AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 20, 1999
SECURITIES ACT FILE NO. 333-77589
INVESTMENT COMPANY ACT FILE NO. 811-09325
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-2
|X| REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
|X| PRE-EFFECTIVE AMENDMENT NO. 1
|_| POST-EFFECTIVE AMENDMENT NO.
AND/OR
|X| REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
|X| AMENDMENT NO. 1
------------
METS TRUST
(Exact Name of Registrant as Specified in Charter)
C/O DEUTSCHE BANK SECURITIES INC.
130 LIBERTY STREET
NEW YORK, NEW YORK 10006
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (212) 250-2500
PAUL CAMBRIDGE
130 LIBERTY STREET
NEW YORK, NEW YORK 10006
(Name and Address of Agent for Service)
COPIES TO:
Michael M. Wiseman, Esq.
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
------------
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, other than securities offered in connection with a dividend reinvestment
plan, check the following box.[_]
It is proposed that this filing will become effective when declared
effective pursuant to section 8(c).
If appropriate, check the following box:
[_] This amendment designates a new effective date for a previously filed
registration statement.
[_] This form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act and the Securities Act
registration statement number of the earlier effective registration statement
for the same offering is 333-________.
------------
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, ACTION PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE>
METS TRUST
CROSS-REFERENCE SHEET
PART A & B OF PROSPECTUS*
<TABLE>
<CAPTION>
ITEM
NUMBER CAPTION LOCATION IN PROSPECTUS
- ------ ------- ----------------------
<S> <C> <C>
1. Outside Front Cover......................................... Front Cover Page
2. Cover Pages; Other Offering Information..................... Front Cover Page; Underwriting
3. Fee Table and Synopsis...................................... Prospectus Summary
4. Financial Highlights........................................ Not Applicable
5. Plan of Distribution........................................ Front Cover Page; Prospectus Summary; Underwriting
6. Selling Shareholders........................................ Not Applicable
7. Use of Proceeds............................................. Prospectus Summary-The Trust's Investment
Policies; Use of Proceeds; Investment Objective and Policies
8. General Description of the Registrant....................... Front Cover Page; Prospectus Summary;
The Trust; Investment Objective and Policies; Risk Factors
9. Management.................................................. The Trust
10. Capital Stock, Long-Term Debt, and Other Securities......... Investment Objective and Policies; Description of
the METS; Certain Federal Income Tax Considerations
11. Defaults and Arrears on Senior Securities................... Not Applicable
12. Legal Proceedings........................................... Not Applicable
13. Table of Contents of the Statement
of Additional Information.................................. Not Applicable
14. Cover Page.................................................. Not Applicable
15. Table of Contents........................................... Not Applicable
16. General Information and History............................. The Trust
17. Investment Objective and Policies........................... Investment Objective and Policies
18. Management.................................................. The Trust
19. Control Persons and Principal Holders of Securities......... The Trust
20 Investment Advisory and Other Services...................... The Trust
21. Brokerage Allocation and Other Practices.................... Investment Objective and Policies
22. Tax Status.................................................. Certain Federal Income Tax Considerations
23. Financial Statements........................................ Statement of Assets and Liabilities
- ---------------------------
<FN>
* Pursuant to the General Instructions to Form N-2, all information required
to be set forth in Part B: Statement of Additional Information has been
included in Part A: The Prospectus. Information required to be included in
Part C is set forth under the appropriate item so numbered in Part C of
this Registration Statement.
</FN>
</TABLE>
<PAGE>
RED HERRING INFORMATION
The information in this Prospectus is not complete and may be changed. A
registration statement relating to the securities has been filed with the
Securities and Exchange Commission. We may not sell these securities until this
registration statement is effective. This Prospectus is not an offer to sell
these securities and it is not soliciting an offer to buy these securities in
any state where the offer, solicitation or sale is not permitted.
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 20, 1999
_______ SECURITIES
METS Trust
$____ Mandatory Exchangeable Trust
Securities (METS)
(Subject to exchange into Shares of Common Stock of [Company])
---------------------------
The Trust is a newly created New York business trust. The METS represent
all of the beneficial interest in the Trust. When the Trust issues the METS, it
will own U.S. Treasury securities and a prepaid forward contract for the
purchase of [Company] Common Stock.
For each METS that you buy, you will receive a quarterly cash distribution
of $[ ] on each [ January , April , July and October ,] starting [ October] ,
1999 and ending when the Trust terminates. Those cash distributions will be made
from payments on the U.S. Treasury securities that the Trust holds when it
issues the METS.
The Trust will hold a prepaid forward contract to purchase [Company] Common
Stock from [Seller]. The Trust will terminate on or shortly after [ July] ,
2002. When the Trust terminates, [Seller] will deliver, at its option, either
cash or [Company] Common Stock to the Trust. The Trust will then deliver this
cash or stock to you. The cash or number of shares of [Company] Common Stock
that [Seller] will deliver and you will receive will depend on the price of
[Company] Common Stock during the twenty business days before the date the Trust
terminates. If the average price of [Company] Common Stock over this period is:
o more than $_______ per share, you will receive 0.__ shares of Common
Stock, or the cash equivalent, for each METS you own.
o more than $_______ per share but less than $______ per share, you will
receive Common Stock worth $_______, or the cash equivalent, for each
METS you own.
o $_______ or less, you will receive one share of Common Stock, or the
cash equivalent, for each METS you own.
The last reported sale price of [Company] Common Stock on [ July __, 1999]
was $[ ] per share. The Trust will apply to list the METS on the
__________________ under the symbol "____".
The Trust's securities have no history of public trading. Typically, shares
of closed-end funds, such as the Trust, trade at a discount from net asset
value. This characteristic of shares of closed-end investment companies is a
risk separate from the risk that the Trust's net asset value will fall. The
Trust cannot predict whether the METS will trade at, below or above net asset
value. The risk of purchasing investments in a closed-end investment company
that might trade at a discount is more pronounced for investors who wish to sell
their investments soon after completion of this offering.
---------------------------
This Prospectus sets forth concisely information about the Trust that you
should know before investing. You are advised to read this Prospectus and to
retain it for future reference. Additional information about the Trust has been
filed with the Securities and Exchange Commission and is available upon written
or oral request and without charge.
---------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 21 OF THIS PROSPECTUS FOR A DISCUSSION
OF SOME OF THE RISKS INVOLVED IN INVESTING IN THE METS.
---------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE METS OR DETERMINED WHETHER THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------------
<PAGE>
Per METS Total
Price to Public...................$________..................$________
Sales Load........................Not applicable.............Not applicable
Proceeds to the Trust.............$________..................$________
The Trust has granted to the Underwriters an option for 30 days to purchase
up to _______ additional METS at the Price to Public per METS to cover
over-allotments. See "Underwriting".
---------------------------
DEUTSCHE BANC ALEX. BROWN
---------------------------
The date of this Prospectus is , 1999.
2
<PAGE>
PROSPECTUS SUMMARY
This summary is not a complete description of the Trust or the METS.
It does not contain all the information that may be important to you. To
understand this offering fully, you must read this entire Prospectus carefully,
including the Risk Factors beginning on page 21.
A Glossary is included in this Prospectus, beginning on page 29. You
should refer to the Glossary if you wish to understand the terms used in this
Prospectus in detail.
THE TRUST
The Trust is a newly organized trust that exists only to offer the
METS. The only activities of the Trust will be to issue the METS and to invest
in the U.S. Treasury securities and forward contracts described in this
Prospectus.
THE TRUST'S INVESTMENT OBJECTIVE
The Trust's investment objective is to give the holder of each METS a
quarterly cash distribution of $____ and, on [ July] __, 2002 (the "Exchange
Date"), between 0.____ and 1 shares of Common Stock (or cash equal to the value
of some or all of those shares). The number of shares, or amount of cash, that a
holder will receive in exchange for a single METS will vary, depending on the
average market price of the Common Stock over the twenty business days before
the Exchange Date.
o If the average market price is more than $_______ per share, you
will receive 0.__ shares of [Company] Common Stock, or the cash
equivalent, for each METS you own.
o If the average market price is more than $_______ per share but
less than $_______ per share, you will receive Common Stock worth
$_______ , or the cash equivalent, for each METS you own.
o If the average market price is $_______ or less, you will receive
one share of Common Stock, or the cash equivalent, for each METS
you own.
This formula will be adjusted if the Company takes steps that combine, split or
dilute the value of the Common Stock. If this formula would require the Trust to
deliver a fraction of a share of Common Stock to any holder, the Trust will
instead deliver cash equal to the same fraction of the value of a share of
Common Stock.
Because of this formula, the holders of the METS will receive part of
any increase in the value of the Common Stock above $_____. However, the holders
of the METS will not receive any increase in the value of the Common Stock
unless that value rises higher than $____. The holders will bear the entire
amount of any fall in the value of the Common Stock.
For more detail, please see "Investment Objective and
Policies--General".
THE TRUST'S INVESTMENT POLICIES
To achieve its investment objective, the Trust will invest all the
proceeds of the METS in:
o "Stripped" U.S. Treasury securities that will mature during each
quarter over the term of the Trust. The Trust will use the
payments it receives as these U.S. Treasury securities mature to
pay the quarterly distributions on the METS.
o Prepaid forward contracts to purchase Common Stock (the
"Contracts") with one or more stockholders of the Company (each
of which is referred to as a "Seller"). Each Seller will be
required to deliver shares of Common Stock to the Trust on the
Exchange Date. Alternatively, the Sellers may choose to deliver
the equivalent amount of cash. If the Sellers perform their
obligations, these Contracts will provide the Trust with the
shares of Common Stock or cash that the Trust must deliver in
exchange for the METS on the Exchange Date.
2
<PAGE>
Each Seller will pledge collateral to the Trust to secure that
Seller's obligations under its Contract. The collateral will initially be the
shares of Common Stock that the Seller must deliver under the Contract. However,
if a Seller complies with its obligations under the Contract and its pledge, the
Seller may deliver U.S. Treasury securities as substitute collateral.
The Trust will not change its investments, even if the value of the
Contracts or the Common Stock falls significantly or the financial condition of
the Company suffers. Furthermore, because the Trust is a grantor trust for
purposes of the U.S. federal tax laws, the trustees of the Trust will not have
the power to change the Trust's investments.
For more detail, please see "Investment Objective and
Policies--General" and "--Investment Restrictions".
THE OFFERING
The Trust is offering _________ METS to the public at a purchase price
of $____ per METS. This price is equal to the last reported sale price of the
Common Stock on the date of this Prospectus. The METS are being offered through
Deutsche Bank Securities Inc. [and _____________] (the "Underwriters").
In addition, the Trust has granted the Underwriters an option to
purchase up to _______ additional METS. These METS may only be used to cover
over-allotments. For more detail, please see "Underwriting".
THE METS
GENERAL. The Trust will pass through to the holders of the METS all
payments that it receives on the U.S. Treasury securities that it purchases with
the proceeds of the METS. Similarly, the Trust will deliver to the holders of
the METS all shares of Common Stock, or cash, that it receives from the Sellers
under the Contracts.
DISTRIBUTIONS. The holder of each METS will receive a distribution of
$____ each quarter. The Trust will pay these distributions on each [ January __,
April __, July __ and October __]. However, if the Trust would be required to
make a distribution on a Saturday, Sunday or legal holiday, that distribution
will instead be paid on the next business day. Each payment will be made to the
holder of the METS whose name appears in the books of the Trust on the Business
Day before the applicable payment date. The first distribution will be payable
on [ October __], 1999 to holders of record on the previous Business Day.
The only source of cash for the quarterly distributions on the METS
will be the cash received from the U.S. Treasury securities purchased by the
Trust with the proceeds of the METS. Part of each year's distributions on the
METS should be treated as a return of capital under the U.S. federal income tax
laws. For more detail, please see "Description of the METS--Tax Treatment of
Distributions".
EXCHANGE FOR COMMON STOCK. On the Exchange Date, each METS will be
exchanged automatically for between 0.__ shares and one share of Common Stock.
However, if the Sellers deliver cash instead of Common Stock under the
Contracts, the holders of the METS will receive cash instead of Common Stock on
the Exchange Date. The amount of cash will be based on the average market price
of the Common Stock during the twenty business days before the Exchange Date.
The number of shares of Common Stock or amount of cash that will be delivered in
exchange for the METS will be adjusted if the Company takes certain actions that
have the effect of combining, splitting or diluting the value of the Common
Stock.
Holders of METS may receive cash or other common equity securities
listed on a U.S. National securities exchange or reported by the NASDAQ National
Market ("Marketable Securities"), rather than shares of Common Stock, if the
Company merges with another entity, the Company is liquidated, or certain
similar events occur.
In addition, if a Seller defaults under its Contract or its collateral
arrangements, that Seller's Contract would be accelerated. The holder of each
METS would then receive an early distribution of shares of Common Stock (or
Marketable Securities), cash, or a combination of Common Stock and cash, instead
of a portion of the Common Stock or cash
3
<PAGE>
that would otherwise be delivered on the Exchange Date.
For more detail, please see "Investment Objective and Policies--The
Contracts".
VOTING RIGHTS. Holders will have the right to vote on changes to the
terms of the METS, on the replacement of the trustees and the custodian, paying
agent, transfer agent, registrar and other agents of the Trust, and on other
matters affecting the Trust, as described below under the caption "Description
of the METS". However, holders of the METS will not have any voting rights with
respect to the Common Stock until they actually receive shares of Common Stock
in exchange for the METS. For more detail, please see "Description of the
METS--Voting".
LISTING. The Trust will apply to list the METS on the
____________________ (the "_______") under the symbol ___.
THE COMPANY
[Insert Description of the Company.]
The Company has prepared a prospectus that describes the Company and
the Common Stock. This Company prospectus is attached as Annex A to this
Prospectus. The Company is not affiliated with the Trust and will not receive
any of the proceeds from the sale of the METS.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The Trust will be treated as a grantor trust under the U.S. federal
income tax laws. This means that under these tax laws, each holder will be
treated as if it owned directly its proportionate share of the assets held by
the Trust. Similarly, income and original issue discount received by the Trust
will generally be treated as income of the holders.
Under the U.S. federal income tax laws, the U.S. Treasury securities
held by the Trust will be treated as having "original issue discount" that will
accrue over the term of the U.S. Treasury securities. However, when the Trust
actually receives cash on these U.S. Treasury securities, these cash payments
will not be included in the Trust's income. Instead, these payments should
reduce the aggregate tax basis of the METS. A holder will have taxable gain or
loss if the Trust receives cash instead of Common Stock.
Distributions on the METS are payments of non-taxable principal and
taxable interest on U.S. Treasury securities, not taxable dividends, and they
are likewise not eligible for the dividend received deduction.
Holders should be aware that the assets of the Trust could be
characterized differently under the federal income tax laws. Other
characterizations could require holders to include more interest in income than
they would under the analysis outlined above. For more detail, please see
"Certain Federal Income Tax Considerations".
RISK FACTORS
An investment in the METS involves risk. Some of the risks of an
investment in the METS are described under "Risk Factors", beginning on page 21.
These risks include the following:
o The Trust will not dispose of the Contracts even if the price of
the Common Stock falls significantly or the financial condition
of the Company suffers. The holders will bear the entire amount
of any fall in the value of the Common Stock.
o Similarly, the U.S. Treasury securities held by the Trust will
not be disposed of before their respective maturities or the
termination of the Trust, whichever comes first, even if the
price of those U.S. Treasury securities falls significantly.
o If the price of Common Stock rises, a holder of a METS will not
receive all of this increase in value. Holders will not receive
any of this increase if the average market price of the Common
Stock at the Exchange Date is below $______. Holders will receive
only ____% of any increase in the value of the Common Stock
4
<PAGE>
over $____. On the other hand, holders of METS will suffer any
fall in the value of the Common Stock.
o The distributions on the METS will be higher than the annual
dividends paid on the Common Stock in the past year. However, the
dividend on the Common Stock may be raised to a level higher than
the distributions on the METS, which will not increase.
o The number of shares of Common Stock or amount of cash that
holders may receive on the Exchange Date will be adjusted if the
Company takes certain actions that have the effect of combining,
splitting or diluting the value of the Common Stock. The number
of shares to be received by holders may not be adjusted for other
events that may adversely affect the price of the Common Stock.
o The only assets held by the Trust will be the U.S. Treasury
securities and the Contracts. An investment in the Trust will be
riskier than an investment in an investment company with
diversified investments.
o The trading prices of the METS in the secondary market will be
directly affected by the trading prices of the Common Stock in
the secondary market. The trading prices of the Common Stock will
be influenced by the Company's operating results and prospects
and by economic, financial and other factors and market
conditions. The trading prices of the METS will also be affected
by fluctuations in interest rates and other factors that are
difficult to predict and beyond the Trust's control.
o There can be no assurance that a secondary market will develop
for the METS or that, if a secondary market does develop, that it
will provide the holders with liquidity of investment or that it
will continue for the life of the METS.
o Holders of the METS will not be entitled to any rights with
respect to the Common Stock unless and until they actually
receive Common Stock in exchange for the METS. For example,
holders of METS will not be entitled to vote the shares of Common
Stock or receive dividends.
FEES AND EXPENSES
UNDERWRITERS' COMPENSATION. The Sellers will compensate the
Underwriters for the offering of the METS because a significant portion of the
proceeds of the sale of the METS will be used by the Trust to purchase the
Contracts from the Sellers. The Underwriting Agreement requires the Sellers to
pay the Underwriters $____ for each METS sold in the offering.
ORGANIZATIONAL AND OFFERING COSTS. The organizational costs of the
Trust will be approximately $10,000. The costs of the Trust in connection with
the offering of the METS will be approximately $_______. The Sellers will pay
these organizational and offering costs.
COSTS OF OTHER SERVICE PROVIDERS. At the closing of the offering of
the METS, the Sellers will make a one-time, up-front payment to the
Administrator, the Custodian, the Paying Agent and each Trustee as compensation
for its services to the Trust. The Sellers will also pay the Administrator
$_____ to cover the anticipated expenses of the Trust over the term of the
Trust. The Sellers will also pay any on-going expenses of the Trust above these
estimated amounts and reimburse the Trust for any amounts it may pay as
indemnification to any Trustee, the Administrator, the Custodian or the Paying
Agent.
DISCLOSURE REQUIRED BY THE SECURITIES AND EXCHANGE COMMISSION. The
Securities and Exchange Commission (the "SEC") requires the Trust to present its
expenses in the following format. The SEC intends that this requirement assist
investors in understanding the various costs and expenses that an investor in
the METS will bear directly or indirectly.
Because the Trust will not bear any fees or
5
<PAGE>
expenses, investors will not bear any expenses directly. The only expenses that
an investor might be considered to be bearing indirectly are (i) the
compensation that each Seller will pay to the Underwriters for selling that
investor's METS and (ii) the ongoing expenses of the Trust that the Sellers will
pay at the closing of the offering.
INVESTOR TRANSACTION EXPENSES
Sales Load (as a percentage of offering price)............................. ___%
Dividend Reinvestment and Cash Purchase Plan Fees.......................... N/A
ANNUAL EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Management Fees............................................................ 0%
Other Expenses............................................................. ___%
Total Annual Expenses................................................... %
===
The SEC also requires that closed-end investment companies present an
illustration of cumulative expenses (both direct and indirect) that an investor
would bear. The example must 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. YOU SHOULD NOTE THAT THE ASSUMPTION OF A 5% ANNUAL RETURN DOES NOT
ACCURATELY REFLECT THE FINANCIAL TERMS OF THE TRUST. SEE "INVESTMENT OBJECTIVE
AND POLICIES--GENERAL". ADDITIONALLY, THE TRUST DOES NOT PERMIT THE REINVESTMENT
OF DISTRIBUTIONS.
EXAMPLE 1 YEAR 3 YEARS
------- ------ -------
You would bear the following expenses (i.e.,
the applicable sales load and allocable portion
of annual expenses paid by the Sellers) on a $1,000
investment, assuming a 5% annual return................ $ $
6
<PAGE>
THE TRUST
CREATION AND FORM OF THE TRUST
The Trust is a newly organized New York trust. It is a registered,
non-diversified, closed-end management investment company under the Investment
Company Act of 1940. The Trust was formed on May 3, 1999 under a trust
agreement, which was amended and restated as of , 1999 to reflect the terms of
this offering. The address of the Trust is 130 Liberty Street, New York, New
York 10006 (telephone no. (212) 250-2500).
TRUST TERMINATION
The Trust will terminate automatically on or shortly after the
Exchange Date. Alternatively, if all Contracts are accelerated because of a
Reorganization Event or a Collateral Event of Default, then any U.S. Treasury
securities then held in the Trust will be liquidated by the Administrator and
the proceeds distributed pro rata to the holders, together with the shares or
cash distributed upon acceleration, and the Trust will be terminated. See
"Investment Objective and Policies--The Contracts--Collateral Arrangements;
Acceleration".
THE TRUSTEES
The Trust will be internally managed by three Trustees. One of the
Trustees will be designated as the "Managing Trustee" of the Trust. The Trustees
will be responsible for the general management and operations of the Trust.
However, the Trustees will not have the power to vary the investments held by
the Trust.
The individuals who have been elected by Deutsche Bank Securities
Inc., as the sponsor of the Trust, to serve as the Trustees are set forth below.
The Sellers will pay each Trustee, on behalf of the Trust, a one-time, up-front
fee to cover the Trustee's annual fee and anticipated out-of-pocket expenses.
The Managing Trustee will also receive an additional up-front fee for serving in
that capacity. The names, ages, addresses and titles of the Trustees, their
principal occupations during the past five years, and their compensation are as
follows:
<TABLE>
<CAPTION>
PRINCIPAL
OCCUPATION DURING
NAME, AGE AND ADDRESS TITLE PAST FIVE YEARS COMPENSATION
--------------------- ----- --------------- ------------
<S> <C> <C> <C>
Managing Trustee $
Trustee $
Trustee $
</TABLE>
None of the Trustees is an "interested person" of the Trust as defined
in the Investment Company Act. None of the Trustees is a director, officer or
employee of the Underwriters or of the Administrator, or of any affiliate of the
Underwriters or the Administrator. Each of the Trustees serves as a trustee of
other similar trusts, but none of the Trustees receives any compensation for
serving as a trustee or director of any other affiliated investment company.
OTHER SERVICE PROVIDERS
ADMINISTRATOR. The day-to-day affairs of the Trust will be managed by
___________________, as Trust Administrator under an Administration Agreement.
Under the Administration Agreement, the Trustees have delegated most of their
operational duties to the Trust Administrator, including the duties to:
o receive invoices for expenses incurred by the Trust;
o with the approval of the Trustees, engage legal and other
professional advisors (other than the independent public
accountants for the Trust);
o instruct the Trust's Paying Agent to pay the
7
<PAGE>
distributions on the METS;
o prepare and mail, file or publish all notices, proxies, reports,
tax returns and other communications and documents for the Trust
and keep all the Trust's books and records;
o at the direction of the Trustees, institute and prosecute legal
and other appropriate proceedings to enforce the rights and
remedies of the Trust; and
o make all necessary arrangements for meetings of the Trustees and
any meetings of holders.
The Administrator will not select the independent public accountants
for the Trust. The Administrator also will not sell any of the Trust's assets,
except (1) when the Contracts require a delivery by the Trust, (2) when the
collateral agreements securing the Contracts require the Trust to liquidate
collateral posted by a Seller, and (3) when the Trust terminates.
Either the Trust or the Administrator may terminate the Administration
Agreement by giving 60 days' written notice. However, no termination will become
effective until a replacement Administrator has accepted the duties of the
Administrator.
The address of the Administrator is _________________________________.
CUSTODIAN. The assets of the Trust will be held by
____________________ as the Trust's Custodian under a Custodian Agreement. If
the Custodian Agreement is terminated by the Trust or the Custodian resigns, the
Trust must engage a new Custodian to hold the Trust assets. Under the Custodian
Agreement, the Custodian must invest all cash received by the Trust and not paid
to cover Trust expenses in short-term U.S. Treasury securities maturing on or
shortly before the next quarterly distribution date.
COLLATERAL AGENT. The Custodian will also act as Collateral Agent
under the Collateral Agreements with the Sellers. The Collateral Agent will hold
a perfected security interest in the Common Stock and U.S. Government
obligations or other assets pledged by the Sellers under the Contracts.
PAYING AGENT. ____________________ will serve as the transfer agent,
registrar and paying agent (the "Paying Agent") for the METS under a Paying
Agent Agreement. If the Paying Agent Agreement is terminated by the Trust or the
Paying Agent resigns, the Trust will use its best efforts to engage a new Paying
Agent.
Except for its roles as Administrator, Custodian, Collateral Agent and
Paying Agent, ____________________ has no other affiliation with, and is not
engaged in any other transactions with, the Trust.
INDEMNIFICATION
The Trust will indemnify each Trustee, the Administrator, the
Custodian, the Collateral Agent and the Paying Agent against any liabilities or
costs (including the costs of defending against any liability) that it may incur
in acting in that capacity, except for willful misfeasance, bad faith, gross
negligence or reckless disregard of their respective duties or where applicable
law prohibits that indemnification. The Sellers have agreed to reimburse the
Trust for any amounts it may be required to pay under these indemnifications.
ESTIMATED EXPENSES OF THE TRUST
In addition to the Trustees' compensation described above, at the
closing of this offering the Sellers will pay to the Administrator, the
Custodian and the Paying Agent a one-time, up-front amount totaling $_______ to
cover their fees. The Sellers will also pay the Administrator a one-time
up-front amount totaling $________ to cover 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:
o expenses for legal and independent accountants' services;
o costs of printing proxies, securities certificates and holder
reports;
o expenses of the Trustees;
8
<PAGE>
o fidelity bond coverage; and
o any expenses of qualifying the METS for sale in the various
states.
In addition, the Sellers will pay, on behalf of the Trust, organization costs of
the Trust in the amount of $__________ and estimated costs of the Trust in
connection with the initial registration and public offering of the METS in the
amount of $_______.
The amount payable to the Administrator to cover ongoing expenses of
the Trust was determined based on estimates made in good faith on the basis of
information currently available to the Trust, including estimates furnished by
the Trust's agents. There cannot, however, be any assurance that actual
operating expenses of the Trust will not be substantially more than this amount.
The Sellers have agreed to pay any excess expenses beyond this amount. If the
Sellers do not pay those excess expenses, the Trust will have to pay them, which
will reduce the amount available to distribute to holders.
VALUATION OF TRUST ASSETS
In calculating the net asset value of the Trust as required by the
Investment Company Act, the Amended and Restated Trust Agreement provides that
(i) the U.S. Treasury securities 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, (ii) short-term investments having a maturity of
60 days or less will be valued at cost with accrued interest or discount earned
included in interest receivable and (iii) the Contracts will be valued on the
basis of the bid price received by the Trust for the Contracts, or any portion
of the Contracts covering not less than 1,000 shares, from an independent
broker-dealer firm unaffiliated with the Trust to be named by the Trustees who
is in the business of making bids on financial instruments similar to the
Contracts and with comparable terms, or if such a bid quotation is not
available, as determined in good faith by the Trustees.
USE OF PROCEEDS
The net proceeds of this offering will be used immediately upon the
closing of this offering to
o purchase a portfolio of stripped U.S. Treasury securities with
face amounts and maturities corresponding to the quarterly
distributions payable with respect to the METS, and
o pay the purchase price to the Sellers under the Contracts.
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INVESTMENT OBJECTIVE AND POLICIES
GENERAL
The Trust's investment objective is to give the holder of each METS a
quarterly cash distribution of $____ and, on the Exchange Date, between 0.____
and 1 shares of Common Stock (or cash equal to the value of some or all of those
shares). The number of shares, or amount of cash, that a holder will receive in
exchange for a single METS will vary, depending on the average market price of
the Common Stock over the twenty business days before the Exchange Date. To
achieve this objective, the Trust will use the proceeds of the METS to buy and
hold:
o a portfolio of stripped U.S. Treasury securities maturing on a
quarterly basis through [ July] __, 2002; and
o the Contracts relating to the Common Stock.
The number of shares of Common Stock that will be delivered in
exchange for each METS is the "Exchange Rate". The Exchange Rate will vary in
accordance with a formula, depending on the "Average Market Price" of the Common
Stock on the Exchange Date:
o if the Average Market Price is more than the Appreciation
Threshold Price, the Exchange Rate will be 0.__ shares of Common
Stock;
o if the Average Market Price is more than the Initial Price but
less than the Appreciation Threshold Price, the Exchange Rate
will be the number of shares of Common Stock having a value
(determined at the Average Market Price) equal to the Initial
Price; and
o if the Average Market Price is the Initial Price or less, the
Exchange Rate will be one share of Common Stock.
This formula will be adjusted if the Company takes steps that combine,
split or dilute the value of the Common Stock. See "--The Contracts--Dilution
Adjustments". The Exchange Rate will be rounded upward or downward to the
nearest 1/10,000 (or if there is not a nearest 1/10,000, to the next lower
1/10,000). Holders who would otherwise receive fractional shares on the Exchange
Date will instead receive cash.
The "Average Market Price" per share of Common Stock on any date means
the average Closing Price of a share of Common Stock on the 20 Trading Days
immediately prior to but not including that date.
The "Closing Price" of the Common Stock on any date of determination
means the daily closing sale price (or, if no closing sale price is reported,
the last reported sale price) of the Common Stock as reported on the NYSE
Consolidated Tape on that date of determination or, if the Common Stock 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 the
Common Stock is so listed, or if the Common Stock is not so listed on a United
States national or regional securities exchange, as reported by the NASDAQ
National Market or, if the Common Stock is not so reported, the last quoted bid
price for the Common Stock in the over-the-counter market as reported by the
National Quotation Bureau or similar organization, provided that if any event
that results in an adjustment to the number of shares of Common Stock
deliverable under the Contracts as described under "--The Contracts--Dilution
Adjustments" occurs before the Exchange Date, the Closing Price as determined
pursuant to the foregoing will be appropriately adjusted to reflect the
occurrence of that event.
A "Trading Day" means a day on which the Common Stock (A) is not
suspended from trading on any national or regional securities exchange or
association or over-the-counter market at the close of business and (B) has
traded at least once on the national or regional securities exchange or
association or over-the-counter market that is the primary market for the
trading of that security.
For illustrative purposes only, the following chart shows the number
of shares of Common Stock that a holder would receive for each METS at various
Average Market Prices. The chart assumes that there would be no dilution
adjustments as a result of any of the events described under "--The
Contracts--Dilution Adjustments". There can be no assurance that the Average
Market Price on the Exchange Date will be within the range set forth below.
Given the Initial Price of $____ per METS and the Appreciation Threshold Price
of $____, a
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holder would receive the following numbers of shares of Common Stock per METS on
the Exchange Date:
AVERAGE MARKET PRICE NUMBER OF SHARES
OF COMMON STOCK OF COMMON STOCK
- ------------------------------- -------------------------------
Holders of METS may receive cash or other Marketable Securities,
rather than shares of Common Stock, if the Company merges with another entity,
the Company is liquidated, or certain similar events occur. If one of these
events would require the Trust to deliver cash in exchange for the METS, this
delivery would take place before [ July] __, 2002. See "--The
Contracts--Reorganization Events".
In addition, if a Seller defaults under its Contract or its collateral
arrangements, that Seller's contract would be accelerated. The holder of each
METS would then receive an early distribution of shares of Common Stock (or
Marketable Securities), cash, or a combination of Common Stock and cash, instead
of a portion of the Common Stock or cash that would otherwise be delivered on
the Exchange Date. See "--The Contracts--Collateral Arrangements; Acceleration".
A fundamental policy of the Trust is to invest at least 70% of its
total assets in the Contracts. The Trust has also adopted a fundamental policy
that the Contracts may not be disposed of during the term of the Trust and that
the U.S. Treasury securities held by the Trust may not be disposed of before the
earlier of their respective maturities and the termination of the Trust. The
foregoing investment objective and policies are fundamental policies of the
Trust that may not be changed without the approval of a majority of the Trust's
outstanding METS. A "majority of the Trust's outstanding METS" means the lesser
of (i) 67% of the METS represented at a meeting at which more than 50% of the
outstanding METS are represented, and (ii) more than 50% of the outstanding
METS.
The value of the Common Stock (or cash or Marketable Securities
received in lieu of Common Stock) that will be received by holders under the
METS may be more or less than the amount paid for the METS offered hereby.
THE COMPANY
[Insert description of the Company.]
The shares of Common Stock are traded on the [New York Stock
Exchange]. The following table sets forth, for the calendar quarters indicated,
the reported high and low sales prices of the shares of Common Stock on the [New
York Stock Exchange Composite Tape] and the cash dividends per share of Common
Stock. As of [ July] __, 1999, there were ____ record holders of the Common
Stock, including The Depository Trust Company, which holds shares of Common
Stock on behalf of an indeterminate number of beneficial owners.
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DIVIDEND
HIGH LOW PER SHARE
------ ----- ---------
1997
1st Quarter............................
2nd Quarter............................
3rd Quarter............................
4th Quarter ...........................
1998
1st Quarter............................
2nd Quarter............................
3rd Quarter............................
4th Quarter............................
1999
1st Quarter............................
2nd Quarter............................
3rd Quarter (through July __, 1999)....
------ ----- ---------
Holders will not be entitled to rights with respect to the Common
Stock (including, without limitation, voting rights and rights to receive
dividends or other distributions on the Common Stock) until receipt of shares of
Common Stock by the holders as a result of the exchange of the METS for the
Common Stock on the Exchange Date.
Reference is made to the accompanying prospectus of the Company, dated
[ July] __, 1999 (pages A-1 through A-_ hereto) which describes the Company and
the shares of Common Stock deliverable to the holders upon mandatory exchange of
the METS on the Exchange Date. The Company is not affiliated with the Trust and
will not receive any of the proceeds from the sale of the METS. The Company
prospectus relates to an aggregate of _________ shares of Common Stock (plus an
additional _______ shares that may be delivered upon exercise of the
Underwriters' over-allotment option).
THE CONTRACTS
GENERAL. The Trust will enter into a Contract with each Seller
obligating that Seller to deliver to the Trust on the Exchange Date a number of
shares of Common Stock equal to the product of the Exchange Rate times the
initial number of shares of Common Stock covered by that Contract. The aggregate
initial number of shares of Common Stock under the Contracts will equal the
aggregate number of METS offered hereby (which will be increased if the
Underwriters exercise their over-allotment option).
The aggregate purchase price that the Trust will pay for all the
Contracts will be $______ (or $_____, if the Underwriters' over-allotment is
exercised in full). This price will be paid on the closing date of this offering
(or, for the portion of the Contracts relating to the METS to be sold under the
Underwriters' over-allotment option, on the closing date for the exercise of
that option). The purchase price of the Contracts was arrived at by arm's-length
negotiation between the Trust and the Sellers taking into consideration factors
including the price, expected dividend level and volatility of the Common Stock,
current interest rates, the term of the Contracts, current market volatility
generally, the collateral security pledged by the Sellers, the value of other
similar instruments and the costs and anticipated proceeds of the offering of
the METS. All matters relating to the administration of the Contracts will be
the responsibility of either the Administrator or the Custodian.
DILUTION ADJUSTMENTS. The Exchange Rate will be adjusted if the
Company (i) pays a stock dividend or makes a distribution with respect to the
Common Stock in shares of that stock, (ii) subdivides or splits its outstanding
shares of Common Stock, (iii) combines its outstanding shares of Common Stock
into a smaller number of shares, or (iv) issues by reclassification of its
shares of Common Stock any shares of other common stock of the Company. In any
such event, the Exchange Rate will be adjusted as follows: for each share of
Common Stock that would have been deliverable upon exchange before the
adjustment, the holder will receive the number of shares of Common Stock (or, in
the case of a reclassification referred to in clause (iv) above, the number of
shares of other common stock of the Company issued pursuant to that
reclassification), or fraction of such shares, that a shareholder who held one
share of Common Stock immediately before that event would be entitled solely by
reason of that event to hold immediately after that event.
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<PAGE>
In addition, if the Company issues rights or warrants to all holders
of Common Stock entitling them to subscribe for or purchase shares of Common
Stock at a price per share less than the Then-Current Market Price of the Common
Stock (as defined below) (other than rights to purchase Common Stock pursuant to
a plan for the reinvestment of dividends or interest), then the Exchange Rate
will be adjusted pursuant to the following formula:
A = ER x OS + AS
-------
OS + PS
where
A = the Exchange Rate as adjusted
ER = the Exchange Rate before the adjustment;
OS = the number of shares of Common Stock outstanding immediately before
the time (determined as described below) the adjustment is calculated
by reason of the issuance of those rights or warrants;
AS = the number of additional shares offered for subscription or purchase
pursuant to those rights or warrants; and
PS = the number of additional shares that the aggregate offering price of
the shares so offered for subscription or purchase would purchase at
the Then-Current Market Price.
To the extent that, after expiration of those rights or warrants, the shares
offered by such rights or warrants are not actually delivered, the Exchange Rate
will be further adjusted to equal the Exchange Rate that would have been in
effect had the foregoing adjustment been made upon the basis of delivery of only
the number of shares of Common Stock actually delivered.
The "Then-Current Market Price" of the Common Stock means the average
Closing Price per share of Common Stock for a Calculation Period of five Trading
Days immediately before the time that adjustment is effected (or, in the case of
an adjustment effected at the opening of business on the business day after a
record date, as described below, immediately before the earlier of the time that
adjustment is effected and the related "ex-date" on which the shares of Common
Stock first trade regular way on their principal market without the right to
receive the relevant dividend, distribution or issuance); provided that if no
Closing Price for the Common Stock is determined for one or more (but not all)
of those Trading Days, that Trading Day will be disregarded in the calculation
of the Then-Current Market Price (but no additional Trading Days will be added
to the Calculation Period). If no Closing Price for the Common Stock is
determined for any of those Trading Days, the most recently available Closing
Price for the Common Stock before those five Trading Days will be the
Then-Current Market Price. "Calculation Period" means any period of Trading Days
for which an average security price must be determined pursuant to the
Contracts.
In addition, if the Company pays a dividend or makes a distribution to
all holders of Common Stock, in either case, of evidences of its indebtedness or
other non-cash assets (excluding any stock dividends or distributions in shares
of Common Stock) or issues to all holders of Common Stock rights or warrants to
subscribe for or purchase any of its securities (other than rights or warrants
referred to in the second paragraph of this subsection), then the Exchange Rate
will be adjusted pursuant to the following formula:
A = ER x T
-----
T - V
where
A = the Exchange Rate as adjusted
ER = the Exchange Rate before adjustment;
T = the Then-Current Market Price per share of Common Stock; and
V = the fair market value (as determined by a nationally recognized
independent investment banking firm retained for this purpose by the
Administrator), as of the time the adjustment is calculated, of the
portion of those evidences of indebtedness, non-cash assets or rights
or warrants payable in respect of one share of Common Stock.
In addition, if the Company distributes cash (other than an Excluded
Distribution), by dividend or otherwise, to all holders of Common Stock or makes
an Excess Purchase Payment, then the Exchange Rate will be adjusted pursuant to
the following formula:
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<PAGE>
A = ER x T
-----
T - D
where
A = the Exchange Rate as adjusted
ER = the Exchange Rate before adjustment;
T = the Then-Current Market Price on the record date for that
distribution; and
D = the amount of that distribution applicable to one share of common
Stock that would not be a Permitted Dividend (or in the case of an
Excess Purchase Payment, the aggregate amount of that Excess Purchase
Payment divided by the number of outstanding shares of Common Stock on
that record date).
For purposes of these adjustments,
(a) the term "Excluded Distribution" means any Permitted Dividend,
any cash distributed in consideration of fractional shares of
Common Stock and any cash distributed in a Reorganization Event;
(b) the term "Permitted Dividend" means any quarterly cash dividend
on the Common Stock, other than a quarterly cash dividend that
exceeds the immediately preceding quarterly cash dividend, and
then only to the extent that the per share amount of that
dividend results in an annualized dividend yield on the Common
Stock above ______%; and
(c) the term "Excess Purchase Payment" means the excess, if any, of
(i) the cash and the value (as determined by a nationally
recognized independent investment banking firm retained for this
purpose by the Administrator, whose determination will be
conclusive) of all other consideration paid by the Company with
respect to one share of Common Stock acquired in a tender offer
or exchange offer by the Company over (ii) the Then-Current
Market Price per share of Common Stock.
If any adjustment in the Exchange Rate must be calculated pursuant to
the formulas described above, corresponding adjustments to the Initial Price and
the Appreciation Threshold Price will be calculated.
Dilution adjustments will be effected: (i) in the case of any
dividend, distribution or issuance described above, at the opening of business
on the business day after the record date for determination of holders of Common
Stock entitled to receive that dividend, distribution or issuance or, if the
announcement of any such dividend, distribution or issuance is after that record
date, at the time that dividend, distribution or issuance is announced by the
Company; (ii) in the case of any subdivision, split, combination or
reclassification described above, on the effective date of that transaction;
(iii) in the case of any Excess Purchase Payment for which the Company
announces, at or before the time it commences the relevant share repurchase, the
repurchase price for those shares to be repurchased, on the date of that
announcement; and (iv) in the case of any other Excess Purchase Payment, on the
date that the holders of Common Stock become entitled to payment with respect to
that Excess Purchase Payment. There will be no adjustment under the Contracts
for any dividends, distributions, issuances or repurchases that may be declared
or announced after the Exchange Date. If any announcement or declaration of a
record date for a dividend, distribution, issuance or repurchase is subsequently
canceled by the Company, or that dividend, distribution, issuance or repurchase
fails to receive requisite approvals or fails to occur for any other reason,
then the Exchange Rate will be further adjusted to equal the Exchange Rate that
would have been in effect had the adjustment for that dividend, distribution,
issuance or repurchase not been made. If after an announcement of a share
repurchase, the Company reduces the repurchase price or repurchases fewer shares
than announced, upon completion of that share repurchase, the Exchange Rate will
be further adjusted to equal the Exchange Rate that would have been in effect
had the adjustment for that repurchase been based on the actual price and amount
repurchased. All adjustments will be rounded upward or downward to the nearest
1/10,000 (or if there is not a nearest 1/10,000, to the next lower 1/10,000). No
adjustment in the Exchange Rate will be required unless that adjustment would
require an increase or decrease of at least one percent in the Exchange Rate;
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.
REORGANIZATION EVENTS. If a Reorganization Event occurs, the Exchange
Rate will be adjusted such that, on the Exchange Date, each holder will receive
for each METS cash in an amount equal to:
(i) if the Transaction Value (as
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<PAGE>
defined below) is more than the Appreciation Threshold Price, 0.__
multiplied by the Transaction Value,
(ii) if the Transaction Value is more than the Initial Price but
less than the Appreciation Threshold Price, the Initial Price,
(iii) if the Transaction Value is the Initial Price or less, the
Transaction Value;
provided, however, that if the consideration received by holders of Common Stock
in such Reorganization Event includes securities or other property (other than
Marketable Securities), then a majority in interest of the Sellers may, at their
option (by joint notice delivered to the Administrator not later than the date
of consummation of such Reorganization Event), elect to accelerate the Contracts
by delivering to the Trust (as promptly as practicable after receipt thereof by
the Sellers) the Applicable Portion of the total consideration received in such
Reorganization Event in respect of the maximum number of shares of Common Stock
subject to the Contracts. In such event the Custodian will liquidate the U.S.
Treasury securities acquired by the Trust at closing of the Offering and then
held by the Trust, and the proceeds of such liquidation, together with the total
consideration received by the Trust from the Sellers, will be distributed to the
Holders.
"Applicable Portion", as applied to each type of consideration
received in a Reorganization Event, means that portion of such type of
consideration determined by multiplying the total amount of such consideration
by a fraction, the numerator of which is the cash amount determined to be
payable as a result of such Reorganization Event pursuant to the first sentence
of this paragraph, and the denominator of which is the Transaction Value.
In addition, to the extent that any Marketable Securities (as defined
below) are received by holders of Common Stock in a Reorganization Event, then
in lieu of delivering cash as provided above, the Sellers shall deliver a
proportional amount of such Marketable Securities on the Exchange Date. If the
Sellers deliver Marketable Securities on the Exchange Date, holders will be
responsible for the payment of any and all brokerage and other transaction costs
upon the sale of those securities.
"Reorganization Event" means (A) any consolidation or merger of the
Company, or any surviving entity or subsequent surviving entity of the Company
(a "Company Successor"), with or into another entity (other than a merger or
consolidation in which the Company is the continuing corporation and in which
the Common Stock outstanding immediately before the merger or consolidation is
not exchanged for cash, securities or other property of the Company or another
corporation), (B) any sale, transfer, lease or conveyance to another corporation
of the property of the Company or any Company Successor as an entirety or
substantially as an entirety, (C) any statutory exchange of securities of the
Company or any Company Successor with another corporation (other than in
connection with a merger or acquisition) or (D) any liquidation, dissolution or
winding up of the Company or any Company Successor.
"Transaction Value" means (i) for any cash received in a
Reorganization Event, the amount of cash received per share of Common Stock,
(ii) for any property other than cash or Marketable Securities received in a
Reorganization Event, an amount equal to the market value on the date the
Reorganization Event is consummated of the property received per share of Common
Stock as determined by a nationally recognized independent investment banking
firm retained for this purpose by the Administrator and (iii) for any Marketable
Securities received in a Reorganization Event, an amount equal to the average
Closing Price per share of those securities on the 20 Trading Days immediately
before the Exchange Date multiplied by the number of those securities received
for each share of Common Stock; provided that if no Closing Price for those
Marketable Securities is determined for one or more (but not all) of those
Trading Days, those Trading Days will be disregarded in the calculation of the
average Closing Price (but no additional Trading Days will be added to the
Calculation Period). If no Closing Price for the Marketable Securities is
determined for all those Trading Days, the calculation in the preceding clause
(iii) will be based on the most recently available Closing Price for the
Marketable Securities before those 20 Trading Days. The number of shares of
Marketable Securities included in the calculation of Transaction Value for
purposes of the preceding clause (iii) will be adjusted if a dilution event of
the type described above occurs with respect to the issuer of the Marketable
Securities between the time of the Reorganization Event and the Exchange Date.
For purposes of determining Transaction Value, the terms "Trading Day"
and "Closing Price" will have the same meaning, as applied to the Marketable
Securities, as these terms have as applied to the Common Stock for purposes of
determining the Average Market Price.
15
<PAGE>
"Marketable Securities" means any common equity securities (whether
voting or non-voting) listed on a U.S. national securities exchange or reported
by the NASDAQ National Market.
No dilution adjustments will be made for events, other than those
described above, such as offerings of Common Stock (other than through the
issuance of rights or warrants described above) for cash or in connection with
acquisitions.
COLLATERAL ARRANGEMENTS; ACCELERATION. Each Seller's obligations under
the Contract between that Seller and the Trust initially will be secured by a
security interest in the maximum number of shares of Common Stock covered by
that Contract (adjusted in accordance with the dilution adjustment provisions of
that Contract, described above), pursuant to a Collateral Agreement between that
Seller and the Collateral Agent. Unless a Seller is in default in its
obligations under its Collateral Agreement, the Seller will be permitted to
substitute for the pledged shares of Common Stock collateral consisting of
short-term, direct obligations of the U.S. Government. Any U.S. Government
obligations pledged as substitute collateral will be required to have an
aggregate market value at the time of substitution and at daily mark-to-market
valuations after that time of 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, 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 those obligations are being substituted. The Collateral
Agreements will provide that, if a Reorganization Event occurs, each Seller will
pledge as alternative collateral any Marketable Securities received by it in
exchange for the maximum number of shares of Common Stock covered by its
Contract at the time of the Reorganization Event, plus cash in an amount equal
to 100% of that Seller's Cash Delivery Obligations (or U.S. Government
obligations having an aggregate market value when pledged and at daily
mark-to-market valuations after that time of not less than 105% of those Cash
Delivery Obligations). The Collateral Agent will be required, under the
Collateral Agreements, to invest any such cash in U.S. Treasury securities
maturing on or before [ July] __, 2002. A Seller's "Cash Delivery Obligations"
will be the Transaction Value of any consideration other than Marketable
Securities received by that Seller in exchange for the maximum number of shares
covered by its Contract at the time of the Reorganization Event. The number of
shares of Marketable Securities required to be pledged will be adjusted if any
event requiring a dilution adjustment under the Contracts occurs. The Sellers
will be permitted to substitute U.S. Government obligations for Marketable
Securities pledged at the time of or after any Reorganization Event. Any U.S.
Government obligations so substituted will be required to have an aggregate
market value at the time of substitution and at daily mark-to-market valuations
after that time of 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, as described below, 200%) of the product of the market price per share of
Marketable Securities at the time of each valuation times the number of shares
of Marketable Securities for which those obligations are being substituted. The
Collateral Agent will promptly pay over to each Seller any dividends, interest,
principal or other payments received by the Collateral Agent on any collateral
pledged by that Seller, including any substitute collateral, unless that Seller
is in default of its obligations under its Collateral Agreement, or unless the
payment of that amount to that Seller would cause the collateral to become
insufficient under its Collateral Agreement. Each Seller will have the right to
vote any pledged shares of Marketable Securities for so long as those shares are
owned by it and pledged under its Collateral Agreement, including after an event
of default under that Seller's Contract or Collateral Agreement.
If the Collateral Agent determines (an "Insufficiency Determination")
that U.S. Government obligations pledged by any Seller as substitute collateral
fail to meet the foregoing requirements at any valuation, or that that Seller
has failed to pledge additional collateral required as a result of a dilution
adjustment increasing the maximum number of shares of Common Stock or shares of
Marketable Securities covered by that Contract, and that failure is not cured by
the close of business on the next business day after that determination, then,
unless a Collateral Event of Default (as defined below) under that Collateral
Agreement has occurred and is continuing, the Collateral Agent will commence (i)
sales of the collateral consisting of U.S. Government obligations and (ii)
purchases, using the proceeds of those sales, of shares of Common Stock or
shares of Marketable Securities, in an amount sufficient to cause the collateral
to meet the requirements under that Collateral Agreement. The Collateral Agent
will discontinue those sales and purchases if at any time a Collateral Event of
Default under the Collateral Agreement has occurred and is continuing. A
"Collateral Event of Default" under a Seller's Collateral Agreement means, at
any time, (A) if no U.S. Government obligations are pledged as substitute
collateral at that time, failure of the collateral to consist of at least the
maximum number
16
<PAGE>
of shares of Common Stock covered by the Seller's Contract at that time (or, if
a Reorganization Event has occurred at or before that time, failure of the
collateral to include the maximum number of shares of any Marketable 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
shares of Marketable Securities) at that time, failure of those U.S. Government
obligations to have a market value at that time of at least 105% of the market
price per share of Common Stock (or the then-Average Market Price per share of
Marketable Securities, as the case may be) times the difference between (x) the
maximum number of shares of Common Stock (or shares of Marketable Securities)
covered by that Contract at that time and (y) the number of shares of Common
Stock (or shares of Marketable Securities) pledged as collateral at that time;
and (C) at any time after a Reorganization Event in which consideration other
than Marketable Securities has been delivered, failure of any U.S. Government
obligations pledged as collateral for Cash Delivery Obligations to have a market
value at that time of at least 105% of those Cash Delivery Obligations, if that
failure is not cured within one business day after notice of that failure is
delivered to that Seller.
The occurrence of a Collateral Event of Default under a Collateral
Agreement, or the bankruptcy or insolvency of a Seller, will cause an automatic
acceleration of that Seller's obligations under its Contract. In any such event,
that Seller will become obligated to deliver the initial number of shares of
Common Stock (or, after a Reorganization Event, the Marketable Securities or
cash or a combination of Marketable Securities and cash deliverable instead of
those shares of Common Stock) covered by that Seller's Contract, or any U.S.
Government obligations then pledged as collateral for the Seller's obligations.
Upon any acceleration under a Collateral Agreement, (i) the Collateral
Agent will distribute to the Trust, for distribution pro rata to the holders,
the shares of Common Stock then pledged by the Defaulting Seller, or cash
generated from the liquidation of U.S. Government obligations then pledged by
the Defaulting Seller, or a combination of Common Stock and cash (or, after a
Reorganization Event, the Marketable Securities then pledged by the Defaulting
Seller, cash generated from the liquidation of U.S. Government obligations then
pledged by the Defaulting Seller, or a combination of Marketable Securities and
cash) and (ii) the Custodian will liquidate a proportionate amount of the U.S.
Treasury securities acquired by the Trust at closing and then held by the Trust
and distribute the proceeds pro rata to the holders. After any distributions
upon acceleration and liquidation in accordance with the foregoing sentence, the
number of shares of Common Stock or Marketable Securities, as applicable,
deliverable to holders on the Exchange Date will be proportionately reduced. In
addition, if, by the Exchange Date, any substitute collateral has not been
replaced by Common Stock (or, after a Reorganization Event, cash or Marketable
Securities) sufficient to meet the obligations under any Contract, the
Collateral Agent will distribute to the Trust for distribution pro rata to the
holders the market value of the Common Stock required to be delivered under that
Contract, in the form of any shares of Common Stock then pledged by the Sellers
plus cash generated from the liquidation of U.S. Government obligations then
pledged by the Sellers (or, after a Reorganization Event, the market value of
the alternative consideration required to be delivered under that Contract, in
the form of any Marketable Securities then pledged, plus any cash then pledged,
plus cash generated from the liquidation of U.S. Government obligations then
pledged).
DESCRIPTION OF THE SELLERS. The Sellers are _________________. Please
see the caption "Selling Stockholders" in the Company's prospectus for
information about the Sellers.
THE U.S. TREASURY SECURITIES
The Trust will purchase and hold a series of zero-coupon ("stripped")
U.S. Treasury securities with face amounts and maturities corresponding to the
distributions payable with respect to the METS and the payment dates under the
METS. Up to 30% of the Trust's total assets may be invested in these U.S.
Treasury securities. If any Contract is accelerated, then a proportionate amount
of those U.S. Treasury securities then held in the Trust will be liquidated by
the Administrator and the proceeds of that liquidation will be distributed pro
rata to the holders, together with the amounts distributed upon acceleration.
See "--Collateral Arrangements; Acceleration".
TEMPORARY INVESTMENTS
For cash management purposes, the Trust may invest the proceeds of the
U.S. Treasury securities and any other cash held by the Trust in short-term
obligations of the U.S. Government maturing no later than the business day
before the next distribution date. Not more than 5% of the Trust's total assets
will be invested in those short-term obligations or held in cash at any one
time.
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INVESTMENT RESTRICTIONS
As a matter of fundamental policy, the Trust may not purchase any
securities or instruments other than the U.S. Treasury securities, the Contracts
and the Common Stock or other assets received pursuant to the Contracts and, for
cash management purposes, short-term obligations of the U.S. Government; issue
any securities or instruments except for the METS; make short sales or purchase
securities on margin; write put or call options; borrow money; underwrite
securities; purchase or sell real estate, commodities or commodities contracts
including futures contracts; or make loans (other than the purchase of stripped
U.S. Treasury securities as described in this Prospectus). The Trust also has
adopted a fundamental policy that the Contracts may not be disposed of during
the term of the Trust and that the U.S. Treasury securities held by the Trust
may not be disposed of before the earlier of their respective maturities and the
termination of the Trust.
Because of the foregoing limitations, the Trust's investments will be
concentrated in the [________________] industry, which is the industry in which
the Company operates. The Trust is not permitted to purchase restricted
securities.
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DESCRIPTION OF THE METS
Each METS represents an equal proportional interest in the Trust, and
a total of _______ METS will be issued (assuming no exercise of the
Underwriters' over-allotment option). Upon liquidation of the Trust, holders are
entitled to share pro rata in the net assets of the Trust available for
distribution. The METS have no preemptive, redemption or conversion rights. METS
are fully paid and nonassessable by the Trust. The only securities that the
Trust is authorized to issue are the METS offered hereby and those sold to the
initial holder referred to below. See "Underwriting".
DISTRIBUTIONS
The Trust intends to distribute to holders on a quarterly basis an
amount equal to $____ per METS (which amount equals the pro rata portion of the
fixed quarterly cash distributions from the proceeds of the maturing U.S.
Treasury securities held by the Trust). The first distribution, reflecting the
Trust's operations from the date of this offering, will be made on [ October]
__, 1999 to holders of record as of the preceding Business Day. Distributions
will then be made on [ January __, April __, July __ and October __] of each
year to holders of record as of the preceding Business Day. Part of each
distribution should be treated as a tax-free return of the holder's investment.
See "Description of the METS--Tax Treatment of Distributions" and "Certain
Federal Income Tax Considerations--Recognition of Interest on the U.S. Treasury
Securities".
Upon termination of the Trust, as described under the caption "The
Trust--Trust Termination", each holder will receive any remaining net assets of
the Trust.
The Trust does not permit the reinvestment of distributions.
TAX TREATMENT OF DISTRIBUTIONS
The following table sets forth information regarding the distributions
to be received on the U.S. Treasury securities to be acquired by the Trust with
part of the proceeds of the Offering (assuming no exercise of the Underwriters'
over-allotment option), 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 (assuming a yield-to-maturity accrual
election in respect of any short-term U.S. Treasury securities) on those U.S.
Treasuries with respect to a holder who acquires its METS at the issue price
from an Underwriter pursuant to the original offering. See "Certain Federal
Income Tax Considerations--Recognition of Original Issue Discount on the U.S.
Treasury Securities".
<TABLE>
<CAPTION>
ANNUAL GROSS ANNUAL INCLUSION OF
ANNUAL GROSS DISTRIBUTIONS FROM ANNUAL RETURN OF ORIGINAL ISSUE
DISTRIBUTIONS FROM U.S. TREASURIES CAPITAL PER DISCOUNT
YEAR U.S. TREASURIES PER SECURITY SEECURITY IN INCOME PER SECURITY
- ---- ------------------ ------------------- ---------------- ----------------------
<S> <C> <C> <C> <C>
1999...........................
2000...........................
2001...........................
2002...........................
</TABLE>
The annual distribution of $____ per METS is payable quarterly on each
[ January __, April __, July __ and October __,] commencing [ October] __, 1999.
Quarterly distributions on the METS will consist solely of the cash received
from the U.S. Treasury securities. The Trust will not be entitled to any
dividends that may be declared on the Common Stock.
VOTING
Holders are entitled to a full vote for each METS held on all matters
to be voted on by holders and are not able to cumulate their votes in the
election of Trustees. The Trustees of the Trust have been selected initially by
Deutsche Bank Securities Inc. , as the initial holder of METS of the Trust. The
Trust intends to hold annual meetings as required by the rules of [the NYSE.]
The Trustees may call special meetings of holders for action by holder vote as
may be required by either the Investment Company Act or the Amended and Restated
Trust Agreement. The holders have the right, upon the declaration in writing or
vote of more than two-thirds of the outstanding METS, to remove a Trustee. The
Trustees will call a meeting of holders to vote on the removal of a Trustee upon
the written request of the holders of record of 10% of the METS or to vote on
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other matters upon the written request of the holders of record of 51% of the
METS (unless substantially the same matter was voted on during the previous 12
months). The Trustees will establish, and notify the holders in writing of, the
record date for each such meeting. The record date must be not less than 10 nor
more than 50 days before the meeting date. Holders at the close of business on
the record date will be entitled to vote at the meeting. The Trust will also
assist in communications with other holders as required by the Investment
Company Act.
BOOK-ENTRY-ONLY ISSUANCE
The Depository Trust Company ("DTC") will act as securities depository
for the METS. The information in this section concerning DTC and DTC's
book-entry system is based upon information obtained from DTC. The METS offered
hereby will be issued only as fully-registered securities registered in the name
of Cede & Co. (as nominee for DTC). One or more fully-registered global METS
certificates will be issued, representing in the aggregate the total number of
METS, and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, eliminating the need
for physical movement of securities certificates. Direct Participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations ("Direct Participants"). Access to the DTC
system is also available to others such as securities brokers and dealers, banks
and trust companies that clear through or maintain a custodial relationship with
a Direct Participant, either directly or indirectly ("Indirect Participants").
Purchases of METS within the DTC system must be made by or through
Direct Participants, which will receive a credit for the METS on DTC's records.
The ownership interest of each actual purchaser of a METS ("Beneficial Owner")
is in turn to be recorded on the Direct or Indirect Participants' records.
Beneficial Owners will not receive written confirmation from DTC of their
purchases, but Beneficial Owners are expected to receive written confirmations
providing details of the transactions, as well as periodic statements of their
holdings, from the Direct or Indirect Participants through which the Beneficial
Owners purchased METS. Transfers of ownership interests in METS are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interests in METS, except upon a resignation of DTC.
DTC has no knowledge of the actual Beneficial Owners of the METS;
DTC's records reflect only the identity of the Direct Participants to whose
accounts those METS are credited, which may or may not be the Beneficial Owners.
The Participants will remain responsible for keeping account of their holdings
on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Payments on the METS will be made to DTC. DTC's practice is to credit
Direct Participants' accounts on the relevant payment date in accordance with
their respective holdings shown on DTC's records unless DTC has reason to
believe that it will not receive payments on that payment date. Payments by
Participants to Beneficial Owners will be governed by standing instructions and
customary practices and will be the responsibility of that Participant and not
of DTC or the Trust, subject to any statutory or regulatory requirements that
may be in effect from time to time. Payment of dividends to DTC is the
responsibility of the Trust, disbursement of those payments to Direct
Participants is the responsibility of DTC, and disbursement of those payments to
the Beneficial Owners is the responsibility of Direct and Indirect Participants.
Except as provided herein, a Beneficial Owner of an interest in a
global METS will not be entitled to receive physical delivery of METS.
Accordingly, each Beneficial Owner must rely on the procedures of DTC to
exercise any rights under the METS.
DTC may discontinue providing its services as securities depository
with respect to the METS at any time by giving reasonable notice to the Trust.
Under those circumstances, if a successor securities
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depository is not obtained, certificates representing the METS will be printed
and delivered.
RISK FACTORS
INTERNAL MANAGEMENT; NO PORTFOLIO MANAGEMENT
AND NO CHANGE IN ASSETS
The Trust will not be managed like a typical closed-end investment
company. The Trust will be internally managed by its Trustees and will not have
any separate investment adviser.
The Trust will not dispose of the Contracts even if the price of the
Common Stock falls significantly or the financial condition of the Company
suffers (or if, after a Reorganization Event, comparable developments occur
affecting any Marketable Securities or the issuer of those Marketable
Securities).
Similarly, the U.S. Treasury securities held by the Trust may not be
disposed of before the earlier of their respective maturities and the
termination of the Trust, even if their value falls significantly.
LIMITED OPPORTUNITY FOR INCREASE IN VALUE; RISK
OF DEPRECIATION IN COMMON STOCK
Because the Contracts allow the Sellers to deliver less than a full
share of Common Stock for each outstanding METS if the Average Market Price
exceeds the Initial Price, the METS have more limited appreciation potential
than the Common Stock. If the price of Common Stock rises, a holder of a METS
will not receive all of this increase in value. Holders will not receive any of
this increase if the average market price of the Common Stock at the Exchange
Date is below $______. Holders will receive only ____% of any increase in the
value of the Common Stock over $____. On the other hand, holders of METS will
suffer any fall in the value of the Common Stock. The value of the Common Stock
to be received by holders on the Exchange Date (and any cash received in lieu of
those shares) may be less than the amount paid for the METS. Furthermore, the
METS may trade below the value of the Common Stock if the Common Stock
appreciates in value.
FIXED RATE OF DISTRIBUTIONS
The distributions on the METS will be at a higher rate than the
dividends paid on the Common Stock in the past year. However, the dividend on
the Common Stock may be raised to a level higher than the distributions on the
METS, which will not increase.
DILUTION ADJUSTMENTS
The number of shares of Common Stock that holders are entitled to
receive at the termination of the Trust will be adjusted for certain events
arising from stock splits and combinations, stock dividends and certain other
actions of the Company that modify its capital structure. See "Investment
Objective and Policies--The Contracts--Dilution Adjustments". The number of
shares to be received by holders may not be adjusted for other events, such as
offerings of Common Stock for cash or in connection with acquisitions, that may
adversely affect the price of the Common Stock and, because of the relationship
of the amount to be received pursuant to the Contracts to the price of the
Common Stock, these other events may adversely affect the trading price of the
METS. There can be no assurance that the Company will not take any of the
foregoing actions, or that it will not make offerings of, or that major
shareholders will not sell any, Common Stock in the future, or as to the amount
of any such offerings or sales.
NON-DIVERSIFIED STATUS
The Trust is considered non-diversified under the Investment Company
Act, which means that the Trust is not limited in the proportion of its assets
that may be invested in the obligations of a single issuer. The only assets held
by the Trust will be the U.S. Treasury securities and the Contracts. As a
result, an investment in the Trust will be riskier than an investment in an
investment company with diversified investments.
TRADING VALUE AFFECTED BY COMMON STOCK PRICE
AND OTHER FACTORS
The Trust is a newly organized closed-end investment company with no
previous operating history and the METS are innovative securities. It is not
possible to predict how the METS will trade in the secondary market.
The trading prices of the METS in the secondary market will be
directly affected by the trading prices of the Common Stock in the secondary
market. The trading prices of the
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<PAGE>
Common Stock may fluctuate, due to changes in the Company's financial condition,
results of operations or prospects, or because of complex and interrelated
political, economic, financial and other factors that can affect the capital
markets generally, the stock exchanges or quotation systems on which the Common
Stock is traded or the market segment of which the Company is a part. The
trading price of the METS may also fluctuate due to, among other things,
fluctuations in interest rates and other factors that are difficult to predict
and beyond the Trust's control. The Trust believes, however, that because of the
yield on the METS and the formula for determining the number of shares of Common
Stock to be delivered on the Exchange Date, the METS will tend to trade at a
premium to the market value of the Common Stock to the extent the Common Stock
price falls and at a discount to the market value of the Common Stock to the
extent the Common Stock price rises. There can, however, be no assurance that
the METS will trade at a premium to the market value of the Common Stock.
Shares of closed-end investment companies 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 fall. The Trust cannot predict whether its
shares will trade at, below or above net asset value. The risk of purchasing
investments in a closed-end investment company that might trade at a discount
may be greater for investors who wish to sell their investments soon after
completion of an initial public offering because for those investors,
realization of a gain or loss on their investments is likely to be more
dependent upon the existence of a premium or discount than upon portfolio
performance.
LIMITED TRADING MARKET FOR METS
Deutsche Bank Securities Inc. currently intends, but is not obligated,
to make a market in the METS. There can be no assurance that a secondary market
will develop or, if a secondary market does develop, that it will provide the
holders with liquidity of investment or that it will continue for the life of
the METS. Deutsche Bank Securities Inc. may cease to make a market in the METS
at any time without notice. Application will be made to list the METS on the
[______]. Assuming the acceptance of that application, there can be no assurance
that the METS will not later be delisted or that trading in the METS on the
[_______] will not be suspended. If the METS are delisted or suspended from
trading on that exchange, the Trust will apply for listing of the METS on
another national securities exchange or for quotation on another trading market.
If the METS are not listed or traded on any securities exchange or trading
market, or if trading of the METS is suspended, pricing information for the METS
may be more difficult to obtain, and the price and liquidity of the METS may be
adversely affected.
SHAREHOLDER RIGHTS
Holders of the METS will not be entitled to any rights with respect to
the Common Stock unless and until they actually receive Common Stock in exchange
for the METS. For example, holders of METS will not be entitled to vote the
shares of Common Stock or receive dividends.
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<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion of the principal United States federal income
tax consequences of ownership of METS represents the opinion of Sullivan &
Cromwell, counsel to the Trust. It deals only with METS held as capital assets
by a holder who acquires its METS at the issue price from an Underwriter
pursuant to the original offering, and not with special classes of holders, such
as dealers in securities or currencies, traders that mark to market, banks, life
insurance companies, persons who are not United States Holders (as defined
below), persons that hold METS that are part of a hedging transaction, straddle
or conversion transaction, or persons whose functional currency is not the U.S.
dollar. The summary is based on the Internal Revenue Code of 1986, as amended
(the "Code"), its legislative history, existing and proposed regulations under
the Code, published rulings and court decisions, all as currently in effect and
all subject to change or different interpretation at any time, perhaps with
retroactive effect. It should be noted that the Trust has not sought a ruling
from the Internal Revenue Service with respect to the federal income tax
consequences of ownership of METS, and the Internal Revenue Service is not
required to agree with the opinion of Sullivan & Cromwell.
PROSPECTIVE PURCHASERS OF METS SHOULD CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE CONSEQUENCES, IN THEIR PARTICULAR CIRCUMSTANCES, UNDER THE CODE
AND THE LAWS OF ANY STATE, LOCAL OR OTHER TAXING JURISDICTION, OF OWNERSHIP OF
METS.
A United States Holder is a beneficial owner of METS who or that is
(i) a citizen or resident of the United States, (ii) a domestic corporation,
(iii) an estate the income of which is subject to United States federal income
tax without regard to its source or (iv) a trust if a court within the United
States is able to exercise primary supervision over the administration of the
trust and one or more United States persons have the authority to control all
substantial decisions of the trust.
Holders should also be aware that there are alternative
characterizations of the assets of the Trust which could result in different
federal income tax consequences. See "Alternative Characterizations" below.
While Sullivan & Cromwell does not believe these alternative characterizations
should apply for federal income tax purposes, there can be no assurance in this
regard, and holders should consult their tax advisors concerning the risks
associated with alternative characterizations. The following discussion assumes
that no such alternative characterizations will apply.
TAX STATUS OF THE TRUST. The Trust will be treated as a grantor trust
for federal income tax purposes, and each holder will be considered the owner of
its pro rata portions of the stripped U.S. Treasury securities and the Contracts
in the Trust under the grantor trust rules of the Code. Income received by the
Trust will be treated as income of the holders in the manner set forth below.
RECOGNITION OF ORIGINAL ISSUE DISCOUNT ON THE U.S. TREASURY
SECURITIES. The U.S. Treasury securities in the Trust will consist of stripped
U.S. Treasury securities. A holder will be required to treat its pro rata
portion of each U.S. Treasury security initially acquired by the Trust as a bond
that was originally issued on the date the Trust acquired the relevant U.S.
Treasury securities and will include original issue discount in income over the
life of the U.S. Treasury securities in an amount equal to the holder's pro rata
portion of the excess of the amounts payable on those U.S. Treasury securities
over the value of the U.S. Treasury securities at the time the Trust acquires
them. The amount of that excess will constitute only part of the total amounts
payable in respect of U.S. Treasury securities held by the Trust, however.
Consequently, a substantial portion of each quarterly cash distribution to the
holders will be treated as a tax-free return of the holders' investment in the
U.S. Treasury securities and will not be considered current income for federal
income tax purposes. See "Description of the METS--Tax Treatment of
Distributions".
A holder (whether on the cash or accrual method of tax accounting)
will be required to include original issue discount (other than original issue
discount on short-term U.S. Treasury securities as defined below) in income for
federal income tax purposes as it accrues on a constant yield basis. The Trust
expects that more than 20% of the holders will be accrual basis taxpayers, in
which case original issue discount on any short-term U.S. Treasury security
(i.e., any U.S. Treasury security with a maturity of one year or less from the
date it is purchased) held by the Trust also will be required to be included in
income by the holders as it is accrued. Unless a holder elects to accrue the
original issue discount on a short-term U.S. Treasury security according to a
constant yield method based on daily compounding, that original issue discount
will be accrued on a straight-line basis.
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TAX BASIS OF THE U.S. TREASURY SECURITIES AND THE CONTRACTS. A
holder's initial tax basis in the Contracts and the U.S. Treasury securities,
respectively, will equal its pro rata portion of the amounts paid for them by
the Trust. It is currently anticipated that ____% and ____% of the net proceeds
of the offering will be used by the Trust to purchase the U.S. Treasury
securities and as payments for the Contracts, respectively. A holder's tax basis
in the U.S. Treasury securities will be increased by the amounts of original
issue discount included in income in respect of U.S. Treasury securities and
decreased by each amount of cash received in respect of U.S. Treasury
securities.
TREATMENT OF THE CONTRACTS. Each holder will be treated as having
entered into a pro rata portion of the Contracts and, at the Exchange Date, as
having received a pro rata portion of the Common Stock or cash, Marketable
Securities or a combination of Common Stock, Marketable Securities and cash
delivered to the Trust.
DISTRIBUTION OF THE COMMON STOCK. The delivery of Common Stock to the
Trust pursuant to the Contracts and the Trust's distribution of Common Stock to
the holders will not be taxable to the holders. Each holder's basis in its
Common Stock will be equal to its basis in its pro rata portion of the Contracts
less the portion of that basis allocable to any fractional shares of Common
Stock for which cash is received. A holder will recognize short-term capital
gain or loss upon receipt by the Trust of cash in lieu of fractional shares of
Common Stock equal to the difference between the holder's allocable portion of
the amount of cash received and the holder's basis in those fractional shares.
The holding period for the Common Stock will begin on the day after it is
acquired by the Trust.
DISTRIBUTION OF CASH. If the Trust receives cash upon settlement of
the Contracts, a holder will recognize capital gain or loss equal to the
difference between the holder's allocable portion of the amount of cash received
and the holder's basis in the Contracts settled for cash. Any gain or loss will
be capital gain or loss which is taxable to holders as described below under
"Sale of METS".
SALE OF METS. A holder who sells METS will be treated as having sold
its pro rata portions of the U.S. Treasury securities and the Contracts
underlying the METS. As a result, the holder will recognize capital gain or loss
equal to the difference between the amount realized and the holder's aggregate
tax bases in its pro rata portions of the U.S. Treasury securities and the
Contracts. Any gain or loss will be long-term capital gain or loss if the Trust
has held the relevant property for more than one year. Long-term capital gain of
an individual holder will be subject to a maximum tax rate of 20%.
ALTERNATIVE CHARACTERIZATIONS. Sullivan & Cromwell believes the
Contracts should be treated for federal income tax purposes as prepaid forward
contracts for the purchase of a variable number of shares of Common Stock.
The Internal Revenue Service could conceivably seek to treat the
Contracts differently. The Internal Revenue Service might, for example, seek to
treat the cash paid to the Sellers pursuant to the Contracts as loans to the
Sellers in exchange for contingent debt obligations of the Sellers. If the
Internal Revenue Service were to prevail in making such an assertion, a holder
might be required to include original issue discount in income over the life of
the METS at a market rate of interest for the Seller, taking account of all the
relevant facts and circumstances. In addition, a holder would be required to
include interest (rather than capital gain) in income on the Exchange Date in an
amount equal to the excess, if any, of the value of the Common Stock received on
the Exchange Date (or the proceeds from cash settlement of the Contracts) over
the aggregate of the basis of the Contracts and any interest on the Contracts
previously included in income (or might be entitled to an ordinary deduction to
the extent of interest previously included in income and not ultimately
received). The Internal Revenue Service could also conceivably take the view
that a holder should include in income the amount of cash actually received each
year on the METS.
BACKUP WITHHOLDING AND INFORMATION REPORTING. The payments of
principal and original issue discount on the U.S. Treasury securities, and the
proceeds received from cash settlement of the Contracts or the sale of METS, may
be subject to U.S. backup withholding tax at the rate of 31% if the holder of
those METS fails to supply an accurate taxpayer identification number or
otherwise to comply with applicable U.S. information reporting or certification
requirements. Any amounts so withheld will be allowed as a credit against that
holder's U.S. federal income tax liability and may entitle that holder to a
refund, provided that the required information is furnished to the Internal
Revenue Service.
After the end of each calendar year, the Trust will furnish to each
record holder of METS an annual statement containing information relating to the
payments on the U.S. Treasury securities received by the Trust. The Trust will
also furnish annual
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<PAGE>
information returns to each record holder of the METS and to the Internal
Revenue Service.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Trust has agreed to sell the METS to the Underwriters, and the Underwriters have
agreed to purchase the METS from the Trust.
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the METS offered hereby,
if any are taken.
The Underwriters propose to offer the METS in part directly to the
public at the price to the public set forth on the cover page of this Prospectus
and in part to certain securities dealers at that price less a concession of
$____ per METS. The Underwriters may allow, and those dealers may re-allow, a
concession not more than $____ per METS to certain brokers and dealers. After
the METS are released for sale to the public, the offering price and other
selling terms may from time to time be varied by the Underwriters. The sales
load of $__________ per METS is equal to ____% of the initial public offering
price. Investors must pay for any METS purchased in the initial public offering
on or before [ July] __, 1999.
In connection with the offering, the Underwriters may purchase and
sell the METS and the Common Stock in the open market. These transactions may
include over-allotment and stabilizing transactions and purchases to cover
syndicate short positions created in connection with the offering. Stabilizing
transactions consist of certain bids or purchases for the purpose of preventing
or retarding a fall in the market price of the securities or the Common Stock;
and short positions created by the Underwriters involve the sale by the
Underwriters of a greater number of METS than they are required to purchase from
the Trust in the offering. The Underwriters also may impose a penalty bid,
whereby selling concessions allowed to syndicate members or other broker-dealers
in respect of the METS sold in the offering may be reclaimed by the syndicate if
those securities are repurchased by the syndicate in stabilizing or covering
transactions. These activities may stabilize, maintain or otherwise affect the
market price of the METS which may be higher than the price that might otherwise
prevail in the open market, and these activities, if commenced, may be
discontinued at any time. These transactions may be effected on the [NYSE], in
the over-the-counter market or otherwise.
In light of the fact that proceeds from the sale of the METS will be
used by the Trust to purchase the Contracts from the Sellers, the Underwriting
Agreement provides that the Sellers will pay to the Underwriters the
Underwriters' Compensation of $____ per METS.
The Trust has granted the Underwriters an option exercisable for 30
calendar days after the date of this Prospectus to purchase up to an aggregate
of _______ additional METS solely to cover over-allotments, if any. If the
Underwriters exercise their over-allotment option, they will receive the
Underwriters' Compensation referred to above for each METS so purchased.
The Sellers and the Company have agreed that, during the period
beginning from the date of this Prospectus and continuing to and including the
date 90 days after the date of this Prospectus, they will not offer, sell,
contract to sell or otherwise dispose of any Common Stock or other securities of
the Company (other than pursuant to employee stock option plans existing, or on
the conversion or exchange of convertible or exchangeable securities
outstanding, on the date of this Prospectus) which are substantially similar to
the Common Stock or which are convertible or exchangeable into Common Stock or
other securities which are substantially similar to the Common Stock, without
the prior written consent of Deutsche Bank Securities Inc.
The METS will be a new issue of securities with no established trading
market. Application has been made to list the METS on the ________. Deutsche
Bank Securities Inc. [and _______] have advised the Company that they intend to
make a market in the METS, but they are not obligated to do so and may
discontinue market making at any time without notice. No assurance can be given
as to the liquidity of the trading market for the METS.
The Underwriters have informed the Trust that they will not confirm
sales to any accounts over which they exercise discretionary authority without
specific written approval of those transactions by the customer.
The Company and the Sellers have agreed to indemnify the Underwriters
against certain liabilities, including certain liabilities under the Securities
Act of 1933.
25
<PAGE>
One METS has been subscribed for by Deutsche Bank Securities Inc. at
an aggregate purchase price of $100,000. No METS will be sold to the public
until the METS subscribed for have been purchased and the purchase price of the
METS paid in full to the Trust.
VALIDITY OF METS
The validity of the METS will be passed upon for the Trust by Sullivan
& Cromwell, New York, New York, and for the Underwriters by
______________________________________, New York, New York.
EXPERTS
The financial statement included in this Prospectus has been audited
by _______________, independent accountants, as stated in their opinion
appearing herein, and has been so included in reliance upon that opinion given
upon the authority of that firm as experts in accounting and auditing.
FURTHER INFORMATION
The Trust has filed with the Securities and Exchange Commission,
Washington, D.C. 20549, a Registration Statement under the Securities Act of
1933, as amended, with respect to the METS offered hereby. More information
concerning the METS and the Trust may be found in the Registration Statement of
which this Prospectus constitutes a part. The Registration Statement may be
inspected without charge at the SEC's office in Washington, D.C., and copies of
all or any part of the Registration Statement may be obtained from that office
after payment of the fees prescribed by the SEC. The Registration Statement is
also available on the SEC's website (http://www.sec.gov).
26
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Securityholders of
METS Trust:
We have audited the accompanying statement of assets and liabilities
of METS Trust as of July __, 1999. This financial statement is the
responsibility of the Trust's management. 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 and liabilities is
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement. An
audit also includes assessing the accounting principles used and significant
estimates made by the Trust's management, as well as evaluating the overall
financial statement presentation. We believe that our audit of the financial
statement provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents
fairly, in all material respects, the financial position of METS Trust, as of
July __, 1999 in conformity with generally accepted accounting principles.
New York, New York
July __, 1999
27
<PAGE>
METS TRUST
STATEMENT OF ASSETS AND LIABILITIES
JULY __, 1999
ASSETS
Cash............................................................ $ 100,000
-----------
Total assets.................................................... $ 100,000
===========
LIABILITIES
................................................................ $ 0
------------
NET ASSETS
Balance applicable to 1 METS outstanding........................ $ 100,000
-----------
Net asset value per METS........................................ $ 100,000
===========
- ------------------
(1) METS Trust (the "Trust") was established on May 3, 1999 and has had no
operations to date other than matters relating to its organization and
registration as a non-diversified, closed-end management investment company
under the Investment Company Act of 1940. Costs incurred in connection with
the organization of the Trust will be paid by the Underwriters.
(2) The Trust proposes to sell Mandatory Exchangeable Trust Securities ("METS")
to the public pursuant to a Registration Statement on Form N-2 under the
Securities Act of 1933, as amended, and the Investment Company Act of 1940,
as amended.
The Trust is a newly organized, finite-term trust established to purchase
and hold a portfolio of stripped U.S. treasury securities and a prepaid
forward contract to purchase common stock with existing shareholders of
[Company] relating to the Common Stock of [Company]. The Trust will be
internally managed and will not have an investment adviser. The
administration of the Trust, which will be overseen by the trustees, will
be carried out by ____________________ as trust administrator.
____________________ will also serve as custodian, paying agent, registrar
and transfer agent with respect to the METS. Ongoing fees and anticipated
expenses for the term of the Trust will be paid for by
____________________.
(3) The Trust issued one METS on July __, 1999 to Deutsche Bank Securities Inc.
in consideration for the aggregate purchase price of $100,000.
The Amended and Restated Trust Agreement provides that before the offering,
the Trust will split the outstanding METS to be effected on the date that
the price and underwriting discount of the METS being offered to the public
is determined, but before the sale of the METS to the Underwriters. The
initial METS will be split into the smallest whole number of METS that
would result in the per METS amount recorded as shareholders' equity after
effecting the split not exceeding the Public Offering price per METS.
28
<PAGE>
GLOSSARY
"Administration Agreement" means the Administration Agreement between
the Trust and ______________________, as Trust Administrator.
"Administrator" means ___________________ (or its successor) in its
capacity as Trust Administrator under the Administration Agreement.
"Amended and Restated Trust Agreement" means the trust agreement dated
as of May 3, 1999 pursuant to which the Trust was formed, as amended and
restated as of [_________ __], 1999.
"Appreciation Threshold Price" means $_______.
"Average Market Price" per share of Common Stock on any date means the
average Closing Price per share of Common Stock for the 20 Trading Days
immediately before, but not including, that date.
"Beneficial Owner" means an actual purchaser of a METS, which will not
receive written confirmation from DTC of their purchases of METS but which are
expected to receive written confirmations providing details of the transactions,
as well as periodic statements of their holdings, from the Direct or Indirect
Participants through which the Beneficial Owners purchased METS.
"Calculation Period" means any period of Trading Days for which an
average security price must be determined pursuant to the Contracts.
"Cash Delivery Obligations" means, for any Seller after a
Reorganization Event, the Transaction Value of any consideration other than
Marketable Securities received by that Seller in exchange for the maximum number
of shares covered by its Contract at the time of the Reorganization Event.
"Cash Settlement Alternative" means the provision of each Contract
that permits the Seller to elect to pay cash upon settlement of that Contract in
an amount equal to the then Average Market Price of the number of shares of
Common Stock deliverable thereunder.
"Closing Price" of the Common Stock on any date of determination means
the daily closing sale price (or, if no closing sale price is reported, the last
reported sale price) of the Common Stock as reported on the NYSE Consolidated
Tape on that date of determination or, if the Common Stock 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 the Common Stock is
so listed, or if the Common Stock is not so listed on a United States national
or regional securities exchange, as reported by The NASDAQ National Market or,
if the Common Stock is not so reported, the last quoted bid price for the Common
Stock in the over-the-counter market as reported by the National Quotation
Bureau or similar organization, provided that if any event that results in an
adjustment to the number of shares of Common Stock deliverable under the
Contracts occurs before the Exchange Date, the Closing Price as determined
pursuant to the foregoing will be appropriately adjusted to reflect the
occurrence of that event.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral Agent" means _________________ (or its successor) in its
capacity as Collateral Agent under the Collateral Agreements.
"Collateral Agreements" means the Collateral Agreements between the
Sellers and ______________________, as Collateral Agent, securing the Sellers'
obligations under their respective Contracts.
"Collateral Event of Default" under any Seller's Collateral Agreement
means, at any time, (A) if no U.S. Government obligations are pledged as
substitute collateral at or before that time, failure of the collateral to
consist of at least the maximum number of shares of Common Stock covered by that
Seller's Contract at that time (or, if a Reorganization Event has occurred at or
before that time, failure of the collateral to include the maximum number of
shares of any Marketable Securities required to be pledged pursuant to the
Collateral Agreement); (B) if any U.S. Government obligations are pledged as
substitute collateral for shares of Common Stock (or shares of Marketable
Securities deliverable pursuant to the Contracts) at that time, failure of those
U.S. Government obligations to have a market value at that time of at least 105%
of the market price per share of Common Stock (or the then-Average Market Price
per share of those Marketable Securities, as the case may be) times the
29
<PAGE>
difference between (x) the maximum number of shares of Common Stock (or shares
of those Marketable Securities) covered by that Contract at that time and (y)
the number of shares of Common Stock (or shares of those Marketable Securities)
pledged as collateral at that time; and (C) at any time after a Reorganization
Event in which consideration other than Marketable Securities has been
delivered, failure of any U.S. Government obligations pledged as collateral for
Cash Delivery Obligations to have a market value at that time of at least 105%
of those Cash Delivery Obligations, if that failure is not cured within one
business day after notice of that failure is delivered to that Seller.
"Common Stock" means the Common Stock, par value $__ per share, of the
Company.
"Company" means [Company], a ___________ corporation.
"Company Prospectus" means the prospectus of the Company, dated [
July] __, 1999 (pages A-1 through A-o hereof), which describes the Company and
the shares of Common Stock deliverable to the holders upon mandatory exchange of
the METS on the Exchange Date.
"Company Successor" means a surviving entity or subsequent entity of
the Company.
"Contracts" means the prepaid forward purchase contracts between the
Sellers and the Trust relating to the Common Stock.
"Custodian" means __________________ (or its successor) in its
capacity as Custodian under the Custodian Agreement.
"Custodian Agreement" means the Custodian Agreement between the Trust
and ______ ________________________, as Custodian.
"Defaulting Seller" means a Seller with respect to which a Collateral
Event of Default has occurred under that Seller's Collateral Agreement or that
is the subject of a bankruptcy or insolvency.
"Direct Participants" means Participants of DTC, including brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations, that are direct Participants of DTC.
"DTC" means The Depository Trust Company.
"Excess Purchase Payment" means the excess, if any, of (i) the cash
and the value (as determined by a nationally recognized independent investment
banking firm retained for this purpose by the Administrator, whose determination
will be conclusive) of all other consideration paid by the Company with respect
to one share of Common Stock acquired in a tender offer or exchange offer by the
Company over (ii) the Then-Current Market Price per share of Common Stock.
"Exchange Date" means [ July] __, 2002.
"Exchange Rate" means the rate of exchange of Common Stock for METS on
the Exchange Date, and will be determined as follows (adjusted in certain
events):
o if the Average Market Price is less than the Appreciation
Threshold Price but equal to or greater than the Initial Price,
the Exchange Rate will be the number of shares of Common Stock
having a value (determined at the Average Market Price) equal to
the Initial Price;
o if the Average Market Price is equal to or greater than the
Appreciation Threshold Price, the Exchange Rate will be 0.____
shares of Common Stock; and
o if the Average Market Price is less than the Initial Price, the
Exchange Rate will be one share of Common Stock.
"Excluded Distribution" means any Permitted Dividend, any cash
distributed in consideration of fractional shares of Common Stock and any cash
distributed in a Reorganization Event.
"holders" means the registered holders of the METS.
"Indirect Participants" means Participants of DTC, such as securities
brokers and dealers, banks and trust companies, that clear through or maintain a
custodial relationship with a Direct Participant, either directly or indirectly.
"Initial Price" means $_______.
30
<PAGE>
"Insufficiency Determination" means a determination by the Collateral
Agent that U.S. Government obligations pledged by any Seller as substitute
collateral fail to meet the requirements specified in the Collateral Agreement
at any valuation, or that that Seller has failed to pledge additional collateral
required as a result of a dilution adjustment increasing the maximum number of
shares of Common Stock or shares of Marketable Securities covered by that
Seller's Contract.
"Investment Company Act" means the Investment Company Act of 1940, as
amended.
"majority of the Trust's outstanding METS" means the lesser of (i) 67%
of the METS represented at a meeting at which more than 50% of the outstanding
METS are represented, and (ii) more than 50% of the outstanding METS.
"Managing Trustee" means the Trustee of the Trust designated to serve
as Managing Trustee.
"Marketable Securities" means any common equity securities (whether
voting or non-voting) listed on a U.S. national securities exchange or reported
by The NASDAQ National Market.
"METS" means the $_____ Mandatory Exchangeable Trust Securities of the
Trust.
"NYSE" means the New York Stock Exchange.
"Participants" means participants of DTC.
"Paying Agent" means ____________________ (or its successor) in its
capacity as transfer agent, registrar and Paying Agent under the Paying Agent
Agreement.
"Paying Agent Agreement" means the Paying Agent Agreement between the
Trust and __________________________, as transfer agent, registrar and Paying
Agent.
"Permitted Dividend" means any quarterly cash dividend on the Common
Stock, other than a quarterly cash dividend that exceeds the immediately
preceding quarterly cash dividend, and then only to the extent that the per
share amount of that dividend results in an annualized dividend yield on the
Common Stock of more than ___%.
"Pricing Date" means the date that a Rollover Offering is priced.
"Reorganization Event" means (A) any consolidation or merger of the
Company, or any Company Successor, with or into another entity (other than a
merger or consolidation in which the Company is the continuing corporation and
in which the Common Stock outstanding immediately before the merger or
consolidation is not exchanged for cash, securities or other property of the
Company or another corporation), (B) any sale, transfer, lease or conveyance to
another corporation of the property of the Company or any Company Successor as
an entirety or substantially as an entirety, (C) any statutory exchange of
securities of the Company or any Company Successor with another corporation
(other than in connection with a merger or acquisition) or (D) any liquidation,
dissolution or winding up of the Company or any Company Successor.
"SEC" means the Securities and Exchange Commission.
"Sellers" means [list Selling Stockholders].
"Then-Current Market Price" of the Common Stock, in respect of any
dilution adjustment, means the average Closing Price per share of Common Stock
for a Calculation Period of five Trading Days immediately before the time that
adjustment is effected (or, in the case of an adjustment effected at the opening
of business on the business day after a record date, immediately before the
earlier of the time that adjustment is effected and the related "ex-date" on
which the shares of Common Stock first trade regular way on their principal
market without the right to receive the relevant dividend, distribution or
issuance); provided that if no Closing Price for the Common Stock is determined
for one or more (but not all) of such Trading Days, such Trading Days will be
disregarded in the calculation of the Then-Current Market Price (but no
additional Trading Days will be added to the Calculation Period). If no Closing
Price for the Common Stock is determined for any of such Trading Days, the most
recently available Closing Price for the Common Stock before those five Trading
Days will be the Then-Current Market Price.
"Trading Day" means a day on which the Common Stock (A) is not
suspended from trading on any national or regional securities exchange or
association or over-the-counter market at the close of
31
<PAGE>
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 that security.
"Transaction Value" means (i) for any cash received in a
Reorganization Event, the amount of cash received per share of Common Stock,
(ii) for any property other than cash or Marketable Securities received in any
such Reorganization Event, an amount equal to the market value on the date the
Reorganization Event is consummated of such property received per share of
Common Stock as determined by a nationally recognized independent investment
banking firm retained for this purpose by the Administrator and (iii) for any
Marketable Securities received in a Reorganization Event, an amount equal to the
average Closing Price per share of those securities on the 20 Trading Days
immediately before the Exchange Date multiplied by the number of those
securities received for each share of Common Stock; provided that if no Closing
Price for those Marketable Securities is determined for one or more (but not
all) of those Trading Days, those Trading Days will be disregarded in the
calculation of that average Closing Price (but no additional Trading Days will
be added to the Calculation Period). If no Closing Price for the Marketable
Securities is determined for all those Trading Days, the calculation in the
preceding clause (iii) will be based on the most recently available Closing
Price for the Marketable Securities before those 20 Trading Days. The number of
shares of Marketable Securities included in the calculation of Transaction Value
for purposes of the preceding clause (iii) will be adjusted if a dilution event
of the type described above occurs with respect to the issuer of the Marketable
Securities between the time of the Reorganization Event and the Exchange Date.
For purposes of determining the Transaction Value, the terms "Trading Day" and
"Closing Price" will have the same meanings, as applied to those Marketable
Securities, as these terms have as applied to the Common Stock for purposes of
determining the Average Market Price.
"Trust" means the METS Trust.
"Trustees" means the three trustees who will internally manage the
Trust.
"Underwriters" means Deutsche Bank Securities Inc. [and ________], the
Underwriters of the METS.
"Underwriters' Compensation" means the compensation of $____ per METS
payable to the Underwriters by the Sellers pursuant to the Underwriting
Agreement.
"United States Holders" means a beneficial owner of METS who or that
is (i) a citizen or resident of the United States, (ii) a domestic corporation
or (iii) otherwise covered by United States federal income taxation on a net
income basis in respect of METS.
32
<PAGE>
<TABLE>
<S> <C>
================================================================= =============================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR
MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR ___________ SECURITIES
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF ANY OFFER TO BUY ANY SECURITIES OTHER THAN METS TRUST
THE SECURITIES TO WHICH IT RELATES OR ANY OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY SUCH SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
$_____ MANDATORY EXCHANGEABLE TRUST
--------------------------- SECURITIES (METS)
TABLE OF CONTENTS
PAGE -------------------------
----
Prospectus Summary......................................... 2
The Trust.................................................. 7 PROSPECTUS
Use of Proceeds............................................ 9
Investment Objective and Policies.......................... 10
Description of the METS.................................... 19 -------------------------
Risk Factors............................................... 21
Certain Federal Income Tax Considerations.................. 23
Underwriting............................................... 25
Validity of METS........................................... 26
Experts.................................................... 26
Further Information........................................ 26
Report of Independent Accountants.......................... 27
Statement of Assets and Liabilities........................ 28
Glossary................................................... 29 DEUTSCHE BANC ALEX. BROWN
Appendix A: Prospectus of [Company]........................
---------------------------
UNTIL ________, 1999 (25 DAYS AFTER THE DATE OF THIS METS)
ALL DEALERS THAT EFFECT TRANSACTIONS IN THE METS, WHETHER OR NOT
PARTICIPATING IN THIS 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 SUBSCRIPTIONS.
================================================================= =============================================================
</TABLE>
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Part A -- Report of Independent Accountants.
Statement of Assets and Liabilities.
Part B -- None.
(b) Exhibits
2.a.(i) Trust Agreement+
2.a.(ii) Form of Amended and Restated Trust Agreement*
2.d Form of Specimen Certificate of Mandatory Exchangeable
Trust Security (included in Exhibit 2.a.(ii))*
2.h Form of Underwriting Agreement*
2.j Form of Custodian Agreement*
2.k.(i) Form of Administration Agreement*
2.k.(ii) Form of Paying Agent Agreement*
2.k.(iii) Form of Purchase Contract*
2.k.(iv) Form of Collateral Agreement*
2.k.(v) Form of Fund Expense Agreement*
2.k.(vi) Form of Fund Indemnity Agreement*
2.l Opinion and Consent of Counsel to the Trust*
2.n.(i) Tax Opinion of Counsel to the Trust (Consent contained
in Exhibit 2.n.(i))*
2.n.(iii) Consent of Independent Public Accountants*
2.n.(iv) Consents to Being Named as Trustee*
2.p Form of Subscription Agreement*
2.r Financial Data Schedule*
- ---------------------------
+ Previously filed.
* To be filed by amendment.
ITEM 25. MARKETING ARRANGEMENTS
See the Form of Underwriting Agreement to be filed as Exhibit 2.h to
this Registration Statement.
C-1
<PAGE>
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses to be incurred
in connection with the offering described in this Registration Statement:
Registration fees........................................................ $
[stock exchange] listing fee.............................................
Printing (other than certificates).......................................
Fees and expenses of qualification under state securities laws
(excluding fees of counsel)............................................
Accounting fees and expenses.............................................
Legal fees and expenses..................................................
NASD fees................................................................
Miscellaneous............................................................
Total.................................................................... $
====
ITEM 27. PERSON CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Before May 3, 1999 the Trust had no existence. As of the effective
date, the Trust will have entered into a Subscription Agreement for one METS
with Deutsche Bank Securities Inc. and an Underwriting Agreement with respect to
_________ METS with Deutsche Bank Securities Inc.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
TITLE OF CLASS RECORD HOLDERS
- -------------- --------------
Mandatory Exchangeable Trust Securities (METS)................. 1
ITEM 29. INDEMNIFICATION
The Underwriting Agreement, to be filed as Exhibit 2.h to this
Registration Statement, provides for indemnification to the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act").
The Amended and Restated Trust Agreement filed as Exhibit 2.a.(ii) to
this Registration Statement provides for indemnification to each Trustee against
any claim or liability incurred in acting as Trustee of the Trust, except in the
case of willful misfeasance, bad faith, gross negligence or reckless disregard
of the Trustee's duties. The Custodian Agreement, Administration Agreement and
Paying Agent Agreement filed as Exhibits 2.j, 2.k.(i) and 2.k.(iii) 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.(vi) to this Registration Statement provides that the Sellers will
indemnify the Trust for certain indemnification expenses incurred under the
Amended and Restated Trust Agreement, the Custodian Agreement, the
Administration Agreement and the Paying Agent Agreement.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. If a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a trustee, officer or controlling person of
C-2
<PAGE>
the registrant in the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the 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 Trust's accounts, books and other documents are currently located
at the offices of the Registrant, c/o Deutsche Bank Securities Inc., 130 Liberty
Street, New York, New York 10006 and at the offices of ___________________,
_______________________________________, the Registrant's Administrator,
Custodian, paying agent, transfer agent and registrar.
ITEM 32. MANAGEMENT SERVICES
Not applicable.
ITEM 33. UNDERTAKINGS
(a) The Registrant hereby undertakes to suspend offering of its units
until it amends its prospectus if (1) subsequent to the effective date of its
Registration Statement, the net asset value falls more than 10 percent from its
net asset value as of the effective date of the Registration Statement or (2)
the net asset value increases to an amount greater than its net proceeds as
stated in the prospectus.
(b) The Registrant hereby undertakes that (i) for the purpose of
determining any liability under the Securities Act, the information omitted from
the form of prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the Registrant
under Rule 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective; (ii) for the
purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of the securities at that time shall be deemed to be the initial
bona fide offering thereof.
C-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of New York, State of New York, on the 20th day of July,
1999.
METS Trust
By: /s/ MIHIR BHATTACHARYA
-----------------------------------
Name: Mihir Bhattacharya
Title: Trustee
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following person, in the
capacities and on the date indicated.
Name Title Date
---- ----- ----
/s/ MIHIR BHATTACHARYA
- -------------------------- ----------------------------- ---------------
Mihir Bhattacharya Principal Executive Officer, July 20, 1999
Principal Financial Officer,
Principal Accounting Officer
and Trustee
<PAGE>
EXHIBIT INDEX
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------ ----------- ------
2.a.(i) Trust Agreement+
2.a.(ii) Form of Amended and Restated Trust Agreement*
2.d Form of Specimen Certificate of Mandatory Exchangeable
Trust Security (included in Exhibit 2.a.(ii))*
2.h Form of Underwriting Agreement*
2.j Form of Custodian Agreement*
2.k.(i) Form of Administration Agreement*
2.k.(ii) Form of Paying Agent Agreement*
2.k.(iii) Form of Purchase Contract*
2.k.(iv) Form of Collateral Agreement*
2.k.(v) Form of Fund Expense Agreement*
2.k.(vi) Form of Fund Indemnity Agreement*
2.l Opinion and Consent of Counsel to the Trust*
2.n.(i) Tax Opinion of Counsel to the Trust (Consent contained in
Exhibit 2.n.(i))*
2.n.(iii) Consent of Independent Public Accountants*
2.n.(iv) Consents to Being Named as Trustee*
2.p Form of Subscription Agreement*
2.r Financial Data Schedule*
- ---------------------------
+ Previously filed.
* To be filed by amendment.
