is to be multiplied in order to
determine which clause of the Exchange Rate definition will apply at the
Exchange Date.
COLLATERAL REQUIREMENTS OF THE CONTRACTS; ACCELERATION. Each Selling
Shareholder'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 among such Selling
Shareholder, the Trust and The Bank of New York, as collateral agent (the
"Collateral Agent"). Unless a Selling Shareholder is in default in its
obligations under the Collateral Agreement, the Selling Shareholder 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 Selling
Shareholder will pledge as alternative collateral any Marketable Securities,
plus cash in an amount at least equal to the Transaction Value of any
consideration other than Marketable Securities, received by it in respect of
the maximum number of shares of Common Stock subject to such Selling
Shareholder's Contract at the time of the Adjustment Event. The number of
Marketable Securities required to be pledged shall be subject to adjustment if
any event requiring a dilution adjustment under the Contracts shall occur.
Each Selling Shareholder will be permitted to substitute U.S. Government
obligations for Marketable 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-
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<PAGE>
market valuations thereafter of: (A) in the case of obligations substituted for
pledged Marketable 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 Marketable Securities at the time of each
valuation times the number of Marketable 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 Selling Shareholder any dividends, interest, principal or other
payments received by the Collateral Agent in respect of any collateral,
including any substitute collateral, unless the relevant Selling Shareholder is
in default of its obligations under its Collateral Agreement, or unless the
payment of such amount to the relevant Selling Shareholder 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 Selling
Shareholder as substitute collateral fail to meet the foregoing requirements at
any valuation, or that such Selling Shareholder has failed to pledge additional
collateral required as a result of a dilution adjustment increasing the maximum
number of shares of Common Stock or Marketable Securities subject to such
Contract, and such failure shall not be cured by the close of business on the
next business day after 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 Marketable Securities,
in an amount sufficient to cause the collateral to meet the requirements under
such Collateral Agreement. The Collateral Agent shall discontinue such sales
and purchases if at any time a Collateral Event of Default under such
Collateral Agreement shall have occurred and be continuing.
The occurrence of a Collateral Event of Default (as defined below) under
any Collateral Agreement, or the bankruptcy or insolvency of any Selling
Shareholder will cause an automatic acceleration of each Selling Shareholder'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 Selling Shareholder'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
Marketable Securities required to be pledged as described above); (B) if any
U.S. Government obligations shall be pledged as substitute collateral for
shares of Common Stock (or Marketable Securities) at such time, failure of such
U.S. Government obligations to have a market value at such time of at least
105% of the market price of the Common Stock (or the then-current market price
per security of Marketable Securities, as the case may be) times the difference
between (x) the maximum number of shares of Common Stock (or Marketable
Securities) subject to the relevant Selling Shareholder's Contract at such time
and (y) the number of shares of Common Stock (or Marketable 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 Selling Shareholder.
Except as described below, upon acceleration of any Selling Shareholder'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
Selling Shareholder'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 Selling Shareholder, or cash generated from the liquidation of
U.S. Government obligations then pledged by that Selling Shareholder, or a
combination thereof (or, after an Adjustment Event, in the form of Marketable
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
23
<PAGE>
not been replaced by shares of Common Stock (or, after an Adjustment Event,
cash or Marketable 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 Selling Shareholder plus
cash generated from the liquidation of U.S. Government obligations then pledged
by such Selling Shareholder (or, after an Adjustment Event, the market value of
the alternative consideration required to be delivered thereunder, in the form
of any Marketable Securities then pledged, plus any cash then pledged, plus
cash generated from the liquidation of U.S. Government obligations then
pledged).
If upon acceleration of a Selling Shareholder's Contract, such Selling
Shareholder is subject to a 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 Selling
Shareholder's Contract, a number of shares of Common Stock, in the form of the
shares of Common Stock then pledged by that Selling Shareholder, or cash
generated from the liquidation of U.S. Government obligations then pledged by
that Selling Shareholder, or a combination thereof (or, after an Adjustment
Event, in the form of Marketable 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
Selling Shareholder'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, Marketable Securities, cash or a combination
thereof) subject to such Selling Shareholder'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, Marketable
Securities, cash or a combination thereof) that would be required to be
delivered under such Selling Shareholder's Contract on the date of acceleration
if the Exchange Date were redefined to be the date of acceleration.
DESCRIPTION OF SELLING SHAREHOLDERS. The Selling Shareholders may be
institutional investors or individuals of trust, foundations or other entities
through which such individuals hold their shares of Common Stock. A brief
description of the Selling Shareholders will be added by amendment. Specific
information on the holdings of the Selling Shareholders, 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 REDSS 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.
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<PAGE>
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.
In the event that all of the Contracts remaining in effect at any time
are accelerated, then any Treasury Securities then held by the Trust will be
liquidated by the Administrator and the proceeds thereof distributed pro rata
to the Holders, together with all shares of Common Stock subject to each
Selling Shareholder's Contract that are pledged by each Selling Shareholder, or
cash generated from the liquidation of U.S. Government obligations then pledged
by each Selling Shareholder, or a combination thereof (or, after an Adjustment
Event, in the form of Marketable 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 Selling Shareholder's Contract, and the term of the Trust will expire.
See "-- The Contracts -- Collateral Requirements of the Contracts;
Acceleration" above.
DELIVERY OF COMMON STOCK AND MARKETABLE SECURITIES; NO FRACTIONAL SHARES OF
COMMON STOCK OR MARKETABLE SECURITIES
Common Stock and Marketable 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 Marketable Securities will be distributed. If more than one
REDSS shall be surrendered at one time by the same Holder, the number of full
shares of Common Stock or Marketable 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 REDSS 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 REDSS, 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
The Trust has adopted a fundamental policy that the Trust may not
purchase any securities or instruments other than the Treasury Securities, the
Contracts and the 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 REDSS; make
short sales or purchase securities on margin; write put or call options; borrow
money; underwrite securities; purchase or sell real estate, commodities or
commodities contracts; or make loans. The Trust has also adopted a fundamental
policy that the Contracts may not be disposed of during the term of the Trust
and that (except for a partial liquidation of Treasury Securities following
acceleration of any Contract as described above under "Investment Objectives
and Policies -- The Treasury Securities") the Treasury Securities may not be
disposed of prior to the earlier of their respective maturities and the
termination of the Trust.
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
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<PAGE>
total number of REDSS 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, the
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 REDSS
Each REDSS 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. REDSS have no preemptive,
redemption or conversion rights. The REDSS, when issued and outstanding, will
be fully paid and nonassessable. The only securities that the Trust is
authorized to issue are the REDSS offered hereby and those sold to the initial
Holder referred to below. See "Underwriting."
Holders are entitled to one vote for each REDSS 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 CIBC
Oppenheimer as the initial Holder of the Trust. The Trust intends to hold
annual meetings as required by the rules of the [ ]. 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 REDSS, 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 REDSS or to vote on other matters upon the
written request of the record Holders of 51% of the REDSS (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 REDSS will be issued in the form of one or more global securities
(the "Global Securities") deposited with The Depository Trust Company (the
"Depositary") and registered in the name of a nominee of the Depositary.
The Depositary has advised the Trust and the Underwriter as follows: The
Depositary is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to Section 17A of the Exchange Act. The
Depositary was created to hold securities of persons who have accounts with the
Depositary ("participants") and to facilitate the clearance and settlement of
securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of certificates. Such participants
include securities brokers and dealers, banks, trust companies and clearing
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<PAGE>
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 REDSS represented by such Global Security to the
accounts of participants. The accounts to be credited shall be designated by
the Underwriter. Ownership of beneficial interests in such Global Securities
will be limited to participants or persons that may hold interests through
participants. Ownership of beneficial interests by participants in such Global
Securities will be shown on, and the transfer of those ownership interests will
be effected only through, records maintained by the Depositary or its nominee
for such Global Securities. Ownership of beneficial interests in such Global
Securities by persons that hold through participants will be shown on, and the
transfer of that ownership interest within such participant will be effected
only through, records maintained by such participant. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to transfer beneficial interests in a Global Security.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the REDSS.
Except as set forth below, owners of beneficial interests in such Global
Securities will not be entitled to have the REDSS registered in their names and
will not receive or be entitled to receive physical delivery of the REDSS 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, REDSS 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 REDSS 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 90 days, the Trust will issue
REDSS in definitive registered form in exchange for the Global Security
representing such REDSS. In that event, an owner of a beneficial interest in a
Global Security will be entitled to physical delivery in definitive form of
REDSS represented by such Global Security equal in number to that represented
by such beneficial interest and to have such REDSS registered in its name.
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<PAGE>
MANAGEMENT AND ADMINISTRATION OF THE TRUST
TRUSTEES
The Trust will be internally managed by three Trustees, none of whom is
an "interested person" of the Trust as defined in the Investment Company Act,
and will not have an investment adviser. Under the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), applicable to grantor trusts,
the Trustees will not have the power to vary the investments held by the Trust.
It is a fundamental policy of the Trust that the Contracts may not be disposed
of during the term of the Trust and that the Treasury Securities held by the
Trust may not be disposed of prior to the earlier of their respective
maturities and the termination of the Trust, except for a partial liquidation
of Treasury Securities following acceleration of any Contract.
The names of the persons who will be elected by CIBC Oppenheimer, the
initial holder of the Trust, to serve as the Trustees, are set forth below.
The positions and the principal occupations of the individual Trustees during
the past five years are also set forth below.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME, AGE AND ADDRESS TITLE DURING PAST FIVE YEARS
--------------------- ----- ----------------------
<S> <C> <C>
Donald J. Puglisi, 52............ Managing Trustee Professor of Finance
Department of finance University of Delaware
University of Delaware
Newark, DE 19716
William R. Latham III, 53........ Trustee Professor of Economics
Department of Economics University of Delaware
University of Delaware
Newark, DE 19716
James B. O'Neil, 58.............. Trustee Professor of Economics
Center for Economic University of Delaware
Education &
Entrepreneurship
University of Delaware
Newark, DE 19716
</TABLE>
Each Trustee who is not a director, officer or employee of either the
Underwriter or the Administrator, or of any affiliate thereof, will be paid by
CIBC Oppenheimer (which will be reimbursed by the Selling Shareholder), 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 The Bank of New
York, as Trust Administrator pursuant to an Administration Agreement. Under
the Administration Agreement, the Trustees have delegated most of their
operational duties to the Administrator, including without limitation, the
duties to: (i) receive invoices for and pay, or cause to be paid, all expenses
incurred by the Trust; (ii) with the approval of the Trustees, engage legal and
other professional advisors (other than the independent public accountants for
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<PAGE>
the Trust); (iii) instruct the Paying Agent to pay distributions on REDSS 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 REDSS. The Administrator
will not, however, select the independent public accountants for the Trust or
sell or otherwise dispose of the Trust assets (except in connection with an
acceleration of the Contracts, or the settlement of the Contracts at the
Exchange Date, and upon termination of the Trust).
The Administration Agreement may be terminated by either the Trust or the
Administrator upon 60 days' prior written notice, except that no termination
shall become effective until a successor Administrator has been chosen and has
accepted the duties of the Administrator.
Except for its roles as Administrator, custodian, paying agent, registrar
and transfer agent of the Trust, and except for its role as Collateral Agent
under the Collateral Agreements, The Bank of New York has no other affiliation
with, and is not engaged in any other transactions with, the Trust.
The address of the Administrator is 101 Barclay Street, New York, New
York 10286.
CUSTODIAN
The Trust's custodian (the "Custodian") is The Bank of New York pursuant
to a Custodian Agreement (the "Custodian Agreement"). In the event of any
termination of the Custodian Agreement by the Trust or the resignation of the
Custodian, the Trust must engage a new Custodian to carry out the duties of the
Custodian as set forth in the Custodian Agreement. Pursuant to the Custodian
Agreement, all net cash received by the Trust will be invested by the Custodian
in short-term U.S. Government securities maturing on or shortly before the next
quarterly distribution date. The Custodian will also act as Collateral Agent
under the Collateral Agreement 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.
PAYING AGENT
The transfer agent, registrar and paying agent (the "Paying Agent") for
the REDSS is The Bank of New York pursuant to a paying agent agreement (the
"Paying Agent Agreement"). In the event of any termination of the Paying Agent
Agreement by the Trust or the resignation of the Paying Agent, the Trust will
use its best efforts to engage a new Paying Agent to carry out the duties of
the Paying Agent.
INDEMNIFICATION
The Trust will indemnify each Trustee, the Administrator, the Custodian
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. CIBC Oppenheimer 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. CIBC Oppenheimer will in turn be reimbursed by the Selling Shareholders
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
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<PAGE>
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 Objective and Policies
- -- Trust Assets" and "Certain United States Federal Income Tax Considerations."
If any Contract is accelerated as described in "Investment Objectives and
Policies -- The Contracts -- Collateral Requirements of the Contracts;
Acceleration," each Holder will receive its pro rata share of the proceeds from
the acceleration of such Contract and from the liquidation of a proportionate
amount of the Treasury Securities then held in the Trust. Upon termination of
the Trust as described in "Investment Objectives and Policies -- Trust
Termination," each Holder will receive its pro rata share of any remaining net
assets of the Trust.
The Trust does not permit the reinvestment of distributions.
ESTIMATED EXPENSES
At the closing of this offering CIBC Oppenheimer 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, REDSS certificates and Holder reports, expenses of the
fidelity bond coverage, stock exchange listing fees and expenses of qualifying
the REDSS for sale in the various states. The aggregate of the one-time, up-
front payments described above will be in the amount of $______. CIBC
Oppenheimer 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 REDSS in the amount of $______
at the closing of the offering. CIBC Oppenheimer will be reimbursed by the
Selling Shareholders for such payments.
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 CIBC Oppenheimer or, in the event
of its failure to pay such amounts, the Selling Shareholders, or, in the event
of the failure of either CIBC Oppenheimer or the Selling Shareholders to pay
such amounts, the Trust. CIBC Oppenheimer will be reimbursed by the Selling
Shareholders for all expenses of the Trust paid by it.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the principal U.S. federal income tax
consequences that may be relevant to a holder of a REDSS that is a citizen or
resident of the United States, a corporation created or organized under the
laws of the United States or any state thereof (including the District of
Columbia), an estate the income of which is subject to U.S. federal income
taxation regardless of its source, or a trust if (i) a U.S. court is able to
exercise primary supervision over the trust's administration and (ii) one or
more United States persons have the authority to control all of the trust's
substantial decisions (a "U.S. person") or a holder that is otherwise subject
to U.S. federal income taxation on a net income basis in respect of a REDSS
(such a holder and any U.S. person, a "U.S. Holder"). In the case of a holder
of REDSS that is a partnership for U.S. federal income tax purposes, each
partner will take into account its allocable share of income or loss from the
REDDS, and will take such income or loss into account under the rules of
taxation applicable to such partner, taking into account the activities of the
partnership and the partner. The discussion below is based on the advice of
Rogers & Wells LLP.
This summary is based on the U.S. federal income tax laws, regulations,
rulings and decisions now in effect, all of which are subject to change
(including retroactive changes) or possible differing interpretations. Except
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<PAGE>
to the extent discussed below under "Non-United States Persons," this summary
deals only with U.S. Holders that will hold REDSS as capital assets. This
summary deals only with initial Holders and does not address tax considerations
applicable to investors that may be subject to special tax rules, such as
banks, insurance companies, dealers in securities, traders in securities making
an election to "mark-to-market" annually their trading positions, regulated
investment companies, tax-exempt entities, persons that will hold REDSS as a
position in a "straddle" for tax purposes or as a part of a "synthetic
security"; a "conversion transaction," a "constructive sale" transaction or
other integrated investment comprised of a REDSS and one or more other
investments, or persons that have a functional currency other than the U.S.
dollar. It does not include any description of the tax laws of any state or
local governments or of any foreign government that may be applicable to the
REDSS or to the Holders thereof. It also does not discuss the tax consequences
of the ownership of the Common Stock or Marketable Securities. Prospective
purchasers of REDSS are urged to review the discussion under "Taxation" in the
accompanying prospectus of the Company concerning the federal income tax
consequences of an investment in the Common Stock. INVESTORS SHOULD CONSULT
THEIR OWN TAX ADVISORS IN DETERMINING THE TAX CONSEQUENCES TO THEM OF HOLDING
REDSS, INCLUDING THE APPLICATION TO THEIR PARTICULAR SITUATION OF THE U.S.
FEDERAL INCOME TAX CONSIDERATIONS DISCUSSED BELOW, AS WELL AS THE APPLICATION
OF STATE, LOCAL OR OTHER TAX LAWS.
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 REDSS. The Trust intends to treat a
REDSS for U.S. federal income tax purposes as a beneficial interest in a trust
that holds zero-coupon U.S. Treasury securities and Contracts, and to report
Holders' income to the Internal Revenue Service in accordance with this
treatment. Under this approach, the tax consequences of holding a REDSS will
be as described below. However, prospective investors in the REDSS should be
aware that the Internal Revenue Service might take a different view as to the
proper characterization of the REDSS and of the tax consequences to a Holder.
TAX STATUS OF THE TRUST
The Trust will be taxable as a grantor trust owned solely by the present
and future holders of REDSS for federal income tax purposes, and income
received by the Trust will be treated as income of the Holders in the manner
set forth below.
TAX CONSEQUENCES TO UNITED STATES HOLDERS
TAX BASIS OF THE TREASURY SECURITIES AND THE CONTRACTS. Each Holder will
be considered the owner of its pro rata portion of the Treasury Securities and
the Contracts in the Trust. The cost to the Holder of its REDSS will be
allocated among the Holder's pro rata portion of the Treasury Securities and
the Contracts (in proportion to the fair market values thereof on the date on
which the Holder acquires its REDSS) in order to determine the Holder's tax
bases. It is currently anticipated that __% and __% of the net proceeds of the
offering will be used by the Trust to purchase the Treasury Securities and as
payments under the Contracts, respectively.
RECOGNITION OF ORIGINAL ISSUE DISCOUNT ON THE TREASURY SECURITIES. The
Treasury Securities in the Trust will consist of zero-coupon U.S. Treasury
securities. A Holder will be required to treat its pro rata portion of each
Treasury Security in the Trust as a bond that was originally issued on the date
the Holder purchased its REDSS 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
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<PAGE>
purposes as it accrues, in accordance with a constant yield method, prior to
the receipt of cash attributable to such income. Because it is expected that
more than 20% of the Holders will be accrual basis taxpayers, original issue
discount on any short-term Treasury Security (i.e., any Treasury Security with
a maturity of one year or less from the date it is purchased) held by the Trust
will also be required to be included in income by the Holders as it is accrued.
Unless a Holder elects to accrue the original issue discount on a short-term
Treasury Security according to a constant yield method based on daily
compounding, such original issue discount will be accrued on a straight-line
basis. The Holder's tax basis in a Treasury Security will be increased by the
amount of any original issue discount included in income by the Holder with
respect to such Treasury Security.
TREATMENT OF THE CONTRACTS. Each Holder will be treated as having
entered into a pro rata portion of the Contracts and, at the Exchange Date, as
having received a pro rata portion of the Common Stock (or cash, Marketable
Securities or combination thereof) delivered to the Trust. Under existing law,
a Holder will not recognize income, gain or loss upon entry into the Contracts.
A Holder should not be required under existing law to include in income
additional amounts over the term of the Contracts.
The Internal Revenue Service may contend that a REDSS should be
characterized for federal income tax purposes in a manner different from the
approach described above. For example, the Internal Revenue Service might
assert that the Contracts should be treated as contingent debt obligations of
the Selling Shareholders that are subject to Treasury regulations promulgated
in June 1996 governing contingent payment debt instruments. If the Internal
Revenue Service were to prevail in making such an assertion, original issue
discount would accrue with respect to each Contract at a "comparable yield" for
the Selling Shareholder under that Contract, determined at the time the
Contract is entered into. A Holder's pro rata portion of original issue
discount in respect of the Contracts and original issue discount in respect of
the Treasury Securities might exceed the aggregate amount of the quarterly cash
distributions to a Holder. In addition, under this treatment, a Holder would
be required to treat any gain realized on the sale, exchange or redemption of
the REDSS as ordinary income to the extent that such gain is allocable to the
Contracts. Any loss realized on such sale, exchange or redemption that is
allocable to the Contracts would be treated as an ordinary loss to the extent
of the Holder's original issue discount inclusions with respect to the
Contracts, and as capital loss to the extent of loss in excess of such
inclusions. It is also possible that the Internal Revenue Service could take
the view that a Holder should include in income the amount of cash actually
received each year in respect of the REDSS, or that the REDSS as a whole
constitute a contingent payment debt instrument subject to the rules described
above.
SALE OF THE REDSS. Upon a sale of all or some of a Holder's REDSS, a
Holder will be treated as having sold its pro rata portion of the Treasury
Securities and Contracts underlying the REDSS, and will be required to allocate
the total amount realized by such Holder upon such sale between the Holder's
pro rata portion for the Treasury Securities and the Contracts based upon their
relative fair market values (as determined on the date of sale). The selling
Holder will recognize gain or loss equal to the difference between the amount
realized and the Holder's aggregate tax bases in its pro rata portion of the
Treasury Securities and the Contracts. Any gain or loss will be long-term
capital gain or loss if the Holder has held the REDSS for more than one year.
The distinction between capital gain or loss and ordinary income or loss is
important for purposes of the limitations on a Holder's ability to offset
capital losses against ordinary income. In addition, certain individuals are
subject to taxation at a reduced rate on long-term capital gains. The Taxpayer
Relief Act of 1997 further reduces tax rates on capital gains recognized by
individuals in respect of assets held for more than 18 months. Holders are
advised to consult their own tax advisers as to the consequences of the
Taxpayer Relief Act of 1997 in their particular circumstances.
DISTRIBUTION OF THE COMMON STOCK. The delivery of Common Stock to the
Trust pursuant to the Contracts will not be taxable to the Holders. The
distribution of Common Stock upon the termination of the Trust will not be
taxable to the Holders. A Holder will have taxable gain or loss (which will be
short-term capital gain or loss) upon receipt of cash in lieu of fractional
shares of Common Stock distributed upon termination of the Trust, in an amount
equal to the difference between the cash received and the portion of the basis
of the Contracts allocable to fractional shares (based on the relative number
of fractional shares and full shares delivered to the Holder). Each Holder's
aggregate basis in its shares of Common Stock will be equal to its basis in its
pro rata portion of the Contracts less the portion of such basis allocable to
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<PAGE>
any fractional shares of class B Stock for which cash is received. Such
Holder's holding period for such Common Stock will begin on the date of
delivery of the Common Stock pursuant to the Contracts and will not include the
period during which the Holder held the related Contracts.
DISTRIBUTION OF CASH. If a Holder receives cash upon dissolution of the
Trust or as a result of a Selling Shareholder's election to deliver cash under
the Cash Delivery Option, a Holder will recognize capital gain or loss equal to
any difference between the amount of cash received from the Selling
Shareholders and the Holder's tax basis in the REDSS at that time. Such gain
or loss generally will be long-term capital gain or loss if the Holder has held
the REDSS for more than one year at the Exchange Date.
DISTRIBUTION OF CASH OR MARKETABLE SECURITIES AS A RESULT OF AN
ADJUSTMENT EVENT. If as a result of an Adjustment Event, cash, Marketable
Securities, or a combination of cash and Marketable Securities is delivered
pursuant to the Contracts, a Holder will have taxable gain or loss upon receipt
equal to the difference between the amount of cash received, including cash
received in lieu of Fractional Marketable Securities, and its basis in its pro
rata portion of the Contracts allocable to any shares of Common Stock for which
such cash was received. Any gain or loss will be capital gain or loss, and if
the Holder has held the REDSS for more than one year, such gain or loss will be
long-term capital gain or loss, other than gain or loss attributable to cash
received in lieu of fractional Marketable Securities, that will be treated as
short-term capital gain or loss. A Holder's basis in any Marketable Securities
received will be equal to its basis in its pro rata portion of the Contracts
less the portion of such basis allocable to any shares of Common Stock for
which cash was received. See "Investment Objectives and Policies -- The
Contracts."
FEES AND EXPENSES OF THE TRUST. A Holder's pro rata portion of the
expenses in connection with the organization of the Trust, underwriting
discounts and commissions and other offering expenses should be includable in
the cost to the Holder of the REDSS. However, there can be no assurance that
the Internal Revenue Service will not take a contrary view. If the Internal
Revenue Service were to prevail in treating such expenses as excludable from
the Holder's cost of the REDSS, such expenses would not be includable in the
basis of the assets of the Trust and should instead be amortizable and
deductible over the term of the Trust. If such expenses were treated as
amortizable and deductible, an individual Holder who itemizes deductions would
be entitled to amortize and deduct (subject to any other applicable limitations
on itemized deductions) such expenses over the term of the Trust only to the
extent that such amortized annual expenses together with such Holder's other
miscellaneous deductions exceed 2% of such Holder's adjusted gross income.
PROPOSED LEGISLATION. A bill recently introduced in Congress by a member
of the House of Representatives (H.R. 3170) would treat some or all of the net
long-term capital gain arising from "constructive ownership" transactions
involving certain derivative financial instruments as short-term capital gain,
and would impose an interest charge on such short-term capital gain. The
proposed legislation would be effective with respect to gain recognized after
the date the legislation is enacted into law, without regard to when the
constructive ownership transaction was entered into. If enacted in its current
form, the legislation would not apply to the REDSS transaction (and, even if
the legislation in its current form were extended to cover the REDSS
transaction, should have no material effect on the REDSS transaction). It is
not possible to predict whether legislation addressing constructive ownership
transactions will be enacted, or what form any such legislation might take
(including with respect to effective dates).
NON-UNITED STATES PERSONS
In the case of a Holder of the REDSS that is not a U.S. person, payments
of interest and of original issue discount made with respect to the Treasury
Securities underlying the REDSS will not be subject to U.S. withholding tax,
provided that such Holder complies with applicable certification requirements
(including in general the furnishing of an Internal Revenue Service Form W-8 or
a substitute form). Any capital gain realized with respect to the REDSS by a
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Holder that is not a U.S. person will generally not be subject to U.S. federal
income tax if (i) such gain is not effectively connected with a U.S. trade or
business of such Holder and (ii) in the case of an individual, such individual
is not present in the United States for 183 days or more in the taxable year of
the sale or other disposition or the gain is not attributable to a fixed place
of business maintained by such individual in the United States and such
individual does not have a "tax home" (as defined for U.S. federal income tax
purposes) in the United States.
BACK-UP WITHHOLDING AND INFORMATION REPORTING
A Holder of a REDSS may be subject to information reporting and to backup
withholding at a rate of 31 percent of certain amounts paid to the Holder
unless such Holder (a) is a corporation or comes within certain other exempt
categories and, when required, provides proof of such exemption or (b) provides
a correct taxpayer identification number, certifies as to no loss of exemption
from backup withholding and otherwise complies with applicable requirements of
the backup withholding rules. Information reporting and backup withholding do
not apply to payments made to a Holder of a REDSS that is not a U.S. person if
the beneficial owner of the REDSS certifies as to its non-U.S. status or
otherwise establishes an exemption, provided that the Trust or its agent does
not have actual knowledge that the Holder is a U.S. person.
Payment of the proceeds from the sale of a REDSS to or through a foreign
office of a broker will not be subject to information reporting or backup
withholding, except that if the broker is (i) a U.S. person, (ii) a controlled
foreign corporation for U.S. tax purposes, (iii) a foreign person 50 percent or
more of whose gross income from all sources for the three-year period ending
with the close of its taxable year preceding the payment was effectively
connected with a U.S. trade or business or (iv) with respect to payments made
after December 31, 1999, a foreign partnership that, at any time during its
taxable year is 50% or more (by income or capital interest) owned by U.S.
persons or is engaged in the conduct of U.S. trade or business, information
reporting may apply to such payments. Payment of the proceeds from a sale of a
REDSS to or through the U.S. office of a broker is subject to information
reporting and backup withholding unless the Holder or beneficial owner
certifies as to its non-U.S. status or otherwise establishes an exemption from
information reporting and backup withholding.
Any amounts withheld under the backup withholding rules are not an
additional tax and may be credited against the U.S. Holder's U.S. federal
income tax liability, provided that the required information is furnished to
the Internal Revenue Service.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement (the "Underwriting Agreement") among the Trust, the Company, each of
the Selling Shareholders and CIBC Oppenheimer, the Trust has agreed to sell to
the Underwriter, and the Underwriter has agreed to purchase, the number of
REDSS set forth opposite its name below:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF REDSS
----------- ---------------
<S> <C> <C> <C> <C>
CIBC Oppenheimer Corp.
</TABLE>
In the Underwriting Agreement, the Underwriter has agreed, subject to the
terms and conditions set forth therein, that the obligations of the Underwriter
are subject to certain conditions precedent and that the Underwriter will be
obligated to purchase all the REDSS offered hereby if any of the REDSS are
purchased.
The Underwriter proposes to offer the REDSS directly to the public
initially at the public offering price set forth on the cover of this
Prospectus and to certain dealers at such prices less a concession not in
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<PAGE>
excess of $_____ per REDSS. The Underwriter may allow, and such dealers may
reallow, a concession not in excess of $____ per REDSS to other dealers. After
the initial public offering, such public offering price and such concession and
reallowance may be changed. The sales load of $___ per REDSS is equal to __%
of the initial public offering price.
The Company, its directors and executive officers and the Selling
Shareholders listed under the caption "Selling Shareholders" in the prospectus
of the Company attached hereto, including the Selling Shareholders, have each
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, 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 Selling Shareholders to take any such actions
in connection with the offering of the REDSS 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 REDSS will be
used by the Trust to purchase the Contracts from the Selling Shareholders, the
Underwriting Agreement provides that the Selling Shareholders will pay to the
Underwriter as compensation $____ per REDSS.
The Trust has granted to the Underwriter an option, exercisable for the
30 day period after the date of this Prospectus, to purchase up to an
additional ______ REDSS from the Trust, at the same price per REDSS as the
initial REDSS to be purchased by the Underwriter. The Underwriter may exercise
such option only for the purpose of covering over-allotments, if any, incurred
in connection with the sale of REDSS offered hereby. If the Underwriter
exercises such option in full, the total price to the public, underwriting
discount or commission and proceeds to the Trust will be $ ,
$ and $ , respectively.
The REDSS will be a new issue of securities with no established trading
market. The Underwriter intends to make a market in the REDSS, subject to
applicable laws and regulations. However, the Underwriter is not obligated to
do so and any such market-making may be discontinued at any time at the sole
discretion of the Underwriter without notice. Accordingly, no assurance can be
given as to the liquidity of such market.
The Underwriting Agreement provides that the Company and the Selling
Shareholders will indemnify the Underwriter against certain liabilities,
including liabilities under the Securities Act, or contribute to payments the
Underwriter may be required to make in respect thereof.
In connection with the formation of the Trust, CIBC Oppenheimer
subscribed for and purchased 1 REDSS for a purchase price of $100. Under the
Contracts, the Selling Shareholders will be obligated to deliver to the Trust
Common Stock in respect of such REDSS on the same terms as the REDSS offered
hereby. CIBC Oppenheimer sponsored the formation of the Trust for purposes of
this offering, including selecting its initial trustee.
Pursuant to the Contracts, the Trust has agreed, subject to the terms and
conditions set forth therein, to purchase from the Selling Shareholders an
aggregate number of shares of the Common Stock equal to the aggregate number of
REDSS to be purchased by the Underwriter from the Trust pursuant to the
Underwriting Agreement (including the REDSS to be purchased by the Underwriter
upon exercise of the over-allotment option plus the number of REDSS purchased
by CIBC Oppenheimer in connection with the organization of the Trust).
Pursuant to the terms of the Contracts, the Selling Shareholders will be
obligated to deliver to the Trust at the Exchange Date of the REDSS a number of
shares of the Common Stock (or, at the Selling Shareholders' option, the cash
equivalent) and/or such other consideration as permitted or required by the
terms of the Contracts, that are expected to have the same value as the shares
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<PAGE>
of the Common Stock delivered pursuant to the REDSS. The closing of the
offering of the REDSS is conditioned upon the closing of the purchase of the
Common Stock pursuant to the Contracts.
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OR
THE REDSS, INCLUDING PURCHASES OF THE REDSS OR THE COMMON STOCK TO STABILIZE
THEIR MARKET PRICES AND PURCHASES OF THE REDSS OR THE COMMON STOCK TO COVER
SOME OR ALL OF A SHORT POSITION IN THE REDSS OR THE COMMON STOCK MAINTAINED BY
THE UNDERWRITER AND THE IMPOSITION OF PENALTY BIDS.
IN CONNECTION WITH THE OFFERING, THE UNDERWRITER (AND CERTAIN SELLING
GROUP MEMBERS) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON
STOCK OR THE REDSS IN ACCORDANCE WITH RULE 103 OF REGULATION M.
In connection with this offering, the Underwriter and certain selling
group members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the REDSS or the
Common Stock. Such transactions may include stabilization transactions
effected in accordance with Rule 104 of Regulation M, pursuant to which such
persons may bid for or purchase REDSS or the Common Stock for purposes of
stabilizing their market prices. The Underwriter also may create short
positions for the account of the Underwriter by selling more REDSS in
connection with this offering than it is committed to purchase from the Trust,
and in such case may purchase REDSS in the open market following the completion
of this offering to cover all or a portion of such short positions. The
Underwriter may also cover all or a portion of such short positions by
exercising the Underwriter's over-allotment options in this offering. In
addition, the Underwriter may impose "penalty bids" under contractual
arrangements whereby it may reclaim from a dealer participating in this
offering the selling concession with respect to REDSS that are distributed in
this offering but subsequently purchased for the account of the Underwriter in
the open market. Any of the transactions described in this paragraph may
result in the maintenance of the price of the REDSS at a level above that which
might otherwise prevail in the open market. None of the transactions described
in this paragraph is required, and, if they are undertaken, they may be
discontinued at any time.
[In the ordinary course of their respective businesses, the Underwriter
and its affiliates have engaged in and may in the future engage in commercial
and investment banking transactions with the Company, the Selling Shareholders
and their respective affiliates.]
LEGAL MATTERS
Certain legal matters will be passed upon for the Trust and the
Underwriter by Rogers & Wells LLP, New York, New York. Certain legal matters
will be passes upon for the Selling Shareholders by ________.
EXPERTS
The statement of assets, liabilities and capital included in this
Prospectus has been audited by ____ , independent accountants, as stated in
their report appearing herein, and is included in reliance upon the report of
such firm given upon their authority as experts in auditing and accounting.
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 REDSS offered hereby. Further information concerning the REDSS
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
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<PAGE>
all or any part thereof may be obtained from such office after payment of the
fees prescribed by the Commission. Such Registration Statement is also
available on the Commission's website (http://www.sec.gov).
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REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES OF REDSS TRUST I
We have audited the accompanying statement of assets, liabilities and
capital of REDSS Trust I (a Delaware trust) as of _______, 1998. 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 management, 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
REDSS Trust I as of _______, 1998, in conformity with generally accepted
accounting principles.
[ ]
New York, New York
________, 1998
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<PAGE>
REDSS TRUST I
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
__________, 1998
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Cash.......................................................... $______
Total Assets.................................................. $______
LIABILITIES
Total Liabilities............................................. $______
NET ASSETS.................................................... $______
CAPITAL
REDSS representing shares of beneficial interest, $__ par
value, ___ shares authorized, ______ shares issued and
outstanding................................................... $______
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE>
39
REDSS TRUST I
NOTES TO STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
_________, 1998
I. ORGANIZATION
REDSS Trust I (the "Trust"), organized as a Delaware business trust on
July 6, 1998, is a closed-end management investment company registered under
the Investment Company Act of 1940, and has had no operations to date other
that 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 1 REDSS
(excluding the over-allotment option) for $100 to CIBC Oppenheimer Corp. ("CIBC
Oppenheimer"). The costs incurred in connection with the organization of the
Trust and this offering will be paid by certain stockholders of the Company.
II. ORGANIZATIONAL COSTS, FEES AND EXPENSES
Organizational costs and ongoing fees of the Trust will be borne by CIBC
Oppenheimer.
III. MANAGEMENT AND ADMINISTRATION OF TRUST
The Trust will be managed by its trustees and will not have a separate
investment adviser. The Trust will be overseen by three trustees and the daily
administration will be carried out by The Bank of New York as the
administrator. The Bank of New York will also serve as the Trust's custodian,
paying agent, registrar and transfer agent with respect to the REDSS.
--------
40
<PAGE>
====================================== ==================================
PROSPECTIVE INVESTORS MAY RELY ONLY
ON THE INFORMATION CONTAINED IN THIS
PROSPECTUS. NEITHER THE TRUST NOR 1,000,000 REDSS<service-mark>
THE UNDERWRITER HAS AUTHORIZED
ANYONE TO GIVE PROSPECTIVE INVESTORS
ANY INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. THIS REDSS TRUST I
PROSPECTUS IS NOT AN OFFER TO SELL
NOR IS IT SEEKING AN OFFER TO BUY
THE REDSS IN ANY JURISDICTION WHERE
THE OFFER OR SALE IS NOT PERMITTED.
THE INFORMATION CONTAINED IN THIS
PROSPECTUS IS CORRECT AS OF THE DATE
OF THIS PROSPECTUS, REGARDLESS OF
THE TIME OF DELIVERY OF THIS
PROSPECTUS OR ANY SALE OF THE REDSS.
-------
PROSPECTUS
-------
--------
__________, 1998
-------
CIBC OPPENHEIMER CORP.
UNTIL _____, 1998 (25 DAYS AFTER THE
COMMENCEMENT OF THE OFFERING), ALL
DEALERS BUY, SELL OR TRADE THE
REDSS, WHETHER OR NOT PARTICIPATING
IN THIS OFFERING, 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.
====================================== ==================================
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
1. Financial Statements
Part A - (i) Report of Independent Accountants
(ii) Statement of Assets and Liabilities as of ,
1998
Part B - none
2. Exhibits
<TABLE>
<CAPTION>
<S> <C> <C>
(a)(1)(A) - Declaration of Trust dated as of July 6, 1998
(a)(1)(B) - Certificate of Trust dated July 6, 1998
(a)(2) - Amended and Restated Declaration of Trust{(*)}
(b) - Not applicable
(c) - Not applicable
(d)(1) - Form of Specimen certificate of [ ] (included in
Exhibit 2(a)(1) (B){ (*)}
(d)(2) - Portions of the Declaration of Trust defining the rights of
Holders of Securities{(*)}
(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 Purchase Contract{(*)}
(k)(4) - Form of Collateral Agreement{(*)}
(k)(5) - Form of Fund Expense Agreement{(*)}
(k)(6) - Form of Fund Indemnity Agreement{(*)}
(l) - Opinion and Consent of Counsel to the Trust{(*)}
(m) - Not applicable
(n)(1) - Tax Opinion of Counsel to the Trust{(*)}
(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{(*)}
</TABLE>
- ------------
{(*)} To be filed by amendment.
C-1
<PAGE>
EXHIBIT (A)(1)(A)
DECLARATION OF TRUST OF REDSS TRUST I
Declaration of Trust, dated as of July 6, 1998, between Robert Blum,
as sponsor (the "Sponsor"), and Andrew MacInnes, as trustee (the "Trustee").
The Sponsor and the Trustee hereby agree as follows:
1. The trust created hereby shall be known as "REDSS Trust I" 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
Delaware Secretary of State in the form attached hereto or in such other 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.
IN WITNESS WHEREOF, the parties hereto have caused this Declaration
of Trust to be duly executed as of the date first above written.
SPONSOR
/s/ Robert A. Blum
________________________
Robert A. Blum, as Sponsor
TRUSTEE
/S/ ANDREW MACINNES
-------------------------------------
Andrew MacInnes, as Trustee
C-2
<PAGE>
EXHIBIT (A)(1)(B)
CERTIFICATE OF TRUST OF REDSS TRUST I
This Certificate of Trust of REDSS Trust I (the "Trust"), dated
July 6, 1998, is being duly executed and filed by Andew MacInnes, 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 REDSS
Trust I.
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/ ANDREW MACINNES
-------------------------------------
Andrew MacInnes, as Sole Trustee
C-3
<PAGE>
ITEM 25. MARKETING ARRANGEMENTS
See Exhibit 2(h) of 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>
<CAPTION>
<S> <C> <C>
Registration fees....................................... $3,393.00
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............................................. $ *
- --------------------
{(*)} To be furnished by amendment.
</TABLE>
ITEM 27. PERSON CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
The Trust will be internally managed and will not have an investment
adviser. The information in the Prospectus under the caption "Management and
Administration of the Trust" is incorporated herein by reference.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
As of the effective date of this Registration Statement:
<TABLE>
<CAPTION>
TITLE OF CLASS NUMBER OF RECORD HOLDERS
-------------- ------------------------
<S> <C>
REDSS representing shares of beneficial
interest 1
</TABLE>
ITEM 29. INDEMNIFICATION
The Underwriting Agreement (Exhibit 2(h) to this Registration Statement)
provides for indemnification.
The Amended and Restated Declaration of Trust filed as Exhibit 2(a)(1) 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 CIBC Oppenheimer will indemnify the Trust for certain
indemnification expenses incurred under the Declaration of Trust, the Custodian
Agreement, the Administration Agreement and the Paying Agent Agreement.
C-4
<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 [CIBC Oppenheimer Corp., CIBC Oppenheimer Tower, World Financial Center,
New York, New York 10281] and at the offices of The Bank of New York, the
Registrant's Administrator, Custodian, paying agent, transfer agent and
registrar. All other records so required to be maintained are maintained at
the offices of the Registrant, c/o CIBC Oppenheimer Corp., CIBC Oppenheimer
Tower, World Financial Center, New York, New York 10281.
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 that 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-5
<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 July, 1998.
REDDS TRUST I
By: /S/ ANDREW MACINNES
By:----------------------------------
Andrew Macinnes, Trustee
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following person, in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
Andrew MacInnes Trustee July 6, 1998
</TABLE>
C-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NAME OF EXHIBIT
- ------- ---------------
<S> <C>
(a)(1)(A) Declaration of Trust dated as of July 6, 1998
(a)(1)(B) Certificate of Trust dated July 6, 1998
(a)(2) Amended and Restated Declaration of Trust{(*)}
(b) Not applicable
(c) Not applicable
(d)(1) Form of Specimen Certificate of [ ] (included in Exhibit (a)(1){(*)}
(d)(2) Portions of the Declaration of Trust defining the rights of Holders of
Securities{(*)}
(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 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{(*)}
(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
- --------------------
{(*)} To be filed by amendment.
</TABLE>
C-7
<PAGE>
