<PAGE>
FILED PURSUANT TO RULE NO. 497(h)
FILE NO. 333-83965
PROSPECTUS
5,000,000 DECS/SM/
DECS Trust V
(Subject to Exchange into Common Stock of Crown Castle International Corp.)
------------
DECS Trust V is a recently created Delaware business trust. The DECS are
securities that represent all of the beneficial interest in the trust. When
the trust issues the DECS, it will acquire U.S. Treasury securities and four
prepaid forward contracts for the purchase of Crown Castle common stock.
For each DECS that you buy, you will receive a cash distribution of $0.3466
on each February 15, May 15, August 15 and November 15 starting on November
15, 1999 and ending on August 15, 2002. Those payments will be made from the
U.S. Treasury securities that the trust acquires when it issues the DECS.
The trust will hold four prepaid forward contracts, each of which will
entitle the trust to receive Crown Castle common stock or cash from one of
four stockholders of Crown Castle. We refer to those four stockholders as the
sellers. On or shortly after August 15, 2002, each seller will deliver, at its
option, either cash or Crown Castle common stock to the trust. The trust will
then deliver this cash or Crown Castle common stock to you. Under the
circumstances described in this prospectus, each seller will have the option
to deliver cash to the trust between August 15, 2002 and November 15, 2002.
After the trust has delivered to you the cash or Crown Castle common stock
delivered to the trust by all of the sellers, the trust will terminate. The
amount of cash or number of shares of Crown Castle common stock each seller
will deliver and you will receive will depend on the price of Crown Castle
common stock shortly before the date the seller delivers the cash or Crown
Castle common stock to the trust. If the price of Crown Castle common stock
is:
. more than $22.57 per share, you will receive 0.84736 shares of Crown
Castle common stock, or the cash equivalent, for each DECS you own
. more than $19.125 per share but less than or equal to $22.57 per share,
you will receive Crown Castle common stock worth $19.125, or the cash
equivalent, for each DECS you own
. $19.125 per share or less, you will receive one share of Crown Castle
common stock, or the cash equivalent, for each DECS you own
The last reported sale price of Crown Castle common stock on August 5, 1999
was $19.1875 per share.
The trust's securities have no history of public trading. Typical closed-
end fund shares frequently trade at a discount from net asset value. This
characteristic of investments in a closed-end investment company is a risk
separate and distinct from the risk that the trust's net asset value will
decrease. The trust cannot predict whether the DECS will trade at, below or
above net asset value. The risk of purchasing investments in a closed-end
company that might trade at a discount is more pronounced for investors who
wish to sell their investments soon after completion of a public offering.
------------
Investing in the DECS involves certain risks. See "Risk Factors for DECS"
beginning on page 22.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
------------
<TABLE>
<CAPTION>
Per DECS Total
-------- -----------
<S> <C> <C>
Public Offering Price $19.125 $95,625,000
Sales Load $ -- $ --
Proceeds to the trust before expenses $19.125 $95,625,000
</TABLE>
The underwriters are offering the DECS subject to various conditions. The
underwriters expect to deliver the DECS to purchasers on August 11, 1999.
------------
Salomon Smith Barney
Goldman, Sachs & Co.
August 6, 1999
<PAGE>
You should rely only on the information contained in or incorporated by
reference in this prospectus. The trust has not authorized anyone to provide
you with different information. The trust is not making an offer of these
securities in any state where the offer is not permitted. You should not assume
that the information contained in or incorporated by reference in this
prospectus is accurate as of any date other than the date on the front of this
prospectus.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary......................................................... 3
Fees and Expenses.......................................................... 8
The Trust.................................................................. 9
Use of Proceeds............................................................ 9
Investment Objectives and Policies......................................... 9
Investment Restrictions.................................................... 22
Risk Factors For DECS...................................................... 22
Net Asset Value............................................................ 26
Description of the DECS.................................................... 27
Management and Administration of the Trust................................. 29
Certain United States Federal Income Tax Considerations.................... 32
Underwriting............................................................... 37
Legal Matters.............................................................. 39
Experts.................................................................... 39
Where You Can Find More Information........................................ 39
Report of Independent Accountants.......................................... 40
Statement of Assets, Liabilities and Capital............................... 41
</TABLE>
Until November 5, 1999, all dealers that effect transactions in these
securities, whether or not participating in this securities offering, may be
required to deliver a prospectus. This is in addition to the dealers'
obligation to deliver a prospectus when acting as underwriters and with respect
to their unsold allotments or subscription.
---------------
"DECS" is a service mark of Salomon Smith Barney Inc.
<PAGE>
PROSPECTUS SUMMARY
This summary highlights certain information contained elsewhere in this
prospectus. This summary is not complete and does not contain all of the
information that you should consider before investing in the DECS. You should
read the entire prospectus carefully, especially the risks of investing in the
DECS discussed under "Risk Factors for DECS."
The Trust
DECS Trust V is a recently created Delaware business trust. The trust will
terminate on or shortly after August 15, 2002, which is referred to in this
summary as the "exchange date" because that is when the Crown Castle common
stock or their value in cash are expected to be delivered under all of the
prepaid forward contracts the trust has with the sellers. In some limited
circumstances, the Crown Castle common stock or its value in cash may be
delivered and the trust terminated sooner than that date. In other limited
circumstances, one or more sellers who elect to deliver cash may extend the
exchange date, for purposes of their respective contracts only, to November 15,
2002, and may subsequently accelerate the extended exchange date if they wish.
If the exchange date under any of the sellers' contracts is extended in this
way, the trust will terminate on or shortly after the date all of the Crown
Castle common stock or cash has been delivered under all of the prepaid forward
contracts.
The DECS
The DECS are securities that represent all of the beneficial interest in the
trust. The underwriters named in this prospectus are offering the DECS for sale
at a price of $19.125 per DECS, which is the same as the closing bid price of a
share of Crown Castle common stock on the Nasdaq National Market on August 5,
1999. The underwriters also may purchase up to 644,995 additional DECS from the
trust to cover over-allotments.
Purpose of the Trust
The trust was created to issue the DECS and to carry out the transactions
described in this prospectus. The terms of the DECS are designed to give you a
higher yield than the current dividend yield on Crown Castle common stock,
while also giving you the chance to share in the increased value of Crown
Castle common stock if its price goes up. Crown Castle does not currently pay
dividends on its common stock and has stated that it does not intend to do so,
but in the future Crown Castle might pay dividends that are higher than the
distributions that you will receive from the trust. Also, you will receive less
than you paid for your DECS if the price of Crown Castle common stock goes
down, but you will receive only part of the increased value if the price goes
up, and then only if the price is above $22.57 per share shortly before the
exchange date.
Quarterly Distributions
For each DECS that you buy, you will receive a cash distribution of $0.3466
on each February 15, May 15, August 15 and November 15, starting on November
15, 1999 and ending on August 15, 2002. Those payments will be made from the
U.S. Treasury securities that the trust acquires when it issues the DECS.
Distributions on the Exchange Date
On the exchange date, you will receive between 0.84736 and 1.0 shares of
Crown Castle common stock for each DECS you own. Those amounts will be adjusted
if Crown Castle splits its stock, pays a stock dividend, issues warrants or
distributes certain types of assets or if certain other events occur that are
described in detail later in this prospectus. Under its prepaid forward
contract with the trust, each seller has the option to
3
<PAGE>
deliver cash to the trust instead of shares of Crown Castle common stock. If a
seller decides to deliver cash, you will receive the cash value of the Crown
Castle common stock you would have received under that seller's contract
instead of the shares themselves. If Crown Castle merges into another company
or liquidates, you may receive shares of the other company or cash instead of
Crown Castle common stock on the exchange date. And if a seller defaults under
its prepaid forward contract with the trust, the obligations of that seller
under its contract will be accelerated, and the trust will immediately
distribute to you the Crown Castle common stock or cash received by the trust
under the relevant prepaid forward contract, plus a proportionate amount of the
U.S. Treasury securities then held by the trust.
In addition, each seller may elect to deliver cash instead of Crown Castle
common stock by completing an offering of securities to refinance the DECS. We
refer to such an offering as a rollover offering. Each seller may extend the
exchange date under its prepaid forward contract to November 15, 2002, but only
in connection with a rollover offering. If any seller completes a rollover
offering and has extended the exchange date, that seller will deliver the cash
due under its prepaid forward contract by the fifth business day after the
extended exchange date. Any sellers that have elected to extend the exchange
date to November 15, 2002 will also have the option of later accelerating the
exchange date to between August 15, 2002 and November 15, 2002, in which case
such sellers will deliver the cash due under their prepaid forward contracts by
the fifth business day after the accelerated exchange date.
In addition, any seller that has extended the exchange date will deliver
cash to be distributed as an additional partial distribution for the period
beginning on August 15, 2002 and ending on the date the seller delivers the
cash value of the Crown Castle common stock under its prepaid forward contract.
Voting Rights
You will not have the right to vote any Crown Castle common stock unless and
until it is delivered to the trust by the sellers and distributed to you by the
trust. You will have the right to vote on matters that affect the trust.
Assets of the Trust; Investment Objectives and Policies
The trust will own the following assets:
. zero-coupon U.S. Treasury securities that will mature every quarter
during the term of the trust, and which will provide cash to pay the
quarterly distributions on the DECS
. a prepaid forward contract with each of the sellers under which each
relevant seller has the right to deliver Crown Castle common stock or
cash to the trust on the exchange date, which the trust will then
distribute to you
The U.S. Treasury securities initially will represent approximately 20% of the
trust's assets and the prepaid forward contracts initially will represent
approximately 80%.
The trust's investment objective is to provide you with (1) a quarterly
distribution of $0.3466 per DECS over the term of the trust and (2) Crown
Castle common stock on the exchange date in an amount equal to:
. 0.84736 shares of Crown Castle common stock per DECS if the average
price of Crown Castle common stock shortly before the exchange date is
more than $22.57
4
<PAGE>
. shares of Crown Castle common stock worth $19.125 per DECS (the issue
price of the DECS) if the average price of Crown Castle common stock
shortly before the exchange date is more than $19.125 per share but less
than or equal to $22.57 per share
. one share of Crown Castle common stock per DECS if the average price of
Crown Castle common stock shortly before the exchange date is $19.125 or
less per share
The trust will not deliver fractions of a share of Crown Castle common stock.
If you would receive a fraction of a share of Crown Castle common stock under
this formula (based on all DECS owned), you will receive cash instead.
At the closing of the sale of the DECS, the trust will enter into prepaid
forward contracts with each of the sellers. The prepaid forward contracts will
require the sellers to deliver to the trust up to a total of 5,000,000 shares
of Crown Castle common stock (excluding shares required to be delivered in
respect of DECS issued to cover the underwriters' over-allotment option and
DECS issued in connection with the formation of the trust) on the exchange date
for all of the contracts together. The purchase price for such Crown Castle
common stock under each prepaid forward contract will be $15.3063 per share or
$76,531,706 in total for all of the contracts together. The trust will pay the
sellers the purchase price for the Crown Castle common stock on the date the
DECS are issued.
Each seller will secure its obligations to deliver Crown Castle common stock
to the trust on the exchange date by pledging the stock to the trust on the
date the DECS are issued. During the term of the DECS, two of the sellers will
have the right to substitute U.S. Treasury securities as collateral for their
pledged Crown Castle common stock.
Any seller electing to extend the exchange date under its contract to
November 15, 2002 will secure its obligation to pay interest accruing during
the period beginning on August 15, 2002 and ending on the extended (or
accelerated) exchange date by pledging U.S. Treasury securities to the trust.
Certain U.S. Federal Income Tax Consequences
For U.S. federal income tax purposes, the trust and owners of DECS agree to
treat the owners of DECS as owning all of the beneficial interests in the U.S.
Treasury securities and the prepaid forward contracts held by the trust. In
addition, the sellers, the trust and owners of DECS agree to treat a portion of
the amount invested by you as a cash deposit that will be used to satisfy your
obligation to make payment under the prepaid forward contracts for the purchase
of Crown Castle common stock on the exchange date. Under this treatment, if you
are a U.S. individual or taxable entity, you generally will be required to pay
taxes on only a relatively small portion of each quarterly cash distribution
you receive from the trust, which will be ordinary income. If you hold the DECS
until they mature, you will not be subject to tax on the receipt of Crown
Castle common stock. If you sell your DECS or receive cash on the exchange
date, you will have a capital gain or loss equal to the difference between your
tax basis in the DECS and the cash you receive. In addition, it is possible
that you will have a capital gain on a deemed exchange of a portion of your
DECS during the term of the DECS. You should refer to the section "Certain
United States Federal Income Tax Considerations" in this prospectus for more
information.
Crown Castle
Crown Castle is a leading owner and operator of towers and transmission
networks for wireless communications and broadcast companies.
A prospectus and a prospectus supplement that describe Crown Castle and the
Crown Castle common stock that you may receive are attached to this prospectus.
Crown Castle is not affiliated with the trust, will not receive any of the
proceeds from the sale of the DECS by the trust and will not have any
obligation under the
5
<PAGE>
DECS or the prepaid forward contracts between the trust and the sellers. The
sellers did not prepare, and are not responsible for, the Crown Castle
prospectus or prospectus supplement. The Crown Castle prospectus and prospectus
supplement are attached to this prospectus only for your convenience. The Crown
Castle prospectus and prospectus supplement are not part of this prospectus and
are not incorporated by reference into this prospectus.
Management and Administration of the Trust
The internal operations of the trust will be managed by three trustees; the
trust will not have an investment advisor. The Bank of New York (or its
successor) will act as trust administrator to carry out the day-to-day
administration of the trust, and will also be the custodian for the trust's
assets, its paying agent, registrar and transfer agent for the DECS and the
collateral agent for the sellers' pledges of Crown Castle common stock to the
trust. The Bank of New York will not have any other affiliation with the trust.
Term of the Trust
The trust will terminate automatically on or shortly after the date on which
the trust distributes to you the Crown Castle common stock or cash that the
trust receives on the exchange date under its prepaid forward contracts with
the sellers. Under most circumstances, this will be on or shortly after August
15, 2002 or November 15, 2002 if any seller has elected to extend the exchange
date under its contract.
Risk Factors
. The trust will not dispose of its prepaid forward contracts for Crown
Castle common stock during the term of the trust even if the value of
Crown Castle common stock declines or Crown Castle's financial condition
changes for the worse.
. During the term of the trust, Crown Castle could start paying dividends
that would provide investors in its stock with a higher yield than you
will receive on the DECS.
. You will bear the entire risk of declines in the value of Crown Castle
common stock between the closing date and the exchange date. The amount
of Crown Castle common stock or cash that you will receive on the
exchange date is not fixed, but is based on the market price of Crown
Castle common stock shortly before the exchange date. If the market
price of Crown Castle common stock declines, the stock or cash that you
receive will be less than what you paid for your DECS and you will lose
money. If Crown Castle becomes bankrupt or insolvent, you could lose
everything you paid for your DECS.
. You will have less opportunity for gains if the value of Crown Castle
common stock increases than you would have if you purchased Crown Castle
common stock directly. You will realize a gain only if the value of
Crown Castle common stock increases by approximately 18% between the
closing date and the exchange date, and then you will only receive
84.736% of the increase in the Crown Castle common stock price above
that level. Because the trust will determine the value of the Crown
Castle common stock based on its average price for 20 trading days
before the exchange date, the actual value of the stock or cash that you
receive on the exchange date may be more or less than the price of the
stock on the exchange date.
. Because the trust will own only U.S. Treasury securities and the prepaid
forward contracts, an investment in the DECS may be riskier than an
investment in an investment company with more diversified assets.
6
<PAGE>
. The trading price of Crown Castle common stock will directly affect the
trading price of the DECS in the secondary market. The trading price of
Crown Castle common stock will be influenced by Crown Castle's operating
results and prospects, by economic, financial and other factors and by
general market conditions.
. You will not have any right to vote the Crown Castle common stock
underlying the DECS, to receive dividends on that stock (if any are
declared) or to act as an owner of the stock in any other way unless and
until the sellers deliver the stock to the trust under their prepaid
forward contracts and the trust distributes the stock to you.
. A bankruptcy of any of the sellers could interfere with the timing of
the delivery of shares or cash under the DECS and therefore could affect
the amount you receive.
Listing
The trust has applied to have the DECS approved for listing on the Nasdaq
National Market under the symbol "TWDE." Crown Castle common stock is traded on
the Nasdaq National Market under the symbol "TWRS." The last reported sale
price of Crown Castle common stock on August 5, 1999 was $19.1875 per share.
7
<PAGE>
FEES AND EXPENSES
Because the trust will use proceeds from the sale of the DECS to purchase
the forward contracts from the sellers, the sellers have agreed in the
underwriting agreement to pay to the underwriters as compensation $0.57 per
DECS. See "Underwriting." Salomon Smith Barney Inc. ("Salomon Smith Barney")
will pay estimated organization costs of the trust in the aggregate amount of
$11,000 and estimated costs of the trust in connection with the initial
registration and public offering of the DECS in the aggregate amount of
approximately $314,000 at the closing of this offering. In addition, Salomon
Smith Barney will pay the Administrator, the Custodian, the Paying Agent and
each Trustee at the closing of this offering a one-time, up-front amount in
respect of its ongoing fees and, in the case of the Administrator, anticipated
expenses of the trust (estimated to be $300,000 in the aggregate) over the
term of the trust. Salomon Smith Barney has agreed to pay any on-going
expenses of the trust in excess of these estimated amounts and to reimburse
the trust for any amounts it may be required to pay as indemnification to any
Trustee, the Administrator, the Custodian or the Paying Agent. The sellers
will reimburse Salomon Smith Barney for certain expenses of the trust and
reimbursements of indemnifications paid by it. See "Management and
Administration of the Trust--Estimated Expenses."
Regulations of the Securities and Exchange Commission require the
presentation of trust expenses in the following format in order to assist
investors in understanding the costs and expenses that an investor will bear
directly or indirectly. Because the trust will not bear any ongoing fees or
expenses, investors will not bear any direct expenses. The only expenses that
an investor might be considered to bear indirectly are (a) the underwriters'
compensation payable by the sellers with respect to such investor's DECS and
(b) the ongoing expenses of the trust (including fees of the Administrator,
Custodian, Paying Agent and Trustees), estimated at $100,000 per year in the
aggregate, which Salomon Smith Barney will pay at the closing of the offering.
<TABLE>
<S> <C>
Investor transaction expenses
Sales Load (as a percentage of offering price)............................ 3%
===
Annual Expenses
Management Fees........................................................... 0%
Other Expenses (after reimbursement by the sellers)*...................... 0%
Total Annual Expenses*.................................................. 0%
===
</TABLE>
- --------
* Without this reimbursement, the trust's "total annual expenses" would be
equal to approximately 0.105% of the trust's average net assets.
SEC regulations also require that closed-end investment companies present
an illustration of cumulative expenses (both direct and indirect) that an
investor would bear. The regulations require the illustration to factor in the
applicable sales load and to assume, in addition to a 5% annual return, the
reinvestment of all distributions at net asset value. Investors should note
that the assumption of a 5% annual return does not accurately reflect the
financial terms of the trust. See "Investment Objectives and Policies--Trust
Assets." Additionally, the trust does not permit the reinvestment of
distributions.
<TABLE>
<CAPTION>
1 Year 3 Years
------ -------
<S> <C> <C>
You would pay the following expenses (i.e., the applicable
sales load and allocable portion of ongoing expenses paid by
Salomon Smith Barney and the sellers) on a $1,000 investment,
assuming a 5% annual return ................................. $36.34 $36.34
</TABLE>
8
<PAGE>
THE TRUST
DECS Trust V is a newly organized Delaware business trust that is registered
as a closed-end management investment company under the Investment Company Act.
The trust was formed on April 22, 1999, pursuant to a Declaration of Trust,
dated as of April 22, 1999 (the "Declaration of Trust"). The term of the trust
will expire on or shortly after August 15, 2002, except that the trust may be
dissolved prior to such date under certain limited circumstances. The address
of the trust is c/o Salomon Smith Barney Inc., 388 Greenwich Street, New York,
New York 10013 (telephone number: (212) 816-6000).
USE OF PROCEEDS
On or shortly after the date on which it sells the DECS, the trust will use
the proceeds of this offering to purchase a fixed portfolio comprised of a
series of zero-coupon U.S. Treasury securities (the "Treasury Securities")
maturing quarterly during the term of the trust and to pay the purchase price
under each prepaid forward contract (the "prepaid forward contract") to the
relevant seller.
INVESTMENT OBJECTIVES AND POLICIES
Trust Assets
The trust's investment objectives are to provide investors with a quarterly
distribution of $0.3466 per DECS on each distribution date during the term of
the trust (representing the pro rata portion of the quarterly distributions in
respect of the maturing Treasury Securities held by the trust) and to provide
investors, on August 15, 2002 or such later date not later than November 15,
2002 as may be elected by one or more sellers making a Rollover Offering as
described below (in each case, the "Exchange Date" under the applicable prepaid
forward contract or contracts), a number of shares of Crown Castle common stock
(the "Common Stock") at the Exchange Rate (as defined below) or, to the extent
that one or more sellers elects the Cash Delivery Option (as defined below), an
amount in cash equal to the Exchange Price (as defined below) thereof. On or
prior to the 25th Business Day prior to the Exchange Date, each seller will
notify the trust concerning its exercise of the Cash Delivery Option, and the
trust in turn will notify The Depository Trust Company and publish a notice in
a daily newspaper of national circulation stating whether investors will
receive shares of Common Stock, cash or both. See "--The Forward Contracts--
General" below. "Business Day" means any day that is not a Saturday, a Sunday
or a day on which the New York Stock Exchange (the "NYSE") or banking
institutions or trust companies in The City of New York are authorized or
obligated by law or executive order to close.
The "Exchange Rate" is equal to, subject to certain adjustments,
(a) if the Exchange Price (as defined below) is greater than $22.57 (the
"Threshold Appreciation Price"), 0.84736 shares of Common Stock per
DECS;
(b) if the Exchange Price is less than or equal to the Threshold
Appreciation Price but is greater than $19.125 (the "Initial Price"), a
fraction, equal to the Initial Price divided by the Exchange Price, of
one share of Common Stock per DECS; and
(c) if the Exchange Price is less than or equal to the Initial Price, one
share of Common Stock per DECS.
Accordingly, the value of the Common Stock to be received by investors (or,
as discussed below, the cash equivalent to be received in lieu of such Common
Stock) at the Exchange Date will not necessarily equal the Initial Price. The
numbers of shares of Common Stock per DECS specified in clauses (a), (b) and
(c) of the Exchange Rate are hereinafter referred to as the "Share Components."
Any shares of Common Stock delivered by the trust to investors that are not
affiliated with Crown Castle will be free of any transfer restrictions and the
investors will be responsible for the payment of all brokerage costs upon the
subsequent
9
<PAGE>
sale of such shares. Investors otherwise entitled to receive fractional shares
in respect of their aggregate holdings of DECS will receive cash in lieu
thereof. See "--Delivery of Common Stock and Reported Securities; No Fractional
Shares of Common Stock or Reported Securities" below. Notwithstanding the
foregoing, (1) in the case of certain dilution events, the Exchange Rate will
be subject to adjustment and (2) in the case of certain adjustment events, the
consideration received by investors at the Exchange Date will be cash or
Reported Securities (as defined herein) or a combination thereof, rather than
(or in addition to) shares of Common Stock. See "--The Forward Contracts--
Dilution Adjustments" and "--The Forward Contracts--Adjustment Events" below.
The trust has adopted a fundamental policy to invest at least 65% of its
portfolio in the prepaid forward contracts. The prepaid forward contracts will
comprise approximately 20% of the trust's initial assets. The trust has also
adopted a fundamental policy that the trust may not dispose of the prepaid
forward contracts during the term of the trust and that the trust may not
dispose of the Treasury Securities held by the trust prior to the earlier of
their respective maturities and the termination of the trust except for the
partial liquidation of Treasury Securities following acceleration of one or
more prepaid forward contracts as described below under "--The Treasury
Securities." These fundamental policies of the trust may not be changed without
the vote of a "majority in interest" of the owners of the DECS. A "majority in
interest" means the lesser of (a) 67% of the DECS represented at a meeting at
which more than 50% of the outstanding DECS are represented and (b) more than
50% of the outstanding DECS.
The "Exchange Price" under any prepaid forward contract means the average
Closing Price (as defined below) per share of Common Stock on the 20 Trading
Days immediately prior to (but not including) the Exchange Date thereunder;
provided, however, that if there are not 20 Trading Days (as defined below) for
the Common Stock occurring later than the 60th calendar day immediately prior
to, but not including, the Exchange Date, the Exchange Price will be the market
value per share of Common Stock as of the Exchange Date as determined by a
nationally recognized independent investment banking firm that the
Administrator retains for this purpose. The Exchange Price will be calculated
in a different manner if the relevant seller carries out a Rollover Offering
(as defined below), as described under "--Rollover Offerings." The "Closing
Price" of any security on any date of determination means:
(1) the closing sale price (or, if no closing price is reported, the last
reported sale price) of such security (regular way) on the NYSE on such
date,
(2) if such security is not listed for trading on the NYSE on any such
date, as reported in the composite transactions for the principal
United States securities exchange on which such security is so listed,
(3) if such security is not so listed on a United States national or
regional securities exchange, as reported by The Nasdaq Stock Market,
(4) if such security is not so reported, the last quoted bid price for such
security in the over-the-counter market as reported by the National
Quotation Bureau or similar organization, or
(5) if such security is not so quoted, the average of the mid-point of the
last bid and ask prices for such security from at least three
nationally recognized investment banking firms that the Administrator
selects for such purpose.
A "Trading Day" is defined as a day on which the security the Closing Price
of which is being determined (A) is not suspended from trading on any national
or regional securities exchange or association or over-the-counter market at
the close of business and (B) has traded at least once on the national or
regional securities exchange or association or over-the-counter market that is
the primary market for the trading of such security.
For illustrative purposes only, the following chart shows the number of
shares of Common Stock or the amount of cash that an investor would receive for
each DECS at various Exchange Prices. The chart assumes that there will be no
adjustments to the Exchange Rate due to any of the events described under "--
The
10
<PAGE>
Forward Contracts--Dilution Adjustments" and "--The Forward Contracts--
Adjustment Events" below and that the prepaid forward contracts will not be
accelerated. There can be no assurance that the Exchange Price will be within
the range set forth below. Given the Initial Price of $19.125 per DECS and the
Threshold Appreciation Price of $22.57 , an investor would receive at the
Exchange Date the following number of shares of Common Stock or amount of cash
(if all sellers exercise the Cash Delivery Option) per DECS:
<TABLE>
<CAPTION>
Exchange Price of Number of Shares of Amount
Common Stock Common Stock of Cash
----------------- ------------------- -------
<S> <C> <C>
18.00 1.00000 18.0000
19.125 1.00000 19.1250
20.00 0.95625 19.1250
22.57 0.84736 19.1250
23.00 0.84736 19.4893
</TABLE>
As the foregoing chart illustrates, if at the Exchange Date, the Exchange
Price is greater than $22.57 , the trust will be obligated to deliver 0.84736
shares of Common Stock per DECS, resulting in an investor receiving only
84.736 percent of the appreciation in market value above $22.57 . If at the
Exchange Date, the Exchange Price is greater than $19.125 and less than or
equal to $22.57 , the trust will be obligated to deliver only a fraction of a
share of Common Stock having a value at the Exchange Price equal to $19.125 ,
resulting in an investor receiving none of the appreciation in market value.
If at the Exchange Date, the Exchange Price is less than or equal to $19.125 ,
the trust will be obligated to deliver one share of Common Stock per DECS,
regardless of the market price of such share, resulting in an investor
realizing the entire loss on the decline in market value of the Common Stock.
The following table sets forth information regarding the distributions to
be received on the Treasury Securities held by the trust, the portion of each
year's distributions that will constitute a return of capital for U.S. federal
income tax purposes and the amount of original issue discount accruing on the
Treasury Securities with respect to an investor who acquires its DECS at the
Initial Price from the underwriters in the original offering. See "Certain
United States Federal Income Tax Considerations."
<TABLE>
<CAPTION>
Annual Gross Annual
Annual Gross Distributions from Inclusion of Original Issue
Distributions from Treasury Securities Annual Return of Discount in Income
Year Treasury Securities per DECS Capital per DECS per DECS
---- ------------------- ------------------- ---------------- ---------------------------
<S> <C> <C> <C> <C>
1999.................... $1,810,234 $0.3620 $0.2831 $0.0789
2000.................... 6,932,813 1.3866 1.2239 0.1626
2001.................... 6,932,813 1.3866 1.2918 0.0947
2002.................... 5,199,609 1.0399 1.0179 0.0221
</TABLE>
The trust will pay the annual distribution of $1.39 per DECS quarterly on
each February 15, May 15, August 15 and November 15 (or, if any such date is
not a Business Day, on the next succeeding Business Day), commencing November
15, 1999. Quarterly distributions on the DECS will consist solely of the cash
received from the Treasury Securities. The trust will not be entitled to any
dividends that may be declared on the Common Stock.
Enhanced Yield; Less Potential for Equity Appreciation than Common Stock; No
Depreciation Protection
The yield on the DECS is higher than the current dividend yield on the
Common Stock, which currently does not pay dividends. However, there is no
assurance that the yield on the DECS will be higher than the dividend yield on
the Common Stock over the term of the trust. In addition, the opportunity for
equity appreciation afforded by an investment in the DECS is less than the
opportunity for equity appreciation afforded by a direct investment in the
Common Stock because the value of the Common Stock to be received by owners of
the DECS at the Exchange Date (the "Amount Receivable at the Exchange Date")
will generally exceed the Initial Price only if the Exchange Price exceeds the
Threshold Appreciation Price (which represents an appreciation of 18% over the
Initial Price) and because investors will be entitled to receive at the
Exchange Date only 84.736% (the percentage equal to the Initial Price divided
by the Threshold Appreciation Price) of any appreciation of the value of the
Common Stock in excess of the Threshold Appreciation Price. Moreover, DECS
investors will bear the entire decline in value if the Exchange Price on the
Exchange Date is less than the Initial Price. Additionally, because the
Exchange Price is generally determined based on a 20
11
<PAGE>
Trading Day average, the value of a share of Common Stock distributed on the
Exchange Date may be more or less than the Exchange Price used to determine the
Amount Receivable at the Exchange Date.
Crown Castle
Crown Castle is a leading owner and operator of towers and transmission
networks for wireless communications and broadcast companies. A prospectus and
prospectus supplement that describe Crown Castle and the Common Stock that
owners of DECS may receive are attached to this prospectus.
Owners of DECS will not be entitled to any rights with respect to the Common
Stock (including, without limitation, voting rights and rights to receive
dividends or other distributions in respect thereof) unless and until such
time, if any, as the sellers deliver shares of Common Stock to the trust
pursuant to the prepaid forward contracts and the trust has distributed such
shares to the owners of the DECS.
The Common Stock has been listed on The Nasdaq National Market under the
symbol "TWRS" since August 18, 1998. The following table sets forth, for the
indicated periods, the high and low sales prices of the Common Stock, as
reported on The Nasdaq National Market. Crown Castle has never paid cash
dividends on the Common Stock and has stated that it does not anticipate paying
cash dividends on the Common Stock in the foreseeable future. As of August 4,
1999, there were 320 record holders of the Common Stock. Crown Castle's fiscal
year end is December 31.
<TABLE>
<CAPTION>
High Low
------ ------
<S> <C> <C>
Fiscal 1999 Third Quarter (through August 4, 1999)............... $25.50 $19.31
Fiscal 1999 Second Quarter....................................... 21.50 16.38
Fiscal 1999 First Quarter........................................ 23.50 16.63
Fiscal 1998 Fourth Quarter....................................... 23.50 9.87
Fiscal 1998 Third Quarter........................................ 13.31 6.00
</TABLE>
Crown Castle is not affiliated with the trust, will not receive any of the
proceeds from the sale of the DECS by the trust and will have no obligations
with respect to the DECS or the prepaid forward contracts. This prospectus
relates only to the DECS offered hereby and does not relate to Crown Castle or
the Common Stock. Crown Castle has filed a registration statement with the SEC
with respect to the shares of Common Stock that may be delivered to the trust
by the sellers, and by the trust to the owners of DECS, at the Exchange Date or
upon earlier acceleration of any of the prepaid forward contracts. The
prospectus and prospectus supplement of Crown Castle constituting a part of
such registration statement include information relating to Crown Castle and
the Common Stock, including certain risk factors relevant to an investment in
the Common Stock. The prospectus and prospectus supplement of Crown Castle are
being attached hereto and delivered to prospective purchasers of DECS together
with this prospectus for convenience of reference only. The Crown Castle
prospectus and prospectus supplement are not part of this prospectus, and are
not incorporated by reference into this prospectus. The sellers did not
prepare, and are not responsible for, the Crown Castle prospectus or prospectus
supplement.
The Forward Contracts
General. The trust will enter into the prepaid forward contracts with the
sellers obligating each seller to deliver to the trust at the Exchange Date
under its prepaid forward contract a number of shares of Common Stock equal to
the initial number of shares of Common Stock subject to the prepaid forward
contract multiplied by the Exchange Rate. The Exchange Rate is equal to,
subject to adjustment as described in "--Dilution Adjustments; Adjustment
Events" below,
(1) if the Exchange Price is greater than the Threshold Appreciation Price,
0.84736;
(2) if the Exchange Price is less than or equal to the Threshold
Appreciation Price but greater than the Initial Price, the Initial
Price divided by the Exchange Price; and
(3) if the Exchange Price is less than or equal to the Initial Price, one.
12
<PAGE>
The purchase price under the prepaid forward contracts is equal to $15.3063 per
share of Common Stock and $76,531,706 in total (excluding shares required to be
delivered in respect of DECS issued to cover the underwriters' over-allotment
option and DECS issued in connection with the formation of the trust) and is
payable to the sellers by the trust on the closing of this offering. The
purchase price of the prepaid forward contracts was arrived at by arm's length
negotiations between the trust and the sellers taking into consideration
factors including the price, expected dividend level and volatility of the
Common Stock, current interest rates, the term of the prepaid forward
contracts, current market volatility generally, the collateral pledged by the
sellers to secure their obligations under their respective prepaid forward
contracts, the value of other similar instruments and the costs and anticipated
proceeds of the offering of the DECS. All matters relating to the
administration of the prepaid forward contracts will be the responsibility of
either the trust's Administrator or its Custodian.
Although each seller currently intends to deliver shares of Common Stock at
the Exchange Date, each seller may, at its option, deliver cash in lieu of
delivering all, but not less than all, of the shares of Common Stock otherwise
deliverable by it on the Exchange Date (the "Cash Delivery Option"), except
where such delivery would violate applicable state law. The amount of cash
deliverable by any seller who exercises the Cash Delivery Option will be equal
to the product of the number of shares of Common Stock otherwise deliverable by
that seller on the Exchange Date multiplied by the Exchange Price. On or prior
to the 25th Business Day prior to the Exchange Date, each seller will notify
the trust concerning its exercise of the Cash Delivery Option, and the trust in
turn will notify The Depository Trust Company and publish a notice in a daily
newspaper of national circulation stating whether the owners of DECS will
receive shares of Common Stock or cash or both.
Extension and Acceleration of the Exchange Date at the Option of
Sellers. Any seller that elects the Cash Delivery Option and is making a
Rollover Offering may extend the Exchange Date under its prepaid forward
contract to November 15, 2002. If a seller extends the Exchange Date, it will
not be required to deliver the cash value of the Common Stock under its prepaid
forward contract until November 15, 2002. However, once the seller extends the
Exchange Date, that seller can then accelerate the Exchange Date under its
prepaid forward contract to any date between August 15, 2002 and November 15,
2002. If any seller extends or accelerates the Exchange Date under its prepaid
forward contract, the trust will receive the cash payable under that contract
within five Business Days after the extended or accelerated Exchange Date, and
the amount of cash will be calculated as of the extended or accelerated
Exchange Date.
Any seller extending the Exchange Date under its prepaid forward contract in
connection with a Rollover Offering must also deliver to the trust an
additional amount of cash on the extended or accelerated Exchange Date to be
distributed as an additional distribution to the holders of the DECS in respect
of the period between the originally scheduled Exchange Date and the Exchange
Date as so extended or accelerated. In addition, such seller will be required
to pledge U.S. Treasury securities to secure its obligation to deliver cash for
this additional distribution. See "--Collateral Requirements of the Forward
Contracts Acceleration." The amount of the additional distribution that would
be paid on the DECS would be equal to a portion of the regular quarterly
distribution on the DECS pro-rated to reflect the number of days by which the
Exchange Date is extended or accelerated and the proportion of all the Common
Stock covered by all of the prepaid forward contracts that are represented by
the prepaid forward contracts as to which the Exchange Date is being extended
or accelerated. For example, if the Exchange Date under all of the prepaid
forward contracts is extended to November 15, 2002 and then accelerated to
October 15, 2002 (i.e., two-thirds of the time between August 15, 2002 and
November 15, 2002), the additional distribution would be equal to two-thirds of
the regular quarterly distribution. If only forward purchase contracts
representing one-half of all of the Common Stock deliverable under the DECS are
the subject of the same extension and acceleration, then the additional
distribution would be equal to one-third of the regular quarterly distribution.
If some sellers elect to extend the Exchange Date under their prepaid
forward contracts in connection with Rollover Offerings and others do not, then
the originally scheduled Exchange Date of August 15, 2002 will remain in effect
for the sellers who do not extend, the Exchange Price under those sellers'
prepaid forward contracts will be determined as described herein shortly before
that date, and the trust will distribute the cash and/or shares of Common Stock
it receives under those prepaid forward contracts to the holders of DECS on or
13
<PAGE>
shortly after that date. All sellers who do extend the Exchange Date under
their prepaid forward contracts will be required to extend to November 15,
2002, and no seller may then accelerate the Exchange Date under its prepaid
forward contract unless all sellers who have extended their Exchange Dates
accelerate to the same date. The Exchange Price under the accelerating sellers'
prepaid forward contracts will be calculated as described below immediately
before the extended or accelerated Exchange Date, and the trust will distribute
the cash it receives under those contracts, together with the additional cash
amount described in the preceding paragraph, to holders of the DECS on or
shortly after that date. Therefore, holders of DECS may receive the cash and/or
shares to which they are entitled on two (but not more than two) separate dates
up to three months apart, and the dates and basis on which the cash or shares
to which they are entitled will not be the same for the two distributions.
Rollover Offerings. Each seller has the option to deliver cash instead of
Common Stock on the Exchange Date (whether or not extended) by completing a
Rollover Offering to refinance the DECS.
The term "Rollover Offering" means a reoffering or refinancing of the DECS
effected by a seller not earlier than August 15, 2002 by means of a completed
public offering or offerings or another similar offering (which may include one
or more exchange offers), by or on behalf of such seller. If a seller elects to
carry out a Rollover Offering, the "Exchange Price" will be the Closing Price
per share of Common Stock on the Trading Day immediately preceding the date
that the Rollover Offering is priced (the "Pricing Date") or, if the Rollover
Offering is priced after 4:00 p.m. New York City time, on the Pricing Date, the
Closing Price per share on the Pricing Date.
If a seller carries out a Rollover Offering that is consummated on or before
the Exchange Date, the cash payable by the seller will be delivered to the
trust within five Business Days after the Exchange Date (which may be extended
and accelerated as described above) instead of on the Exchange Date itself.
Accordingly, owners of the DECS may not receive a portion of the cash
deliverable in exchange for the DECS until the fifth Business Day after the
Exchange Date.
The trust will notify the owners of the DECS (1) if any seller elects to
settle with cash, and whether it elects to do so in connection with a Rollover
Offering, not less than 30 days nor more than 90 days prior to the Exchange
Date, (2) if any seller elects to extend the Exchange Date, not less than 30
days nor more than 90 days prior to the Exchange Date as in effect when the
election is made, and (3) if any seller accelerates the Exchange Date in
connection with a Rollover Offering, not later than the Exchange Date as in
effect when the election is made.
Dilution Adjustments. The Exchange Rate is subject to adjustment if Crown
Castle
(1) pays a stock dividend or makes a distribution, in either case, with
respect to Common Stock in shares of such stock,
(2) subdivides or splits its outstanding shares of Common Stock into a
greater number of shares,
(3) combines its outstanding shares of Common Stock into a smaller number
of shares,
(4) issues by reclassification (other than a reclassification pursuant to
clause (2), (3), (4) or (5) of the definition of Adjustment Event
below) of its shares of Common Stock any other equity securities of
Crown Castle, or
(5) issues rights or warrants (other than rights to purchase Common Stock
pursuant to a plan for the reinvestment of dividends or interest) to
all holders of Common Stock entitling them to subscribe for or purchase
shares of Common Stock at a price per share less than the Market Price
(as defined below) of the Common Stock on the Business Day next
following the record date for the determination of holders of Common
Stock entitled to receive such rights or warrants.
In the case of the events referred to in clauses (1), (2), (3) and (4)
above, the Exchange Rate will be adjusted by adjusting each of the Share
Components of the Exchange Rate in effect immediately prior to such event so
that the trust will be entitled under the prepaid forward contracts to receive
at the Exchange Date the number of shares of Common Stock (or, in the case of a
reclassification referred to in clause (4) above, the number of other equity
securities of Crown Castle issued pursuant thereto) which it would have owned
or been
14
<PAGE>
entitled to receive immediately following such event had the Exchange Date
occurred immediately prior to such event or any record date with respect
thereto.
In the case of the event referred to in clause (5) above, the Exchange Rate
will be adjusted by multiplying each of the Share Components of the Exchange
Rate in effect on the record date for the issuance of the rights or warrants
referred to in clause (5) above, by a fraction. The numerator of this fraction
is
(A) the number of shares of Common Stock outstanding on the record date for
the issuance of such rights or warrants, plus
(B) the number of additional shares of Common Stock offered for
subscription or purchase pursuant to such rights or warrants.
The denominator of this fraction is
(x) the number of shares of Common Stock outstanding on the record date for
the issuance of such rights or warrants, plus
(y) the number specified in clause (B) above multiplied by the quotient of
(I) the exercise price of such rights or warrants divided by
(II) the Market Price of the Common Stock on the Business Day next
following the record date for the determination of holders of
Common Stock entitled to receive such rights or warrants.
To the extent that such rights or warrants expire prior to the Exchange Date
and shares of Common Stock are not delivered pursuant to such rights or
warrants prior to such expiration, the Exchange Rate will be readjusted to the
Exchange Rate which would then be in effect had such adjustments for the
issuance of such rights or warrants been made upon the basis of delivery of
only the number of shares of Common Stock actually delivered pursuant to such
rights or warrants. For purposes of this paragraph, dividends will be deemed to
be paid as of the record date for such dividend.
"Market Price" means, as of any date of determination, the average Closing
Price per share of Common Stock on the 20 Trading Days immediately prior to
(but not including) the date of determination; provided, however, that if there
are not 20 Trading Days for the Common Stock occurring later than the 60th
calendar day immediately prior to, but not including, such date, the Market
Price will be determined as the market value per share of Common Stock as of
such date as determined by a nationally recognized investment banking firm that
the Administrator retains for such purpose.
All adjustments to the Exchange Rate will be calculated to the nearest
1/10,000th of a share of Common Stock (or, if there is not a nearest 1/10,000th
of a share, to the next higher 1/10,000th of a share). No adjustment in the
Exchange Rate will be made unless such adjustment would require an increase or
decrease of at least one percent therein; provided, however, that any
adjustments which by reason of the foregoing are not required to be made will
be carried forward and taken into account in any subsequent adjustment. If an
adjustment is made to the Exchange Rate pursuant to clauses (1), (2), (3), (4)
or (5) above, an adjustment will also be made to the Exchange Price as such
term is used throughout the definition of Exchange Rate. The required
adjustment to the Exchange Price will be made at the Exchange Date by
multiplying the Exchange Price by the cumulative number or fraction determined
pursuant to the Exchange Rate adjustment procedure described above. In the case
of the reclassification of any shares of Common Stock into any equity
securities of Crown Castle other than the Common Stock, such equity securities
will be deemed shares of Common Stock for all purposes. Each such adjustment to
the Exchange Rate and the Exchange Price will be made successively.
Adjustments Events. Each of the following events are called "Adjustment
Events":
(1) any dividend or distribution by Crown Castle to all holders of Common
Stock of evidences of its indebtedness or other assets (excluding any
dividends or distributions referred to in clause (1) of the first
paragraph under the caption "--Dilution Adjustments" above, any equity
securities issued pursuant to a reclassification referred to in clause
(4) of such paragraph and any Ordinary Cash
15
<PAGE>
Dividends (as defined below)) or any issuance by Crown Castle to all
holders of Common Stock of rights or warrants to subscribe for or
purchase any of its securities (other than rights or warrants referred
to in clause (5) of the first paragraph under the caption "--Dilution
Adjustments" above),
(2) any consolidation or merger of Crown Castle with or into another entity
(other than a merger or consolidation in which Crown Castle is the
continuing corporation and in which the Common Stock outstanding
immediately prior to the merger or consolidation is not exchanged for
cash, securities or other property of Crown Castle or another
corporation),
(3) any sale, transfer, lease or conveyance to another corporation of the
property of Crown Castle as an entirety or substantially as an
entirety,
(4) any statutory exchange of securities of Crown Castle with another
corporation (other than in connection with a merger or acquisition),
and
(5) any liquidation, dissolution or winding up of Crown Castle.
After the occurrence of any Adjustment Event, each seller will deliver at
the Exchange Date, in lieu of or (in the case of an Adjustment Event described
in clause (1) above) in addition to, shares of Common Stock as described
above, cash in an amount equal to
(A) if the Exchange Price is greater than the Threshold Appreciation Price,
0.84736 multiplied by the Transaction Value (as defined below);
(B) if the Exchange Price is less than or equal to the Threshold
Appreciation Price but greater than the Initial Price, the product of
(x) the Initial Price divided by the Exchange Price multiplied by (y)
the Transaction Value; and
(C) if the Exchange Price is less than or equal to the Initial Price, the
Transaction Value;
provided, however, that if the consideration received by holders of Common
Stock in such Adjustment Event does not and may not at the option of such
holders include Reported Securities, then (except in the case of an Adjustment
Event solely of the type described in (1) above) (a) each seller's delivery
obligations under its prepaid forward contract will be accelerated and
promptly upon consummation of the Adjustment Event each seller will be
required to deliver cash in an amount equal to (x) if the Transaction Value is
greater than the Threshold Appreciation Price, 0.84736 multiplied by the
Transaction Value, (y) if the Transaction Value is less than or equal to the
Threshold Appreciation Price but greater than Initial Price, the Initial
Price, and (z) if the Transaction Value is less than or equal to the Initial
Price, the Transaction Value; (b) the Custodian will liquidate the Treasury
Securities acquired by the trust at closing and then held by the trust; and
(c) the amount delivered by the sellers as described in (a) above and the
proceeds of such liquidation will be distributed to the owners of the DECS.
Following an Adjustment Event, the Exchange Price, as such term is used in
the formula in the preceding paragraph and throughout the definition of
Exchange Rate, will be deemed to equal (A) if shares of Common Stock are
outstanding at the Exchange Date, the Exchange Price of the Common Stock, as
adjusted pursuant to the method described above under "--Dilution Adjustments"
otherwise zero, plus (B) the Transaction Value.
Notwithstanding the foregoing, with respect to any securities received by
holders of Common Stock in an Adjustment Event that
(1) are
(a) listed on a United States national securities exchange,
(b) reported on a United States national securities system subject to
last sale reporting,
(c) traded in the over-the-counter market and reported on the National
Quotation Bureau or similar organization, or
16
<PAGE>
(d) for which bid and ask prices are available from at least three
nationally recognized investment banking firms; and
(2) are either (x) perpetual equity securities or (y) non-perpetual equity
or debt securities with a stated maturity after the Exchange Date of
the DECS
("Reported Securities"), each seller will, in lieu of delivering cash in
respect of such Reported Securities received in an Adjustment Event, deliver a
number of such Reported Securities with a value equal to all cash amounts that
would otherwise be deliverable in respect of Reported Securities received in
such Adjustment Event, as determined in accordance with clause (2) of the
definition of Transaction Value, unless such seller has made an election to
exercise the Cash Delivery Option or such Reported Securities have not yet been
delivered to the holders entitled thereto following such Adjustment Event or
any record date with respect thereto. If a seller delivers any Reported
Securities, upon distribution thereof by the trust to owners of DECS, each
owner of a DECS will be responsible for the payment of any and all brokerage
and other transaction costs upon the sale of such Reported Securities. If,
following any Adjustment Event, any Reported Security ceases to qualify as a
Reported Security, then (x) the seller will not deliver such Reported Security
but instead will deliver an equivalent amount of cash and (y) notwithstanding
clause (2) of the definition of Transaction Value, the Transaction Value of
such Reported Security will mean the fair market value of such Reported
Security on the date such security ceases to qualify as a Reported Security, as
determined by a nationally recognized investment banking firm that the
Administrator retains for this purpose.
Because each DECS represents the right of the owner of the DECS to receive a
pro rata portion of the Common Stock or other assets delivered by the sellers
pursuant to the prepaid forward contracts, the amount of cash and/or the kind
and number of securities which the owners of DECS are entitled to receive after
an Adjustment Event will be adjusted following the date of such Adjustment
Event in the same manner and upon the occurrence of the same type of events as
described under the captions "--Dilution Adjustments" and "--Adjustment Events"
with respect to Common Stock and Crown Castle.
For purposes of the foregoing, the term "Ordinary Cash Dividend" means, with
respect to any consecutive 365-day period, any dividend with respect to Common
Stock paid in cash to the extent that the amount of such dividend, together
with the total amount of all other dividends on the Common Stock paid in cash
during such 365-day period, does not exceed on a per share basis 10% of the
average of the Closing Prices of the Common Stock over such 365-day period.
The term "Transaction Value" means
(1) for any cash received in any Adjustment Event, the amount of cash
received per share of Common Stock,
(2) for any Reported Securities received in any Adjustment Event, an amount
equal to (x) the average Closing Price per security of such Reported
Securities on the 20 Trading Days immediately prior to (but not
including) the Exchange Date multiplied by (y) the number of such
Reported Securities (as adjusted pursuant to the methods described
above under "--Dilution Adjustments" and "--Adjustment Events")
received per share of Common Stock, and
(3) for any property received in any Adjustment Event other than cash or
such Reported Securities, an amount equal to the fair market value of
the property received per share of Common Stock on the date such
property is received, as determined by a nationally recognized
investment banking firm that the Administrator retains for this
purpose;
provided, however, that in the case of clause (2),
(x) with respect to securities that are Reported Securities by virtue of
only clause (d) of the definition of Reported Securities above,
Transaction Value with respect to any such Reported Security means the
17
<PAGE>
average of the mid-point of the last bid and ask prices for such
Reported Security as of the Exchange Date from each of at least three
nationally recognized investment banking firms that the Administrator
retains for such purpose multiplied by the number of such Reported
Securities (as adjusted pursuant to the methods described above under
"--Dilution Adjustments" and "--Adjustment Events") received per share
of Common Stock, and
(y) with respect to all other Reported Securities, if there are not 20
Trading Days for any particular Reported Security occurring after the
60th calendar day immediately prior to, but not including, the Exchange
Date, Transaction Value with respect to such Reported Security means
the market value per security of such Reported Security as of the
Exchange Date as determined by a nationally recognized investment
banking firm that the Administrator retains for such purpose multiplied
by the number of such Reported Securities (as adjusted pursuant to the
methods described above under "--Dilution Adjustments" and "--
Adjustment Events") received per share of Common Stock.
For purposes of calculating the Transaction Value, any cash, Reported
Securities or other property receivable in an Adjustment Event will be deemed
to have been received immediately prior to the close of business on the record
date for such Adjustment Event or, if there is no record date for such
Adjustment Event, immediately prior to the close of business on the effective
date of such Adjustment Event.
No adjustments will be made for certain other events, such as offerings of
Common Stock by Crown Castle for cash or in connection with acquisitions.
Likewise, no adjustments will be made for any sales of Common Stock by the
sellers.
Each seller is required under its prepaid forward contract to notify the
trust promptly upon becoming aware that an event requiring an adjustment to
the Exchange Rate or which is an Adjustment Event is pending or has occurred.
The trust will, within ten Business Days following the occurrence of an event
that requires an adjustment to the Exchange Rate or the occurrence of an
Adjustment Event (or, in either case, if the trust is not aware of such
occurrence, as soon as practicable after becoming so aware), notify each owner
of DECS in writing of the occurrence of such event including a statement in
reasonable detail setting forth the method by which the adjustment to the
Exchange Rate or change in the consideration to be received by owners of DECS
following the Adjustment Event was determined and setting forth the revised
Exchange Rate or consideration, as the case may be. However, for any
adjustment to the Exchange Price, this notice will only disclose the factor by
which the Exchange Price is to be multiplied in order to determine which
clause of the Exchange Rate definition will apply at the Exchange Date.
Collateral Requirements of the Forward Contracts; Acceleration. Each
seller's obligations under its prepaid forward contract will be secured by a
pledge of one share of Common Stock for each share of Common Stock subject to
the prepaid forward contract (subject to adjustment in accordance with the
dilution provisions of the prepaid forward contract), pursuant to a Collateral
Agreement among the seller, the trust and The Bank of New York, as collateral
agent (the "Collateral Agent"). In addition, the obligation of any seller to
pay an additional amount in connection with the extension or acceleration of
the Exchange Date will be secured by a pledge of U.S. Treasury securities (the
"Additional Government Securities").
Unless they are in default in their obligations under their respective
Collateral Agreements, the sellers under two of the prepaid forward contracts
(representing 4,061,182 shares of Common Stock in the aggregate) will be
permitted to substitute for the pledged shares of Common Stock collateral
consisting of short-term, direct obligations of the U.S. Government. Any U.S.
Government obligations pledged as substitute collateral for shares of Common
Stock must have an aggregate market value at the time of substitution and at
daily mark-to-market valuations thereafter of not less than 150% (or, from and
after any Insufficiency Determination (as defined below) that is not cured by
the close of business on the next Business Day thereafter, as described below,
200%) of the product of the market price of the Common Stock at the time of
each valuation times the number of shares of Common Stock for which such
obligations are being substituted. Each of the Collateral Agreements provides
that, after an Adjustment Event, the relevant seller will pledge as
alternative collateral any Reported Securities, plus cash in an amount at
least equal to the Transaction Value of any consideration
18
<PAGE>
other than Reported Securities, received by it in respect of the maximum number
of shares of Common Stock subject to its prepaid forward contract at the time
of the Adjustment Event. The number of Reported Securities required to be
pledged will be adjusted if any event requiring a dilution adjustment under the
prepaid forward contracts occurs. The two sellers referred to above will be
permitted to substitute U.S. Government obligations for Reported Securities or
cash pledged after any Adjustment Event. Any U.S. Government obligations so
substituted must have an aggregate market value at the time of substitution and
at daily mark-to-market valuations thereafter of:
(A) in the case of obligations substituted for pledged Reported Securities,
not less than 150% (or, from and after any Insufficiency Determination
that is not cured by the close of business on the next Business Day
thereafter, as described below, 200%) of the product of the market
price per security of Reported Securities at the time of each valuation
times the number of Reported Securities for which such obligations are
being substituted; and
(B) in the case of obligations substituted for pledged cash, not less than
105% of the amount of cash for which such obligations are being
substituted.
The Collateral Agent will promptly pay over to the relevant seller any
dividends, interest, principal or other payments received by the Collateral
Agent in respect of any collateral, including any substitute collateral, unless
the seller is in default of its obligations under its Collateral Agreement, or
unless the payment of such amount to the seller would cause the seller's
collateral to become insufficient under its Collateral Agreement.
If the Collateral Agent determines (an "Insufficiency Determination") that
U.S. Government obligations pledged by a seller as substitute collateral fail
to meet the foregoing requirements at any valuation, or that a seller has
failed to pledge additional collateral required as a result of a dilution
adjustment increasing the maximum number of shares of Common Stock or Reported
Securities subject to its prepaid forward contract, and such failure is not
cured by the close of business on the next Business Day after such
determination, then, unless a Collateral Event of Default (as defined below)
under the relevant Collateral Agreement has occurred and is continuing, the
Collateral Agent will commence (1) sales of the collateral consisting of U.S.
Government obligations and (2) purchases, using the proceeds of such sales, of
shares of Common Stock or Reported Securities in an amount sufficient to cause
the collateral to meet the requirements under the relevant Collateral
Agreement. The Collateral Agent will discontinue such sales and purchases if at
any time a Collateral Event of Default under the relevant Collateral Agreement
has occurred and is continuing.
The occurrence of a Collateral Event of Default (as defined below) under any
seller's Collateral Agreement, or the bankruptcy or insolvency of a seller,
will cause an automatic acceleration of that seller's obligations under its
prepaid forward contract. A "Collateral Event of Default" under a Collateral
Agreement means, at any time,
(A) if no U.S. Government obligations are pledged as substitute collateral
at such time, failure of the collateral to consist of at least the
maximum number of shares of Common Stock subject to the relevant
seller's prepaid forward contract at such time (or, if an Adjustment
Event has occurred at or prior to such time, failure of the collateral
to include the amount of cash and the maximum number of any Reported
Securities required to be pledged by that seller as described above);
(B) if any U.S. Government obligations are pledged as substitute collateral
for shares of Common Stock (or Reported Securities) under that
Collateral Agreement at such time, failure of such U.S. Government
obligations to have a market value at such time of at least 105% of the
market price of the Common Stock (or the then-current market price per
security of Reported Securities, as the case may be) times the
difference between
(x) the maximum number of shares of Common Stock (or Reported
Securities) subject to the relevant seller's prepaid forward
contract at such time, and
(y) the number of shares of Common Stock (or Reported Securities)
pledged as collateral by that seller at such time; and
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<PAGE>
(C) if any U.S. Government obligations are pledged as substitute collateral
for any cash under that Collateral Agreement at such time, failure of
such U.S. Government obligations to have a market value at such time of
at least 105% of such cash, if such failure is not cured within one
Business Day after notice thereof is delivered to the relevant seller.
Except as described below, upon acceleration of any seller's prepaid forward
contract, the Collateral Agent will to the extent permitted by law distribute
to the trust for distribution pro rata to investors the maximum number of
shares of Common Stock subject to such prepaid forward contract, in the form of
the shares of Common Stock then pledged by that seller, or cash generated from
the liquidation of U.S. Government obligations then pledged by that seller, or
a combination thereof (or, after an Adjustment Event, in the form of Reported
Securities then pledged, cash then pledged, cash generated from the liquidation
of U.S. Government obligations then pledged, or a combination thereof). In
addition, if by the Exchange Date any substitute collateral has not been
replaced by shares of Common Stock (or, after an Adjustment Event, cash or
Reported Securities) sufficient to meet the obligations under a seller's
prepaid forward contract, the Collateral Agent will distribute to the trust for
distribution pro rata to investors the market value of the shares of Common
Stock required to be delivered thereunder, in the form of any shares of Common
Stock then pledged by that seller plus cash generated from the liquidation of
U.S. Government obligations then pledged by that seller (or, after an
Adjustment Event, the market value of the alternative consideration required to
be delivered thereunder, in the form of any Reported Securities then pledged,
plus any cash then pledged, plus cash generated from the liquidation of U.S.
Government obligations then pledged).
If upon acceleration of a seller's prepaid forward contract, that seller is
subject to a bankruptcy or similar proceeding, the Collateral Agent will to the
extent permitted by law distribute to the trust for distribution pro rata to
the investors a number of shares of Common Stock, in the form of the shares of
Common Stock then pledged by that seller, or cash generated from the
liquidation of U.S. Government obligations then pledged by that seller, or a
combination thereof (or, after an Adjustment Event, in the form of Reported
Securities then pledged, cash then pledged, cash generated from the liquidation
of U.S. Government obligations then pledged, or a combination thereof), with an
aggregate value equal to the "Acceleration Value." The Administrator will
determine the Acceleration Value on the basis of quotations from independent
dealers. Each quotation will be for an amount that would be paid to the
relevant dealer in consideration of an agreement that would have the effect of
preserving the trust's rights to receive the number of shares of Common Stock
(or, after an Adjustment Event, Reported Securities, cash or a combination
thereof) subject to the relevant seller's prepaid forward contract on the
Exchange Date. The Administrator will request quotations from four nationally
recognized independent dealers on or as soon as reasonably practicable
following the date of acceleration. If four quotations are provided, the
Acceleration Value will be the arithmetic mean of the two quotations remaining
after disregarding the highest and lowest quotations. If two or three
quotations are provided, the Acceleration Value will be the arithmetic mean of
such quotations. If one quotation is provided, the Acceleration Value will be
such quotation. If no quotations are provided, the Acceleration Value will be
the aggregate value of the number of shares of Common Stock (or, after an
Adjustment Event, Reported Securities, cash or a combination thereof) that
would be required to be delivered under the relevant seller's prepaid forward
contract on the date of acceleration if the Exchange Date were redefined to be
the date of acceleration.
The trust's recourse to the sellers under two of the prepaid forward
contracts representing 938,823 shares of Common Stock in the aggregate (plus up
to an additional 644,995 shares if the underwriters' over-allotment option is
exercised in full) will be limited to the Common Stock (or, after an Adjustment
Event, cash or Reported Securities) pledged thereunder. Such sellers will not
be permitted to substitute U.S. Government obligations for shares of Common
Stock, Reported Securities or cash pledged under their Collateral Agreements.
Description of the Sellers. Specific information on the holdings of the
sellers, as required by the Securities Act of 1933, as amended (the "Securities
Act"), is included in the prospectus and prospectus supplement of Crown Castle
attached hereto.
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<PAGE>
The Treasury Securities
The trust will purchase and hold a series of zero-coupon ("stripped") U.S.
Treasury securities with such face amounts and maturities as will provide
investors with a quarterly distribution of $0.3466 per DECS on each
Distribution Date during the term of the trust. The trust may invest up to 35%
of its total assets in these Treasury Securities. If any prepaid forward
contract is accelerated, the Administrator will liquidate a proportionate
amount of the Treasury Securities then held in the trust and will distribute
the proceeds thereof pro rata to investors, together with proceeds from the
acceleration of the prepaid forward contract. See "--The Forward Contracts--
Collateral Requirements of the Forward Contract; Acceleration" above and "--
Trust Termination" below.
If a seller extends the Exchange Date, it will be required to pledge
Additional Government Securities to the trust as collateral securing its
obligation to pay the additional amount described above under "--The Forward
Contracts--Extension and Acceleration of the Exchange Date at the Option of the
Sellers."
Temporary Investments
For cash management purposes, the trust may invest the proceeds of the
Treasury Securities held by the trust and any other cash held by the trust in
short-term obligations of the U.S. Government maturing no later than the
Business Day preceding the next distribution date.
Trust Termination
The trust will terminate automatically on or shortly after the latest
Exchange Date or following the distribution of all trust assets to investors,
if earlier.
If all of the prepaid forward contracts are accelerated, the Administrator
will liquidate any Treasury Securities then held by the trust and will
distribute the proceeds thereof pro rata to the investors, together with all
shares of Common Stock subject to the prepaid forward contracts that are
pledged by the sellers, or cash generated from the liquidation of U.S.
Government obligations then pledged by the sellers, or a combination thereof
(or, after an Adjustment Event, in the form of Reported Securities then
pledged, cash then pledged, cash generated from the liquidation of U.S.
Government obligations then pledged, or a combination thereof) or in certain
cases, the Acceleration Value of the prepaid forward contracts. After this
distribution, the term of the trust will expire. See "--The Forward Contracts--
Collateral Requirements of the Forward Contracts; Acceleration" above.
Delivery of Common Stock and Reported Securities; No Fractional Shares of
Common Stock or Reported Securities
Common Stock and Reported Securities delivered under the prepaid forward
contracts at the Exchange Date are expected to be distributed by the trust to
the investors pro rata shortly after the Exchange Date, except that no
fractional shares of Common Stock or Reported Securities will be distributed.
If more than one DECS is surrendered at one time by the same investor, the
number of full shares of Common Stock or Reported Securities to be delivered
upon termination of the trust, in whole or in part, as the case may be, will be
computed on the basis of the total number of DECS so surrendered at the
Exchange Date. Instead of delivering any fractional share or security, the
trust will sell a number of shares or securities equal to the total of all
fractional shares or securities that would otherwise be delivered to investors
of all DECS, and each such investor will be entitled to receive an amount in
cash equal to the pro rata portion of the proceeds of such sale (which may be
at a price lower than the Exchange Price).
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<PAGE>
INVESTMENT RESTRICTIONS
The trust has adopted a fundamental policy that the trust may not purchase
any securities or instruments other than the Treasury Securities, the prepaid
forward contracts and the Common Stock or other assets received pursuant to the
prepaid forward contracts and, for cash management purposes, short-term
obligations of the U.S. Government; issue any securities or instruments except
for the DECS; make short sales or purchase securities on margin; write put or
call options; borrow money; underwrite securities; purchase or sell real
estate, commodities or commodities contracts; or make loans. The trust has also
adopted a fundamental policy that the trust may not dispose of the prepaid
forward contracts during the term of the trust and (except for a partial
liquidation of Treasury Securities following acceleration of any prepaid
forward contract as described above under "Investment Objectives and Policies--
The Treasury Securities") the trust may not dispose of the Treasury Securities
prior to the earlier of their respective maturities and the termination of the
trust.
RISK FACTORS FOR DECS
The DECS may trade at widely different prices before maturity depending upon
factors such as changes in the market price of the Crown Castle common stock
and other events that the trust cannot predict and are beyond the trust's
control. The text describes this in more detail below.
Internal Management; No Portfolio Management
The internal operations of the trust will be managed by its trustees; the
trust will not have any separate investment advisor. The trust has adopted a
fundamental policy that the trust may not dispose of the prepaid forward
contracts during the term of the trust and the trust may not dispose of the
Treasury Securities held by the trust prior to the earlier of their maturities
and the termination of the trust, except for a partial liquidation of Treasury
Securities following acceleration of a prepaid forward contract. As a result,
the trust will continue to hold the prepaid forward contracts even if there is
a significant decline in the market price of the Crown Castle common stock or
adverse changes in the financial condition of Crown Castle (or, after an
Adjustment Event, comparable developments affecting any Reported Securities or
the issuer of such securities). The trust will not be managed like a typical
closed-end investment company.
Comparison to Other Securities; Relationship to Crown Castle Shares
The DECS are different from ordinary securities because the value of the
Crown Castle common stock, cash or other securities you will receive on
termination of the trust may be more or less than the initial price of the
DECS. If the value of a share of Crown Castle common stock shortly before the
exchange date is less than the price you paid for each of your DECS, you will
suffer a loss on your investment in the DECS. If Crown Castle is insolvent or
bankrupt when the DECS mature, you might lose your entire investment. You take
all the risk of a fall in the value of Crown Castle common stock before the
exchange date.
In addition, you have less opportunity to make money from an increase in the
price of Crown Castle common stock by investing in the DECS than by investing
directly in Crown Castle common stock. The value of what you receive when the
trust is terminated will be greater than the initial price of the DECS only if
the value of Crown Castle common stock exceeds $22.57 per share. This is an
increase of about 18% over the price of Crown Castle common stock when the DECS
were first offered for sale. In addition, you will receive only about 84.736%
of any increase in the value of a Crown Castle common stock above $22.57 per
share.
In return, you will receive annual distributions on the DECS at a rate of
7.25%, which is more than the historical annual dividend on a Crown Castle
common stock, which currently pay no dividends. However, Crown Castle could pay
dividends in the future that are higher than the distributions that you receive
from the trust.
The trust cannot predict whether the price of a Crown Castle common stock
will rise or fall. However, the following factors may affect the trading price
of Crown Castle common stock:
. whether Crown Castle makes a profit and what its future prospects are;
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<PAGE>
. trading in the capital markets generally;
. trading on Nasdaq, where the Crown Castle common stock is traded;
. the health of the tower and transmission networks industry; and
. whether Crown Castle issues securities like the DECS, or Crown Castle or
another person in the market transfers a large amount of Crown Castle
common stock.
As of the date of this prospectus, the sellers owned a total of 5,645,000
shares of Crown Castle common stock, of which the sellers may deliver up to
5,000,005 shares of Crown Castle common stock ( 5,645,000 shares if the
underwriters' over-allotment option is exercised in full) to the trust at the
exchange date.
Please refer to the attached prospectus and prospectus supplement for
information about Crown Castle and the Crown Castle common stock.
Impact of the DECS on the Market for the Crown Castle Shares
The trust cannot predict accurately how or whether investors will resell the
DECS and how easy it will be to resell them. Any market that develops for the
DECS is likely to influence and be influenced by the market for Crown Castle
common stock. For example, investors' anticipation that the sellers may deliver
Crown Castle common stock that represents approximately 3.3% of the currently
outstanding Crown Castle common stock when the DECS mature could cause the
price of Crown Castle common stock to be unstable or fall. The following
factors could also affect the price of Crown Castle common stock:
. sales of Crown Castle common stock by investors who prefer to invest in
Crown Castle by investing in the DECS;
. hedging of investments in the DECS by selling Crown Castle common stock
(called "selling short"); and
. arbitrage trading activity between the DECS and Crown Castle common
stock.
Dilution of Crown Castle Shares; Lack of Stockholder Rights
The terms of the DECS include some protections so you will receive
equivalent value when the DECS mature even if Crown Castle splits or combines
its shares, pays stock dividends or does other similar things that change the
amount of Crown Castle common stock currently outstanding. However, these terms
will not protect you against all events. For example, the amount you receive
when the DECS mature may not change if Crown Castle offers shares for cash or
in an acquisition, even if the price of Crown Castle common stock falls and
this causes the price of the DECS to fall. The trust has no control over
whether Crown Castle will offer shares or do something similar in the future or
the amount of any offering.
In addition, unless and until a seller decides to deliver Crown Castle
common stock to the trust when the DECS mature and until the trust distributes
the Crown Castle common stock to you, you will have no dividend rights or other
similar rights associated with Crown Castle common stock.
Crown Castle not Responsible for the DECS
Crown Castle has no obligation to make any payments on the DECS. Crown
Castle also does not have to take the trust's needs or your needs into
consideration for any reason. Crown Castle will not receive any money from the
sale of the DECS and did not decide to issue the DECS. Crown Castle did not
determine when the trust will issue the DECS, how much the trust will sell them
for or how many the trust will sell. Crown Castle is not involved in managing
or trading the DECS or determining or calculating the amount you will receive
when the DECS mature.
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<PAGE>
DECS May be Difficult to Resell
The DECS are new and innovative securities, and there is currently no market
in which to resell them. The underwriters currently intend, but are not
obligated, to buy and sell the DECS. A resale market might not develop or, if
it does, might not give you the opportunity to resell your DECS and may not
continue until the DECS mature.
The trust has applied to have the DECS approved for listing on the Nasdaq
National Market. Nonetheless, the Nasdaq might not approve the application or
if approved, could revoke the listing after approval or stop trading of the
DECS at any time. If Nasdaq will no longer quote the DECS or stops trading
them, the trust will ask another national securities exchange to list the DECS
or another trading market to quote them. If the DECS are no longer listed or
traded on any securities exchange or trading market, or if a securities
exchange or trading market stops trading of the DECS, you may have difficulty
getting price information and it may be more difficult to resell the DECS.
Net Asset Value of the Trust
The trust is a newly organized closed-end investment company with no
previous operating history. Shares of closed-end investment companies
frequently trade at a discount from their net asset value, which is a risk
separate and distinct from the risk that the trust's net asset value will
decrease. The trust cannot predict whether the DECS will trade at, below or
above their net asset value. For investors who wish to sell the DECS in a
relatively short period of time after the DECS offering, the risk of the DECS
trading at a discount is more pronounced because the gain or loss that such
investors realize on their investment is likely to be depend more on whether
the DECS are trading at a discount or premium than upon the value of the
trust's assets. The trust will not redeem any DECS prior to the exchange date
of the Crown Castle common stock or the earlier termination of the trust.
Non-Diversified Status
The trust is considered non-diversified under the Investment Company Act of
1940, which means that the trust is not limited in the proportion of its assets
that may be invested in one security. Because the trust will only own the
Treasury Securities, the prepaid forward contracts or other assets subject to
the prepaid forward contracts, the DECS may be a riskier investment than would
be the case for an investment company with more diversified investments.
Tax Treatment of DECS Uncertain
No statutory, judicial or administrative authority directly addresses the
characterization of the DECS or instruments similar to the DECS for U.S.
federal income tax purposes. As a result, significant aspects of the U.S.
federal income tax consequences of an investment in the DECS are not certain.
There is no ruling from the Internal Revenue Service with respect to the DECS
and the Internal Revenue Service might not agree with the conclusions expressed
under the section "Certain United States Federal Income Tax Considerations" in
this prospectus.
Risk Factors for Crown Castle
You should carefully consider the information in the attached prospectus and
prospectus supplement of Crown Castle, including the risk factors for Crown
Castle on pages S-11 to S-21 of the attached prospectus supplement.
Risk Relating to Bankruptcy of the Sellers
It is possible that one or more of the sellers may be the subject of
proceedings under the U.S. Bankruptcy Code. The trust believes that each
prepaid forward contract constitutes a "securities contract" for purposes of
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the U.S. Bankruptcy Code, liquidation of which would not be subject to the
automatic stay provisions of the U.S. Bankruptcy Code in the event of the
bankruptcy of the relevant seller. It is, however, possible that a prepaid
forward contract could be determined not to qualify as a "securities contract"
for this purpose.
Proceedings under the U.S. Bankruptcy Code in respect of any seller may thus
cause a delay in settlement of that seller's prepaid forward contract, or
otherwise subject the prepaid forward contract to such proceedings. In turn,
this could adversely affect the timing of settlement and could impair the
trust's ability to distribute the Crown Castle common stock or other assets
subject to that prepaid forward contract and the related Collateral Agreement
to you on a timely basis and, as a result, could adversely affect the amount
received by you in respect of the DECS and/or the timing of such receipt.
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<PAGE>
NET ASSET VALUE
The Administrator will calculate the net asset value of the portfolio at
least quarterly by dividing the value of the net assets of the trust (the value
of its assets less its liabilities) by the total number of DECS outstanding.
The trust's net asset value will be published semi-annually as part of the
trust's semi-annual report to investors and at such other times as the trust is
may determine. The Treasury Securities held by the trust will be valued at the
mean between the last current bid and asked prices or, if quotations are not
available, as determined in good faith by the trustees. Short-term investments
having a maturity of 60 days or less will be valued at cost with accrued
interest or discount earned included in interest to be received. Each of the
prepaid forward contracts will be valued at the mean of the bid prices the
trust receives from at least three independent broker-dealer firms unaffiliated
with the trust who are in the business of making bids on financial instruments
similar to the prepaid forward contracts and with terms comparable thereto. If
the trust (acting through the Administrator) is unable to obtain valuations
from three independent broker-dealer firms, as required by the preceding
sentence, on a timely basis or without unreasonable effort or expense, the
prepaid forward contracts will be valued at the median of bid prices received
from two such broker-dealer firms. If the trust (acting through the
Administrator) is unable to obtain a valuation for the prepaid forward
contracts that it believes to be reasonable through the above method, the value
of the prepaid forward contracts will be established at a level deemed to be
fair and reflective of the market value for the prepaid forward contracts based
on all appropriate factors relevant to the value of the prepaid forward
contracts as set forth in pricing guidelines adopted by the trustees.
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DESCRIPTION OF THE DECS
Each DECS represents an equal proportional interest in the trust. Upon
liquidation of the trust, investors are entitled to share pro rata in the net
assets of the trust available for distribution. DECS have no preemptive,
redemption or conversion rights. The DECS, when issued and outstanding, will be
fully paid and non-assessable. The only securities that the trust is authorized
to issue are the DECS offered hereby and those sold to the initial investor
referred to below. See "Underwriting."
Owners of DECS are entitled to one vote for each DECS held on all matters to
be voted on by investors and are not able to cumulate their votes in the
election of Trustees. The trustees of the trust have been selected initially by
Salomon Smith Barney as the initial investor in the trust. The trust intends to
hold annual meetings as required by the rules of Nasdaq.
The trustees may call special meetings of investors for action by investor
vote as may be required by either the Investment Company Act or the Declaration
of Trust. Investors have the right, upon the declaration in writing or vote of
more than two-thirds of the outstanding DECS, to remove a Trustee. The Trustees
will call a meeting of investors to vote on the removal of a Trustee upon the
written request of the record owners of 10% of the DECS or to vote on other
matters upon the written request of the record owners of 51% of the DECS
(unless substantially the same matter was voted on during the preceding 12
months). The Trustees shall establish, and notify the investors in writing of,
the record date for each such meeting, which shall be not less than 10 nor more
than 50 days before the meeting date. Owners at the close of business on the
record date will be entitled to vote at the meeting. The trust will also assist
in communications with other owners as required by the Investment Company Act.
Book-Entry System
The DECS will be issued in the form of one or more global securities (the
"Global Security") deposited with The Depository Trust Company (the
"Depositary") and registered in the name of a nominee of the Depositary.
The Depositary has advised the trust and the underwriters as follows: The
Depositary is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to Section 17A of the Securities Exchange
Act of 1934, as amended. The Depositary was created to hold securities of
persons who have accounts with the Depositary ("participants") and to
facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical
movement of certificates. Such participants include securities brokers and
dealers, banks, trust companies and clearing corporations. Indirect access to
the Depositary's book-entry system is also available to others, such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
Upon the issuance of a Global Security, the Depositary or its nominee will
credit the respective DECS represented by such Global Security to the accounts
of participants. The accounts to be credited will be designated by the
underwriters. Ownership of beneficial interests in such Global Security will be
limited to participants or persons that may hold interests through
participants. Ownership of beneficial interests by participants in such Global
Security will be shown on, and the transfer of those ownership interests will
be effected only through, records maintained by the Depositary or its nominee
for such Global Security. Ownership of beneficial interests in such Global
Security by persons that hold through participants will be shown on, and the
transfer of that ownership interest within such participant will be effected
only through, records maintained by such participant. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to transfer beneficial interests in a Global Security.
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So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the DECS.
Except as set forth below, owners of beneficial interests in such Global
Security will not be entitled to have the DECS registered in their names and
will not receive or be entitled to receive physical delivery of the DECS in
definitive form and will not be considered the owners or holders thereof.
Shares of Common Stock or other assets deliverable in respect of, and any
quarterly distributions on, DECS registered in the name of or held by the
Depositary or its nominee will be made to the Depositary or its nominee, as the
case may be, as the registered owner or the holder of the Global Security. None
of the trust, any Trustee, the Paying Agent, the Administrator or the Custodian
for the DECS will have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interests in a Global Security or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
The trust expects that the Depositary, upon receipt of any payment in
respect of a permanent Global Security, will credit immediately participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Security as shown on the
records of the Depositary. The trust also expects that payments by participants
to owners of beneficial interests in such Global Security held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in "street name," and will be the responsibility of such
participants.
A Global Security may not be transferred except as a whole by the Depositary
to a nominee or a successor of the Depositary. If the Depositary is at any time
unwilling or unable to continue as depositary and a successor depositary is not
appointed by the trust within 90 days, the trust will issue DECS in definitive
registered form in exchange for the Global Security representing such DECS. In
that event, an owner of a beneficial interest in a Global Security will be
entitled to physical delivery in definitive form of DECS represented by such
Global Security equal in number to that represented by such beneficial interest
and to have such DECS registered in its name.
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MANAGEMENT AND ADMINISTRATION OF THE TRUST
Trustees
The internal operations of the trust will be managed by three Trustees, none
of whom is an "interested person" of the trust as defined in the Investment
Company Act; the trust will not have an investment adviser. Under the
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
applicable to grantor trusts, the Trustees will not have the power to vary the
investments held by the trust.
The names of the persons who will be elected by Salomon Smith Barney, the
sponsor/initial investor of the trust, to serve as the Trustees are set forth
below. The positions and the principal occupations of the individual Trustees
during the past five years are also set forth below.
<TABLE>
<CAPTION>
Principal Occupation
Name, Age and Address Title During Past Five Years
--------------------- ---------------- -----------------------
<S> <C> <C>
Donald J. Puglisi, 53.................. Managing Trustee Professor of Finance
Department of Finance University of Delaware
University of Delaware
Newark, DE 19716
William R. Latham, III, 54............. Trustee Professor of Economics
Department of Economics University of Delaware
University of Delaware
Newark, DE 19716
James B. O'Neill, 60................... Trustee Professor of Economics
Center for Economic University of Delaware
Education and
Entrepreneurship
University of Delaware
Newark, DE 19716
</TABLE>
Salomon Smith Barney will pay each Trustee who is not a director, officer or
employee of either the underwriters or the Administrator, or of any affiliate
thereof, in respect of his annual fee and anticipated out-of-pocket expenses, a
one-time, up-front fee of $10,800 in the aggregate. The trust's Managing
Trustee will also receive an additional up-front fee of $3,600 in the aggregate
for serving in that capacity. Except as otherwise noted, the sellers will
reimburse Salomon Smith Barney for any of these payments as part of the
expenses of the trust. The Trustees will not receive, either directly or
indirectly, any compensation, including any pension or retirement benefits,
from the trust. None of the Trustees receives any compensation for serving as a
trustee or director of any other affiliated investment company.
Administrator
The day-to-day affairs of the trust will be managed by The Bank of New York,
as Trust Administrator pursuant to an administration agreement. Under the
administration agreement, the Trustees have delegated most of their operational
duties to the Administrator, including without limitation, their duties to:
(1) receive invoices for and pay, or cause to be paid, all expenses
incurred by the trust;
(2) with the approval of the Trustees, engage legal and other professional
advisors (other than the independent public accountants for the trust);
(3) instruct the Paying Agent to pay distributions on DECS as described
herein;
(4) prepare and mail, file or publish all notices, proxies, reports, tax
returns and other communications and documents, and keep all books and
records, for the trust;
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<PAGE>
(5) at the direction of the Trustees, institute and prosecute legal and
other appropriate proceedings to enforce the rights and remedies of the
trust; and
(6) make all necessary arrangements with respect to meetings of Trustees
and any meetings of holders of DECS.
The Administrator will not, however, select the independent public accountants
for the trust or sell or otherwise dispose of the trust's assets (except in
connection with an acceleration of a prepaid forward contract, or the
settlement of the prepaid forward contracts at the Exchange Date, and upon
termination of the trust).
Either the trust or the Administrator may terminate the Administration
Agreement upon 60 days' prior written notice, except that no termination shall
become effective until a successor Administrator has been chosen and has
accepted the duties of the Administrator.
Except for its roles as Administrator, Custodian, paying agent, registrar
and transfer agent of the trust, and except for its role as Collateral Agent
under the Collateral Agreements, The Bank of New York has no other affiliation
with, and is not engaged in any other transactions with, the trust.
The address of the Administrator is 101 Barclay Street, New York, New York
10286.
Custodian
The trust's custodian (the "Custodian") is The Bank of New York pursuant to
a custodian agreement. In the event of any termination of the custodian
agreement by the trust or the resignation of the Custodian, the trust must
engage a new Custodian to carry out the duties of the Custodian as set forth in
the custodian agreement. Pursuant to the custodian agreement, the Custodian
will invest all net cash received by the trust in short-term U.S. Government
securities maturing on or shortly before the next quarterly distribution date.
The Custodian will also act as Collateral Agent under the Collateral Agreements
and will hold a perfected security interest in the Common Stock and U.S.
Government obligations or other assets consistent with the terms of the prepaid
forward contracts.
Paying Agent
The transfer agent, registrar and paying agent (the "Paying Agent") for the
DECS is The Bank of New York pursuant to a paying agent agreement. In the event
of any termination of the paying agent agreement by the trust or the
resignation of the Paying Agent, the trust will use its best efforts to engage
a new Paying Agent to carry out the duties of the Paying Agent.
Indemnification
The trust will indemnify each Trustee, the Administrator, the Custodian and
the Paying Agent with respect to any claim, liability, loss or expense
(including the costs and expenses of the defense against any claim or
liability) which it may incur in acting as Trustee, Administrator, Custodian or
Paying Agent, as the case may be, except in the case of willful misfeasance,
bad faith, gross negligence or reckless disregard of their respective duties or
where applicable law prohibits such indemnification. Salomon Smith Barney has
agreed to reimburse the trust for any amounts it may be required to pay as
indemnification to any Trustee, the Administrator, the Custodian or the Paying
Agent. Except as otherwise noted, the sellers in turn will reimburse Salomon
Smith Barney for all such reimbursements paid by it as part of the expenses of
the trust.
Distributions
The trust intends to distribute to investors on a quarterly basis the
proceeds of the Treasury Securities held by the trust. The first distribution,
reflecting the trust's operations from the date of this offering, will be made
on November 15, 1999 to owners of record as of November 1, 1999. Thereafter,
the trust will make
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<PAGE>
distributions on February 15, May 15, August 15 and November 15 or, if any such
date is not a Business Day, on the next succeeding Business Day, of each year
to owners of record as of each February 1 , May 1, August 1 and November 1,
respectively. A portion of each such distribution should be treated as a tax-
free return of the investor's investment. See "Investment Objective and
Policies--Trust Assets" and "Certain United States Federal Income Tax
Considerations." If any prepaid forward contract is accelerated as described in
"Investment Objectives and Policies--The Forward Contracts--Collateral
Requirements of the Contract; Acceleration," each investor will receive its pro
rata share of the proceeds from the acceleration of that prepaid forward
contract and from the liquidation of a proportionate share of the Treasury
Securities then held in the trust. Upon termination of the trust as described
in "Investment Objectives and Policies--Trust Termination," each investor will
receive its pro rata share of any remaining net assets of the trust.
The trust does not permit the reinvestment of distributions.
Estimated Expenses
At the closing of this offering, Salomon Smith Barney will pay to each of
the Administrator, the Custodian and the Paying Agent, and to each Trustee, a
one-time, up-front amount in respect of such party's ongoing fees and, in the
case of the Administrator, anticipated expenses of the trust over the term of
the trust. The anticipated trust expenses to be borne by the Administrator
include, among other things, expenses for legal and independent accountants'
services, costs of printing proxies, DECS certificates and investor reports,
expenses of the trustees, fidelity bond coverage, stock exchange listing fees
and expenses of qualifying the DECS for sale in the various states. The one-
time, up-front payments described above total approximately $300,000. Salomon
Smith Barney also will pay estimated organization costs of the trust in the
amount of $11,000 and estimated costs of the trust in connection with the
initial registration and public offering of the DECS in the amount of
approximately $314,000 at the closing of the offering.
The amount payable to the Administrator in respect of ongoing expenses of
the trust was determined based on estimates made in good faith on the basis of
information currently available to the trust, including estimates furnished by
the trust's agents. Actual operating expenses of the trust may be substantially
more than this amount. Any additional expenses will be paid by Salomon Smith
Barney or, in the event of its failure to pay such amounts, the sellers, or, in
the event of the failure of either of Salomon Smith Barney, or the sellers to
pay such amounts, the trust. The sellers will reimburse Salomon Smith Barney
for certain expenses of the trust paid by it.
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<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the principal U.S. federal income tax
consequences that may be relevant to an owner of a DECS that is a "U.S.
Holder." A DECS owner will be treated as a U.S. Holder for U.S. federal income
tax purposes if the owner is:
. an individual who is a citizen or resident of the United States,
. a U.S. domestic corporation, or
. any other person that is subject to U.S. federal income taxation on a
net income basis in respect of its investment in DECS.
This summary is based on the U.S. federal income tax laws, regulations,
rulings and decisions now in effect, all of which are subject to change,
possibly on a retroactive basis. Except to the extent discussed below under
"Non-U.S. Holders," this summary applies only to U.S. Holders that will hold
DECS as capital assets, and only if the investor purchased the DECS in their
initial offering. This summary does not address all aspects of U.S. federal
income taxation that may be relevant to an investor in light of the investor's
individual investment circumstances, and does not address tax considerations
applicable to investors that may be subject to special tax rules, such as
dealers in securities or foreign currencies, traders in securities or
commodities electing to mark to market, financial institutions, insurance
companies, tax-exempt organizations, persons that will hold DECS as a position
in a "straddle" for tax purposes or as a part of a "synthetic security" or a
"conversion transaction" or other integrated investment comprised of a DECS and
one or more other investments, or persons that have a functional currency other
than the U.S. dollar.
This summary does not include any description of the tax laws of any state
or local governments or of any foreign government that may be applicable to the
DECS or to the owners thereof. It also does not discuss the tax consequences of
the ownership of the Common Stock or Reported Securities. Investors should
consult their own tax advisors in determining the tax consequences to them of
holding DECS, including the application to their particular situation of the
U.S. federal income tax considerations discussed below, as well as the
application of state, local or other tax laws.
There are no regulations, published rulings or judicial decisions addressing
the characterization for federal income tax purposes of securities with terms
substantially the same as the DECS. Pursuant to the terms of the Declaration of
Trust, the trust and every holder of the DECS agree to treat a DECS for U.S.
federal income tax purposes as a beneficial interest in a trust that holds
zero-coupon U.S. Treasury securities and the prepaid forward contracts. The
trust intends to report holders' income to the Internal Revenue Service in
accordance with this treatment. In addition, pursuant to the terms of the
prepaid forward contracts and the Declaration of Trust, the sellers, the trust
and every holder of a DECS will be obligated (in the absence of an
administrative determination or judicial ruling to the contrary) to
characterize the prepaid forward contracts for all tax purposes as forward
purchase contracts to purchase Common Stock at the Exchange Date (including as
a result of acceleration or otherwise), under the terms of which contract:
(a) at the time of issuance of the DECS the holder is required to deposit
irrevocably with the sellers a fixed amount of cash equal to the
purchase price of the DECS, less the purchase price of the Treasury
Securities, to assure the fulfillment of the obligation described in
clause (b) below, and
(b) at Maturity such cash deposit unconditionally and irrevocably will be
applied by the sellers in full satisfaction of the holder's payment
obligation under the forward contracts, and the sellers will deliver
to the holder the number of shares of Common Stock that the holder is
entitled to receive at that time pursuant to the terms of the DECS
(subject to the right of each seller to deliver cash in lieu of the
Common Stock).
Under this approach, the tax consequences of holding a DECS will be as
described below. However, prospective investors in the DECS should be aware
that no ruling is being requested from the Internal Revenue
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Service with regard to the DECS and that the Internal Revenue Service might
take a different view as to the proper characterization of the DECS or of the
prepaid forward contracts and of the tax consequences to an investor.
Tax Status of the Trust
The trust will be taxable as a grantor trust owned solely by the present and
future holders of DECS for federal income tax purposes, and income received by
the trust will be treated as income of the holders in the manner set forth
below.
Tax Consequences to U.S. Holders
Tax Basis of the Treasury Securities and the Forward Contracts. Each
investor will be considered to be the owner of its pro rata portion of the
Treasury Securities and the prepaid forward contracts in the trust. The cost to
the investor of the DECS will be allocated among the investor's pro rata
portion of the Treasury Securities and the prepaid forward contracts (in
proportion to the fair market values thereof on the date on which the investor
acquired the DECS) in order to determine the investor's tax basis in its pro
rata portion of the Treasury Securities and the prepaid forward contracts. It
is currently anticipated that 20% and 80% of the net proceeds of the offering
will be used by the trust to purchase the Treasury Securities and as a payment
to the sellers under the prepaid forward contracts, respectively.
Recognition of Original Issue Discount on the Treasury Securities. The
Treasury Securities in the trust will consist of zero-coupon U.S. Treasury
securities. An investor will be required to treat its pro rata portion of each
Treasury Security in the trust as a bond that was originally issued on the date
the investor purchased its DECS and at an original issue discount equal to the
excess of the investor's pro rata portion of the amounts payable on such
Treasury Security over the investor's tax basis for the Treasury Security as
discussed above. The investor (whether on the cash or accrual method of tax
accounting) is required to include original issue discount (other than original
issue discount on short-term Treasury Securities as described below) in income
for federal income tax purposes as it accrues, in accordance with a constant
yield method, prior to the receipt of cash attributable to such income. Because
it is expected that more than 20% of the holders of DECS will be accrual basis
taxpayers, the investor will be required to include in income original issue
discount on any short-term Treasury Security (i.e., any Treasury Security with
a maturity of one year or less from the date it is purchased) held by the trust
as that original issue discount accrues. Unless an investor elects to accrue
the original issue discount on a short-term Treasury Security according to a
constant yield method based on daily compounding, the original issue discount
will be accrued on a straight-line basis. The investor's tax basis in a
Treasury Security will be increased by the amount of any original issue
discount included in income by the investor with respect to such Treasury
Security.
Treatment of the Forward Contracts. Each investor will be treated as having
entered into a pro rata portion of the prepaid forward contracts and, at the
Exchange Date, as having received a pro rata portion of the Common Stock (or
cash, Reported Securities or combination thereof) delivered to the trust. Under
existing law, an investor will not recognize income, gain or loss upon entry
into the prepaid forward contracts. An investor should not be required under
existing law to include in income additional amounts over the term of the
prepaid forward contracts. See "--Possible Alternative Treatment," below,
however.
Each of two sellers under two of the contracts representing in the aggregate
938,823 shares of Common Stock (plus up to an additional 644,995 shares of
Common Stock if the underwriters' overallotment option is exercised in full) is
a limited liability company ("LLC") which in turn is wholly-owned by a grantor
retained annuity trust (each, a "GRAT"). Under the terms of the GRATs, the
GRATs will terminate on March 10, 2001 and the trust estate will be distributed
at that time among several newly created trusts that will have different terms,
beneficiaries and trustees. It is possible that when the GRATs terminate an
investor would be treated as if it had exchanged its pro rata portion of the
prepaid forward contracts issued by the LLCs for a pro rata portion of new
prepaid forward contracts in a taxable exchange. In such a case, an investor
would recognize
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gain equal to the difference between the value of its pro rata share of the
prepaid forward contracts issued by such LLCs at the time of the deemed
exchange and the investor's basis in such pro rata share. The investor's basis
in each new prepaid forward contract would be equal to the value of the
contract at the time of the deemed exchange and the investor's holding period
in the new prepaid forward contract would begin on the date after the deemed
exchange. Gain on the deemed exchange would be long-term capital gain if the
investor had held the DECS for more than one year at the time of the deemed
exchange.
Sale of the DECS. Upon a sale of all or some of an investor's DECS, an
investor will be treated as having sold its pro rata portion of the Treasury
Securities and prepaid forward contracts underlying the DECS. The selling
investor will recognize gain or loss equal to the difference between the amount
realized and the investor's aggregate tax bases in its pro rata portion of the
Treasury Securities and the prepaid forward contracts. Any gain or loss
generally will be long-term capital gain or loss if the investor has held the
DECS for more than one year. If there has been a deemed exchange with respect
to the forward contracts issued by the LLCs, any gain or loss with respect to
the investor's pro rata portion of such contracts will be long-term capital
gain if the investor has held the DECS for more than one year after the deemed
exchange. The distinction between capital gain or loss and ordinary income or
loss is important for purposes of the limitations on an investor's ability to
offset capital losses against ordinary income. In addition, individuals
generally are subject to taxation at a reduced rate on long-term capital gains.
Distribution of the Common Stock. The delivery of Common Stock to the trust
pursuant to the prepaid forward contracts will not be taxable to the investors.
The distribution of Common Stock upon the termination of the trust will not be
taxable to the investors. An investor will have taxable gain or loss (which
will be short-term capital gain or loss) upon receipt of cash in lieu of
fractional shares of Common Stock distributed upon termination of the trust, in
an amount equal to the difference between the cash received and the portion of
the basis of the prepaid forward contracts allocable to fractional shares
(based on the relative number of fractional shares and full shares delivered to
the investor). Each investor's aggregate basis in its shares of Common Stock
will be equal to its basis in its pro rata portion of the prepaid forward
contracts less the portion of such basis allocable to any fractional shares of
Common Stock for which cash is received.
Distribution of Cash. If an investor receives cash upon dissolution of the
trust or as a result of a seller's election to deliver cash, the investor will
recognize capital gain or loss equal to any difference between the amount of
cash received and its tax basis in the DECS at that time. Such gain or loss
generally will be long-term capital gain or loss if the investor has held the
DECS for more than one year at the Exchange Date. If there has been a deemed
exchange with respect to the forward contracts issued by the LLCs, any gain or
loss with respect to the investor's pro rata portion of such contracts will be
long-term capital gain if the investor has held the DECS for more than one year
after the deemed exchange.
Distribution of Cash or Reported Securities as a Result of an Adjustment
Event. If as a result of an Adjustment Event, cash, Reported Securities, or a
combination of cash and Reported Securities is delivered pursuant to the
prepaid forward contracts, an investor will have taxable gain or loss upon
receipt equal to the difference between the amount of cash received, including
cash received in lieu of fractional Reported Securities, and its basis in its
pro rata portion of the prepaid forward contracts allocable to any shares of
Common Stock for which such cash or fractional Reported Securities were
received. In addition, if as a result of an Adjustment Event the Custodian
liquidates Treasury Securities, an investor will have taxable gain or loss upon
receipt of cash allocable to the liquidated Treasury Securities equal to the
difference between the amount of such cash and the investor's basis in its pro
rata portion of the Treasury Securities. Any gain or loss will be capital gain
or loss, and if the investor has held the DECS for more than one year, such
gain or loss generally will be long-term capital gain or loss. If there has
been a deemed exchange with respect to the forward contracts issued by the
LLCs, any gain or loss with respect to the investor's pro rata portion of such
contracts will be long-term capital gain if the investor has held the DECS for
more than one year after the deemed exchange. An investor's basis in any
Reported Securities received will be equal to its basis in its pro rata portion
of the prepaid forward contracts less the portion of such basis allocable to
any shares of Common Stock for which cash or fractional Reported Securities
were received. See "Investment Objectives and Policies--The Forward Contracts."
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Extension of Exchange Date. While not free from doubt, an extension of the
Exchange Date under a prepaid forward contract should not be a taxable event
and an investor therefore should not recognize gain upon such an extension.
Although there is no authority addressing the treatment of the cash
distribution paid on the extended Exchange Date (whether or not later
accelerated), the trust intends to file information returns with the Internal
Revenue Service on the basis that the cash distribution is ordinary income to
the investors. Investors should consult their own tax advisors concerning the
consequences of extending the Exchange Date, including the possibility that an
investor may be treated as realizing gain as a result of the extension and the
possibility that the cash distribution may be treated as a reduction in an
investor's tax basis in the DECS by analogy to the treatment of rebates or of
option premiums.
Possible Alternative Treatment. The Internal Revenue Service may contend
that a DECS should be characterized for federal income tax purposes in a manner
different from the approach described above. For example, the Internal Revenue
Service might assert that the prepaid forward contracts should be treated as
contingent debt obligations of the sellers that are subject to Treasury
regulations governing contingent payment debt instruments. If the Internal
Revenue Service were to prevail in making such an assertion, original issue
discount would accrue with respect to the prepaid forward contracts at a
"comparable yield" for the sellers under the prepaid forward contracts,
determined at the time the prepaid forward contracts are entered into. An
investor's pro rata portion of original issue discount in respect of the
prepaid forward contracts and original issue discount in respect of the
Treasury Securities might exceed the aggregate amount of the quarterly cash
distributions to the investor. In addition, under this treatment, the investor
would be required to treat any gain realized on the sale, exchange or
redemption of the DECS as ordinary income to the extent that such gain is
allocable to the prepaid forward contracts. Any loss realized on such sale,
exchange or redemption that is allocable to the prepaid forward contracts would
be treated as an ordinary loss to the extent of the investor's original issue
discount inclusions with respect to the prepaid forward contracts, and as
capital loss to the extent of loss in excess of such inclusions. It is also
possible that the Internal Revenue Service could take the view that an investor
should include in income the amount of cash actually received each year in
respect of the DECS, or that the DECS as a whole constitute a contingent
payment debt instrument subject to the rules described above.
Fees and Expenses of the Trust. An investor's pro rata portion of the
expenses in connection with the organization of the trust, underwriting
discounts and commissions and other offering expenses should be includible in
the cost to the owner of the DECS. However, there can be no assurance that the
Internal Revenue Service will not take a contrary view. If the Internal Revenue
Service were to prevail in treating such expenses as excludable from the
investor's cost of the DECS, such expenses would not be includible in the basis
of the assets of the trust and should instead be amortizable and deductible
over the term of the trust. If such expenses were treated as amortizable and
deductible, an individual investor who itemizes deductions would be entitled to
amortize and deduct (subject to any other applicable limitations on itemized
deductions) such expenses over the term of the trust only to the extent that
such amortized annual expenses together with the investor's other miscellaneous
deductions exceed 2% of such investor's adjusted gross income.
Proposed Legislation. Proposed legislation currently under consideration in
Congress would (if enacted into law in its current form) recharacterize some or
all of the net long-term capital gain arising from certain "constructive
ownership" transactions entered into after July 11, 1999 as ordinary income,
and would impose an interest charge on any such ordinary income. The proposed
legislation would have no immediate application to forward contracts in respect
of the stock of a domestic operating company, including the DECS transaction.
The proposed legislation would, however, grant discretionary authority to the
U.S. Treasury Department to promulgate regulations to expand the scope of
"constructive ownership" transactions to include forward contracts in respect
of the stock of all corporations. The proposed legislation separately would
direct the Treasury to promulgate regulations excluding from the scope of the
legislation a forward contract that does not convey "substantially all" of the
economic return on an underlying asset (which category may include the DECS
transaction). It is not possible to predict whether legislation addressing
constructive ownership transactions will be enacted by Congress, the form or
effective date of any such legislation, or the form or effective date that any
Treasury regulations promulgated thereunder might take.
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Non-U.S. Holders
In the case of an investor that is a non-resident alien individual or
foreign corporation (a "Non-U.S. Holder"), payments made with respect to the
DECS should not be subject to U.S. withholding tax, provided that the investor
complies with applicable certification requirements (including in general the
furnishing of an Internal Revenue Service Form W-8 or a substitute form). Any
capital gain realized upon the sale or other disposition of the DECS by a Non-
U.S. Holder generally will not be subject to U.S. federal income tax if
(a) such gain is not effectively connected with a U.S. trade or business and
(b) in the case of an individual, (i) the individual is not present in the
United States for 183 days or more in the taxable year of the sale or other
disposition, and (ii) the gain is not attributable to a fixed place of business
maintained by the individual in the United States.
A Non-U.S. Holder of the DECS that is subject to U.S. federal income
taxation on a net income basis with respect to the DECS should see the
discussion in "--Tax Consequences to U.S. Holders."
Backup Withholding Tax and Information Reporting
An investor in a DECS may be subject to information reporting and to backup
withholding tax at a rate of 31 percent of certain amounts paid to the investor
unless the investor (a) is a corporation or comes within certain other exempt
categories and, when required, provides proof of such exemption or (b) provides
a correct taxpayer identification number, certifies as to no loss of exemption
from backup withholding tax and otherwise complies with applicable requirements
of the backup withholding tax rules. Information reporting and backup
withholding tax will not apply to payments made to an owner of a DECS that is a
Non-U.S. Holder if such owner (a) is the beneficial owner of the DECS and
certifies as to its non-U.S. status, (b) is not the beneficial owner of the
DECS, but the beneficial owner of the DECS certifies as to its non-U.S. status,
or (c) otherwise establishes an exemption, provided that the trust or its agent
does not have actual knowledge that the investor or the beneficial owner is a
U.S. person.
Payment of the proceeds from the sale of a DECS to or through a foreign
office of a broker will not be subject to information reporting or backup
withholding tax, except that if the broker is (1) a U.S. person for U.S.
federal income tax purposes, (2) a controlled foreign corporation for U.S. tax
purposes, (3) a foreign person 50 percent or more of whose gross income from
all sources for the three-year period ending with the close of its taxable year
preceding the payment was effectively connected with a U.S. trade or business
or (4) with respect to payments made after December 31, 2000, a foreign
partnership that, at any time during its taxable year is 50% or more (by income
or capital interest) owned by U.S. persons or is engaged in the conduct of U.S.
trade or business, information reporting may apply to such payments. Payment of
the proceeds from a sale of a DECS to or through the U.S. office of a broker is
subject to information reporting and backup withholding tax unless the investor
or beneficial owner certifies as to its non-U.S. status or otherwise
establishes an exemption from information reporting and backup withholding.
Any amounts withheld under the backup withholding tax rules are not an
additional tax and may be credited against a U.S. Holder's U.S. federal income
tax liability, provided that the required information is furnished to the
Internal Revenue Service.
Recently issued Treasury regulations may change the certification procedures
relating to withholding and backup withholding on certain amounts paid to Non-
U.S. Holders after December 31, 2000. Prospective investors should consult
their tax advisors regarding the effect, if any, of such new Treasury
regulations on an investment in the DECS.
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UNDERWRITING
Subject to the terms and conditions stated in the underwriting agreement
dated the date hereof, each underwriter named below has severally agreed to
purchase, and the trust has agreed to sell to such underwriter, the number of
DECS set forth opposite the name of such underwriter.
<TABLE>
<CAPTION>
Name Number of DECS
---- --------------
<S> <C>
Salomon Smith Barney Inc................................... 2,500,000
Goldman, Sachs & Co........................................ 2,500,000
---------
Total.................................................... 5,000,000
=========
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the DECS included in this offering are subject to
approval of certain legal matters by counsel and to certain other conditions.
The underwriters are obligated to purchase all the DECS (other than those
covered by the over-allotment option described below) if they purchase any of
the DECS.
The underwriters, for whom Salomon Smith Barney Inc. and Goldman, Sachs &
Co. are acting as representatives, propose to offer some of the DECS directly
to the public at the public offering price set forth on the cover page of this
prospectus and some of the DECS to certain dealers at the public offering price
less a concession not in excess of $0.35 per DECS. The underwriters may allow,
and such dealers may reallow, a concession not in excess of $0.10 per DECS on
sales to certain other dealers. After the initial offering of the DECS to the
public, the public offering price and such concessions may be changed by the
representatives. The sales load of $0.57 per DECS is equal to 3% of the initial
public offering price.
The underwriting agreement provides that the sellers will pay to the
underwriters $0.57 per DECS as compensation for underwriting the DECS. As
described under "Fees and Expenses," the sellers will reimburse Salomon Smith
Barney Inc. on the closing date for certain expenses incurred in establishing
the trust and registering the DECS, except that Salomon Smith Barney Inc. and
Goldman, Sachs & Co. have agreed to bear the first $500,000 of such expenses.
The trust has granted to the underwriters an option, exercisable for 30 days
from the date of this prospectus, to purchase up to 644,995 additional DECS at
the same price per DECS as the initial DECS purchased by the underwriters. The
underwriters may exercise such option solely for the purpose of covering over-
allotments, if any, in connection with this offering. To the extent such option
is exercised, each underwriter will be obligated, subject to certain
conditions, to purchase a number of additional DECS approximately proportionate
to such underwriter's initial purchase commitment. In addition, Salomon Smith
Barney purchased five DECS in connection with the organization of the trust.
Crown Castle, its executive officers and the sellers have agreed that, for a
period of 45 days from the date of this prospectus, they will not, without the
prior written consent of Salomon Smith Barney Inc., as representative of the
underwriters, offer, sell, contract to sell, or otherwise dispose of, any
shares of common stock of Crown Castle or any securities convertible into, or
exercisable or exchangeable for, common stock. Salomon Smith Barney Inc. in its
sole discretion may release any of the securities subject to these lock-up
agreements at any time without notice. However, this agreement will not
restrict the ability of Crown Castle and the sellers to take any of the actions
listed above in connection with the offering by the trust of the DECS or any
delivery of shares of Crown Castle common stock pursuant to the terms of the
DECS.
The DECS will be a new issue of securities with no established trading
market. The trust has applied to have the DECS approved for listing on the
Nasdaq National Market under the symbol "TWDE ." The underwriters intend to
make a market in the DECS, subject to applicable laws and regulations. However,
the underwriters are not obligated to do so and any such market-making may be
discontinued at any time at the sole discretion of the underwriters without
notice. Accordingly, no assurance can be given as to the liquidity of such
market.
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<PAGE>
In connection with the formation of the trust, Salomon Smith Barney Inc.
subscribed for and purchased five DECS for a purchase price of $100. Under the
prepaid forward contracts, the sellers will be obligated to deliver to the
trust Crown Castle common stock in respect of such DECS on the same terms as
the DECS offered hereby. Salomon Smith Barney Inc. sponsored the formation of
the trust for purposes of this offering, including selecting its initial
Trustees.
Pursuant to the prepaid forward contracts, the trust has agreed, subject to
the terms and conditions set forth therein, to purchase from the sellers a
number of shares of Crown Castle common stock equal to the total number of DECS
to be purchased by the Underwriters from the trust pursuant to the underwriting
agreement (including any DECS to be purchased by the Underwriters upon exercise
of the over-allotment option plus the number of DECS purchased by Salomon Smith
Barney Inc. in connection with the organization of the trust). Pursuant to the
terms of the prepaid forward contracts, each seller will deliver to the trust
at the Exchange Date a number of shares of Crown Castle common stock (or, at
the option of each seller, the cash equivalent) and/or such other consideration
as permitted or required by the terms of the prepaid forward contracts, that
are expected to have the same value as the shares of Crown Castle common stock
delivered pursuant to the DECS. The closing of the offering of the DECS is
conditioned upon execution of the prepaid forward contracts by the sellers and
the trust.
In connection with the DECS offering, the underwriters may over-allot, or
engage in syndicate covering transactions, stabilizing transactions and penalty
bids. Over-allotment involves syndicate sales of DECS or Crown Castle common
stock in excess of the number of DECS to be purchased by the underwriters in
the offering, which creates a syndicate short position. Syndicate covering
transactions involve purchases of the DECS or the Crown Castle common stock in
the open market after the distribution has been completed in order to cover
syndicate short positions. Stabilizing transactions consist of certain bids or
purchases of DECS or common stock made for the purpose of preventing or
retarding a decline in the market price of the DECS or common stock while the
offering is in progress. Penalty bids permit the underwriters to reclaim a
selling concession from a syndicate member when Salomon Smith Barney Inc. or
Goldman, Sachs & Co., in covering syndicate short positions or making
stabilizing purchases, repurchase DECS or common stock originally sold by the
syndicate member. These activities may cause the price of DECS or common stock
to be higher than the price that otherwise would exist in the open market in
the absence of such transactions. These transactions may be effected on the
Nasdaq National Market or in the over-the-counter market, or otherwise and, if
commenced, may be discontinued at any time.
In addition, in connection with this offering, certain of the underwriters
(and selling group members) may engage in passive market making transactions in
the DECS or common stock on the Nasdaq National Market, prior to the pricing
and completion of the DECS offering. Passive market making consists of
displaying bids on the Nasdaq National Market no higher than the bid prices of
independent market makers and making purchases at prices no higher than those
independent bids and effected in response to order flow. Net purchases by a
passive market maker on each day are limited to a specified percentage of the
passive market maker's average daily trading volume in the common stock during
a specified period and must be discontinued when such limit is reached. Passive
market making may cause the price of the common stock to be higher than the
price that otherwise would exist in the open market in the absence of such
transactions. If passive market making is commenced, it may be discontinued at
any time.
The underwriters have performed certain investment banking and advisory
services for Crown Castle from time to time for which they have received
customary fees and expenses. The underwriters may, from time to time, engage in
transactions with and perform services for Crown Castle in the ordinary course
of its business.
Crown Castle and the sellers have agreed to indemnify the underwriters
against certain liabilities, including liabilities under the Securities Act of
1933, or to contribute to payments the underwriters may be required to make in
respect of any of those liabilities. Crown Castle has agreed to pay $750,000 on
behalf of the sellers in respect of fees, expenses and other compensation in
connection with the DECS offering.
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<PAGE>
LEGAL MATTERS
Certain legal matters will be passed upon for the trust and the underwriters
by Cleary, Gottlieb, Steen & Hamilton, New York, New York. Certain matters of
Delaware law will be passed upon for the trust by Richards, Layton & Finger,
Wilmington, Delaware. Certain legal matters will be passed upon for the sellers
by Kirkpatrick & Lockhart LLP.
EXPERTS
The statement of assets, liabilities and capital included in this prospectus
has been audited by PricewaterhouseCoopers LLP, independent auditors, as stated
in their report appearing herein, and is included in reliance upon the report
of such firm given upon their authority as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
The trust has filed a registration statement for the DECS with the SEC.
Information about the DECS and the trust may be found in that registration
statement. You may read and copy the registration statement at the public
reference facilities of the SEC in Washington, D.C., Chicago, Illinois and New
York, New York. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. The Registration Statement is also available to
the public from the SEC's web site at http:\\www.sec.gov.
39
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustee and Securityholders
of DECS Trust V:
In our opinion, the accompanying statement of assets and liabilities
presents fairly, in all material respects, the financial position of DECS Trust
V (the "Trust") as of August 5, 1999, in conformity with generally accepted
accounting principles. 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 of this
financial statement in accordance with generally accepted auditing standards
which 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, assessing the
accounting principles used and significant estimates made by the Trust's
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
New York, New York
August 5, 1999
40
<PAGE>
DECS TRUST V
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
August 5, 1999
<TABLE>
<S> <C>
ASSETS
Cash...................................................................... $100
----
Total Assets.............................................................. $100
====
LIABILITIES
Total Liabilities......................................................... $
----
NET ASSETS................................................................ $100
====
CAPITAL
DECS, 1 DECS issued and outstanding....................................... $100
====
</TABLE>
The accompanying notes are an integral part of this statement.
41
<PAGE>
DECS TRUST V
NOTES TO STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
August 5, 1999
I. Organization
DECS Trust V, organized as a Delaware business trust on April 22, 1999, is a
closed-end management investment company registered under the Investment
Company Act of 1940. The term of the trust is anticipated to expire in the year
2002; however, the exact date will be determined in the future. The trust may
be dissolved prior to its planned termination date under certain circumstances
as outlined in the registration statement.
The trust has registered 5,645,000 DECS representing shares of beneficial
interest in the trust. The only securities that the trust is authorized to
issue are the DECS. Each of the DECS represents the right to receive
(a) quarterly distributions during the term of the trust, and (b) upon the
conclusion of the term of the trust (the "Exchange Date"), certain shares of
common stock (the "Common Stock") or cash with an equivalent value (such
amounts determined as described in the registration statement). The DECS are
not subject to redemption prior to the Exchange Date or the earlier termination
of the trust. The trust will hold a series of zero-coupon U.S. Treasury
securities and one or more prepaid forward contracts relating to the Common
Stock. The business activities of the trust are limited to the matters
discussed above. The trust will be treated as a grantor trust for U.S. federal
income tax purposes.
On August 4, 1999, the trust issued one DECS to Salomon Smith Barney Inc. in
consideration for a purchase price of $100.
II. Organizational Costs, Fees and Expenses
Organizational costs and ongoing fees of the trust will be borne by Salomon
Smith Barney Inc.
III. Management and Administration of Trust
The internal operation of the trust will be managed by its trustees; the
trust will not have a separate investment adviser. The trust will be overseen
by three trustees, and its daily administration will be carried out by The Bank
of New York as the administrator. The Bank of New York will also serve as the
trust's custodian, paying agent, registrar and transfer agent with respect to
the DECS.
42
<PAGE>
5,000,000 DECS/SM/
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DECS TRUST V
(Subject to Exchange into Common Stock of Crown Castle
International Corp.)
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PROSPECTUS
August 6, 1999
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Salomon Smith Barney
Goldman, Sachs & Co.
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