<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 9, 1999
SECURITIES ACT FILE NO. 333-69325
INVESTMENT COMPANY ACT FILE NO. 811-09163
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933 [X]
PRE-EFFECTIVE AMENDMENT NO. 2 [X]
POST-EFFECTIVE AMENDMENT NO. [ ]
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [X]
AMENDMENT NO. 2 [X]
------------------------
DECS TRUST IV
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
C/O PUGLISI & ASSOCIATES
850 LIBRARY AVENUE, SUITE 204
NEWARK, DELAWARE 19715
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 816-6000
DONALD J. PUGLISI
C/O PUGLISI & ASSOCIATES
850 LIBRARY AVENUE, SUITE 204
NEWARK, DELAWARE 19715
(NAME AND ADDRESS OF AGENT FOR SERVICE)
WITH COPIES TO:
RAYMOND B. CHECK, ESQ.
DAVID W. HIRSCH, ESQ.
CLEARY, GOTTLIEB, STEEN & HAMILTON
ONE LIBERTY PLAZA
NEW YORK, NEW YORK 10006-1470
(212) 225-2000
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of this Registration Statement.
If any securities being registered on this form will be offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act of
1933, as amended, other than securities offered in connection with a dividend
reinvestment plan, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES BEING AMOUNT BEING OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED REGISTERED(1) PER DECS OFFERING PRICE REGISTRATION FEE(2)(3)
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DECS representing shares of
beneficial interest......... $310,823,438 $86,409
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</TABLE>
(1) Includes DECS that may be issued in connection with the exercise of an
over-allotment option.
(2) Computed pursuant to Rule 457(o) based upon the maximum aggregate offering
price of the DECS.
(3) Previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a)
MAY DETERMINE.
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<PAGE> 2
DECS TRUST IV
CROSS-REFERENCE SHEET
PARTS A AND B OF PROSPECTUS*
<TABLE>
<CAPTION>
ITEM NO. CAPTION PROSPECTUS CAPTION
- -------- ------- ------------------
<C> <S> <C>
1. Outside Front Cover............................ Front Cover Page
2. Inside Front and Outside Back Cover Page....... Front Cover Page; Inside Front Cover
Page
3. Fee Table and Synopsis......................... Prospectus Summary; Fees and Expenses
4. Financial Highlights........................... Not Applicable
5. Plan of Distribution........................... Front Cover Page; Prospectus Summary;
Underwriting
6. Selling Shareholders........................... Not Applicable
7. Use of Proceeds................................ Use of Proceeds; Investment Objectives
and Policies
8. General Description of the Registrant.......... Front Cover Page; Prospectus Summary;
The Trust; Investment Restrictions;
Investment Objectives and Policies; Risk
Factors for DECS
9. Management..................................... Management and Administration of the
Trust
10. Capital Stock, Long-Term Debt and Other
Securities; Federal Income Tax
Considerations............................... Description of DECS
11. Defaults and Arrears on Senior Securities...... Not Applicable
12. Legal Proceedings.............................. Not Applicable
13. Table of Contents of the Statement of
Additional Information....................... Not Applicable
14. Cover Page..................................... Not Applicable
15. Table of Contents.............................. Not Applicable
16. General Information and History................ The Trust
17. Investment Objective and Policies.............. Investment Objectives and Policies;
Investment Restrictions
18. Management..................................... Management and Administration of the
Trust
19. Control Persons and Principal Holders of Management and Administration of the
Securities................................... 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
</TABLE>
- ---------------
* Pursuant to the General Instructions to Form N-2, all information required to
be set forth in Part B: Statement of Additional Information has been included
in Part A: The Prospectus. Information required to be included in Part C is
set forth under the appropriate item, so numbered, in Part C of the N-2
Registration Statement.
<PAGE> 3
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES, AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED FEBRUARY 9, 1999
PROSPECTUS
15,500,000 DECS(SM)
DECS TRUST IV
(SUBJECT TO EXCHANGE INTO COMMON STOCK OF MAXTOR CORPORATION)
DECS Trust IV is a recently created Delaware business trust. The DECS are
securities that represent all of the beneficial interest in the trust. When the
trust issues the DECS, it will own U.S. Treasury securities and a prepaid
forward contract for the purchase of Maxtor common stock.
For each DECS that you buy, you will receive a cash distribution of $
on each February 15, May 15, August 15 and November 15 starting on May 15, 1999
and ending when the trust terminates. Those payments will be made from U.S.
Treasury securities that the trust holds when it issues the DECS.
The trust will hold a prepaid forward contract to receive Maxtor common
stock from Hyundai Electronics America. The trust will terminate on or shortly
after February 15, 2002. When the trust terminates, Hyundai Electronics America
will deliver, at its option, either cash or Maxtor stock to the trust. The trust
will then deliver this cash or Maxtor stock to you. The cash or number of shares
of Maxtor stock that Hyundai Electronics America will deliver and you will
receive will depend on the price of Maxtor common stock shortly before the date
the trust terminates. If the price of Maxtor stock is:
- more than $ per share, you will receive 0. shares of Maxtor common
stock, or the cash equivalent, for each DECS you own
- more than $ per share but less than or equal to $ per share, you
will receive Maxtor common stock worth $ , or the cash equivalent,
for each DECS you own
- $ per share or less, you will receive one share of Maxtor common
stock, or the cash equivalent, for each DECS you own
The last reported sale price of Maxtor common stock on February 8, 1999 was
$14.44 per share.
------
The trust's securities have no history of public trading. Typical
closed-end fund shares frequently trade at a discount from net asset value. This
characteristic of investments in a closed-end investment company is a risk
separate and distinct from the risk that the trust's net asset value will
decrease. The trust cannot predict whether the DECS will trade at, below or
above net asset value. The risk of purchasing investments in a closed-end
company that might trade at a discount is more pronounced for investors who wish
to sell their investments soon after completion of a public offering.
INVESTING IN THE DECS INVOLVES CERTAIN RISKS. SEE "RISK FACTORS FOR DECS"
BEGINNING ON PAGE 20. ------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PER DECS TOTAL
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<S> <C> <C>
Public Offering Price....................................... $ $
Sales Load.................................................. $ $
Proceeds to the Trust before expenses....................... $ $
</TABLE>
The underwriters are offering the DECS subject to various conditions. The
underwriters expect to deliver the DECS to purchasers on ,
1999.
------
SALOMON SMITH BARNEY
HAMBRECHT & QUIST
LEHMAN BROTHERS
MERRILL LYNCH & CO.
NATIONSBANC MONTGOMERY SECURITIES LLC
, 1999
<PAGE> 4
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. THE TRUST HAS NOT AUTHORIZED ANYONE TO PROVIDE YOU
WITH DIFFERENT INFORMATION. THE TRUST IS NOT MAKING AN OFFER OF THESE SECURITIES
IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE
INFORMATION CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS IS
ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS PROSPECTUS.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 3
Fees and Expenses........................................... 7
The Trust................................................... 8
Use of Proceeds............................................. 8
Investment Objectives and Policies.......................... 8
Investment Restrictions..................................... 19
Risk Factors For DECS....................................... 20
Net Asset Value............................................. 22
Description of the DECS..................................... 23
Management and Administration of the Trust.................. 25
Certain United States Federal Income Tax Considerations..... 28
Underwriting................................................ 32
Legal Matters............................................... 34
Experts..................................................... 34
Where You Can Find More Information......................... 34
Report of Independent Accountants........................... 35
Statement of Assets, Liabilities and Capital................ 36
</TABLE>
UNTIL , 1999, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS SECURITIES OFFERING, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION
TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTION.
------------------------
"DECS" is a service mark of Salomon Smith Barney Inc.
<PAGE> 5
PROSPECTUS SUMMARY
This summary highlights certain information contained elsewhere in this
prospectus. This summary is not complete and does not contain all of the
information that you should consider before investing in the DECS. You should
read the entire prospectus carefully, especially the risks of investing in the
DECS discussed under "Risk Factors for DECS."
THE TRUST
DECS Trust IV is a recently created Delaware business trust. The trust will
terminate on or shortly after February 15, 2002, which is referred to in this
summary as the "exchange date" because that is when the Maxtor shares or their
value in cash are expected to be delivered under a contract the trust has with
Hyundai Electronics America. In some limited circumstances, the Maxtor shares
may be delivered and the trust terminated sooner than that date.
THE DECS
The DECS are securities that represent all of the beneficial interest in
the trust. The underwriters named in this prospectus are offering the DECS for
sale at a price of $ per DECS, which is the same as the closing bid price of
a share of Maxtor common stock on the NASDAQ National Market on ,
1999. The underwriters also may purchase up to 2,325,000 additional DECS from
the trust to cover over-allotments and in connection with the formation of the
Trust.
PURPOSE OF THE TRUST
The trust was created to issue the DECS and to carry out the transactions
described in this prospectus. The terms of the DECS are designed to give you a
higher yield than the current dividend yield on Maxtor stock, while also giving
you the chance to share in the increased value of Maxtor stock if its price goes
up. Maxtor does not currently pay dividends on its stock and has stated that it
does not intend to do so, but in the future Maxtor might pay dividends that are
higher than the distributions that you will receive from the trust. Also, you
will receive less than you paid for your DECS if the price of Maxtor stock goes
down, but you will receive only part of the increased value if the price goes
up, and then only if the price is above $ per share shortly before the
exchange date.
QUARTERLY DISTRIBUTIONS
For each DECS that you buy, you will receive a cash distribution of $
on each February 15, May 15, August 15 and November 15, starting on May 15, 1999
and ending when the trust terminates. Those payments will be made from U.S.
Treasury securities that the trust holds when it issues the DECS.
DISTRIBUTIONS ON THE EXCHANGE DATE
On the exchange date, you will receive between 0. and 1.0 shares of Maxtor
stock for each DECS you own. Those amounts will be adjusted if Maxtor splits its
stock, pays a stock dividend, issues warrants or distributes certain types of
assets or if certain other events occur that are described in detail later in
this prospectus. Under its contract with the trust, Hyundai Electronics America
has the option to deliver cash to the trust instead of shares of Maxtor stock.
If Hyundai Electronics America decides to deliver cash, you will receive the
cash value of the Maxtor shares you would have received instead of the shares
themselves. If Maxtor merges into another company or liquidates, you may receive
shares of the other company or cash instead of Maxtor stock on the exchange
date. And if Hyundai Electronics America defaults under its contract with the
trust, the obligations of Hyundai Electronics America under the contract will be
accelerated, and the trust will immediately distribute to you the Maxtor stock
or cash received by the trust under the contract, plus the proceeds of
liquidation of the U.S. Treasury securities then held by the trust.
3
<PAGE> 6
VOTING RIGHTS
You will not have the right to vote any Maxtor shares unless and until they
are delivered to the trust by Hyundai Electronics America and distributed to you
by the trust. You will have the right to vote on matters that affect the trust.
ASSETS OF THE TRUST; INVESTMENT OBJECTIVES AND POLICIES
The trust will own the following assets:
- zero-coupon U.S. Treasury securities that will mature every quarter
during the term of the trust, and which will provide cash to pay the
quarterly distributions on the DECS
- a prepaid forward purchase contract with Hyundai Electronics America
under which Hyundai Electronics America has the right to deliver Maxtor
stock or cash to the trust on the exchange date, which the trust will
then distribute to you
The U.S. Treasury securities initially will represent approximately % of
the trust's assets and the prepaid forward purchase contract initially will
represent approximately %.
The trust's investment objective is to provide you with (1) a quarterly
distribution of $ per DECS over the term of the trust and (2) Maxtor common
stock on the exchange date in an amount equal to:
- 0. shares of Maxtor stock per DECS if the average price of Maxtor
stock shortly before the exchange date is more than $ per share
- shares of Maxtor stock worth $ per DECS (the issue price of the DECS)
if the average price of Maxtor stock shortly before the exchange date is
more than $ per share but less than or equal to $ per share
- one share of Maxtor stock per DECS if the average price of Maxtor stock
shortly before the exchange date is $ or less per share
The trust will not deliver fractions of a share of Maxtor stock. If you would
receive a fraction of a share of Maxtor stock under this formula (based on all
DECS owned), you will receive cash instead.
At the closing of the sale of the DECS, the trust and Hyundai Electronics
America will enter into the prepaid forward purchase contract, which will
require Hyundai Electronics America to deliver to the trust up to a total of
17,825,000 shares of Maxtor stock on the exchange date. The purchase price for
the Maxtor stock under the contract will be $ per share or $ in
total. The trust will pay Hyundai Electronics America the purchase price for the
Maxtor shares on the date the DECS are issued.
Hyundai Electronics America will secure its obligation to deliver Maxtor
shares to the trust on the exchange date by pledging the shares to the trust on
the date the DECS are issued. During the term of the DECS, Hyundai Electronics
America will have the right to substitute U.S. Treasury securities as collateral
for the pledged Maxtor shares.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
For U.S. federal income tax purposes, you and the trust agree to treat your
investment in the DECS as a pro rata beneficial interest in the U.S. Treasury
securities and the forward purchase contract held by the trust. In addition,
you, Hyundai Electronics America and the trust agree to treat a portion of the
amount invested by you as a cash deposit that will be used to satisfy your
obligation to make payment under the forward purchase contract for the purchase
of Maxtor stock on the exchange date. Under this treatment, if you are a U.S.
individual or taxable entity, you generally will be required to pay taxes on
only a relatively small portion of each quarterly cash distribution you receive
from the trust, which will be ordinary income. If you hold the DECS until they
mature, you will not be subject to tax on the receipt of Maxtor stock. If you
sell your DECS or receive cash on the exchange date, you will have a capital
gain or loss equal to the difference between your
4
<PAGE> 7
tax basis in the DECS and the cash you receive. You should refer to the section
"Certain United States Federal Income Tax Considerations" in this prospectus for
more information.
MAXTOR
Maxtor is a leading provider of hard disk drives for desktop computers. Its
customers are desktop computer manufacturers, including Compaq, Dell and IBM;
distributors, including Bell Micro and Ingram; and retailers, including Best
Buy, CompUSA and Staples.
A prospectus that describes Maxtor and the Maxtor stock that owners of DECS
may receive is attached to this prospectus. Maxtor is not affiliated with the
trust, will not receive any of the proceeds from the sale of the DECS by the
trust and will not have any obligation under the DECS or the forward purchase
contract between the trust and Hyundai Electronics America. Hyundai Electronics
America did not prepare, and is not responsible for, the Maxtor prospectus. THE
MAXTOR PROSPECTUS IS ATTACHED TO THIS PROSPECTUS ONLY FOR YOUR CONVENIENCE. THE
MAXTOR PROSPECTUS IS NOT PART OF THIS PROSPECTUS AND IS NOT INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS. HYUNDAI ELECTRONICS AMERICA IS NOT AFFILIATED
WITH THE TRUST AND WILL HAVE NO RESPONSIBILITY FOR THE TRUST'S COMPLIANCE WITH
THE TERMS OF THE DECS OR ITS TRUST AGREEMENT.
MANAGEMENT AND ADMINISTRATION OF THE TRUST
The internal operations of the trust will be managed by three trustees; the
trust will not have an investment advisor. The Bank of New York (or its
successor) will act as trust administrator to carry out the day-to-day
administration of the trust, and will also be the custodian for the trust's
assets, its paying agent, registrar and transfer agent for the DECS and the
collateral agent for Hyundai Electronics America's pledge of Maxtor stock to the
trust. The Bank of New York will not have any other affiliation with the trust.
TERM OF THE TRUST
The trust will terminate automatically on or shortly after the date on
which the trust distributes to you the Maxtor shares or cash that the trust
receives on the exchange date under its contract with Hyundai Electronics
America. Under most circumstances, this will be on or shortly after February 15,
2002.
RISK FACTORS
- The trust will not dispose of its forward purchase contract for Maxtor
stock during the term of the trust even if the value of Maxtor stock
declines or Maxtor's financial condition changes for the worse.
- During the term of the trust, Maxtor could start paying dividends that
would provide investors in its stock with a higher yield than you will
receive on the DECS.
- You will bear the entire risk of declines in the value of Maxtor stock
between the closing date and the exchange date. The number of Maxtor
shares or the amount of cash that you will receive on the exchange date
is not fixed, but is based on the market price of Maxtor stock shortly
before the exchange date. If the market price of Maxtor stock declines,
the stock or cash that you receive will be less than what you paid for
your DECS and you will lose money. If Maxtor becomes bankrupt or
insolvent, you could lose everything you paid for your DECS.
- You will have less opportunity for gains if the value of Maxtor stock
increases than you would have if you purchased Maxtor stock directly. You
will realize a gain only if the value of Maxtor stock increases by
approximately % between the closing date and the exchange date, and
then you will only receive % of the increase in the Maxtor stock
price above that level. Because the trust will determine the value of the
Maxtor stock based on its average price for 20 trading days before the
exchange date, the actual value of the stock or cash that you receive on
the exchange date may be more or less than the price of the stock on the
exchange date.
5
<PAGE> 8
- Because the trust will own only U.S. Treasury securities and its forward
purchase contract, an investment in the DECS may be riskier than an
investment in an investment company with more diversified assets.
- The trading price of Maxtor's common stock will directly affect the
trading price of the DECS in the secondary market. The trading price of
Maxtor's stock will be influenced by Maxtor's operating results and
prospects, by economic, financial and other factors and by general market
conditions.
- You will not have any right to vote the Maxtor stock underlying the DECS,
to receive dividends on that stock (if any are declared) or to act as an
owner of the stock in any other way unless and until Hyundai Electronics
America delivers the stock to the trust under its forward purchase
contract and the trust distributes the stock to you.
- A bankruptcy of Hyundai Electronics America or one of its subsidiaries
could interfere with the timing of the delivery of shares or cash under
the DECS and therefore could affect the amount you receive.
LISTING
The DECS have been approved for quotation on the Nasdaq National Market
under the symbol "HYTDL." Maxtor common stock is traded on the Nasdaq National
Market under the symbol "MXTR." The last reported sale price of Maxtor common
stock on February 8, 1999 was $14.44 per share.
CONCURRENT SHARE OFFERING
Concurrently with this offering, in a separate offering Maxtor is offering
for sale 7,800,000 shares of Maxtor common stock and Hyundai Electronics America
is offering for sale 1,200,000 shares of Maxtor common stock (10,350,000 shares
in the aggregate if the underwriters' over-allotment option is exercised in
full).
6
<PAGE> 9
FEES AND EXPENSES
Because the trust will use proceeds from the sale of the DECS to purchase
the forward purchase contract from Hyundai Electronics America, Hyundai
Electronics America has agreed in the underwriting agreement to pay to the
underwriters as compensation $ per DECS. See "Underwriting." Salomon Smith
Barney Inc. ("Salomon Smith Barney") will pay estimated organization costs of
the trust in the amount of $11,000 and estimated costs of the trust in
connection with the initial registration and public offering of the DECS in the
amount of $299,000 at the closing of this offering. In addition, Salomon Smith
Barney will pay the Administrator, the Custodian, the Paying Agent and each
Trustee at the closing of this offering a one-time, up-front amount in respect
of its ongoing fees and, in the case of the Administrator, anticipated expenses
of the trust (estimated to be $311,500 in the aggregate) over the term of the
trust. Salomon Smith Barney has agreed to pay any on-going expenses of the Trust
in excess of these estimated amounts and to reimburse the trust for any amounts
it may be required to pay as indemnification to any Trustee, the Administrator,
the Custodian or the Paying Agent. Hyundai Electronics America will reimburse
Salomon Smith Barney for all expenses of the trust and reimbursements of
indemnifications paid by it. See "Management and Administration of the
Trust -- Estimated Expenses."
Regulations of the Securities and Exchange Commission require the
presentation of trust expenses in the following format in order to assist
investors in understanding the costs and expenses that an investor will bear
directly or indirectly. Because the trust will not bear any ongoing fees or
expenses, investors will not bear any direct expenses. The only expenses that an
investor might be considered to bear indirectly are (a) the underwriters'
compensation payable by Hyundai Electronics America with respect to such
investor's DECS and (b) the ongoing expenses of the trust (including fees of the
Administrator, Custodian, Paying Agent and Trustees), estimated at $103,833 per
year in the aggregate, which Salomon Smith Barney will pay at the closing of the
offering.
<TABLE>
<S> <C>
Investor transaction expenses
Sales Load (as a percentage of offering price)............ %
===
Annual Expenses
Management Fees........................................... 0%
Other Expenses (after reimbursement by Hyundai Electronics
America)*.............................................. 0%
---
Total Annual Expenses*............................ 0%
===
</TABLE>
- ---------------
* Without this reimbursement, the trust's "total annual expenses" would be equal
to approximately % of the trust's average net assets.
SEC regulations also require that closed-end investment companies present
an illustration of cumulative expenses (both direct and indirect) that an
investor would bear. The regulations require the illustration to factor in the
applicable sales load and to assume, in addition to a 5% annual return, the
reinvestment of all distributions at net asset value. INVESTORS SHOULD NOTE THAT
THE ASSUMPTION OF A 5% ANNUAL RETURN DOES NOT ACCURATELY REFLECT THE FINANCIAL
TERMS OF THE TRUST. SEE "INVESTMENT OBJECTIVES AND POLICIES -- TRUST ASSETS."
ADDITIONALLY, THE TRUST DOES NOT PERMIT THE REINVESTMENT OF DISTRIBUTIONS.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
You would pay the following expenses (i.e., the applicable
sales load and allocable portion of ongoing expenses paid
by Salomon Smith Barney and Hyundai Electronics America)
on a $1,000 investment, assuming a 5% annual return....... $ $
</TABLE>
7
<PAGE> 10
THE TRUST
DECS Trust IV (the "Trust") 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 pursuant to a Declaration of Trust
dated as of December 17, 1998, as amended and restated in its entirety as of
February 8, 1999 (the "Declaration of Trust"). The term of the Trust will expire
on or shortly after February 15, 2002, except that the Trust may be dissolved
prior to such date under certain limited circumstances. The address of the Trust
is c/o Puglisi & Associates, 850 Library Avenue, Suite 204, Newark, Delaware
19715 (telephone number: (302) 738-6680).
USE OF PROCEEDS
On or shortly after the date on which it sells the DECS, the Trust will use
the proceeds of this offering to purchase a fixed portfolio comprised of a
series of zero-coupon U.S. Treasury securities (the "Treasury Securities")
maturing quarterly during the term of the Trust and to pay the purchase price
under the prepaid forward purchase contract (the "Contract") to Hyundai
Electronics America ("Hyundai").
INVESTMENT OBJECTIVES AND POLICIES
TRUST ASSETS
The Trust's investment objectives are to provide investors with a quarterly
distribution of $ per DECS on each distribution date during the term of the
Trust (representing the pro rata portion of the quarterly distributions in
respect of the maturing Treasury Securities held by the Trust) and to provide
investors, on February 15, 2002 (the "Exchange Date"), a number of shares of
Maxtor common stock (the "Common Stock") at the Exchange Rate (as defined below)
or, to the extent that Hyundai elects the Cash Delivery Option (as defined
below), an amount in cash equal to the Exchange Price (as defined below)
thereof. On or prior to the 25th Business Day prior to the Exchange Date,
Hyundai will 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
investors will receive shares of Common Stock or cash. See "-- The
Contract -- General" below. "Business Day" means any day that is not a Saturday,
a Sunday or a day on which the New York Stock Exchange (the "NYSE") or banking
institutions or trust companies in The City of New York are authorized or
obligated by law or executive order to close.
The "Exchange Rate" is equal to, subject to certain adjustments,
(a) if the Exchange Price (as defined below) is greater than $
(the "Threshold Appreciation Price"), shares of Common Stock per
DECS;
(b) if the Exchange Price is less than or equal to the Threshold
Appreciation Price but is greater than $ (the "Initial Price"), a
fraction, equal to the Initial Price divided by the Exchange Price, of
one share of Common Stock per DECS; and
(c) if the Exchange Price is less than or equal to the Initial Price, one
share of Common Stock per DECS.
Accordingly, the value of the Common Stock to be received by investors (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. The
numbers of shares of Common Stock per DECS specified in clauses (a), (b) and (c)
of the Exchange Rate are hereinafter referred to as the "Share Components." Any
shares of Common Stock delivered by the Trust to investors that are not
affiliated with Maxtor will be free of any transfer restrictions and the
investors will be responsible for the payment of all brokerage costs upon the
subsequent sale of such shares. Investors otherwise entitled to receive
fractional shares in respect of their aggregate holdings of DECS will receive
cash in lieu thereof. See "-- Delivery of Common Stock and Reported Securities;
No Fractional Shares of Common Stock or Reported Securities" below.
Notwithstanding the foregoing, (1) in the case of
8
<PAGE> 11
certain dilution events, the Exchange Rate will be subject to adjustment and (2)
in the case of certain adjustment events, the consideration received by
investors at the Exchange Date will be cash or Reported Securities (as defined
herein) or a combination thereof, rather than (or in addition to) shares of
Common Stock. See "-- The Contract -- Dilution Adjustments" and "-- The
Contract -- Adjustment Events" below.
The Trust has adopted a fundamental policy to invest at least 65% of its
portfolio in the Contract. The Contract will comprise approximately % of
the Trust's initial assets. The Trust has also adopted a fundamental policy that
the Trust may not dispose of the Contract during the term of the Trust and that
the Trust may not dispose of the Treasury Securities held by the Trust 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 the Contract as described below under "-- The Treasury Securities." These
fundamental policies of the Trust may not be changed without the vote of a
"majority in interest" of the owners of the DECS. A "majority in interest" means
the lesser of (a) 67% of the DECS represented at a meeting at which more than
50% of the outstanding DECS are represented and (b) more than 50% of the
outstanding DECS.
The "Exchange Price" means the average Closing Price (as defined below) per
share of Common Stock on the 20 Trading Days immediately prior to (but not
including) the Exchange Date; provided, however, that if there are not 20
Trading Days (as defined below) for the Common Stock occurring later than the
60th calendar day immediately prior to, but not including, the Exchange Date,
the Exchange Price will be the market value per share of Common Stock as of the
Exchange Date as determined by a nationally recognized independent investment
banking firm that the Administrator retains for this purpose. The "Closing
Price" of any security on any date of determination means:
(1) the closing sale price (or, if no closing price is reported, the last
reported sale price) of such security (regular way) on the NYSE on such
date,
(2) 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,
(3) if such security is not so listed on a United States national or
regional securities exchange, as reported by The Nasdaq Stock Market,
(4) if such security is not so reported, the last quoted bid price for such
security in the over-the-counter market as reported by the National
Quotation Bureau or similar organization, or
(5) 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 that the Administrator
selects for such purpose.
A "Trading Day" is defined as a day on which the security the Closing Price
of which is being determined (A) is not suspended from trading on any national
or regional securities exchange or association or over-the-counter market at the
close of business and (B) has traded at least once on the national or regional
securities exchange or association or over-the-counter market that is the
primary market for the trading of such security.
For illustrative purposes only, the following chart shows the number of
shares of Common Stock or the amount of cash that an investor would receive for
each DECS at various Exchange Prices. The chart assumes that there will be no
adjustments to the Exchange Rate due to any of the events described under
"-- The Contract -- Dilution Adjustments" and "-- The Contract -- Adjustment
Events" below and that the Contract will not be accelerated. There can be no
assurance that the Exchange Price will be within the range set forth below.
Given the Initial Price of $ per DECS and the Threshold Appreciation Price
of $ , an
9
<PAGE> 12
investor would receive at the Exchange Date the following number of shares of
Common Stock or amount of cash (if Hyundai exercises the Cash Delivery Option)
per DECS:
<TABLE>
<CAPTION>
EXCHANGE PRICE OF NUMBER OF SHARES OF
COMMON STOCK COMMON STOCK AMOUNT OF CASH
- ----------------- ------------------- --------------
<S> <C> <C>
</TABLE>
As the foregoing chart illustrates, if at the Exchange Date, the Exchange
Price is greater than $ , the Trust will be obligated to deliver
0. shares of Common Stock per DECS, resulting in an investor 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 an investor 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 DECS,
regardless of the market price of such share, resulting in an investor 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 an investor who acquires its DECS at the
Initial Price from the underwriters in the original offering. See "Certain
United States Federal Income Tax Considerations."
<TABLE>
<CAPTION>
ANNUAL
ANNUAL GROSS INCLUSION OF
ANNUAL GROSS DISTRIBUTIONS FROM ANNUAL RETURN OF ORIGINAL ISSUE
DISTRIBUTIONS FROM TREASURY SECURITIES CAPITAL PER DISCOUNT IN INCOME
YEAR TREASURY SECURITIES PER DECS DECS PER DECS
---- ------------------- ------------------- ---------------- ------------------
<S> <C> <C> <C> <C>
1999................. $ $ $ $
2000.................
2001.................
2002.................
</TABLE>
The Trust will pay the annual distribution of $ per DECS quarterly on
each February 15, May 15, August 15 and November 15 (or, if any such date is not
a Business Day, on the next succeeding Business Day), commencing May 15, 1999.
Quarterly distributions on the DECS will consist solely of the cash received
from the Treasury Securities. The Trust will not be entitled to any dividends
that may be declared on the Common Stock.
ENHANCED YIELD; LESS POTENTIAL FOR EQUITY APPRECIATION THAN COMMON STOCK; NO
DEPRECIATION PROTECTION
The yield on the DECS is higher than the current dividend yield on the
Common Stock, which currently does not pay dividends. However, there is no
assurance that the yield on the DECS 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 DECS 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 owners of
the DECS at the Exchange Date (the "Amount Receivable at the Exchange Date")
will generally exceed the Initial Price only if the Exchange Price exceeds the
Threshold Appreciation Price (which represents an appreciation of % over
the Initial Price) and because investors 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, DECS investors
will bear 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
10
<PAGE> 13
Exchange Date may be more or less than the Exchange Price used to determine the
Amount Receivable at the Exchange Date.
MAXTOR
Maxtor Corporation is a leading provider of hard disk drives for desktop
computers. Its customers are desktop computer manufacturers, including Compaq,
Dell and IBM; distributors, including Bell Micro and Ingram; and retailers,
including Best Buy, CompUSA and Staples.
Owners of DECS will not be entitled to any 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 Hyundai delivers shares of Common Stock to the Trust pursuant to the
Contract and the Trust has distributed such shares to the owners of the DECS.
A prospectus that describes Maxtor and the Common Stock that owners of DECS
may receive is attached to this prospectus.
The Common Stock has been quoted on The Nasdaq National Market under the
symbol "MXTR" since July 31, 1998. The following table sets forth, for the
indicated periods, the high and low closing sale prices of the Common Stock on
the Nasdaq National Market. Maxtor has never paid cash dividends on its stock
and has stated that it does not anticipate paying cash dividends on its stock,
including the Common Stock, in the near future. As of February 8, 1999, there
were approximately 100 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. Maxtor's fiscal year end is the last
Saturday in December, conforming to a 52/53-week/year methodology.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
Fiscal 1999 First Quarter (through February 8, 1999)........ $19.56 $12.63
Fiscal 1998 Fourth Quarter.................................. 15.63 7.63
Fiscal 1998 Third Quarter (from July 31, 1998).............. 11.63 6.81
</TABLE>
Maxtor is not affiliated with the Trust, will not receive any of the
proceeds from the sale of the DECS by the Trust and will have no obligations
with respect to the DECS or the Contract. This prospectus relates only to the
DECS offered hereby and does not relate to Maxtor or the Common Stock. Maxtor
has filed a registration statement with the SEC with respect to the shares of
Common Stock that may be delivered to the Trust by Hyundai, and by the Trust to
the owners of DECS, at the Exchange Date or upon earlier acceleration of the
Contract. The prospectus of Maxtor constituting a part of such registration
statement includes information relating to Maxtor and the Common Stock,
including certain risk factors relevant to an investment in the Common Stock.
The prospectus of Maxtor is being attached hereto and delivered to prospective
purchasers of DECS together with this prospectus for convenience of reference
only. The Maxtor prospectus is not part of this prospectus, and is not
incorporated by reference into this prospectus. Hyundai did not prepare, and is
not responsible for, the Maxtor prospectus.
THE CONTRACT
General. The Trust will enter into the Contract with Hyundai obligating
Hyundai to deliver to the Trust at the Exchange Date a number of shares of
Common Stock equal to the initial number of shares of Common Stock subject to
the Contract multiplied by the Exchange Rate. The Exchange Rate is equal to,
subject to adjustment as described in "-- Dilution Adjustments; Adjustment
Events" below,
(1) if the Exchange Price is greater than the Threshold Appreciation Price,
0. ;
(2) if the Exchange Price is less than or equal to the Threshold
Appreciation Price but greater than the Initial Price, the Initial
Price divided by the Exchange Price; and
(3) if the Exchange Price is less than or equal to the Initial Price, one.
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<PAGE> 14
The purchase price under the Contract is equal to $ per share of Common
Stock and $ in total and is payable to Hyundai by the Trust on the
closing of this offering. The purchase price of the Contract was arrived at by
arm's length negotiations between the Trust and Hyundai taking into
consideration factors including the price, expected dividend level and
volatility of the Common Stock, current interest rates, the term of the
Contract, current market volatility generally, the collateral pledged by Hyundai
to secure its obligations under the Contract, the value of other similar
instruments and the costs and anticipated proceeds of the offering of the DECS.
All matters relating to the administration of the Contract will be the
responsibility of either the Trust's Administrator or its Custodian.
Although Hyundai currently intends to deliver shares of Common Stock at the
Exchange Date, Hyundai may, at its option, deliver cash in lieu of delivering
all, but not less than all, of the shares of Common Stock otherwise deliverable
by it on the Exchange Date (the "Cash Delivery Option"), except where such
delivery would violate applicable state law. The amount of cash deliverable by
Hyundai 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 Hyundai
on the Exchange Date multiplied by the Exchange Price. On or prior to the 25th
Business Day prior to the Exchange Date, Hyundai will 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 owners of DECS will receive shares of
Common Stock or cash.
Dilution Adjustments. The Exchange Rate is subject to adjustment if Maxtor
(1) pays a stock dividend or makes a distribution, in either case, with
respect to Common Stock in shares of such stock,
(2) subdivides or splits its outstanding shares of Common Stock into a
greater number of shares,
(3) combines its outstanding shares of Common Stock into a smaller number
of shares,
(4) issues by reclassification (other than a reclassification pursuant to
clause (2), (3), (4) or (5) of the definition of Adjustment Event
below) of its shares of Common Stock any other equity securities of
Maxtor, or
(5) issues rights or warrants (other than rights to purchase Common Stock
pursuant to a plan for the reinvestment of dividends or interest) to
all holders of Common Stock entitling them to subscribe for or purchase
shares of Common Stock at a price per share less than the Market Price
(as defined below) of the Common Stock on the Business Day next
following the record date for the determination of holders of Common
Stock entitled to receive such rights or warrants.
In the case of the events referred to in clauses (1), (2), (3) and (4)
above, the Exchange Rate will be adjusted by adjusting each of the Share
Components of the Exchange Rate in effect immediately prior to such event so
that the Trust will be entitled under the Contract to receive at the Exchange
Date the number of shares of Common Stock (or, in the case of a reclassification
referred to in clause (4) above, the number of other equity securities of Maxtor
issued pursuant thereto) which it would have owned or been entitled to receive
immediately following such event had the Exchange Date occurred immediately
prior to such event or any record date with respect thereto.
In the case of the event referred to in clause (5) above, the Exchange Rate
will be adjusted by multiplying each of the Share Components of the Exchange
Rate in effect on the record date for the issuance of the rights or warrants
referred to in clause (5) above, by a fraction. The numerator of this fraction
is
(A) the number of shares of Common Stock outstanding on the record date for
the issuance of such rights or warrants, plus
(B) the number of additional shares of Common Stock offered for
subscription or purchase pursuant to such rights or warrants.
12
<PAGE> 15
The denominator of this fraction is
(x) the number of shares of Common Stock outstanding on the record date for
the issuance of such rights or warrants, plus
(y) the number specified in clause (B) above multiplied by the quotient of
(I) the exercise price of such rights or warrants divided by
(II) 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.
If such rights or warrants expire prior to the Exchange Date and shares of
Common Stock are not delivered pursuant to such rights or warrants prior to such
expiration, the Exchange Rate will be readjusted to the Exchange Rate which
would then be in effect had such adjustments for the issuance of such rights or
warrants been made upon the basis of delivery of only the number of shares of
Common Stock actually delivered pursuant to such rights or warrants. For
purposes of this paragraph, dividends will be deemed to be paid as of the record
date for such dividend.
"Market Price" means, as of any date of determination, the average Closing
Price per share of Common Stock on the 20 Trading Days immediately prior to (but
not including) the date of determination; provided, however, that if there are
not 20 Trading Days for the Common Stock occurring later than the 60th calendar
day immediately prior to, but not including, such date, the Market Price will be
determined as the market value per share of Common Stock as of such date as
determined by a nationally recognized investment banking firm that the
Administrator retains for such purpose.
All adjustments to the Exchange Rate will be calculated to the nearest
1/10,000th of a share of Common Stock (or, if there is not a nearest 1/10,000th
of a share, to the next higher 1/10,000th of a share). No adjustment in the
Exchange Rate will be made 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 will be
carried forward and taken into account in any subsequent adjustment. If an
adjustment is made to the Exchange Rate pursuant to clauses (1), (2), (3), (4)
or (5) above, an adjustment will also be made to the Exchange Price as such term
is used throughout the definition of Exchange Rate. The required adjustment to
the Exchange Price will be made at the Exchange Date by multiplying the Exchange
Price by the cumulative number or fraction determined pursuant to the Exchange
Rate adjustment procedure described above. In the case of the reclassification
of any shares of Common Stock into any equity securities of Maxtor other than
the Common Stock, such equity securities will be deemed shares of Common Stock
for all purposes. Each such adjustment to the Exchange Rate and the Exchange
Price will be made successively.
Adjustments Events. Each of the following events are called "Adjustment
Events":
(1) any dividend or distribution by Maxtor to all holders of Common Stock
of evidences of its indebtedness or other assets (excluding any
dividends or distributions referred to in clause (1) of the first
paragraph under the caption "-- Dilution Adjustments" above, any equity
securities issued pursuant to a reclassification referred to in clause
(4) of such paragraph and any Ordinary Cash Dividends (as defined
below)) or any issuance by Maxtor to all holders of Common Stock of
rights or warrants to subscribe for or purchase any of its securities
(other than rights or warrants referred to in clause (5) of the first
paragraph under the caption "-- Dilution Adjustments" above),
(2) any consolidation or merger of Maxtor with or into another entity
(other than a merger or consolidation in which Maxtor 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 Maxtor or another corporation),
(3) any sale, transfer, lease or conveyance to another corporation of the
property of Maxtor as an entirety or substantially as an entirety,
(4) any statutory exchange of securities of Maxtor with another corporation
(other than in connection with a merger or acquisition), and
13
<PAGE> 16
(5) any liquidation, dissolution or winding up of Maxtor.
After the occurrence of any Adjustment Event, Hyundai will deliver at the
Exchange Date, in lieu of or (in the case of an Adjustment Event described in
clause (1) above) in addition to, shares of Common Stock as described above,
cash in an amount equal to
(A) if the Exchange Price is greater than the Threshold Appreciation Price,
0. multiplied by the Transaction Value (as defined below);
(B) if the Exchange Price is less than or equal to the Threshold
Appreciation Price but greater than the Initial Price, the product of
(x) the Initial Price divided by the Exchange Price multiplied by (y)
the Transaction Value; and
(C) if the Exchange Price is less than or equal to the Initial Price, the
Transaction Value.
Following an Adjustment Event, the Exchange Price, as such term is used in
the formula in the preceding paragraph and throughout the definition of Exchange
Rate, will 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 described above under "-- Dilution Adjustments", 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
(1) are
(a) listed on a United States national securities exchange,
(b) reported on a United States national securities system subject to
last sale reporting,
(c) traded in the over-the-counter market and reported on the National
Quotation Bureau or similar organization, or
(d) for which bid and ask prices are available from at least three
nationally recognized investment banking firms; and
(2) are either (x) perpetual equity securities or (y) non-perpetual equity
or debt securities with a stated maturity after the Exchange Date of
the DECS
("Reported Securities"), Hyundai will, in lieu of delivering cash in respect of
such Reported Securities received in an Adjustment Event, deliver a number of
such Reported Securities with a value equal to all cash amounts that would
otherwise be deliverable in respect of Reported Securities received in such
Adjustment Event, as determined in accordance with clause (2) of the definition
of Transaction Value, unless Hyundai has made an election to exercise the Cash
Delivery Option or such Reported Securities have not yet been delivered to the
holders entitled thereto following such Adjustment Event or any record date with
respect thereto. If Hyundai delivers any Reported Securities, upon distribution
thereof by the Trust to owners of DECS, each owner of a DECS will be responsible
for the payment of any and all brokerage and other transaction costs upon the
sale of such Reported Securities. If, following any Adjustment Event, any
Reported Security ceases to qualify as a Reported Security, then (x) Hyundai
will not deliver such Reported Security but instead will deliver an equivalent
amount of cash and (y) notwithstanding clause (2) of the definition of
Transaction Value, the Transaction Value of such Reported Security will mean the
fair market value of such Reported Security on the date such security ceases to
qualify as a Reported Security, as determined by a nationally recognized
investment banking firm that the Administrator retains for this purpose.
Because each DECS represents the right of the owner of the DECS to receive
a pro rata portion of the Common Stock or other assets delivered by Hyundai
pursuant to the Contract, the amount of cash and/or the kind and number of
securities which the owners of DECS are entitled to receive after an Adjustment
Event will be adjusted following the date of such Adjustment Event in the same
manner and upon the occurrence of the same type of events as described under the
captions "-- Dilution Adjustments" and "-- Adjustment Events" with respect to
Common Stock and Maxtor.
14
<PAGE> 17
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 total 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 10% of
the average of the Closing Prices of the Common Stock over such 365-day period.
The term "Transaction Value" means
(1) for any cash received in any Adjustment Event, the amount of cash
received per share of Common Stock,
(2) for any Reported Securities received in any Adjustment Event, an amount
equal to (x) the average Closing Price per security of such Reported
Securities on the 20 Trading Days immediately prior to (but not
including) the Exchange Date multiplied by (y) the number of such
Reported Securities (as adjusted pursuant to the methods described
above under "-- Dilution Adjustments" and "-- Adjustment Events")
received per share of Common Stock, and
(3) for any property received in any Adjustment Event other than cash or
such Reported Securities, an amount equal to the fair market value of
the property received per share of Common Stock on the date such
property is received, as determined by a nationally recognized
investment banking firm that the Administrator retains for this
purpose;
provided, however, that in the case of clause (2),
(x) with respect to securities that are Reported Securities by virtue of
only clause (d) of the definition of Reported Securities above,
Transaction Value with respect to any such Reported Security means the
average of the mid-point of the last bid and ask prices for such
Reported Security as of the Exchange Date from each of at least three
nationally recognized investment banking firms that the Administrator
retains for such purpose multiplied by the number of such Reported
Securities (as adjusted pursuant to the methods described above under
"-- Dilution Adjustments" and "-- Adjustment Events") received per
share of Common Stock, and
(y) with respect to all other Reported Securities, if there are not 20
Trading Days for any particular Reported Security occurring after the
60th calendar day immediately prior to, but not including, the Exchange
Date, Transaction Value with respect to such Reported Security means
the market value per security of such Reported Security as of the
Exchange Date as determined by a nationally recognized investment
banking firm that the Administrator retains for such purpose multiplied
by the number of such Reported Securities (as adjusted pursuant to the
methods described above under "-- Dilution Adjustments" and
"-- Adjustment Events") received per share of Common Stock.
For purposes of calculating the Transaction Value, any cash, Reported Securities
or other property receivable in an Adjustment Event will 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 Maxtor for cash or in connection with acquisitions. Likewise, no
adjustments will be made for any sales of Common Stock by Hyundai.
Hyundai is required under the Contract to notify the Trust promptly upon
becoming aware that an event requiring an adjustment to the Exchange Rate or
which is an Adjustment Event is pending or has occurred. The Trust will, 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), notify each owner of DECS in writing 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 owners of DECS following the Adjustment Event
was determined and setting forth the revised Exchange Rate or consideration, as
the case may be. However, for any adjustment to the Exchange Price, this notice
will only disclose the factor by
15
<PAGE> 18
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 Contract; Acceleration. Hyundai's
obligations under the Contract will be secured by a pledge of one share of
Common Stock for each share of Common Stock subject to the Contract (subject to
adjustment in accordance with the dilution provisions of the Contract), pursuant
to a Collateral Agreement among Hyundai, the Trust and The Bank of New York, as
collateral agent (the "Collateral Agent"). Unless Hyundai is in default in its
obligations under the Collateral Agreement, Hyundai 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 must
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 (as defined below) that is not 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. The Collateral Agreement provides that, after an Adjustment Event,
Hyundai will pledge as alternative collateral any Reported Securities, plus cash
in an amount at least equal to the Transaction Value of any consideration other
than Reported Securities, received by it in respect of the maximum number of
shares of Common Stock subject to the Contract at the time of the Adjustment
Event. The number of Reported Securities required to be pledged will be adjusted
if any event requiring a dilution adjustment under the Contract occurs. Hyundai
will be permitted to substitute U.S. Government obligations for Reported
Securities or cash pledged after any Adjustment Event. Any U.S. Government
obligations so substituted must have an aggregate market value at the time of
substitution and at daily mark-to-market valuations thereafter of:
(A) in the case of obligations substituted for pledged Reported Securities,
not less than 150% (or, from and after any Insufficiency Determination
that is not cured by the close of business on the next Business Day
thereafter, as described below, 200%) of the product of the market
price per security of Reported Securities at the time of each valuation
times the number of Reported Securities for which such obligations are
being substituted; and
(B) in the case of obligations substituted for pledged cash, not less than
105% of the amount of cash for which such obligations are being
substituted.
The Collateral Agent will promptly pay over to Hyundai any dividends, interest,
principal or other payments received by the Collateral Agent in respect of any
collateral, including any substitute collateral, unless Hyundai is in default of
its obligations under the Collateral Agreement, or unless the payment of such
amount to Hyundai would cause the collateral to become insufficient under the
Collateral Agreement.
If the Collateral Agent determines (an "Insufficiency Determination") that
U.S. Government obligations pledged by Hyundai as substitute collateral fail to
meet the foregoing requirements at any valuation, or that Hyundai has failed to
pledge additional collateral required as a result of a dilution adjustment
increasing the maximum number of shares of Common Stock or Reported Securities
subject to the Contract, and such failure is not 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 the Collateral Agreement has occurred
and is continuing, the Collateral Agent will commence (1) sales of the
collateral consisting of U.S. Government obligations and (2) purchases, using
the proceeds of such sales, of shares of Common Stock or Reported Securities in
an amount sufficient to cause the collateral to meet the requirements under the
Collateral Agreement. The Collateral Agent will discontinue such sales and
purchases if at any time a Collateral Event of Default under the Collateral
Agreement has occurred and is continuing.
16
<PAGE> 19
The occurrence of a Collateral Event of Default (as defined below) under
the Collateral Agreement, or the bankruptcy or insolvency of Hyundai (or of any
"significant subsidiary" of Hyundai as defined in SEC rules (a "Subsidiary")),
will cause an automatic acceleration of Hyundai's obligations under the
Contract. A "Collateral Event of Default" under the Collateral Agreement means,
at any time,
(A) if no U.S. Government obligations are pledged as substitute collateral
at such time, failure of the collateral to consist of at least the
maximum number of shares of Common Stock subject to the Contract at
such time (or, if an Adjustment Event has occurred at or prior to such
time, failure of the collateral to include the amount of cash and the
maximum number of any Reported Securities required to be pledged as
described above);
(B) if any U.S. Government obligations are pledged as substitute collateral
for shares of Common Stock (or Reported Securities) at such time,
failure of such U.S. Government obligations to have a market value at
such time of at least 105% of the market price of the Common Stock (or
the then-current market price per security of Reported Securities, as
the case may be) times the difference between
(x) the maximum number of shares of Common Stock (or Reported
Securities) subject to the Contract at such time, and
(y) the number of shares of Common Stock (or Reported Securities)
pledged as collateral at such time; and
(C) if any U.S. Government obligations are 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 is not cured within one Business Day after notice thereof
is delivered to Hyundai.
Except as described below, upon acceleration of the Contract, the
Collateral Agent will to the extent permitted by law distribute to the Trust for
distribution pro rata to investors the maximum number of shares of Common Stock
subject to the Contract, in the form of the shares of Common Stock then pledged
by Hyundai, or cash generated from the liquidation of U.S. Government
obligations then pledged by Hyundai, or a combination thereof (or, after an
Adjustment Event, in the form of Reported Securities then pledged, cash then
pledged, cash generated from the liquidation of U.S. Government obligations then
pledged, or a combination thereof). In addition, if by the Exchange Date any
substitute collateral has not been replaced by shares of Common Stock (or, after
an Adjustment Event, cash or Reported Securities) sufficient to meet the
obligations under the Contract, the Collateral Agent will distribute to the
Trust for distribution pro rata to investors 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 Hyundai plus cash generated from the liquidation of
U.S. Government obligations then pledged by Hyundai (or, after an Adjustment
Event, the market value of the alternative consideration required to be
delivered thereunder, in the form of any Reported Securities then pledged, plus
any cash then pledged, plus cash generated from the liquidation of U.S.
Government obligations then pledged).
If upon acceleration of the Contract, Hyundai or a Subsidiary is subject to
a bankruptcy or similar proceeding, the Collateral Agent will to the extent
permitted by law distribute to the Trust for distribution pro rata to the
investors a number of shares of Common Stock, in the form of the shares of
Common Stock then pledged by Hyundai, or cash generated from the liquidation of
U.S. Government obligations then pledged by Hyundai, or a combination thereof
(or, after an Adjustment Event, in the form of Reported Securities then pledged,
cash then pledged, cash generated from the liquidation of U.S. Government
obligations then pledged, or a combination thereof), with an aggregate value
equal to the "Acceleration Value." The Administrator will determine the
Acceleration Value on the basis of quotations from independent dealers. Each
quotation will be for an amount that would be paid to the relevant dealer in
consideration of an agreement that would have the effect of preserving the
Trust's rights to receive the number of shares of Common Stock (or, after an
Adjustment Event, Reported Securities, cash or a combination thereof) subject to
the Contract on the Exchange Date. The Administrator will request quotations
from four nationally recognized independent
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<PAGE> 20
dealers on or as soon as reasonably practicable following the date of
acceleration. If four quotations are provided, the Acceleration Value will be
the arithmetic mean of the two quotations remaining after disregarding the
highest and lowest quotations. If two or three quotations are provided, the
Acceleration Value will be the arithmetic mean of such quotations. If one
quotation is provided, the Acceleration Value will be such quotation. If no
quotations are provided, the Acceleration Value will be the aggregate value of
the number of shares of Common Stock (or, after an Adjustment Event, Reported
Securities, cash or a combination thereof) that would be required to be
delivered under the Contract on the date of acceleration if the Exchange Date
were redefined to be the date of acceleration.
Description of Hyundai. Specific information on the holdings of Hyundai, as
required by the Securities Act of 1933, as amended (the "Securities Act"), is
included in the prospectus of Maxtor 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
investors with a quarterly distribution of $ per DECS on each distribution
date during the term of the Trust. The Trust may invest up to 35% of its total
assets in these Treasury Securities. If the Contract is accelerated, the
Administrator will liquidate the Treasury Securities then held in the Trust and
will distribute the proceeds thereof pro rata to investors, together with
proceeds from the acceleration of the Contract. See "-- The
Contract -- Collateral Requirements of the Contract; Acceleration" above and
"-- Trust Termination" below.
TEMPORARY INVESTMENTS
For cash management purposes, the Trust may invest the proceeds of the
Treasury Securities held by the Trust and any other cash held by the Trust in
short-term obligations of the U.S. Government maturing no later than the
Business Day preceding the next 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 investors, if earlier.
If the Contract is accelerated, the Administrator will liquidate any
Treasury Securities then held by the Trust and will distribute the proceeds
thereof pro rata to the investors, together with all shares of Common Stock
subject to the Contract that are pledged by Hyundai, or cash generated from the
liquidation of U.S. Government obligations then pledged by Hyundai, or a
combination thereof (or, after an Adjustment Event, in the form of Reported
Securities then pledged, cash then pledged, cash generated from the liquidation
of U.S. Government obligations then pledged, or a combination thereof) or in
certain cases, the Acceleration Value of the Contract. After this distribution,
the term of the Trust will expire. See "-- The Contract -- Collateral
Requirements of the Contract; Acceleration" above.
DELIVERY OF COMMON STOCK AND REPORTED SECURITIES; NO FRACTIONAL SHARES OF COMMON
STOCK OR REPORTED SECURITIES
Common Stock and Reported Securities delivered under the Contract at the
Exchange Date are expected to be distributed by the Trust to the investors pro
rata shortly after the Exchange Date, except that no fractional shares of Common
Stock or Reported Securities will be distributed. If more than one DECS is
surrendered at one time by the same investor, the number of full shares of
Common Stock or Reported Securities to be delivered upon termination of the
Trust, in whole or in part, as the case may be, will be computed on the basis of
the total number of DECS so surrendered at the Exchange Date. Instead 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 investors of all DECS, and each such
investor 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).
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<PAGE> 21
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 Contract
and the Common Stock or other assets received pursuant to the Contract and, for
cash management purposes, short-term obligations of the U.S. Government; issue
any securities or instruments except for the DECS; make short sales or purchase
securities on margin; write put or call options; borrow money; underwrite
securities; purchase or sell real estate, commodities or commodities contracts;
or make loans. The Trust has also adopted a fundamental policy that the Trust
may not dispose of the Contract during the term of the Trust and (except for a
liquidation of Treasury Securities following acceleration of the Contract as
described above under "Investment Objectives and Policies -- The Treasury
Securities") the Trust may not dispose of the Treasury Securities prior to the
earlier of their respective maturities and the termination of the Trust.
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<PAGE> 22
RISK FACTORS FOR DECS
The DECS may trade at widely different prices before maturity depending
upon factors such as changes in the market price of the Maxtor shares and other
events that the trust cannot predict and are beyond the trust's control. The
trust describes this in more detail below.
INTERNAL MANAGEMENT; NO PORTFOLIO MANAGEMENT
The internal operations of the trust will be managed by its trustees; the
trust will not have any separate investment advisor. The trust has adopted a
fundamental policy that the trust may not dispose of the prepaid forward
contract during the term of the trust and the trust may not dispose of the
Treasury securities held by the trust prior to the earlier of their maturities
and the termination of the trust, except for a liquidation of Treasury
securities following acceleration of the prepaid forward contract. As a result,
the trust will continue to hold the prepaid forward contract even if there is a
significant decline in the market price of the Maxtor shares or adverse changes
in the financial condition of Maxtor (or, after an Adjustment Event, comparable
developments affecting any Reported Securities or the issuer of such
securities). The trust will not be managed like a typical closed-end investment
company.
COMPARISON TO OTHER SECURITIES; RELATIONSHIP TO MAXTOR SHARES
The DECS are different from ordinary securities because the value of the
Maxtor shares, cash or other securities you will receive on termination of the
trust may be more or less than the initial price of the DECS. If the value of a
Maxtor share shortly before the exchange date is less than the amount you paid
for your DECS, you will suffer a loss on your investment in the DECS. If Maxtor
is insolvent or bankrupt when the DECS mature, you might lose your entire
investment. You take all the risk of a fall in the value of Maxtor shares before
the exchange date.
In addition, you have less opportunity to make money from an increase in
the price of a Maxtor share by investing in the DECS than by investing directly
in Maxtor shares. The value of what you receive when the trust is terminated
will be greater than the initial price of the DECS only if the value of a Maxtor
share exceeds $ . This is an increase of about % over the price of
Maxtor shares when the DECS were first offered for sale. In addition, you will
receive only about % of any increase in the value of a Maxtor share above
$ .
In return, you will receive annual distributions on the DECS at a rate of
%, which is more than the historical annual dividend on a Maxtor share,
which currently pay no dividends. However, Maxtor could pay dividends in the
future that are higher than the distributions that you receive from the trust.
The trust cannot predict whether the price of a Maxtor share will rise or
fall. However, the following factors may affect the trading price of Maxtor
shares:
- whether Maxtor makes a profit and what its future prospects are;
- trading in the capital markets generally;
- trading on NASDAQ where the Maxtor shares are traded;
- the health of the hard disk drive industry; and
- whether Maxtor issues securities like the DECS, or Maxtor, Hyundai or
another person in the market sells a large number of Maxtor shares.
Concurrently with this offering, in a separate offering Maxtor is offering
for sale 7,800,000 shares of Maxtor common stock and Hyundai Electronics America
is offering for sale 1,200,000 shares of Maxtor common stock (10,350,000 shares
in the aggregate if the underwriters' over-allotment option is exercised in
full). As of the date of this prospectus, Hyundai owned a total of 44,029,850
Maxtor shares, of which Hyundai may deliver up to 15,500,000 Maxtor shares
(17,825,000 shares if the underwriters' over-allotment option is exercised in
full) to the trust at the exchange date.
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<PAGE> 23
Please refer to the attached prospectus for information about Maxtor and
the Maxtor shares.
IMPACT OF THE DECS ON THE MARKET FOR THE MAXTOR SHARES
The trust cannot predict accurately how or whether investors will resell
the DECS and how easy it will be to resell them. Any market that develops for
the DECS is likely to influence and be influenced by the market for Maxtor
shares. For example, investors' anticipation that Hyundai may deliver Maxtor
shares that represent approximately 15% of the currently outstanding Maxtor
shares when the DECS mature could cause the price of a Maxtor share to be
unstable or fall. The following factors could also affect the price of Maxtor
shares:
- sales of Maxtor shares by investors who prefer to invest in Maxtor by
investing in the DECS;
- hedging of investments in the DECS by selling Maxtor shares (called
"selling short"); and
- arbitrage trading activity between the DECS and Maxtor shares.
DILUTION OF MAXTOR SHARES; LACK OF STOCKHOLDER RIGHTS
The terms of the DECS include some protections so you will receive
equivalent value when the DECS mature even if Maxtor splits or combines its
shares, pays stock dividends or does other similar things that change the number
of Maxtor shares currently outstanding. However, these terms will not protect
you against all events. For example, the amount you receive when the DECS mature
may not change if Maxtor offers shares for cash or in an acquisition, even if
the price of a Maxtor share falls and this causes the price of the DECS to fall.
The trust has no control over whether Maxtor will offer shares or do something
similar in the future or the amount of any offering.
In addition, unless and until Hyundai decides to deliver Maxtor shares to
the trust when the DECS mature and until the trust distributes the Maxtor shares
to you, you will have no dividend rights or other similar rights associated with
Maxtor shares.
MAXTOR NOT RESPONSIBLE FOR THE DECS
Maxtor has no obligation to make any payments on the DECS. Maxtor also does
not have to take the trust's needs or your needs into consideration for any
reason. Maxtor will not receive any money from the sale of the DECS and did not
decide to issue the DECS. Maxtor did not determine when the trust will issue the
DECS, how much the trust will sell them for or how many the trust will sell.
Maxtor is not involved in managing or trading the DECS or determining or
calculating the amount you will receive when the DECS mature.
DECS MAY BE DIFFICULT TO RESELL
The DECS are new and innovative securities, and there is currently no
market in which to resell them. The underwriters currently intend, but are not
obligated, to buy and sell the DECS. A resale market might not develop or, if it
does, might not give you the opportunity to resell your DECS and may not
continue until the DECS mature.
The trust has applied to have the DECS approved for quotation on the NASDAQ
National Market. Nonetheless, the NASDAQ might not approve the application or if
approved, could revoke the listing after approval or stop trading of the DECS at
any time. If NASDAQ will no longer quote the DECS or stops trading them, the
trust will ask another national securities exchange to list the DECS or another
trading market to quote them. If the DECS are no longer listed or traded on any
securities exchange or trading market, or if a securities exchange or trading
market stops trading of the DECS, you may have difficulty getting price
information and it may be more difficult to resell the DECS.
NET ASSET VALUE OF THE TRUST
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
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separate and distinct from the risk that the trust's net asset value will
decrease. The trust cannot predict whether the DECS will trade at, below or
above their net asset value. For investors who wish to sell the DECS in a
relatively short period of time after the DECS offering, the risk of the DECS
trading at a discount is more pronounced because the gain or loss that such
investors realize on their investment is likely to be depend more on whether the
DECS are trading at a discount or premium than upon the value of the trust's
assets. The trust will not redeem any DECS 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 of
1940, which means that the trust is not limited in the proportion of its assets
that may be invested in one security. Because the trust will only own the
Treasury securities, the prepaid forward contract or other assets subject to the
prepaid forward contract, the DECS may be a riskier investment than would be the
case for an investment company with more diversified investments.
TAX TREATMENT OF DECS UNCERTAIN
No statutory, judicial or administrative authority directly addresses the
characterization of the DECS or instruments similar to the DECS for U.S. federal
income tax purposes. As a result, significant aspects of the U.S. federal income
tax consequences of an investment in the DECS are not certain. There is no
ruling from the Internal Revenue Service with respect to the DECS and the
Internal Revenue Service might not agree with the conclusions expressed under
the section "Certain United States Federal Income Tax Considerations" in this
prospectus.
RISK FACTORS FOR MAXTOR
You should carefully consider the information in the attached prospectus of
Maxtor, including the risk factors for Maxtor beginning on page 5 of the
attached prospectus.
RISK RELATING TO BANKRUPTCY OF HYUNDAI
It is possible that Hyundai Electronics America would be the subject of
proceedings under the U.S. Bankruptcy Code. The trust believes that the prepaid
forward contract constitutes a "securities contract" for purposes of the U.S.
Bankruptcy Code, liquidation of which would not be subject to the automatic stay
provisions of the U.S. Bankruptcy Code in the event of the bankruptcy of Hyundai
Electronics America. It is, however, possible that the prepaid forward contract
could be determined not to qualify as a "securities contract" for this purpose.
Proceedings under the U.S. Bankruptcy Code in respect of Hyundai
Electronics America may thus cause a delay in settlement of the prepaid forward
contract, or otherwise subject the prepaid forward contract to such proceedings.
In turn, this could adversely affect the timing of settlement and could impair
the trust's ability to distribute the Maxtor stock or other assets subject to
the prepaid forward contract and the related Collateral Agreement to you on a
timely basis and, as a result, could adversely affect the amount received by you
in respect of the DECS and/or the timing of such receipt.
NET ASSET VALUE
The Administrator will calculate the net asset value of the portfolio at
least quarterly by dividing the value of the net assets of the Trust (the value
of its assets less its liabilities) by the total number of DECS outstanding. The
Trust's net asset value will be published semi-annually as part of the Trust's
semi-annual report to investors 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 Contract
will be valued at the bid price received by the Administrator from an
independent broker-dealer firm
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unaffiliated with the Trust which is in the business of making bids on financial
instruments similar to the Contract and with terms comparable thereto. If the
Trust (acting through the Administrator) is unable to obtain a valuation from an
independent broker-dealer firm, as required by the preceding sentence, on a
timely basis or without unreasonable effort or expense, the Contract will be
valued at a level deemed to be fair and reflective of the market value for the
Contract based on all appropriate factors relevant to the value of the Contract
as determined by an independent expert or appraiser retained by the Trust or by
the Administrator on its behalf.
DESCRIPTION OF THE DECS
Each DECS represents an equal proportional interest in the Trust. Upon
liquidation of the Trust, investors are entitled to share pro rata in the net
assets of the Trust available for distribution. DECS have no preemptive,
redemption or conversion rights. The DECS, when issued and outstanding, will be
fully paid and non-assessable. The only securities that the Trust is authorized
to issue are the DECS offered hereby and those sold to the initial investor
referred to below. See "Underwriting."
Owners of DECS are entitled to one vote for each DECS held on all matters
to be voted on by investors and are not able to cumulate their votes in the
election of Trustees. The Trustees of the Trust have been selected initially by
Salomon Smith Barney as the initial investor in the Trust. The Trust intends to
hold annual meetings as required by the rules of Nasdaq.
The Trustees may call special meetings of investors for action by investor
vote as may be required by either the Investment Company Act or the Declaration
of Trust. Investors have the right, upon the declaration in writing or vote of
more than two-thirds of the outstanding DECS, to remove a Trustee. The Trustees
will call a meeting of investors to vote on the removal of a Trustee upon the
written request of the record owners of 10% of the DECS or to vote on other
matters upon the written request of the record owners of 51% of the DECS (unless
substantially the same matter was voted on during the preceding 12 months). The
Trustees shall establish, and notify the investors 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. Owners 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 owners as required by the Investment Company Act.
BOOK-ENTRY SYSTEM
The DECS will be issued in the form of one or more global securities (the
"Global Security") 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 underwriters 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 Securities Exchange
Act of 1934, as amended. The Depositary was created to hold securities of
persons who have accounts with the Depositary ("participants") and to facilitate
the clearance and settlement of securities transactions among its participants
in such securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of
certificates. Such participants include securities brokers and dealers, banks,
trust companies and clearing corporations. Indirect access to the Depositary's
book-entry system is also available to others, such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a participant, either directly or indirectly.
Upon the issuance of a Global Security, the Depositary or its nominee will
credit the respective DECS represented by such Global Security to the accounts
of participants. The accounts to be credited will be designated by the
underwriters. Ownership of beneficial interests in such Global Security will be
limited to participants or persons that may hold interests through participants.
Ownership of beneficial interests by participants in such Global Security will
be shown on, and the transfer of those ownership interests will be
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<PAGE> 26
effected only through, records maintained by the Depositary or its nominee for
such Global Security. Ownership of beneficial interests in such Global Security
by persons that hold through participants will be shown on, and the transfer of
that ownership interest within such participant will be effected only through,
records maintained by such participant. The laws of some jurisdictions require
that certain purchasers of securities take physical delivery of such securities
in definitive form. Such limits and such laws may impair the ability to transfer
beneficial interests in a Global Security.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the DECS. Except
as set forth below, owners of beneficial interests in such Global Security will
not be entitled to have the DECS registered in their names and will not receive
or be entitled to receive physical delivery of the DECS in definitive form and
will not be considered the owners or holders thereof.
Shares of Common Stock or other assets deliverable in respect of, and any
quarterly distributions on, DECS registered in the name of or held by the
Depositary or its nominee will be made to the Depositary or its nominee, as the
case may be, as the registered owner or the holder of the Global Security. None
of the Trust, any Trustee, the Paying Agent, the Administrator or the Custodian
for the DECS will have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interests in a Global Security or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
The Trust expects that the Depositary, upon receipt of any payment in
respect of a 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
DECS in definitive registered form in exchange for the Global Security
representing such DECS. In that event, an owner of a beneficial interest in a
Global Security will be entitled to physical delivery in definitive form of DECS
represented by such Global Security equal in number to that represented by such
beneficial interest and to have such DECS registered in its name.
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<PAGE> 27
MANAGEMENT AND ADMINISTRATION OF THE TRUST
TRUSTEES
The internal operations of the Trust will be managed by three Trustees,
none of whom is an "interested person" of the Trust as defined in the Investment
Company Act; the Trust 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.
The names of the persons who have been elected by Salomon Smith Barney, the
sponsor/initial investor 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, 53............................. Managing Trustee Professor of Finance
Department of Finance University of Delaware
University of Delaware
Newark, DE 19716
William R. Latham, III, 54........................ Trustee Professor of Economics
Department of Economics University of Delaware
University of Delaware
Newark, DE 19716
James B. O'Neill, 59.............................. Trustee Professor of Economics
Center for Economic University of Delaware
Education and
Entrepreneurship
University of Delaware
Newark, DE 19716
</TABLE>
Salomon Smith Barney will pay each Trustee who is not a director, officer
or employee of either the underwriters or the Administrator, or of any affiliate
thereof, in respect of his annual fee and anticipated out-of-pocket expenses, a
one-time, up-front fee of $10,800. The Trust's Managing Trustee will also
receive an additional up-front fee of $3,600 for serving in that capacity.
Hyundai will reimburse Salomon Smith Barney for these payments. 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:
(1) receive invoices for and pay, or cause to be paid, all expenses
incurred by the Trust;
(2) with the approval of the Trustees, engage legal and other professional
advisors (other than the independent public accountants for the Trust);
(3) instruct the Paying Agent to pay distributions on DECS as described
herein;
(4) 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;
(5) at the direction of the Trustees, institute and prosecute legal and
other appropriate proceedings to enforce the rights and remedies of the
Trust; and
(6) make all necessary arrangements with respect to meetings of Trustees
and any meetings of holders of DECS.
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<PAGE> 28
The Administrator will not, however, select the independent public accountants
for the Trust or sell or otherwise dispose of the Trust's assets (except in
connection with an acceleration of the Contract, or the settlement of the
Contract at the Exchange Date, and upon termination of the Trust).
Either the Trust or the Administrator may terminate the Administration
Agreement 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 Agreement, 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. 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, the Custodian will
invest all net cash received by the Trust 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
Contract.
PAYING AGENT
The transfer agent, registrar and paying agent (the "Paying Agent") for the
DECS is The Bank of New York pursuant to a paying agent agreement. 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. Salomon Smith Barney 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. Hyundai in turn will reimburse Salomon Smith Barney for all such
reimbursements paid by it.
DISTRIBUTIONS
The Trust intends to distribute to investors 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 this offering, will be made
on May 15, 1999 to owners of record as of May 1, 1999. Thereafter, the Trust
will make distributions on August 15, November 15, February 15 and May 15 or, if
any such date is not a Business Day, on the next succeeding Business Day, of
each year to owners of record as of each August 1, November 1, February 1 and
May 1 , respectively. A portion of each such distribution should be treated as a
tax-free return of the investor's investment. See "Investment Objective and
Policies -- Trust Assets" and "Certain United States Federal Income Tax
Considerations." If the Contract is accelerated as described in "Investment
Objectives and Policies -- The Contract -- Collateral Requirements of the
Contract; Acceleration," each investor will receive its pro rata share of the
proceeds from the acceleration of the Contract and from the liquidation of the
Treasury Securities then held in the Trust. Upon termination of the Trust as
described in "Investment
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<PAGE> 29
Objectives and Policies -- Trust Termination," each investor 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, Salomon Smith Barney 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 such party's ongoing fees and, in the
case of the Administrator, anticipated expenses of the Trust over the term of
the Trust. The anticipated Trust expenses to be borne by the Administrator
include, among other things, expenses for legal and independent accountants'
services, costs of printing proxies, DECS certificates and investor reports,
expenses of the Trustees, fidelity bond coverage, stock exchange listing fees
and expenses of qualifying the DECS for sale in the various states. The
one-time, up-front payments described above total $311,500. Salomon Smith Barney
also will pay estimated organization costs of the Trust in the amount of $11,000
and estimated costs of the Trust in connection with the initial registration and
public offering of the DECS in the amount of $299,000 at the closing of the
offering. Hyundai will reimburse Salomon Smith Barney 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. Actual operating expenses of the Trust may be substantially
more than this amount. Any additional expenses will be paid by Salomon Smith
Barney or, in the event of its failure to pay such amounts, the Trust. Hyundai
will reimburse Salomon Smith Barney for all expenses of the Trust paid by it.
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<PAGE> 30
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 an owner of a DECS that is a "U.S. Holder."
A DECS owner will be treated as a U.S. Holder for U.S. federal income tax
purposes if the owner is:
- an individual who is a citizen or resident of the United States,
- a U.S. domestic corporation, or
- any other person that is subject to U.S. federal income taxation on a net
income basis in respect of its investment in DECS.
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,
possibly on a retroactive basis. Except to the extent discussed below under
"Non-U.S. Holders," this summary applies only to U.S. Holders that will hold
DECS as capital assets, and only if the investor purchased the DECS in their
initial offering. This summary does not address all aspects of U.S. federal
income taxation that may be relevant to an investor in light of the investor's
individual investment circumstances, and does not address tax considerations
applicable to investors that may be subject to special tax rules, such as
dealers in securities or foreign currencies, traders in securities or
commodities electing to mark to market, financial institutions, insurance
companies, tax-exempt organizations, persons that will hold DECS as a position
in a "straddle" for tax purposes or as a part of a "synthetic security" or a
"conversion transaction" or other integrated investment comprised of a DECS and
one or more other investments, or persons that have a functional currency other
than the U.S. dollar.
This summary does not include any description of the tax laws of any state
or local governments or of any foreign government that may be applicable to the
DECS or to the owners thereof. It also does not discuss the tax consequences of
the ownership of the Common Stock or Reported Securities. INVESTORS SHOULD
CONSULT THEIR OWN TAX ADVISORS IN DETERMINING THE TAX CONSEQUENCES TO THEM OF
HOLDING DECS, INCLUDING THE APPLICATION TO THEIR PARTICULAR SITUATION OF THE
U.S. FEDERAL INCOME TAX CONSIDERATIONS DISCUSSED BELOW, AS WELL AS THE
APPLICATION OF STATE, LOCAL OR OTHER TAX LAWS.
There are no regulations, published rulings or judicial decisions
addressing the characterization for federal income tax purposes of securities
with terms substantially the same as the DECS. Pursuant to the terms of the
Declaration of Trust, the Trust and every holder of the DECS agree to treat a
DECS for U.S. federal income tax purposes as a beneficial interest in a trust
that holds zero-coupon U.S. Treasury securities and the Contract. The Trust
intends to report holders' income to the Internal Revenue Service in accordance
with this treatment. In addition, pursuant to the terms of the Contract and the
Declaration of Trust, Hyundai, the Trust and every holder of a DECS will be
obligated (in the absence of an administrative determination or judicial ruling
to the contrary) to characterize the Contract for all tax purposes as a forward
purchase contract to purchase Common Stock at the Exchange Date (including as a
result of acceleration or otherwise), under the terms of which contract:
(a) at the time of issuance of the DECS the holder is required to deposit
irrevocably with Hyundai a fixed amount of cash equal to the purchase
price of the DECS, less the purchase price of the Treasury Securities,
to assure the fulfillment of the obligation described in clause (b)
below, and
(b) at the Exchange Date such cash deposit unconditionally and irrevocably
will be applied by Hyundai in full satisfaction of the holder's payment
obligation under the forward purchase contract, and Hyundai will
deliver to the holder the number of shares of Common Stock that the
holder is entitled to receive at that time pursuant to the terms of the
DECS (subject to Hyundai's right to deliver cash in lieu of the Common
Stock).
Under this approach, the tax consequences of holding a DECS will be as
described below. However, prospective investors in the DECS should be aware that
no ruling is being requested from the Internal Revenue Service with regard to
the DECS and that the Internal Revenue Service might take a different view as to
the proper characterization of the DECS or of the Contract and of the tax
consequences to an investor.
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<PAGE> 31
TAX STATUS OF THE TRUST
The Trust will be taxable as a grantor trust owned solely by the present
and future holders of DECS for federal income tax purposes, and income received
by the Trust will be treated as income of the holders in the manner set forth
below.
TAX CONSEQUENCES TO U.S. HOLDERS
Tax Basis of the Treasury Securities and the Contract. Each investor will
be considered to be the owner of its pro rata portion of the Treasury Securities
and the Contract in the Trust. The cost to the investor of the DECS will be
allocated among the investor's pro rata portion of the Treasury Securities and
the Contract (in proportion to the fair market values thereof on the date on
which the investor acquired the DECS) in order to determine the investor's tax
basis in its pro rata portion of the Treasury Securities and the Contract. 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 a payment
to Hyundai under the Contract, 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. An investor 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 investor purchased its DECS and at an original issue discount equal to the
excess of the investor's pro rata portion of the amounts payable on such
Treasury Security over the investor's tax basis for the Treasury Security as
discussed above. The investor (whether on the cash or accrual method of tax
accounting) is required to include original issue discount (other than original
issue discount on short-term Treasury Securities as described below) in income
for federal income tax purposes as it accrues, in accordance with a constant
yield method, prior to the receipt of cash attributable to such income. Because
it is expected that more than 20% of the holders of DECS will be accrual basis
taxpayers, the investor will be required to include in income 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 as
that original issue discount accrues. Unless an investor elects to accrue the
original issue discount on a short-term Treasury Security according to a
constant yield method based on daily compounding, the original issue discount
will be accrued on a straight-line basis. The investor's tax basis in a Treasury
Security will be increased by the amount of any original issue discount included
in income by the investor with respect to such Treasury Security.
Treatment of the Contract. Each investor will be treated as having entered
into a pro rata portion of the Contract and, at the Exchange Date, as having
received a pro rata portion of the Common Stock (or cash, Reported Securities or
combination thereof) delivered to the Trust. Under existing law, an investor
will not recognize income, gain or loss upon entry into the Contract. An
investor should not be required under existing law to include in income
additional amounts over the term of the Contract. See "-- Possible Alternative
Treatment," below, however.
Sale of the DECS. Upon a sale of all or some of an investor's DECS, an
investor will be treated as having sold its pro rata portion of the Treasury
Securities and Contract underlying the DECS. The selling investor will recognize
gain or loss equal to the difference between the amount realized and the
investor's aggregate tax bases in its pro rata portion of the Treasury
Securities and the Contract. Any gain or loss will be long-term capital gain or
loss if the investor has held the DECS for more than one year. The distinction
between capital gain or loss and ordinary income or loss is important given the
limitations on an investor's ability to offset capital losses against ordinary
income. In addition, individuals generally are subject to taxation at a reduced
rate on long-term capital gains.
Distribution of the Common Stock. The delivery of Common Stock to the Trust
pursuant to the Contract will not be taxable to the investors. The distribution
of Common Stock upon the termination of the Trust will not be taxable to the
investors. An investor 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
Contract allocable to fractional shares (based on the relative number of
fractional shares and full shares delivered to the investor). Each investor's
aggregate basis in its shares of Common Stock will be equal
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<PAGE> 32
to its basis in its pro rata portion of the Contract less the portion of such
basis allocable to any fractional shares of Common Stock for which cash is
received.
Distribution of Cash. If an investor receives cash upon dissolution of the
Trust or as a result of Hyundai's election to deliver cash under the Cash
Delivery Option, the investor will recognize capital gain or loss equal to any
difference between the amount of cash received and its tax basis in the DECS at
that time. Such gain or loss generally will be long-term capital gain or loss if
the investor has held the DECS for more than one year at the Exchange Date.
Distribution of Cash or Reported Securities as a Result of an Adjustment
Event. If as a result of an Adjustment Event, cash, Reported Securities, or a
combination of cash and Reported Securities is delivered pursuant to the
Contract, an investor will have taxable gain or loss upon receipt equal to the
difference between the amount of cash received, including cash received in lieu
of fractional Reported Securities, and its basis in its pro rata portion of the
Contract allocable to any shares of Common Stock for which such cash or
fractional Reported Securities were received. Any gain or loss will be capital
gain or loss, and if the investor has held the DECS for more than one year, such
gain or loss will be long-term capital gain or loss. An investor's basis in any
Reported Securities received will be equal to its basis in its pro rata portion
of the Contract less the portion of such basis allocable to any shares of Common
Stock for which cash or fractional Reported Securities were received. See
"Investment Objectives and Policies -- The Contract."
Possible Alternative Treatment. The Internal Revenue Service may contend
that a DECS should be characterized for federal income tax purposes in a manner
different from the approach described above. For example, the Internal Revenue
Service might assert that the Contract should be treated as a contingent debt
obligation of Hyundai that is subject to Treasury regulations 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 the Contract at a "comparable yield" for Hyundai under the Contract,
determined at the time the Contract takes effect. An investor's pro rata portion
of original issue discount in respect of the Contract and original issue
discount in respect of the Treasury Securities might exceed the aggregate amount
of the quarterly cash distributions to the investor. In addition, under this
treatment, the investor would be required to treat any gain realized on the
sale, exchange or redemption of the DECS as ordinary income to the extent that
such gain is allocable to the Contract. Any loss realized on such sale, exchange
or redemption that is allocable to the Contract would be treated as an ordinary
loss to the extent of the investor's original issue discount inclusions with
respect to the Contract, and as capital loss to the extent of loss in excess of
such inclusions. The Internal Revenue Service could also take the view that an
investor should include in income the amount of cash actually received each year
in respect of the DECS, or that the DECS as a whole constitute a contingent
payment debt instrument subject to the rules described above.
Fees and Expenses of the Trust. An investor's pro rata portion of the
expenses in connection with the organization of the Trust, underwriting
discounts and commissions and other offering expenses should be includible in
the cost to the owner of the DECS. 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
investor's cost of the DECS, such expenses would not be includible in the basis
of the assets of the Trust and should instead be amortizable and deductible over
the term of the Trust. If such expenses were treated as amortizable and
deductible, an individual investor 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 the investor's other miscellaneous
deductions exceed 2% of such investor's adjusted gross income.
Proposed Legislation. A bill introduced in 1998 in Congress by a member of
the House of Representatives (H.R. 3170) would have treated 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 have imposed an interest charge on such short-term capital gain. The
proposed legislation would have been effective with respect to gain recognized
after the date the legislation was enacted into law, without regard to when the
constructive ownership transaction was entered into. In its proposed form, the
legislation would not have applied to the DECS transaction (and, even if the
legislation in its proposed form were
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<PAGE> 33
extended to cover the DECS transaction, would have had no material effect on the
DECS 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-U.S. HOLDERS
In the case of an investor that is a non-resident alien individual or
foreign corporation (a "Non-U.S. Holder"), payments made with respect to the
DECS should not be subject to U.S. withholding tax, provided that the investor
complies with applicable certification requirements (including in general the
furnishing of an Internal Revenue Service Form W-8 or a substitute form). Any
capital gain realized upon the sale or other disposition of the DECS by a
Non-U.S. Holder generally will not be subject to U.S. federal income tax if (a)
such gain is not effectively connected with a U.S. trade or business and (b) in
the case of an individual, (i) the individual is not present in the United
States for 183 days or more in the taxable year of the sale or other
disposition, and (ii) the gain is not attributable to a fixed place of business
maintained by the individual in the United States.
A Non-U.S. Holder of the DECS that is subject to U.S. federal income
taxation on net income basis with respect to the DECS should see the discussion
in "-- Tax Consequences to U.S. Holders."
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
An investor in a DECS may be subject to information reporting and to backup
withholding tax at a rate of 31 percent of certain amounts paid to the investor
unless the investor (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 tax and otherwise complies with applicable requirements
of the backup withholding tax rules. Information reporting and backup
withholding tax will not apply to payments made to an owner of a DECS that is a
Non-U.S. Holder if such owner (a) is the beneficial owner of the DECS and
certifies as to its non-U.S. status, (b) is not the beneficial owner of the
DECS, but the beneficial owner of the DECS certifies as to its non-U.S. status,
or (c) otherwise establishes an exemption, provided that the Trust or its agent
does not have actual knowledge that the investor or the beneficial owner is a
U.S. person.
Payment of the proceeds from the sale of a DECS to or through a foreign
office of a broker will not be subject to information reporting or backup
withholding tax, except that if the broker is (1) a U.S. person for U.S. federal
income tax purposes, (2) a controlled foreign corporation for U.S. tax purposes,
(3) 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 (4) 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 DECS to or through the U.S. office of a broker is subject to
information reporting and backup withholding tax unless the investor 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 tax rules are not an
additional tax and may be credited against a U.S. Holder's U.S. federal income
tax liability, provided that the required information is furnished to the
Internal Revenue Service.
Recently issued Treasury regulations may change the certification
procedures relating to withholding and backup withholding on certain amounts
paid to Non-U.S. Holders after December 31, 1999. Prospective investors should
consult their tax advisors regarding the effect, if any, of such new Treasury
regulations on an investment in the DECS.
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<PAGE> 34
UNDERWRITING
Subject to the terms and conditions stated in the underwriting agreement
dated the date hereof, each underwriter named below has severally agreed to
purchase, and the Trust has agreed to sell to such underwriter, the number of
DECS set forth opposite the name of such underwriter.
<TABLE>
<CAPTION>
NAME NUMBER OF DECS
---- --------------
<S> <C>
Salomon Smith Barney Inc....................................
Hambrecht & Quist LLC.......................................
Lehman Brothers Inc.........................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
NationsBanc Montgomery Securities LLC.......................
----------
Total....................................................... 15,500,000
==========
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the DECS included in this offering are subject to
approval of certain legal matters by counsel and to certain other conditions.
The underwriters are obligated to purchase all the DECS (other than those
covered by the over-allotment option described below) if they purchase any of
the DECS.
The underwriters, for whom Salomon Smith Barney Inc. is acting as
representative, propose to offer some of the DECS directly to the public at the
public offering price set forth on the cover page of this prospectus and some of
the DECS to certain dealers at the public offering price less a concession not
in excess of $ per DECS. The underwriters may allow, and such dealers may
reallow, a concession not in excess of $ per DECS on sales to certain other
dealers. After the initial offering of the DECS to the public, the public
offering price and such concessions may be changed by the representative. The
sales load of $ per DECS is equal to % of the initial public offering
price.
Because proceeds from the sale of the DECS will be used by the Trust to
purchase the Contract from Hyundai, the underwriting agreement provides that
Hyundai will pay to the underwriters as compensation $ per DECS.
The Trust has granted to the underwriters an option, exercisable for 30
days from the date of this prospectus, to purchase up to
additional DECS at the same price per DECS as the initial DECS purchased by the
underwriters. The underwriters may exercise such option solely for the purpose
of covering over-allotments, if any, in connection with this offering. To the
extent such option is exercised, each underwriter will be obligated, subject to
certain conditions, to purchase a number of additional DECS approximately
proportionate to such underwriter's initial purchase commitment.
Maxtor, its executive officers and directors (comprised of fourteen
individuals) and Hyundai have agreed that, for a period of 90 days from the date
of this prospectus, they will not, without the prior written consent of Salomon
Smith Barney Inc., as representative of the underwriters, offer, sell, contract
to sell, or otherwise dispose of, any shares of common stock of Maxtor or any
securities convertible into, or exercisable or exchangeable for, common stock,
except that each such officer and director of Maxtor may sell, during the 90 day
period, up to 10,000 shares of common stock of Maxtor, subject to an aggregate
maximum of 100,000 shares for all such officers and directors during this
period. Salomon Smith Barney Inc. in its sole discretion may release any of the
securities subject to these lock-up agreements at any time without notice.
However, this agreement will not restrict the ability of Maxtor and Hyundai to
take any of the actions listed above in connection with the offering by the
Trust of the DECS or any delivery of shares of Maxtor common stock pursuant to
the terms of the DECS.
The DECS will be a new issue of securities with no established trading
market. The Trust has applied to have the DECS approved for quotation on the
Nasdaq National Market under the symbol "HYTDL." The underwriters intend to make
a market in the DECS, subject to applicable laws and regulations. However, the
underwriters are not obligated to do so and any such market-making may be
discontinued at any time at the sole discretion of the underwriters without
notice. Accordingly, no assurance can be given as to the liquidity of such
market.
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<PAGE> 35
In connection with the formation of the Trust, Salomon Smith Barney Inc.
subscribed for and purchased DECS for a purchase price of
$100. Under the Contract, Hyundai will be obligated to deliver to the Trust
Common Stock in respect of such DECS on the same terms as the DECS offered
hereby. Salomon Smith Barney Inc. sponsored the formation of the Trust for
purposes of this offering, including selecting its initial Trustees.
Pursuant to the Contract, the Trust has agreed, subject to the terms and
conditions set forth therein, to purchase from Hyundai a number of shares of
Maxtor common stock equal to the total number of DECS to be purchased by the
underwriters from the Trust pursuant to the underwriting agreement (including
any DECS to be purchased by the underwriters upon exercise of the over-allotment
option plus the number of DECS purchased by Salomon Smith Barney in connection
with the organization of the Trust). Pursuant to the terms of the Contract,
Hyundai will deliver to the Trust at the Exchange Date a number of shares of
Maxtor common stock (or, at Hyundai's option, the cash equivalent) and/or such
other consideration as permitted or required by the terms of the Contract, that
are expected to have the same value as the shares of Maxtor common stock
delivered pursuant to the DECS. The closing of the offering of the DECS is
conditioned upon execution of the Contract by Hyundai and the Trust.
In connection with the offering of the DECS and Maxtor's concurrent
offering of Common Stock, Salomon Smith Barney Inc., on behalf of the
underwriters, may over-allot, or engage in syndicate covering transactions,
stabilizing transactions and penalty bids. Over-allotment involves syndicate
sales of DECS or Common Stock in excess of the number of DECS to be purchased by
the underwriters in the offering, which creates a syndicate short position.
Syndicate covering transactions involve purchases of the DECS or the Common
Stock in the open market after the distribution has been completed in order to
cover syndicate short positions. Stabilizing transactions consist of certain
bids or purchases of DECS or Common Stock made for the purpose of preventing or
retarding a decline in the market price of the DECS or Common Stock while the
offering is in progress. Penalty bids permit the underwriters to reclaim a
selling concession from a syndicate member when Salomon Smith Barney Inc., in
covering syndicate short positions or making stabilizing purchases, repurchases
DECS or Common Stock originally sold by the syndicate member. These activities
may cause the price of DECS or Common Stock to be higher than the price that
otherwise would exist in the open market in the absence of such transactions.
These transactions may be effected on the Nasdaq National Market or in the
over-the-counter market, or otherwise and, if commenced, may be discontinued at
any time.
In addition, in connection with this offering, certain of the underwriters
(and selling group members) may engage in passive market making transactions in
the DECS or Common Stock on the Nasdaq National Market, prior to the pricing and
completion of the DECS offering. Passive market making consists of displaying
bids on the Nasdaq National Market no higher than the bid prices of independent
market makers and making purchases at prices no higher than those independent
bids and effected in response to order flow. Net purchases by a passive market
on each day are limited to a specified percentage of the passive market maker's
average daily trading volume in the common stock during a specified period and
must be discontinued when such limit is reached. Passive market making may cause
the price of the common stock to be higher than the price that otherwise would
exist in the open market in the absence of such transactions. If passive market
making is commenced, it may be discontinued at any time.
Maxtor and Hyundai have entered into a separate underwriting agreement for
the offer and sale of 7,800,000 shares and 1,200,000 shares, respectively, of
common stock, plus up to an additional 1,170,000 shares and 180,000 shares,
respectively, of common stock solely to cover over-allotments. The closings of
the DECS Offering and the Stock Offering are not conditioned upon each other.
The underwriters have performed certain investment banking and advisory
services for Maxtor from time to time for which they have received customary
fees and expenses. The underwriters may, from time to time, engage in
transactions with and perform services for Maxtor in the ordinary course of its
business.
Maxtor and Hyundai have agreed to indemnify the underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, or
to contribute to payments the underwriters may be required to make in respect of
any of those liabilities.
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<PAGE> 36
LEGAL MATTERS
Certain legal matters will be passed upon for the Trust and the
underwriters by Cleary, Gottlieb, Steen & Hamilton, New York, New York. Certain
matters of Delaware law will be passed upon for the Trust by Richards, Layton &
Finger, Wilmington, Delaware. Certain legal matters will be passed upon for
Hyundai by Gray Cary Ware & Freidenrich, Palo Alto, California.
EXPERTS
The statement of assets, liabilities and capital included in this
Prospectus has been audited by PricewaterhouseCoopers LLP, 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.
WHERE YOU CAN FIND MORE INFORMATION
The Trust has filed a registration statement for the DECS with the SEC.
Information about the DECS and the Trust may be found in that registration
statement. You may read and copy the registration statement at the public
reference facilities of the SEC in Washington, D.C., Chicago, Illinois and New
York, New York. Please call the SEC at 1-800-SEC-0330 for further information on
the public reference rooms. The Registration Statement is also available to the
public from the SEC's web site at http:\\www.sec.gov.
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<PAGE> 37
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustee of DECS Trust IV
We have audited the accompanying statement of assets, liabilities and
capital of DECS Trust IV (a Delaware trust) as of January 21, 1999. This
financial statement is the responsibility of the Trustee 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
DECS Trust IV as of January 21, 1999, in conformity with generally accepted
accounting principles.
/s/ PricewaterhouseCoopers LLP
New York, New York
January 22, 1999
35
<PAGE> 38
DECS TRUST IV
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
JANUARY 21, 1999
<TABLE>
<S> <C>
ASSETS
Cash........................................................ $ 100
Total Assets................................................ 100
LIABILITIES
Total Liabilities........................................... --
NET ASSETS.................................................. 100
CAPITAL
DECS, 1 DECS issued and outstanding......................... $ 100
</TABLE>
The accompanying notes are an integral part of this financial statement.
36
<PAGE> 39
DECS TRUST IV
NOTES TO STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
JANUARY 21, 1999
I. ORGANIZATION
DECS Trust IV, organized as a Delaware business trust on December 18, 1998,
is a closed-end management investment company registered under the Investment
Company Act of 1940. The term of the Trust is anticipated to expire in the year
2002; however, the exact date will be determined in the future. The Trust may be
dissolved prior to its planned termination date under certain circumstances as
outlined in the registration statement.
The Trust has registered 17,825,000 DECS representing shares of beneficial
interest in the Trust. The only securities that the Trust is authorized to issue
are the DECS. Each of the DECS represents the right to receive (a) quarterly
distributions during the term of the Trust, and (b) upon the conclusion of the
term of the Trust (the "Exchange Date"), certain shares of common stock of
Maxtor Corporation (the "Common Stock") or cash with an equivalent value (such
amounts determined as described in the registration statement). The DECS are not
subject to redemption prior to the Exchange Date or the earlier termination of
the Trust. The Trust will hold a series of zero-coupon U.S. Treasury securities
and a forward purchase contract relating to the Common Stock. The business
activities of the Trust are limited to the matters discussed above. The Trust
will be treated as a grantor trust for U.S. federal income tax purposes.
On January 21, 1999, the Trust issued one DECS to Salomon Smith Barney Inc.
in consideration for a purchase price of $100.
II. ORGANIZATIONAL COSTS, FEES AND EXPENSES
Organizational costs and ongoing fees of the Trust will be borne by Salomon
Smith Barney Inc.
III. MANAGEMENT AND ADMINISTRATION OF TRUST
The internal operation of the Trust will be managed by its trustees; the
Trust will not have a separate investment adviser. The Trust will be overseen by
three trustees, and its daily administration will be carried out by The Bank of
New York as the administrator. The Bank of New York will also serve as the
Trust's custodian, paying agent, registrar and transfer agent with respect to
the DECS.
37
<PAGE> 40
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
15,500,000 DECS(SM)
DECS TRUST IV
(SUBJECT TO EXCHANGE INTO COMMON STOCK OF MAXTOR CORPORATION)
------------------------
PROSPECTUS
, 1999
------------------------
SALOMON SMITH BARNEY
HAMBRECHT & QUIST
LEHMAN BROTHERS
MERRILL LYNCH & CO.
NATIONSBANC MONTGOMERY SECURITIES LLC
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 41
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 January 21, 1999
Part B -- none
2. Exhibits
<TABLE>
<S> <C> <C>
(a)(1)(A) -- Declaration of Trust dated as of December 17, 1998/*/
(a)(1)(B) -- Amended and Restated Declaration of Trust dated as of
February 8, 1999
(a)(2)(A) -- Certificate of Trust dated December 17, 1998/*/
(a)(2)(B) -- Restated Certificate of Trust dated February 8, 1999
(b) -- Not applicable
(c) -- Not applicable
(d)(1) -- Form of specimen certificate of DECS (included in Exhibit
2(a)(1)(B))
(d)(2) -- Portions of the Amended and Restated Declaration of Trust
defining the rights of Holders of DECS (included in Exhibit
2(a)(1)(B))
(e) -- Not applicable
(f) -- Not applicable
(g) -- Not applicable
(h) -- Form of Underwriting Agreement
(i) -- Not applicable
(j) -- 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 Amended and Restated Subscription Agreement
(q) -- Not applicable
(r) -- Financial Data Schedule
</TABLE>
- ---------------
/*/ Previously filed.
ITEM 25. MARKETING ARRANGEMENTS
See Exhibit 2(h) to this Registration Statement.
C-1
<PAGE> 42
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses to be incurred in
connection with the DECS offering described in this Registration Statement:
<TABLE>
<S> <C>
Registration fees........................................... $ 86,409
Nasdaq National Market application fee...................... 90,500
Printing (other than certificates).......................... 75,000
Engraving and printing certificates......................... 1,000
Fees and expenses of qualification under state securities
laws (including fees of counsel).......................... 2,000
Accounting fees and expenses................................ 10,000
Legal fees and expenses..................................... 10,000
NASD fees................................................... 30,500
Miscellaneous............................................... 4,591
--------
Total............................................. $310,000
</TABLE>
ITEM 27. PERSON CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
The Trust will be internally managed and will not have an investment
adviser. The information in the Prospectus under the caption "Management and
Administration of the Trust" is incorporated herein by reference.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
As of the effective date of this Registration Statement:
<TABLE>
<CAPTION>
NUMBER OF
TITLE OF CLASS RECORD HOLDERS
-------------- --------------
<S> <C>
DECS representing shares of beneficial interest............. 1
</TABLE>
ITEM 29. INDEMNIFICATION
The Underwriting Agreement (Exhibit 2(h) to this Registration Statement)
provides for indemnification.
The Amended and Restated Declaration of Trust filed as Exhibit 2(a)(1)(B)
to this Registration Statement provides for indemnification to each Trustee
against any claim or liability incurred in acting as Trustee of the Trust,
except in the case of willful misfeasance, bad faith, gross negligence or
reckless disregard of the Trustee's duties. The Custodian Agreement,
Administration Agreement and Paying Agent Agreement filed as Exhibits 2(j),
2(k)(1) and 2(k)(2) to this Registration Statement provide for indemnification
to the Custodian, Administrator and Paying Agent against any loss or expense
incurred in the performance of their obligations under the respective
agreements, unless such loss or expense is due to willful misfeasance, bad
faith, gross negligence or reckless disregard of their obligations. The Fund
Indemnity Agreement filed as Exhibit 2(k)(6) to this Registration Statement
provides that Salomon Smith Barney will indemnify the Trust for certain
indemnification expenses incurred under the Amended and Restated Declaration of
Trust, the Custodian Agreement, the Administration Agreement and the Paying
Agent Agreement.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant, pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been
C-2
<PAGE> 43
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 Puglisi
& Associates, 850 Library Avenue, Suite 204, Newark, Delaware 19715 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 Puglisi &
Associates, 850 Library Avenue, Suite 204, Newark, Delaware 19715.
ITEM 32. MANAGEMENT SERVICES
Not applicable.
ITEM 33. UNDERTAKINGS
(a) The Registrant hereby undertakes to suspend the offering of the shares
covered hereby until it amends its prospectus contained herein if (1) subsequent
to the effective date of this Registration Statement, its net asset value per
share declines more than ten percent from its net asset value per share as of
the effective date of this Registration Statement or (2) the net asset value per
share increases to an amount greater than its net proceeds as stated in its
prospectus contained herein.
(b) The Registrant hereby undertakes that (i) for the purpose of
determining any liability under the Securities Act, the information omitted from
the form of prospectus filed as part of this Registration Statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the registrant
under Rule 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective; (ii) for the
purpose of determining any liability under the Securities Act, each post-
effective amendment that contains a form of prospectus shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of the securities at that time shall be deemed to be the initial bona
fide offering thereof.
C-3
<PAGE> 44
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment
No. 2 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on the 8th day of February, 1999.
DECS TRUST IV
By: /s/ DONALD J. PUGLISI
------------------------------------
Donald J. Puglisi, Managing Trustee
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed below by the following
person, in the capacities and on the date indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <C> <S>
/s/ DONALD J. PUGLISI Managing Trustee February 8, 1999
- -----------------------------------------------------
Donald J. Puglisi
/s/ WILLIAM R. LATHAM Trustee February 8, 1999
- -----------------------------------------------------
William R. Latham III
/s/ JAMES B. O'NEILL Trustee February 8, 1999
- -----------------------------------------------------
James B. O'Neill
</TABLE>
C-4
<PAGE> 45
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NAME OF EXHIBIT
------- ---------------
<S> <C>
(a)(1)(A) Declaration of Trust dated as of December 17, 1998/*/
(a)(1)(B) Amended and Restated Declaration of Trust dated as of
February 8, 1999
(a)(2)(A) Certificate of Trust dated December 17, 1998/*/
(a)(2)(B) Restated Certificate of Trust dated February 8, 1999
(b) Not applicable
(c) Not applicable
(d)(1) Form of specimen certificate of DECS (included in Exhibit
2(a)(1)(B))
(d)(2) Portions of the Amended and Restated Declaration of Trust
defining the rights of Holders of DECS (included in Exhibit
2(a)(1)(B))
(e) Not applicable
(f) Not applicable
(g) Not applicable
(h) Form of Underwriting Agreement
(i) Not applicable
(j) 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 (Consent contained in
Exhibit 2(n)(1))
(n)(2) Consent of Independent Public Accountants
(n)(3) Consents to being named as Trustee
(o) Not applicable
(p) Form of Amended and Restated Subscription Agreement
(q) Not applicable
(r) Financial Data Schedule
</TABLE>
- ---------------
/*/ Previously filed.
<PAGE> 1
Exhibit (a)(1)(B)
EXECUTION COPY
AMENDED AND RESTATED
DECLARATION OF
TRUST
CONSTITUTING
DECS TRUST IV
Dated as of February 8, 1999
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
ARTICLE II
TRUST DECLARATION; PURPOSES, POWERS AND DUTIES OF
THE TRUSTEES; ADMINISTRATION
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 2.1 Name...........................................................................5
SECTION 2.2 Office.........................................................................5
SECTION 2.3 Resignation of Initial Trustee; Transfer of Beneficial Interest Ratification
and Approval of Action of Either or Both of the Initial Sponsor and the
Initial Trustee................................................................5
SECTION 2.4 Declaration of Trust; Purposes of the Trust; Statement of Intent...............6
SECTION 2.5 General Powers and Duties of the Trustees......................................7
SECTION 2.6 Portfolio Acquisition..........................................................8
SECTION 2.7 Portfolio Administration.......................................................9
SECTION 2.8 Manner of Sales...............................................................10
SECTION 2.9 Limitations on Trustees' Powers...............................................10
SECTION 2.10 Legal Title to Trust Property.................................................11
SECTION 2.11 Situs of Trust................................................................11
ARTICLE III
ACCOUNTS AND PAYMENTS
SECTION 3.1 The Trust Account.............................................................11
SECTION 3.2 Payment of Fees and Expenses..................................................12
SECTION 3.3 Distributions to Holders......................................................12
SECTION 3.4 Segregation...................................................................12
SECTION 3.5 Temporary Investments.........................................................12
ARTICLE IV
REDEMPTION
SECTION 4.1 Redemption....................................................................13
ARTICLE V
ISSUANCE OF CERTIFICATES; REGISTRY; TRANSFER OF
DECS
SECTION 5.1 Form of Certificate...........................................................13
SECTION 5.2 Transfer of DECS; Issuance, Transfer and Exchange of Certificates.............14
SECTION 5.3 Replacement of Certificates...................................................14
SECTION 5.4 Limitation on Liability.......................................................15
SECTION 5.5 General Provisions Regarding the DECS.........................................15
ARTICLE VI
ISSUANCE OF THE CONTRACTS
SECTION 6.1 Execution of the Contracts....................................................16
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE VII
TRUSTEES
SECTION 7.1 Trustees......................................................................16
SECTION 7.2 Vacancies.....................................................................17
SECTION 7.3 Powers........................................................................17
SECTION 7.4 Meetings......................................................................17
SECTION 7.5 Resignation and Removal.......................................................18
SECTION 7.6 Liability.....................................................................18
SECTION 7.7 Compensation..................................................................18
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Meetings of Holders...........................................................18
SECTION 8.2 Books and Records; Reports....................................................19
SECTION 8.3 Termination...................................................................20
SECTION 8.4 Amendment and Waiver..........................................................21
SECTION 8.5 Accountants...................................................................22
SECTION 8.6 Nature of Holder's Interest...................................................22
SECTION 8.7 Delaware Law to Govern........................................................23
SECTION 8.8 Notices.......................................................................23
SECTION 8.9 Severability..................................................................23
SECTION 8.10 Counterparts..................................................................23
SECTION 8.11 Successors and Assigns........................................................23
</TABLE>
ii
<PAGE> 4
AMENDED AND RESTATED DECLARATION OF TRUST
This Amended and Restated Declaration of Trust, dated as of
February 8, 1999 (the "Trust Agreement"), by and between Salomon Smith Barney
Inc., as sponsor (the "Sponsor"), Donald J. Puglisi, William R. Latham III and
James B. O'Neill as trustees (the "Trustees"), Alan Rifkin, as initial sponsor,
Tyler Dickson, as initial trustee, and the Holders (as defined herein),
constituting DECS Trust IV (the "Trust").
WITNESSETH:
WHEREAS, Alan Rifkin (the "Initial Sponsor") and Tyler
Dickson, as trustee (the "Initial Trustee"), have previously entered into a
Declaration of Trust dated as of December 17, 1998 (the "Original Agreement"),
creating the Trust;
WHEREAS, the Initial Sponsor desires to transfer his interest
in the Trust to the Sponsor;
WHEREAS, the Initial Trustee desires to resign as trustee of
the Trust, such resignation to be effective upon the appointment and acceptance
of the Trustees as provided herein;
WHEREAS, the Trustees hereby ratify and approve the transfer
of the interest of the Initial Sponsor in the Trust to the Sponsor;
WHEREAS, the parties hereto desire to amend and restate the
Original Agreement in certain respects; and
WHEREAS, the Initial Trustee, on behalf of the Trust, and the
Sponsor entered into a Subscription Agreement dated as of January 21, 1999 (the
"Subscription Agreement") pursuant to which the Trust issued to the Sponsor one
DECS in consideration of the aggregate purchase price therefor of $100.00;
NOW, THEREFORE, the parties hereto agree to amend and restate
the Original Agreement as provided herein. Upon the execution and delivery of
copies hereof by the parties hereto, the Original Agreement will be
automatically amended and restated in its entirety to read as provided herein.
ARTICLE I
DEFINITIONS
Whenever used in this Trust Agreement, the following words and
phrases shall have the meanings listed below. Any reference to any agreement
shall be a reference to such agreement as supplemented or amended from time to
time.
"Act": The Delaware Business Trust Act, 12 Del. C. Section
3801 et seq.
<PAGE> 5
"Additional DECS": The Additional DECS as defined in the
Contract.
"Additional Purchase Price": The Additional Purchase Price as
defined in the Contract.
"Adjustment Event": An Adjustment Event as defined in the
Contract.
"Administration Agreement": The Administration Agreement,
dated as of the date hereof, between the Administrator and the Trust, and any
substitute agreement therefor entered into pursuant to Section 2.5(a) hereof.
"Administrator": The Bank of New York or its successor as
permitted under Section 6.1 of the Administration Agreement or appointed
pursuant to Section 2.5(a) hereof.
"Business Day": A day on which the New York Stock Exchange,
Inc. is open for trading that is not a day on which banks in The City of New
York are authorized or obligated by law to close.
"Cash Delivery Option": The Cash Delivery Option as defined in
the Contract.
"Certificate": Any certificate evidencing the ownership of
DECS substantially in the form of Exhibit A hereto.
"Closing Date": The Closing Date as defined in the
Underwriting Agreement.
"Code": The Internal Revenue Code of 1986, as amended from
time to time; each reference herein to any section of the Code or any regulation
thereunder shall constitute a reference to any successor provision thereto.
"Collateral Agent": The Bank of New York or its successor as
permitted under the Collateral Agreement.
"Collateral Agreement": The Collateral Agreement among the
Seller, the Collateral Agent and the Trust, securing the Seller's obligations
under the Contract, substantially in the form of Exhibit B hereto.
"Commencement Date": The day on which the Underwriting
Agreement is executed.
"Commission": The United States Securities and Exchange
Commission.
"Common Stock": Common Stock, $.01 par value, of the Company.
"Company": Maxtor Corporation, a Delaware corporation.
"Contract": The forward purchase agreement between the Trust
and the Seller, substantially in the form of Exhibit C hereto.
2
<PAGE> 6
"Custodian": The Bank of New York or its successor as
permitted under paragraph 11 of the Custodian Agreement or appointed pursuant to
Section 2.5(a) hereof.
"Custodian Agreement": The Custodian Agreement, dated as of
January 21, 1999, between the Custodian and the Trust, and any substitute
agreement therefor entered into pursuant to Section 2.5(a) hereof.
"DECS": The DECS issued by the Trust evidencing a Holder's
undivided interest in the Trust and right to receive a pro rata distribution
upon liquidation of the Trust Estate.
"Depositary" or "DTC": The Depository Trust Company, or any
successor thereto.
"Distribution Date": Each February 15, May 15, August 15 and
November 15 of each year commencing May 15, 1999, to and including February 15,
2002 or if any such date is not a Business Day, then the first Business Day
thereafter.
"Event of Default": An Event of Default as defined in the
Contract.
"Exchange": The distribution by the Trust to the Holders of
the Shares, Reported Securities and/or cash delivered to the Trust pursuant to
the Contract (or, if the Seller elects the Cash Delivery Option under the
Contract, the amount in cash specified in the Contract as payable in respect
thereof), on the Exchange Date.
"Exchange Date": The Exchange Date as defined in the Contract.
"Exchange Rate": The Exchange Rate as defined in the Contract.
"Firm Purchase Price": The Firm Purchase Price as defined in
the Contract.
"Holder": The registered owner of any DECS as recorded on the
books of the Paying Agent.
"Indemnity Agreement": The Fund Indemnity Agreement dated as
of the date hereof between the Trust and the Sponsor substantially in the form
of Exhibit D hereto.
"Investment Company Act": The Investment Company Act of 1940,
as amended from time to time; each reference herein to any section of such Act
or any rule or regulation thereunder shall constitute a reference to any
successor provision thereto.
"Managing Trustee": The Trustee designated as such by the
Trustees, who hereby initially designate Donald J. Puglisi as the Managing
Trustee.
"Option Closing Date": The settlement date for the sale of any
Option DECS with respect to which the option provided for in Section 4(b) of the
Underwriting Agreement is exercised by the Underwriters.
3
<PAGE> 7
"Original Agreement": The meaning specified in the recitals
hereof.
"Participant": A Person having an account with the Depositary.
"Paying Agent": The Bank of New York or its successor as
permitted under Section 6.6 of the Paying Agent Agreement or appointed pursuant
to Section 2.5(a) hereof.
"Paying Agent Agreement": The Paying Agent Agreement, dated as
of the date hereof, between the Paying Agent and the Trust, and any substitute
agreement therefor entered into pursuant to Section 2.5(a) hereof.
"Person": An individual, a partnership, a corporation, a
trust, a limited liability company, an unincorporated association, a joint
venture or other entity or a government or any agency or political subdivision
thereof.
"Prospectus": The prospectus of the Trust relating to the
offering of the DECS and constituting a part of the Registration Statement, as
first filed with the Commission pursuant to Rule 497(b) or (h) under the
Securities Act, and as subsequently amended or supplemented by the Trust.
"Quarterly Distribution": $0.____ per DECS paid to each Holder
on each Distribution Date.
"Record Date": Each February 1, May 1, August 1, and November
1 of each year commencing May 1, 1999.
"Registration Statement": The registration statement on Form
N-2 (Registration Nos. 333-69325 and 811-09163) of the Trust, as amended.
"Reported Securities": Reported Securities as defined in the
Contract.
"Securities Act": The Securities Act of 1933, as amended from
time to time.
"Seller": The Person named as Seller in the Contract.
"Shares": Shares of Common Stock to be delivered by the Seller
to the Trust pursuant to the Contract, and by the Trust to the Holders pursuant
to the DECS, on the Exchange Date.
"Subscription Agreement": The meaning specified in the
recitals hereof.
"Temporary Investments": Direct short-term U.S. government
obligations, as specified from time to time by the Trustees or through standing
instructions from the Trustees to the Administrator or the Paying Agent.
4
<PAGE> 8
"Transfer Agent and Registrar": With respect to the Common
Stock or any Reported Securities at any time, the Person then acting as Transfer
Agent and Registrar for such Common Stock or Reported Securities.
"Treasury Securities": The meaning specified in Section 2.6(b)
hereof.
"Trust Account": The account created pursuant to Section 3.1
hereof.
"Trust Agreement": The meaning specified in the recitals
hereof.
"Trust Estate": The Contract and the Treasury Securities held
at any time by the Trust, together with any Temporary Investments held at any
time pursuant to Section 3.5 hereof, and any proceeds thereof or therefrom and
any other moneys held at any time in the Trust Account.
"Trustee": The meaning specified in the recitals hereof.
"Underwriters": Salomon Smith Barney Inc., Hambrecht & Quist
LLC, Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated
and NationsBanc Montgomery Securities LLC, each in its capacity as an
underwriter of the DECS pursuant to the Underwriting Agreement.
"Underwriting Agreement": The Underwriting Agreement as
described in the Prospectus.
ARTICLE II
TRUST DECLARATION; PURPOSES, POWERS
AND DUTIES OF THE TRUSTEES; ADMINISTRATION
SECTION 2.1 Name. The Trust is named "DECS Trust IV," as such
name may be modified from time to time by the Trustees following written notice
to the Holders and in which name the Trustees may conduct the affairs of the
Trust, make and execute contracts and other instruments on behalf of the Trust
and sue and be sued on behalf of the Trust. The Trust's activities may be
conducted under the name of the Trust or any other name deemed advisable by the
Trustees.
SECTION 2.2 Office. The address of the principal office and
registered office for service of process of the Trust is Donald J. Puglisi, c/o
Puglisi & Associates, 850 Library Avenue, Suite 204, Newark, Delaware 19715. On
ten Business Days' written notice to the Holders, the Trustees may designate
another principal office.
SECTION 2.3 Resignation of Initial Trustee; Transfer of
Beneficial Interest; Ratification and Approval of Prior Actions.
5
<PAGE> 9
(a) The Initial Sponsor hereby assigns, transfers, conveys and
sets over to the Sponsor all of its rights and interests in, to and under the
Original Agreement. The Sponsor hereby accepts such assignment effective as of
the date hereof.
(b) The Initial Trustee hereby resigns as trustee of the
Trust, such resignation to be effective upon the appointment and acceptance of
the Trustees pursuant to Section 2.4(b) of this Agreement. The Initial Trustee
hereby conveys, assigns and transfers to the Trustees, effective as of the date
hereof, and to their successors and assigns, all the rights, powers and trusts
of the Initial Trustee as trustee, under and pursuant to the Original Agreement,
and all property and money held by the Initial Trustee as trustee under the
Original Agreement. The Initial Trustee hereby represents to the Sponsor and the
Trustees that, at the time the Trustees' appointment as such becomes effective,
it will hold no monies or other property as trustee under the Original
Agreement.
(c) The Sponsor and the Trustees hereby ratify and approve any
and all actions taken by either or both of the Initial Sponsor and the Initial
Trustee on behalf of the Trust on or prior to the date hereof.
SECTION 2.4 Declaration of Trust; Purposes of the Trust;
Statement of Intent.
(a) The Sponsor hereby creates the Trust in order that it may
acquire the Treasury Securities, enter into the Contract, issue and sell to the
Sponsor and the Underwriters the DECS, hold the Trust Estate in trust for the
use and benefit of all present and future Holders and otherwise carry out the
terms and conditions of this Trust Agreement, all for the purpose of achieving
the investment objectives set forth in the Prospectus.
(b) The Sponsor hereby appoints the Trustees of the Trust
effective as of the date hereof, to have all the rights, powers and duties set
forth herein and in the Act. Effective as of date hereof, the Trustees shall
have all rights, powers and duties set forth herein and in the Act with respect
to accomplishing the purposes of the Trust. The Trustees hereby accept such
appointment and agree to hold the Trust Estate in trust for the use and benefit
of all present and future Holders, subject to all trusts, conditions and
provisions of this Agreement, and accept, upon the trusts expressed in this
Agreement, all the rights, powers and trusts of the Initial Trustee as trustee
under and pursuant to the Original Agreement and agree to be bound by all the
terms of the Original Agreement and this Agreement, such acceptance and
agreement to be effective as of the close of business on the date hereof.
(c) The Trust shall not engage in any activities other than
those required or authorized by the terms of this Agreement relating to the
issuance, sale and payment of the DECS in accordance with their terms, and the
acquisition, management, collection and holding of the Trust Estate, all in
accordance with the terms of this Agreement.
(d) It is the intention of the parties hereto that the Trust
constitute a business trust under the Act and that this Trust Agreement
constitute the governing instrument of the Trust. It is the intention of the
parties hereto that, for purposes of federal income taxes, state and local
income and franchise taxes imposed upon, measured by, or based upon gross or net
income, the
6
<PAGE> 10
Trust shall be treated as a grantor trust owned solely by the present and future
Holders and the provisions of this Agreement shall be interpreted in a manner
consistent with such intention.
(e) The Sponsor hereby waives the thirty (30) day notice
requirement of Section 5 of the Original Agreement. The Initial Sponsor has
heretofore deposited with the Initial Trustees the sum of $1 to accept and hold
in trust hereunder until the issuance and sale of the DECS to the Underwriters,
whereupon such sum shall be donated to an organization satisfying the
requirements of Section 170(c)(2) of the Code selected by unanimous consent of
the Trustees.
SECTION 2.5 General Powers and Duties of the Trustees. In
furtherance of the provisions of Section 2.4 hereof, the Sponsor authorizes and
directs the Trustees, on behalf of the Trust:
(a) to enter into and perform (and, in accordance with Section
8.4(a) hereof, amend), the Contract, the Collateral Agreement, the
Underwriting Agreement, the Indemnity Agreement, the Custodian
Agreement, the Administration Agreement and the Paying Agent Agreement
and to perform all obligations of the Trustees (including the
obligation to provide indemnity hereunder and thereunder) and enforce
all rights and remedies of the Trust under each of such agreements; and
if any of the Custodian Agreement, the Administration Agreement, the
Collateral Agreement and the Paying Agent Agreement terminates, or the
agent of the Trust thereunder resigns or is discharged, to appoint a
substitute agent and enter into a new agreement with such substitute
agent containing provisions substantially similar to those contained in
the agreement being terminated; provided that in any such new agreement
(i) the Custodian and the Paying Agent shall each be a commercial bank
or trust company organized and existing under the laws of the United
States of America or any state therein, shall have full trust powers
and shall have minimum capital, surplus and retained earnings of not
less than $100,000,000; and (ii) the Administrator and the Collateral
Agent shall each be a reputable financial institution qualified in all
respects to carry out its obligations under the Administration
Agreement or the Collateral Agreement, as the case may be;
(b) to hold the Trust Estate in trust, to create and
administer the Trust Account, to direct payments received by the Trust
to the Trust Account and to make payments out of the Trust Account as
set forth in Article III hereof;
(c) to issue and sell to the Underwriters an aggregate of up
to 17,825,000 DECS (including those DECS subject to the over-allotment
option of the Underwriters provided for in the Underwriting Agreement)
pursuant to the Underwriting Agreement and as contemplated by the
Prospectus; provided, however, that subsequent to the determination of
the public offering price per DECS and related underwriting discount
for the DECS to be sold to the Underwriters but prior to the sale of
the DECS to the Underwriters, the DECS originally issued to the Sponsor
shall be split into a greater number of DECS, with any fractional
shares being rounded down to the nearest integral number, so that
immediately following such split the value of each DECS held by the
Sponsor will equal the aforesaid public offering price;
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(d) to select independent public accountants and, subject to
the provisions of Section 8.5 hereof, to engage such independent public
accountants;
(e) to engage legal counsel and, to the extent required by
Section 2.7 hereof, to engage professional advisors and pay reasonable
compensation thereto;
(f) to defend any action commenced against the Trustees or the
Trust and to prosecute any action which the Trustees deem necessary to
protect the Trust and the rights and interests of Holders, and to pay
the costs thereof;
(g) to arrange for the bonding of officers and employees of
the Trust as required by Section 17(g) of the Investment Company Act
and the rules and regulations thereunder;
(h) to delegate any and all of its powers and duties hereunder
as contemplated by the Custodian Agreement, the Paying Agent Agreement
and the Administration Agreement, to the extent permitted by applicable
law; and
(i) to adopt and amend bylaws, and take any and all such other
actions as necessary or advisable to carry out the purposes of the
Trust, subject to the provisions hereof and applicable law, including,
without limitation, the Investment Company Act.
SECTION 2.6 Portfolio Acquisition. In furtherance of the
provisions of Section 2.4 hereof, the Sponsor further specifically authorizes
and directs the Trustees, acting on behalf of the Trust:
(a) to enter into the Contract with respect to the Shares
subject thereto with the Seller on the Commencement Date for settlement
on the date or dates provided thereunder and, subject to satisfaction
of the conditions set forth in the Contract, to pay the Firm Purchase
Price and the Additional Purchase Price, if any, thereunder with the
proceeds of the sale of the DECS, net of underwriting commissions and
net of the purchase price paid for the Treasury Securities as provided
in paragraph (b) below; and, subject to the adjustments and exceptions
set forth in the Contract, the Contract shall entitle the Trust to
receive from the Seller on the Exchange Date the Shares and/or Reported
Securities subject thereto (or, if the Seller elects the Cash Delivery
Option under the Contract, the amount in cash specified in the Contract
in respect thereof) so that the Trust may execute the Exchange with the
Holders; and
(b) to purchase for settlement at the Closing Date, and at the
Option Closing Date, as appropriate, with the proceeds of the sale of
the DECS, net of underwriting commissions, U.S. Treasury securities
from such brokers or dealers as the Trustees shall designate in writing
to the Administrator having the terms set forth on Schedule I hereto
("Treasury Securities").
SECTION 2.7 Portfolio Administration. In furtherance of the
provisions of Section 2.4 hereof, the Sponsor further specifically authorizes
and directs the Trustees:
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(a) Determination of Exchange Rate Adjustments. Upon receipt
of any notice pursuant to Section 5.4(b) of the Contract of an event
requiring an adjustment to the Exchange Rate, Exchange Price or Closing
Price, or upon otherwise acquiring knowledge of such an event, to
calculate or select and retain a nationally recognized firm of
independent certified public accountants (which may be the Company's
independent auditors) to calculate the required adjustment and furnish
notice thereof to the Collateral Agent, the Seller and the
Administrator, or to request from the Seller or the Administrator such
further information as may be necessary to calculate or effect the
required adjustment;
(b) Selection of Independent Investment Bank. At such times
and for such purposes as provided in the Contract, to select and retain
a nationally recognized investment banking firm to determine the market
value of any property as provided in the Contract, and to deliver to
the Seller notice pursuant to Section 8.1 of the Contract identifying
the firm proposed to be selected and retained, and to consult with the
Seller on such selection and retention as provided in such Section 8.1;
(c) Acceleration. In the event an Acceleration Date shall
occur due to an Event of Default as provided in Article VII of the
Contract, to deliver to the Seller the notice contemplated in the last
paragraph of Article VII of the Contract, if applicable, and to
liquidate the Treasury Securities and distribute the proceeds thereof
pro rata to each of the Holders of the DECS, together with any shares
of Common Stock or other amounts to be distributed to the Holders of
the DECS, in each case in accordance with the Contract and the
Collateral Agreement;
(d) Determination of Exchange Date Amounts. To calculate, on
the Exchange Date, the number of Shares (or, if the Seller elects the
Cash Delivery Option under the Contract, the amount in cash) required
to be delivered by the Seller under Section 1.1 of the Contract or, if
an Adjustment Event shall have occurred, the amount of cash required to
be delivered by the Seller, and the number of Reported Securities
permitted to be delivered by the Seller in lieu of all or a portion of
such cash, all as provided in Section 6.2 of the Contract, and to
furnish notice of the amounts so determined to the Collateral Agent and
the Seller.
(e) Distribution of Exchange Consideration. Unless an Event of
Default or an Adjustment Event shall have occurred or the Seller elects
the Cash Delivery Option under the Contract (in which event the cash
received in respect thereof shall be distributed pro rata to the
Holders of the DECS):
(i) Determination of Fractional Shares. To determine,
on the Exchange Date: (a) for each Holder of DECS, such
Holder's pro rata share of the total number of Shares
delivered to the Trust under the Contract on the Exchange
Date; and (b) the number of fractional Shares allocable to
each Holder (including, in the case of the Depositary,
fractional shares allocable to beneficial owners of Securities
who own through Participants) and in the aggregate;
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(ii) Cash for Fractional Shares. To sell, in the
principal market therefor, on the Exchange Date, a number of
Shares equal to the aggregate number of fractional Shares
determined pursuant to clause (i) (b) above, rounded down to
the nearest integral number; and to distribute to the Holders,
pro rata in accordance with the fractional shares to which
they would otherwise have been entitled, the aggregate
proceeds of such sale (net of any brokerage or related
expenses); and
(iii) Delivery of Shares. To deliver the remaining
Shares to the Transfer Agent and Registrar on the Exchange
Date, with instructions that such Shares be re-registered and
re-issued as follows: (a) for and in the name of each Holder
(other than the Depositary) who holds DECS in definitive form,
if any, the Transfer Agent and Registrar shall be instructed
to issue definitive certificates representing a number of
Shares equal to such Holder's pro rata share of the total
number of Shares delivered to the Trust under the Contracts,
rounded down to the nearest integral number and the Trustees
shall cause the delivery of such re-registered and re-issued
Shares to each respective Holder; and (b) the Transfer Agent
and Registrar shall be instructed to transfer all remaining
Shares to the account of the Custodian held through the
Depositary, who shall then be instructed to transfer and
credit such Shares to each Participant who holds DECS, with
each Participant receiving its pro rata share of the total
Shares delivered to the Trust on the Exchange Date, reduced by
the aggregate fractional shares allocable to such Participant
as described in (i) above;
(iv) Distribution of Other Property. To distribute on
the Exchange Date to each Holder of DECS such Holder's pro
rata share of the total number or amount of each other type of
property owned by the Trust at the Exchange Date, rounded to
the nearest integral number; and
(v) Record Date. The distributions described in this
paragraph (e) shall be made to Holders of record as of the
close of business on the Business Day preceding the Exchange
Date.
SECTION 2.8 Manner of Sales. Any sale of Trust property
permitted under Section 8.3(c) hereof shall be made through such executing
brokers or to such dealers as the Trustees, seeking best price and execution for
the Trust, shall designate in writing to the Paying Agent, taking into account
such factors as price, commission, size of order, difficulty of execution and
brokerage skill required.
SECTION 2.9 Limitations on Trustees' Powers. The Trustees are
not permitted:
(a) to purchase or hold any securities or instruments except
for the Shares, the Contracts the Treasury Securities, the Temporary
Investments contemplated by Section 3.5 hereof and any Reported
Securities, cash or other property delivered pursuant to the terms of
the Contract;
(b) to dispose of the Contract prior to the Exchange Date;
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(c) to issue any securities or instruments except for the
DECS, or to issue any DECS other than the DECS sold to the Sponsor and
the DECS to be sold pursuant to the Underwriting Agreement;
(d) to make short sales or purchases on margin;
(e) to write put or call options;
(f) to borrow money;
(g) to underwrite securities;
(h) to purchase or sell real estate, commodities or
commodities contracts;
(i) to purchase restricted securities;
(j) to make loans; or
(k) to take any action, or direct or permit the Administrator,
the Paying Agent or the Custodian to take any action, that would vary
the investment of the Holders within the meaning of Treasury Regulation
Section 301.7701-4(c), or otherwise take any action or direct or permit
any action to be taken that would or could cause the Trust not to be a
"grantor trust" owned solely by the present and future Holders under
the Code.
SECTION 2.10 Legal Title to Trust Property. Legal title to the
Trust Estate shall be vested at all times in the Trust as a separate legal
entity except where applicable law in any jurisdiction requires title to any
part of the Trust Estate to be vested in a trustee or trustees, in which case
legal title shall be deemed to be vested in the Trustees, a co-trustee and/or a
separate trustee, as the case may be.
SECTION 2.11 Situs of Trust. The Trust shall be located and
administered in, and all bank accounts of the Trust maintained in, the State of
Delaware or the State of New York. Payments shall be received by the Trust only
in the State of Delaware or the State of New York and payments will be made by
the Trust only from the State of Delaware or the State of New York.
ARTICLE III
ACCOUNTS AND PAYMENTS
SECTION 3.1 The Trust Account. The Trustees shall, upon
issuance of the DECS, establish with the Paying Agent an account to be called
the "Trust Account." All moneys received by the Trust or the Trustees in respect
of the Contract, the Treasury Securities and any Temporary Investments held
pursuant to Section 3.5 hereof, all moneys received from the sale of the DECS to
the Sponsor, and any proceeds from the sale of the DECS to the Underwriters
after the purchase of the Contract and the Treasury Securities shall be credited
to the Trust Account.
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SECTION 3.2 Payment of Fees and Expenses. The Sponsor will pay
the fees and expenses of the Trust incurred in connection with the offering of
the DECS and the costs and expenses incurred in the organization of the Trust.
SECTION 3.3 Distributions to Holders. On or shortly after each
Distribution Date the Trust shall distribute to each Holder of record at the
close of business on the preceding Record Date, at the post office address of
the Holder appearing on the books of the Trust or Paying Agent or by any other
means mutually agreed upon by the Holder and the Trust, the Quarterly
Distribution computed as of the close of business on such Distribution Date.
SECTION 3.4 Segregation. All moneys and other assets deposited
or received by the Trust or the Trustees hereunder shall be held by them in
trust as part of the Trust Estate until required to be disbursed or otherwise
disposed of in accordance with the provisions of this Trust Agreement, and the
Trust or the Trustees shall handle such moneys and other assets in such manner
as shall constitute the segregation and holding in trust within the meaning of
the Investment Company Act.
SECTION 3.5 Temporary Investments. To the extent necessary to
enable the Paying Agent to make the next succeeding Quarterly Distribution, any
moneys deposited with or received by the Trust or the Trustees in the Trust
Account shall be invested as soon as possible by the Paying Agent in Temporary
Investments maturing no later than the Business Day preceding the next following
Distribution Date. Except as otherwise specifically provided herein or in the
Paying Agent Agreement, the Paying Agent shall not have the power to sell,
transfer or otherwise dispose of any Temporary Investment prior to the maturity
thereof, or to acquire additional Temporary Investments. The Paying Agent shall
hold any Temporary Investment to its maturity and shall apply the proceeds
thereof upon maturity to the payment of the next succeeding Quarterly
Distribution. All such Temporary Investments shall be selected from time to time
by the Trustees or pursuant to standing instructions from the Trustees to the
Administrator, and the Administrator and/or Paying Agent shall have no liability
to the Trust or any Holder or any other Person with respect to any such
Temporary Investment. Any interest or other income received on any moneys in the
Trust Account shall, upon receipt thereof, be deposited into the Trust Account.
Notwithstanding the foregoing, not more than 5% of the assets of the Trust may
be held at any time in the form of cash and Temporary Investments, and the
Trustees shall distribute cash, or liquidate Temporary Investments and
distribute the proceeds thereof, if, when and to the extent needed to maintain
compliance with the foregoing restriction.
ARTICLE IV
REDEMPTION
SECTION 4.1 Redemption. The Trustees shall have no right or
obligation to redeem DECS.
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ARTICLE V
ISSUANCE OF CERTIFICATES; REGISTRY; TRANSFER OF DECS
SECTION 5.1 Form of Certificate. Each Certificate evidencing
DECS shall be countersigned manually or in facsimile by the Managing Trustee and
countersigned manually by the Paying Agent in substantially the form of Exhibit
A hereto with the blanks appropriately filled in, shall be dated the date of
execution and delivery by the Paying Agent and shall represent a fractional
undivided interest in the Trust, the numerator of which fraction shall be the
number of DECS set forth on the face of such Certificate and the denominator of
which shall be the total number of DECS outstanding at that time. All DECS shall
be issued in registered form and shall be numbered serially.
The DECS delivered to the Underwriters on the Closing Date and
on any settlement date under Section 4(b) of the Underwriting Agreement will be
issued in the form of a global Certificate or Certificates representing the DECS
issued to the Underwriters, to be delivered to the Depositary by or on behalf of
the Trust. Such Certificate or Certificates shall initially be registered on the
books and records of the Trust in the name of Cede & Co., the nominee of DTC,
and no beneficial owner of such DECS will receive a definitive Certificate
representing such beneficial owner's interest in such DECS, except as provided
in the next paragraph. Unless and until definitive, fully registered
Certificates have been issued pursuant to the next paragraph, the Trust shall be
entitled to deal with the Depositary for all purposes of this Agreement as the
Holder and the sole holder of the Certificates and shall have no obligation to
the beneficial owners thereof, and none of the Trust, the Trustees, or any agent
of the Trust or the Trustees shall have any liability with respect to or
responsibility for the records of the Depositary.
If the Depositary elects to discontinue its services as
securities depository and a successor depositary is not appointed by the Trust
within 90 days, then definitive Certificates shall be prepared by the Trust.
Upon surrender of the global Certificate or Certificates accompanied by
registration instructions, the Trustees shall cause definitive Certificates to
be delivered to the beneficial owners in accordance with the instructions of the
Depositary. Neither the Trustees nor the Trust shall be liable for any delay in
delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions.
Pending the preparation of definitive Certificates, the
Trustees may execute and the Paying Agent shall authenticate and deliver
temporary Certificates (printed, lithographed, typewritten or otherwise
reproduced, in each case in form satisfactory to the Paying Agent). Temporary
Certificates shall be issuable as registered Certificates substantially in the
form of the definitive Certificates but with such omissions, insertions and
variations as may be appropriate for temporary Certificates, all as may be
determined by the Trustees with the concurrence of the Paying Agent. Every
temporary Certificate shall be executed by the Managing Trustee and be
authenticated by the Paying Agent upon the same conditions and in substantially
the same manner, and with like effect, as the definitive Certificates. Without
unreasonable delay the Managing Trustee shall execute and shall furnish
definitive Certificates and thereupon temporary
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Certificates may be surrendered in exchange therefor without charge at each
office or agency of the Paying Agent and the Paying Agent shall authenticate and
deliver in exchange for such temporary Certificates definitive Certificates for
a like aggregate number of DECS. Until so exchanged, the temporary Certificates
shall be entitled to the same benefits hereunder as definitive Certificates.
SECTION 5.2 Transfer of DECS; Issuance, Transfer and Exchange
of Certificates. DECS may be transferred by the Holder thereof by presentation
and surrender of properly endorsed Certificates at the office of the Paying
Agent, accompanied by such documents executed by the Holder or his authorized
attorney as the Paying Agent deems necessary to evidence the authority of the
person making the transfer. Certificates issued pursuant to this Trust Agreement
are exchangeable for one or more other Certificates representing an equal
aggregate number of DECS and all Certificates issued as may be requested by the
Holder and deemed appropriate by the Paying Agent shall be issued in
denominations of one DECS or any multiple thereof. The Paying Agent may deem and
treat the person in whose name any DECS shall be registered upon the books of
the Paying Agent as the owner of such DECS for all purposes hereunder and the
Paying Agent shall not be affected by any notice to the contrary. The transfer
books maintained by the Paying Agent for the purposes of this Section 5.2 hereof
shall include the name and address of the record owners of the DECS and shall be
closed in connection with the termination of the Trust pursuant to Section 8.3
hereof.
A sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such transfer shall be paid to the
Paying Agent by the Holder. A Holder may be required to pay a fee for each new
Certificate to be issued pursuant to the preceding paragraph in such amount as
may be specified by the Paying Agent and approved by the Trustees.
All Certificates canceled pursuant to this Trust Agreement may
be voided by the Paying Agent in accordance with the usual practice of the
Paying Agent or in accordance with the instructions of the Trustees; provided,
however, that the Paying Agent shall not be required to destroy canceled
Certificates.
The Paying Agent may adopt other reasonable rules and
regulations for the registration, transfer and tender of DECS as it may, in its
discretion, deem necessary.
SECTION 5.3 Replacement of Certificates. In case any
Certificate shall become mutilated or be destroyed, stolen or lost, the Paying
Agent shall execute and deliver a new Certificate in exchange and substitution
therefor upon the Holder's furnishing the Paying Agent with proper
identification and satisfactory indemnity, complying with such other reasonable
regulations and conditions as the Paying Agent may prescribe and paying such
expenses and charges, including any bonding fee, as the Paying Agent may incur
or reasonably impose; provided that if the Trust has terminated or is in the
process of terminating, the Paying Agent, in lieu of issuing such new
Certificate, may, upon the terms and conditions set forth herein, make the
distributions set forth in Section 8.3(c) hereof. Any mutilated Certificate
shall be duly surrendered and canceled before any duplicate Certificate shall be
issued in exchange and
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substitution therefor. Upon issuance of any duplicate Certificate pursuant to
this Section 5.3 hereof, the original Certificate claimed to have been lost,
stolen or destroyed shall become null and void and of no effect, and any
protected purchaser thereof shall have only such rights as are afforded under
Article 8 of the Uniform Commercial Code to a Holder presenting a Certificate
for transfer in the case of an overissue.
SECTION 5.4 Limitation on Liability. Pursuant to Section
3803(a) of the Act, the Holders of the DECS shall be entitled to the same
limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the State
of Delaware.
SECTION 5.5. General Provisions Regarding the DECS.
(a) The consideration received by the Trust for the issuance
of the DECS shall constitute a contribution to the capital of the Trust and
shall not constitute a loan to the Trust.
(b) Upon issuance of the DECS as provided in this Trust
Agreement, the DECS so issued shall be deemed to be validly issued, fully paid
and non-assessable.
(c) Every person, by virtue of having become a Holder in
accordance with the terms of this Trust Agreement, shall be deemed to have
expressly assented and agreed to the terms of, and shall be bound by, this Trust
Agreement.
(d) The Trust and every Holder agree to treat a DECS as a
beneficial interest in a trust that holds zero-coupon U.S. Treasury securities
and the Contract, and that:
(i) it will treat the Contract in its entirety as a
forward purchase contract for the delivery of the Shares on
the Exchange Date (including as a result of acceleration or
otherwise), under the terms of which contract (A) at the time
of issuance of the DECS the Trust deposits irrevocably with
Seller a fixed amount of cash equal to the Firm Purchase Price
(plus, if the Underwriters exercise their option to purchase
Additional DECS, the Additional Purchase Price) to assure the
fulfillment of the Trust's purchase obligation described in
clause (B) below, which deposit will unconditionally and
irrevocably be applied at the Exchange Date to satisfy such
obligation and (B) at the Exchange Date such cash deposit
unconditionally and irrevocably will be applied by Seller in
full satisfaction of the Trust's obligation under the forward
purchase contract, and Seller will deliver to Trust the number
of Contract Shares that the Trust is entitled to receive at
that time pursuant to the terms of the Contract (subject to
Seller's right to deliver cash and/or other property as
provided in the Contract in lieu of the Contract Shares);
(ii) it will treat, consistent with the above
characterization, amounts paid to Seller in respect of the
Contract as allocable in their entirety to the amount of the
cash deposit attributable to such Contract;
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(iii) it will not treat the Contract, any portion of
the Contract or any obligation hereunder as giving rise to any
interest income or other inclusions of ordinary income;
(iv) it will not treat the delivery of any portion of
the Contract Shares, cash or Reported Securities to be
delivered pursuant to this Agreement as the payment of
interest or ordinary income; and
(v) it will not take any action (including filing any
tax return or form or taking any position in any tax
proceeding) that is inconsistent with the obligations
contained in clauses (i) through (iv), unless such action or
position is required by an applicable taxing authority or
unless such action or position is required by a change in
statutory law or regulation or by a judicial or other
authoritative interpretation of the law enacted, promulgated
or published after the date of this Agreement.
ARTICLE VI
ISSUANCE OF THE CONTRACTS
SECTION 6.1 Execution of the Contracts. The Contract shall be
countersigned manually or in facsimile by the Managing Trustee and executed
manually by the Seller and shall be dated the date of execution and delivery by
the Seller.
ARTICLE VII
TRUSTEES
SECTION 7.1 Trustees. The Trust shall have three Trustees who
shall initially be elected by the Initial Trustee. One Trustee shall be the
Managing Trustee and, as such, is authorized to execute documents and
instruments on behalf of the Trust. The Managing Trustee will be appointed by
resolution of the Trustees. Each Trustee shall serve until the next regular
annual or special meeting of Holders called for the purpose of electing Trustees
and, then, until such Trustee's successor is duly elected and qualified. Holders
may not cumulate their votes in the election of Trustees. Each Trustee shall not
be considered to have qualified for the office unless such Trustee shall agree
to be bound by the terms of this Trust Agreement and shall evidence his consent
by executing this Trust Agreement or a supplement hereto.
SECTION 7.2 Vacancies. Any vacancy in the office of a Trustee
may be filled in compliance with Sections 10 and 16 of the Investment Company
Act by the vote, within thirty days, of the remaining Trustees; provided that if
required by Section 16 of the Investment Company Act, the Trustees shall
forthwith cause to be held as promptly as possible and in any event within sixty
days (unless the Commission by order shall extend such period) a meeting of
Holders for the purpose of electing Trustees in compliance with Sections 10 and
16 of the Investment Company Act. Until a vacancy in the office of any Trustee
is filled as provided above, the remaining Trustees in office, regardless of
their number, shall have the powers granted
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to the Trustees and shall discharge all the duties imposed upon the Trustees by
this Trust Agreement. Election shall be by the affirmative vote of Holders of a
majority of the DECS entitled to vote present in person or by proxy at a special
meeting of Holders called for the purpose of electing any Trustee. Each
individual Trustee shall be at least 21 years of age and shall not be under any
legal disability. No Trustee who is an "interested person," as defined in the
Investment Company Act, may assume office if it would cause the composition of
the Trustees of the Trust not to be in compliance with the percentage
limitations on interested persons in Section 10 of the Investment Company Act.
Trustees need not be Holders. Notice of the appointment or election of a
successor Trustee shall be mailed promptly after acceptance of such appointment
by the successor Trustee to each Holder.
SECTION 7.3 Powers. The Trust will be managed solely by the
Trustees, who will, subject to the provisions of Article II hereof, have
complete and exclusive control over the management, conduct and operation of the
Trust's business, and shall have the rights, powers and authority of a board of
directors of a corporation organized under Delaware law. The Trustees shall have
fiduciary responsibility for the safekeeping and use of all funds and assets of
the Trust and shall not employ, or permit another to employ, such funds or
assets in any manner except for the exclusive benefit of the Trust and except in
accordance with the terms of this Trust Agreement. Subject to the continuing
supervision of the Trustees and as permitted by applicable law, the functions of
the Trust shall be performed by the Custodian, the Paying Agent, the
Administrator and such other entities engaged to perform such functions as the
Trustees may determine, including, without limitation, any or all administrative
functions.
SECTION 7.4 Meetings. Meetings of the Trustees shall be held
from time to time upon the call of any Trustee on not less than 48 hours' notice
(which may be waived by any or all of the Trustees in writing either before or
after such meeting or by attendance at the meeting unless the Trustee attends
the meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting has not been lawfully called or
convened). The Trustees shall act either by majority vote of the Trustees
present at a meeting at which at least a majority of the Trustees then in office
are present or by a unanimous written consent of the Trustees without a meeting.
Except as otherwise required under the Investment Company Act, all or any of the
Trustees may participate in a meeting of the Trustees by means of a conference
telephone call or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to such communications equipment shall constitute presence in person at
such meeting.
SECTION 7.5 Resignation and Removal. Any Trustee may resign
and be discharged of the trust created by the Trust Agreement by executing an
instrument in writing resigning as Trustee, filing the same with the
Administrator and sending notice thereof to the remaining Trustees, and such
resignation shall become effective immediately unless otherwise specified
therein. Any Trustee may be removed in the event of incapacity by vote of the
remaining Trustees and for any reason by written declaration or vote of the
Holders of more than 66 2/3% of the outstanding DECS, notice of which vote shall
be given to the remaining Trustees and the Administrator. The resignation,
removal or failure to reelect any Trustee shall not cause the termination of the
Trust.
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SECTION 7.6 Liability. The Trustees shall not be liable to the
Trust or any Holder for any action taken or for refraining from taking any
action except in the case of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties of their office. Specifically, without
limitation, the Trustees shall not be responsible for or in respect of the
recitals herein or the validity or sufficiency of this Trust Agreement or for
the due execution hereof by any other Person, or for or in respect of the
validity or sufficiency of DECS or certificates representing DECS and shall in
no event assume or incur any liability, duty or obligation to any Holder or to
any other Person, other than as expressly provided for herein. The Trustees may
employ agents, attorneys, administrators, accountants and auditors, and shall
not be answerable for the default or misconduct of any such Persons if such
Persons shall have been selected with reasonable care. Action in good faith may
include action taken in good faith in accordance with an opinion of counsel. In
no event shall any Trustee be personally liable for any expenses with respect to
the Trust. Each Trustee shall be indemnified from the Trust Account with respect
to any claim, liability, loss or expense incurred in acting as Trustee of the
Trust, including the costs and expenses of the defense against any such claim or
liability, except in the case of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties of his office.
SECTION 7.7 Compensation. Each Trustee, other than a Trustee
who is a director, officer or employee of the Sponsor, any Underwriter, or the
Administrator or any affiliate thereof, shall receive a one-time, up-front fee
of $10,800, in respect of its annual fee and anticipated out-of-pocket expenses.
In addition, the Managing Trustee shall receive an additional one-time, up-front
fee of $3,600 for serving in such capacity. The Trustees will not receive any
pension or retirement benefits. In the event of the resignation or removal of a
Trustee, such Trustee shall remit to the Trust the portion of its fee ratable
for the period from the day of such resignation or removal through the Exchange
Date.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Meetings of Holders. The Trustees shall not hold
annual or regular meetings of Holders except as set forth herein. A special
meeting may be called at any time by the Trustees or upon petition of Holders of
not less than 51% of the DECS outstanding (unless substantially the same matter
was voted on during the preceding 12 months), and shall be called as provided in
Section 7.2 hereof (or as otherwise required by the Investment Company Act and
the rules and regulations thereunder, including, without limitation, when
requested by the Holders of not less than 10% of the DECS outstanding for the
purposes of voting upon the question of the removal of any Trustee or Trustees).
The Trustees shall establish, and notify the Holders in writing of, the record
date for each such meeting which shall be not less than 10 nor more than 50 days
before the meeting date. Holders at the close of business on the record date
will be entitled to vote at the meeting. The Administrator shall, as soon as
possible after any such record date (or prior to such record date if
appropriate), mail by first class mail to each Holder a notice of meeting and a
proxy statement and form of proxy in the form approved by the Trustees and
complying with the Investment Company Act and the rules and regulations
18
<PAGE> 22
thereunder. Except as otherwise specified herein or in any provision of the
Investment Company Act and the rules and regulations thereunder, any action may
be taken by vote of Holders of a majority of the DECS outstanding present in
person or by proxy if Holders of a majority of DECS outstanding on the record
date are so represented. Each DECS shall have one vote and may be voted in
person or by duly executed proxy. Any proxy may be revoked by notice in writing,
by a subsequently dated proxy or by voting in person at the meeting, and no
proxy shall be valid after eleven months following the date of its execution.
Any investment company (as defined in Section 3 of the Investment Company Act)
owning DECS in excess of the limits imposed by Sections 12(d)(1)(A)(i) and
12(d)(1)(c) of the Investment Company Act will be required to vote its DECS in
proportion to the votes of all other Holders.
SECTION 8.2 Books and Records; Reports. (a) The Trustees shall
keep a certified copy or duplicate original of this Trust Agreement on file at
the office of the Trust and the office of the Administrator available for
inspection at all reasonable times during its usual business hours by any
Holder. The Trustees shall keep proper books of record and account for all the
transactions under this Trust Agreement at the office of the Trust and the
office of the Administrator, and such books and records shall be open to
inspection by any Holder at all reasonable times during usual business hours.
The Trustees shall retain all books and records in compliance with Section 31 of
the Investment Company Act and the rules and regulations thereunder.
(b) With each payment to Holders the Paying Agent shall set
forth, either in the instruments by means of which payment is made or in a
separate statement, the amount being paid from the Trust Account expressed as a
dollar amount per DECS and the other information required under Section 19 of
the Investment Company Act and the rules and regulations thereunder. The
Trustees shall prepare and file or distribute reports as required by Section 30
of the Investment Company Act and the rules and regulations thereunder. The
Trustees shall prepare and file such reports as may from time to time be
required to be filed or distributed to Holders under any applicable state or
Federal statute or rule or regulation thereunder, and shall file such tax
returns as may from time to time be required under any applicable state or
Federal statute or rule or regulation thereunder. One of the Trustees shall be
designated by resolution of the Trustees to make the filings and give the
notices required by Rule 17g-1 under the Investment Company Act.
(c) In calculating the net asset value of the Trust as
required by the Investment Company Act, (i) the Treasury Securities shall be
valued at the mean between the last current bid and asked prices or, if
quotations are not available, as determined in good faith by the Trustees, (ii)
short-term investments having a maturity of 60 days or shall be valued at cost
with accrued interest or discount earned included in interest receivable and
(iii) the Contract shall be valued at the mean of the bid prices received by the
Administrator from one independent broker-dealer firm unaffiliated with the
Trust to be named by the Trustees which is in the business of making bids on
financial instruments similar to the Contract and with terms comparable thereto.
In the event that the Trust (acting through the Administrator) is unable to
obtain a valuation from an independent broker-dealer firm, as required by clause
(iii) of the preceding sentence, on a timely basis or without unreasonable
effort or expense, the Contract shall be valued at a price deemed to
19
<PAGE> 23
be fair and reflective of the market value for the Contract based on all
appropriate factors relevant to the value of the Contract as determined by an
independent expert or appraiser retained by the Trust or by the Administrator on
its behalf.
SECTION 8.3 Termination. (a) The Trust created hereby shall
dissolve, and its affairs be wound up, upon the earliest of (i) the date 90 days
after the execution of this Trust Agreement if (x) the DECS have not theretofore
been issued or (y) the net worth of the Trust is not at least $100,000 at such
time, (ii) the date of the repayment, sale or other disposition, as the case may
be, of the Contract, the Treasury Securities and any other securities held
hereunder, (iii) the date 10 Business Days after the Exchange Date (or, if the
Contract shall be accelerated pursuant to Article VII thereof, 10 Business Days
after the date on which the Trust shall receive the Shares, cash or other
property then required to be delivered by the Seller, or the proceeds of any
sale of collateral pursuant to the Collateral Agreement), and (iv) the date
which is 21 years less 91 days after the death of the last survivor of all of
the descendants of Joseph P. Kennedy living on the date hereof. The Trust is
irrevocable, the Sponsor has no right to withdraw any assets constituting a
portion of the Trust Estate, and the dissolution of the Sponsor shall not
operate to terminate the Trust. The death or incapacity of any Holder shall not
operate to terminate this Trust Agreement, nor entitle his legal representatives
or heirs to claim an accounting or to take any action or proceeding in any court
for a partition or winding up of the Trust, and shall not otherwise affect the
rights, obligations and liabilities of the parties hereto.
(b) Written notice of any dissolution shall be sent to Holders
specifying the record date for any distribution to Holders and the time of
dissolution as determined by the Trustees, upon which the books maintained by
the Paying Agent pursuant to Section 5.2 hereof shall be closed.
(c) To the extent permitted by applicable law, for purposes of
dissolution under Sections 8.3(a)(ii), (iii) and (iv) hereof, within five
Business Days after such dissolution, the Trustees shall effect the sale of any
remaining property of the Trust, and the Paying Agent shall distribute pro rata
as soon as practicable thereafter to each Holder, upon surrender for
cancellation of its Certificates, its interest in the Trust Estate. Together
with the distribution to the Holders, the Trustees shall furnish the Holders
with a final statement as of the date of the distribution of the amount
distributable with respect to each DECS.
(d) Upon the winding up of the Trust and its dissolution, the
Managing Trustee shall cause the Certificate of Trust to be canceled by filing a
certificate of cancellation with the Office of the Secretary of State of the
State of Delaware in accordance with the provisions of Section 3810 of the Act.
Upon the dissolution of the Trust, the sale of Trust property and distribution
of the Trust Estate to the Holders, and the filing of the certificate of
cancellation, the Trust shall terminate and this Agreement shall be of no
further force or effect.
SECTION 8.4 Amendment and Waiver. (a) This Trust Agreement,
and any of the agreements referred to in Section 2.5(a) hereof, may be amended
from time to time by the Trustees for any purpose prior to the issuance and sale
to the Underwriters of the DECS and thereafter without the consent of any of the
Holders (i) to cure any ambiguity or to correct or
20
<PAGE> 24
supplement any provision contained herein or therein which may be defective or
inconsistent with any other provision contained herein or therein; (ii) to
change any provision hereof or thereof as may be required by applicable law or
the Commission or any successor governmental agency exercising similar
authority; or (iii) to make such other provisions in regard to matters or
questions arising hereunder or thereunder as shall not materially adversely
affect the interests of the Holders (as determined in good faith by the
Trustees, who may rely on an opinion of counsel).
(b) This Trust Agreement may also be amended from time to time
by the Trustees (or the performance of any of the provisions of the Trust
Agreement may be waived) with consent by the required vote of the Holders in
accordance with Section 8.1 hereof; provided that this Trust Agreement may not
be amended (i) without the consent by vote of the Holders of all DECS then
outstanding, so as to increase the number of DECS issuable hereunder above the
number of DECS specified in Section 2.5(c) hereof or such lesser number as may
be outstanding at any time during the term of this Trust Agreement, (ii) to
reduce the interest in the Trust represented by DECS without the consent of the
Holders of such DECS, (iii) if such amendment is prohibited by the Investment
Company Act or other applicable law, (iv) without the consent by vote of the
Holders of all DECS then outstanding, if such amendment would effect a change in
the voting requirements set forth in Section 8.1 hereof or this Section 8.4, or
(v) without the consent by vote of the Holders of the lesser of (x) 67% or more
of the DECS represented at a special meeting of Holders, if more than 50% of the
DECS outstanding are represented at such meeting, and (y) more than 50% of the
DECS outstanding, if such amendment would effect a change in Section 2.4 or 2.9
hereof.
(c) Promptly after the execution of any amendment, the
Trustees shall furnish written notification of the substance of such amendment
to each Holder.
(d) Notwithstanding subsections (a) and (b) of this Section
8.4, no amendment hereof shall permit the Trust, the Trustees, the
Administrator, the Paying Agent or the Custodian to take any action or direct or
permit any Person to take any action that (i) would vary the investment of
Holders within the meaning of Treasury Regulation Section 301.7701-4(c), or (ii)
would or could cause the Trust, or direct or permit any action to be taken that
would or could cause the Trust, not to be a "grantor trust" under the Code.
SECTION 8.5 Accountants.
(a) The Trustees shall, in accordance with Section 30 of the
Investment Company Act, file annually with the Commission such information,
documents and reports as investment companies having securities registered on a
national securities exchange are required to file annually pursuant to Section
13(a) of the Securities Exchange Act of 1934, as amended, and the rules and
regulations issued thereunder. The Trustees shall transmit to the Holders, at
least semi-annually, the reports required by Section 30(d) of the Investment
Company Act and the rules and regulations thereunder, including, without
limitation, a balance sheet accompanied by a statement of the aggregate value of
investments on the date of such balance sheet, a list showing the amounts and
values of such investments owned on the date of such balance sheet, and a
21
<PAGE> 25
statement of income for the period covered by the report. Financial statements
contained in such annual reports shall be accompanied by a certificate of
independent public accountants based upon an audit not less in scope or
procedures than that which independent public accountants would ordinarily make
for the purpose of presenting comprehensive and dependable financial statements
and shall contain such information as the Commission may prescribe. Each such
report shall state that such independent public accountants have verified
investments owned, either by actual examination or by receipt of a certificate
from the Custodian.
(b) The independent public accountants referred to in
subsection (a) above shall be selected at a meeting held within thirty days
before or after the beginning of the fiscal year by the vote, cast in person, of
a majority of the Trustees who are not "interested persons" as defined in the
Investment Company Act and such selection shall be submitted for ratification at
the first meeting of Holders to be held as set forth in Section 8.1 hereof, and
thereafter as required by the Investment Company Act and the rules and
regulations thereunder. The employment of any independent public accountant for
the Trust shall be conditioned upon the right of the Holders by a vote of the
lesser of (i) 67% or more of the DECS present at a special meeting of Holders,
if Holders of more than 50% of DECS outstanding are present or represented by
proxy at such meeting or (ii) more than 50% of the DECS outstanding to terminate
such employment at any time without penalty.
(c) The foregoing provisions of this Section 8.5 are in
addition to any applicable requirements of the Investment Company Act and the
rules and regulations thereunder.
SECTION 8.6 Nature of Holder's Interest. Each Holder holds at
any given time a beneficial interest in the Trust Estate, but does not have any
right to take title or possession of any portion of the Trust Estate. Each
Holder expressly waives any right he may have under any rule of law, or the
provisions of any statute, or otherwise, to require the Trustees at any time to
account, in any manner other than as expressly provided in this Trust Agreement,
for the Shares, the Contract, the Treasury Securities or other assets or monies
from time to time received, held and applied by the Trustees hereunder. No
Holder shall have any right except as provided herein to control or determine
the operation and management of the Trust or the obligations of the parties
hereto. Nothing set forth herein or in the certificates representing DECS shall
be construed to constitute the Holders from time to time as partners or members
of an association.
SECTION 8.7 Delaware Law to Govern. This Trust Agreement is
executed and delivered in the State of Delaware, and all laws or rules of
construction of the State of Delaware shall govern the rights of the parties
hereto and the Holders and the construction, validity and effect of the
provisions hereof.
SECTION 8.8 Notices. Any notice, demand, direction or
instruction to be given to the Sponsor hereunder shall be in writing and shall
be duly given if mailed or delivered to the General Counsel of Salomon Smith
Barney Inc., 388 Greenwich Street, New York, New York 10013, Telephone: (212)
816-6000, Telecopier: (212) 816-7912, Attention: General Counsel. Any notice,
demand, direction or instruction to be given to the Trust and the Trustees
hereunder shall be in writing and shall be duly given if mailed or delivered to
the Trust at c/o Puglisi &
22
<PAGE> 26
Associates, 850 Library Avenue, Suite 204, Newark, Delaware 19715, Telephone:
(302) 738-6680, Telecopier: ( 302) 738-7210, Attention: Donald J. Puglisi and to
each Trustee at such Trustee's address set forth beneath its signature below, or
such other address as shall be specified to the other parties hereto by such
party in writing. Any notice to be given to a Holder shall be duly given if
mailed, first class postage prepaid, or by such other substantially equivalent
means as the Trustees may deem appropriate, or delivered to such Holder at the
address of such Holder appearing on the registry of the Paying Agent.
SECTION 8.9 Severability. If any one or more of the covenants,
agreements, provisions or terms of this Trust Agreement shall be for any reason
whatsoever held invalid, then such covenants, agreements, provisions or terms
shall be deemed severable from the remaining covenants, agreements, provisions
and terms of this Trust Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Trust Agreement or of the
Certificates, or the rights of the Holders thereof.
SECTION 8.10 Counterparts. This Trust Agreement may be
executed in several counterparts, each of which shall be an original and all of
which shall constitute one and the same instrument.
SECTION 8.11 Successors and Assigns. Whenever in this Trust
Agreement any of the parties hereto is named or referred to, the successors and
assigns of such party shall be deemed to be included, and all covenants and
agreements in this Trust Agreement by the Sponsor and Trustees shall bind and
inure to the benefit of their respective successors and assigns, whether or not
so expressed.
23
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed.
SPONSOR:
SALOMON SMITH BARNEY INC.
By:
/s/ Steve Bujno
-------------------------------------
Name: Steve Bujno
Title: Director
TRUSTEES:
Managing Trustee
/s/ Donald J. Puglisi
-------------------------------------
Name: Donald J. Puglisi
Address: 850 Library Avenue, Suite 204
Newark, Delaware 19715
/s/ William R. Latham
-------------------------------------
Name: William R. Latham III
Address: 850 Library Avenue, Suite 204
Newark, Delaware 19715
/s/ James B. O'Neill
-------------------------------------
Name: James B. O'Neill
Address: 850 Library Avenue, Suite 204
Newark, Delaware 19715
24
<PAGE> 28
INITIAL SPONSOR:
/s/ Alan Rifkin
-------------------------------------
Alan Rifkin
INITIAL TRUSTEE:
/s/ Tyler Dickson
-------------------------------------
Tyler Dickson
25
<PAGE> 29
Schedule I
TREASURY SECURITIES
All terms specified are for stripped principal or interest
components of U.S. Treasury debt obligations.
<TABLE>
<CAPTION>
Aggregate Face Amount, Per
Payment Date Security, Payable at Payment Date
------------ ---------------------------------
<S> <C>
May 15, 1999
August 15, 1999
November 15, 1999
February 15, 2000
May 15, 2000
August 15, 2000
November 15, 2000
February 15, 2001
May 15, 2001
August 15, 2001
November 15, 2001
February 15, 2002
</TABLE>
<PAGE> 30
Exhibit A
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York Corporation ("DTC"),
to DECS Trust IV or its agent for registration of transfer, exchange, or
payment, and any certificate issued is registered in the name of Cede & Co. (or
in such other name as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein. This certificate may be exchanged by an authorized representative of DTC
in whole or in part for securities in definitive form, registered in the names
of such holders as such representative of DTC shall specify, in which case, a
new certificate will be issued in the name of Cede & Co. (or in such other name
as is requested by such authorized representative of DTC) representing the
securities not issued in definitive form.
THIS CERTIFICATE IS ISSUED UNDER AND IS SUBJECT TO THE TERMS,
PROVISIONS AND CONDITIONS OF THE TRUST AGREEMENT REFERRED TO BELOW TO WHICH THE
HOLDER OF THIS CERTIFICATE BY VIRTUE OF THE ACCEPTANCE HEREOF ASSENTS AND IS
BOUND.
____ DECS
DECS TRUST IV
CUSIP NO. 243664 20 8
NO. 1 ______________ DECS
THIS CERTIFIES THAT CEDE & CO. IS THE RECORD OWNER OF
__________ DECS OF DECS TRUST IV CONSTITUTING FRACTIONAL UNDIVIDED INTERESTS IN
DECS TRUST IV, A TRUST CREATED UNDER THE LAWS OF THE STATE OF DELAWARE PURSUANT
TO AN AMENDED AND RESTATED DECLARATION OF TRUST BETWEEN SALOMON SMITH BARNEY
INC. AND THE TRUSTEES NAMED THEREIN. THIS CERTIFICATE IS ISSUED UNDER AND IS
SUBJECT TO THE TERMS, PROVISIONS AND CONDITIONS OF THE TRUST AGREEMENT TO WHICH
THE HOLDER OF THIS CERTIFICATE BY VIRTUE OF THE ACCEPTANCE HEREOF ASSENTS AND IS
BOUND, A COPY OF WHICH TRUST AGREEMENT IS AVAILABLE AT THE OFFICE OF THE TRUST'S
ADMINISTRATOR AND PAYING AGENT, THE BANK OF NEW YORK, 101 BARCLAY STREET, FLOOR
12E, NEW YORK 10286, ATTENTION: BETTY COCOZZA. THIS CERTIFICATE IS TRANSFERABLE
AND EXCHANGEABLE BY THE REGISTERED OWNER IN PERSON OR BY HIS DULY AUTHORIZED
ATTORNEY AT THE OFFICE OF THE PAYING AGENT UPON SURRENDER OF THIS CERTIFICATE
PROPERLY ENDORSED OR ACCOMPANIED BY A WRITTEN INSTRUMENT OF TRANSFER AND ANY
OTHER DOCUMENTS THAT THE PAYING AGENT MAY REQUIRE FOR TRANSFER, IN FORM
SATISFACTORY TO THE PAYING AGENT AND PAYMENT OF THE FEES AND EXPENSES PROVIDED
IN THE TRUST AGREEMENT.
A-1
<PAGE> 31
THIS CERTIFICATE IS NOT VALID UNLESS MANUALLY
COUNTERSIGNED BY THE PAYING AGENT.
WITNESS THE FACSIMILE SIGNATURE OF THE MANAGING TRUSTEE.
DECS Trust IV
DATED:
By
-------------------------------------
Managing Trustee
COUNTERSIGNED:
The Bank of New York, as Paying Agent
By:
- ----------------------------------
Authorized Signature
A-2
<PAGE> 1
Exhibit (a)(2)(B)
CERTIFICATE OF TRUST OF DECS TRUST IV
This Restated Certificate of Trust of DECS Trust IV (the "Trust"), dated
February 8, 1999, is being duly executed and filed by Donald J. Puglisi, William
R. Latham III and James B. O'Neill, as trustees, to restate the original
Certificate of Trust, which was filed on December 17, 1998, with the Secretary
of the State of Delaware under the Delaware Business Trust Act (12 Del. C. ss.
3801, et seq.) (the "Original Certificate of Trust").
The Original Certificate of Trust is hereby restated in its entirety to
read as follows:
1. Name. The name of the business trust formed hereby is DECS Trust IV.
2. Registered Office; Registered Agent. The business address of the
registered office of the Trust in the State of Delaware is c/o Puglisi &
Associates, 850 Library Avenue, Suite 204, Newark, Delaware 19715. The name of
the Trust's registered agent at such address is Puglisi & Associates.
3. Effective Date. This 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/ Donald J. Puglisi
-------------------------------------
Donald J. Puglisi, Managing Trustee
/s/ William R. Latham
-------------------------------------
William R. Latham III, Trustee
/s/ James B. O'Neill
-------------------------------------
James B. O'Neill, Trustee
<PAGE> 1
EXHIBIT (h)
DECS TRUST IV
DECS* SM
(Representing Beneficial Interests in a Contract Relating to
Shares of Common Stock, $.01 par value, of Maxtor Corporation)
Underwriting Agreement
New York, New York
February , 1999
Salomon Smith Barney Inc.
As Representatives of the several Underwriters,
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
DECS Trust IV, a statutory business trust organized under the Delaware
Business Trust Act, 12 Del.C. Section 3801 et seq. (the "Delaware Act"), of the
State of Delaware (such trust and the trustees thereof acting in their
capacities as such being referred to herein as the "Trust"), proposes to issue
and to sell to the several underwriters named in Schedule I hereto (the
"Underwriters"), for whom you (the "Representatives") are acting as
representatives, an aggregate of DECS representing shares of beneficial interest
in the Trust (the "Underwritten DECS"). In addition, the Underwriters will have
an option to purchase up to DECS (the "Option DECS" and, together with the
Underwritten DECS, the "DECS") to cover over-allotments, if any. The Option DECS
and the Underwritten DECS, together with the DECS of the Trust subscribed for by
Salomon Smith Barney Inc. ("Salomon Smith Barney") pursuant to the Subscription
Agreement, dated January 21, 1999, between Salomon Smith Barney and the Trust
(the "Subscription DECS"), are referred to herein as the "Securities." The
Securities are to be issued under an Amended and Restated Declaration of Trust,
dated as of ,
- --------
* Plus an option to purchase from the Trust up to
additional DECS to cover over-allotments.
<PAGE> 2
1999 (the "Trust Agreement"), among the initial trustee and initial sponsor of
the Trust, the trustees of the Trust (the "Trustees") and Salomon Smith Barney,
as sponsor.
The Trust has entered into a forward purchase contract (the "Contract")
with Hyundai Electronics America, a corporation organized under the laws of
California ("HEA"), pursuant to which HEA has agreed to sell, and the Trust has
agreed to purchase, the number of shares of Common Stock, $.01 par value (the
"Shares"), of Maxtor Corporation (the "Company") specified therein on , 2002
(the "Exchange Date") (subject to HEA's right to deliver cash with a value
equivalent thereto, or other property, as provided in the Contract). HEA's
obligations under the Contract will be secured by a pledge of collateral under a
collateral agreement (the "Collateral Agreement") among HEA, the Trust and The
Bank of New York ("BoNY"), as collateral agent (in such capacity, the
"Collateral Agent").
In connection with the foregoing, the Company has filed with the
Commission a registration statement with respect to Shares in respect of the
Underwritten DECS, plus an additional Shares in respect of the Option DECS and
an additional Shares in respect of the Subscription DECS, for delivery by HEA
pursuant to the Securities.
To the extent there are no additional Underwriters listed on Schedule I
other than you, the term Representatives as used herein shall mean you, as
Underwriters, and the terms Representatives and Underwriters shall mean either
the singular or plural as the context requires. The use of the neuter in this
Agreement shall include the feminine and masculine wherever appropriate. Certain
terms used herein are defined in Section 23 hereof.
1. Representations and Warranties of the Trust. The Trust represents
and warrants to, and agrees with, each Underwriter as set forth below in this
Section 1.
(a) The Trust meets the requirements for use of Form N-2 under the Act
and has prepared and filed with the Commission (a) a notification on Form N-8A
(the "Notification") of registration of the Trust as an investment company under
the Investment Company Act and (b) a registration statement on Form N-2 (file
numbers 333-69325 and 811-09163), including a related preliminary prospectus,
for the registration of the offering and sale of the DECS under the Act. The
Trust may have filed one or more amendments thereto, including the related
preliminary prospectus, each of which has previously been furnished to you. The
Trust will next file with the Commission one of the following: either (1) prior
to the Trust Effective Date of such registration statement, a further amendment
to such registration statement (including the form of final prospectus); or (2)
after the Trust Effective Date of such registration statement, a final
prospectus in accordance with Rules 430A and 497(h). In the case of clause (2),
the Trust has included in such registration statement, as amended at the Trust
Effective Date, all information (other than Rule 430A Information) required by
the Act and the rules thereunder to be included in such registration statement
and the Trust Prospectus. As filed, such amendment and form of final prospectus,
or such final prospectus, shall contain all Rule 430A Information, together with
all other such required information, and, except to the extent the
Representatives shall agree in writing to a modification, shall be in all
substantive respects in the form furnished to you prior to the Execution Time
or, to the extent not completed at the Execution Time, shall contain only
2
<PAGE> 3
such specific additional information and other changes (beyond that contained in
the latest Preliminary Trust Prospectus) as the Trust has advised you, prior to
the Execution Time, will be included or made therein.
(b) On the Trust Effective Date, the Trust Registration Statement and
the Notification did or will, and when the Trust Prospectus is first filed (if
required) in accordance with Rule 497(h) and on the Closing Date (as defined
herein) and on any date on which Option DECS are purchased, if such date is not
the Closing Date (a "Settlement Date"), the Trust Prospectus (and any
supplements thereto) will comply in all material respects with the applicable
requirements of the Act, the Exchange Act and the Investment Company Act, and
the respective rules thereunder; on the Trust Effective Date and at the
Execution Time, the Trust Registration Statement did not or will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein not
misleading; and, on the Trust Effective Date, the Trust Prospectus, if not filed
pursuant to Rule 497(h), did not or will not, and on the date of any filing
pursuant to Rule 497(h) and on the Closing Date and any Settlement Date, the
Trust Prospectus (together with any supplement thereto) will not, include any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(c) No stop order suspending the effectiveness of the Trust
Registration Statement is in effect, no order preventing or suspending the use
of any Preliminary Trust Prospectus has been issued by the Commission, no notice
or order under Section 8(e) of the Investment Company Act has been issued, and
no proceedings for any such purpose are pending before or threatened by the
Commission.
(d) The Trust has been duly created, is validly existing as a business
trust under the Delaware Act, has the power and authority to own or lease, as
the case may be, and to operate its properties and conduct its business as
described in the Trust Prospectus and to enter into and perform its obligations
under this Agreement, the Trust Agreement and each of the Fundamental Documents
(as defined below) and is duly qualified to do business and is in good standing
under the laws of each jurisdiction in which it owns or leases properties or
conducts any business so as to require such qualification other than where the
failure to be so qualified would not have a material adverse effect on the Trust
or its assets. The Trust has no subsidiaries.
(e) The Trust is registered with the Commission as a non-diversified,
closed-end management investment company under the Investment Company Act and no
order of suspension or revocation of such registration has been issued or
proceedings therefor initiated or, to the knowledge of the Trust, threatened by
the Commission. No person is serving or acting as an officer or trustee of the
Trust except in accordance with the provisions of the Investment Company Act.
(f) This Agreement has been duly authorized, executed and delivered by
the Trust.
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<PAGE> 4
(g) Each of the Contract, the Collateral Agreement, the Administration
Agreement between BoNY and the Trust (the "Administration Agreement"), the
Custodian Agreement between BoNY and the Trust (the "Custodian Agreement"), the
Paying Agent Agreement between BoNY and the Trust (the "Paying Agent Agreement")
and the Fund Indemnity Agreement between Salomon Smith Barney and the Trust (the
"Fund Indemnity Agreement") (the Contract, the Collateral Agreement, the
Administration Agreement, the Custodian Agreement, the Paying Agent Agreement
and the Fund Indemnity Agreement are referred to herein, collectively, as the
"Fundamental Agreements") has been duly authorized, executed and delivered by
the Trust and, assuming due authorization, execution and delivery by the other
parties thereto, is a valid and binding agreement of the Trust, enforceable
against the Trust in accordance with its terms except as such enforceability may
be limited by applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and by general equitable principles.
(h) The execution and delivery by the Trust of, and the performance by
the Trust of its obligations under, this Agreement and each Fundamental
Agreement (including the issue and sale by the Trust of the DECS as contemplated
by this Agreement) do not and will not, whether with or without the giving of
notice or passage of time or both, conflict with or constitute a breach or
violation of, or default under, or give the holder of any indebtedness of the
Trust the right to require the repurchase, redemption or repayment of all or a
portion of such indebtedness under, or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the Trust
pursuant to, any contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or other agreement or instrument to which the Trust is a
party or by which it may be bound, or to which any of the property or assets of
the Trust is subject, nor will such action result in any violation of the
provisions of the Trust Agreement or any applicable law, statute, rule,
regulation, judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over the
Trust or any of its assets or properties; and no consent, approval,
authorization, order of, or qualification or filing with, any governmental body
or agency, self-regulatory organization or court or other tribunal, whether
foreign or domestic, is required for the execution and delivery by the Trust of
this Agreement or the Fundamental Agreements or the performance by the Trust of
its obligations hereunder and thereunder, except for the filing of a Certificate
of Trust and the filing of a Restated Certificate of Trust with the office of
the Secretary of State of the State of Delaware (which filings have been duly
made) and such as have been obtained and as may be required by the securities or
Blue Sky laws of the various states and foreign jurisdictions in connection with
the offer and sale of the DECS by the Underwriters.
(i) The DECS, the Trust Agreement and the Fundamental Agreements
conform in all material respects to the descriptions thereof contained in the
Trust Prospectus.
(j) The Trust Agreement and the Fundamental Agreements comply with all
applicable provisions of the Act, the Exchange Act and the Investment Company
Act, and all approvals of such documents required under the Investment Company
Act by the holders of the Securities and the Trustees have been obtained and are
in full force and effect.
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<PAGE> 5
(k) On the Closing Date, as defined below in Section 5, the Fundamental
Agreements will be in full force and effect and the Trust will not be in default
thereunder and, to the knowledge of the Trust, no event will have occurred which
with the passage of time or the giving of notice or both would constitute a
default thereunder. The Trust is not currently in breach of, or in default
under, the Trust Agreement or any other written agreement or instrument to which
it or its property is bound or affected.
(l) All of the outstanding Securities have been duly authorized and are
validly issued, fully paid and nonassessable undivided beneficial interests in
the assets of the Trust, and the form of certificate used to evidence the
Securities is in due and proper form and complies with all provisions of
applicable law.
(m) The DECS have been duly authorized by the Trust for issuance to the
Underwriters pursuant to this Agreement and, when issued and delivered by the
Trust in accordance with the terms of this Agreement and the Trust Agreement
against payment of the purchase price therefor as provided herein, will be
validly issued, fully paid and nonassessable undivided beneficial interests in
the assets of the Trust, and the issuance of such DECS will not be subject to
any preemptive or similar rights. No person has rights to the registration of
any securities because of the filing of the Trust Registration Statement, and no
holder of the Securities will be subject to personal liability by reason of
being such a holder.
(n) The DECS have been approved for listing on the National Market
System of the National Association of Securities Dealers Automated Quotation
System (the "Nasdaq National Market System"), subject to official notice of
issuance. The Trust's Registration Statement on Form 8-A under the Exchange Act
is effective.
(o) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the condition,
financial or otherwise, of the Trust, or in the investment objectives,
investment policies, liabilities, business, prospects or operations of the Trust
from that set forth in the Trust Prospectus (exclusive of any supplements
thereto subsequent to the date of this Agreement) and there have been no
transactions entered into by the Trust which are material to the Trust other
than those in the ordinary course of its business or as described in the Trust
Prospectus (exclusive of any supplements thereto subsequent to the date of this
Agreement).
(p) There are no legal or governmental proceedings pending or, to the
knowledge of the Trust, threatened against or affecting the Trust that are
required to be described in the Trust Registration Statement or the Trust
Prospectus and are not so described or any statutes, regulations, contracts or
other documents that are required to be described in the Trust Registration
Statement or the Trust Prospectus or to be filed as exhibits to the Trust
Registration Statement that are not described or files as required.
(q) The Trust has all necessary consents, authorizations, approvals,
orders (including exemptive orders), certificates and permits of and from, and
has made all declarations and filings with, all governmental authorities,
self-regulatory organizations and courts and other tribunals, whether foreign or
domestic, to own and use its assets and to conduct its business in
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<PAGE> 6
the manner described in the Trust Prospectus, except to the extent that the
failure to obtain or file the foregoing would not have a material adverse effect
on the Trust and except such as may be required by the securities or Blue Sky
laws of the various states in connection with the offer and sale of the DECS.
(r) There are no material restrictions, limitations or regulations with
respect to the ability of the Trust to invest its assets as described in the
Trust Prospectus, other than as described therein.
(s) The Trust has good title to all properties owned by it, in each
case, free and clear of all mortgages, pledges, liens, security interests,
claims, restrictions or encumbrances of any kind except such as (a) are
described in the Trust Prospectus or (b) do not, singly or in the aggregate,
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Trust.
(t) There are no legal or governmental proceedings pending to which the
Trust is a party or of which any property of the Trust is the subject which, if
determined adversely to the Trust, would individually or in the aggregate have a
material adverse effect on the current or future financial position or results
of operations of the Trust; and, to the best of the Trust's knowledge, no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others.
(u) The statement of assets, liabilities and capital included in the
Trust Registration Statement and the Trust Prospectus, together with the notes
thereto, present fairly the financial position of the Trust at the date
indicated, and such financial statement has been prepared in conformity with
generally accepted accounting principles.
(v) The accountants who certified the financial statements and
supporting schedules included in the Trust Registration Statement are
independent public accountants as required by the Act and the rules and
regulations of the Commission thereunder.
(w) The Trust has not directly or indirectly taken any action designed
to or which has constituted or which might reasonably be expected to cause or
result, under the Exchange Act or otherwise, in stabilization or manipulation of
the price of any security of the Company to facilitate the sale or resale of the
DECS or the Shares.
2. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, each Underwriter as set forth below
in this Section 2.
(a) The Company meets the requirements for use of Form S-3 under the
Act and has prepared and filed with the Commission a registration statement
(file number 333-69307) on Form S-3, including a related preliminary prospectus,
for the registration under the Act of the offering and sale of the Shares in
connection with the offering and sale of the DECS. The Company may have filed
one or more amendments thereto, including the related preliminary prospectus,
each of which has previously been furnished to you. The Company will next file
with the Commission one of the following: either (1) prior to the Company
Effective Date of
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<PAGE> 7
such registration statement, a further amendment to such registration statement,
(including the final forms of such prospectus), or (2) after the Company
Effective Date of such registration statement, such final prospectus in
accordance with Rules 430A and 424(b). In the case of clause (2), the Company
has included in such registration statement, as amended at the Company Effective
Date, all information (other than Rule 430A Information) required by the Act and
the rules thereunder to be included in such registration statement and the
Company Prospectus with respect to the Shares and the offering thereof. As
filed, such amendment and form of final prospectus, or such final prospectus,
shall contain all Rule 430A Information, together with all other such required
information with respect to the Shares and the offering thereof and, except to
the extent the Representatives shall agree in writing to a modification, shall
be in all substantive respects in the form furnished to you prior to the
Execution Time or, to the extent not completed at the Execution Time, shall
contain only such specific additional information and other changes (beyond that
contained in the latest Preliminary Company Prospectus) as the Company has
advised you, prior to the Execution Time, will be included or made therein.
(b) On the Company Effective Date, the Company Registration Statement
did or will, and when the Company Prospectus is first filed (if required) in
accordance with Rule 424(b) and on the Closing Date (as defined herein) and on
any Settlement Date, the Company Prospectus (and any supplements thereto) will,
comply in all material respects with the applicable requirements of the Act and
the Exchange Act and the respective rules thereunder; on the Company Effective
Date and at the Execution Time, the Company Registration Statement did not or
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading; and, on the Company Effective Date, the
Company Prospectus, if not filed pursuant to Rule 424(b), did not or will not,
and on the date of any filing pursuant to Rule 424(b) and on the Closing Date
and any Settlement Date, the Company Prospectus (together with any supplement
thereto) will not, include any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; provided,
however, that the Company makes no representations or warranties as to the
information contained in or omitted from the Company Registration Statement, or
the Company Prospectus (or any supplement thereto) in reliance upon and in
conformity with information furnished herein or in writing to the Company by or
on behalf of any Underwriter through the Representatives specifically for
inclusion in the Company Registration Statement or the Company Prospectus (or
any supplement thereto).
(c) No stop order suspending the effectiveness of the Company
Registration Statement is in effect, no order preventing or suspending the use
of any Preliminary Company Prospectus has been issued by the Commission, and no
proceedings for any such purpose are pending before or threatened by the
Commission. Each document incorporated by reference in the Company Registration
Statement or the Company Prospectus, when they were filed or are filed with the
Commission, conformed or will conform in all material respects to the
requirements of the Exchange Act and the rules and regulations of the Commission
thereunder, and none of such documents contained or will contain an untrue
statement of a material fact or omitted or will omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
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<PAGE> 8
(d) Each of the Company and Maxtor Asia Pacific Limited, Maxtor Disc
Drives Pty. Limited, Maxtor Europe GmbH, Maxtor Europe Limited, Maxtor Europe
SARL, Maxtor (Japan) Limited, Maxtor Korea Limited, Maxtor Ireland Limited,
Maxtor Peripherals (S) Pte. Limited, Maxtor Receivables Corporation, Maxtor
Sales Private Limited, Maxtor (Thailand) Limited and Old SDI Sub (each a
"Subsidiary" and collectively the "Subsidiaries") has been duly incorporated and
is validly existing as a corporation in good standing under the laws of the
jurisdiction in which it is chartered or organized with full corporate power and
authority to own or lease, as the case may be, and to operate its properties and
conduct its business as described in the Company Prospectus, and is duly
qualified to do business as a foreign corporation and is in good standing under
the laws of each jurisdiction which requires such qualification except to the
extent that the failure to be so qualified or be in good standing could not
reasonably be expected to have a Material Adverse Effect (as defined herein).
(e) All the outstanding shares of capital stock of each Subsidiary have
been duly and validly authorized and issued and are fully paid and
nonassessable, and all outstanding shares of capital stock of the Subsidiaries
are owned by the Company either directly or through wholly owned Subsidiaries
free and clear of any perfected security interest or any other security
interests, claims, liens or encumbrances.
(f) The Company's authorized equity capitalization is as set forth in
the Company Prospectus; the capital stock of the Company conforms in all
material respects to the description thereof contained in the Company
Prospectus; the outstanding Shares have been duly and validly authorized and
issued and are fully paid and nonassessable; and the Shares are duly listed, and
admitted and authorized for trading on the Nasdaq National Market System; the
certificates for the Shares are in valid and sufficient form; the holders of
outstanding shares of capital stock of the Company are not entitled to
preemptive or other rights to subscribe for the Shares except for the ownership
maintenance rights granted to HEA under the stockholder agreement, dated as of
June 25, 1998 among the Company, HEA and Hyundai Electronics Industries Co.,
Ltd. (the "Stockholder Agreement"), which do not apply to the Shares subject to
the Contract; and, except as set forth in the Company Prospectus, no options,
warrants or other rights to purchase, agreements or other obligations to issue,
or rights to convert any obligations into or exchange any securities for, shares
of capital stock of or ownership interests in the Company are outstanding,
except options granted to employees in the ordinary course of business since the
end of the Company's fiscal year ended December 26, 1998.
(g) There is no franchise, contract or other document of a character
required to be described in the Company Registration Statement or Company
Prospectus, or to be filed as an exhibit thereto, which is not described or
filed as required; and the statements in the Company Prospectus under the
headings "Risk Factors--Protection of Our Intellectual Property is Limited; We
Face Risk of Third Party Claims of Infringement", "--We are the Subject of Legal
Proceedings and Claims", "Relationship Between Maxtor and Hyundai" and "Certain
Transactions" insofar as such statements summarize legal matters, agreements,
documents, or proceedings discussed therein, are accurate and fair summaries of
such legal matters, agreements, documents or proceedings.
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<PAGE> 9
(h) This Agreement has been duly authorized, executed and delivered by
the Company and constitutes a valid and binding obligation of the Company,
enforceable in accordance with its terms, except (i) as the enforceability
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally and
by general equitable principles and (ii) to the extent that rights to indemnity
or contribution under this Agreement may be limited by Federal and state
securities laws or the public policy underlying such laws.
(i) The Company is not an "investment company" as defined in the
Investment Company Act of 1940, as amended.
(j) No consent, approval, license, authorization, order or validation
of, and no filing, recording, or registration with, any court or governmental
agency or body is required for the consummation by the Company of the
transactions contemplated herein, except such as have been obtained under the
Act and such as may be required under the blue sky laws of any jurisdiction in
connection with the purchase and distribution of the DECS by the Underwriters
and the distribution of the Shares pursuant to the terms of the DECS in the
manner contemplated herein and in the Trust Prospectus and the Company
Prospectus.
(k) Neither the performance of this Agreement by the Company, the
distribution of the Shares nor the consummation of any other of the transactions
herein contemplated nor the consummation of any other of the transactions herein
contemplated nor the fulfillment of the terms hereof will conflict with, or
result in a breach or violation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any Subsidiaries pursuant to, (i)
the charter or by-laws of the Company or any Subsidiaries, (ii) the terms of any
material indenture, contract, lease, mortgage, deed of trust, note agreement,
loan agreement or other material agreement, obligation, condition, covenant or
instrument to which the Company or any Subsidiary is a party or bound or to
which its or their property is subject, or (iii) any statute, law, rule,
regulation, judgment, order or decree applicable to the Company or any
Subsidiary of any court, regulatory body, administrative agency, governmental
body, arbitrator or other authority having jurisdiction over the Company or any
Subsidiary or any of its or their properties.
(l) No holders of securities of the Company have rights to the
registration of such securities under the Company Registration Statement which
have not been waived in writing prior to the Execution Time.
(m) The consolidated historical financial statements and schedules of
the Company and its consolidated subsidiaries included in the Company Prospectus
and the Company Registration Statement present fairly in all material respects
the financial condition, results of operations and cash flows of the Company as
of the dates and for the periods indicated, comply as to form with the
applicable accounting requirements of the Act and have been prepared in
conformity with generally accepted accounting principles applied on a consistent
basis throughout the periods involved (except as otherwise noted therein). The
selected financial data set forth under the caption "Selected Consolidated
Financial Data" in the Company
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<PAGE> 10
Prospectus and Company Registration Statement fairly present, on the basis
stated in the Company Prospectus and the Company Registration Statement, the
information included therein.
(n) No action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the Company
or any Subsidiaries or its or their property is pending or, to the knowledge of
the Company, threatened that (i) could reasonably be expected to have a material
adverse effect on the performance of this Agreement or the consummation of any
of the transactions contemplated hereby or (ii) could reasonably be expected to
have a material adverse effect on the condition (financial or otherwise),
prospects, earnings, business or properties of the Company and the Subsidiaries,
taken as a whole, whether or not arising from transactions in the ordinary
course of business (a "Material Adverse Effect"), except as set forth in or
contemplated in the Company Prospectus (exclusive of any supplement thereto).
(o) Each of the Company and the Subsidiaries owns, leases or has
sufficient rights to use all such properties as are necessary to the conduct of
its operations as presently conducted.
(p) Neither the Company nor any Subsidiary is in violation or default
of (i) any provision of its charter or bylaws, (ii) the terms of any material
indenture, contract, lease, mortgage, deed of trust, note agreement, loan
agreement or other material agreement, obligation, condition, covenant or
instrument to which it is a party or bound or to which its property is subject,
or (iii) any statute, law, rule, regulation, judgment, order or decree of any
court, regulatory body, administrative agency, governmental body, arbitrator or
other authority having jurisdiction over the Company or such subsidiary or any
of its properties, as applicable, the violation of which could reasonably be
expected to have a Material Adverse Effect.
(q) PricewaterhouseCoopers LLP, who have certified certain financial
statements of the Company and its consolidated subsidiaries and delivered their
report with respect to the audited consolidated financial statements and
schedules included in the Company Prospectus, and Ernst & Young LLP, who have
certified certain financial statements of the Company and its consolidated
subsidiaries and delivered their report with respect to the audited consolidated
financial statements included in the Company Prospectus, are each independent
public accountants with respect to the Company within the meaning of the Act and
the applicable published rules and regulations thereunder.
(r) There are no transfer taxes or other similar fees or charges under
Federal law or the laws of any state, or any political subdivision thereof,
required to be paid by the Company or any Subsidiary in connection with the
execution and delivery of this Agreement.
(s) The Company has filed all foreign, federal, state and local tax
returns that are required to be filed or has requested extensions thereof
(except in any case in which the failure so to file would not have a Material
Adverse Effect) and has paid all taxes required to be paid by it and any other
assessment, fine or penalty levied against it, to the extent that any of the
foregoing is due and payable, except for any such assessment, fine or penalty
that is currently
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<PAGE> 11
being contested in good faith or as could not reasonably be expected to have a
Material Adverse Effect.
(t) No labor problem or dispute with the employees of the Company or
any Subsidiary exists or, to the knowledge of the Company, is threatened or
imminent, that could, in any such case, reasonably be expected to have a
Material Adverse Effect.
(u) The Company and each Subsidiary carry, or are entitled to the
benefits of, insurance (including self-insurance) in such amounts and covering
such risks as are prudent and customary in the businesses in which they are
engaged and all such insurance is, and after consummation of the transactions
contemplated herein will be, in full force and effect; and neither the Company
nor any Subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that could not reasonably be expected to have a Material
Adverse Effect.
(v) No Subsidiary is currently prohibited, directly or indirectly, from
paying any dividends to the Company, from making any other distribution on such
Subsidiary's capital stock, from repaying to the Company any loans or advances
to such Subsidiary from the Company or from transferring any of such
Subsidiary's property or assets to the Company or any other Subsidiary, except
for any requirements under the laws of the jurisdictions in which any Subsidiary
is organized that corporations organized in such jurisdictions maintain
specified levels of capital or statutory reserves.
(w) The Company and the Subsidiaries possess all licenses,
certificates, permits and other authorizations issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses as presently conducted except where the failure to possess
such licenses, certificates, permits or authorizations would not have a Material
Adverse Effect, and neither the Company nor any Subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
license, certificate, authorization or permit which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, could reasonably
be expected to have a Material Adverse Effect.
(x) The Company and each of the Subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(y) The Company has not directly or indirectly taken any action
designed to or which has constituted or which might reasonably be expected to
cause or result, under the Exchange Act or otherwise, in stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Securities.
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(z) The Company and the Subsidiaries (i) are in material compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received and are in compliance
with all permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses as presently conducted
and (iii) have not received notice of any actual or potential liability for the
investigation or remediation of any disposal or release of hazardous or toxic
substances or wastes, pollutants or contaminants, except where such
non-compliance with Environmental Laws, failure to receive required permits,
licenses or other approvals, or liability would not, individually or in the
aggregate, have a Material Adverse Effect. Neither the Company nor any
Subsidiary has been named as a "potentially responsible party" under the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended.
(aa) Each of the Company and the Subsidiaries has fulfilled its
obligations, if any, under the minimum funding standards of Section 302 of the
United States Employee Retirement Income Security Act of 1974 ("ERISA") and the
regulations and published interpretations thereunder with respect to each "plan"
(as defined in Section 3(3) of ERISA and such regulations and published
interpretations) in which employees of the Company or any of the Subsidiaries
are eligible to participate. Each such plan is in compliance in all material
respects with the presently applicable provisions of ERISA and such regulations
and published interpretations, except where the failure to so comply could not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect. Neither the Company nor any of the Subsidiaries has incurred any
unpaid liability to the Pension Benefit Guaranty Corporation (other than for the
payment of premiums in the ordinary course) or to any such plan under Title IV
of ERISA.
(bb) Maxtor Peripherals (S) Pte. Limited ("Maxtor Singapore") is the
only Subsidiary that reasonably could be deemed to be a "significant subsidiary"
of the Company within the meaning of Rule 11-02(w) of Regulation S-X under the
Act.
(cc) The Company and the Subsidiaries own, possess, license or have
other rights to use, all patents, patent applications, trade and service marks,
trade and service mark registrations, trade names, copyrights, licenses,
inventions, trade secrets, technology, know-how and other intellectual property
(collectively, the "Intellectual Property") necessary for the conduct of their
respective businesses as now conducted (as described in the Company Prospectus),
except where the failure to own or possess any such Intellectual Property could
not reasonably be expected, singly or in the aggregate, to have a Material
Adverse Effect and (i) to the knowledge of the Company, there are no rights of
third parties to any such Intellectual Property other than licenses granted in
the ordinary course of business; (ii) to the knowledge of the Company, there is
no material infringement by third parties of any such Intellectual Property;
(iii) except as specifically set
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<PAGE> 13
forth in the Company Prospectus, there is no pending or, to the knowledge of the
Company, threatened action, suit, proceeding or claim by others challenging the
Company's rights in or to any such Intellectual Property, and the Company is
unaware of any facts which would form a reasonable basis for any such claim;
(iv) except as specifically set forth in the Company Prospectus, there is no
pending or to the knowledge of the Company, threatened action, suit, proceeding
or claim by others challenging the validity or scope of any such Intellectual
Property, and the Company is unaware of any facts which would form a reasonable
basis for any such claim; (v) except as specifically set forth in the Company
Prospectus under the caption "Risk Factor--Protection of Our Intellectual
Property is Limited; We Face Risk of Third Party Claims of Infringement," there
is no pending or, to the knowledge of the Company, threatened action, suit,
proceeding or claim by others that the Company infringes or otherwise violates
any patent, trademark, copyright, trade secret or other proprietary rights of
others, and the Company is unaware of any other fact which would form a
reasonable basis for any such claim and (vi) to the Company's knowledge, all
U.S. patents owned by the Company are valid and enforceable.
(dd) Except as disclosed in the Company Prospectus, the Company does
not have any material lending or other relationship with any bank or lending
affiliate of any of the Underwriters.
(ee) The Company and the Subsidiaries are implementing a program, as
described in the Prospectus, to analyze and address the risk that the computer
hardware and software used by them and each supplier, vendor, customer or
financial service organizations used or serviced by them may be unable to
recognize and properly execute date-sensitive functions involving certain dates
prior to and any dates after December 31, 1999 (the "Year 2000 Problem"), and
reasonably believe that such risk will be remedied on a timely basis and will
not have a Material Adverse Effect. The Company is in substantial compliance
with the Commission's staff legal bulletin No. 5 dated January 12, 1998 related
to Year 2000 compliance.
(ff) Neither the Company nor any of the Subsidiaries has distributed
nor will it distribute prior to the latest of (i) the Closing Date, (ii) any
Settlement Date and (iii) completion of the distribution of the Securities, any
offering material in connection with the offering and sale of the Securities
other than any Preliminary Company Prospectus, the Company Prospectus, the
Company Registration Statement and other materials, if any, permitted by the
Act.
(gg) There are no outstanding loans, advances (except normal advances
for business expenses in the ordinary course of business) or guarantees of
indebtedness by the Company or any of the Subsidiaries to or for the benefit of
any of the officers or directors of the Company or any Subsidiary or any of the
members of the families of any of them, which loans, advances or guarantees are
required to be, and are not, disclosed in the Company Registration Statement and
Company Prospectus.
(hh) There have not been, and there are not proposed, any transactions
or agreements between the Company or any of the Subsidiaries on the one hand and
the officers, directors or stockholders of the Company or any of the
Subsidiaries on the other, which transactions or agreements are required to be,
and are not, disclosed in the Company Registration Statement and Company
Prospectus.
(ii) To the knowledge of the Company, no officer or director of the
Company is in breach or violation of any employment agreement,
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<PAGE> 14
non-competition agreement, confidentiality agreement, or other agreement
restricting the nature or scope of employment to which such officer or director
is a party, other than such breaches or violations which could not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect;
the conduct of the Company's business, as described in the Company Registration
Statement and Company Prospectus, will not result in a breach or violation of
any such agreement.
(jj) There are no outstanding options to acquire shares of capital
stock of the Company, except as disclosed in the Company Registration Statement
and the Company Prospectus and options granted to employees in the ordinary
course of business since the end of the Company's fiscal year ended December 26,
1998.
(kk) The Company has not received any notice or communication (in
writing or otherwise), or any other information, indicating that there is a
material possibility that any customer of the Company identified in the
"Business--Customers and Sales Channels" section of the Company Registration
Statement will cease dealing with the Company or otherwise materially reduce the
volume of business transacted by such customer with the Company below historical
levels.
Any certificate signed by any officer of the Company and delivered to
the Representatives or counsel for the Underwriters in connection with the
offering of the DECS shall be deemed a representation and warranty by the
Company (and not of such officer in his individual capacity) as to matters
covered thereby, to each Underwriter.
3. Representations and Warranties of HEA. HEA represents and warrants
to, and agrees with, each Underwriter, the Company and the Trust that:
(a) HEA has been duly organized, is validly existing as a corporation
in good standing under the laws of the State of California, with full power and
authority to own its property.
(b) HEA has full legal right, capacity, power and authority to enter
into and perform its obligations under this Agreement, the Contract and
Collateral Agreement and the letter agreement between HEA and Salomon Smith
Barney relating to expenses of the Trust (the "Reimbursement Agreement").
(c) This Agreement has been duly authorized, executed and delivered by
HEA. The Contract, the Collateral Agreement and the Reimbursement Agreement have
been duly authorized, executed and delivered by HEA and, assuming due
authorization, execution and delivery by the other parties thereto, are valid
and binding agreements of HEA, enforceable against it in accordance with their
terms.
(d) The execution and delivery by HEA of this Agreement, the Contract
and Collateral Agreement and the Reimbursement Agreement, the performance by HEA
of its obligations hereunder and thereunder and the consummation of the
transactions herein and therein contemplated do not and will not, whether with
or without the giving of notice or passage of time or both, conflict with,
result in a breach or violation of or imposition of any lien (other
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<PAGE> 15
than pursuant to the Collateral Agreement), charge or encumbrance upon any
property or assets of HEA or its subsidiaries pursuant to (i) the charters or
by-laws of HEA or its subsidiaries, (ii) the terms of any indenture, contract,
lease, mortgage, deed of trust, note agreement, loan agreement or other
agreement, obligation, condition, covenant or instrument to which HEA or its
subsidiaries is a party or bound or to which its or their property is subject,
or (iii) any statute, law, rule, regulation, judgment, order or decree
applicable to HEA or its subsidiaries of any court, regulatory body,
administrative agency, governmental body, arbitrator or other authority having
jurisdiction over HEA or its subsidiaries or any of its or their properties.
Amounts received by HEA under the Contract at the Closing Date and, if any
Option DECS are purchased, at the time of delivery thereof pursuant to Section
4(b), will not be used by HEA for the purpose, whether immediate, incidental or
ultimate, of buying or carrying a margin stock, as such terms are defined in
Regulation G promulgated by the Board of Governors of the Federal Reserve
System.
(e) HEA is not and, after giving effect to the transactions
contemplated in the Contract and the Collateral Agreement and the offering and
sale of the DECS contemplated by this Agreement, will not be an "investment
company" or an entity "controlled" by an "investment company" as such terms are
defined in the Investment Company Act.
(f) HEA is the sole registered owner of and has, and on the Closing
Date (and, if any Option DECS are purchased, at the time of delivery thereof
pursuant to Section 4(b)) will have, good and valid title to the Shares to be
pledged and assigned by it under the Collateral Agreement, free and clear of any
security interests, claims, liens, equities and other encumbrances, except for
those created pursuant to the Collateral Agreement or those which otherwise have
been waived; and HEA has the full right, power and authority, and all
authorization and approval required by law to pledge and assign the Shares to be
pledged and assigned by HEA pursuant to the Collateral Agreement.
(g) Title to any Shares to be delivered by HEA pursuant to the Contract
on the Exchange Date, assuming payment of the consideration due pursuant to the
Contract on the Closing Date, will pass to the Trust free and clear of any
security interests, claims, liens, equities and other encumbrances. The sale,
transfer and delivery of any Shares to be delivered by HEA pursuant to the
Contract is not, and at the time of delivery of such Shares will not be, subject
to any right of first refusal or similar rights of any person pursuant to any
contract to which HEA or any shareholder of HEA is a party or by which any of
them is bound.
(h) HEA hereby repeats and confirms as if set forth in full herein each
of the representations, warranties, guarantees and agreements made by it in the
Contract and the Collateral Agreement and agrees that the representations,
warranties, guarantees and agreements therein and herein are made hereby for the
benefit of, and may be relied upon by, (i) the Underwriters and Cleary,
Gottlieb, Steen & Hamilton, counsel to the Underwriters and (ii) the Company and
Gray Cary Ware & Freidenrich LLP, counsel to the Company.
(i) HEA has not directly or indirectly taken any action which is
designed to or which has constituted or which might reasonably be expected to
cause or result, under the
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<PAGE> 16
Exchange Act or otherwise, in stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Shares or the
DECS.
(j) HEA is familiar with the Company Registration Statement and the
Company Prospectus and verifies that the information set forth therein
respecting it is a fair and accurate summary of HEA's relationships and material
transactions with the Company and HEA's participation in the offering made under
the Company Registration Statement.
(k) No consent, approval, license, authorization, order or validation
of, and no filing, recording, or registration with, any court or governmental
authority, agency or body is required for the compliance by HEA with all of the
provisions of this Agreement, the Contract, the Collateral Agreement and the
Reimbursement Agreement, except such as have been obtained under the Act and
such as may be required under the blue sky laws in connection with the purchase
and distribution of the DECS by the Underwriters and the distribution of the
Shares pursuant to the terms of the DECS in the manner contemplated herein and
in the Trust Prospectus and the Company Prospectus.
Any certificate signed by HEA or any director or officer thereof, as
the case may be, and delivered to the Representatives or counsel for the
Underwriters in connection with the offering of the DECS shall be deemed a
representation and warranty by HEA (and not of such officer in his individual
capacity), as to matters covered thereby, to each Underwriter.
4. Purchase and Sale.
(a) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Trust agrees to sell to
each Underwriter, and each Underwriter agrees, severally and not jointly, to
purchase from the Trust, at a purchase price of $ per DECS, the amount of the
Underwritten DECS set forth opposite such Underwriter's name in Schedule I
hereto.
(b) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Trust hereby grants an
option to the several Underwriters to purchase, severally and not jointly, up to
Option DECS at the same purchase price per DECS as the Underwriters shall pay
for the Underwritten DECS. The option may be exercised only to cover
over-allotments in the sale of the Underwritten DECS by the Underwriters. The
option may be exercised in whole or in part at any time (but not more than once)
on or before the 30th day after the date of the Trust Prospectus upon written or
facsimile notice by the Representatives to the Trust setting forth the number of
Option DECS as to which the several Underwriters are exercising the option and
the Settlement Date. Delivery of certificates for the Option DECS by the Trust,
and payment therefor to the Trust, shall be made as provided in Section 5
hereof. The number of shares of the Option DECS to be purchased by each
Underwriter shall be the same percentage of the total number of Option DECS to
be purchased by the several Underwriters as such Underwriter is purchasing of
the Underwritten DECS, subject to such adjustments as you in your absolute
discretion shall make to eliminate any fractional DECS.
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<PAGE> 17
(c) As compensation to the Underwriters for their commitment hereunder,
and in view of the fact that the proceeds of the sale of the DECS will be used
by the Trust as specified in the Contract, HEA agrees to pay to Salomon Smith
Barney, at the time of each delivery of DECS pursuant to Section 5, an amount
equal to $ per DECS being delivered at such time, plus $ per DECS for each
Subscription DECS owned by Salomon Smith Barney after giving effect to the
subdivision of the Subscription DECS provided for in the Subscription Agreement.
5. Delivery and Payment. Delivery of and payment for the Underwritten
DECS and the Option DECS (if the option provided for in Section 4(b) hereof
shall have been exercised on or before the first Business Day prior to the
Closing Date) shall be made at 10:00 A.M., New York City time, on , 1999, or at
such time on such later date not later than five Business Days after the
foregoing date as the Representatives shall designate, which date and time may
be postponed by agreement among the Representatives, the Trust and HEA or as
provided in Section 13 hereof (such date and time of delivery and payment for
the DECS being herein called the "Closing Date"). Delivery of the DECS shall be
made to the Representatives for the respective accounts of the several
Underwriters against payment by the several Underwriters through the
Representatives of the purchase price thereof to or upon the order of the Trust
by wire transfer payable in immediately available same-day funds to an account
specified by the Trust in writing at least two Business Days in advance of the
Closing Date. Delivery of the DECS shall be made through the facilities of the
Depository Trust Company unless the Representatives shall otherwise instruct.
The Trust agrees to have the DECS available for inspection and checking
by the Representatives in New York, New York, not later than 1:00 P.M. on the
Business Day prior to the Closing Date.
If the option provided for in Section 4(b) hereof is exercised after
the first Business Day prior to the Closing Date, the Trust will deliver the
Option DECS (at the expense of the Trust) to the Representatives on the date
specified by the Representatives (which shall be within three Business Days
after exercise of said option) for the respective accounts of the several
Underwriters, against payment by the several Underwriters through the
Representatives of the purchase price thereof to or upon the order of the Trust
by wire transfer payable in immediately available same-day funds to an account
specified by the Trust in writing at least two Business Days in advance of such
Settlement Date. If settlement for the Option DECS occurs after the Closing
Date, the Trust, the Company and HEA will deliver to the Representatives on the
Settlement Date for the Option DECS, and the obligation of the Underwriters to
purchase the Option DECS shall be conditioned upon receipt of, supplemental
opinions, certificates and letters confirming as of such date the opinions,
certificates and letters delivered on the Closing Date pursuant to Section 10
hereof.
6. Offering by the Underwriters. It is understood that the several
Underwriters propose to offer the DECS for sale to the public as set forth in
the Trust Prospectus.
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<PAGE> 18
7. Agreements of the Trust. The Trust agrees with the several
Underwriters that:
(a) The Trust will use its best efforts to cause the Trust
Registration Statement, if not effective at the Execution Time, and any
amendment thereof, to become effective. Prior to the termination of the
offering of the DECS, the Trust will not file any amendment of the
Trust Registration Statement or supplement to the Trust Prospectus or
any Rule 462(b) Trust Registration Statement unless the Trust has
furnished you a copy for your review prior to filing and will not file
any such proposed amendment or supplement to which you object. Subject
to the foregoing sentence, if the Trust Registration Statement has
become or becomes effective pursuant to Rule 430A, or filing of the
Trust Prospectus is otherwise required under Rule 424(b), the Trust
will cause the Trust Prospectus, properly completed, and any supplement
thereto to be filed with the Commission pursuant to the applicable
paragraph of Rule 424(b) within the time period prescribed and will
provide evidence satisfactory to the Representatives of such timely
filing. The Trust will promptly advise the Representatives (1) when the
Trust Registration Statement, if not effective at the Execution Time,
shall have become effective, (2) when the Trust Prospectus, and any
supplement thereto, shall have been filed (if required) with the
Commission pursuant to Rule 424(b) or when any Rule 462(b) Trust
Registration Statement shall have been filed with the Commission, (3)
when, prior to termination of the offering of the DECS, any amendment
to the Trust Registration Statement or any Rule 462(b) Trust
Registration Statement, shall have been filed or become effective, (4)
of any request by the Commission or its staff for any amendment of the
Trust Registration Statement, or any Rule 462(b) Trust Registration
Statement, or for any supplement to the Trust Prospectus or for any
additional information, (5) of the issuance by the Commission of any
stop order suspending the effectiveness of the Trust Registration
Statement or the institution or threatening of any proceeding for that
purpose and (6) of the receipt by the Trust of any notification with
respect to the suspension of the qualification of the DECS for sale in
any jurisdiction or the institution or threatening of any proceeding
for such purpose. The Trust will use its best efforts to prevent the
issuance of any such stop order or the suspension of any such
qualification and, if issued, to obtain as soon as possible the
withdrawal thereof.
(b) If, at any time when a prospectus relating to the DECS is
required to be delivered under the Act, any event occurs as a result of
which the Trust Prospectus as then supplemented would include any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, or if it shall
be necessary to amend the Trust Registration Statement or supplement
the Trust Prospectus to comply with the Act or the Exchange Act or the
respective rules thereunder, the Trust promptly will (1) notify the
Representatives of any such event, (2) prepare and file with the
Commission, subject to the second sentence of paragraph (a) of this
Section 7, an amendment or supplement which will correct such statement
or omission or effect such compliance and (3) supply any supplemental
Trust Prospectus to you in such quantities as you may reasonably
request.
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<PAGE> 19
(c) The Trust will furnish to the Representatives and counsel
for the Underwriters, without charge, signed copies of the Trust
Registration Statement (including exhibits thereto) and to each other
Underwriter a copy of the Trust Registration Statement (without
exhibits thereto). The Trust will furnish to the Representatives and
counsel for the Underwriters, without charge, copies of the Trust
Registration Statement (including exhibits thereto). The Trust will
furnish to the Underwriters not later than (i) 12:00 P.M., New York
City time, on the Business Day immediately following the date of
determination of the public offering price of the DECS, if such
determination occurred at or prior to 12:00 noon, New York City time,
on such date or (ii) 9:00 A.M. New York City time, on the second
Business Day immediately following the date on which the public
offering price was determined, if such determination occurred after
12:00 noon, New York City time, on such date, as many copies of each
Preliminary Trust Prospectus, the Trust Prospectus and any supplement
thereto as the Representatives may reasonably request; further, so long
as delivery of a prospectus by an Underwriter or any dealer may be
required by the Act, as many copies of each Preliminary Trust
Prospectus and the Trust Prospectus and any supplement thereto as the
Representatives may reasonably request.
(d) The Trust will arrange, if necessary, for the
qualification of the DECS and the Shares for sale under the laws of
such jurisdictions as the Representatives may designate, will maintain
such qualifications in effect so long as required for the distribution
of the DECS and will pay any fee of the National Association of
Securities Dealers, Inc. (the "NASD"), in connection with its review,
if any, of the Trust Registration Statement and the offering of the
DECS.
8. Agreements of the Company. The Company agrees with the several
Underwriters that:
(a) The Company will use its best efforts to cause the Company
Registration Statement, if not effective at the Execution Time, and any
amendment thereof, to become effective. Prior to the termination of the
offering of the DECS, the Company will not file any amendment of the
Company Registration Statement or supplement to the Company Prospectus
or any Rule 462(b) Company Registration Statement unless the Company
has furnished to you a copy for your review prior to filing and will
not file any such proposed amendment or supplement to which you
reasonably object. Subject to the foregoing sentence, if the Company
Registration Statement has become or becomes effective pursuant to Rule
430A, or filing of the Company Prospectus is otherwise required under
Rule 424(b), the Company will cause the Company Prospectus, properly
completed, and any supplement thereto to be filed with the Commission
pursuant to the applicable paragraph of Rule 424(b) within the time
period prescribed and will provide evidence satisfactory to the
Representatives of such timely filing. The Company will promptly advise
the Representatives (1) when the Company Registration Statement, if not
effective at the Execution Time, shall have become effective, (2) when
the Company Prospectus, and any supplement thereto, shall have been
filed (if required) with the Commission pursuant to Rule 424(b) or when
any Rule 462(b) Company Registration Statement shall
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<PAGE> 20
have been filed with the Commission, (3) when, prior to termination of
the offering of the DECS, any amendment to the Company Registration
Statement shall have been filed or become effective, (4) of any request
by the Commission or its staff for any amendment of the Company
Registration Statement, or any Rule 462(b) Company Registration
Statement, or for any supplement to the Company Prospectus or for any
additional information, (5) of the issuance by the Commission of any
stop order suspending the effectiveness of the Company Registration
Statement or the institution or threatening of any proceeding for that
purpose and (6) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Shares for sale
in any jurisdiction or the institution or threatening of any proceeding
for such purpose. The Company will use its best efforts to prevent the
issuance of any such stop order or the suspension of any such
qualification and, if issued, to obtain as soon as possible the
withdrawal thereof.
(b) If, at any time when a prospectus relating to the Shares
is required to be delivered under the Act (including in respect of the
offering and sale of the DECS), any event occurs as a result of which
the Company Prospectus as then supplemented would include any untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, or if it shall
be necessary to amend the Company Registration Statement or supplement
the Company Prospectus to comply with the Act or the Exchange Act or
the respective rules thereunder, the Company promptly will (1) notify
the Representatives of such event, (2) prepare and file with the
Commission, subject to the second sentence of paragraph (a) of this
Section 8, an amendment or supplement which will correct such statement
or omission or effect such compliance and (3) supply any supplemented
Company Prospectus to you in such quantities as you may reasonably
request.
(c) As soon as practicable, the Company will make generally
available to its security holders and to the Representatives an
earnings statement or statements of the Company and its subsidiaries
which will satisfy the provisions of Section 11(a) of the Act and Rule
158 under the Act.
(d) The Company will furnish to the Representatives and
counsel for the Underwriters signed copies of the Company Registration
Statement (including exhibits thereto) and to each other Underwriter a
copy of the Company Registration Statement (without exhibits thereto).
The Company will furnish to the Underwriters not later than (A) 12:00
P.M., New York City time, on the Business Day immediately following the
date of determination of the public offering price of the DECS, if such
determination occurred at or prior to 12:00 noon, New York City time,
on such date or (B) 9:00 A.M., New York City time, on the second
Business Day immediately following the date on which the public
offering price of the DECS was determined, if such determination
occurred after 12:00 noon, New York City time, on such date, as many
copies of each Preliminary Company Prospectus, the Company Prospectus
and any supplement thereto as the Representatives may reasonably
request; further, so long as delivery of a prospectus by
20
<PAGE> 21
any Underwriter or any dealer may be required by the Act (including in
respect of the offering and sale of the DECS), as many copies of each
Preliminary Company Prospectus and the Company Prospectus and any
supplement thereto as the Representatives may reasonably request.
(e) The Company will cooperate with the Trust for purposes of
the qualification of the DECS and the Shares for sale under the laws of
such jurisdictions as the Representatives may designate, and will
maintain such qualifications in effect so long as required for the
distribution of the DECS or the Shares; provided that in no event shall
the Company be obligated to qualify to do business in any jurisdiction
where it is not now so qualified or to take any action that would
subject it to service of process in suits, in each case, other than
those arising out of the offering or sale of the DECS, the offering and
sale of the Shares in connection with the offering of the DECS, in any
jurisdiction where it is not now so subject.
(f) The Company will not, without the prior written consent of
Salomon Smith Barney, during the period of 90 days following the
Execution Time, (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase or otherwise
transfer or dispose of, directly or indirectly, or announce the
offering of any shares of any class of common stock of the Company or
any securities convertible into or exercisable or exchangeable for
shares of any class of common stock of the Company (whether such shares
or any such securities are now owned or hereafter acquired) or (ii)
enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of
shares of any class of the common stock of the Company, whether any
such transaction described in clause (i) or (ii) above is to be settled
by delivery of shares of any class of common stock of the Company or
such other securities, in cash or otherwise; provided, however, that
the Company may issue, or grant options for, shares of any class of
common stock of the Company pursuant to any stock plan for employees or
directors, or any employee benefit plan, of the Company in effect at
the Execution Time, or pursuant to any stock options outstanding at the
Execution Time. The Company also will not, without the prior written
consent of Salomon Smith Barney, during the period of 90 days following
the Execution Time, authorize any executive officer or director of the
Company to engage in transactions described in clause (i) or (ii) above
involving more than 10,000 shares of any class of common stock of the
Company, and will not authorize such transactions involving more than
100,000 shares of any class of common stock of the Company in the
aggregate for all such executive officers and directors during such 90
day period.
(g) The Company will furnish the Trust in sufficient
quantities for transmission to holders of the DECS the Company's annual
report to shareholders and reports on Forms 10-K and 10-Q as soon as
practicable after such reports are required to be filed with the
Commission.
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<PAGE> 22
(h) The Company will take such actions as may be reasonably
necessary to comply with the rules and regulations of the Nasdaq
National Market System in respect of the offering of the Shares
contemplated hereby.
(i) The Company will not become an "investment company" as
defined in the Investment Company Act.
(j) Neither the Company nor the Subsidiaries has directly or
indirectly taken any action designed to or which has constituted or
which might reasonably be expected to cause or result, under the
Exchange Act or otherwise, in the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale
of the DECS or the Shares.
9. Agreements of HEA. HEA agrees with each of the Underwriters that:
(a) HEA will not, without the prior written consent of Salomon
Smith Barney, during the period of 90 days following the Execution
Time, (i) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase or otherwise transfer or
dispose of, directly or indirectly, or announce the offering of any
shares of any class of common stock of the Company or any securities
convertible into or exercisable or exchangeable for shares of any class
of common stock of the Company (whether such shares or any such
securities are now owned or hereafter acquired) or (ii) enter into any
swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of shares of any
class of the common stock of the Company, whether any such transaction
described in clause (i) or (ii) above is to be settled by delivery of
shares of any class of common stock of the Company or such other
securities, in cash or otherwise; provided, however, that HEA may
engage in any of the transactions described in clause (i) or (ii) above
in connection with the offering by the Trust of the DECS or any
delivery of Shares pursuant to the terms of the DECS.
(b) HEA will not take any action designed to or which has
constituted or which might reasonably be expected to cause or result,
under the Exchange Act or otherwise, in stabilization or manipulation
of the price of any security of the Company to facilitate the sale or
resale of the DECS or the Shares.
(c) HEA will advise you promptly, and if requested by you,
will confirm such advice in writing, so long as delivery of a
prospectus relating to the Shares (including with respect to the
offering and sale of the DECS) by an Underwriter or dealer may be
required under the Act, of any change in the information in the Company
Registration Statement or the Company Prospectus relating to HEA.
10. Conditions to the Obligations of the Underwriters. The obligations
of the Underwriters to purchase the Underwritten DECS and the Option DECS, as
the case may be, shall be subject to the accuracy of the representations and
warranties on the part of the Trust, the Company and HEA contained herein as of
the Execution Time, the Closing Date and any
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<PAGE> 23
Settlement Date pursuant to Section 4(b) hereof, to the accuracy of the
statements of the Trust, the Company and HEA made in any certificates pursuant
to the provisions hereof, to the performance by each of the Trust, the Company
and HEA of their respective obligations hereunder and to the following
additional conditions:
(a) If the Trust Registration Statement or the Company
Registration Statement has not become effective prior to the Execution
Time, unless the Representatives agree in writing to a later time, such
Trust Registration Statement or Company Registration Statement will
become effective not later than (i) 6:00 P.M. New York City time on the
date of determination of the public offering price of the DECS, if such
determination occurred at or prior to 3:00 P.M. New York City time on
such date or (ii) 9:30 A.M. New York City time on the Business Day
following the day on which the public offering price of the DECS was
determined, if such determination occurred after 3:00 P.M. New York
City time on such date; if filing of the Trust Prospectus or the
Company Prospectus, or any supplement thereto, is required pursuant to
Rule 497(h) or Rule 424(b), such Trust Prospectus or Company
Prospectus, and any such supplement, will be filed in the manner and
within the time period required by such Rule; and no stop order
suspending the effectiveness of the Trust Registration Statement or the
Company Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or threatened.
(b) The Representatives shall have received the opinion of
Richards, Layton & Finger, special Delaware counsel for the Trust,
dated the Closing Date and addressed to the Representatives, with
respect to such matters as the Representatives may reasonably request.
(c) The Company shall have caused Gray Cary Ware & Freidenrich
LLP, counsel for the Company, to have furnished to the Representatives
their opinion, dated the Closing Date and addressed to the
Representatives, to the effect that:
(i) the Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of Delaware, with corporate power and
authority to own or lease, as the case may be, and to operate
its properties and conduct its businesses as described in the
Company Prospectus, and is duly qualified to do business as
foreign corporation and is in good standing under the laws of
the State of California and, to the knowledge of such counsel,
each other jurisdiction which requires such qualification,
except where the failure to be so qualified or be in good
standing could not reasonably be expected to have a Material
Adverse Effect.
(ii) except as otherwise set forth in the Company
Prospectus, all outstanding shares of capital stock of each
Subsidiary are owned of record by the Company or by another
Subsidiary;
(iii) the Company's authorized equity capitalization
is as set forth in the Company Prospectus; the capital stock
of the Company conforms in all material
23
<PAGE> 24
respects to the description thereof contained in the Company
Prospectus; the outstanding Shares have been duly and validly
authorized and issued and are fully paid and nonassessable;
and the Shares are duly listed, and admitted and authorized
for trading on the Nasdaq National Market System; the
certificates for the Shares are in valid and sufficient form;
the holders of outstanding shares of capital stock of the
Company are not entitled to preemptive rights under the
Company's charter documents, Delaware corporate law or any
agreements of which such counsel is aware, or to such
counsel's knowledge, similar rights to subscribe for the
Shares except for the ownership maintenance rights granted to
HEA under the Stockholder Agreement, which do not apply to the
Shares subject to the Contract; and, to the knowledge of such
counsel and except as set forth in the Company Prospectus and
the options granted to employees in the ordinary course of
business since the end of the Company's fiscal year ended
December 27, 1998, no options, warrants or other rights to
purchase, agreements or other obligations to issue, or rights
to convert any obligations into or exchange any securities
for, shares of capital stock of or ownership interests in the
Company are outstanding, except options granted to employees
in the ordinary course of business since the end of the
Company's fiscal year ended December 26, 1998;
(iv) to the knowledge of such counsel, there is no
pending or threatened action, suit or proceeding by or before
any court or governmental agency, authority or body or any
arbitrator involving the Company or any Subsidiaries or its or
their property of a character required to be disclosed in the
Company Registration Statement which is not adequately
disclosed in the Company Prospectus, and, to the knowledge of
such counsel, there is no franchise, contract or other
document of a character required to be described in the
Company Registration Statement or Company Prospectus, or to be
filed as an exhibit thereto, which is not described or filed
as required under the Act or the applicable rules and
regulations of the Commission thereunder; and the statements
in the Company Prospectus under the headings "Risk
Factors--Protection of Our Intellectual Property is Limited;
We Face Risk of Third Party Claims of Infringement," "--We are
the Subject of legal Proceedings and Claims", "Relationship
Between Maxtor and Hyundai," "Certain Transactions,"
"Management--Executive Compensation," "--Employment
Agreements" and "Benefit Plans" accurately summarize in all
material respects the matters therein described to the extent
they are matters of law and descriptions of contractual
arrangements;
(v) the Company Registration Statement has become
effective under the Act; any required filing of the Company
Prospectus, and any supplements thereto, pursuant to Rule
424(b) has been made in the manner and within the time period
required by Rule 424(b); to the knowledge of such counsel, no
stop order suspending the effectiveness of the Company
Registration Statement has been issued, no proceedings for
that purpose have been instituted or threatened and the
Company Registration Statement and the Company Prospectus
(other than the
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<PAGE> 25
financial statements, schedules and other financial
information contained therein, as to which such counsel need
express no opinion) comply as to form in all material respects
with the applicable requirements of the Act and the rules
thereunder;
(vi) this Agreement has been duly authorized,
executed and delivered by the Company (assuming due
authorization and execution by each party thereto other than
the Company);
(vii) the Company is not an "investment company" as
defined in the Investment Company Act of 1940, as amended;
(viii) to the knowledge of such counsel, after due
inquiry, there is no action, proceeding or investigation
pending or threatened against the Company, any of its
subsidiaries or HEA which questions the validity of the
issuance of the DECS or the offering thereof by the
Underwriters;
(ix) no consent, approval, authorization, filing with
or order of any court or governmental agency or body is
required in connection with the transactions contemplated
herein, except such as have been obtained under the Act and
such as may be required under the blue sky laws of any
jurisdiction in connection with the purchase and distribution
of the DECS or the distribution of Shares pursuant to the
terms of the DECS by the Underwriters in the manner
contemplated in this Agreement and in the Trust Prospectus or
the Company Prospectus and such other approvals (specified in
such opinion) as have been obtained;
(x) neither the performance of this Agreement by the
Company, the distribution of the Shares nor the consummation
of any other of the transactions herein contemplated nor the
fulfillment of the terms hereof will conflict with, result in
a breach or violation of or imposition of any lien, charge or
encumbrance upon any property or assets of the Company
pursuant to, (i) the charter or by-laws of the Company, (ii)
the terms of any indenture, contract, lease, mortgage, deed of
trust, note agreement, loan agreement or other agreement,
obligation, condition, covenant or instrument to which the
Company is a party or bound or to which its property is
subject and that is filed as an exhibit to the Company
Registration Statement, or (iii) any statute, law, rule or
regulation which, in the experience of such counsel, typically
is applicable to the types of transactions contemplated herein
or, to the knowledge of such counsel, any judgment, order or
decree applicable to the Company of any court, regulatory
body, administrative agency, governmental body, arbitrator or
other authority asserting jurisdiction over the Company or any
of its properties; and
(xi) to the knowledge of such counsel, no holders of
securities of the Company have rights to the registration of
such securities under the Company
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<PAGE> 26
Registration Statement except for rights granted to HEA under
the Stockholder Agreement.
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws of any jurisdiction other
than the State of California, the General Corporation Law of the State
of Delaware or the Federal laws of the United States, to the extent
they deem proper and specified in such opinion, upon the opinion of
other counsel of good standing whom they believe to be reliable and who
are reasonably satisfactory to counsel for the Underwriters and (B) as
to matters of fact, to the extent they deem proper, on certificates of
responsible officers of the Company and public officials. References to
the Company Prospectus in this paragraph (c) include any supplements
thereto at the Closing Date.
In addition, such counsel shall state that such counsel has
participated in conferences and in telephone conversations with
officers and other representatives of the Company, representatives of
HEA, representatives of the Representatives and representatives of the
independent public accountants of the Company, during which conferences
and conversations the contents of the Company Registration Statement
and the Company Prospectus were discussed, and such counsel has
reviewed certain corporate records and documents furnished to such
counsel by the Company and that, although such counsel has not
undertaken to independently verify and does not assume any
responsibility for the accuracy, completeness or fairness of the
statements contained in the Company Registration Statement and the
Company Prospectus (except as specified in the foregoing opinion), on
the basis of the foregoing, and such counsel's understanding of the
U.S. federal securities laws, no information has come to the attention
of such counsel that causes such counsel to believe that the Company
Registration Statement on the Effective Date or at the Execution Time
contained any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make
the statements therein not misleading or that the Company Prospectus as
of its date and on the Closing Date included or includes any untrue
statement of a material fact or omitted or omits to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (other than
financial statements and schedules and other financial information
contained therein, as to which such counsel need express no opinion).
(d) The Company shall have caused counsel for Maxtor Singapore
(such counsel to be reasonably satisfactory to the Representatives) to
have furnished to the Representatives an opinion, dated the Closing
Date and addressed to the Representatives, to the effect that:
(i) Maxtor Singapore has been duly incorporated and
is validly existing as a corporation in good standing under
the laws of the jurisdiction in which it is chartered or
organized, with corporate power and authority to own or lease,
as the case may be, and to operate its properties and conduct
its businesses as described in the Company Prospectus, and, to
the knowledge of such counsel, is duly
26
<PAGE> 27
qualified to do business as a foreign corporation and is in
good standing under the laws of each jurisdiction which
requires such qualification, except where the failure to be so
qualified or be in good standing could not reasonably be
expected to have a material adverse effect on the condition
(financial or otherwise), prospects, earnings, business or
properties of Maxtor Singapore, whether or not arising from
transactions in the ordinary course of business;
(ii) all the outstanding shares of capital stock of
Maxtor Singapore have been duly and validly authorized and
issued and are fully paid and nonassessable, and except as
otherwise set forth in the Company Prospectus, are owned of
record by the Company;
(iii) to the knowledge of such counsel, there is no
pending or threatened action, suit or proceeding by or before
any court or governmental agency, authority or body or any
arbitrator involving Maxtor Singapore or its property which,
if determined adversely to Maxtor Singapore could reasonably
be expected to have, individually or in the aggregate, a
material adverse effect on the condition (financial or
otherwise), prospects, earnings, business or properties of
Maxtor Singapore, whether or not arising from transactions in
the ordinary course of business; and
(iv) neither the performance of this Agreement by the
Company, the distribution of the Shares nor the consummation
of any other of the transactions herein contemplated nor the
fulfillment of the terms hereof will conflict with, result in
a breach or violation of or imposition of any lien, charge or
encumbrance upon any property or assets of Maxtor Singapore
pursuant to, (i) the charter or by-laws of Maxtor Singapore,
(ii) to the knowledge of such counsel, the terms of any
material indenture, contract, lease, mortgage, deed of trust,
note agreement, loan agreement or other material agreement,
obligation, condition, covenant or instrument to which Maxtor
Singapore is a party or bound or to which its property is
subject, or (iii) any statute, law, rule or regulation which,
in the experience of such counsel, typically is applicable to
the types of transactions contemplated herein or, to the
knowledge of such counsel, any judgment, order or decree
applicable to Maxtor Singapore of any court, regulatory body,
administrative agency, governmental body, arbitrator or other
authority asserting jurisdiction over Maxtor Singapore or any
of its property.
In rendering such opinion, such counsel may rely as to matters
of fact, to the extent they deem proper and specified in such opinion,
upon certificates of responsible officers of the Company, Maxtor
Singapore and public officials. References to the Company Prospectus in
this paragraph (d) include any supplements thereto at the Closing Date.
27
<PAGE> 28
(e) HEA shall have caused Gray Cary Ware & Freidenrich LLP,
counsel for HEA, to have furnished to the Representatives his opinion
dated the Closing Date and addressed to the Representatives, to the
effect that:
(i) HEA is duly incorporated and is validly existing
as a corporation in good standing under the laws of the
jurisdiction in which it is chartered or organized, with
corporate power and authority to own or lease, as the case may
be, and to operate its properties and conduct its business as
described in the Company Prospectus;
(ii) this Agreement has been duly authorized,
executed and delivered by HEA; the Contract, the Collateral
Agreement and the Reimbursement Agreement have been duly
authorized, executed and delivered by HEA and assuming due
authorization, execution and delivery by the other parties
thereto, constitute valid and legally binding agreement of
HEA; and HEA has corporate power and authority to sell,
transfer and deliver Shares in connection with the offering of
the DECS in the manner provided in this Agreement and the
Contract;
(iii) HEA is not, and after giving effect to the
distribution of the Shares in connection with the offering of
the DECS and the application of the proceeds thereof, will not
be, an "investment company" as defined in the Investment
Company Act of 1940, as amended;
(iv) the Collateral Agreement creates a valid
security interest in favor of the Collateral Agent (as defined
therein) for the benefit of the Trust in the Shares pledged
thereunder as security for the performance by HEA of its
obligations under the Contract and to secure the observance
and performance of the covenants and agreements of HEA
contained in the Contract and the Collateral Agreement;
(vi) pursuant to Section 9-103(6) of the California
UCC as currently in effect, the perfection and the effect of
perfection or non-perfection of the security interest of the
Trust in the Shares pledged pursuant to the Contract and the
Collateral Agreement will be governed by the laws of the State
of New York, assuming the Share certificates are located in
New York at all times.
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws of any jurisdiction other
than the State of California, the General Corporation Law of the State
of Delaware or the Federal laws of the United States, to the extent
they deem proper and specified in such opinion, upon the opinion of
other counsel of good standing whom they believe to be reliable and who
are satisfactory to counsel for the Underwriters, and (B) as to matters
of fact, to the extent it deems proper, on certificates of responsible
officers of HEA and public officials.
(f) HEA shall have caused Hal Hofherr, counsel for HEA, to
have furnished to the Representatives his opinion dated the Closing
Date and addressed to the Representatives, to the effect that:
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<PAGE> 29
(i) HEA is duly incorporated and is validly existing
as a corporation in good standing under the laws of the State
of California, with corporate power and authority to own or
lease, as the case may be, and to operate its properties and
conduct its business as described in the Company Prospectus;
to the knowledge of such counsel, is duly qualified to do
business as a foreign corporation and is in good standing
under the laws of each jurisdiction which requires such
qualification, except where the failure to be so qualified or
be in good standing could not reasonably be expected to have a
material adverse effect on the condition (financial or
otherwise), prospects, earnings, business or properties of HEA
and its subsidiaries, taken as a whole, whether or not arising
from transactions in the ordinary course of business;
(ii) this Agreement has been duly authorized,
executed and delivered by HEA; the Contract, the Collateral
Agreement and the Reimbursement Agreement have been duly
authorized, executed and delivered by HEA and assuming due
authorization, execution and delivery by the other parties
thereto, constitute valid and legally binding agreement of
HEA; and HEA has full legal right and authority to sell,
transfer and deliver Shares in connection with the offering of
the DECS in the manner provided in this Agreement and the
Contract;
(iii) no consent, approval, authorization, filing
with or order of any court or governmental agency or body is
required for the consummation by HEA of the transactions
contemplated herein, except such as may have been obtained
under the Act and such as may be required under the blue sky
laws of any jurisdiction in connection with the purchase and
distribution of the DECS by the Underwriters and the
distribution of the Shares pursuant to the terms of the DECS
in the manner contemplated in this Agreement and in the Trust
Prospectus and the Company Prospectus;
(iv) neither the performance of this Agreement by
HEA, the distribution of the Shares nor the consummation of
any other of the transactions herein contemplated nor the
fulfillment of the terms hereof will conflict with, result in
a breach or violation of or imposition of any lien, charge or
encumbrance upon any property or assets of HEA pursuant to,
(i) the charter or by-laws of the HEA, (ii) to the knowledge
of such counsel, the terms of any material indenture,
contract, lease, mortgage, deed of trust, note agreement, loan
agreement or other material agreement, obligation, condition,
covenant or instrument to which HEA is a party or bound or to
which its property is subject, or (iii) any statute, law, rule
or regulation which, in the experience of such counsel,
typically is applicable to the types of transactions
contemplated herein or, to the knowledge of such counsel, any
judgment, order or decree applicable to HEA of any court,
regulatory body, administrative agency, governmental body,
arbitrator or other authority asserting jurisdiction over HEA
or any of its properties.
29
<PAGE> 30
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws of any jurisdiction other
than the State of California, the General Corporation Law of the State
of Delaware or the Federal laws of the United States, to the extent he
deems proper and specified in such opinion, upon the opinion of other
counsel of good standing whom he believes to be reliable and who are
satisfactory to counsel for the Underwriters, and (B) as to matters of
fact, to the extent it deems proper, on certificates of responsible
officers of HEA and public officials.
(g) The Representatives shall have received from Cleary,
Gottlieb, Steen & Hamilton, counsel for the Underwriters and the Trust,
such opinion or opinions, dated the Closing Date and addressed to the
Representatives, with respect to the issuance and sale of the DECS, the
Trust Registration Statement, the Trust Prospectus (together with any
supplement thereto), the Fundamental Documents, the Company
Registration Statement, the Company Prospectus (together with any
supplement thereto) and other related matters as the Representatives
may reasonably require, and the Company shall have furnished to such
counsel such documents as they reasonably request for the purpose of
enabling them to pass upon such matters.
(h) The Trust shall have furnished to the Representatives a
certificate of the Trust, signed by the Managing Trustee and dated the
Closing Date, to the effect that:
(i) the representations and warranties of the Trust
in this Agreement are true and correct in all material
respects on and as of the Closing Date with the same effect as
if made on the Closing Date and the Trust has complied in all
material respects with all of the agreements and satisfied all
the conditions on its part to be performed or satisfied at or
prior to the Closing Date (such certificate to set forth all
known failures to comply with such agreements or satisfy such
conditions whether such known failures are material or
immaterial); and
(ii) no stop order suspending the effectiveness of
the Trust Registration Statement or the use of the Trust
Prospectus has been issued and to the Trust's knowlege after
due inquiry, no proceedings for that purpose have been
instituted or, to the Trust's knowledge, threatened.
(i) The Company shall have furnished to the Representatives a
certificate of the Company, signed by the Chief Executive Officer and
the Chief Financial Officer of the Company, dated the Closing Date, to
the effect that the signers of such certificate have carefully examined
the Company Registration Statement, the Company Prospectus, any
supplements to the Company Prospectus and this Agreement and that:
(i) the representations and warranties of the Company
in this Agreement are true and correct on and as of the
Closing Date with the same effect as if made on the Closing
Date and the Company has complied in all material respects
with all the agreements and satisfied all the conditions on
its part to be performed or satisfied at or prior to the
Closing Date (such certificate to set forth
30
<PAGE> 31
all known failures to comply with such agreements or satisfy
such conditions whether such known failures are material or
immaterial);
(ii) no stop order suspending the effectiveness of
the Company Registration Statement or the use of the Company
Prospectus has been issued and to the Company's knowledge,
after due inquiry with the Commission, no proceedings for that
purpose have been instituted or, to the Company's knowledge,
threatened; and
(iii) since the date of the most recent financial
statements included in the Company Prospectus (exclusive of
any supplement thereto), there has been no material adverse
effect on the condition (financial or otherwise), prospects,
earnings, business or properties of the Company and the
Subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business, except as set
forth in or contemplated in the Company Prospectus (exclusive
of any supplement thereto).
(j) HEA shall have furnished to the Representatives a
certificate, signed by the Chief Executive Officer, dated the Closing
Date, to the effect that the signer of such certificate has carefully
examined the Company Registration Statement, the Company Prospectus,
any supplement to the Company Prospectus and this Agreement and that
the representations and warranties of HEA in this Agreement are true
and correct in all material respects on and as of the Closing Date to
the same effect as if made on the Closing Date and HEA has complied in
all material respect with all the agreements and satisfied in all
material respect all the conditions on its part to be performed or
satisfied at or prior to the Closing Date (such certificate to set
forth all known failures to comply with such agreements or satisfy such
conditions whether such known failures are material or immaterial);
(k) The Company shall have caused PricewaterhouseCoopers LLP
to have furnished to the Representatives letters, at the Execution Time
and at the Closing Date, dated respectively as of the Execution Time
and as of the Closing Date, in form and substance satisfactory to the
Representatives, confirming that they are independent accountants
within the meaning of the Act and the Exchange Act and the respective
applicable published rules and regulations adopted by the Commission
thereunder and stating in effect that:
(i) in their opinion the audited financial statements
and financial statement schedule included in the Company
Registration Statement and the Company Prospectus and reported
on by them comply as to form in all material respects with the
applicable accounting requirements of the Act and Exchange Act
and the related published rules and regulations adopted by the
Commission;
(ii) on the basis of a reading of the latest
unaudited financial statements made available by the Company
and the Subsidiaries; carrying out certain
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<PAGE> 32
specified procedures (but not an examination in accordance
with generally accepted auditing standards) which would not
necessarily reveal matters of significance with respect to the
comments set forth in such letter; a reading of the minutes of
the meetings of the stockholders, directors and the audit,
executive and compensation committees of the Company and its
subsidiaries; and inquiries of certain officials of the
Company who have responsibility for financial and accounting
matters of the Company and its subsidiaries as to transactions
and events subsequent to December 26, 1998, nothing came to
their attention which caused them to believe that:
(1) any unaudited financial statements included or
incorporated by reference in the Company Registration
Statement and the Company Prospectus do not comply as
to form in all material respects with applicable
accounting requirements of the Act and with the
related rules and regulations adopted by the
Commission with respect to financial statements
included or incorporated by reference in quarterly
reports on Form 10-Q under the Exchange Act; and said
unaudited financial statements are not in conformity
with generally accepted accounting principles applied
on a basis substantially consistent with that of the
audited financial statements included in the Company
Registration Statement and the Company Prospectus;
(2) with respect to the period subsequent to December
26, 1998, there were any changes, at a specified date
not more than five business days prior to the date of
the letter, in the long-term debt and capital lease
obligations due after one year of the Company or
capital stock of the Company or any increase in the
shareholders' deficit of the Company or decreases in
net current assets or total assets of the Company as
compared with the amounts shown on the December 26,
1998, consolidated balance sheet included or
incorporated in the Company Registration Statement
and the Company Prospectus, or for the period from
December 26, 1998 to such specified date there were
any decreases, as compared with the corresponding
period in the preceding year, in total revenue or
income from operations or income before income taxes
or in total or per share amounts of net income of the
Company, except in all instances for changes or
decreases set forth in such letter, in which case the
letter shall be accompanied by an explanation by the
Company as to the significance thereof unless said
explanation is not deemed necessary by the
Representatives; or
(ii) the information included or incorporated in the
Company Registration Statement and Company Prospectus in
response to Regulation S-K, Item 301 (Selected Financial
Data), Item 302 (Supplementary Financial Information) and
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<PAGE> 33
Item 402 (Executive Compensation) is not in conformity with
the applicable disclosure requirements of Regulation S-K;
(iii) they have performed certain other specified
procedures as a result of which they determined that certain
information of an accounting, financial or statistical nature
(which is limited to accounting, financial or statistical
information derived from the general accounting records of the
Company and its subsidiaries) set forth in the Company
Registration Statement and the Company Prospectus, including
the information set forth under the captions "Selected
Consolidated Financial Data," "Capitalization," "Management's
Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and "Certain Transactions" in the
Company Prospectus and the information included or
incorporated by reference in Items 1, 2, 6, 7, and 11 of the
Company's Annual Report on Form 10-K, incorporated in the
Company Registration Statement and the Company Prospectus,
agrees with the accounting records of the Company and its
subsidiaries, excluding any questions of legal interpretation.
References to the Company Prospectus in this paragraph (k) include any
supplement thereto at the date of the letter.
(l) The Shares shall have been duly approved for quotation
through the Nasdaq National Market System, and satisfactory evidence of
such action shall have been provided to the Representatives.
(m) The DECS shall have been approved for listing on the
Nasdaq National Market System, subject only to official notice of
issuance.
(n) Subsequent to the Execution Time or, if earlier, the dates
as of which information is given in the Company Registration Statement
(exclusive of any amendment thereof) and the Company Prospectus
(exclusive of any supplement thereto), there shall not have been (i)
any change or decrease specified in the letter or letters referred to
in paragraph (k) of this Section 10 or (ii) any change, or any
development involving a prospective change, in or affecting the
condition (financial or otherwise), earnings, business or properties of
the Company and the Subsidiaries taken as a whole, whether or not
arising from transactions in the ordinary course of business, except as
set forth in or contemplated in the Company Prospectus (exclusive of
any supplement thereto) the effect of which, in any case referred to in
clause (i) or (ii) above, is, in the judgment of the Representatives,
so material and adverse as to make it impractical or inadvisable to
proceed with the offering or delivery of the DECS as contemplated by
the Trust Registration Statement and the Company Registration Statement
(in either case, exclusive of any amendment thereof) and the Trust
Prospectus and the Company Prospectus (in either case, exclusive of any
supplement thereto).
(o) Subsequent to the Execution Time, there shall not have
been any decrease in the rating of any of the Company's debt securities
by any "nationally recognized statistical rating organization" (as
defined for purposes of Rule 436(g) under the Act) or
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<PAGE> 34
any notice given of any intended or potential decrease in any such
rating or of a possible change in any such rating that does not
indicate the direction of the possible change.
(p) The NASD shall not have raised any objection with respect
to the fairness and reasonableness of the underwriting terms and
arrangements.
(q) Each Fundamental Agreement shall have been executed and
delivered by all parties thereto, and HEA shall have delivered to the
Collateral Agent the number of Shares required by the Collateral
Agreement to be initially pledged and assigned by HEA in accordance
with the requirements of the Collateral Agreement.
(r) At the Execution Time, the Company shall have furnished to
the Representatives a letter substantially in the form of Exhibit A
hereto from each executive officer and director of the Company, which
persons are listed on Schedule II hereto, addressed to the
Representatives relating to sales and certain other dispositions of
shares of common stock of the Company or certain other securities, and
such letter agreements shall be in full force and effect on the Closing
Date.
(s) Prior to the Closing Date, the Company, the Trust and HEA
shall have furnished to the Representatives such further information,
certificates and documents as the Representatives may reasonably
request.
If any of the conditions specified in this Section 10 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Representatives and counsel for the Underwriters, this
Agreement and all obligations of the Underwriters hereunder may be canceled at,
or at any time prior to, the Closing Date by the Representatives. Notice of such
cancellation shall be given to the Trust, the Company and HEA in writing or by
telephone or facsimile confirmed in writing.
The documents required to be delivered by this Section 10 shall be
delivered at the office of Gray Cary Ware & Freidenrich LLP, counsel for the
Company, at 400 Hamilton Avenue, Palo Alto, California 94301, on the Closing
Date.
11. Expenses.
(a) HEA and the Company, severally and jointly, will pay all expenses
incident to the performance by the Trust and their obligations under this
Agreement and the Contract and Collateral Agreement, including (i) the
preparation, printing and filing of the Notification and the Trust Registration
Statement (including financial statements and exhibits) as originally filed and
of each amendment thereto, (ii) the preparation, printing and delivery of this
Agreement, the Trust Agreement, each of the Fundamental Agreements and such
other documents as may be required in connection with the offering, purchase,
sale, issuance or delivery of the DECS, (iii) the preparation, issuance and
delivery of the certificates for the DECS to the Representatives, (iv) the fees
and disbursements of the Trust's counsel, accountants and
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<PAGE> 35
other advisors, (v) the fees and disbursements of HEA's counsel and other
advisors, (vi) the qualification of the DECS under state securities laws in
accordance with the provisions of Section 7(d) hereof, including filing fees and
the reasonable fees and disbursements of the counsel for the Underwriters in
connection therewith and in connection with the preparation of the related blue
sky survey and any supplement thereto, (vii) the printing and delivery to the
Representatives of copies of each Preliminary Trust Prospectus, the Trust
Prospectus and any amendments or supplements thereto, (viii) the fees and
expenses of any transfer agent or registrar for the DECS, (ix) the filing fees
incident to, and the reasonable fees and disbursements of counsel to the
Underwriters in connection with, securing any required review by the NASD of the
Trust Registration Statement and the offering of the DECS in accordance with the
provisions of Section 7(d) hereof, (x) the fees and expenses incurred in
connection with the listing of the DECS on the Nasdaq National Market System and
(xi) the fees and expenses incurred in connection with the preparation and
filing of a registration statement under the Exchange Act relating to the DECS.
HEA and the Company, severally and jointly, will reimburse the Underwriters
through Salomon Smith Barney on the Closing Date in immediately available funds
for the Up-Front Fee Amount and the Up-Front Expense Amount (each as defined in
the Fund Expense Agreement dated as of the Closing Date between Salomon Smith
Barney and BoNY) and for the up-front fees of the trustees of the Trust paid by
Salomon Smith Barney.
(b) HEA and the Company, severally and jointly, will pay all expenses
incident to the performance by the Company of its obligations under this
Agreement, including (i) the preparation, printing and filing of the Company
Registration Statement (including financial statements and exhibits) as
originally filed and of each amendment thereto, (ii) the preparation, issuance
and delivery of the certificates for the Shares to the Trust, (iii) the fees and
disbursements of the Company's counsel, accountants and other advisors, (iv) the
qualification of the Shares under state securities laws in accordance with the
provisions of Section 8(e) hereof, including filing fees and the reasonable fees
and disbursements of counsel for the Underwriters in connection therewith and in
connection with the preparation of any related blue sky survey and any
supplement thereto, (v) the printing and delivery to the Representatives of
copies of each Preliminary Company Prospectus, the Company Prospectus and any
amendments or supplements thereto, (vi) the fees and expenses of any transfer
agent or registrar for the Shares, (vii) the filing fees incident to, and the
reasonable fees and disbursements of counsel to the Underwriters in connection
with, securing any required review by the NASD of the Company Registration
Statement and the offering of the Shares in accordance with the provisions of
Section 8(e) hereof and (viii) the fees and expenses incurred in connection with
the approval of the Shares for quotation through the Nasdaq National Market
System.
(c) If the sale of the DECS provided for herein is not consummated
because any condition to the obligations of the Underwriters set forth in
Section 10 hereof is not satisfied, because of any termination pursuant to
Section 15 hereof or because of any refusal, inability or failure on the part of
the Company or HEA to perform any agreement herein or comply with any provision
hereof other than by reason of a default by the Underwriters, HEA and the
Company, jointly and severally, will reimburse the Underwriters through Salomon
Smith Barney upon demand for all out-of-pocket expenses (including reasonable
fees and disbursements of counsel)
35
<PAGE> 36
that shall have been incurred by the Underwriters in connection with the
proposed purchase and sale of the DECS.
(d) The provisions of this Section 11 shall not supersede or otherwise
affect any agreement that the Company and HEA may otherwise have for the
allocation of such expenses among themselves.
12. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless the Trust, each
of the Trustees, each Underwriter, the directors, officers, employees and agents
of each Underwriter, and each person who controls the Trust or any Underwriter
within the meaning of the Act, the Exchange Act or other Federal or state
statutory law or regulation, at common law or otherwise, against any and all
losses, claims, damages or liabilities, joint or several, to which they or any
of them may become subject under the Act, the Exchange Act or other Federal or
state statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Company Registration Statement as originally
filed or in any amendment thereof, or in any Preliminary Company Prospectus or
the Company Prospectus, or in any amendment thereof or supplement thereto (each
such document, a "Company Registration Document"), or the omission or alleged
omission to state in any Company Registration Document a material fact required
to be stated therein or necessary to make the statements therein not misleading;
and in each such case agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company in any such case will
not be liable to the extent that any such loss, claim, damage or liability
arises out of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission made in any Company Registration
Document in reliance upon and in conformity with written information furnished
to the Company, HEA or the Trust by or on behalf of any Underwriter through the
Representatives specifically for inclusion therein. This indemnity agreement
will be in addition to any liability which the Company may otherwise have.
(b) HEA agrees to indemnify and hold harmless the Trust, each of the
Trustees, each Underwriter, the directors, officers, employees and agents of
each Underwriter, and each person who controls the Trust or any Underwriter
within the meaning of the Act, the Exchange Act or other Federal or state
statutory law or regulation, at common law or otherwise, against any and all
losses, claims, damages or liabilities, joint or several, to which they or any
of them may become subject under the Act, the Exchange Act or other Federal or
state statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Trust Registration Statement as originally filed
or in any amendment thereof, or in any Preliminary Trust Prospectus or the Trust
Prospectus, or in any amendment thereto or supplement thereto (each such
document, a "Trust Registration Document") or the omission or alleged omission
to state in any Trust Registration
36
<PAGE> 37
Document a material fact required to be stated therein or necessary to make the
statements therein not misleading; and in each such case agrees to reimburse
each such indemnified party, as incurred, for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that HEA in
any such case will not be liable to the extent that any such loss, claim, damage
or liability arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made in any Trust Registration
Document in reliance upon and in conformity with written information furnished
to the Company, HEA or the Trust by or on behalf of any Underwriter through the
Representatives specifically for inclusion therein. This indemnity agreement
will be in addition to any liability which HEA may otherwise have.
(c) Each Underwriter severally and not jointly agrees to indemnify and
hold harmless the Company, each of its directors, each of its officers who signs
the Company Registration Statement, each person who controls the Company within
the meaning of the Act, the Exchange Act, to the same extent as the foregoing
indemnity in clause (a) to each Underwriter, but only with reference to written
information relating to such Underwriter furnished to the Company or the Trust
by or on behalf of such Underwriter through the Representatives specifically for
inclusion in the Company Registration Documents. This indemnity agreement will
be in addition to any liability which any Underwriter may otherwise have. The
Company acknowledges that the statements set forth under the heading "Plan of
Distribution," (i) the list of Underwriters and their respective participation
in the sale of the DECS, (ii) the sentences related to concessions and
reallowances and (iii) the paragraph related to stabilization, syndicate
covering transactions and penalty bids in any Preliminary Company Prospectus or
the Company Prospectus, constitute the only information furnished in writing by
or on behalf of the several Underwriters for inclusion in any Company
Registration Document.
(d) Each Underwriter severally and not jointly agrees to indemnify and
hold harmless HEA, the directors, officers, employees and agents of HEA, and
each person who controls HEA within the meaning of the Act, to the same extent
as the foregoing indemnity in clause (b) to each Underwriter, but only with
reference to written information relating to such Underwriter furnished to HEA
by or on behalf of such Underwriter through the Representatives specifically for
inclusion in the Trust Registration Documents. This indemnity agreement will be
in addition to any liability which any Underwriter may otherwise have. HEA
acknowledges that the statements set forth in the last paragraph of the cover
page regarding delivery of the DECS, and, under the heading "Underwriting" (i)
the list of Underwriters and their respective participation in the sale of the
DECS, (ii) the sentences related to concessions and reallowances and (iii) the
paragraph related to stabilization, syndicate covering transactions and penalty
bids in any Preliminary Trust Prospectus or the Trust Prospectus, constitute the
only information furnished in writing by or on behalf of the several
Underwriters for inclusion in any Trust Registration Document.
(e) Promptly after receipt by an indemnified party under this Section
12 of notice of the commencement of any action, such indemnified party will, if
a claim in respect thereof is to be made against the indemnifying party under
this Section 12, notify the indemnifying party in writing of the commencement
thereof; but the failure so to notify the indemnifying party (i) will not
relieve it from liability under paragraph (a), (b), (c) or (d) above
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<PAGE> 38
unless and to the extent it did not otherwise learn of such action and such
failure results in the forfeiture by the indemnifying party of substantial
rights and defenses and (ii) will not, in any event, relieve the indemnifying
party from obligations to any indemnified party other than the indemnification
obligation provided in paragraph (a), (b), (c) or (d) above. The indemnifying
party shall be entitled to appoint counsel of indemnifying party's choice at the
indemnifying party's expense to represent the indemnified party in any action
for which indemnification is sought (in which case the indemnifying party shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be satisfactory to the indemnified
party. Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel if (i) the use of counsel chosen by the indemnifying party to
represent the indemnified party would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, (iii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such action or (iv) the indemnifying party
shall authorize the indemnified party to employ separate counsel at the expense
of the indemnifying party. An indemnifying party will not, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such settlement, compromise or
consent includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding.
(f) In the event that the indemnity provided in paragraph (a) or (c) of
this Section 12 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the Underwriters severally
agree to contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in connection with
investigating or defending same) (collectively "Losses") to which the Company
and one or more of the Underwriters may be subject in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and by the Underwriters on the other from the offering of the DECS;
provided, however, that in no case shall any Underwriter (except as may be
provided in any agreement among the underwriters relating to the offering of the
DECS) be responsible for any amount in excess of the underwriting discount
applicable to the DECS purchased by such Underwriter hereunder. If the
allocation provided by the immediately preceding sentence is unavailable for any
reason, the Company and the Underwriters severally shall contribute in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company on one hand and of the Underwriters on the
other in connection with the statements or omissions which resulted in such
Losses as well as any other relevant equitable considerations. The benefits
received by the Company shall be deemed to be
38
<PAGE> 39
equal to the total net proceeds from the offering (before deducting expenses)
received by the Trust, and the benefits received by the Underwriters shall be
deemed to be equal to the total underwriting discounts and commissions, in each
case as set forth on the cover page of the Trust Prospectus and, as between the
Company and the Underwriters, the Company shall be deemed for this purpose to
have received such total net proceeds as are received by the Trust. Relative
fault shall be determined by reference to, among other things, whether any
untrue or any alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information provided by the
Company on the one hand or the Underwriters on the other, the intent of the
parties and their relative knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The Company and the
Underwriters agree that it would not be just and equitable if contribution were
determined by pro rata allocation or any other method of allocation which does
not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (f), no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 12, each person who
controls an Underwriter within the meaning of either the Act or the Exchange Act
and each director, officer, employee and agent of an Underwriter shall have the
same rights to contribution as such Underwriter; and each person who controls
the Company within the meaning of either the Act or the Exchange Act, each
officer of the Company who shall have signed the Company Registration Statement
and each director of the Company shall have the same rights to contribution as
the Company; subject in each case to the applicable terms and conditions of this
paragraph (f).
(g) In the event that the indemnity provided in paragraph (b) or (d) of
this Section 12 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, HEA and the Underwriters severally agree to
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating or
defending same) (collectively "Losses") to which HEA and one or more of the
Underwriters may be subject in such proportion as is appropriate to reflect the
relative benefits received by HEA on the one hand and by the Underwriters on the
other from the offering of the DECS; provided, however, that in no case shall
any Underwriter (except as may be provided in any agreement among the
underwriters relating to the offering of the DECS) be responsible for any amount
in excess of the underwriting discount applicable to the DECS purchased by such
Underwriter hereunder. If the allocation provided by the immediately preceding
sentence is unavailable for any reason, HEA and the Underwriters severally shall
contribute in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of HEA on one hand and of the
Underwriters on the other in connection with the statements or omissions which
resulted in such Losses as well as any other relevant equitable considerations.
The benefits received by HEA shall be deemed to be equal to the total net
proceeds from the offering (before deducting expenses) received by the Trust,
and the benefits received by the Underwriters shall be deemed to be equal to the
total underwriting discounts and commissions, in each case as set forth on the
cover page of the Trust Prospectus and, as between HEA and the Underwriters, HEA
shall be deemed for this purpose to have received such total net proceeds as are
received by the Trust. Relative fault shall be determined by reference to, among
other things, whether any untrue or any alleged untrue statement of a material
fact or the omission or alleged
39
<PAGE> 40
omission to state a material fact relates to information provided by HEA on the
one hand or the Underwriters on the other, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. HEA and the Underwriters agree that it would
not be just and equitable if contribution were determined by pro rata allocation
or any other method of allocation which does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this
paragraph (g), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 12, each person who controls an Underwriter within the meaning of
either the Act or the Exchange Act and each director, officer, employee and
agent of an Underwriter shall have the same rights to contribution as such
Underwriter; and each person who controls HEA within the meaning of the Act or
the Exchange Act shall have the same rights to contribution as HEA, subject in
each case to the applicable terms and conditions of this paragraph (g).
13. Default by an Underwriter. If any one or more Underwriters shall
fail to purchase and pay for any of the DECS agreed to be purchased by such
Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated severally to take up
and pay for (in the respective proportions which the amount of DECS set forth
opposite their names in Schedule I hereto bears to the aggregate amount of DECS
set forth opposite the names of all the remaining Underwriters) the DECS which
the defaulting Underwriter or Underwriters agreed but failed to purchase;
provided, however, that in the event that the aggregate amount of DECS which the
defaulting Underwriter or Underwriters agreed but failed to purchase shall
exceed 10% of the aggregate amount of DECS set forth in Schedule I hereto, the
remaining Underwriters shall have the right to purchase all, but shall not be
under any obligation to purchase any, of the DECS, and if such nondefaulting
Underwriters do not purchase all the DECS, then the Company shall have 36 hours
within which it may, but it is not obligated, to find one or more substitute
underwriters satisfactory to the Representatives to purchase such Securities
upon the terms set forth in this Agreement and if the Company is unable to find
one or more such underwriters that are satisfactory to the Representatives, this
Agreement will terminate without liability to any nondefaulting Underwriter, the
Company, or HEA. In the event of a default by any Underwriter as set forth in
this Section 13, the Closing Date shall be postponed for such period, not
exceeding five Business Days, as the Representatives shall determine in order
that the required changes in the Company Registration Statement, the Company
Prospectus, the Trust Registration Statement and the Trust Prospectus or in any
other documents or arrangements may be effected. Nothing contained in this
Agreement shall relieve any defaulting Underwriter of its liability, if any, to
the Company, HEA and any nondefaulting Underwriter for damages occasioned by its
default hereunder.
14. Termination. This Agreement shall be subject to termination in the
absolute discretion of the Representatives, by notice given to the Trust and the
Company and HEA prior to delivery of and payment for the DECS, if at any time
prior to such time (i) trading in any class of the Company's Common Stock shall
have been suspended by the Commission or the Nasdaq National Market System or
trading in securities generally on the New York Stock
40
<PAGE> 41
Exchange or the Nasdaq National Market System shall have been suspended or
limited or minimum prices shall have been established on such Exchange or
National Market System, (ii) a banking moratorium shall have been declared by
either Federal or New York State authorities or (iii) there shall have occurred
any outbreak or escalation of hostilities, declaration by the United States of a
national emergency or war or other calamity or crisis, the effect of which on
financial markets is such as to make it, in the sole judgment of the
Representatives, impractical or inadvisable to proceed with the offering or
delivery of the DECS as contemplated by the Trust Prospectus (exclusive of any
supplement thereto).
15. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Trust, the Company, HEA or their respective officers, if applicable, and of the
Underwriters set forth in or made pursuant to this Agreement will remain in full
force and effect, regardless of any investigation made by or on behalf of any
Underwriter, the Trust, the Company, HEA or any of the officers, directors or
controlling persons referred to in Section 12 hereof, and will survive delivery
of and payment for the DECS. The provisions of Sections 11, 12 and 17 hereof
shall survive the termination or cancellation of this Agreement.
16. Notices. All communications hereunder will be in writing and
effective only on receipt, and, if sent to the Representatives, will be mailed,
delivered or telefaxed to the Salomon Smith Barney Inc., General Counsel (fax
no.: (212) 816-8571) and confirmed to the General Counsel, care of Salomon Smith
Barney Inc., at 388 Greenwich Street, New York, New York 10013, attention:
General Counsel; if sent to the Trust, will be mailed, delivered or telefaxed
and confirmed to it at c/o Puglisi & Associates, 850 Library Avenue, Suite 204,
Newark, Delaware 19715, Attention: Donald J. Puglisi; if sent to the Company,
will be mailed, delivered, telefaxed and confirmed to it at Chief Financial
Officer c/o of Maxtor Corporation, 510 Cottonwood Drive, Milpitas, California
95035 (fax no. (408) 432-4158) and confirmed to the General Counsel c/o Maxtor
Corporation, 2190 Miller Drive, Longmont. Colorado 80501 (fax no. (303)
678-3111), attention of the Legal Department, with a copy to Diane Holt Frankle
(fax no. (650) 327-3699) at Gray Cary Ware & Freidenrich LLP, 400 Hamilton
Avenue, Palo Alto, California 94301; or if sent to HEA, will be mailed,
delivered or telefaxed to Chief Executive Officer, c/o Hyundai Electronics
America, 3101 North First Street, San Jose, California 95134 (fax no. (408)
232-8194) and confirmed to the General Counsel c/o Hyundai Electronics America,
3101 North First Street, San Jose, California 95134 (fax no. (408) 232-8194),
attention of the Legal Department.
17. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 12 hereof, and no
other person will have any right or obligation hereunder.
18. Applicable Law. This agreement will be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed within the State of New York.
41
<PAGE> 42
19. Counterparts. This Agreement may be executed by any one or more of
the parties in any number of counterparts, each of which shall be deemed to be
an original, but all such counterparts shall together constitute one and the
same agreement.
20. Headings. The section headings used herein are for convenience only
and shall not affect the construction hereof.
21. Definitions. The terms which follow, when used in this Agreement,
shall have the meanings indicated.
"Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"Business Day" shall mean any day other than a Saturday, a
Sunday or a legal holiday or a day on which banking institutions or
trust companies are authorized or obligated by law to close in New York
City.
"Commission" shall mean the Securities and Exchange
Commission.
"Company Effective Date" shall mean each date and time that
the Company Registration Statement, any post-effective amendment or
amendments thereto and any Rule 462(b) Company Registration Statement
became or become effective.
"Company Prospectus" shall mean the prospectus relating to the
Shares that is used in connection with the offering and sale of the
DECS and that is first filed pursuant to Rule 424(b) after the
Execution Time or, if no filing pursuant to Rule 424(b) is required,
shall mean the form of final prospectus relating to the Shares that is
used in connection with such offering and sale and that is included in
the Company Registration Statement at the Company Effective Date.
"Company Registration Statement" shall mean the registration
statement referred to in Section 2(a) above including incorporated
documents, exhibits and financial statements, as amended at the
Execution Time (or, if not effective at the Execution Time, in the form
in which it shall become effective) and, in the event any
post-effective amendment thereto or any Rule 462(b) Company
Registration Statement becomes effective prior to the Closing Date,
shall also mean such registration statement as so amended or such Rule
462(b) Company Registration Statement, as the case may be. Such term
shall include any Rule 430A Information deemed to be included therein
at the Company Effective Date as provided by Rule 430A.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Commission promulgated
thereunder.
"Execution Time" shall mean the date and time that this
Agreement is executed and delivered by the parties hereto.
42
<PAGE> 43
"Investment Company Act" shall mean the Investment Company Act
of 1940, as amended, and the rules and regulations of the Commission
promulgated thereunder.
"Preliminary Company Prospectus" shall mean any preliminary
prospectus referred to in Section 2(a) and any preliminary prospectus
included in the Company Registration Statement at the Company Effective
Date that omits Rule 430A Information.
"Preliminary Trust Prospectus" shall mean any preliminary
prospectus referred to in Section 1(a) above and any preliminary
prospectus included in the Trust Registration Statement at the Trust
Effective Date that omits Rule 430A Information.
"Rule 415," "Rule 424," "Rule 430A," "Rule 462," "Rule
497(h)," "Regulation S-K" and "Regulation S-X" refer to such rules and
regulations under the Act.
"Rule 430A Information" shall mean information with respect to
the DECS, the Shares and the offering thereof permitted to be omitted
from the Trust Registration Statement (or, as used in Section 2 above,
the Company Registration Statement) when it becomes effective pursuant
to Rule 430A.
"Rule 462(b) Company Registration Statement" shall mean a
registration statement and any amendments thereto filed pursuant to
Rule 462(b) relating to the offering covered by the initial
registration statement referred to in Section 2(a) above.
"Rule 462(b) Trust Registration Statement" shall mean a
registration statement and any amendments thereto filed pursuant to
Rule 462(b) relating to the offering covered by the initial
registration statement referred to in Section 1(a) above.
"Trust Effective Date" shall mean each date and time that the
Trust Registration Statement, any post-effective amendment or
amendments thereto and any Rule 462(b) Trust Registration Statement
became or become effective.
"Trust Prospectus" shall mean the prospectus relating to the
DECS that is first filed pursuant to Rule 497(h) after the Execution
Time or, if no filing pursuant to Rule 497(h) is required, shall mean
the form of final prospectus relating to the DECS included in the Trust
Registration Statement at the Trust Effective Date.
"Trust Registration Statement" shall mean the registration
statement referred to in paragraph 1(a) above, including exhibits and
financial statements, as amended at the Execution Time (or, if not
effective at the Execution Time, in the form in which it shall become
effective) and, in the event any post-effective amendment thereto or
any Rule 462(b) Trust Registration Statement becomes effective prior to
the Closing Date, shall also mean such registration statement as so
amended or such Rule 462(b) Trust Registration Statement, as the case
may be. Such term shall include any Rule 430A Information deemed to be
included therein at the Trust Effective Date as provided by Rule 430A.
43
<PAGE> 44
As used herein, the terms "Trust Registration Statement,"
"Preliminary Trust Prospectus" and "Trust Prospectus" shall not include
the Company Prospectus attached thereto.
44
<PAGE> 45
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among the
Trust, the Company, HEA and the several Underwriters.
Very truly yours,
DECS Trust IV
By: ____________________________________
Name:
Title:
Maxtor Corporation
By: ____________________________________
Name:
Title:
Hyundai Electronics America
By: ____________________________________
Name:
Title:
45
<PAGE> 46
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
Salomon Smith Barney Inc.
By:___________________________
Name:
Title:
For themselves and the other
several Underwriters named in
Schedule I to the foregoing
Agreement
46
<PAGE> 47
SCHEDULE I
NUMBER OF UNDERWRITTEN
DECS TO BE
UNDERWRITERS PURCHASED
Salomon Smith Barney Inc.
Hambrecht & Quist LLC
Lehman Brothers Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
NationsBanc Montgomery Securities LLC
Total..................................
<PAGE> 48
SCHEDULE II
List of Officers, Directors and Shareholders
Executive Officers and Directors
<TABLE>
<CAPTION>
Name Position
- ---- --------
<S> <C>
Dr. C. S. Park Chairman of the Board of Directors
Michael R. Cannon President, Chief Executive Officer, Director
Charles F. Christ Director
Chang See Chung Director
Charles Hill Director
Y.H. Kim Director
Phillip S. Paul Director
Thomas L. Chun Director
Victor B. Jipson Senior Vice President
William F. Roach Senior Vice president
Paul J. Tufano Senior Vice President
Glenn H. Stevens Vice President
Phillip C. Duncan Vice President
K. K. Kim Vice President
Misha Rozenberg Vice President
K. H. Teh Vice President
David L. Beaver Vice President
</TABLE>
<PAGE> 49
[FORM OF LOCK-UP AGREEMENT] EXHIBIT A
[LETTERHEAD OF EXECUTIVE OFFICER OR DIRECTOR OF MAXTOR CORPORATION]
Maxtor Corporation
Public Offering by DECS Trust IV
,1999
Salomon Smith Barney Inc.
Hambrecht & Quist LLC
Lehman Brothers Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Nations Banc Montgomery Securities LLC
As Representatives of the several Underwriters,
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
This letter is being delivered to you in connection with the
proposed Underwriting Agreement (the "Underwriting Agreement"), among Maxtor
Corporation, a Delaware Corporation (the "Company"), Hyundai Electronics
America, a stockholder of the Company ("HEA"), DECS Trust IV (the "Trust"), a
Delaware business trust, and each of you as representatives of a group of
Underwriters named therein, relating to an underwritten public offering of DECS
representing shares of beneficial interest in the Trust.
In order to induce you and the other Underwriters to enter
into the Underwriting Agreement, the undersigned will not, without the prior
written consent of Salomon Smith Barney Inc., offer, sell, contract to sell,
pledge or otherwise dispose of, (or enter into any transaction which is designed
to, or might reasonably be expected to, result in the disposition (whether by
actual disposition or effective economic disposition due to cash settlement or
otherwise) by the Company or any affiliate of the Company or any person in
privity with the Company or any affiliate of the Company) directly or
indirectly, including the filing (or participation in the filing of) a
registration statement with the Securities and Exchange Commission in respect
of, or establish or increase a put equivalent position or liquidate or decrease
a call equivalent position within the meaning of Section 16 of the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the
Securities and Exchange Commission promulgated thereunder with respect to, any
shares of capital stock of the Company or any securities convertible into, or
exercisable or exchangeable for such capital stock, or publicly announce an
intention to effect any such transaction, for a period of 90 days after the date
of this Agreement, other than (i) shares of common stock of the Company disposed
of as bona fide gifts approved by Salomon Smith Barney Inc., or (ii) a number of
shares of common stock of the Company (not to exceed 10,000 shares) authorized
by the Company to be sold (it being understood that the Company will not
authorize all executive officers and directors to sell more than 100,000 shares
of common stock of the Company in the aggregate during such 90 day period). In
case of (ii) above, the undersigned agrees to sell such shares of common stock
of the Company only to or through Salomon Smith Barney Inc.
<PAGE> 50
If for any reason the Underwriting Agreement shall be
terminated prior to the Closing Date (as defined in the Underwriting Agreement),
the agreement set forth above shall likewise be terminated.
Yours very truly,
By: ____________________________
Name:
Title:
<PAGE> 1
Exhibit (j)
CUSTODIAN AGREEMENT
This CUSTODIAN AGREEMENT dated as of this 21st day of January, 1999, by
and between The Bank of New York, a New York banking corporation (the
"Custodian"), and DECS Trust IV (such trust and the trustees thereof acting in
their capacity as such being referred to herein as the "Trust"), a statutory
business trust organized under the Business Trust Act of the State of Delaware
pursuant to a Declaration of Trust dated as of December 17, 1998 (as it may be
amended and restated from time to time, the "Trust Agreement").
WITNESSETH
WHEREAS the Trust is a non-diversified, closed-end management investment
company, as defined in the Investment Company Act of 1940 (the "Investment
Company Act"), formed to purchase and hold certain U.S. Treasury securities (the
"Treasury Securities"), to enter into and hold a forward purchase contract (the
"Contract" ) with Hyundai Electronics America ("Hyundai"), to hold security for
the performance of Hyundai of its obligations under the Contract pursuant to a
related collateral agreement (the "Collateral Agreement") and to issue DECS in
accordance with the terms and conditions of the Trust Agreement;
WHEREAS the Trustees desire to engage the services of the Custodian to
perform certain custodial duties for the Trust; and
WHEREAS the Custodian is qualified and willing to assume such duties on
the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties agree as follows:
1. Definitions. Capitalized terms not otherwise defined herein shall
have the respective meanings specified in the Trust Agreement.
2. Appointment of Custodian; Transfer of Assets. The Trust hereby
constitutes and appoints the Custodian, and the Custodian accepts such
appointment, as agent of the Trust and as custodian of all of the property,
including but not limited to, the Contract, the Treasury Securities, the
Temporary Investments, any cash and any other property at any time owned or held
by the Trust (other than Pledged Items (as defined in the Collateral Agreement)
held by the Collateral Agent thereunder) (collectively, the "Assets"). The Trust
hereby deposits the Assets owned by the Trust on the date hereof with the
Custodian and the Custodian hereby accepts such Assets into its custody, and the
Trust shall deliver to the Custodian all additional Assets, including all
monies, securities and other property, received by the Trust at any time during
the period of this Agreement, subject to the following terms and conditions. The
Custodian hereby agrees that it shall hold the Assets in a segregated custody
account, separate and distinct from all other accounts, in accordance with
Section 17(f) of, and in such manner as shall constitute the segregation and
holding in trust within the meaning of, the Investment Company Act and the rules
and regulations thereunder. The Trust authorizes the Custodian, for any Assets
held
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hereunder, to use the services of any United States securities depository
permitted to perform such services for registered investment companies and their
custodians under Rule 17f-4 under the Investment Company Act and which have been
approved by the Trust, including but not limited to, The Depository Trust
Company and the Federal Reserve Book Entry System. The Custodian shall be under
no duty or obligation to inspect, review or examine any Assets to determine that
they are genuine, enforceable, or appropriate for the represented purpose or
that they are other than what they purport to be on their face.
3. Asset Disposition; Examinations. The Custodian shall have no power or
authority to assign, hypothecate, pledge or otherwise dispose of the Assets,
except pursuant to a written direction in accordance with paragraph 4 below and
then only for the account of the Trust. The Assets shall be subject to no lien
or charge of any kind in favor of the Custodian for itself or for any other
Person claiming through the Custodian. The Custodian shall permit actual
examination of the Assets by the Trust's independent public accountant at the
end of each annual and semi-annual fiscal period of the Trust and at least one
other time during the fiscal year of the Trust chosen by such independent public
accountant and shall permit the inspection of the Assets by the Commission
through its employees or agents during the normal business hours of the
Custodian upon reasonable request.
4. Authorized Actions. The Custodian shall take such actions with
respect to the Assets as directed in writing by any Trustee or by any officer of
the Administrator as may be received by the Custodian from time to time.
5. Custodian's Actions Taken In Good Faith. In connection with the
performance of its duties under this Agreement, the Custodian shall have no
duties or obligations other than those specifically set forth herein or in the
Trust Agreement or as may subsequently be agreed in writing by the parties
hereto and shall be under no liability to the Trust or any Holder for any action
taken in good faith in reliance on any paper, order, certification, list,
demand, request, consent, affidavit, notice, opinion, direction, endorsement,
assignment, resolution, draft or other document, prima facie properly executed,
or for the disposition of the Assets pursuant to the Trust Agreement or in
respect of any action taken or suffered under the Trust Agreement in good faith,
in accordance with an opinion of counsel or at the direction of the Trustees
pursuant hereto; provided that this provision shall not protect the Custodian
against any liability to which it would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and duties
hereunder. Notwithstanding any other provision of this Agreement, the Custodian
shall under no circumstances be liable for any punitive, exemplary, indirect or
consequential damages.
6. Trust Agreement Validity. The Custodian shall not be responsible for
the validity or sufficiency of the Trust Agreement or the due execution thereof,
or for the form, character, genuineness, sufficiency, value or validity of any
of the Assets and the Custodian shall in no event assume or incur any liability,
duty or obligation to any Holder or to the Trustees, other than as expressly
provided herein. The Custodian shall not be responsible for or in respect of the
validity of any signature by or on behalf of the Trustees.
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7. Litigation Obligations, Costs and Indemnity. The Custodian shall not
be under any obligation to appear in, prosecute or defend any action which in
its opinion may involve it in expense or liability, unless it shall be furnished
with such reasonable security and indemnity against such expense or liability as
it may require, and any pecuniary costs of the Custodian from such actions shall
be expenses which are reimbursable pursuant to paragraph 13 hereof.
8. Taxes; Trust Expenses. In no event shall the Custodian be personally
liable for any taxes or other governmental charges imposed upon or in respect of
the Assets or upon the monies, securities or other properties included therein.
The Custodian shall be reimbursed and indemnified by the Trust for all such
taxes and charges, for any tax or charge imposed against the Trust and for any
expenses, including counsel fees, interest, penalties and additions to tax which
the Custodian may sustain or incur with respect to such taxes or charges.
9. Custodian Resignation, Succession. (a) The Custodian may resign by
executing an instrument in writing resigning as Custodian and delivering the
same to the Trustees, not less than 60 days before the date specified in such
instrument when, subject to clause (b) of this paragraph 9, such resignation is
to take effect. Upon receiving such notice of resignation, the Trustees shall
use their reasonable efforts promptly to appoint a successor Custodian in the
manner and meeting the qualifications provided in the Trust Agreement, by
written instrument or instruments delivered to the resigning Custodian and the
successor Custodian.
(b) In case no successor Custodian shall have been appointed within 30
days after notice of resignation has been received by the Trustees, the
resigning Custodian may forthwith apply to a court of competent jurisdiction for
the appointment of a successor Custodian. Such court may thereupon, after such
notice, if any, as it may deem proper and prescribed, appoint a successor
Custodian.
10. Custodian Removal. The Trust may remove the Custodian upon 60 days'
prior written notice to the Custodian and appoint a successor Custodian. In case
at any time the Custodian shall not meet the requirements set forth in the Trust
Agreement or shall become incapable of acting or if a court having jurisdiction
shall enter a decree or order for relief in respect of the Custodian in an
involuntary case, or the Custodian shall commence a voluntary case, under any
applicable bankruptcy, insolvency, or other similar law now or hereafter in
effect, or any receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) for the Custodian or for any substantial part of its
property shall be appointed, or the Custodian shall make any general assignment
for the benefit of creditors, or shall generally fail to pay its debts as they
become due, the Trust may remove the Custodian immediately and appoint a
successor Custodian. The termination of the Administration Agreement or the
Paying Agent Agreement shall cause the removal of the Custodian simultaneously
therewith.
11. Transfers to Successor Custodian. Upon the request of any successor
Custodian, the Custodian hereunder shall, upon payment of all amounts due it,
execute and deliver an instrument acknowledged by it transferring to such
successor Custodian all the rights
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<PAGE> 4
and powers of the retiring Custodian; and the retiring Custodian shall transfer,
deliver and pay over to the successor Custodian the Assets at the time held by
it hereunder, if any, together with all necessary instruments of transfer and
assignment or other documents properly executed necessary to effect such
transfer and such of the records or copies thereof maintained by the retiring
Custodian in the administration hereof as may be requested by the successor
Custodian, and shall thereupon be discharged from all duties and
responsibilities hereunder. Any resignation or removal of the Custodian shall
become effective upon such acceptance of appointment by the successor Custodian.
The indemnification of the resigning Custodian provided for hereunder shall
survive any resignation, discharge or removal of the Custodian hereunder.
12. Custodian Merger, Consolidation. Any corporation into which the
Custodian may be merged or converted or with which it may be consolidated, or
any corporation resulting from any merger, conversion or consolidation to which
the Custodian shall be a party, shall be the successor Custodian hereunder and
under the Trust Agreement without the execution or filing of any paper,
instrument or further act to be done on the part of the parties hereto or
thereto, provided that such corporation meets the requirements set forth in the
Trust Agreement.
13. Compensation; Expenses. The Custodian shall receive compensation for
performing the usual, ordinary, normal and recurring services under this
Custodian Agreement and, with the prior written approval of the Trust,
reimbursement for any and all expenses and disbursements incurred hereunder, as
provided in Section 3.1 of the Administration Agreement.
14. Section 17(f) Qualification. The Custodian hereby represents that it
is qualified to act as a custodian under Section 17(f) of the Investment Company
Act.
15. Custodian's Limited Liability. The Trust shall indemnify and hold
the Custodian harmless from and against any loss, damages, cost or expense
(including the costs of investigation, preparation for and defense of legal
and/or administrative proceedings related to a claim against it and reasonable
attorneys' fees and disbursements), liability or claim incurred by reason of any
inaccuracy in information furnished to the Custodian by the Trustees, or any act
or omission in the course of, connected with or arising out of any services to
be rendered hereunder, provided that the Custodian shall not be indemnified and
held harmless from and against any such loss, damages, cost, expense, liability
or claim arising from its willful misfeasance, bad faith or gross negligence in
the performance of its duties, or its reckless disregard of its duties and
obligations hereunder. Neither the Federal Reserve Book Entry System nor the
Depository Trust Company shall be deemed to be agents of the Custodian.
16. Rights of Set-Off; Banker's Lien. The Custodian hereby waives all
rights of set-off or banker's lien it may have with respect to the Assets held
by it as Custodian hereunder.
17. Termination. This Agreement shall terminate upon the earlier of the
termination of the Trust or the appointment of a successor Custodian.
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18. Choice of Law. This Agreement is executed and delivered in the State
of New York, and all laws or rules of construction of the State of New York
shall govern the right of the parties hereto and the interpretation of the
provisions hereof.
19. Notices. Any notice to be given to the Trust hereunder shall be in
writing and shall be duly given if mailed or delivered to DECS Trust IV, c/o
Tyler Dickson, Salomon Smith Barney Inc., Seven World Trade Center, New York,
New York 10048, Tel. (212) 723-7325, Fax. (212) 723-8874, and to the Custodian
if mailed or delivered to The Bank of New York, 101 Barclay Street, Floor 12E,
New York, New York 10286, Attention: Betty Cocozza, Tel.: (212) 815-5366, Fax:
(212) 815-7157 or at such other address as shall be specified by the addressee
to the other party hereto in writing.
20. No Third Party Beneficiaries. Nothing herein, express or implied,
shall give to any Person, other than the Trust, the Custodian and their
respective successors and assigns, any benefit of any legal or equitable right,
remedy or claim hereunder.
21. Amendments; Trust Agreement Changes; Waiver. This Agreement shall
not be deemed or construed to be modified, amended, rescinded, canceled or
waived, in whole or in part, except by a written instrument signed by a duly
authorized representative of the party to be charged. The Trustees shall notify
the Custodian of any change in the Trust Agreement prior to the effective date
of any such change. Failure of either party hereto to exercise any right or
remedy hereunder in the event of a breach hereof by the other party shall not
constitute a waiver of any such right or remedy with respect to any subsequent
breach.
22. Counterparts. This Agreement may be signed in any number of
counterparts with all counterparts constituting one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
DECS TRUST IV
By: /s/ Tyler Dickson
-------------------------------
Tyler Dickson
as Trustee
The Bank of New York
By: /s/ Betty Cocozza
-------------------------------
Name: Betty Cocozza
Title: Assistant Vice President
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<PAGE> 1
Exhibit (k)(1)
CGSH Draft of 1/6/99
ADMINISTRATION AGREEMENT
This ADMINISTRATION AGREEMENT dated as of this ____ day of __, 1999 by
and between The Bank of New York, a New York banking corporation (the
"Administrator"), and DECS Trust IV (such trust and the trustees thereof acting
in their capacity as such being referred to herein as the "Trust"), a statutory
business trust organized under the Business Trust Act of the State of Delaware
pursuant to a Declaration of Trust dated as of December 17, 1998, as amended and
restated as of ________ , 1999 (the "Trust Agreement").
WITNESSETH
WHEREAS the Trust is a non-diversified, closed-end management investment
company, as defined in the Investment Company Act of 1940 (the "Investment
Company Act"), formed to purchase and hold certain U.S. Treasury securities (the
"Treasury Securities"), to enter into and hold a forward purchase contract (the
"Contract") with Hyundai Electronics America and to issue DECS in accordance
with the terms and conditions of the Trust Agreement;
WHEREAS the Trust desires to engage the services of the Administrator to
assume certain duties and responsibilities of the Trust under the Trust
Agreement and the Investment Company Act and to undertake certain services on
behalf of and subject to the supervision of the Trust as provided herein; and
WHEREAS the Administrator is qualified and willing to assume such duties
and responsibilities and to undertake to render such services, subject to the
supervision of the Trust, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. Capitalized terms not otherwise defined herein shall
have the respective meanings specified in the Trust Agreement.
ARTICLE II
ENGAGEMENT OF ADMINISTRATOR
2.1. Engagement. The Trust hereby engages the Administrator, and the
Administrator hereby agrees to be so engaged, to provide or cause the provision
of the services hereinafter enumerated.
2.2. Services of Administrator. Subject to the supervision of the Trust,
the Administrator shall on behalf of the Trust take the actions set forth in
Sections 2.6, 2.7 and 2.8 of the Trust Agreement, to the extent such
responsibilities may lawfully be delegated to the
<PAGE> 2
Administrator; provided, however, that the Administrator shall not (i) render
investment advisory services to the Trust as defined in the Investment Company
Act or the Investment Advisers Act of 1940; (ii) have the power of the Trustees
to sell the Treasury Securities except as provided in Section 2.8 of the Trust
Agreement; or (iii) have the power to select the independent public accountants
for the Trust. Additionally, the Administrator shall be responsible for
rendering the following services:
(a) instructing the Paying Agent on behalf of the Trust to take the
actions set forth in Sections 2.6, 2.7, 2.8 and 3.5 of the Trust Agreement and
to otherwise perform the duties of the Paying Agent referred to in the Trust
Agreement;
(b) with the approval of the Trustees, engaging legal and other
professional advisors, other than the Trust's independent accountants as
provided in clause 2.2 (iii) above;
(c) receiving all demands, bills and invoices for expenses incurred by
or on behalf of the Trust and pay the same, or cause the Paying Agent to pay the
same, out of moneys paid to the Administrator pursuant to the Fund Expense
Agreement dated the date hereof between Salomon Smith Barney Inc. and The Bank
of New York (the "Fund Expense Agreement") but in no event out of any assets of
the Trust, and give notice to Salomon Smith Barney Inc. pursuant to the Fund
Indemnity Agreement dated the date hereof between Salomon Smith Barney Inc. and
the Trust (the "Fund Indemnity Agreement") of any claim for Indemnification
Expenses (as defined in the Fund Indemnity Agreement) or any threatened claim
for Indemnification Expenses;
(d) (i) keeping or causing to be kept all the books and records of the
Trust (other than those to be kept by the Paying Agent), and (ii) preparing and,
as necessary, mailing, filing or publishing, or, as appropriate, directing the
Paying Agent or causing the legal and other professional advisors engaged
pursuant to Section 2.2(b) to prepare and, as necessary, mail, file or publish
any and all notices, proxies, reports, tax returns and other communications and
documents as required under the Trust Agreement, the Investment Company Act, the
Securities Exchange Act of 1934, or the Code, or, as reasonably requested by the
Trustees, under any other applicable laws, rules or regulations or otherwise;
provided, however, that responsibility for the adequacy and accuracy of any such
reports, returns, etc. shall be that of the Trustees and provided, further, that
the Administrator shall have no liability for the adequacy or accuracy of such
reports, returns, etc.;
(e) at the request of the Trustees and upon being furnished with such
reasonable security and indemnity against any related expense or liability as
the Administrator may require, instituting and prosecuting, in accordance with
the instructions of the Trustees, legal or other appropriate proceedings to
enforce any and all rights and remedies of the Trust;
(f) receiving and reviewing on behalf of the Trust all notices, reports,
certificates and other documents regarding the Contract and the Treasury
Securities;
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(g) make or cause to be made all necessary arrangements with respect to
meetings of Trustees and meetings of Holders, including, without limitation, the
preparation of notices, proxies and minutes, subject to the approval of the
Trustees; and
(h) in conjunction with the Trustees, determining and publishing, in
such manner as the Trustees shall direct in writing, the Trust's net asset value
in accordance with Section 8.2(c) of the Trust Agreement and the Trust's policy
as set forth in the Prospectus.
2.3. Certain Rights of the Administrator. In connection with the
performance of its duties under this Agreement, the Administrator shall not be
liable to the Trust, the Trustees or any Holder (i) for any action taken or for
refraining from taking any action hereunder except in the case of its willful
misfeasance, bad faith, gross negligence or the reckless disregard of its duties
hereunder, (ii) with respect to any action taken or omitted to be taken by it in
good faith in accordance with the directions of the Trustees or of any Trustee
or (iii) in connection with the performance of its duties under Section 2.2(h)
hereof, for good faith reliance upon information furnished by third parties
selected by the Administrator with due care. The Administrator shall under no
circumstances be liable for any punitive, exemplary, indirect or consequential
damages. The Administrator may consult with counsel and the written advice of
such counsel shall be full and complete authorization and protection in respect
of any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon. The Administrator may perform its duties and exercise its
rights hereunder either directly or by or through agents or attorneys appointed
with due care by it but shall be liable for the acts and omissions of such
persons to the same extent as if the functions had been performed by the
Administrator itself (except as to the extent that the Trustees shall have
directed the Administrator to retain such persons, in which event the
Administrator shall not be liable for such persons' acts or omissions). Without
limiting the generality of the preceding sentence, the Administrator (i) may
select and employ independent public accountants acceptable to the Trustees
(other than the independent public accountants referred to in clause (iii) of
Section 2.2 of this Agreement and Section 2.5(d) of the Trust Agreement) to keep
the financial books and records of the Trust, to prepare the financial
statements of the Trust and to prepare Trust tax returns, and (ii) may select
and engage attorneys acceptable to the Trustees to prepare annual, semiannual
and periodical reports, notices of meetings and proxy statements, annual reports
to Holders and other documents required under the Investment Company Act or the
Securities Exchange Act of 1934. The Administrator shall not be liable and shall
be fully protected in acting upon any writing or document reasonably believed by
it to be genuine and to have been given, signed or made by the proper person or
persons and shall not be held to have any notice of any change of authority of
any person until receipt of written notice thereof from a Trustee.
2.4. Power of Attorney. The Trustees hereby appoint the Administrator,
acting through any duly appointed officer, the attorney-in-fact and agent of the
Trust for the purpose of performing the duties prescribed in Sections 2.2(d)(ii)
and 2.2(g) hereof.
2.5. Delivery of Certain Documents. The Trust will deliver to the
Administrator, promptly following the execution hereof: (a) a complete conformed
copy of the registration statement of the Trust under the Securities Act and the
Investment Company Act,
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including all amendments, exhibits and schedules thereto; and (b) the EDGAR
access codes (Central Index Key, CIK Confirmation Code, Password and Password
Modification Access Code) employed to file such registration statement.
ARTICLE III
COMPENSATION OF ADMINISTRATOR
3.1. Compensation. (a) For services to be rendered by the Administrator
(i) pursuant to this Agreement, (ii) as custodian under the Custodian Agreement,
dated as of __________, 1999, between the Administrator, as custodian, and the
Trust, (iii) as paying agent under the Paying Agent Agreement, dated as of
__________, 1999, between the Administrator, as paying agent, and the Trust, and
(iv) as collateral agent under the Collateral Agreement, dated as of ________,
1999, among the Administrator, as collateral agent, Hyundai Electronics America
and the Trust, and for the payment of Trust expenses pursuant to Section 2.2(c)
hereof, the Administrator shall receive only such fees and expenses as shall be
paid to it pursuant to the terms of the Fund Expense Agreement and shall have no
recourse to the assets of the Trust for the payment of any such amounts.
(b) In connection with the performance of the services referred to in
Section 3.1(a) hereof, the Administrator, as such or in any other capacity,
shall not be required to advance, expend or risk its own funds or otherwise
incur or become exposed to financial liability in the performance of its duties
hereunder or under the other agreements referred to in Section 3.1(a) hereof.
3.2. Additional Services. If and to the extent that the Trustees shall
request the Administrator to render services for the Trust, other than those to
be rendered by the Administrator hereunder, and if the Administrator agrees to
render such services, such additional services shall be compensated separately
on terms to be agreed upon between the Administrator and the Trustees from time
to time.
ARTICLE IV
TERMINATION
4.1. Termination.
(a) This Agreement shall terminate immediately upon written notice of
termination from the Trustees to the Administrator if any of the following
events shall occur:
(i) If the Administrator shall violate or default in the
performance of any provision of this Agreement, the Trust Agreement, or
the Investment Company Act, and after notice of such violation or
default, shall not cure such violation or default within 30 days; or
(ii) If the Administrator shall be adjudged bankrupt or
insolvent by a court of competent jurisdiction, or an order shall be
made by a court of competent jurisdiction for the appointment of a
receiver, liquidator, or trustee of the Administrator, or of all or
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<PAGE> 5
substantially all of its property by reason of the foregoing, or
approving any petition filed against the Administrator for its
reorganization, and such adjudication or order shall remain in force or
unstayed for a period of 30 days; or
(iii) If the Administrator shall institute proceedings for
voluntary bankruptcy, or shall file a petition seeking reorganization
under the federal bankruptcy laws, or for relief under any law for the
relief of debtors, or shall consent to the appointment of a receiver of
the Administrator or of all or substantially all of its property, or
shall make a general assignment for the benefit of its creditors, or
shall admit in writing its inability to pay its debts generally as they
become due; or
(iv) Upon the voluntary or involuntary dissolution of the
Administrator, or unless the Trust shall have given its prior written
consent thereto, the merger or consolidation of the Administrator with
any other entity.
If any of the events specified in clauses (ii), (iii) or (iv) of this
Section 4.1(a) shall occur, the Administrator shall give immediate written
notice thereof to the Trustees.
(b) Notwithstanding anything to the contrary contained herein, this
Agreement shall terminate immediately (i) upon termination of the Trust
Agreement, (ii) upon termination of the Paying Agent Agreement, (iii) upon
termination of all the Collateral Agreement, (iv) upon termination of the
Custodian Agreement or (v) upon the resignation or removal of the Custodian.
(c) The Trustees may remove the Administrator, or the Administrator may
resign, and thereby terminate this Agreement without penalty upon 60 days' prior
written notice to the other party hereto; provided that neither party hereto may
terminate this Agreement pursuant to this Section 4.1(c) unless a successor
Administrator shall have been appointed and shall have accepted the duties of
the Administrator. If, within 30 days after notice by the Administrator to the
Trustees of termination of this Agreement, no successor Administrator shall have
been selected and accepted the duties of the Administrator, the Administrator
may apply to a court of competent jurisdiction for the appointment of a
successor Administrator.
4.2. Effect of Termination. The Administrator shall forthwith upon
termination of this Agreement deliver to the Trustees any records or other
property of the Trust then in the possession or custody of the Administrator.
Any obligation to indemnify the Administrator pursuant to Section 6.6 hereof
shall survive the termination of this Agreement.
ARTICLE V
RECORDS AND REPORTS
5.1. Books and Records; Inspection and Copying. The Administrator shall
keep, or cause to be kept, appropriate, and reasonably detailed and accurate,
books and records of all its activities pursuant to this Agreement. The Trustees
shall have the right to inspect such books and records during the
Administrator's normal business hours upon reasonable request, and to make
copies of the same at the expense of the Trust.
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5.2. Access to Information. The Administrator shall make available to
each of the Trustees all information it receives and compiles with respect to
the Contract and the Treasury Securities, the moneys available to the Trust, the
financial condition of the Trust and all other relevant matters concerning the
Trust.
ARTICLE VI
MISCELLANEOUS
6.1. Binding Effect. Any corporation into which the Administrator may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the
Administrator shall be a party, shall be the successor Administrator hereunder
and under the Trust Agreement without the execution or filing of any paper,
instrument or further act to be done on the part of the parties hereto, provided
that such corporation meets the requirements set forth in the Trust Agreement
and provided, further, that the Trustees have given their prior written consent
to the Administrator with respect to any such merger, conversion or
consolidation. This Agreement shall be binding on and inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
6.2. Entire Agreement. This Agreement contains the entire agreement
between the parties with respect to the matters contained herein and supersedes
all prior agreements or understandings, whether oral or written. This Agreement
shall not be amended, changed, modified, or discharged, in whole or in part,
except by an instrument in writing signed by both parties hereto, or their
respective successors or permitted assigns.
6.3. Notices. Any notice, report or other communication required or
permitted to be given hereunder shall be in writing, and shall, unless some
other method of giving such notice, report or other communication is accepted by
the party to whom it is to be given or is required by the Trust Agreement or the
Investment Company Act, be given by being mailed by U.S. first class mail,
certified or registered, return receipt requested, postage prepaid, to the
following addresses of the parties hereto:
The Trust: DECS Trust IV
c/o Puglisi & Associates
850 Library Avenue, Suite 204
Newark, Delaware 19715
Telephone: 302-738-6680
Telecopier: 302-738-7210
The Administrator: The Bank of New York
101 Barclay Street, Floor 12E
New York, New York 10286
Attn: Betty Cocozza
Telephone: 212-816-5366
Telecopier: 212-816-
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Any party may at any time give written notice to the other party that it
wishes to change its address for the purposes of this Section 6.3.
6.4. Applicable Law. The provisions of this Agreement shall be construed
and interpreted in accordance with the law of the State of New York as at the
time in effect except to the extent such law is preempted by federal law.
6.5. Non-assignability. This Agreement and the rights and obligations of
the parties hereunder may not be assigned or delegated by either party without
the prior written consent of the other party.
6.6. Indemnification. The Trust shall indemnify and hold the
Administrator harmless from and against any loss, damages, cost or expense
(including the costs of investigation, preparation for and defense of legal
and/or administrative proceedings related to a claim against it and reasonable
attorneys' fees and disbursements), liability or claim incurred by reason of any
inaccuracy in information furnished to the Administrator by the Trustees, or any
act or omission in the course of, connected with or arising out of any services
to be rendered hereunder, provided that the Administrator shall not be
indemnified and held harmless from and against any such loss, damages, cost,
expense, liability or claim incurred by reason of its willful misfeasance, bad
faith, or gross negligence in the performance of its duties, or its reckless
disregard of its duties and obligations hereunder.
6.7. Provisions of Law to Control. This Agreement shall be subject to
the applicable provisions of the Investment Company Act and the rules and
regulations of the Commission thereunder. To the extent that any provisions
herein contained conflict with any applicable provisions of the Investment
Company Act or such rules and regulations, the latter shall control.
6.8. Counterparts. This Agreement may be signed in counterparts with all
counterparts constituting one and the same instrument.
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<PAGE> 8
IN WITNESS WHEREOF, the parties have hereunto executed this
Administration Agreement as of the day and year first above written.
DECS TRUST IV
-----------------------------------
Donald J. Puglisi
as Managing Trustee
850 Library Avenue, Suite 204
Newark, Delaware 19716
THE BANK OF NEW YORK
By:
-------------------------------
Name: Betty Cocozza
Title: Assistant Vice president
8
<PAGE> 1
Exhibit (k)(2)
CGSH DRAFT of 1/6/99
PAYING AGENT AGREEMENT
This PAYING AGENT AGREEMENT dated as of this ____ day of __________,
1999 by and between The Bank of New York, a New York banking corporation (the
"Paying Agent"), and DECS Trust IV (such trust and the trustees thereof acting
in their capacity as such being referred to herein as the "Trust"), a statutory
business trust organized under the Business Trust Act of the State of Delaware
pursuant to a Declaration of Trust dated as of December 17, 1998, as amended and
restated as of ________, 1999 (the "Trust Agreement").
WITNESSETH
WHEREAS the Trust is a non-diversified, closed-end management investment
company, as defined in the Investment Company Act of 1940 (the "Investment
Company Act"), formed to purchase and hold certain U.S. Treasury securities, to
enter into and hold a forward purchase contract with Hyundai Electronics America
and to issue DECS to the public in accordance with the terms and conditions of
the Trust Agreement;
WHEREAS the Trustees desire to engage the services of the Paying Agent
to assume certain responsibilities and to perform certain duties as the transfer
agent, registrar and paying agent with respect to the DECS upon the terms and
conditions of this Agreement; and
WHEREAS the Paying Agent is qualified and willing to assume such
responsibilities and to perform such duties, subject to the supervision of the
Trustees, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. Capitalized terms not otherwise defined herein shall
have the respective meanings specified in the Trust Agreement.
ARTICLE II
PAYING AGENT
2.1 Appointment of Paying Agent and Acceptance. The Trust Agreement
provides that The Bank of New York shall act as the initial Paying Agent. The
Bank of New York hereby accepts such appointment and agrees to act in accordance
with its standard procedures and the provisions of the Trust Agreement and the
provisions set forth in this Article II as Paying Agent with respect to the
DECS. Without limiting the generality of the foregoing, The Bank of New York, as
Paying Agent, agrees that it shall establish and maintain the Trust Account,
subject to the provisions of Section 2.3 hereof.
<PAGE> 2
2.2 Certificates and Notices. The Trustees shall deliver to the Paying
Agent the certificates and notices required to be delivered to the Paying Agent
pursuant to the Trust Agreement, and the Paying Agent shall mail or publish such
certificates or notices as required by the Trust Agreement, but the Paying Agent
shall have no responsibility to confirm or verify the accuracy of certificates
or notices of the Trustees so delivered.
2.3 Payments and Investments. The Paying Agent shall make payments out
of the Trust Account as provided in Section 3.3 of the Trust Agreement. The
Paying Agent on behalf of the Trust shall effect the transactions set forth in
Sections 2.6, 2.7, 2.8, 3.5 and 8.3 of the Trust Agreement upon instructions to
do so from the Administrator (except that with respect to its obligations under
Section 8.3 of the Trust Agreement, the Paying Agent shall act without
instructions from the Administrator) and shall invest moneys on deposit in the
Trust Account in the Temporary Investments in accordance with Section 3.5 of the
Trust Agreement. Except as otherwise specifically provided herein or in the
Trust Agreement, the Paying Agent shall not have the power to sell, transfer or
otherwise dispose of any Temporary Investment prior to the maturity thereof, or
to acquire additional Temporary Investments. The Paying Agent shall hold any
Temporary Investments to their maturity and shall apply the proceeds thereof
paid upon maturity to the payment of the next succeeding Quarterly Distribution.
All such Temporary Investments shall be selected by the Trustees from time to
time or pursuant to standing instructions from the Trustees, and the Paying
Agent shall have no liability to the Trust or any Holder or any other Person
with respect to any such Temporary Investment.
2.4 Instructions from Administrator. The Paying Agent shall execute all
instructions received from an officer of the Administrator, except to the extent
that they conflict with or are contrary to the terms of the Trust Agreement or
this Agreement.
ARTICLE III
TRANSFER AGENT AND REGISTRAR
3.1 Original Issue of Certificates. On the date DECS sold pursuant to
the Underwriting Agreement are originally issued, certificates for such DECS
shall be issued by the Trust, and, at the request of the Trustees, registered in
such names and such denominations as the Underwriters shall have previously
requested of the Trustees, executed manually or in facsimile by the Managing
Trustee and countersigned by the Paying Agent. At no time shall the aggregate
number of DECS represented by such countersigned certificates exceed the number
of then outstanding DECS except as permitted by Section 3.4 hereof.
3.2 Registry of Holders. The Paying Agent shall maintain a registry of
the Holders of the DECS.
3.3 Registration of Transfer of DECS. DECS shall be registered for
transfer or exchange, and new certificates shall be issued, in the name of the
designated transferee or transferees, upon surrender of the old certificates in
form deemed by the Paying Agent properly endorsed for transfer with (a) all
necessary endorsers' signatures guaranteed in such manner and form as the Paying
Agent may require by a guarantor reasonably believed by the Paying Agent to be
responsible, (b) such assurances as the Paying Agent shall deem necessary or
appropriate to
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<PAGE> 3
evidence the genuineness and effectiveness of each necessary endorsement and (c)
satisfactory evidence of compliance with all applicable laws relating to the
collection of taxes or funds necessary for the payment of such taxes.
3.4 Lost Certificates. If there shall be delivered to the Paying Agent
(a) evidence to its satisfaction of the destruction, loss or theft of any
certificate for DECS and (b) such security or indemnity as may be required by it
to hold it and any of its agents harmless, then, in the absence of notice to the
Paying Agent that such certificate has been acquired by a protected purchaser,
the Managing Trustee shall execute and upon its request the Paying Agent shall
countersign and deliver, in lieu of any such destroyed, lost or stolen
certificate, a new certificate of like tenor bearing a number not
contemporaneously outstanding. Any request by the Managing Trustee to the Paying
Agent to issue a replacement or new certificate pursuant to this Section 3.4
shall be deemed to be a representation and warranty by the Trust to the Paying
Agent that such issuance will comply with provisions of law, the Trust Agreement
and the resolutions adopted by the Trustees with respect to lost securities. If,
after the delivery of such new certificate, a protected purchaser of the
original certificate in lieu of which such new certificate was issued presents
for payment such original certificate, the Trust and the Paying Agent shall be
entitled to recover such new certificate from the person to whom it was
delivered or any transferee thereof, except a protected purchaser, and shall be
entitled to recover upon the security or indemnity provided therefor to the
extent of any loss, damage, cost or expense incurred by the Trust or the Paying
Agent in connection therewith. Upon the issuance of any new certificate under
this Section 3.4, the Trust and the Paying Agent may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in relation thereto and any other expenses (including the fees and expenses of
the Paying Agent) connected therewith.
3.5 Transfer Books. The Paying Agent shall maintain the transfer books
listing the Holders of the DECS. In case of any written request or demand for
the inspection of the transfer books of the Trust or any other books in the
possession of the Paying Agent, the Paying Agent shall notify the Trustees and
secure instructions as to permitting or refusing such inspection. The Paying
Agent reserves the right, however, to exhibit the transfer books or other books
to any person in case it is advised by its counsel that its failure to do so
would be unlawful.
3.6 Disposition of Canceled Certificates, Records. The Paying Agent
shall retain certificates which have been canceled in transfer or in exchange
and accompanying documentation in accordance with applicable rules and
regulations of the Commission for six calendar years from the date of such
cancellation, and shall make such records available during this period at any
time, or from time to time, for reasonable periodic, special, or other
examinations by representatives of the Commission and the Board of Governors of
the Federal Reserve System. Thereafter such records shall not be destroyed by
the Paying Agent but will be safely stored for possible future reference. In
case of any request or demand for the inspection of the register of the Trust or
any other books in the possession of the Paying Agent, the Paying Agent shall
notify the Trustees and secure instructions as to permitting or refusing such
inspection. The Paying Agent reserves the right, however, to exhibit the
register or other records to any person in case it is advised by its counsel
that its failure to do so would (i) be unlawful, or
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<PAGE> 4
(ii) expose it to liability, unless the Trustees shall have offered
indemnification satisfactory to the Paying Agent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE TRUST
The Trust represents and warrants to the Paying Agent that:
(a) the Trust is a validly existing trust under the laws of the
State of Delaware and the Trustees have full power under the
Trust Agreement to execute and deliver this Agreement and to
authorize, create and issue the DECS;
(b) this Agreement has been duly and validly authorized, executed
and delivered by the Trust and constitutes the valid and binding
agreement of the Trust, enforceable against the Trust in
accordance with its terms, subject as to such enforceability to
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to
general equitable principles;
(c) the form of the certificate evidencing the DECS complies with
all applicable laws of the State of Delaware and the State of
New York;
(d) the DECS have been duly and validly authorized, executed and
delivered by the Trust and are validly issued;
(e) the DECS have been registered under the Securities Act of 1933,
the Trust has been registered under the Investment Company Act,
and no further action by or before any governmental body or
authority of the United States or of any state thereof is
required in connection with the execution and delivery of this
Agreement or the issuance of the DECS;
(f) the execution and delivery of this Agreement and the issuance
and delivery of the DECS do not and will not conflict with,
violate, or result in a breach of, the terms, conditions or
provisions of, or constitute a default under, the Trust
Agreement, any law or regulation, any order or decree of any
court or public authority having jurisdiction over the Trust, or
any mortgage, indenture, contract, agreement or undertaking to
which the Trust is a party or by which it is bound; and
(g) no taxes are payable upon or in respect of the execution of this
Agreement or the issuance of the DECS.
4
<PAGE> 5
ARTICLE V
DUTIES AND RIGHTS
5.1 Duties.
(a) The Paying Agent is acting solely as agent for the Trust
hereunder and owes no fiduciary duties to any other Person by
reason of this Agreement.
(b) In the absence of bad faith, gross negligence or willful
misfeasance on its part in the performance of its duties
hereunder or its reckless disregard of its duties and
obligations hereunder, the Paying Agent shall not be liable for
any action taken, suffered, or omitted in the performance of its
duties under this Agreement or in accordance with any direction
or request of the Managing Trustee not inconsistent with the
provisions of this Agreement. The Paying Agent shall under no
circumstances be liable for any punitive, exemplary, indirect or
consequential damages hereunder.
5.2. Rights.
(a) The Paying Agent may rely and shall be protected in acting or
refraining from acting upon any communication authorized hereby
and upon any written instruction, notice, request, direction,
consent, report, certificate, share certificate or other
instrument, paper or document reasonably believed by it to be
genuine. The Paying Agent shall not be liable for acting upon
any telephone communication authorized hereby which the Paying
Agent believes in good faith to have been given by the Trustees.
(b) The Paying Agent may consult with legal counsel and the advice
of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon.
(c) The Paying Agent may perform its duties and exercise its rights
hereunder either directly or by or through agents or attorneys
appointed with due care by it hereunder.
5.3 Disclaimer. The Paying Agent makes no representations as to (a) the
first two recitals of this Agreement or (b) the validity or adequacy of the
DECS.
5.4 Compensation, Expenses and Indemnification.
(a) The Paying Agent shall receive for all services rendered by it
under this Agreement and, upon the prior written approval of the
Trustees, for all expenses, disbursements and advances incurred
or made by the Paying Agent in accordance with any provision of
this Agreement (including the reasonable
5
<PAGE> 6
compensation and the expenses and disbursements of its agents
and counsel), the compensation set forth in Section 3.1 of the
Administration Agreement.
(b) The Trust shall indemnify the Paying Agent for and hold it
harmless against any loss, liability, claim or expense
(including the costs of investigation, preparation for and
defense of legal and/or administrative proceedings relating to a
claim against it and reasonable attorneys' fees and
disbursements) arising out of or in connection with the
performance of its obligations under this Agreement, provided
such loss, liability or expense is not the result of gross
negligence, willful misfeasance or bad faith on its part in the
performance of its duties hereunder or its reckless disregard of
its duties or obligations hereunder, including the costs and
expenses of defending itself against any claim or liability in
connection with its exercise or performance of any of its duties
or obligations hereunder and thereunder. The indemnification
provided by this Section 5.4(b) shall survive the termination of
this Agreement.
ARTICLE VI
MISCELLANEOUS
6.1 Term of Agreement.
(a) The term of this Agreement is unlimited unless terminated as
provided in this Section 6.1 or unless the Trust is terminated,
in which case this Agreement shall terminate ten days after the
date of termination of the Trust. This Agreement may be
terminated by either party hereto without penalty upon 60 days'
prior written notice to the other party hereto; provided that
neither party hereto may terminate this Agreement pursuant to
this Section 6.1(a) unless a successor Paying Agent shall have
been appointed and shall have accepted the duties of the Paying
Agent. The termination of the Administration Agreement or the
resignation or removal of the Custodian shall cause the
termination of this Agreement simultaneously therewith. If,
within 30 days after notice by the Paying Agent of termination
of this Agreement, no successor Paying Agent shall have been
selected and accepted the duties of the Paying Agent, the Paying
Agent may apply to a court of competent jurisdiction for the
appointment of a successor Paying Agent.
(b) Except as otherwise provided in this paragraph (b), the
respective rights and duties of the Trust and the Paying Agent
under this Agreement shall cease upon termination of this
Agreement. The Trust's representations, warranties, covenants
and obligations to the Paying Agent under Sections 4 and 5.4
hereof shall survive the termination hereof. Upon termination of
the Agreement, the Paying Agent shall, at the Trust's request,
promptly deliver to the Trust or to any successor Paying Agent
as requested by the Trust (i) copies of all books and records
maintained by it and (ii) any funds deposited with the Paying
Agent by the Trust.
6
<PAGE> 7
6.2 Communications. Except for communications authorized to be made by
telephone pursuant to this Agreement, all notices, requests and other
communications to any party hereunder shall be in writing (including telecopy or
similar writing) and given to such person at its address or telecopy number set
forth below:
If to the Trust, DECS Trust IV
addressed: c/o Puglisi & Associates
850 Library Avenue, Suite 204
Newark, Delaware 19715
Telephone: 302-738-6680
Telecopier: 302-738-7210
with a copy to the Administrator if the duties of the Administrator are being
performed by a Person other than the Person performing the obligations of the
Paying Agent.
If to the Paying Agent, The Bank of New York
addressed: 101 Barclay Street, Floor 12E
New York, New York 10286
Attn: Betty Cocozza
Telephone: 212-815-5366
Telecopier: 212-815-
or such other address or telecopy number as such party may hereafter specify for
such purposes by notice to the other party. Each such notice, request or
communication shall be effective when delivered at the address specified herein.
Communications shall be given on behalf of the Trust by the Trustees (or by the
Administrator, provided that the Trust shall not have delivered to the Paying
Agent an instrument in writing revoking the authorization of the Administrator
to act for it pursuant hereto) and on behalf of the Paying Agent by a Senior
Vice President or Vice President of the Paying Agent assigned to its Corporate
Trust Department.
6.3 Entire Agreement. This Agreement contains the entire agreement
between the parties relating to the subject matter hereof, and there are no
other representations, endorsements, promises, agreements or understandings,
oral, written or inferred, between the parties relating to the subject matter
hereof.
6.4 No Third Party Beneficiaries. Nothing herein, express or implied,
shall give to any Person, other than the Trustees, the Paying Agent and their
respective successors and assigns, any benefit of any legal or equitable right,
remedy or claim hereunder.
6.5 Amendment; Waiver.
(a) This Agreement shall not be deemed or construed to be modified,
amended, rescinded, canceled or waived, in whole or in part,
except by a written instrument signed by a duly authorized
representative of the party to be charged. The Trust shall
notify the Paying Agent of any change in the Trust Agreement
prior to the effective date of any such change.
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<PAGE> 8
(b) Failure of either party hereto to exercise any right or remedy
hereunder in the event of a breach hereof by the other party
shall not constitute a waiver of any such right or remedy with
respect to any subsequent breach.
6.6 Successors and Assigns. Any corporation into which the Paying Agent
may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Paying Agent shall be a party, shall be the successor Paying Agent under the
Trust Agreement without the execution or filing of any paper, instrument or
further act to be done on the part of the parties hereto, provided that such
corporation meets the requirements set forth in the Trust Agreement and provided
further that the Trust has given its prior written consent to the Paying Agent
with respect to any such merger, conversion or consolidation. This Agreement
shall be binding upon, inure to the benefit of, and be enforceable by, the
respective successors of each of the Trust and the Paying Agent. This Agreement
shall not be assignable by either the Trust or the Paying Agent without the
prior written consent of the other party.
6.7 Severability. If any clause, provision or section hereof shall be
ruled invalid or unenforceable by any court of competent jurisdiction, the
invalidity or unenforceability of such clause, provision or section shall not
affect any of the remaining clauses, provisions or sections hereof.
6.8 Execution in Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
6.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the law of the State of New York, without giving effect to
principles of conflicts of law.
8
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the date first above written.
DECS TRUST IV
------------------------------------------
Donald J. Puglisi
as Managing Trustee
THE BANK OF NEW YORK
By:
-------------------------------
Name: Betty Cocozza
Title: Assistant Vice President
9
<PAGE> 1
Exhibit (k)(3)
CGSH Draft of 1/5/99
FORWARD PURCHASE AGREEMENT
Between
HYUNDAI ELECTRONICS AMERICA,
As Seller,
and
DECS TRUST IV, As Purchaser
Dated as of
, 1999
<PAGE> 2
FORWARD PURCHASE AGREEMENT
THIS AGREEMENT is made as of this ________ day of ________, 1999
between Hyundai Electronics America, a corporation organized under the law of
the State of ("Seller") and DECS Trust IV, a business trust organized under the
law of the State of Delaware under and by virtue of an amended and restated
declaration of trust, dated as of ________, 1999 (the "Declaration of Trust")
(such trust and the trustees thereof acting in their capacity as such being
referred to herein as "Purchaser").
WHEREAS, Seller owns shares of common stock, $.01 par value (the
"Common Stock"), of Maxtor Corporation, a Delaware corporation (including its
successors, the "Company");
WHEREAS, Purchaser has filed with the Securities and Exchange
Commission a registration statement contemplating the offering of up to
________ DECS (the "DECS"), the terms of which contemplate delivery by Purchaser
to the holders thereof of a number of shares of Common Stock (or, if Seller
exercises its cash settlement option, cash in lieu thereof), on , 2002 (the
"Exchange Date");
WHEREAS, in exchange for certain consideration to be paid by
Purchaser hereunder, Purchaser and Seller desire to provide for the future
acquisition, sale and delivery of the aggregate number of shares of Common Stock
contemplated to be delivered by Purchaser in respect of the DECS on the Exchange
Date, at a price to be established under this Agreement;
WHEREAS, Seller has agreed to enter into a Collateral Agreement (the
"Collateral Agreement") to be dated as of ________, 1999, among Purchaser,
Seller and The Bank of New York, as collateral agent (the "Collateral Agent"),
to grant Purchaser a security interest in the shares of Common Stock specified
therein and in certain other circumstances certain other collateral to secure
the obligations of Seller hereunder;
WHEREAS, Purchaser has agreed, pursuant to an underwriting
agreement, dated ________, 1999 (the "Underwriting Agreement"), among Purchaser,
Seller, the Company and Salomon Smith Barney Inc. and ____________ (each an
"Underwriter", and collectively, the "Underwriters"), to issue and sell to the
Underwriters an aggregate of ________ DECS (the "Initial DECS") and, at the
Underwriters' option, up to ________ additional DECS (the "Additional DECS") to
cover over-allotments, if any;
NOW, THEREFORE, in consideration of their mutual covenants herein
contained, the parties hereto, intending to be legally bound, hereby mutually
covenant and agree as follows:
DEFINITIONS
As used herein, the following words and phrases shall have the
following meanings:
<PAGE> 3
"Acceleration Date" has the meaning provided in Article VII.
"Acceleration Value" has the meaning provided in Article VII.
"Act" means the Securities Act of 1933, as amended, and the rules
and regulations of the Commission promulgated thereunder.
"Additional DECS" has the meaning provided in the recitals of this
Agreement.
"Additional Purchase Price" has the meaning provided in Section
1.2(b).
"Additional Share Base Amount" means a number equal to the number of
Additional DECS that the Underwriters elect to Purchase under the Underwriting
Agreement.
"Additional Shares" has the meaning provided in Section 1.1(b).
"Additional STRIPS" means the U.S. Treasury obligations purchased by
Purchaser for settlement on the Option Closing Date.
"Adjustment Event" has the meaning provided in Section 6.2.
"Administrator" means The Bank of New York, administrator for
Purchaser under the Administration Agreement to be dated as of , 1999, or any
successor thereto.
"Affiliate" means, as to any Person, any other Person that, directly
or indirectly, controls, is controlled by or is under common control with such
Person or is a partner in, or a director or officer of, such Person. For
purposes of this definition, "control" (including the terms "controlled by" or
"under common control with") means, as to any Person, the possession, direct or
indirect, of the power to vote ten percent or more of the securities having
ordinary voting power for the election of directors of such Person, or the power
to direct or cause the direction of the management and policies of such Person,
whether through ownership of voting securities or by contract or otherwise.
"Bankruptcy Code" has the meaning provided in Section 10.7.
"Business Day" means any day that is not a Saturday, a Sunday or a
day on which the NYSE or banking institutions or trust companies in The City of
New York are authorized or obligated by law or executive order to close.
"Calculation Period" means any period of Trading Days for which an
average security price must be determined pursuant to this Agreement.
"Cash Delivery Option" has the meaning provided in Section 1.3(d).
"Closing Price" means, for any security on any date of
determination, (i) the closing sale price (or, if no closing price is reported,
the last reported sale price) of such security (regular way) on the NYSE on such
date, (ii) if such security is not listed for trading on the
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<PAGE> 4
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 reported, the last quoted bid price
for such security in the over-the-counter market as reported by the National
Quotation Bureau or similar organization or (vi) if such security is not so
quoted, the average of the mid-point of the last bid and ask prices for such
security from at least three nationally recognized investment banking firms
selected by the Administrator for such purpose. The Closing Price as determined
pursuant to the foregoing shall be subject to adjustment in certain
circumstances as provided in Section 6.1(c).
"Collateral" has the meaning provided in the Collateral Agreement.
"Collateral Agent" has the meaning provided in the recitals of this
Agreement.
"Collateral Agreement" has the meaning provided in the recitals of
this Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" has the meaning provided in the recitals of this
Agreement.
"Company" has the meaning provided in the recitals of this
Agreement.
"Contract Shares" has the meaning provided in Section 1.1.
"Custodian" means The Bank of New York, custodian for Purchaser
under the Custodian Agreement dated as of ________, 1999, or any successor
thereto.
"Declaration of Trust" has the meaning provided in the introductory
paragraph of this Agreement.
"DECS" has the meaning provided in the recitals of this Agreement.
"Dilution Adjustment" means any fraction or number by which the
Exchange Rate shall be multiplied pursuant to Section 6.1(a) or (b) or by which
Closing Prices may be divided pursuant to Section 6.1(c).
"Event of Default" has the meaning provided in Article VII.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"Exchange Date" has the meaning provided in the recitals of this
Agreement.
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<PAGE> 5
"Exchange Price" means the average Closing Price per share of Common
Stock on the 20 Trading Days immediately prior to (but not including) the
Exchange Date; provided, however, that if there are not 20 Trading Days for the
Common Stock occurring later than the 60th calendar day immediately prior to,
but not including, the Exchange Date, Exchange Price shall mean the market value
per share of the Common Stock as of the Exchange Date as determined by a
nationally recognized independent investment banking firm retained for this
purpose by the Administrator. The Exchange Price as determined pursuant to the
foregoing shall be subject to adjustment in certain circumstances as provided in
Section 6.1(c).
"Exchange Rate" has the meaning provided in Section 1.1(c).
"Firm Payment Date" has the meaning provided in Section 1.3(a).
"Firm Purchase Price" has the meaning provided in Section 1.2(a).
"Firm Share Base Amount" has the meaning provided in Section 1.1(a).
"Firm Shares" has the meaning provided in Section 1.1(a).
"Forward Purchase Contract Characterization" has the meaning
provided in Section 5.2(a).
"Independent Dealers" has the meaning provided in Article VII.
"Initial DECS" has the meaning provided in the recitals of this
Agreement.
"Initial Price" has the meaning provided in Section 1.1(c).
"Market Price" means, as of any date of determination, the average
Closing Price per share of Common Stock on the 20 Trading Days immediately prior
to (but not including) the date of determination; provided, however, that if
there are not 20 Trading Days for the Common Stock occurring later than the 60th
calendar day immediately prior to, but not including, such date, the Market
Price shall mean the market value per share of Common Stock as of such date as
determined by a nationally recognized investment banking firm retained for such
purpose by the Administrator.
"NYSE" means the New York Stock Exchange Inc.
"Officer" shall mean the manager, trustee, president, any vice
president, the chief financial officer, the treasurer or the secretary of a
Person.
"Officer's Certificate" means a certificate signed by an Officer of
a Person.
"Opinion of Counsel" means a written opinion from legal counsel who
is acceptable to the Trust.
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<PAGE> 6
"Option Closing Date" means the settlement dates for the Additional
DECS under Section 5 of the Underwriting Agreement.
"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 10% of the average of the Closing Prices of
the Common Stock over such 365-day period; provided that, for purposes of the
foregoing definition, the amount of cash dividends paid on a per share basis
shall be appropriately adjusted to reflect the occurrence during such period of
any event described in Article VI.
"Parent" has the meaning provided in Section 2(b) of this Agreement.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, limited
liability company, joint venture or other entity, or a government or any
political subdivision or agency thereof.
"Purchaser" has the meaning provided in the introductory paragraph
of this Agreement.
"Reimbursement Agreement" means the reimbursement agreement, to be
dated as of , 1999 among Salomon Smith Barney Inc. and Seller.
"Reported Securities" has the meaning provided in Section 6.2.
"Seller" has the meaning provided in the introductory paragraph of
this Agreement.
"Significant Subsidiary" has the meaning provided in Section 7(a).
"Threshold Appreciation Price" has the meaning provided in Section
1.1(c).
"Trading Day" means, with respect to any security the Closing Price
of which is being determined, a day on which such security (A) is not suspended
from trading on any national or regional securities exchange or association or
over-the-counter market at the close of business and (B) has traded at least
once on the national or regional securities exchange or association or
over-the-counter market that is the primary market for the trading of such
security.
"Transaction Value" has the meaning provided in Section 6.2.
"Underwriter" and "Underwriters" have the meaning provided in the
recitals of this Agreement.
"Underwriting Agreement" has the meaning provided in the recitals of
this Agreement.
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ARTICLE I
SALE AND PURCHASE
1.1 Sale and Purchase.
(a) Firm Shares. Upon the terms and subject to the conditions of
this Agreement, Seller agrees to sell to Purchaser, and Purchaser agrees to
purchase and acquire from Seller, the number of shares of Common Stock (the
"Firm Shares") equal to the product of ____________ (the "Firm Share Base
Amount") and the Exchange Rate.
(b) Additional Shares. Upon the terms and subject to the
conditions of this Agreement, Seller agrees to sell to Purchaser, and Purchaser
agrees to purchase and acquire from Seller, a number of additional shares of
Common Stock (the "Additional Shares") equal to the product of the Additional
Share Base Amount and the Exchange Rate. In addition to the other conditions set
forth herein, such purchase and sale shall be conditioned on the Underwriters'
purchase of the Additional Share Base Amount of Additional DECS pursuant to the
Underwriting Agreement on the Option Closing Date. Promptly after receipt by
Purchaser of notice that the Underwriters are exercising their option to
purchase Additional DECS, Purchaser will provide Seller with written notice of
such exercise by the Underwriters, stating the related Additional Share Base
Amount and the date on which Purchaser shall deliver the purchase price for the
Additional Shares, which shall be the Option Closing Date for the Additional
DECS. The Firm Shares and the Additional Shares (if any) are collectively
referred to herein as the "Contract Shares."
(c) Exchange Rate. The "Exchange Rate" shall be determined in
accordance with the following formula, subject to adjustment as a result of
certain events as provided in Article VI: (i) if the Exchange Price is greater
than $_______ (the "Threshold Appreciation Price"), 0._______, (ii) if the
Exchange Price is less than or equal to the Threshold Appreciation Price but
greater than $________ (the "Initial Price"), a fraction (rounded upward or
downward to the nearest 1/10,000th or, if there is not a nearest 1/10,000th, to
the next higher 1/10,000th) equal to the Initial Price divided by the Exchange
Price and (iii) if the Exchange Price is less than or equal to the Initial
Price, 1.
1.2 Purchase Price.
(a) Firm Purchase Price. The purchase price for the Firm Shares
(the "Firm Purchase Price") shall be $[Y x Firm Share Base Amount] in cash.
(b) Additional Purchase Price. The purchase price for the
Additional Shares (the "Additional Purchase Price") shall be an amount equal to
(i) the difference between (1) the aggregate proceeds to Purchaser from the sale
of the Additional DECS and (2) the aggregate cost to Purchaser, as notified by
Purchaser to Seller on the Option Closing Date for the Additional DECS, of the
Additional STRIPS, multiplied by (ii) a fraction, the numerator of which is the
Firm Share Base Amount and the denominator of which is the number of Initial
DECS purchased by the Underwriters under the Underwriting Agreement.
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1.3 Payment for and Delivery of Contract Shares.
(a) Firm Payment Date. Upon the terms and subject to the
conditions of this Agreement, Purchaser shall deliver to Seller the Firm
Purchase Price on ________, 1999 (the "Firm Payment Date") at the offices of
Cleary, Gottlieb, Steen & Hamilton, One Liberty Plaza, New York, New York 10006,
or at such other place as shall be agreed upon by Purchaser and Seller, paid by
wire transfer of Federal (immediately available) funds to an account designated
by Seller, against delivery by Seller to the Collateral Agent of the number of
shares of Common Stock and/or cash, securities and other property necessary to
comply with Seller's obligations under the Collateral Agreement.
(b) Option Closing Date. Upon the terms and subject to the
conditions of this Agreement, Purchaser shall deliver to Seller the Additional
Purchase Price on the Option Closing Date at the offices of Cleary, Gottlieb,
Steen & Hamilton, New York, New York 10006, or at such other place as shall be
agreed upon by Purchaser and Seller, paid by wire transfer of Federal
(immediately available) funds to an account designated by Seller, against
delivery by Seller to the Collateral Agent of the additional number of shares of
Common Stock and/or cash, securities and other property necessary to comply with
Seller's obligations under the Collateral Agreement.
(c) Delivery of Contract Shares.
(i) Seller will deliver the Contract Shares to Purchaser on the
Exchange Date. Seller shall be deemed to have instructed the Collateral
Agent to deliver to the Custodian, for the account of Purchaser, shares of
Common Stock then held by the Collateral Agent as collateral under the
Collateral Agreement, in an amount equal to the number of Contract Shares,
rounded down to the nearest whole number. Instead of any fractional shares
of Common Stock that would otherwise be deliverable (prior to rounding) to
Purchaser at the Exchange Date, Seller agrees to make a cash payment in
respect of such fractional shares of Common Stock in an amount equal to
the value thereof at the Exchange Price. Notwithstanding the foregoing, if
an Adjustment Event shall have occurred prior to the Exchange Date then,
in lieu of the foregoing, Seller shall be deemed to have instructed: (A)
in the case of any cash required to be delivered on the Exchange Date as
provided in Section 6.2, the Collateral Agent to wire transfer Federal
(immediately available) funds to an account designated by Purchaser; and
(B) in the case of any Reported Securities required to be delivered by
Seller in lieu of cash as provided in Section 6.2, the Collateral Agent to
deliver to the Custodian, for the account of Purchaser, a specified number
of Reported Securities then held as collateral under the Collateral
Agreement, as provided in Section 6(g) of the Collateral Agreement.
(ii) In the event that by the Exchange Date any substitute
collateral has not been replaced by shares of Common Stock (and/or, after
an Adjustment Event, cash or Reported Securities) sufficient to meet
Seller's obligations hereunder, delivery shall be effected by delivery by
the Collateral Agent to the Custodian, for the account of Purchaser, of
the market value of the shares of Common Stock required to be delivered
hereunder, in the form of any shares of Common Stock then pledged by
Seller plus cash
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generated from the liquidation of U.S. Government obligations then pledged
by Seller (and/or, after an Adjustment Event, the market value of the
alternative consideration required to be delivered hereunder, in the form
of any Reported Securities then pledged, plus any cash then pledged, plus
cash generated from the liquidation of U.S. Government obligations then
pledged). In such event, Seller shall be deemed to have instructed the
Collateral Agent to liquidate and turn into cash the U.S. Government
obligations then pledged by Seller to the extent necessary to satisfy
Seller's obligations hereunder.
(iii) Certificates representing Common Stock (or Reported
Securities) in registered form that are part of the Contract Shares shall
be registered in Purchaser's name or in the name of a depositary or a
nominee of a depositary as requested by Purchaser, unless such Common
Stock (and/or Reported Securities) is represented by one or more global
certificates registered in the name of a depositary or a nominee of a
depositary or are book entry securities, in which event Purchaser's
interest in such securities shall be noted in a manner satisfactory to
Purchaser and its counsel.
(iv) Seller's right to deliver (or cause to be delivered) to
Purchaser hereunder Common Stock and Reported Securities shall be
conditioned upon such Common Stock and Reported Securities to be so
delivered being transferable by Purchaser, following receipt from Seller,
without any restrictions not generally applicable to all holders of such
Common Stock or Reported Securities, as the case may be. If the condition
set forth in the preceding sentence shall not be satisfied with respect to
any Common Stock or Reported Securities to be delivered by Seller, then,
notwithstanding the provisions hereof, Seller shall exercise the Cash
Delivery Option.
(d) Cash Delivery Option. At its option, Seller may deliver to
Purchaser on the Exchange Date, in lieu of the Contract Shares, an amount in
cash equal to, subject to adjustment as provided in Section 6.2, the Exchange
Price of the Contract Shares (the "Cash Delivery Option"), paid by wire transfer
to an account designated by Purchaser, in Federal (immediately available) funds.
Seller may elect the Cash Delivery Option in respect of all, but not less than
all, Contract Shares and may do so by notice to Purchaser, the Collateral Agent
and the Custodian not less than 25 Business Days prior to the Exchange Date. If
Seller elects the Cash Delivery Option and so notifies Purchaser, Purchaser
shall promptly notify The Depository Trust Company and publish a notice in a
daily newspaper of national circulation stating whether the holders of DECS will
receive shares of Common Stock or cash.
(e) Seller represents, and Purchaser acknowledges, that it is
Seller's current intention to deliver Contract Shares to the Purchaser on the
Exchange Date and not to exercise the Cash Delivery Option; however, Seller
intends to consider all relevant economic, market and business factors in
ultimately determining whether to deliver Contract Shares on the Exchange Date
or to exercise the Cash Delivery Option.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser that each representation
and warranty made by Seller in Section 3 of the Underwriting Agreement is true
and correct on the date hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller that:
(a) each representation and warranty made by Purchaser in Section
1 of the Underwriting Agreement is true and correct on the date hereof; and
(b) it acknowledges that the Common Stock delivered pursuant to
this Agreement and the Collateral Agreement may contain one or more of the type
of legends referred to in Section 3(e) of the Collateral Agreement (which legend
(i) will not be applicable to the delivery of any such Common Stock to the Trust
pursuant to this Agreement and the Collateral Agreement or to the delivery of
any such Common Stock by the Trust to the holders of DECS pursuant to the DECS
and (ii) will be removed at the request of the Collateral Agent to the transfer
agent for the Common Stock prior to any such delivery to holders of DECS).
ARTICLE IV
CONDITIONS TO PURCHASER'S OBLIGATIONS
(a) The obligation of Purchaser to deliver the Firm Purchase Price
on the Firm Payment Date is subject to the satisfaction of the following
conditions:
(i) the purchase by the Underwriters of the Initial DECS pursuant
to the Underwriting Agreement shall have been consummated as contemplated
under the Underwriting Agreement;
(ii) the representations and warranties of Seller contained in
Article II hereof shall be true and correct as of the Firm Payment Date;
(iii) the Collateral Agreement shall have been executed by Seller
and the delivery of the Collateral thereunder shall have been made; and
(iv) the Reimbursement Agreement shall have been executed by
Seller.
(b) The obligation of Purchaser to deliver the Additional Purchase
Price on the Option Closing Date is subject to the satisfaction of the following
conditions:
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(i) the purchase by the Underwriter of the Additional DECS
pursuant to the Underwriting Agreement shall have been consummated as
contemplated under the Underwriting Agreement;
(ii) the representations and warranties of Seller contained in
Article II hereof shall be true and correct as of the Option Closing Date;
and
(iii) the delivery of any additional Collateral under the Collateral
Agreement shall have been made.
ARTICLE V
COVENANTS
5.1 Taxes. Seller shall pay any and all documentary, stamp,
transfer or similar taxes and charges that may be payable in respect of the
entry into this Agreement and the transfer and delivery of the Contract Shares,
cash or Reported Securities pursuant hereto.
5.2 Forward Purchase Contract. Each of Purchaser and Seller hereby
agrees that
(a) it will treat this Agreement in its entirety as a forward
purchase contract for the delivery of the Contract Shares on the Exchange Date
(including as a result of acceleration or otherwise) (the "Forward Purchase
Contract Characterization"), under the terms of which contract (i) at the time
of issuance of the DECS Purchaser deposits irrevocably with Seller a fixed
amount of cash equal to the Firm Purchase Price (plus, if the Underwriters
exercise their option to purchase Additional DECS, the Additional Purchase
Price) to assure the fulfillment of Purchaser's purchase obligation described in
clause (ii) below, which deposit will unconditionally and irrevocably be applied
at the Exchange Date to satisfy such obligation and (ii) at the Exchange Date
such cash deposit unconditionally and irrevocably will be applied by Seller in
full satisfaction of Purchaser's obligation under the forward purchase contract,
and Seller will deliver to Purchaser the number of Contract Shares that
Purchaser is entitled to receive at that time pursuant to the terms of this
Agreement (subject to Seller's right to deliver cash and/or other property as
provided in this Agreement in lieu of the Contract Shares);
(b) it will treat, consistent with the above characterization,
amounts paid to Seller in respect of this Agreement as allocable in their
entirety to the amount of the cash deposit attributable to such Agreement;
(c) it will not treat this Agreement, any portion of this
Agreement or any obligation hereunder as giving rise to any interest income or
other inclusions of ordinary income (in the case of Purchaser) or as giving rise
to any interest expense or other deductions of ordinary expense (in the case of
Seller);
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(d) it will not treat the delivery of any portion of the Contract
Shares, cash or Reported Securities to be delivered pursuant to this Agreement
as the payment of interest or ordinary income; and
(e) it will not take any action (including filing any tax return
or form or taking any position in any tax proceeding) that is inconsistent with
the obligations contained in clauses (a) through (d), unless such action or
position is required by an applicable taxing authority or unless such action or
position is required by a change in statutory law or regulation or by a judicial
or other authoritative interpretation of the law enacted, promulgated or
published after the date of this Agreement.
5.3 Limitations on Trading During Certain Days. Seller hereby
agrees that it will not, and will cause each of its Affiliates that is under its
control not to, buy or sell shares of Common Stock of the Company or Reported
Securities for its own account during the 60 days prior to the Exchange Date.
5.4 Notices. Seller will cause to be delivered to Purchaser:
(a) Immediately upon the occurrence of any Event of Default
hereunder or under the Collateral Agreement, or upon Seller's obtaining
knowledge that any of the conditions or events described in paragraph (a) or (b)
of Article VII shall have occurred with respect to the Company, notice of such
occurrence; and
(b) In case at any time prior to the Exchange Date Seller receives
notice, or otherwise obtains knowledge, that any event requiring that an
adjustment be effected pursuant to Article VI hereof shall have occurred or be
pending, then Seller shall promptly cause to be delivered to Purchaser a notice
identifying such event and stating, if known to Seller, the date on which such
event is to occur and, if applicable, the record date relating to such event.
Seller shall cause further notices to be delivered to Purchaser if Seller shall
subsequently receive notice, or shall otherwise obtain knowledge, of any further
or revised information regarding the terms or timing of such event or any record
date relating thereto.
5.5. Affirmative Covenants. During the term of this Agreement,
Seller covenants and agrees that it will:
(a) Comply in all material respects with all applicable laws,
rules, regulations and orders to the extent noncompliance would have a material
adverse effect on the ability of Seller to perform its obligations hereunder or
under the Collateral Agreement, such compliance to include, without limitation,
paying before the same become delinquent all taxes, assessments and governmental
charges imposed upon Seller or upon Seller's property, including the collateral
pledged under the Collateral Agreement, except to the extent contested in good
faith.
(b) Furnish to Purchaser as soon as possible and in any event
within twenty calendar days after Seller shall become aware of the occurrence of
any failure by Seller to comply with or perform any agreement or obligation
contained in this Agreement or the
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Collateral Agreement, a statement of Seller describing such failure and setting
forth details of such failure and the action which Seller has taken and proposes
to take with respect thereto.
(c) Continue to be validly existing as a corporation under the law
of its jurisdiction of incorporation.
5.6 Further Assurances. From time to time on and after the date
hereof through the Exchange Date (or, if later, the date on which this Agreement
has been fully performed), each of the parties hereto shall use its reasonable
best efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper and advisable to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement in accordance with the terms and conditions hereof, including (i)
using reasonable best efforts to remove any legal impediment to the consummation
of such transactions and (ii) the execution and delivery of all such deeds,
agreements, assignments and further instruments of transfer and conveyance
necessary, proper or advisable to consummate and make effective the transactions
contemplated by the Agreement in accordance with the terms and conditions
hereof.
ARTICLE VI
ADJUSTMENT OF EXCHANGE RATE, EXCHANGE PRICE AND CLOSING PRICE
6.1 Dilution Adjustments. The Exchange Rate, Exchange Price and
Closing Price shall be subject to adjustment successively from time to time as
follows:
(a) Stock Dividends, Splits, Reclassifications, Etc. If the
Company shall, after the date hereof,
(i) pay a stock dividend or make a distribution, in either case,
with respect to Common Stock in shares of such stock;
(ii) subdivide or split its outstanding shares of Common Stock into
a greater number of shares;
(iii) combine its outstanding shares of Common Stock into a smaller
number of shares; or
(iv) issue by reclassification (other than a reclassification
pursuant to clause (b), (c), (d) or (e) of the definition of Adjustment
Event) of its shares of Common Stock any other equity securities of the
Company;
then, in each such case, the Exchange Rate shall be multiplied by a Dilution
Adjustment equal to the number of shares of common stock (or the fraction
thereof) that a holder 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 the case of the reclassification of any shares of Common
Stock into any other equity securities of the Company other than the Common
Stock,
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such other equity securities shall be deemed shares of Common Stock for all
purposes hereunder. The Exchange Price and Closing Price shall also be adjusted
in the manner described in paragraph (c).
(b) Right or Warrant Issuances. If the Company shall, after the
date hereof, issue, or declare a record date in respect of an issuance of,
rights or warrants (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 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, in each such case, the
Exchange Rate shall be multiplied by the following Dilution Adjustment: a
fraction, of which the numerator shall be (A) the number of shares of Common
Stock outstanding on the record date for the issuance of such rights or warrants
plus (B) the number of additional shares of Common Stock offered for
subscription or purchase pursuant to such rights or warrants, and of which the
denominator shall be (x) the number of shares of Common Stock outstanding on the
record date for the issuance of such rights or warrants plus (y) the number
specified in clause (B) above multiplied by the quotient of the exercise price
of such rights or warrants divided by the Market Price of the Common Stock on
the Business Day next following the record date for the determination of holders
of Common Stock entitled to receive such rights or warrants. To the extent that
such rights or warrants expire prior to the Exchange Date and shares of Common
Stock are delivered with respect to less than all of such rights or warrants
prior to such expiration, the Exchange Rate shall be readjusted to the Exchange
Rate which would then be in effect had such adjustments for the issuance of such
rights or warrants been made upon the basis of delivery of only the number of
shares of Common Stock actually delivered pursuant to such rights or warrants.
The Exchange Price and Closing Price shall also be adjusted in the manner
described in paragraph (c).
(c) Corresponding Adjustments to Exchange Price; Adjustment of
Closing Price in Certain Circumstances.
(i) If any adjustment is made to the Exchange Rate pursuant to
paragraph (a) or (b) of this Section 6.1, an adjustment shall also be made
to the Exchange Price as such term is used throughout the definition of
Exchange Rate. The required adjustment to the Exchange Price shall be made
at the Exchange Date by multiplying the Exchange Price by the cumulative
Dilution Adjustment.
(ii) If, during any Calculation Period used in calculating the
Exchange Price, the Market Price or the Transaction Value, there shall
occur any event requiring an adjustment to be effected pursuant to this
Section 6.1, then the Closing Price for each Trading Day in the
Calculation Period occurring prior to the day on which such adjustment is
effected shall be adjusted by being divided by the relevant Dilution
Adjustment.
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(d) Timing of Dilution Adjustments. Each Dilution Adjustment shall
be effected:
(i) in the case of any dividend, distribution, or issuance of
rights or warrants, at the opening of business on the Business Day next
following the record date for determination of holders of 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, on the effective date of such transaction.
(e) General; Failure of Dilution Event to Occur. All Dilution
Adjustments shall be rounded upward or downward to the nearest 1/10,000th (or if
there is not a nearest 1/10,000th to the next higher 1/10,000th). No adjustment
in the Exchange Rate shall be required unless such adjustment would require an
increase or decrease of at least one percent therein; provided, however, that
any adjustments which by reason of this sentence are not required to be made
shall be carried forward and taken into account in any subsequent adjustment. If
any announcement or declaration of a record date in respect of a dividend,
distribution or issuance requiring an adjustment pursuant to this Section 6.1
shall subsequently be canceled by the Company, or such dividend, distribution or
issuance shall fail to receive requisite approvals or shall fail to occur for
any other reason, then, upon such cancellation, failure of approval or failure
to occur, the Exchange Rate shall be readjusted to the Exchange Rate which would
then have been in effect had adjustment for such event not been made. If an
Adjustment Event shall occur after the occurrence of one or more events
requiring an adjustment pursuant to this Section 6.1, the Dilution Adjustments
previously applied to the Exchange Rate in respect of such events shall not be
rescinded but shall be applied to the new Exchange Rate provided for under
Section 6.2.
6.2 Adjustment for Consolidation, Merger or Other Adjustment
Event. In the event of (a) any dividend or distribution by the Company to all
holders of Common Stock of evidences of its indebtedness or other assets
(excluding any dividends or distributions referred to in Section 6.1(a)(i), any
other equity securities issued pursuant to a reclassification referred to in
Section 6.1(a)(iv) and any Ordinary Cash Dividends) or any issuance by the
Company to all holders of Common Stock of rights or warrants to subscribe for or
purchase any of its securities (other than rights or warrants referred to in
Section 6.1(b)), (b) any consolidation 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), (c) any sale, transfer,
lease or conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety, (d) any statutory exchange of
securities of the Company with another corporation (other than in connection
with a merger or acquisition) or (e) any liquidation, dissolution or winding up
of the Company (any such event described in clause (a), (b), (c), (d) or (e), an
"Adjustment Event"), the Exchange Rate shall be adjusted so that on the Exchange
Date Seller shall deliver to Purchaser,
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in lieu of or (in the case of an Adjustment Event described in clause (a) above)
in addition to, the Contract Shares, cash in an amount equal to the product of
the number of Contract Shares and the Transaction Value (as defined below).
Following an Adjustment Event, the Exchange Price, as such term is used
throughout the definition of Exchange Rate, shall be deemed to equal (A) if
shares of Common Stock are outstanding at the Exchange Date, the Exchange Price
of the Common Stock, as adjusted pursuant to Section 6.1(c), otherwise zero,
plus (B) the Transaction Value.
Notwithstanding the foregoing, with respect to any Reported
Securities (as defined below) received by holders of Common Stock in an
Adjustment Event, Seller shall, in lieu of delivering cash in respect of such
Reported Securities as described above, deliver a number of such Reported
Securities with a value, as determined in accordance with clause (ii) of the
definition of Transaction Value, equal to all cash amounts that would otherwise
be deliverable in respect of Reported Securities received in such Adjustment
Event, unless Seller has made an election to exercise the Cash Delivery Option
or such Reported Securities have not yet been delivered to the holders entitled
thereto following such Adjustment Event or any record date with respect thereto.
If, following any Adjustment Event, any Reported Security ceases to qualify as a
Reported Security, then (x) Seller shall not deliver such Reported Security but
instead shall deliver of an equivalent amount of cash and (y) notwithstanding
clause (ii) of the definition of Transaction Value, the Transaction Value of
such Reported Security shall mean the fair market value of such Reported
Security on the date such security ceases to qualify as a Reported Security, as
determined by a nationally recognized investment banking firm retained for this
purpose by the Administrator.
"Transaction Value" means (i) for any cash received in any
Adjustment Event, the amount of cash received per share of Common Stock, (ii)
for any Reported Securities received in any Adjustment Event, an amount equal to
(x) the average Closing Price per security of such Reported Securities on the 20
Trading Days immediately prior to (but not including) the Exchange Date
multiplied by (y) the number of such Reported Securities (as adjusted pursuant
to the definition thereof) received per share of Common Stock and (iii) for any
property received in any Adjustment Event other than cash or Reported
Securities, an amount equal to the fair market value of the property received
per share of Common Stock on the date such property is received, as determined
by a nationally recognized investment banking firm retained for this purpose by
the Administrator; provided, however, that in the case of clause (ii), (x) with
respect to securities that are Reported Securities by virtue of only clause (iv)
of the definition of Reported Securities, Transaction Value with respect to any
such Reported Security means the average of the mid-point of the last bid and
ask prices for such Reported Security as of the Exchange Date from each of at
least three nationally recognized investment banking firms retained for such
purpose by the Administrator multiplied by the number of such Reported
Securities (as adjusted pursuant to the definition thereof) received per share
of Common Stock and (y) with respect to all other Reported Securities, if there
are not 20 Trading Days for any particular Reported Security occurring after the
60th calendar day immediately prior to, but not including, the Exchange Date,
Transaction Value with respect to such Reported Security means the fair 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
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by the number of such Reported Securities (as adjusted pursuant to the
definition thereof) received per share of Common Stock. For purposes of
calculating the Transaction Value, any cash, Reported Securities or other
property receivable in an Adjustment Event shall be deemed to have been received
immediately prior to the close of business on the record date for such
Adjustment Event or, if there is no record date for such Adjustment Event,
immediately prior to the close of business on the effective date of such
Adjustment Event.
"Reported Securities" means any securities received in an Adjustment
Event that (A) are (i) listed on a 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. The number of shares of any Reported Securities included in the
calculation of Transaction Value pursuant to clause (ii) of the definition
thereof shall be subject to adjustment if any event that would, had it occurred
with respect to the Common Stock or the Company, have required an adjustment
pursuant to Section 6.1 or 6.2, shall occur with respect to such Reported
Securities or the issuer thereof subsequent to the date the Adjustment Event is
consummated. Adjustment for such subsequent events shall be as nearly equivalent
as practicable to the adjustments provided for in Section 6.1 or 6.2, as
applicable.
ARTICLE VII
ACCELERATION
If one or more of the following events (each an "Event of Default")
shall occur:
(a) Seller or any "significant subsidiary" of the Seller (as
defined in Rule 1-02(w) of Securities and Exchange Commission Rule S-X) (a
"Significant Subsidiary") shall commence a voluntary case or other proceeding
seeking a liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, or shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against him or it, or shall take any action to authorize any of the
foregoing;
(b) an involuntary case or other proceeding shall be commenced
against Seller or any Significant Subsidiary seeking liquidation, reorganization
or other relief with respect to it or its debts under any bankruptcy, insolvency
or other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official for it or any
substantial part of its property and, in the case of a proceeding against a
Significant Subsidiary, shall not have been dismissed within sixty days; or an
order for relief shall be entered
17
<PAGE> 18
against Seller or any Significant Subsidiary under any bankruptcy, insolvency or
other similar law as now or hereafter in effect; or
(c) a Collateral Event of Default within the meaning of the
Collateral Agreement;
then an "Acceleration Date" shall occur, Seller's rights under
Section 1.3(d) shall terminate immediately and (i) in the case of clause
(c), Seller shall become obligated to the extent permitted by law to
deliver to Purchaser (and shall be deemed to instruct the Collateral Agent
to deliver to the Custodian, for the account of Purchaser, and to
liquidate and turn into cash the U.S. Government obligations then pledged
by Seller to the extent necessary to satisfy such obligation) the Contract
Shares, in the form of the shares of Common Stock then pledged by Seller,
or cash generated from the liquidation of U.S. Government obligations then
pledged by Seller, or a combination thereof (or, after an Adjustment
Event, the alternate consideration to be delivered, in the form of
Reported Securities then pledged, cash then pledged, cash generated from
the liquidation of U.S. Government obligations then pledged, or a
combination thereof); or
(ii) in the case of clauses (a) or (b), Seller shall become
obligated to the extent permitted by law to deliver to Purchaser (and
shall be deemed to instruct the Collateral Agent to deliver to the
Custodian, for the account of Purchaser, and to liquidate and turn into
cash the U.S. Government obligations then pledged by Seller to the extent
necessary to satisfy such obligation) a number of shares of Common Stock,
in the form of the shares of Common Stock then pledged by Seller, or cash
generated from the liquidation of U.S. Government obligations then pledged
by Seller, or a combination thereof (or, after an Adjustment Event, the
alternate consideration to be delivered, in the form of Reported
Securities then pledged, cash then pledged, cash generated from the
liquidation of U.S. Government obligations then pledged, or a combination
thereof), with an aggregate value (based on the Closing Price on the
Acceleration Date) equal to the Acceleration Value (as defined below).
"Acceleration Value" means an amount determined by the Administrator
on the basis of quotations from Independent Dealers (as defined below). Each
quotation will be for an amount that would be paid to the relevant Independent
Dealer in consideration of an agreement between Purchaser and such Independent
Dealer that would have the effect of preserving for Purchaser the economic
equivalent of the payments and deliveries that Purchaser would, but for the
occurrence of the Acceleration Date, have been entitled to receive after the
Acceleration Date hereunder (taking into account any adjustments to the Exchange
Rate that may have been effected on or prior to the Acceleration Date). On or as
soon as reasonably practicable following the Acceleration Date, the
Administrator will request each Independent Dealer to provide its quotation as
soon as reasonably practicable, but in any event within two Business Days. The
Administrator shall compute the Acceleration Value upon receipt of each
Independent Dealer's quotation, provided that if, at the close of business on
the fourth Business Day following the Acceleration Date, the Administrator shall
have received quotations from fewer than four of the Independent Dealers, the
Administrator shall compute the Acceleration Value using the
18
<PAGE> 19
quotations, if any, it shall have received at or prior to such time. If four
quotations are provided, the Acceleration Value will be the arithmetic mean of
the two quotations remaining after disregarding the highest and lowest
quotations. (For this purpose, if more than one quotation has the same highest
or lowest value, then one of such quotations shall be disregarded.) If two or
three quotations are provided, the Acceleration Value will be the arithmetic
mean of such quotations. If one quotation is provided, the Acceleration Value
will be equal to such quotation. If no quotations are provided, the Acceleration
Value will be the aggregate value of the number of shares of Common Stock (or,
after an Adjustment Event, Reported Securities, cash or a combination thereof)
that would be required to be delivered hereunder on the Acceleration Date if the
Exchange Date were redefined to be the Acceleration Date.
"Independent Dealers" means four nationally recognized independent
investment banking firms selected in good faith by the Administrator.
As promptly as reasonably practicable after receipt of the
quotations on which the Acceleration Value is based (or, as the case may be,
after failure to receive any such quotations within the time period prescribed
above), Purchaser shall deliver to Seller and the Collateral Agent a notice
specifying the number of shares of Common Stock (or, after an Adjustment Event,
the alternate consideration) required to be delivered by Seller. Purchaser and
Seller agree that the obligations contained in clauses (i) and (ii) above are a
reasonable pre-estimate of loss and not a penalty. Such amount is payable for
the loss of bargain and Purchaser will not be entitled to recover additional
damage as a consequence of loss resulting from an Event of Default.
ARTICLE VIII
MISCELLANEOUS
8.1 Adjustments; Selection of Independent Investment Banking Firm.
Purchaser shall be responsible for the effectuation and calculation of any
adjustment pursuant to Article VI hereof and shall furnish Seller notice of any
such adjustment and shall provide Seller reasonable opportunity to review the
calculations pertaining to any such adjustment. If, pursuant to the terms and
conditions hereof, the Administrator shall be required to retain a nationally
recognized independent investment banking firm for any purpose provided herein,
such nationally recognized independent investment banking firm shall be selected
and retained by the Administrator only after consultation with Seller; provided,
however, that Seller shall be deemed to have waived its right to consult if
Seller fails to consult within five Business Days of notice being sent by the
Administrator to Seller seeking consultation. Purchaser may delegate the
effectuation and calculation of any such adjustments to its Administrator.
8.2 Notices. Notices to Purchaser shall be directed to it in care
of the Administrator for Purchaser, The Bank of New York, 101 Barclay Street,
New York, New York 10286, Telephone: (212) 816-5228, Telecopier: (212) 816-7157;
notices to Seller shall be directed to Hyundai Electronics America, Telephone:
________, Telecopier: _______, with a copy to
19
<PAGE> 20
Gray, Cary, Ware & Friedenrich, Telephone: 650-328-6561, Telecopier:
650-327-3699, Attention: Craig M. Tighe, Esq. Notwithstanding the foregoing,
notices to a party shall be directed to such other address for such party as
shall be specified by such party in a like notice given pursuant to this Section
8.2. All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given if either (i) personally delivered
(including delivery by courier service or by Federal Express or any other
nationally recognized overnight delivery service for next day delivery) to the
offices specified in the preceding sentence, in which case they shall be deemed
received on the first Business Day by which delivery shall have been made to
said offices; or (ii) sent by certified mail, return receipt requested, in
accordance with the preceding sentence, in which case they shall be deemed
received when receipted for unless acknowledgment is refused (in which case
delivery shall be deemed to have been received on the first Business Day on
which such acknowledgment is refused).
8.3 Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
8.4 Entire Agreement. Except as expressly set forth herein, this
Agreement constitutes the entire agreement among the parties with respect to the
subject matter hereof and supersedes all prior agreements, understandings and
negotiations, both written and oral, among the parties with respect to the
subject matter of this Agreement.
8.5 Amendments; Waivers. Any provision of this Agreement may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by Purchaser or Seller or, in the case of a
waiver, by the party against whom the waiver is to be effective. No failure or
delay by either party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law.
8.6 No Third Party Rights; Successors and Assigns. This Agreement
is not intended and shall not be construed to create any rights in any person
other than Seller and Purchaser and their respective successors and assigns and
no person shall assert any rights as third party beneficiary hereunder. Whenever
any of the parties hereto is referred to, such reference shall be deemed to
include the successors and permitted assigns of such party.
8.7. Application of Bankruptcy Code. The parties hereto acknowledge
and agree that the Collateral Agent is a "financial institution" within the
meaning of Section 101(22) of Title 11 of the United States Code (the
"Bankruptcy Code") and is acting as agent and custodian for Purchaser in
connection with this Agreement and that Purchaser is a "customer" of the
Collateral Agent within the meaning of said Section 101(22). The parties hereto
further acknowledge and agree that this Agreement is a "securities contract", as
such term is defined in Section 741(7) of the Bankruptcy Code, entitled to the
protection of Section 555 of the Bankruptcy Code.
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<PAGE> 21
8.8 Governing Law; Jurisdiction; Severability; Waiver of Jury
Trial. This Agreement shall be governed by and construed in accordance with the
law of the State of New York. For the purpose of any suit, action or proceeding
arising out of or relating to this Agreement, the parties hereto hereby
expressly and irrevocably consent and submit to the non-exclusive jurisdiction
of any United States Federal or New York State court sitting in the Borough of
Manhattan, City and State of New York, and expressly and irrevocably waive, to
the extent permitted under applicable law, any immunity from the jurisdiction
thereof and any claim or defense in such suit, action or proceeding based on a
claim of improper venue, forum non conveniens or any similar basis to which it
might otherwise be entitled. To the extent permitted by law, the
unenforceability or invalidity of any provision or provisions of this Agreement
shall not render any other provision or provisions herein contained
unenforceable or invalid. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES
HERETO HEREBY WAIVE AND COVENANT THAT THEY WILL NOT ASSERT (WHETHER AS
PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN
RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING OUT OF OR
BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR TORT OR OTHERWISE. EACH
PARTY HERETO ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE OTHER PARTY HERETO
THAT THE PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL INDUCEMENT UPON WHICH
SUCH OTHER PARTY HERETO HAS RELIED, IS RELYING AND WILL RELY IN ENTERING INTO
THIS AGREEMENT AND ANY DOCUMENT RELATED THERETO. EACH PARTY HERETO MAY FILE AN
ORIGINAL COUNTERPART OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE OTHER PARTY HERETO TO THE WAIVER OF ITS RIGHTS TO TRIAL BY JURY.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the
date and year first above written.
PURCHASER: SELLER:
DECS TRUST IV: HYUNDAI ELECTRONICS
AMERICA
By:_______________________________ By:___________________________________
Name: Name:
Title: Title
21
<PAGE> 1
Exhibit (k)(4)
CGSH Draft of 1/5/99
COLLATERAL AGREEMENT
Among
HYUNDAI ELECTRONICS AMERICA,
As Pledgor,
THE BANK OF NEW YORK, As Collateral Agent
and
DECS TRUST IV
Dated as of
, 1999
<PAGE> 2
The following Table of Contents has been inserted for convenience
of reference only and does not constitute a part of the Collateral Agreement.
TABLE OF CONTENTS
SECTION
<TABLE>
<S> <C>
1. The Security Interests...................................................................1
2. Definitions..............................................................................2
3. Representations and Warranties of the Pledgor............................................6
4. Representations and Warranties of the Collateral Agent...................................7
5. Certain Covenants of the Pledgor.........................................................7
6. Administration of the Collateral and Valuation of the Securities.........................9
7. Income and Voting Rights on Collateral..................................................14
8. Remedies upon Events of Default.........................................................14
9. The Collateral Agent....................................................................17
10. Miscellaneous..........................................................................19
11. Termination of Collateral Agreement....................................................21
12. No Personal Liability of Trustees......................................................21
</TABLE>
Exhibit A - Certificate for Substituted Collateral
Exhibit B - Certificate for Additional Collateral
i
<PAGE> 3
COLLATERAL AGREEMENT
THIS COLLATERAL AGREEMENT (the "Collateral Agreement"), dated as
of ___________, 1999, among Hyundai Electronics America, a corporation organized
under the law of the State of ____________ (the "Pledgor"), The Bank of New
York, a New York banking corporation, as collateral agent (the "Collateral
Agent") hereunder for the benefit of DECS Trust IV, a statutory business trust
organized under the Business Trust Act of the State of Delaware (such trust and
the trustees thereof acting in their capacity as such being referred to herein
as the "Trust" or "Purchaser"), and the Trust;
W I T N E S S E T H:
WHEREAS, pursuant to the Forward Purchase Agreement (the
"Purchase Agreement"), dated as of ____________, 1999, between Pledgor and
Purchaser, the Pledgor has agreed to sell and Purchaser has agreed to purchase
Common Stock, $.01 par value (the "Common Stock"), of Maxtor Corporation, a
Delaware corporation (the "Company"), subject to the terms and conditions of the
Purchase Agreement; and
NOW, THEREFORE, to secure the performance by the Pledgor of its
obligations under the Purchase Agreement and to secure the observance and
performance of the covenants and agreements contained herein and in the Purchase
Agreement, the parties hereto agree as follows:
1. The Security Interests.
In order to secure the observance and performance of the
covenants and agreements contained herein and in the Purchase Agreement:
(a) Security Interests. The Pledgor hereby grants, sells,
conveys, assigns, transfers and pledges unto the Collateral Agent, as agent of
and for the benefit of the Trust, a security interest in and to, and a lien upon
and right of set-off against, all of Pledgor's right, title and interest in and
to (i) the Pledged Items described in paragraphs (b) and (c); (ii) all additions
to and substitutions for such Pledged Items; (iii) (subject to the remittance of
certain payments upon satisfaction of the conditions specified in Section 7(a)
hereof) all income, proceeds and collections received or to be received, or
derived or to be derived, now or any time hereafter from or in connection with
the Pledged Items (whether such proceeds arise before or after the commencement
of any proceeding under any applicable bankruptcy, insolvency or other similar
law, by or against the Pledgor with respect to the Pledgor); and (iv) all powers
and rights now owned or hereafter acquired under or with respect to the Pledged
Items (such Pledged Items, additions, substitutions, income, proceeds,
collections, powers and rights being herein collectively called the
"Collateral"). The Collateral Agent shall have all of the rights, remedies and
recourses with respect to the Collateral afforded a secured party by the New
York Uniform Commercial Code, in addition to, and not in limitation of, the
other rights, remedies and recourses afforded to the Collateral Agent by this
Collateral Agreement.
<PAGE> 4
(b) Firm Payment Date. At the Firm Payment Date, the Pledgor
shall deliver to the Collateral Agent in pledge hereunder one or more
certificates in registered form representing in the aggregate _________ shares
of the Common Stock, indorsed in blank or in the name of the Collateral Agent
for the benefit of the Trust (together with all signature guarantees and any
other documents necessary to permit the Collateral Agent to effect the
re-registration of such Common Stock without further action by the Pledgor) or,
if such Common Stock is not issuable in certificated form but is held in book
entry form by The Depository Trust Company, the Pledgor shall transfer such
number of shares of Common Stock to an account of the Collateral Agent or to an
account (other than an account of the Pledgor) designated by the Collateral
Agent with The Depository Trust Company.
(c) Option Closing Date. Effective upon and subject to the
receipt by the Pledgor of the Additional Purchase Price, at the Option Closing
Date, the Pledgor shall deliver to the Collateral Agent in pledge hereunder one
or more certificates in registered form representing in the aggregate a number
of shares of Common Stock equal to the Additional Share Base Amount, indorsed in
blank or in the name of the Collateral Agent for the benefit of the Trust
(together with all signature guarantees and any other documents necessary to
permit the Collateral Agent to effect the re-registration of such Common Stock
without further action by the Pledgor) or, if such Common Stock is not issuable
in certificated form but is held in book entry form by The Depository Trust
Company, the Pledgor shall transfer such number of shares of Common Stock to an
account of the Collateral Agent or to an account (other than an account of the
Pledgor) designated by the Collateral Agent with The Depository Trust Company.
(d) Reregistration. Immediately following the Firm Payment Date
and any Option Closing Date, the Collateral Agent shall cause all certificates
for Common Stock delivered pursuant to Section 1(b) or 1(c) above to be
re-registered on the books of the transfer agent for the Common Stock into the
name of the Collateral Agent or its nominee, and shall thereafter maintain them
in such form until the termination of this Collateral Agreement; provided,
however, that at any time following the Firm Payment Date and any Option Closing
Date, the Collateral Agent may cause any such certificates for the Common Stock
to be deposited with The Depository Trust Company and thereafter hold such
certificates in book entry form in an account (other than an account of the
Pledgor) designated by the Collateral Agent.
2. Definitions.
Capitalized terms used and not otherwise defined herein shall
have the meanings ascribed to them in the Purchase Agreement. Capitalized terms
used herein shall have the meanings as follows:
"Authorized Representative" of the Pledgor means any officer or
other representative as to whom Pledgor shall have delivered notice to the
Collateral Agent that such trustee or other representative is authorized to act
hereunder on behalf of Pledgor.
"Business Day" means any day except a Saturday, Sunday or other
day on which banking institutions in New York City are authorized or obligated
by law or regulation to close or a day on which the New York Stock Exchange,
Inc. is closed.
2
<PAGE> 5
"Cash Delivery Obligations" means, at any time (A) if no
Adjustment Event shall have occurred prior to such time, zero, and (B) from and
after any Adjustment Event, the product of: (i) the Firm Share Base Amount plus
the Additional Share Base Amount (if any) and (ii) the Transaction Value of any
property other than Reported Securities received by the Pledgor in such
Adjustment Event, multiplied successively by each number by which the Exchange
Rate shall have been multiplied on or prior to the Adjustment Event pursuant to
the adjustments provided for under Section 6.1 of the Purchase Agreement.
"Collateral" has the meaning specified in Section 1(a).
"Collateral Agent" means the financial institution identified as
such in the preliminary paragraph hereof, or any successor appointed in
accordance with Section 9.
"Collateral Agreement" means this Collateral Agreement and any
exhibits hereto.
"Collateral Event of Default" has the meaning specified in
Section 6(e).
"Collateral Requirement" means, as of any date and with respect
to: (i) any Common Stock, 100%; (ii) any Reported Securities, 100%; (iii) any
U.S. Government Securities pledged in respect of Cash Delivery Obligations,
105%; and (iv) any other U.S. Government Securities, 150%, provided that upon
and after any failure to cure an Insufficiency Determination by 4:00 p.m. New
York City time on the Business Day following telephonic notice of such
Insufficiency Determination as described in Section 6(e), which insufficiency
shall be continuing on such Business Day, the Collateral Requirement relating to
any U.S. Government Securities (other than U.S. Government Securities pledged in
respect of Cash Delivery Obligations) shall be 200%. The portion of any pledged
U.S. Government Securities that shall be deemed at any time to be in respect of
Cash Delivery Obligations shall be as provided in Section 6(e).
"Delivery Date" has the meaning specified in Section 8(a).
"Eligible Collateral" means (i) Common Stock, (ii) U.S.
Government Securities, and (iii) from and after any Adjustment Event, Reported
Securities, provided, in each case, that (A) the Pledgor has good and marketable
title thereto, free of all Liens (other than the Liens created by this
Collateral Agreement) and Transfer Restrictions and (B) the Collateral Agent has
a valid, first priority perfected security interest therein and first lien
thereon, and provided further that to the extent the number of shares of Common
Stock or Reported Securities pledged hereunder exceeds at any time the Maximum
Deliverable Number thereof, such excess shares shall not be Eligible Collateral.
"Event of Default" means the occurrence of: (i) an event
described in clause (a) or (b) of Article VII of the Purchase Agreement, (ii) a
Collateral Event of Default, (iii) a failure by Pledgor to have caused the
Collateral to meet the requirements described in Section 5(d), (iv) if an
Adjustment Event shall have occurred prior to the Exchange Date, failure by
Pledgor to cause to be delivered to Purchaser on the Exchange Date the
consideration then required to be delivered pursuant to Section 6.2 of the
Purchase Agreement or (v) if Pledgor shall have exercised its Cash
3
<PAGE> 6
Delivery Option, a failure by the Pledgor to deliver cash on the Exchange Date
in the amount required under Section 1.3(d) of the Purchase Agreement.
"Ineligible Collateral" means Collateral that does not constitute
"Eligible Collateral."
"Insufficiency Determination" has the meaning specified in
Section 6(e).
"Lien" means any lien, mortgage, security interest, pledge,
charge or encumbrance of any kind.
"Market Value" means, as of any date: (a) with respect to any
Common Stock (except as otherwise provided in Section 6(e)(2)), the Closing
Price on such date; (b) with respect to any U.S. Government Security, the
product of (x)(i) the average unit bid price for such security on the Trading
Day prior to such date as published in the New York edition of The Wall Street
Journal or The New York Times or, if not so published, (ii) the lower bid price
quoted (which quotation shall be evidenced in writing) on such date (or if such
date is not a Trading Date, on the preceding Trading Date) by either of two
nationally recognized dealers making a market in such security which are members
of the National Association of Securities Dealers, Inc. and (y) the number of
such units comprised in the outstanding principal amount of such U.S. Government
Security; and (c) with respect to any unit of Reported Securities, the Closing
Price thereof on such date; provided that the "Market Value" of any Ineligible
Collateral shall be zero.
"Maximum Deliverable Number" means, on any date, with respect to
the Common Stock, the product of the Firm Share Base Amount plus the Additional
Share Base Amount (if any), multiplied successively by each number by which the
Exchange Rate shall have been multiplied on or prior to such date pursuant to
the adjustments provided for under Section 6.1 of the Purchase Agreement. The
Maximum Deliverable Number of Reported Securities means, on any date, the
product of (i) the Firm Share Base Amount plus the Additional Share Base Amount
(if any) and (ii) the number of Reported Securities received by the Pledgor in
the Adjustment Event for each share of Common Stock, multiplied successively by
each number by which the Exchange Rate shall have been multiplied on or prior to
such date and after the date of such Adjustment Event pursuant to the
adjustments provided for under Article VI of the Purchase Agreement.
"Person" means an individual, a corporation, a partnership, an
association, a limited liability company, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"Pledge Value" means, as of any date and with respect to any
particular type of Collateral, an amount equal to the aggregate Market Value of
such Collateral divided by the Collateral Requirement for such Collateral.
"Pledge Value Requirement" means, as of any date, (a) the
aggregate Market Value on such date of the Maximum Deliverable Number of shares
of Common Stock or, from
4
<PAGE> 7
and after an Adjustment Event, Reported Securities, on such date plus (b) from
and after an Adjustment Event, the Cash Delivery Obligations.
"Pledged Items" means, as of any date, any and all securities and
instruments delivered by the Pledgor to be held by the Collateral Agent under
this Collateral Agreement as Collateral, whether Eligible Collateral or
Ineligible Collateral.
"Prior Collateral" has the meaning specified in Section 6(b)(1).
"Responsible Officer" means, when used with respect to the
Collateral Agent, any vice president, assistant vice president, assistant
treasurer or assistant secretary located in the division or department of the
Collateral Agent responsible for performing the obligations of the Collateral
Agent under this Collateral Agreement, or in any other division or department of
the Collateral Agent performing operations substantially equivalent to those
performed by such division or department pursuant hereto, or any other officer
of the Collateral Agent or any successor Collateral Agent customarily performing
functions similar to those performed by any of the aforesaid officers, and also
means, with respect to any matter relating to this Collateral Agreement or the
Collateral, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Transfer Restriction" means, with respect to any item of
Collateral, any condition to or restriction on the ability of the holder thereof
to sell, assign or otherwise transfer such item of Collateral or to enforce the
provisions thereof or of any document related thereto whether set forth in such
item of Collateral itself or in any document related thereto, including, without
limitation, (i) any requirement that any sale, assignment or other transfer or
enforcement of such item of Collateral be consented to or approved by any
Person, including, without limitation, the issuer thereof or any other obligor
thereon, (ii) any limitations on the type or status, financial or otherwise, of
any purchaser, pledgee, assignee or transferee of such item of Collateral, (iii)
any requirement of the delivery of any certificate, consent, agreement, opinion
of counsel, notice or any other document of any Person to the issuer of, any
other obligor on or any registrar or transfer agent for, such item of
Collateral, prior to the sale, pledge, assignment or other transfer or
enforcement of such item of Collateral and (iv) any registration or
qualification requirement for such item of Collateral pursuant to any federal or
state securities law; provided that the required delivery of any assignment from
the seller, pledgor, assignor or transferor of such item of Collateral, together
with any evidence of the corporate or other authority of such Person, shall not
constitute a "Transfer Restriction."
"Trustee" or "Trustees" means any trustee or trustees of the
Trust identified on the signature pages hereto, or any successor as such trustee
or trustees.
"UCC" means the Uniform Commercial Code as in effect in the State
of New York.
"U.S. Government Securities" means direct obligations of the
United States of America that mature on a date that is one year or less from the
date such obligations are pledged hereunder, but in any event prior to the
Exchange Date.
5
<PAGE> 8
3. Representations and Warranties of the Pledgor.
The Pledgor hereby represents and warrants to the Collateral
Agent and the Trust that:
(a) Power. The Pledgor has full power and authority to
execute and deliver this Collateral Agreement and to perform and observe
the provisions hereof;
(b) Non-Contravention. The execution, delivery and
performance by the Pledgor of this Collateral Agreement do not and will
not violate, contravene or constitute a default under any provision of
applicable law or regulation or of any material agreement, judgment,
injunction, order, decree or other instrument binding upon the Pledgor.
The Pledgor is not in default under any agreement by which the
Collateral may be bound and no litigation, arbitration or administrative
proceedings are current or pending, which default, litigation,
arbitration or administrative proceedings are material to the Collateral
in the context of this Collateral Agreement.
(c) Binding Effect. This Collateral Agreement constitutes
a valid and binding agreement of the Pledgor enforceable against the
Pledgor in accordance with its terms.
(d) Solvency. The Pledgor is presently solvent and able to
pay, and paying its debts as they become due, and anticipates that it
will continue to be able to pay its debts as they become due for the
foreseeable future.
(e) No Transfer Restrictions. Except for any legend with
respect to restrictions pursuant to applicable federal and state
securities laws on transfer of the Common Stock pledged by the Pledgor
hereunder which appears on the [face] [back] of the certificates
representing such Common Stock (and which (i) will not be applicable to
the delivery of any such Common Stock to the Trust pursuant to the
Purchase Agreement and this Collateral Agreement or to the delivery of
any such Common Stock by the Trust to the holders of DECS pursuant to
the DECS and (ii) will be removed at the request of the Collateral Agent
to the transfer agent for the Common Stock prior to any such delivery to
the holders of DECS) no Transfer Restrictions exist with respect to or
otherwise apply to the assignment of, or transfer by the Pledgor of
possession of, any items of Collateral to the Collateral Agent
hereunder, or the subsequent sale or transfer of such items of
Collateral by the Collateral Agent pursuant to the terms hereof.
(f) Title to Collateral; Perfected Security Interest. The
Pledgor has good and marketable title to the Pledged Items, free of all
Liens (other than the Lien created by this Collateral Agreement) and
Transfer Restrictions (except for any legend as provided in Section 3(e)
hereof). Upon delivery of the Pledged Items described in paragraphs (b)
and (c) of Section 1 to the Collateral Agent hereunder, the Collateral
Agent will obtain a valid, first priority perfected security interest
in, and a first lien upon, such Pledged Items subject to no other Lien.
None of the Collateral is or shall be pledged by the Pledgor as
collateral for any other purpose.
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4. Representations and Warranties of the Collateral Agent.
The Collateral Agent represents and warrants to the Pledgor and
the Trust that:
(a) Corporate Existence and Power. The Collateral Agent is
a banking corporation, duly incorporated, validly existing and in good
standing under the law of the jurisdiction of its incorporation, and has
all corporate powers and all material governmental licenses,
authorizations, consents and approvals required to enter into, and
perform its obligations under, this Collateral Agreement.
(b) Authorization and Non-Contravention. The execution,
delivery and performance by the Collateral Agent of this Collateral
Agreement have been duly authorized by all necessary corporate action on
the part of the Collateral Agent (no action by the shareholders of the
Collateral Agent being required) and do not and will not violate,
contravene or constitute a default under any provision of applicable law
or regulation or of the charter or by-laws of the Collateral Agent or of
any material agreement, judgment, injunction, order, decree or other
instrument binding upon the Collateral Agent.
(c) Binding Effect. This Collateral Agreement constitutes
a valid and binding agreement of the Collateral Agent enforceable
against the Collateral Agent in accordance with its terms.
5. Certain Covenants of the Pledgor.
The Pledgor agrees that, so long as any of its obligations under
the Purchase Agreement remain outstanding:
(a) Title to Collateral. The Pledgor shall at all times
hereafter have good and marketable title to the Collateral pledged
hereunder, free of all Liens (other than the Liens created by this
Collateral Agreement) and Transfer Restrictions (except for any legend
as provided in Section 3(e) hereof), and, subject to the terms of this
Collateral Agreement, will at all times hereafter have good, right and
lawful authority to assign, transfer and pledge such Collateral and all
such additions thereto and substitutions therefor under this Collateral
Agreement.
(b) Pledge Value Requirement. The Pledgor shall cause the
aggregate Pledge Value of the Collateral to be equal to or greater than
the Pledge Value Requirement at all times, and shall pledge additional
Collateral in the manner described in Section 6(d) as necessary to cause
such requirement to be met.
(c) Pledge upon Adjustment Event. Upon the occurrence of
an Adjustment Event, the Pledgor shall immediately cause to be delivered
to the Collateral Agent, in the manner provided in Section 6(d): (i)
U.S. Government Securities having an aggregate Market Value at least
equal to 105% of the Cash Delivery Obligations, if any; and (ii)
Reported Securities in an amount at least equal to the Maximum
Deliverable
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Number thereof (if any), or, at Pledgor's election, U.S. Government
Securities having an aggregate Market Value at least equal to 150% of
such Maximum Deliverable Number of Reported Securities; in each case to
be held as substitute or additional Collateral hereunder.
(d) Composition of Pledged Items. Notwithstanding the
Pledgor's right to substitute Collateral pursuant to Section 6(b), the
Pledgor shall cause the Collateral to include, on the Exchange Date,
unless Pledgor shall have exercised its Cash Delivery Option, a number
of shares of Common Stock (and/or, if an Adjustment Event shall have
occurred, Reported Securities) at least equal to the number of shares of
Common Stock (and/or, if an Adjustment Event shall have occurred,
Reported Securities) required to be delivered under the Purchase
Agreement on the Exchange Date. If the Pledgor exercises its Cash
Delivery Option, then the Pledgor shall cause the Collateral to consist
entirely of U.S. Government Obligations or cash at all times from and
after the date 25 Business Days prior to the Exchange Date.
(e) Further Assurances. The Pledgor shall, at its expense
and in such manner and form as the Trust or the Collateral Agent may
require, give, execute, deliver, file and record any financing
statement, notice, instrument, document, agreement or other papers that
may be necessary or desirable in order to create, preserve, perfect,
substantiate or validate any security interest granted pursuant hereto
or to enable the Collateral Agent to exercise and enforce its rights and
the rights of the Trust hereunder with respect to such security
interest. To the extent permitted by applicable law, the Pledgor hereby
authorizes the Collateral Agent to execute and file, in the name of the
Pledgor or otherwise, Uniform Commercial Code financing or continuation
statements (which may be carbon, photographic, photostatic or other
reproductions of this Collateral Agreement or of a financing statement
relating to this Collateral Agreement) which the Collateral Agent in its
sole discretion may deem necessary or appropriate to further perfect, or
maintain the perfection of the security interests granted hereby.
(g) The Pledgor shall not consolidate with or merge with
or into, or transfer all or substantially of its assets to, any other
Person unless:
(i) either (x) the Pledgor shall be the resulting or
surviving entity or (y) such other Person is an entity organized
and existing under the laws of the United States, a State thereof
or the District of Columbia, such other Person expressly assumes
by supplemental agreement executed and delivered to the Trust, in
form satisfactory to counsel to the Trust, all the obligations of
the Pledgor under the Underwriting Agreement, Collateral
Agreement, the Reimbursement Agreement, and this Collateral
Agreement (in which case all such obligations of the Pledgor
shall terminate); and
(ii) the Pledgor shall deliver to the Trust prior to the
proposed transaction an Officer's Certificate and an Opinion of
Counsel, each of which shall state that such consolidation,
merger or transfer and such supplemental
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agreement comply with this Section 5(g) and that all conditions
precedent herein provided for relating to such transaction have
been complied with.
Upon any consolidation or merger, or any transfer of all
or substantially all of the assets of the Pledgor in accordance with
this Section 5(g), the successor entity formed by such consolidation or
into which the Pledgor is merged or to which such transfer is made shall
succeed to, and be substituted for, and may exercise every right and
power of the Pledgor under this Collateral Agreement with the same
effect as if such successor entity had been named as the Pledgor herein,
and the predecessor entity, shall be relieved of any further obligation
under this Collateral Agreement.
6. Administration of the Collateral and Valuation of the Securities.
(a) Valuation of Collateral. The Collateral Agent shall determine
on each Business Day whether the Pledge Value is at least equal to the Pledge
Value Requirement and whether an Insufficiency Determination or Collateral Event
of Default shall have occurred and, from and after any substitution of U.S.
Government Securities for pledged Common Stock or Reported Securities pursuant
to paragraph (b) of this Section 6, shall determine the Pledge Value on each
Business Day and shall provide written notice of the Pledge Value to the
Pledgor.
(b) Substitution of Collateral. The Pledgor may substitute
Collateral in accordance with the following provisions:
(1) Unless an Event of Default or a failure by the Pledgor
to meet any of its obligations under Section 5(b) or (c) hereof has
occurred and is continuing, the Pledgor shall have the right at any time
and from time to time to deposit Eligible Collateral with the Collateral
Agent in substitution for Pledged Items previously deposited hereunder
("Prior Collateral") and to obtain the release from the Lien hereof of
such Prior Collateral.
(2) If the Pledgor wishes to deposit Eligible Collateral
with the Collateral Agent in substitution for Prior Collateral, the
Pledgor shall (i) give written notice to the Collateral Agent
identifying the Prior Collateral to be released from the Lien hereof,
(ii) deliver to the Collateral Agent concurrently with such Eligible
Collateral a certificate of the Pledgor substantially in the form of
Exhibit A hereto and dated the date of such delivery, (A) identifying
the items of Eligible Collateral being substituted for the Prior
Collateral and the Prior Collateral that is to be transferred to the
Pledgor and (B) certifying that the representations and warranties
contained in such Exhibit A hereto are true and correct on and as of the
date thereof and (iii) deliver to the Collateral Agent concurrently with
such Eligible Collateral an opinion (dated the date of such delivery) of
counsel, substantially similar to those delivered by Gray, Cary, Ware &
Friedenrich LLP at the Firm Purchase Date with respect to similar
matters, addressed to the Collateral Agent confirming the
representations contained in the second sentence of paragraph 3(b) of
Exhibit A hereto. The Pledgor hereby covenants and agrees to take all
actions required under Section 6(d) and any other actions necessary to
create for the benefit of the Collateral Agent a valid, first priority
perfected security interest in, and a first lien upon,
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such Eligible Collateral deposited with the Collateral Agent in
substitution for Prior Collateral.
(3) No such substitution shall be made unless and until
the Collateral Agent shall have determined that the aggregate Pledge
Value of all of the Collateral at the time of such proposed
substitution, after giving effect to the proposed substitution, shall at
least equal the Pledge Value Requirement.
(c) Additional Collateral. The Pledgor may pledge additional
Collateral hereunder at any time. Concurrently with the delivery of any
additional Eligible Collateral, the Pledgor shall deliver (i) a certificate of
the Pledgor substantially in the form of Exhibit B hereto and dated the date of
such delivery, (A) identifying the additional items of Eligible Collateral being
pledged and (B) certifying that with respect to such items of additional
Eligible Collateral the representations and warranties contained in such Exhibit
B hereto are true and correct on and as of the date thereof and (ii) an opinion,
dated the date of such delivery, of counsel addressed to the Collateral Agent,
substantially similar to those delivered by Gray, Cary, Ware & Friedenrich LLP
at the Firm Purchase Date with respect to similar matters, confirming the
representations contained in the second sentence of paragraph 2(b) of Exhibit B
hereto. The Pledgor hereby covenants and agrees to take all actions required
under Section 6(d) and any other actions necessary to create for the benefit of
the Collateral Agent a valid, first priority perfected security interest in, and
a first lien upon, such additional Eligible Collateral.
(d) Delivery of Collateral. The Pledgor shall deliver all
Collateral to the Collateral Agent in accordance with the following provisions:
(1) Pledged Common Stock. In the case of Collateral
consisting of Common Stock, by delivery of certificates evidencing such
Common Stock, indorsed in blank (together with all signature guarantees
and any other documents necessary to permit the Collateral Agent to
effect the re-registration thereof without further action by the
Pledgor) or registered in the name of the Collateral Agent or its
nominee or, if such Common Stock is not issuable in certificated form
but is held in book entry form by The Depository Trust Company, by
transfer to an account of the Collateral Agent or to an account (other
than an account of the Pledgor) designated by the Collateral Agent with
The Depository Trust Company;
(2) Pledged U.S. Government Securities. In the case of
Collateral consisting of U.S. Government Securities, by transfer thereof
through the Book Entry System of the Federal Reserve System to the
account of the Collateral Agent or to an account (other than an account
of the Pledgor) designated by the Collateral Agent; and
(3) Pledged Reported Securities. In the case of Collateral
consisting of Reported Securities, by delivery of certificates
evidencing such Reported Securities, indorsed in blank (together with
all signature guarantees and any other documents necessary to permit the
Collateral Agent to effect the re-registration thereof without further
action by the Pledgor) or registered in the name of the Collateral Agent
or its nominee or, if such Reported Securities are not issuable in
certificated form but are held
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in book entry form by The Depository Trust Company, by transfer to an
account of the Collateral Agent or to an account (other than an account
of the Pledgor) designated by the Collateral Agent with The Depository
Trust Company. Each such delivery of Reported Securities shall be
accompanied by an opinion of counsel, substantially similar to those
delivered by Gray, Cary, Ware & Friedenrich LLP at the Firm Purchase
Date with respect to similar matters, satisfactory to the Collateral
Agent that the Collateral Agent has obtained a valid, first priority
perfected security interest in, and a first lien upon, such Reported
Securities.
Upon delivery of any Pledged Item under this Collateral
Agreement, the Collateral Agent shall examine such Pledged Item and any opinions
and certificates delivered pursuant to Sections 6(b), 6(c), 6(d)(3) or otherwise
pursuant to the terms hereof in connection therewith to determine that they
comply as to form with the requirements for Eligible Collateral. Immediately
following the delivery to the Collateral Agent of any Collateral in the form of
certificates indorsed in blank, the Collateral Agent shall cause all such
certificates to be re-registered on the books of the applicable transfer agent
into the name of the Collateral Agent or its nominee, and shall thereafter
maintain all such Collateral in such form until the termination of this
Collateral Agreement; provided, however, that at any time following such
delivery to the Collateral Agent, the Collateral Agent may cause any such
certificates to be deposited with The Depository Trust Company and thereafter
hold such certificates in book entry form in an account (other than an account
of Pledgor) designated by the Collateral Agent. The Pledgor hereby designates
the Collateral Agent as the person in whose name any Collateral held in book
entry form in the Federal Reserve System shall be registered.
(e) Insufficiency Determination.
(1) If on any Business Day the Collateral Agent determines
that the aggregate Pledge Value of the Collateral is less than the
Pledge Value Requirement (any such determination, an "Insufficiency
Determination"), the Collateral Agent shall, by telephone call to an
Authorized Representative of the Pledgor followed by a written
confirmation of such call, promptly notify the Pledgor of such
determination and of the amount of the insufficiency.
(2) If, by 4:00 p.m., New York City time on the Business
Day following the day on which telephonic notice shall have been given
pursuant to the preceding paragraph (e)(1), the Pledgor shall have
failed to deliver, in the manner set forth in paragraphs (c) and (d) of
this Section 6, sufficient additional Eligible Collateral so that, after
giving effect to such delivery (and taking into account that Common
Stock and Reported Securities in excess of the Maximum Deliverable
Number thereof shall not constitute Eligible Collateral), the aggregate
Pledge Value of the Collateral, as of such Business Day, is at least
equal to the Pledge Value Requirement, then (x) the Collateral
Requirement with respect to any U.S. Government Securities pledged
hereunder (other than in respect of Cash Delivery Obligations) shall be
increased from 150% to 200%, and (y) unless a Collateral Event of
Default shall have occurred and be continuing, the Collateral Agent
shall:
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(i) commence sales, in the manner described in
paragraph (3) below, of such portion of the Collateral consisting of
U.S. Government Securities as may be required to be sold in order to
generate proceeds sufficient to purchase Common Stock and/or, after an
Adjustment Event, Reported Securities, as described in the following
clause (ii); and
(ii) commence purchases, in the manner described
in paragraph (3) below, of Common Stock and/or, after an Adjustment
Event, Reported Securities, in an amount sufficient to cause the
aggregate Pledge Value of the Collateral to be at least equal to the
Pledge Value Requirement.
Notwithstanding the foregoing, the Collateral Agent shall
discontinue sales and purchases pursuant to the preceding clauses (i)
and (ii), respectively, if at any time a Collateral Event of Default
shall have occurred and be continuing. The Collateral Agent shall
determine the Market Value and the Pledge Value of the Collateral after
each purchase of Common Stock or Reported Securities pursuant to the
preceding clause (ii) in order to determine whether the Pledge Value
Requirement is met and whether a Collateral Event of Default has
occurred. Solely for purposes of such calculation, the Market Value of
the Common Stock or Reported Securities shall be: (A) the most recent
sales price as reported in the composite transactions for the principal
securities exchange on which the Common Stock or Reported Securities, as
the case may be, are then listed or, if such securities are not so
listed, the last quoted ask price for such securities in the
over-the-counter market as reported by The NASDAQ National Market or, if
not so reported, by the National Quotation Bureau or a similar
organization; or (B) if higher, in the case of Common Stock, the most
recent available Closing Price.
A "Collateral Event of Default" shall mean, at any time,
the occurrence of any of the following: (A) failure of the aggregate
Market Value of the Collateral to equal or exceed the Pledge Value
Requirement; (B) failure of the Market Value of any U.S. Government
Securities pledged at such time (not including any U.S. Government
Securities pledged in respect of Cash Delivery Obligations at such time)
to have an aggregate Market Value of at least 105% of the Market Value
of a number of shares of Common Stock (or, from and after any Adjustment
Event, Reported Securities) equal to (x) the Maximum Deliverable Number
thereof minus (y) the number thereof pledged as Collateral hereunder at
such time; or (C) from and after any Adjustment Event, failure of the
U.S. Government Securities pledged in respect of Cash Delivery
Obligations to have an aggregate Market Value at least equal to 105% of
the Cash Delivery Obligations at such time, if, in the case of a failure
described in this clause (C), such failure shall continue to be in
effect at 4:00 p.m., New York City time, on the Business Day following
the day on which telephonic notice in respect thereof shall have been
given pursuant to paragraph (e)(1) above. For purposes of this
Collateral Agreement, the portion of any pledged U.S. Government
Securities that shall be deemed to be in respect of Cash Delivery
Obligations at any time shall be a portion having a Market Value equal
to 105% of the Cash Delivery Obligations at such time (or, if less, the
aggregate Market Value of all U.S. Government Securities pledged at such
time).
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(3) Collateral sold and Common Stock or shares of Reported
Securities purchased by the Collateral Agent pursuant to the preceding
paragraphs (e)(2)(i) and (ii) may be sold and purchased on any
securities exchange or in any over-the-counter market or in any private
purchase transaction, and at such price or prices, in each case as the
Collateral Agent may deem satisfactory. The Pledgor covenants and agrees
that it will execute and deliver such documents and take such other
action as the Collateral Agent deems necessary or advisable in order
that any such sales and purchases may be made in compliance with law.
(f) Release of Excess Collateral. If on any Business Day the
Collateral Agent determines that the aggregate Pledge Value of the Pledgor's
Eligible Collateral exceeds the Pledge Value Requirement and no Event of Default
or failure by the Pledgor to meet any of its obligations under Sections 5 or 6
hereof has occurred and is continuing, the Pledgor may obtain the release from
the Lien hereof of any Collateral having an aggregate Pledge Value on such
Business Day less than or equal to such excess, upon delivery to the Collateral
Agent of a written notice from an Authorized Representative of the Pledgor
indicating the items of Collateral to be released. Such Collateral shall be
released only after the Collateral Agent shall have determined that the
aggregate Pledge Value of all of the Collateral remaining after such release as
determined on such Business Day is at least equal to the Pledge Value
Requirement.
(g) Delivery of Purchase Agreement Consideration. On the Exchange
Date, unless Pledgor shall have exercised its Cash Delivery Option, the
Collateral Agent shall deliver to the Trust Common Stock (or, if an Adjustment
Event shall have occurred, Reported Securities) then held by it hereunder
representing the number of shares of Common Stock (or, if an Adjustment Event
shall have occurred, Reported Securities) then required to be delivered under
the Purchase Agreement. Upon such delivery, the Trust shall hold such Common
Stock or Reported Securities, as the case may be, absolutely and free from any
claim or right whatsoever.
(h) Investment of Cash Collateral. The Collateral Agent shall
invest any cash received by it pursuant to Section 6.2 of the Purchase Agreement
in U.S. Treasury Securities maturing on or before the Exchange Date.
7. Income and Voting Rights on Collateral.
(a) Unless an Event of Default or failure by the Pledgor to meet
any of Pledgor's obligations under Section 5(b) or (c) hereof has occurred and
is continuing, the Pledgor shall be entitled to receive for Pledgor's own
account all dividends, interest and, if any, principal and premium relating to
all of the Collateral, unless the payment thereof to the Pledgor would reduce
the aggregate Pledge Value of the Collateral below the Pledge Value Requirement.
The Collateral Agent agrees to remit to the Pledgor on the Business Day received
or the first Business Day thereafter all such payments received by it. If an
Event of Default or failure by the Pledgor to meet any of its obligations under
Section 5(b) or (c) hereof has occurred and is continuing, all such payments
made or accrued after and during the continuance of such Event of Default or
failure shall be retained by the Collateral Agent, and any such payments which
are received by the Pledgor shall be received in trust for the benefit of the
Trust, shall be segregated from other
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funds of the Pledgor and shall forthwith be paid over to the Collateral Agent.
Any such payments so retained by, or paid over to, the Collateral Agent shall be
held by the Collateral Agent as Collateral hereunder. If any such Event of
Default or failure is no longer continuing, then the Collateral Agent shall
remit any such payments that are so retained by, or paid to it, on the first
Business Day after the Collateral Agent shall have received notice from the
Trust that such Event of Default or failure is no longer continuing, unless the
payment thereof to the Pledgor would reduce the aggregate Pledge Value of the
Collateral below the Pledge Value Requirement.
(b) Unless an Event of Default has occurred and is continuing,
the Pledgor shall have the right, from time to time, to vote and to give
consents, ratifications and waivers with respect to the Collateral, and the
Collateral Agent shall promptly deliver to the Pledgor such proxies, powers of
attorney, consents, ratifications and waivers in respect of any of the
Collateral which is registered in the name of the Collateral Agent or its
nominee and shall further deliver such documents and instruments as shall be
specified in a written request by the Pledgor.
If an Event of Default shall have occurred and be continuing, the
Collateral Agent shall have the right to the extent permitted by law, and the
Pledgor shall take all such action as may be necessary or appropriate to give
effect to such right, to vote and to give consents, ratifications and waivers,
and take any other action with respect to any or all of the Collateral with the
same force and effect as if the Collateral Agent were the absolute and sole
owner thereof.
8. Remedies upon Events of Default.
(a) If any Event of Default shall have occurred and be
continuing, the Collateral Agent may exercise on behalf of the Trust all the
rights of a secured party under the UCC (whether or not in effect in the
jurisdiction where such rights are exercised) and, in addition, without being
required to give any notice, except as herein provided or as may be required by
mandatory provisions of law, shall: (i) deliver all Collateral consisting of
Common Stock or Reported Securities (but not, in either case, in excess of the
number of shares thereof deliverable under the Purchase Agreement at such time)
to the Trust on the date of the notice delivered to the Collateral Agent
pursuant to the last paragraph of Article VII of the Purchase Agreement relating
to such Event of Default (or, in the case of an Event of Default described in
clause (iii), (iv) or (v) of the definition thereof, on the Exchange Date) (in
either case, the "Delivery Date"), whereupon the Trust shall hold such Common
Stock or Reported Securities absolutely free from any claim or right of
whatsoever kind, including any equity or right of redemption of the Pledgor
which may be waived, and the Pledgor, to the extent permitted by law, hereby
specifically waives all rights of redemption, stay or appraisal which Pledgor
has or may have under any law now existing or hereafter adopted; and (ii) if
such delivery shall be insufficient to satisfy in full all of the obligations of
Pledgor under the Purchase Agreement, sell all of the remaining Collateral, or
such lesser portion thereof as may be necessary to generate proceeds sufficient
to satisfy in full all of the obligations of Pledgor under the Purchase
Agreement, at public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery, and at such
price or prices as the Collateral Agent may
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deem satisfactory. The Pledgor covenants and agrees to execute and deliver such
documents and take such other action as the Collateral Agent deems necessary or
advisable in order that any such sale may be made in compliance with law. Upon
any such sale the Collateral Agent shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral so sold. Each purchaser at any
such sale shall hold the Collateral so sold absolutely and free from any claim
or right of whatsoever kind, including any equity or right of redemption of the
Pledgor which may be waived, and the Pledgor, to the extent permitted by law,
hereby specifically waives all rights of redemption, stay or appraisal which
Pledgor has or may have under any law now existing or hereafter adopted. The
notice (if any) of such sale required by Article 9 of the UCC shall (1) in case
of a public sale, state the time and place fixed for such sale, (2) in case of
sale at a broker's board or on a securities exchange, state the board or
exchange at which such sale is to be made and the day on which the Collateral,
or the portion thereof so being sold, will first be offered for sale at such
board or exchange, and (3) in the case of a private sale, state the day after
which such sale may be consummated. Any such public sale shall be held at such
time or times within ordinary business hours and at such place or places as the
Collateral Agent may fix in the notice of such sale. At any such sale the
Collateral may be sold in one lot as an entirety or in separate parcels, as the
Collateral Agent may determine. The Collateral Agent shall not be obligated to
make any such sale pursuant to any such notice. The Collateral Agent may,
without notice or publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the time and place
fixed for the sale, and such sale may be made at any time or place to which the
same may be so adjourned. In case of any sale of all or any part of the
Collateral on credit or for future delivery, the Collateral so sold may be
retained by the Collateral Agent until the selling price is paid by the
purchaser thereof, but the Collateral Agent shall not incur any liability in
case of the failure of such purchaser to take up and pay for the Collateral so
sold and, in case of any such failure, such Collateral may again be sold upon
like notice. The Collateral Agent, instead of exercising the power of sale
herein conferred upon it, may proceed by a suit or suits at law or in equity to
foreclose the security interests and sell the Collateral, or any portion
thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
(b) Power of Attorney. The Collateral Agent is hereby irrevocably
appointed the true and lawful attorney of the Pledgor with full power and
authority, in the name and stead of the Pledgor, to do all of the following: (i)
upon any delivery or sale of all or any part of any Collateral made either under
the power of delivery or sale given hereunder or under judgment or decree in any
judicial proceedings for foreclosure or otherwise for the enforcement of this
Collateral Agreement, to make all necessary deeds, bills of sale and instruments
of assignment, transfer or conveyance of the property thus delivered or sold;
(ii) upon the occurrence of an Adjustment Event while any shares of Common Stock
are Pledged Items, to take any necessary actions with respect to such shares of
Common Stock to cause the Pledged Items to conform to the requirements of this
Agreement following the occurrence of the Adjustment Event, including, without
limitation, the tender of shares of Common Stock and the sale of property (other
than Reported Securities) received in respect of Common Stock. For such purposes
the Collateral Agent may execute all necessary documents and instruments. This
power of attorney shall be deemed coupled with an interest, and the Pledgor
hereby ratifies and confirms all that his attorneys acting under such power, or
such attorneys' successors or agents, shall lawfully do by virtue of this
Collateral Agreement. If so requested by the Collateral Agent, by the Trustees
or
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by any purchaser of the Collateral or a portion thereof, the Pledgor shall
further ratify and confirm any such delivery or sale by executing and delivering
to the Collateral Agent, to the Trustees or to such purchaser or purchasers at
the expense of the Pledgor all proper deeds, bills of sale, instruments of
assignment, conveyance of transfer and releases as may be designated in any such
request. The Pledgor's obligations and authorizations hereunder shall not be
terminated by operation of law or the occurrence of any event whatsoever,
including the death or disability of the Pledgor, or the occurrence of any other
event.
(c) Application of Collateral and Proceeds. In the case of an
Event of Default, the Collateral Agent may proceed to realize upon the security
interest in the Collateral against any one or more of the types of Collateral,
at any one time, as the Collateral Agent shall determine in its sole discretion
subject to the foregoing provisions of this Section 8. The proceeds of any sale
of, or other realization upon, or other receipt from, any of the Collateral
remaining after delivery to the Trust pursuant to Section 8(a) shall be applied
by the Collateral Agent in the following order of priorities:
(1) first, to the payment to the Trust of an amount equal to: (A) the
aggregate Market Value of a number of shares of Common Stock
equal to (1) the number of shares of Common Stock required to be
delivered under the Purchase Agreement on the Delivery Date minus
(2) the number of shares of Common Stock delivered by the
Collateral Agent to the Trust on the Delivery Date as described
above; or (B) from and after an Adjustment Event, the sum of (1)
the Cash Delivery Obligations on the Delivery Date and (2) the
aggregate Market Value on the Delivery Date of a number of
Reported Securities (and, if applicable, shares of Common Stock)
equal to (x) the number thereof required to be delivered on the
Delivery Date under Section 6.2 of the Purchase Agreement minus
(y) the number thereof delivered by the Collateral Agent to the
Trust on the Delivery Date as described above; or (C) if the
Pledgor shall have exercised its Cash Delivery Option, the amount
of cash required to be delivered under Section 1.3(d) of the
Purchase Agreement minus the amount of cash so delivered;
(2) second, to the payment to the Collateral Agent of the expenses of
such sale or other realization, including reasonable compensation
to the Collateral Agent and its agents and counsel, and all
expenses, liabilities and advances incurred or made by the
Collateral Agent in connection therewith, including brokerage
fees in connection with the sale by the Collateral Agent of any
Pledged Item; and
(3) finally, if all of the obligations of the Pledgor hereunder and
under the Purchase Agreement have been fully discharged or
sufficient funds have been set aside by the Collateral Agent at
the request of the Pledgor for the discharge thereof, any
remaining proceeds shall be released to the Pledgor.
9. The Collateral Agent.
The Collateral Agent accepts its duties and responsibilities
hereunder as agent for the Trust, on and subject to the following terms and
conditions:
16
<PAGE> 19
(a) Performance of Duties. The Collateral Agent undertakes to
perform such duties and only such duties as are expressly set forth herein and,
beyond the exercise of reasonable care in the performance of such duties, no
implied covenants or obligations shall be read into this Collateral Agreement
against the Collateral Agent. No provision hereof shall be construed to relieve
the Collateral Agent from liability for its own grossly negligent action,
grossly negligent failure to act or its own willful misconduct, subject to the
following:
(1) The Collateral Agent may consult with counsel, and the
advice or opinion of such counsel shall be full and complete
authorization and protection in respect of an action taken or suffered
hereunder in good faith and in accordance with such advice or opinion of
counsel.
(2) The Collateral Agent shall not be liable with respect
to any action taken, suffered or omitted by it in good faith (i)
reasonably believed by it to be authorized or within the discretion or
rights or powers conferred on it by this Collateral Agreement or (ii) in
accordance with any direction or request of the Trustees.
(3) The Collateral Agent shall not be liable for any error
of judgment made in good faith by any of its officers, unless the
Collateral Agent was grossly negligent in ascertaining the pertinent
facts.
(4) In the absence of bad faith on its part, the
Collateral Agent may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
any note, notice, resolution, consent, certificate, affidavit, letter,
telegram, teletype message, statement, order or other document believed
by it to be genuine and correct and to have been signed or sent by the
proper Person or Persons.
(5) No provision of this Collateral Agreement shall
require the Collateral Agent to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights or powers, if
it shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(6) The Collateral Agent may perform any duties hereunder
either directly or by or through agents or attorneys, and the Collateral
Agent shall not be responsible for any misconduct or negligence on the
part of any agent or attorney appointed with due care by it hereunder.
In furtherance thereof, any subsidiary owned or controlled by the
Collateral Agent, or its successors, as agent for the Collateral Agent,
may perform any or all of the duties of the Collateral Agent relating to
the valuation of securities and other instruments constituting
Collateral hereunder.
(7) In no event shall the Collateral Agent be personally
liable for any taxes or other governmental charges imposed upon or in
respect of (i) the collateral or (ii) the income or other distributions
thereon.
17
<PAGE> 20
(8) Unless and until the Collateral Agent shall have
received notice from the Pledgor, or unless and until a Responsible
Officer of the Collateral Agent shall have actual knowledge to the
contrary, the Collateral Agent shall be entitled to deem and treat all
Collateral delivered to it hereunder as Eligible Collateral hereunder,
provided that the Collateral Agent has carried out the duties specified
in Section 6 with respect to such Collateral at the time of delivery
thereof.
The Collateral Agent shall not be responsible for the correctness
of the recitals and statements herein which are made by the Pledgor or for any
statement or certificate delivered by the Pledgor pursuant hereto. Except as
specifically provided herein, the Collateral Agent shall not be responsible for
the validity, sufficiency, collectibility or marketability of any Collateral
given to or held by it hereunder or for the validity or sufficiency of the
Purchase Agreement or the Lien on the Collateral purported to be created hereby.
(b) Knowledge. The Collateral Agent shall not be deemed to have
knowledge of any Event of Default (except a Collateral Event of Default), unless
and until a Responsible Officer of the Collateral Agent shall have actual
knowledge thereof or shall have received written notice thereof.
(c) Merger. Any corporation or association into which the
Collateral Agent may be converted or merged, or with which it may be
consolidated, or to which it may sell or transfer its agency business and assets
as a whole or substantially as a whole, or any corporation or association
resulting from any such conversion, sale, merger, consolidation or transfer to
which it is a party, shall, subject to the prior written consent of the Trust,
be and become a successor Collateral Agent hereunder and vested with all of the
title to the Collateral and all of the powers, discretions, immunities,
privileges and other matters as was its predecessor without, except as provided
above, the execution or filing of any instrument or any further act, deed or
conveyance on the part of any of the parties hereto, anything herein to the
contrary notwithstanding.
(d) Resignation. The Collateral Agent and any successor
Collateral Agent may at any time resign by giving thirty days' written notice by
registered or certified mail to the Pledgor and notice to the Trust in
accordance with the provisions of Section 10(d) hereof. Such resignation shall
take effect upon the appointment of a successor Collateral Agent by the Trust.
(e) Removal. The Collateral Agent may be removed at any time by
an instrument or concurrent instruments in writing delivered to the Collateral
Agent and to the Pledgor and signed by the Trust.
(f) Appointment of Successor. (1) If the Collateral Agent
hereunder shall resign or be removed, or be dissolved or shall be in the course
of dissolution or liquidation or otherwise become incapable of action hereunder,
or if it shall be taken under the control of any public officer or officers or
of a receiver appointed by a court, a successor may be appointed by the Trust by
an instrument or concurrent instruments in writing signed by the Trust or by its
attorneys in fact fully authorized a copy of such instrument or concurrent
instruments shall be sent by registered mail to the Pledgor.
18
<PAGE> 21
(2) Every such temporary or permanent successor Collateral Agent
appointed pursuant to the provisions hereof shall be a trust company or bank in
good standing, having a reported capital and surplus of not less than
$100,000,000 and capable of holding the Collateral in the State of New York, if
there be such an institution willing, qualified and able to accept the duties of
the Collateral Agent hereunder upon customary terms.
(g) Acceptance by Successor. Every temporary or permanent
successor Collateral Agent appointed hereunder shall execute, acknowledge and
deliver to its predecessor and also to the Pledgor an instrument in writing
accepting such appointment hereunder, whereupon such successor, without any
further act, deed or conveyance, shall become fully vested with all the estates,
properties, rights, powers, duties and obligations of its predecessors. Such
predecessor shall, nevertheless, on the written request of its successor or the
Pledgor, execute and deliver an instrument transferring to such successor all
the estates, properties, rights and powers of such predecessor hereunder. Every
predecessor Collateral Agent shall deliver all Collateral held by it as the
Collateral Agent hereunder to its successor. Should any instrument in writing
from the Pledgor be required by a successor Collateral Agent for more fully and
certainly vesting in such successor the estates, properties, rights, powers,
duties and obligations hereby vested or intended to be vested in the
predecessor, any and all such instruments in writing shall, at the request of
the temporary or permanent successor Collateral Agent, be forthwith executed,
acknowledged and delivered by the Pledgor.
10. Miscellaneous.
(a) Benefit of Agreement; Successors and Assigns. Whenever any of
the parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party. All the covenants and agreements herein
contained by or on behalf of the Pledgor and the Collateral Agent shall bind,
and inure to the benefit of, their respective successors and assigns whether so
expressed or not, and shall be enforceable by and inure to the benefit of the
Trust and its successors and assigns.
(b) Separability. To the extent permitted by law, the
unenforceability or invalidity of any provision or provisions of this Collateral
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
(c) Amendments and Waivers. Any term, covenant, agreement or
condition of this Collateral Agreement may be amended or compliance therewith
may be waived (either generally or in a particular instance and either
retrospectively or prospectively) but only by a writing signed by the Collateral
Agent, the Pledgor and the Trust.
(d) Notices.
(1) Any notice provided for herein, unless otherwise
specified, shall be in writing (including transmittals by telex or
telecopier) and shall be given to a party at the address set forth
opposite such party's name on the signature pages hereto or at such
other address as may be designated by notice duly given in accordance
with this Section 10(d) to each other party hereto.
19
<PAGE> 22
(2) Each such notice given pursuant to paragraph (1) shall
be effective (i) if sent by certified mail (return receipt requested),
72 hours after being deposited in the United States mail, postage
prepaid; (ii) if given by telex or telecopier, when such telex or
telecopied notice is transmitted; or (iii) if given by any other means,
when delivered at the address specified in this Section 10(d).
(e) Governing Law. This Collateral Agreement shall in all
respects be construed in accordance with and governed by the law of the State of
New York; provided that as to Pledged Items located in any jurisdiction other
than the State of New York, the Collateral Agent on behalf of the Trust shall
have all of the rights to which a secured party is entitled under the laws of
such other jurisdiction.
(f) Counterparts. This Collateral Agreement may be executed,
acknowledged and delivered in any number of counterparts and such counterparts
taken together shall constitute one and the same instrument.
(g) Application of Bankruptcy Code. The parties hereto
acknowledge and agree that the Collateral Agent is a "financial institution"
within the meaning of Section 101(22) of Title 11 of the United States Code (the
"Bankruptcy Code") and is acting as agent and custodian for the Trust in
connection with the Purchase Agreement and that the Trust is a "customer" of the
Collateral Agent within the meaning of said Section 101(22).
(h) WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE
LAW, THE PARTIES HERETO HEREBY WAIVE AND COVENANT THAT THEY WILL NOT ASSERT
(WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY
FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING
OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR TORT OR
OTHERWISE. EACH PARTY HERETO ACKNOWLEDGES THAT IT OR HE HAS BEEN INFORMED BY THE
OTHER PARTY HERETO THAT THE PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL
INDUCEMENT UPON WHICH SUCH OTHER PARTY HERETO HAS RELIED, IS RELYING AND WILL
RELY IN ENTERING INTO THIS AGREEMENT AND ANY DOCUMENT RELATED THERETO. EACH
PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OF THIS SECTION WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF THE OTHER PARTY HERETO TO THE WAIVER OF ITS
OR HIS RIGHTS TO TRIAL BY JURY.
11. Termination of Collateral Agreement.
This Collateral Agreement and the rights hereby granted by the
Pledgor in the Collateral shall cease, terminate and be void upon fulfillment of
all of the obligations of the Pledgor under the Purchase Agreement, and the
Pledgor shall have no further liability hereunder upon such termination. Any
Collateral remaining at the time of such termination shall be fully released and
discharged from the Lien hereof and delivered to the Pledgor by the Collateral
Agent, all at the expense of the Pledgor.
20
<PAGE> 23
12. No Personal Liability of Trustees.
By executing this Collateral Agreement none of the Trustees
assumes any personal liability hereunder.
21
<PAGE> 24
IN WITNESS WHEREOF, each of the Pledgor, the Collateral Agent and
the Trust has caused this Collateral Agreement to be duly executed on its behalf
as of the date hereof.
PLEDGOR:
HYUNDAI ELECTRONICS AMERICA
----------------------------------
By:
----------------------------------
Name:
Title:
Address for Notices:
----------------------------------
Attention:
----------------------------------
THE TRUST:
DECS TRUST IV
By:
-------------------------------
Donald J. Puglisi,
as Trustee
By:
-------------------------------
William R. Latham, III,
as Trustee
By:
-------------------------------
James B. O'Neill,
as Trustee
Address for Notices:
----------------------------------
Attention:
----------------------------------
22
<PAGE> 25
COLLATERAL AGENT:
THE BANK OF NEW YORK
as Collateral Agent
By:
----------------------------------
Name:
Title:
Address for Notices:
----------------------------------
Attention:
----------------------------------
23
<PAGE> 26
Exhibit A
to
Collateral Agreement
CERTIFICATE FOR SUBSTITUTED COLLATERAL
The undersigned, _____________ (the "Pledgor"), hereby certifies, pursuant to
Section 6(b) of the Collateral Agreement dated as of ___________, 1999, among
the Pledgor, The Bank of New York, as Collateral Agent and DECS Trust IV (the
"Collateral Agreement"; terms defined in the Collateral Agreement being used
herein as defined therein), that:
1. The Pledgor is delivering the following securities to the
Collateral Agent to be held by the Collateral Agent as substituted Collateral
(the "Substituted Collateral"):
2. The Pledgor requests that the Collateral Agent transfer to the
Pledgor the following Prior Collateral, pursuant to Section 6(b) of the
Collateral Agreement:
3. The Pledgor hereby represents and warrants to the Collateral
Agent and the Trust that:
(a) Consents to Transfer. No Transfer Restrictions exist
with respect to or otherwise apply to the assignment of, or transfer by
the Pledgor of possession of, any items of Substituted Collateral to the
Collateral Agent under the Collateral Agreement, or the subsequent sale
or transfer of such items of Substituted Collateral by the Collateral
Agent pursuant to the terms of the Collateral Agreement.
(b) Title to Collateral; Perfected Security Interest. The
Pledgor has good and marketable title to the Substituted Collateral,
free of all Liens (other than the Lien created by the Collateral
Agreement) and Transfer Restrictions. Upon delivery of the Collateral to
the Collateral Agent, the Collateral Agent will obtain a valid, first
priority perfected security interest in, and a first lien upon, such
Substituted Collateral subject to no other Lien. None of such
Substituted Collateral is or shall be pledged by the Pledgor as
collateral for any other purpose.
This Certificate may be relied upon by the Trust as fully and to
the same extent as if this Certificate had been specifically addressed to the
Trust.
A-1
<PAGE> 27
IN WITNESS WHEREOF, the undersigned has executed this Certificate
this _____ day of _________, .
----------------------------------
Name:
Title:
A-2
<PAGE> 28
Exhibit B
to
Collateral Agreement
CERTIFICATE FOR ADDITIONAL COLLATERAL
The undersigned, __________________ (the "Pledgor"), hereby
certifies, pursuant to Section 6(c) of the Collateral Agreement, dated as of
__________, 1999, among the Pledgor, The Bank of New York, as Collateral Agent
and DECS Trust IV (the "Collateral Agreement"; terms defined in the Collateral
Agreement being used herein as defined therein), that:
1. The Pledgor is delivering the following securities to the
Collateral Agent to be held by the Collateral Agent as additional Collateral
(the "Additional Collateral"):
2. The Pledgor hereby represents and warrants to the Collateral
Agent that:
(a) Consents to Transfer. No Transfer Restrictions exist
with respect to or otherwise apply to the assignment of, or transfer by
the Pledgor of possession of, any items of Additional Collateral to the
Collateral Agent under the Collateral Agreement, or the subsequent sale
or transfer of such items of Additional Collateral by the Collateral
Agent pursuant to the terms of the Collateral Agreement.
(b) Title to Collateral; Perfected Security Interest. The
Pledgor has good and marketable title to the Additional Collateral, free
of all Liens (other than the Lien created by the Collateral Agreement)
and Transfer Restrictions. Upon delivery of the Collateral to the
Collateral Agent, the Collateral Agent will obtain a valid, first
priority perfected security interest in, and a first lien upon, such
additional Collateral subject to no other Lien. None of such Additional
Collateral is or shall be pledged by the Pledgor as collateral for any
other purpose.
This Certificate may be relied upon by the Trust as fully and to
the same extent as if this Certificate had been specifically addressed to the
Trust.
B-1
<PAGE> 29
IN WITNESS WHEREOF, the undersigned has executed this Certificate
this _____ day of _________ .
----------------------------------
Name:
Title:
B-2
<PAGE> 1
Exhibit (k)(5)
CGSH Draft of 1/6/99
FUND EXPENSE AGREEMENT
Agreement dated as of ____________, 1999 between Salomon Smith Barney
Inc. ("Salomon Smith Barney") and The Bank of New York (the "Service Provider"),
in its capacities as administrator, custodian, paying agent and collateral agent
for DECS Trust IV (the "Trust").
WHEREAS the Trust is a statutory business trust organized under the
Business Trust Act of the State of Delaware pursuant to a Declaration of Trust
dated as of December 17, 1998, as amended and restated as of ____________, 1999
(the "Trust Agreement"); and
WHEREAS Salomon Smith Barney desires to make provision for the payment
of certain initial and ongoing expenses of the Trust;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, the parties agree as follows:
1. Definitions. (a) Capitalized terms used herein and not defined herein
shall have the meanings ascribed thereto in the Trust Agreement.
(b) The following terms shall have the following meanings:
"Additional Expense" means the Ordinary Expense the incurring of which
will require the Service Provider to provide the Additional Expense Notice
pursuant to Section 3(a) hereof and any Ordinary Expense incurred thereafter.
"Additional Expense Notice" means the notice required to be given by the
Service Provider to Salomon Smith Barney pursuant to Section 3(a)(i) hereof.
"Closing Date" shall have the meaning ascribed thereto in the
Underwriting Agreement.
"Ordinary Expense" of the Trust means any expense of the Trust other
than any expense of the Trust arising under Sections 2.2(e) and 6.6 of the
Administration Agreement, Section 15 of the Custodian Agreement, Section 5.4(b)
of the Paying Agent Agreement and Section 7.6 of the Trust Agreement.
"Up-front Fee Amount" means the amount set forth as such on Schedule I
hereto payable as a one-time payment to the Service Provider in respect of its
collective services as Administrator, Custodian, Paying Agent and Collateral
Agent for the entire term of the Trust.
"Up-front Expense Amount" means the amount set forth as such on Schedule
I hereto payable as a one-time payment to the Service Provider in respect of
Ordinary Expenses anticipated to be incurred by the Administrator on behalf of
the Trust, pursuant to the Administration Agreement, during the term of the
Trust.
<PAGE> 2
2. Agreement to Pay Up-front Fees and Expenses. Salomon Smith Barney
agrees to pay to the Service Provider in New York Clearing House funds on the
Closing Date the Up-front Fee Amount and the Up-front Expense Amount.
3. Agreement to Pay Additional Expenses. (a) Prior to incurring any
Ordinary Expense on behalf of the Trust that, together with all prior Ordinary
Expenses incurred by the Administrator on behalf of the Trust, would cause the
aggregate amount of Ordinary Expenses of the Trust to exceed the Up-front
Expense Amount, the Administrator shall provide to Salomon Smith Barney (i)
prompt written notice to the effect that the aggregate amount of Ordinary
Expenses of the Trust will exceed the Up-front Expense Amount, and (ii) an
accounting, in such detail as shall be reasonably acceptable to Salomon Smith
Barney, of all Ordinary Expenses incurred on behalf of the Trust through the
date of the Additional Expense Notice.
(b) From and after the date of the Additional Expense Notice, the
Service Provider agrees that it will not, without the prior written consent of
Salomon Smith Barney, incur on behalf of the Trust (i) any single expense in
excess of $3,000 or (ii) in any calendar quarter, expenses aggregating in excess
of $15,000. Subject to the foregoing, the Service Provider shall give notice to
Salomon Smith Barney in writing promptly following the incurring of any
Additional Expense. Such notice shall be accompanied by any demand, bill,
invoice or other similar document in respect of such Additional Expense.
(c) Subject to the first sentence of paragraph (b) of this Section 3,
Salomon Smith Barney agrees to pay to the Service Provider from time to time the
amount of any Additional Expense. Payment by Salomon Smith Barney of any
Additional Expense shall be made in New York Clearing House funds by the later
of (i) five Business Days after the receipt by Salomon Smith Barney of written
notice from the Service Provider of the incurring thereof or (ii) the due date
for the payment of such Additional Expense.
(d) Salomon Smith Barney may contest in good faith the reasonableness of
any Additional Expense and the parties shall attempt to resolve amicably the
disagreement; provided that if the parties cannot resolve the dispute by the due
date hereunder with respect to such Additional Expense, subject to the first
sentence of paragraph (b) of this Section 3, Salomon Smith Barney shall pay the
amount of such Additional Expense, subject to later adjustment and credit if
such dispute is resolved in favor of Salomon Smith Barney.
4. Condition to Payment. The obligations of Salomon Smith Barney
hereunder shall be subject to the condition that the Trust's DECS shall have
been issued and paid for on the Closing Date.
5. Trust Termination; Refund of Unused Expense Funds. If at the
termination of the Trust in accordance with Section 8.3 of the Trust Agreement
the aggregate amount of Ordinary Expenses incurred by the Service Provider on
behalf of the Trust through the date of termination shall be less than the
Up-front Expense Amount, the Service Provider shall, promptly following the date
of such termination, pay to Salomon Smith Barney in New York Clearing House
funds the amount of such excess.
2
<PAGE> 3
6. Termination of Administration Agreement. If the Administration
Agreement is terminated in accordance with Section 4.1 thereof, the Service
Provider shall promptly pay to Salomon Smith Barney (i) the ratable portion of
its Up-front Fee Amount for the period from the date of the termination of the
Administration Agreement to the Exchange Date and (ii) any unexpended portion of
the Up-front Expense Amount.
7. Statements and Reports. The Service Provider shall collect and
safekeep all demands, bills, invoices or other written communications received
from third parties in connection with any Ordinary Expenses and Additional
Expenses and shall prepare and maintain adequate books and records showing all
receipts and disbursements of funds in connection therewith. Salomon Smith
Barney shall have the right to inspect and to copy, at its expense, all such
documents, books and records at all reasonable times and from time to time
during the term of this Agreement.
8. Term of Contract. This Agreement shall continue in effect until the
termination of the Trust in accordance with Section 8.3 of the Trust Agreement.
9. No Assignment. No party to this Agreement may assign its rights or
delegate its duties hereunder without the prior written consent of the other
party.
10. Amendments. The Service Provider agrees that it will not consent to
any amendment to any of the Administration Agreement, the Custodian Agreement,
the Paying Agent Agreement or the Collateral Agreement without the prior written
consent of Salomon Smith Barney.
11. Entire Agreement. This Agreement contains the entire agreement among
the parties with respect to the matters contained herein and supersedes all
prior agreements or understandings. No amendment or modification of this
Agreement shall be valid unless the amendment or modification is in writing and
is signed by all the parties to this Agreement.
12. Notices. All notices, demands, reports, statements, approvals or
consents given by any party under this Agreement shall be in writing and shall
be delivered in person or by telecopy or other facsimile communication or sent
by first-class U.S. mail, registered or certified, postage prepaid, to the
appropriate party at its address on the signature pages hereof or at such other
address subsequently notified to the other parties hereto. A copy of any
communication to Salomon Smith Barney shall be furnished to Cleary, Gottlieb,
Steen & Hamilton, One Liberty Plaza, New York, New York 10006, Attention:
Raymond B. Check, provided that the failure to furnish such copy shall not
affect the effectiveness of any such communication. Any party may change its
address for purposes hereof by delivering a written notice of the change to the
other parties. All notices given under this Agreement shall be deemed received
(a) in the case of hand delivery, on the day of delivery, (b) in the case of
telecopy or other facsimile communication, on the day of transmission, and (c)
in the case of mailing, on the third day after such notice was deposited in the
mail.
13. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns.
3
<PAGE> 4
14. Governing Law. This Agreement shall be governed by and be construed
in accordance with the law of the State of New York.
15. Counterparts. This Agreement may be signed in any number of
counterparts with all of such counterparts constituting one and the same
instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their authorized representatives as of the date first above written.
SALOMON SMITH BARNEY INC.
By:
----------------------------------------
Name:
Title:
Address: 388 Greenwich Street
New York, New York 10013
Attention:
THE BANK OF NEW YORK
By:
----------------------------------------
Name:
Title:
Address: 101 Barclay Street
New York, New York 10286
4
<PAGE> 5
SCHEDULE I
to Fund Expense Agreement
Up-front Fee Amount: $[ ]
Up-front Expense Amount: $[ ]
5
<PAGE> 1
Exhibit (k)(6)
CGSH Draft of 1/6/99
FUND INDEMNITY AGREEMENT
Agreement dated as of ________, 1999, between Salomon Smith Barney
Inc. ("Salomon Smith Barney") and DECS Trust IV (such trust and the trustees
thereof acting in their capacity as such being referred to herein as the
"Trust").
WHEREAS the Trust is a statutory business trust organized under the
Business Trust Act of the State of Delaware pursuant to a Declaration of Trust
dated as of December 17, 1998, as amended and restated as of ________, 1999 (the
"Trust Agreement"); and
WHEREAS Salomon Smith Barney, as sponsor under the Trust Agreement,
desires to make provision for the payment of certain indemnification expenses of
the Trust;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, the parties agree as follows:
1. Definitions. Capitalized terms used herein and not defined
herein shall have the meanings ascribed thereto in the Trust Agreement.
2. Agreement to Pay Expenses. Salomon Smith Barney agrees to pay
to the Trust, and hold the Trust harmless from, any expenses of the Trust
arising under Sections 2.2(e) and 6.6 of the Administration Agreement, Section
15 of the Custodian Agreement, Section 5.4(b) of the Paying Agent Agreement and
Section 7.6 of the Trust Agreement (collectively, together with any amounts paid
pursuant to paragraph 4 of this Agreement, "Indemnification Expenses"). Subject
to paragraph 4 hereof, payment hereunder by Salomon Smith Barney shall be made
in New York Clearing House funds no later than five Business Days after the
receipt by Salomon Smith Barney, pursuant to paragraph 3 hereof, of written
notice of any claim for Indemnification Expenses.
3. Notice of Receipt of Claim. The Trust shall give notice to, or
cause notice to be given to, Salomon Smith Barney in writing of any claim for
Indemnification Expenses or any threatened claim for Indemnification Expenses
immediately upon the Trust acquiring knowledge thereof. Such written notice
shall be accompanied by any demand, bill, invoice or other communication
received from any third party claimant (a "Claimant") in respect of such
Indemnification Expense.
4. Right to Contest. The Trust agrees that Salomon Smith Barney
may, and Salomon Smith Barney is authorized on behalf of the Trust to, contest
in good faith with any Claimant any amount contained in any claim for
Indemnification Expense, provided, that if, within such time period as Salomon
Smith Barney shall determine to be reasonable, Salomon Smith Barney and such
Claimant are unable to resolve amicably any disagreement regarding such claim
for Indemnification Expense, Salomon Smith Barney shall retain counsel
reasonably satisfactory to the Trustees to represent the Trustees in any
resulting proceeding and shall pay the fees and disbursements of such counsel
related to such proceeding. Notwithstanding any other
1
<PAGE> 2
provision herein, it is understood that (a) Salomon Smith Barney shall not, in
respect of the legal expenses of any indemnified party in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm (in addition to any local
counsel), and (b) Salomon Smith Barney shall not be liable for any settlement of
any proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the Claimant, Salomon Smith Barney
agrees to indemnify the Trust from and against any loss or liability by reason
of such settlement or judgment.
5. Statements and Reports. The Trust shall collect and safekeep
all demands, bills, invoices or other written communications received from third
parties in connection with any claim for Indemnification Expenses and shall
prepare and maintain adequate books and records showing all receipts and
disbursements of funds in connection therewith. Salomon Smith Barney shall have
the right to inspect and to copy, at its expense, all such documents, books and
records at all reasonable times and from time to time during the term of this
Agreement.
6. Term of Contract. This Agreement shall continue in effect
until the termination of the Trust in accordance with Section 8.3 of the Trust
Agreement.
7. No Assignment. No party to this Agreement may assign its
rights or delegate its duties hereunder without the prior written consent of the
other parties, except that the Trust may delegate any and all duties hereunder
to the Administrator to the extent permitted by law.
8. Entire Agreement. This Agreement contains the entire agreement
among the parties with respect to the matters contained herein and supersedes
all prior agreements or understandings. No amendment or modification of this
Agreement shall be valid unless the amendment or modification is in writing and
is signed by all the parties to this Agreement.
9. Notices. All notices, demands, reports, statements, approvals
or consents given by any party under this Agreement shall be in writing and
shall be delivered in person or by telecopy or other facsimile communication or
sent by first-class U.S. mail, registered or certified, postage prepaid, to the
appropriate party at its address on the signature pages hereof or at such other
address subsequently notified to the other parties hereto. A copy of any
communication to Salomon Smith Barney shall be furnished to Cleary, Gottlieb,
Steen & Hamilton, One Liberty Plaza, New York, New York 10006, Attention:
Raymond B. Check, provided that the failure to furnish such copy shall not
affect the effectiveness of any such communication. Any party may change its
address for purposes hereof by delivering a written notice of the change to the
other parties. All notices given under this Agreement shall be deemed received
(a) in the case of hand delivery, on the day of delivery, (b) in the case of
telecopy or other facsimile communication, on the day of transmission, and (c)
in the case of mailing, on the third day after such notice was deposited in the
mail.
10. Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns.
2
<PAGE> 3
11. Governing Law. This Agreement shall be governed by and be
construed in accordance with the law of the State of New York.
12. Counterparts. This Agreement may be signed in any number of
counterparts with all of such counterparts constituting one and the same
instrument.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their authorized representatives the date first above written.
SALOMON SMITH BARNEY INC.
By:____________________________________________
Name:
Title
Address: 388 Greenwich Street
New York, New York 10013
Attention:
DECS TRUST IV
By:____________________________________________
Donald J. Puglisi,
as Managing Trustee
Address: c/o Puglisi & Associates
850 Library Avenue,
Suite 204
Newark, Delaware 19716
4
<PAGE> 1
Exhibit (l)
[LETTERHEAD OF RICHARDS, LAYTON & FINGER, P.A.]
February 9, 1999
DECS Trust IV
c/o Puglisi & Associates
850 Liberty Avenue, Suite 204
Newark, Delaware 19715
Re: DECS Trust IV
Ladies and Gentlemen:
We have acted as special Delaware counsel for DECS Trust IV, a Delaware
business trust (the "Trust"), in connection with the matters set forth herein.
At your request, this opinion is being furnished to you.
For purposes of giving the opinions hereinafter set forth, our examination
of documents has been limited to the examination of executed or conformed
counterparts, or copies otherwise proved to our satisfaction, of the following:
(a) The Certificate of Trust of the Trust (the "Original Certificate of
Trust"), dated December 18, 1998, as filed in the office of the Secretary of
State of the State of Delaware (the "Secretary of State") on December 18, 1998;
(b) The Restated Certificate of Trust of the Trust (the "Restated
Certificate of Trust"; and together with the Original Certificate of Trust, the
"Certificate of Trust"), dated February 8, 1999, as filed in the office of the
Secretary of State on February 8, 1999;
(c) The Declaration of Trust of the Trust, dated as of December 17, 1998,
between Alan Rifkin, as sponsor (the "Initial Sponsor"), and Tyler Dickson, as
trustee (the "Initial Trustee");
<PAGE> 2
DECS Trust IV
February 9, 1999
Page 2
(d) The registration statement (the "Initial Registration Statement") on
Form N-2, including a prospectus (the "Prospectus"), relating to the issuance of
up to 15,500,000 DECS of the Trust representing preferred undivided beneficial
interests in the assets of the Trust (the "DECS"), as filed by the Trust with
the Securities and Exchange Commission (the "SEC") on December 21, 1998, as
amended by Amendment No. 1 to the Initial Registration Statement ("Amendment No.
1"), filed by the Trust with the SEC on January 22, 1999, as amended by
Amendment No. 2 to the Initial Registration Statement ("Amendment No. 2"), filed
by the Trust with the SEC on February 9, 1999 (the Initial Registration
Statement, as amended by Amendment No. 1 and Amendment No. 2 being hereinafter
referred to as the "Registration Statement");
(e) The Amended and Restated Declaration of Trust of the Trust, dated as
of February 8, 1999 (the "Declaration of Trust"), among the Initial Sponsor, the
Initial Trustee, Salomon Smith Barney, as sponsor, Donald J. Puglisi, William R.
Latham III and James B. O'Neill, as trustees, and the holders, from time to
time, of the undivided beneficial interests in the assets of such Trust,
including Exhibit A attached thereto (the "Declaration"); and
(f) A Certificate of Good Standing for the Trust, dated February 9, 1999,
obtained from the Secretary of State.
Initially capitalized terms used herein and not otherwise defined are used
as defined in the Declaration.
For purposes of this opinion, we have not reviewed any documents other than
the documents listed in paragraphs (a) through (f) above. In particular, we have
not reviewed any document (other than the documents listed in paragraphs (a)
through (f) above) that is referred to in or incorporated by reference into the
documents reviewed by us. We have assumed that there exists no provision in any
document that we have not reviewed that bears upon or is inconsistent with the
opinions stated herein. We have conducted no independent factual investigation
of our own but rather have relied solely upon the foregoing documents, the
statements and information set forth therein and the additional matters recited
or assumed herein, all of which we have assumed to be true, complete and
accurate in all material respects.
With respect to all documents examined by us, we have assumed that (i) all
signatures on documents examined by us are genuine, (ii) all documents submitted
to us as originals are authentic, and (iii) all documents submitted to us as
copies conform with the original copies of those documents.
<PAGE> 3
DECS Trust IV
February 9, 1999
Page 3
For purposes of this opinion, we have assumed (i) that the Declaration and
the Certificate of Trust constitute the entire agreement among the parties
thereto with respect to the subject matter thereof, including with respect to
the creation, operation and termination of the Trust, and that the Declaration
and the Certificate of Trust are in full force and effect and have not been
amended, (ii) except to the extent provided in paragraph 1 below, the due
creation or due organization or due formation, as the case may be, and valid
existence in good standing of each party to the documents examined by us under
the laws of the jurisdiction governing its creation, organization or formation,
(iii) the legal capacity of natural persons who are parties to the documents
examined by us, (iv) that each of the parties to the documents examined by us
has the power and authority to execute and deliver, and to perform its
obligations under, such documents, (v) the due authorization, execution and
delivery by all parties thereto of all documents examined by us, (vi) the
receipt by each Person to whom a DECS is to be issued by the Trust
(collectively, the "DECS Holders") of an interest in the DECS Certificate
(substantially in the form of Exhibit A to the Declaration) and the payment for
the DECS acquired by it, in accordance with the Declaration and the Registration
Statement, and (vii) that the DECS are issued and sold to the DECS Holders in
accordance with the Declaration and the Registration Statement. We have not
participated in the preparation of the Registration Statement and assume no
responsibility for its contents.
This opinion is limited to the laws of the State of Delaware (excluding the
securities laws of the State of Delaware), and we have not considered and
express no opinion on the laws of any other jurisdiction, including federal laws
and rules and regulations relating thereto. Our opinions are rendered only with
respect to Delaware laws and rules, regulations and orders thereunder which are
currently in effect.
Based upon the foregoing, and upon our examination of such questions of law
and statutes of the State of Delaware as we have considered necessary or
appropriate, and subject to the assumptions, qualifications, limitations and
exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly created and is validly existing in good
standing as a business trust under the Delaware Business Trust Act, 12 Del. C.
ss. 3801, et seq.
2. When issued and sold, the DECS will represent valid and, subject to
the qualifications set forth in paragraph 3 below, fully paid and nonassessable
undivided beneficial interests in the assets of the Trust.
<PAGE> 4
DECS Trust IV
February 9, 1999
Page 4
3. The DECS Holders, as beneficial owners of the Trust, will be entitled
to the same limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the State
of Delaware. We note that the DECS Holders may be obligated to make payments as
set forth in the Declaration.
We consent to the filing of this opinion with the SEC as an exhibit to the
Registration Statement. In addition, we hereby consent to the use of our name
under the heading "Legal Matters" in the Prospectus. In giving the foregoing
consents, we do not thereby admit that we come within the category of Persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the SEC thereunder. Except as stated
above, without our prior written consent, this opinion may not be furnished or
quoted to, or relied upon by, any other Person for any purpose.
Very truly yours,
/s/ Richards, Layton & Finger
<PAGE> 1
EXHIBIT (n)(1)
[CLEARY, GOTTLIEB, STEEN & HAMILTON LETTERHEAD]
February 9, 1999
DECS Trust IV
c/o Puglisi & Associates
850 Library Avenue, Suite 204
Newark, Delaware 19715
Ladies and Gentlemen:
We have acted as special tax counsel to DECS Trust IV (the "Trust") in
connection with the registration statement on Form N-2 of the Trust (the
"Registration Statement") with the Securities and Exchange Commission and hereby
confirm to you our advice as set forth under the heading "Certain United States
Federal Income Tax Considerations" in the Prospectus included in the
Registration Statement.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the caption "Certain
United States Federal Income Tax Considerations" in the Prospectus. In giving
such consent, we do not thereby admit that we are in the capacity of persons
whose consent is required under Section 7 of the Act.
Very truly yours,
Cleary, Gottlieb, Steen & Hamilton
By: /s/ Erika W. Nijenhuis
-----------------------------------------
Erika W. Nijenhuis, a Partner
<PAGE> 1
Exhibit (n)(2)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in the Registration Statement of DECS Trust IV on
Form N-2 filed with the Securities and Exchange Commission on or about February
9, 1999 of our report dated January 21, 1999 on our audit of the Statement of
Assets, Liabilities and Capital of DECS Trust IV as of January 21, 1999. We also
consent to the reference to our firm under the caption "Experts."
New York, New York
February 8, 1999
<PAGE> 1
Exhibit (n)(3)
CONSENT TO BEING NAMED AS TRUSTEE
The undersigned hereby consents to being named in the Registration
Statement on Form N-2 of DECS Trust IV (the "Trust") and any amendments thereto,
as a person about to become a Trustee of the Trust.
Dated as of February 9, 1998
/s/ JAMES B. O'NEILL
-------------------------------
James B. O'Neill
<PAGE> 2
CONSENT TO BEING NAMED AS TRUSTEE
The undersigned hereby consents to being named in the Registration
Statement on Form N-2 of DECS Trust IV (the "Trust") and any amendments thereto,
as a person about to become a Trustee of the Trust.
Dated as of February 9, 1998
/s/ DONALD J. PUGLISI
-------------------------------
Donald J. Puglisi
<PAGE> 3
CONSENT TO BEING NAMED AS TRUSTEE
The undersigned hereby consents to being named in the
Registration Statement on Form N-2 of DECS Trust IV (the "Trust") and any
amendments thereto, as a person about to become a Trustee of the Trust.
Dated as of February 9, 1998
/s/ WILLIAM R. LATHAM, III
-------------------------------
William R. Latham, III
<PAGE> 1
Exhibit (p)
CGSH Draft of 1/7/99
AMENDED AND RESTATED SUBSCRIPTION AGREEMENT
THIS AMENDED AND RESTATED SUBSCRIPTION AGREEMENT dated as of , 1999 is
entered into between DECS Trust IV, a statutory business trust organized under
the Business Trust Act of the State of Delaware (such trust and the trustees
thereof acting in their capacity as such being referred to herein as the
"Trust"), and Salomon Smith Barney Inc. (the "Purchaser").
WHEREAS the Purchaser and Tyler Dickson, as trustee of the Trust, have
previously entered into a Subscription Agreement dated as of January 21, 1999
(the "Initial Agreement"); and
WHEREAS following the execution of the Initial Agreement, Tyler Dickson
resigned as trustee of the Trust and Donald J. Puglisi was appointed Managing
Trustee; and
WHEREAS the Trust and the Purchaser have agreed to amend and restate the
Initial Agreement as set forth herein, intending such amendment and restatement
to have effect from the date of the Initial Agreement;
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of the DECS.
1.1. Sale and Issuance of DECS. Subject to the terms and conditions of
this Agreement, the Trust agrees to sell to the Purchaser, and the Purchaser
agrees to purchase from the Trust, one DECS (the "Subscription DECS"),
representing an undivided beneficial interest in the Trust, at a purchase price
of $100.00.
1.2. Closing. The purchase and sale of the Subscription DECS shall
take place at the offices of Cleary, Gottlieb, Steen & Hamilton, One Liberty
Plaza, New York, New York 10006 at 10:00 a.m., on January 21, 1999, or at such
other time ("Closing Date") and place as the Trust and the Purchaser mutually
agree upon. At or after the Closing Date, the Trust shall deliver to the
Purchaser a certificate representing the Subscription DECS, registered in the
name of the Purchaser or its nominee. Payment for the Subscription DECS shall be
made on the Closing Date by the Purchaser by bank wire transfer or by delivery
of a certified or official bank check, in either case in immediately available
funds, of an amount equal to the purchase price of the Subscription DECS.
2. Representations, Warranties and Covenants of the Purchaser. The
Purchaser hereby represents and warrants to, and covenants for the benefit of,
the Trust that:
2.1. Purchase Entirely for Own Account. This Agreement is made by the
Trust with the Purchaser in reliance upon the Purchaser's representation to the
Trust, which by the Purchaser's execution of this Agreement the Purchaser hereby
confirms, that Purchaser is acquiring the Subscription DECS for investment for
the Purchaser's own account, and not as a nominee or agent and not with a view
to the resale or distribution by the Purchaser of such
<PAGE> 2
Subscription DECS, and that the Purchaser has no present intention of selling,
granting any participation in, or otherwise distributing the Subscription DECS,
in either case in violation of any securities registration requirement under
applicable law, but subject nevertheless, to any requirement of law that the
disposition of its property shall at all times by within its control. By
executing this Agreement, the Purchaser further represents that the Purchaser
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participation to such person or to any third
person, with respect to the Subscription DECS.
2.2. Investment Experience. The Purchaser acknowledges that it can
bear the economic risk of the investment for an indefinite period of time and
has such knowledge and experience in financial and business matters (and
particularly in the business in which the Trust operates) as to be capable of
evaluating the merits and risks of the investment in the Subscription DECS. The
Purchaser is an "accredited investor" as defined in Rule 501(a) of Regulation D
under the Securities Act of 1933 (the "Act").
2.3. Restricted Securities. The Purchaser understands that the
Subscription DECS are characterized as "restricted securities" under the United
States securities laws inasmuch as they are being acquired from the Trust in a
transaction not involving a public offering and that under such laws and
applicable regulations such Subscription DECS may be resold without registration
under the Act only in certain circumstances. In this connection, the Purchaser
represents that it understands the resale limitations imposed by the Act and is
generally familiar with the existing resale limitations imposed by Rule 144.
2.4. Further Limitations on Disposition. The Purchaser further agrees
not to make any disposition directly or indirectly of all or any portion of the
Subscription DECS unless and until:
(a) There is then in effect a registration statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
The Purchaser shall have furnished the Trust with an opinion of
counsel, reasonably satisfactory to the Trust, that such disposition will not
require registration of such Subscription DECS under the Act.
Notwithstanding the provisions of subsections (a) and (b) above,
no such registration statement or opinion of counsel shall be necessary for a
transfer by the Purchaser to any affiliate of the Purchaser, if the transferee
agrees in writing to be subject to the terms hereof to the same extent as if it
were the original Purchaser hereunder.
2.5. Legends. It is understood that the certificate evidencing the
Subscription DECS may bear either or both of the following legends:
(b) "These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in effect with respect
to the securities under such Act or an opinion of counsel
<PAGE> 3
reasonably satisfactory to the Trustees of DECS Trust IV that such registration
is not required." Any legend required by the laws of any other applicable
jurisdiction. The Purchaser and the Trust agree that the legend contained in
paragraph (a) above shall be removed at a holder's request when it is no longer
necessary to ensure compliance with federal securities laws.
2.6. Amendment to Declaration of Trust; Split of DECS. The Purchaser
consents to
(a) the execution and delivery by the Trustees of the Trust and
Salomon Smith Barney Inc., as sponsor of the Trust, of an Amended and Restated
Declaration of Trust in the form attached hereto and
(b) the split of the Subscription DECS subsequent to the
determination of the public offering price per DECS but prior to the sale of the
DECS to the Underwriter into a greater number of DECS so that immediately
following such split the value of the Subscription DECS will equal the aforesaid
public offering price per DECS.
2.7. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
2.8. Governing Law. This Agreement shall be governed by and construed
and interpreted in accordance with the law of the State of New York applicable
to agreements made and to be performed wholly within such state.
IN WITNESS WHEREOF, the parties have executed this Amended and Restated
Agreement on , 1999.
DECS TRUST IV
By
--------------------------------------
Donald J. Puglisi, as Managing Trustee
SALOMON SMITH BARNEY INC.
By
--------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE> 1
[ARTICLE] 6
<TABLE>
<S> <C>
[PERIOD-TYPE] OTHER
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-START] JAN-21-1999
[PERIOD-END] JAN-21-1999
[INVESTMENTS-AT-COST] 100
[INVESTMENTS-AT-VALUE] 0
[RECEIVABLES] 0
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 100
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 0
[TOTAL-LIABILITIES] 0
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 0
[SHARES-COMMON-STOCK] 100
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 100
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 0
[OTHER-INCOME] 0
[EXPENSES-NET] 0
[NET-INVESTMENT-INCOME] 0
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 0
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 0
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 0
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 0
[AVERAGE-NET-ASSETS] 0
[PER-SHARE-NAV-BEGIN] 0
[PER-SHARE-NII] 0
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 0
[EXPENSE-RATIO] 0
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
