<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 10, 1999
SECURITIES ACT FILE NO. 333-89677
INVESTMENT COMPANY ACT FILE NO. 811-09647
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-2
[X] Registration Statement Under The Securities Act of 1933
[X] Pre-Effective Amendment No.2
[ ] Post-Effective Amendment No.
[X] Registration Statement Under The Investment Company Act of 1940
[X] Amendment No.2
DECS TRUST VI
(Exact Name of Registrant as Specified in Charter)
PUGLISI & ASSOCIATES
850 LIBRARY AVENUE
SUITE 204
NEWARK, DE 19715
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (212) 816-6000
DONALD J. PUGLISI
PUGLISI & ASSOCIATES
850 LIBRARY AVENUE
SUITE 204
NEWARK, DE 19715
(Name and Address of Agent for Service)
WITH COPIES TO
RAYMOND B. CHECK, ESQ.
CLEARY, GOTTLIEB, STEEN & HAMILTON
ONE LIBERTY PLAZA
NEW YORK, NEW YORK 10006
(212) 225-2000
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after
the effective date of this Registration Statement.
If any securities being registered on this form will be offered on a delayed
or continuous basis in reliance on Rule 415 under the Securities Act of 1933, as
amended, other than securities offered in connection with a dividend
reinvestment plan, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
PROPOSED
MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT BEING OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
BEING REGISTERED REGISTERED(1) PER DECS(2) PRICE(2) REGISTRATION FEE(3)
<S> <C> <C> <C> <C>
DECS representing shares of beneficial
interest............................. 11,500,000 DECS $35.00 $402,500,000 $111,895
</TABLE>
(1) Includes a total of 1,500,000 DECS that may be issued in connection with the
exercise of an over-allotment option.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) Previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
DECS TRUST V
CROSS-REFERENCE SHEET
PARTS A AND B OF PROSPECTUS*
<TABLE>
<CAPTION>
ITEM
NO. CAPTION PROSPECTUS CAPTION
- --------------------- ------- ------------------
<C> <S> <C>
1. Outside Front Cover......................................... Front Cover Page
2. Inside Front and Outside Back Cover Page.................... Front Cover Page; Inside Front Cover Page
3. Fee Table and Synopsis...................................... Prospectus Summary; Fees and Expenses
4. Financial Highlights........................................ Not Applicable
5. Plan of Distribution........................................ Front Cover Page; Prospectus Summary;
Underwriting
6. Sellers Not Applicable...................................... Not Applicable
7. Use of Proceeds............................................. Use of Proceeds; Investment Objectives and
Policies
8. General Description of the Registrant....................... Front Cover Page; Prospectus Summary; The
Trust; Investment Restrictions; Investment
Objectives and Policies; Risk Factors for
DECS
9. Management.................................................. Management and Administration of the Trust
10. Capital Stock, Long-Term Debt and Other Securities; Federal
Income Tax Considerations................................... Description of DECS
11. Defaults and Arrears on Senior Securities................... Not Applicable
12. Legal Proceedings........................................... Not Applicable
13. Table of Contents of the Statement of Additional
Information................................................. Not Applicable
14. Cover Page.................................................. Not Applicable
15. Table of Contents........................................... Not Applicable
16. General Information and History............................. The Trust
17. Investment Objective and Policies........................... Investment Objectives and Policies;
Investment Restrictions
18. Management.................................................. Management and Administration of the Trust
19. Control Persons and Principal Holders of Management and
Administration of the Securities............................ Trust
20. Investment Advisory and Other Services...................... Management and Administration of the Trust
21. Brokerage Allocation and Other Practices.................... Investment Objectives and Policies
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM
NO. CAPTION PROSPECTUS CAPTION
- --------------------- ------- ------------------
<C> <S> <C>
22. Tax Status.................................................. Certain United States Federal Income Tax
Considerations
23. Financial Statements........................................ Statement of Assets, Liabilities and
Capital
</TABLE>
- ------------------------
* Pursuant to the General Instructions to Form N-2, all information required
to be set forth in Part B: Statement of Additional Information has been
included in Part A: The Prospectus. Information required to be included in
Part C is set forth under the appropriate item, so numbered, in Part C of
the N-2 Registration Statement.
<PAGE>
SUBJECT TO COMPLETION, DATED NOVEMBER 10, 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES, AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
PROSPECTUS
10,000,000 DECS(SM)
DECS TRUST VI
(SUBJECT TO EXCHANGE INTO CLASS A COMMON STOCK OF METROMEDIA FIBER NETWORK,
INC.)
---------------------
DECS Trust VI 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 three
prepaid forward contracts for the purchase of Metromedia Fiber Network, Inc.
class A common stock. For each DECS that you buy, you will receive a cash
distribution of $ on each , , and starting on
, 2000 and ending on , 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 three prepaid forward contracts, each of which will
entitle the trust to receive class A common stock, cash or a combination thereof
from one of three stockholders of Metromedia Fiber Network, Inc. We refer to
those three stockholders as the sellers. On or shortly after , 2002, each
seller will deliver, at its option, either cash or class A common stock or a
combination thereof to the trust. The trust will then deliver this cash and/or
class A common stock to you. Under the circumstances described in this
prospectus, each seller will have the option to deliver cash to the trust
between , 2002 and , 2003. After the trust has delivered to
you the cash and/or the class A common stock delivered to the trust by all of
the sellers, the trust will terminate. The amount of cash or number of shares of
class A common stock each seller will deliver and you will receive will depend
on the price of class A common stock shortly before the date the seller delivers
the cash or class A common stock to the trust. If the price of the class A
common stock is:
- more than $ per share, you will receive 0. shares of class A
common stock, or the cash equivalent, for each DECS you own.
- more than $ per share but less than or equal to $ per share, you
will receive
class A common stock worth $ , or the cash equivalent, for each DECS you
own.
- $ per share or less, you will receive one share of class A common
stock, or the cash equivalent, for each DECS you own.
The last reported sale price of class A common stock on November 9, 1999 was
$37 3/8 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 23.
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 $ $
Sales Load $ -- $ --
Proceeds to the trust before expenses $ $
</TABLE>
The underwriters are offering the DECS subject to various conditions. The
underwriters expect to deliver the DECS to purchasers on , 1999.
------------------------
SALOMON SMITH BARNEY
CREDIT SUISSE FIRST BOSTON
DEUTSCHE BANC ALEXu BROWN
DONALDSON, LUFKIN & JENRETTE
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
November , 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........................................... 7
The Trust................................................... 8
Use of Proceeds............................................. 8
Investment Objectives and Policies.......................... 8
Investment Restrictions..................................... 22
Risk Factors for DECS....................................... 23
Net Asset Value............................................. 26
Description of the DECS..................................... 26
Management and Administration of the Trust.................. 28
Certain United States Federal Income Tax Considerations..... 31
Underwriting................................................ 36
Legal Matters............................................... 38
Experts..................................................... 38
Where You Can Find More Information......................... 38
Report of Independent Accountants........................... 39
Statement of Assets, Liabilities and Capital................ 40
</TABLE>
UNTIL , 1999, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS SECURITIES OFFERING, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION
TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTION.
------------------------
"DECS" IS A SERVICE MARK OF SALOMON SMITH BARNEY INC.
<PAGE>
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 VI is a recently created Delaware business trust. The trust will
terminate on or shortly after , 2002, which is referred to in this summary as
the "exchange date" because that is when the class A shares of Metromedia Fiber
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 class A 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 , 2003, 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 class A 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 $ per DECS, which is the same as the closing bid price of a
share of the class A common stock on The Nasdaq Stock Market's National Market
on , 1999. The underwriters also may purchase up to 1,500,000 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 the class A common stock, while
also giving you the chance to share in the increased value of class A common
stock if its price goes up. Metromedia Fiber does not currently pay dividends on
its common stock and has stated that it does not intend to do so, but in the
future Metromedia Fiber 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 the class A 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 $ per share shortly before the exchange date.
QUARTERLY DISTRIBUTIONS
For each DECS that you buy, you will receive a cash distribution of $ on
each , , and , starting on , 2000 and ending on
, 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. and 1.0 shares of class
A common stock for each DECS you own. Those amounts will be adjusted if
Metromedia Fiber 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 deliver cash to the trust instead
of shares of class A common stock. If a seller decides to deliver cash, you will
receive the cash value of the class A common stock you would have received under
that seller's contract instead of the shares themselves. If Metromedia Fiber
merges into
3
<PAGE>
another company or liquidates, you may receive shares of the other company or
cash instead of class A 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 class A 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 all or a
portion of the class A common stock subject to its contract 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 , 2003, 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 , 2003 will also have the option of
later accelerating the exchange date to between , 2002 and , 2003, 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 , 2002 and ending on the date the seller delivers the cash
value of the class A common stock under its prepaid forward contract.
VOTING RIGHTS
You will not have the right to vote any class A 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 class A common stock and/or cash
to the trust on the exchange date, which the trust will then distribute to
you
The U.S. treasury securities initially will represent approximately % of
the trust's assets and the prepaid forward contracts initially will represent
approximately %.
The trust's investment objective is to provide you with (1) a quarterly
distribution of $ per DECS over the term of the trust and (2) class A common
stock on the exchange date in an amount equal to:
- shares of class A common stock per DECS if the average price of
class A common stock shortly before the exchange date is more than $ per
share
- shares of class A common stock worth $ per DECS (the issue price of
the DECS) if the average price of class A common stock shortly before the
exchange date is more than $ per share but less than or equal to $
per share
- one share of class A common stock per DECS if the average price of class A
common stock shortly before the exchange date is $ or less per share
The trust will not deliver fractions of a share of class A common stock. If
you would receive a fraction of a share of class A common stock under this
formula (based on all DECS owned), you will receive cash instead.
4
<PAGE>
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 11,500,000 shares
of class A common stock on the exchange date for all of the contracts together.
The purchase price for the class A common stock under each prepaid forward
contract will be $ per share or $ in total for all of the contracts
together. The trust will pay the sellers the purchase price for the class A
common stock on the date the DECS are issued.
Each seller will secure its obligations to deliver class A common stock to
the trust on the exchange date by pledging stock to the trust on the date the
DECS are issued. During the term of the DECS, the sellers will have the right to
substitute U.S. treasury securities or other cash equivalents as collateral for
their pledged common stock.
Any seller electing to extend the exchange date under its contract to
, 2003 will secure its obligation to pay interest accruing during the
period beginning on , 2002 and ending on the extended (or accelerated)
exchange date by pledging U.S. treasury securities or other cash equivalents 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 class A 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 class A
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.
METROMEDIA FIBER
A prospectus and a prospectus supplement that describe Metromedia Fiber and
the class A common stock that you may receive are attached to this prospectus.
Metromedia Fiber is not affiliated with the trust, will not receive any of the
proceeds from the sale of the DECS by the trust and will not have any obligation
under the DECS or the prepaid forward contracts between the trust and the
sellers. The sellers did not prepare, and are not responsible for, the
Metromedia Fiber prospectus or prospectus supplement. The Metromedia Fiber
prospectus and prospectus supplement are attached to this prospectus only for
your convenience. The Metromedia Fiber 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 common stock or U.S. treasury
securities or other cash equivalents to the trust. The Bank of New York will not
have any other affiliation with the trust.
5
<PAGE>
TERM OF THE TRUST
The trust will terminate automatically on or shortly after the date on which
the trust distributes to you the class A 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 , 2002
or , 2003 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 class A
common stock during the term of the trust even if the value of class A
common stock declines or Metromedia Fiber's financial condition changes
for the worse.
- During the term of the trust, Metromedia Fiber 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 the class A
common stock between the closing date and the exchange date. The amount of
class A common stock or cash that you will receive on the exchange date is
not fixed, but is based on the market price of class A common stock
shortly before the exchange date. If the market price of class A 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 Metromedia Fiber
becomes bankrupt or insolvent, you could lose everything you paid for your
DECS.
- You will have less opportunity for gains if the value of the class A
common stock increases than you would have if you purchased the class A
common stock directly. You will realize a gain only if the value of the
class A common stock increases by approximately % between the closing
date and the exchange date, and then you will only receive % of the
increase in the class A common stock price above that level.
- Because the trust will determine the value of the class A 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.
- The trading price of the class A common stock will directly affect the
trading price of the DECS in the secondary market. The trading price of
class A common stock will be influenced by Metromedia Fiber'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 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
Stock Market's National Market under the symbol "MFDE." The class A common stock
is quoted on The Nasdaq Stock Market's National Market under the symbol "MFNX."
The last reported sale price of the class A common stock on November 10, 1999
was $37 3/8 per share.
6
<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 $ 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)............ %
===
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 % 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..................... $ $
</TABLE>
7
<PAGE>
THE TRUST
DECS Trust VI 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 October 22, 1999, pursuant to a Declaration
of Trust, dated as of October 22, 1999. The term of the trust will expire on or
shortly after , 2002, except that the trust may be dissolved prior
to such date under certain limited circumstances. The address of the trust is
c/o Puglisi & Associates, 850 Library Avenue, Suite 204, Newark, DE 19711
(telephone number: (302) 738-6600).
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 maturing quarterly during the
term of the trust and to pay the purchase price under each 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 $ 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 U.S. treasury securities held by the trust) and to
provide investors, on , 2002 or such later date not later than ,
2003 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 class A 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 class A 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 or banking institutions or trust companies in The City of
New York are authorized or obligated by law or executive order to close.
The "Exchange Rate" is equal to, subject to certain adjustments,
(a) if the Exchange Price (as defined below) is greater than $
(the "Threshold Appreciation Price"), shares of class A common
stock per DECS;
(b) if the Exchange Price is less than or equal to the Threshold
Appreciation Price but is greater than $ (the "Initial Price"), a
fraction, equal to the Initial Price divided by the Exchange Price, of
one share of class A common stock per DECS; and
(c) if the Exchange Price is less than or equal to the Initial Price, one
share of class A common stock per DECS.
Accordingly, the value of the class A common stock to be received by
investors (or, as discussed below, the cash equivalent to be received in lieu of
such class A common stock) at the Exchange Date will not necessarily equal the
Initial Price. The numbers of shares of class A 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 class A common stock delivered by the
trust to investors that are not affiliated with Metromedia Fiber will be free of
any transfer restrictions and the investors will be responsible for the payment
of all brokerage costs upon the subsequent sale of such shares. Investors
8
<PAGE>
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 below) or a
combination thereof, rather than (or in addition to) shares of class A 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 % 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 U.S. 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 such 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 class A 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 class A 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 the class A 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
9
<PAGE>
number of shares of class A 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 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
$ per DECS and the Threshold Appreciation Price of $ , an investor
would receive at the Exchange Date the following number of shares of class A
common stock or amount of cash (if all sellers exercise the Cash Delivery Option
for all of their shares of class A common stock) per DECS:
<TABLE>
<CAPTION>
EXCHANGE PRICE OF NUMBER OF SHARES OF
CLASS A CLASS A
COMMON STOCK COMMON STOCK AMOUNT OF CASH
- --------------------- ------------------- ---------------
<S> <C> <C>
</TABLE>
As the foregoing chart illustrates, if at the Exchange Date, the Exchange
Price is greater than $ , the trust will be obligated to deliver
shares of class A common stock per DECS, resulting in an investor receiving
only % of the appreciation in market value above $ . If at the Exchange
Date, the Exchange Price is greater than $ and less than or equal to
$ , the trust will be obligated to deliver only a fraction of a share of
class A common stock having a value at the Exchange Price equal to $ ,
resulting in an investor receiving none of the appreciation in market value. If
at the Exchange Date, the Exchange Price is less than or equal to $ , the
trust will be obligated to deliver one share of class A 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 class A common stock.
The following table sets forth information regarding the distributions to be
received on the U.S. 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 such
treasury securities with respect to an investor who acquires its DECS at the
initial public offering price from the underwriters in the original offering.
See "Certain United States Federal Income Tax Considerations."
<TABLE>
<CAPTION>
ANNUAL GROSS ANNUAL INCLUSION OF
ANNUAL GROSS DISTRIBUTIONS FROM ORIGINAL ISSUE
DISTRIBUTIONS FROM TREASURY SECURITIES ANNUAL RETURN PER DISCOUNT IN INCOME
TREASURY SECURITIES PER DECS DECS PER DECS
------------------- ------------------- ----------------- -------------------
<S> <C> <C> <C> <C>
2000........................ $ $ $ $
2001........................
2002........................
</TABLE>
The trust will pay the annual distribution of $ per DECS quarterly
on each , , and (or, if any such date is not a Business
Day, on the next succeeding Business Day), commencing , 2000. Quarterly
distributions on the DECS will consist solely of the cash received from the U.S.
treasury securities held by the trust. The trust will not be entitled to any
dividends that may be declared on the class A common stock.
10
<PAGE>
ENHANCED YIELD; LESS POTENTIAL FOR EQUITY APPRECIATION THAN CLASS A COMMON
STOCK; NO DEPRECIATION PROTECTION
The yield on the DECS is higher than the current dividend yield on the
class A 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 class A 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 class A common stock because the value of the class A common
stock to be received by owners of the DECS at the Exchange Date (the "Amount
Receivable at the Exchange Date") will generally exceed the Initial Price only
if the Exchange Price exceeds the Threshold Appreciation Price (which represents
an appreciation of % over the Initial Price) and because investors will be
entitled to receive at the Exchange Date only % (the percentage equal to the
Initial Price divided by the Threshold Appreciation Price) of any appreciation
of the value of the class A common stock in excess of the Threshold Appreciation
Price. Moreover, DECS investors will bear the entire decline in value if the
Exchange Price on the Exchange Date is less than the Initial Price.
Additionally, because the Exchange Price is generally determined based on a 20
Trading Day average, the value of a share of class A 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.
A prospectus and prospectus supplement that describe Metromedia Fiber and
the class A 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
class A 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 class A 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 class A common stock has been quoted on The Nasdaq Stock Market's
National Market under the symbol "MFNX" since October 29, 1997. The following
table sets forth, for the indicated periods, the high and low sales prices of
the class A common stock, as reported on The Nasdaq Stock Market's National
Market, giving effect to Metromedia Fiber's stock splits. Metromedia Fiber has
never paid cash dividends on the class A common stock and has stated that it
does not anticipate paying cash dividends on the class A common stock in the
foreseeable future. As of October 25, 1999, there were 361 record holders of the
class A common stock. Metromedia Fiber's fiscal year end is December 31.
<TABLE>
<CAPTION>
HIGH LOW
----------- -----------
<S> <C> <C>
Fiscal 1999 Fourth Quarter (through October 26, 1999)....... 38 3/8 23 3/4
Fiscal 1999 Third Quarter................................... 41 1/4 21 1/8
Fiscal 1999 Second Quarter.................................. 47 9/16 26 9/16
Fiscal 1999 First Quarter................................... 28 5/8 16 7/8
Fiscal 1998 Fourth Quarter.................................. 19 1/16 5 7/8
Fiscal 1998 Third Quarter................................... 9 1/16 4 7/32
Fiscal 1998 Second Quarter.................................. 5 29/32 3 3/16
Fiscal 1998 First Quarter................................... 5 7/16 1 59/64
</TABLE>
Metromedia Fiber 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 Metromedia Fiber
or the class A common stock. Metromedia Fiber has filed a registration statement
with the SEC with respect to the shares of class A 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
11
<PAGE>
of any of the prepaid forward contracts. The prospectus and prospectus
supplement of Metromedia Fiber constituting a part of such registration
statement include information relating to Metromedia Fiber and the class A
common stock, including certain risk factors relevant to an investment in the
class A common stock. The prospectus and prospectus supplement of Metromedia
Fiber are being attached hereto and delivered to prospective purchasers of DECS
together with this prospectus for convenience of reference only. The Metromedia
Fiber 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 Metromedia Fiber 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 class A common stock
equal to the initial number of shares of the class A 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" and
"--Adjustment Events" below,
(1) if the Exchange Price is greater than the Threshold Appreciation Price,
;
(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.
The purchase price under the prepaid forward contracts is equal to
$ per share of common stock and $ in total 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 class A 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 class A common
stock at the Exchange Date, each seller may, at its option, deliver cash in lieu
of delivering all or a portion of the shares of class A 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 class A common stock with respect to
which that seller has experienced the Cash Delivery Option 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 class A 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 as to any of the
shares of class A common stock subject to its prepaid forward contract and is
making a Rollover Offering may extend the Exchange Date under its prepaid
forward contract to , 2003. If a seller extends the Exchange Date,
it will not be required to deliver the cash value of the class A common stock
under its prepaid forward contract for which it has elected the Cash Delivery
Option until , 2003. 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 , 2002 and , 2003.
If any seller extends or accelerates the Exchange
12
<PAGE>
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 or other Cash Equivalents (as defined below) 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 class A 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 , 2003 and
then accelerated to , 2002 (i.e., two-thirds of the time between ,
2002 and , 2003), 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 class A 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 , 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 class A common
stock it receives under those prepaid forward contracts to the holders of DECS
on or shortly after that date. All sellers who do extend the Exchange Date under
their prepaid forward contracts will be required to extend to , 2003,
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
all or a portion of the class A 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 , 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 the class A 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.
13
<PAGE>
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
Metromedia Fiber:
(1) pays a stock dividend or makes a distribution, in either case, with
respect to the class A common stock in shares of such stock,
(2) subdivides or splits its outstanding shares of class A common stock into
a greater number of shares,
(3) combines its outstanding shares of class A 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 class A common stock any other equity securities of
Metromedia Fiber,
(5) issues rights or warrants (other than rights to purchase class A common
stock pursuant to a plan for the reinvestment of dividends or interest)
to all holders of class A common stock entitling them to subscribe for or
purchase shares of class A common stock at a price per share less than
the Market Price (as defined below) of the class A common stock on the
Business Day next following the record date for the determination of
holders of class A common stock entitled to receive such rights or
warrants, or
(6) is acquired by, consolidates with or merges into any other entity in a
transaction in which the holders of class A common stock receive common
stock in exchange for their shares of class A common stock.
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 class A common stock (or, in the
case of a reclassification referred to in clause (4) above, the number of other
equity securities of Metromedia Fiber issued pursuant thereto) which it would
have owned or been entitled to receive immediately following such event had the
Exchange Date occurred immediately prior to such event or any record date with
respect thereto.
In the case of the event referred to in clause (5) above, the Exchange Rate
will be adjusted by multiplying each of the Share Components of the Exchange
Rate in effect on the record date for the issuance of the rights or warrants
referred to in clause (5) above, by a fraction. The numerator of this fraction
is
(A) the number of shares of class A common stock outstanding on the record
date for the issuance of such rights or warrants, plus
(B) the number of additional shares of class A common stock offered for
subscription or purchase pursuant to such rights or warrants.
14
<PAGE>
The denominator of this fraction is
(x) the number of shares of class A 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 class A common stock on the Business Day
next following the record date for the determination of holders of
class A 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 class A 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 class A 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.
In the case of the the event referred to in clause (6) above, the Exchange
Rate will be adjusted on the Exchange Date (but not above one share of class A
common stock per DECS prior to the application of all other adjustments to the
Exchange Rate or the Share Components) by adjusting the Exchange Rate so that
the trust will be entitled under the prepaid forward contracts to receive at the
Exchange Date, in addition to the number of shares otherwise deliverable,
additional shares of class A common stock with a Closing Price as of the date of
such acquisition, consolidation or merger equal to times the amount of
dividends, if any, that would have been paid on the number of shares of such
common stock received per share of common stock in connection with such
transaction, for the period from the date of such acquisition, consolidation or
merger to the Exchange Date, at the announced dividend rate for the stock
received in such transaction at the date of consummation of such transaction.
"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 class A 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 class A 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), (5) or (6) 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 class A common stock into any equity
securities of Metromedia Fiber other than the class A common stock, such equity
securities will be deemed shares of class A common stock for all purposes. Each
such adjustment to the Exchange Rate and the Exchange Price will be made
successively.
15
<PAGE>
ADJUSTMENT EVENTS. Each of the following events are called "Adjustment
Events":
(1) any dividend or distribution by Metromedia Fiber to all holders of
class A common stock of evidences of its indebtedness or other assets
(excluding any dividends or distributions referred to in clause (1) of
the first paragraph under the caption "--Dilution Adjustments" above, any
equity securities issued pursuant to a reclassification referred to in
clause (4) of such paragraph and any Ordinary Cash Dividends (as defined
below)) or any issuance by Metromedia Fiber to all holders of class A
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 Metromedia Fiber with or into another
entity (other than a merger or consolidation in which Metromedia Fiber is
the continuing corporation and in which the class A common stock
outstanding immediately prior to the merger or consolidation is not
exchanged for cash, securities or other property of Metromedia Fiber or
another corporation),
(3) any sale, transfer, lease or conveyance to another corporation of the
property of Metromedia Fiber as an entirety or substantially as an
entirety,
(4) any statutory exchange of securities of Metromedia Fiber with another
corporation (other than in connection with a merger or acquisition), and
(5) any liquidation, dissolution or winding up of Metromedia Fiber.
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 class A common stock as described
above, cash in an amount equal to:
(A) if the Exchange Price is greater than the Threshold Appreciation Price,
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 class A
common stock in such Adjustment Event does not and may not at the option of such
holders include Reported Securities (as defined below), 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, 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 U.S. 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 class A common stock are
outstanding at the Exchange Date, the Exchange Price of the
class A common stock, as adjusted pursuant to the method described above under
"--Dilution Adjustments," otherwise zero, plus (B) the Transaction Value.
16
<PAGE>
Notwithstanding the foregoing, with respect to any securities received by
holders of class A 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,
(d) for which bid and ask prices are available from at least three
nationally recognized investment banking firms, or
(e) are immediately convertible or exchangeable on a one-for-one basis
during the term of the trust without any requirement of payment of
consideration for any of the securities specified in clauses (a)-(d);
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 class A 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 class A common stock and Metromedia Fiber.
For purposes of the foregoing, the term "Ordinary Cash Dividend" means, with
respect to any consecutive 365-day period, any dividend with respect to the
class A 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 class A
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 class A 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 class A 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
17
<PAGE>
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 class A 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 class A common stock on the date such
property is received, as determined by a nationally recognized investment
banking firm that the Administrator retains for this purpose;
provided, however, that in the case of clause (2),
(x) with respect to securities that are Reported Securities by virtue of
only clause (d) of the definition of Reported Securities above,
Transaction Value with respect to any such Reported Security means the
average of the mid-point of the last bid and ask prices for such Reported
Security as of the Exchange Date from each of at least three nationally
recognized investment banking firms that the Administrator retains for
such purpose multiplied by the number of such Reported Securities (as
adjusted pursuant to the methods described above under "--Dilution
Adjustments" and "--Adjustment Events") received per share of class A
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 class A 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
class A common stock by Metromedia Fiber for cash or in connection with
acquisitions. Likewise, no adjustments will be made for any sales of class A
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 Metromedia Fiber common stock
18
<PAGE>
for each share of class A 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 or other Cash Equivalents.
Unless they are in default in their obligations under their respective
Collateral Agreements, the sellers under each of the prepaid forward contracts
will be permitted to substitute for the pledged shares of Metromedia Fiber
common stock collateral consisting of short-term, direct obligations of the U.S.
Government or other Cash Equivalents. Any U.S. Government obligations or other
Cash Equivalents pledged as substitute collateral for shares of Metromedia Fiber
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 class A common stock at
the time of each valuation times the number of shares of Metromedia Fiber 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 other than Reported
Securities, received by it in respect of the maximum number of shares of class A
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. Each seller will be permitted to substitute U.S.
Government obligations or other Cash Equivalents for Reported Securities or cash
pledged after any Adjustment Event. Any U.S. Government obligations or other
Cash Equivalents 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.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by (a) the United States government
or any agency or instrumentality thereof (provided that the full faith and
credit of the United States is pledged in support thereof) having maturities of
not more than six months from the date of acquisition, (iii) certificates of
deposit with maturities of six months or less from the date of acquisition,
bankers' acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any domestic commercial bank having capital and
surplus in excess of $500 million and a Thompson Bank Watch Rating of "B" or
better, (iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (ii) above entered into
with any financial institution meeting the qualifications specified in
clause (iii) above, (v) commercial paper having the highest rating obtainable
from Moody's Investors Service, Inc. or Standard & Poor's Ratings Group and in
each case maturing within six months after the date of acquisition and
(vi) money market funds at least 95% of the assets of which constitute Cash
Equivalents of the kinds described in clauses (i)-(v) of this definition.
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
19
<PAGE>
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 or other Cash Equivalents 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 class A
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 or other Cash Equivalents and (2) purchases, using
the proceeds of such sales, of shares of class A 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 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 or other Cash Equivalents are pledged
as substitute collateral at such time, failure of the collateral to
consist of at least the maximum number of shares of class A 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 or other Cash Equivalents are pledged
as substitute collateral for shares of Metromedia Fiber common stock (or
Reported Securities) under that Collateral Agreement at such time,
failure of such U.S. Government obligations or other Cash Equivalents to
have a market value at such time of at least 105% of the market price of
the class A 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 class A common stock (or Reported
Securities) subject to the relevant seller's prepaid forward contract
at such time, and
(y) the number of shares of Metromedia Fiber common stock (or Reported
Securities) pledged as collateral by that seller at such time; and
(C) if any U.S. Government obligations or other Cash Equivalents are pledged
as substitute collateral for any cash under that Collateral Agreement at
such time, failure of such U.S. Government obligations or other Cash
Equivalents 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
class A common stock subject to such prepaid forward contract, in the form of
the shares of Metromedia Fiber common stock then pledged by that seller, or cash
generated from the liquidation of U.S. Government obligations or other Cash
Equivalents 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 or
other Cash Equivalents then pledged, or a combination thereof). In
20
<PAGE>
addition, if by the Exchange Date any substitute collateral has not been
replaced by shares of Metromedia Fiber 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
class A common stock required to be delivered thereunder, in the form of any
shares of Metromedia Fiber common stock then pledged by that seller plus cash
generated from the liquidation of U.S. Government obligations or other Cash
Equivalents 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 or other Cash Equivalents 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 class A common stock, in the form of the shares
of Metromedia Fiber common stock then pledged by that seller, or cash generated
from the liquidation of U.S. Government obligations or other Cash Equivalents
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 or other Cash
Equivalents 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 class A 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 class A 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.
Each seller will be permitted to pledge class B common stock (which is
convertible into class A common stock on a one-for-one basis) under such
seller's collateral agreement instead of class A common stock, in which case the
collateral agent will convert such class B common stock into shares of class A
common stock if such seller's prepaid forward contract is accelerated.
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 Metromedia
Fiber attached hereto.
THE U.S. TREASURY SECURITIES
The trust will purchase and hold a series of zero-coupon ("stripped") U.S.
treasury securities with such face amounts and maturities as will provide
investors with a quarterly distribution of $ per DECS on each
Distribution Date during the term of the trust. The trust may invest up to 35%
of its total assets in these treasury securities. If any prepaid forward
contract is accelerated, the Administrator will liquidate a proportionate amount
of the U.S. treasury securities then held in the trust and will distribute the
proceeds thereof PRO RATA to investors, together with proceeds from the
21
<PAGE>
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 under its prepaid forward contract, it
will be required to pledge U.S. treasury securities or other Cash Equivalents 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 U.S.
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 U.S. treasury securities then held by the trust and will
distribute the proceeds thereof PRO RATA to the investors, together with all
shares of class A 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."
DELIVERY OF CLASS A COMMON STOCK AND REPORTED SECURITIES; NO FRACTIONAL SHARES
OF CLASS A COMMON STOCK OR REPORTED SECURITIES
The class A 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 class A 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 class A 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).
INVESTMENT RESTRICTIONS
The trust has adopted a fundamental policy that the trust may not purchase
any securities or instruments other than the U.S. treasury securities, the
prepaid forward contracts and the class A 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 U.S. 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 U.S.
treasury securities prior to the earlier of their respective maturities and the
termination of the trust.
22
<PAGE>
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 class A 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 U.S.
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 U.S.
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 class A common stock
or adverse changes in the financial condition of Metromedia Fiber (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 METROMEDIA FIBER SHARES
The DECS are different from ordinary securities because the value of the
class A 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 class A 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 Metromedia Fiber 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 the class A common stock before the Exchange Date.
In addition, you have less opportunity to make money from an increase in the
price of the class A common stock by investing in the DECS than by investing
directly in the class A 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 the class A common stock exceeds $ per share. This is an increase
of about % over the price of the class A common stock when the DECS were first
offered for sale. In addition, you will receive only about % of any increase
in the value of the class A common stock above $ per share.
In return, you will receive annual distributions on the DECS at a rate of
%, which is more than the historical annual dividend on the class A common
stock, which currently pay no dividends. However, Metromedia Fiber 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 share of class A common
stock will rise or fall. However, the following factors may affect the trading
price of class A common stock:
- whether Metromedia Fiber makes a profit and what its future prospects are;
- trading in the capital markets generally;
- trading on The Nasdaq Stock Market's National Market, where the class A
common stock is traded;
- the health of the communications infrastructure industry; and
- whether Metromedia Fiber issues securities like the DECS, or Metromedia
Fiber or another person in the market transfers a large amount of class A
common stock.
23
<PAGE>
As of the date of this prospectus, the sellers beneficially owned a total of
83,320,784 shares of class A common stock and class B common stock, which is
convertible into class A common stock on a one-for-one basis, of which the
sellers may deliver up to 10,000,000 shares of class A common stock (or
11,500,000 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 Metromedia Fiber and the class A common stock.
IMPACT OF THE DECS ON THE MARKET FOR THE METROMEDIA FIBER 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 the class A
common stock. For example, investors' anticipation that the sellers may deliver
class A common stock that represents approximately 5% of the currently
outstanding class A common stock when the DECS mature could cause the price of
the class A common stock to be unstable or fall. The following factors could
also affect the price of class A common stock:
- sales of class A common stock by investors who prefer to invest in
Metromedia Fiber by investing in the DECS;
- hedging of investments in the DECS by selling class A common stock (called
"selling short"); and
- arbitrage trading activity between the DECS and class A common stock.
DILUTION OF METROMEDIA FIBER 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 Metromedia Fiber splits or
combines its shares, pays stock dividends or does other similar things that
change the amount of class A 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 Metromedia Fiber offers shares
for cash or in an acquisition, even if the price of class A common stock falls
and this causes the price of the DECS to fall. The trust has no control over
whether Metromedia Fiber 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 class A common
stock to the trust when the DECS mature and until the trust distributes the
class A common stock to you, you will have no voting, dividend or other similar
rights associated with the class A common stock.
METROMEDIA FIBER NOT RESPONSIBLE FOR THE DECS
Metromedia Fiber has no obligation to make any payments on the DECS.
Metromedia Fiber also does not have to take the trust's needs or your needs into
consideration for any reason. Metromedia Fiber will not receive any money from
the sale of the DECS and did not decide to issue the DECS. Metromedia Fiber 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. Metromedia Fiber is not involved in
managing or trading the DECS or determining or calculating the amount you will
receive when the DECS mature.
DECS MAY BE DIFFICULT TO RESELL
The DECS are new and innovative securities, and there is currently no market
in which to resell them. The underwriters currently intend, but are not
obligated, to buy and sell the DECS. A resale
24
<PAGE>
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
Stock Market's National Market. Nonetheless, The Nasdaq Stock Market might not
approve the application or if approved, could revoke the listing after approval
or stop trading of the DECS at any time. If The Nasdaq Stock Market 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 class A 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 U.S.
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 METROMEDIA FIBER
You should carefully consider the information in the attached prospectus and
prospectus supplement of Metromedia Fiber, including the risk factors for
Metromedia Fiber.
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 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.
25
<PAGE>
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 class A 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.
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 may
determine. The U.S. 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 on a timely basis or without unreasonable
effort or expense, 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 determined by an independent expert or
appraiser retained by the Trustees (as defined below) or the Administrator (as
defined below) on their behalf.
DESCRIPTION OF THE DECS
Each DECS represents an equal proportional interest in the trust. Upon
liquidation of the trust, investors are entitled to share PRO RATA in the net
assets of the trust available for distribution. DECS have no preemptive,
redemption or conversion rights. The DECS, when issued and outstanding, will be
fully paid and non-assessable. The only securities that the trust is authorized
to issue are the DECS offered hereby and those sold to the initial investor
referred to below. See "Underwriting."
Owners of DECS are entitled to one vote for each DECS held on all matters to
be voted on by investors and are not able to vote cumulatively 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 The Nasdaq Stock Market.
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
26
<PAGE>
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.
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 class A 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
27
<PAGE>
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.
MANAGEMENT AND ADMINISTRATION OF THE TRUST
TRUSTEES
The internal operations of the trust will be managed by three Trustees, none
of whom is an "interested person" of the trust as defined in the Investment
Company Act; the trust will not have an investment adviser. Under the provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), applicable to
grantor trusts, the Trustees will not have the power to vary the investments
held by the trust.
The names of the persons who have been elected by Salomon Smith Barney, the
sponsor/initial investor of the trust, to serve as the Trustees are set forth
below. The positions and the principal occupations of the individual Trustees
during the past five years are also set forth below.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME, AGE AND ADDRESS TITLE DURING PAST FIVE YEARS
- --------------------- ----- ----------------------
<S> <C> <C>
Donald J. Puglisi, 52........................... Managing Trustee Professor of Finance
Department of Finance University of Delaware
University of Delaware
Newark, DE 19716
William R. Latham, III, 53...................... Trustee Professor of Economics
Department of Economics University of Delaware
University of Delaware
Newark, DE 19716
James B. O'Neill, 58............................ 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. 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.
28
<PAGE>
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;
(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 (as defined below), Paying
Agent (as defined below), 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 Metromedia Fiber 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.
29
<PAGE>
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. The sellers in turn will reimburse Salomon Smith Barney for certain of
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 U.S. treasury securities held by the trust. The first
distribution, reflecting the trust's operations from the date of this offering,
will be made on , 2000 to owners of record as of , 2000. Thereafter,
the trust will make distributions on , , and 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 , , and ,
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 $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 of the expenses of the trust paid by it.
30
<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 class A 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 class A 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 U.S. 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 class A 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
class A common stock).
31
<PAGE>
Under this approach, the tax consequences of holding a DECS will be as
described below. However, prospective investors in the DECS should be aware that
no ruling is being requested from the Internal Revenue Service with regard to
the DECS and that the Internal Revenue Service might take a different view as to
the proper characterization of the DECS or of the 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 U.S.
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 U.S. 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 U.S. treasury securities and the prepaid forward contracts. It is currently
anticipated that % and % of the net proceeds of the offering will be used by
the trust to purchase the U.S. treasury securities and as 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
U.S. 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
U.S. treasury security over the investor's tax basis for the U.S. 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 U.S. treasury security (i.e., any U.S. treasury
security with a maturity of one year or less from the date it is purchased) held
by the trust as that original issue discount accrues. Unless an investor elects
to accrue the original issue discount on a short-term U.S. treasury security
according to a constant yield method based on daily compounding, the original
issue discount will be accrued on a straight-line basis. The investor's tax
basis in a U.S. treasury security will be increased by the amount of any
original issue discount included in income by the investor with respect to such
U.S 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 class A 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," however.
SALE OF THE DECS. Upon a sale of all or some of an investor's DECS, an
investor will be treated as having sold its PRO RATA portion of the U.S.
treasury securities and prepaid forward contracts underlying the DECS. The
selling investor will recognize gain or loss equal to the difference between
32
<PAGE>
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. 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 class A common stock to
the trust pursuant to the prepaid forward contracts will not be taxable to the
investors. The distribution of class A 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 class A 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 class A 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 class A 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.
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 any
combination of cash, Reported Securities and class A common stock 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
and its basis in its PRO RATA portion of the prepaid forward contracts for which
such cash was received. In addition, if as a result of an Adjustment Event the
Custodian liquidates U.S. treasury securities, an investor will have taxable
gain or loss upon receipt of cash allocable to the liquidated U.S. treasury
securities equal to the difference between the amount of such cash and the
investor's basis in its PRO RATA portion of the U.S. 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 (except with respect to any cash received in lieu of a fractional
interest in Reported Securities or class A common stock). 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 for which such Reported Securities were
received. See "Investment Objectives and Policies--The Forward Contracts."
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
33
<PAGE>
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 U.S. 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. 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.
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.
34
<PAGE>
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% 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% 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.
35
<PAGE>
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....................................
Credit Suisse First Boston Corporation......................
Deutsche Bank Securities Inc. ..............................
Donaldson, Lufkin & Jenrette Securities Corporation.........
Goldman, Sachs & Co. .......................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated......................................
Total................................................... 10,000,000
</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 is acting as representative,
propose to offer some of the DECS directly to the public at the public offering
price set forth on the cover page of this prospectus and some of the DECS to
certain dealers at the public offering price less a concession not in excess of
$ per DECS. The underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per DECS on sales to certain other dealers.
After the initial offering of the DECS to the public, the public offering price
and such concessions may be changed by the representative. The sales load of
$ per DECS is equal to % of the initial public offering price.
Because proceeds from the sale of the DECS will be used by the trust to
purchase the prepaid forward contracts from the sellers, the underwriting
agreement provides that the sellers will pay to the underwriters as compensation
$ per DECS.
The trust has granted to the underwriters an option, exercisable for
30 days from the date of this prospectus, to purchase up to 1,500,000 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 DECS in connection with the organization of
the trust.
Metromedia Fiber, its executive officers and the sellers have agreed that,
for a period of days from the date of this prospectus, they will not, without
the prior written consent of Salomon Smith Barney, as representative of the
underwriters, offer, sell, contract to sell, or otherwise dispose of, any shares
of common stock of Metromedia Fiber or any securities convertible into, or
exercisable or exchangeable for, such common stock. Salomon Smith Barney 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 Metromedia Fiber 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 class A 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 Stock Market's National Market under the symbol "MFDE." 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.
36
<PAGE>
In connection with the formation of the trust, Salomon Smith Barney
subscribed for and purchased DECS for a purchase price of $100. Under the
prepaid forward contracts, the sellers will be obligated to deliver to the trust
class A common stock in respect of such DECS on the same terms as the DECS
offered hereby. Salomon Smith Barney 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 class A common stock equal to the total number of DECS to be
purchased by the underwriters from the trust pursuant to the underwriting
agreement (including any DECS to be purchased by the underwriters upon exercise
of the over-allotment option plus the number of DECS purchased by Salomon Smith
Barney in connection with the organization of the trust). Pursuant to the terms
of the prepaid forward contracts, each seller will deliver to the trust at the
Exchange Date a number of shares of class A 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 class A 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 class A 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 class A 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 class A common stock
while the offering is in progress. Penalty bids permit the underwriters to
reclaim a selling concession from a syndicate member when an underwriter, in
covering syndicate short positions or making stabilizing purchases, repurchases
DECS or class A common stock originally sold by the syndicate member. These
activities may cause the price of DECS or class A 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 Stock Market's
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 class A common stock on The Nasdaq Stock Market's National Market,
prior to the pricing and completion of the DECS offering. Passive market making
consists of displaying bids on The Nasdaq Stock Market's National Market no
higher than the bid prices of independent market makers and making purchases at
prices no higher than those independent bids and effected in response to order
flow. Net purchases by a passive market on each day are limited to a specified
percentage of the passive market maker's average daily trading volume in the
class A common stock during a specified period and must be discontinued when
such limit is reached. Passive market making may cause the price of the class A
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 Metromedia Fiber 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 Metromedia Fiber in the ordinary
course of its business.
Metromedia Fiber 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. Metromedia Fiber has agreed to pay certain
amounts on behalf of the sellers in respect of fees, expenses and other
compensation in connection with the DECS offering.
37
<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 Paul, Weiss, Rifkind, Wharton & Garrison, New York, New York.
EXPERTS
The statement of assets, liabilities and capital included in this prospectus
has been audited by PricewaterhouseCoopers LLP, independent accountants, as
stated in their report appearing herein, and is included in reliance upon the
report of such firm given upon their authority as experts in auditing and
accounting.
WHERE YOU CAN FIND MORE INFORMATION
The trust has filed a registration statement for the DECS with the SEC.
Information about the DECS and the trust may be found in that registration
statement. You may read and copy the registration statement at the public
reference facilities of the SEC in Washington, D.C., Chicago, Illinois and New
York, New York. Please call the SEC at 1-800-SEC-0330 for further information on
the public reference rooms. The Registration Statement is also available to the
public from the SEC's web site at http:\\www.sec.gov.
38
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustee and Securityholders
of DECS Trust VI:
In our opinion, the accompanying statement of assets, liabilities and capital
presents fairly, in all material respects, the financial position of DECS TRUST
VI (THE "TRUST") as of October 26, 1999, in conformity with accounting
principles generally accepted in the United States. 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 auditing standards
generally accepted in the United States which require that we plan and perform
the audit to obtain reasonable assurance about whether the statement of assets,
liabilities and capital is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the 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
October 26, 1999
39
<PAGE>
DECS TRUST VI
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL, OCTOBER 26, 1999
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Cash........................................................ $ 100
---------
Total Assets................................................ $ 100
=========
LIABILITIES
Total Liabilities........................................... $
---------
NET ASSETS.................................................. $ 100
=========
CAPITAL
DECS, one DECS issued and outstanding....................... $ 100
=========
</TABLE>
The accompanying notes are an integral part of this statement.
40
<PAGE>
DECS TRUST VI
NOTES TO STATEMENT OF ASSETS, LIABILITIES AND CAPITAL, OCTOBER 26, 1999
I. ORGANIZATION
DECS Trust VI, organized as a Delaware business trust on October 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 11,500,000 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 class A 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 October 26, 1999, the trust issued one DECS to Salomon Smith Barney Inc.
in consideration for a purchase price of $100.
II. ORGANIZATIONAL COSTS AND FEES
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.
41
<PAGE>
10,000,000 DECS(SM)
- ---------------------------------------------------------
- ---------------------------------------------------------
DECS TRUST VI
(SUBJECT TO EXCHANGE INTO CLASS A COMMON STOCK OF METROMEDIA FIBER NETWORK,
INC.)
-----------------
PROSPECTUS
November , 1999
-----------------
SALOMON SMITH BARNEY
CREDIT SUISSE FIRST BOSTON
DEUTSCHE BANC ALEXu BROWN
DONALDSON, LUFKIN & JENRETTE
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
- ---------------------------------------------------------
- ---------------------------------------------------------
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
1. FINANCIAL STATEMENTS
Part A (i) Report of Independent Accountants
(ii) Statement of Assets, Liabilities and Capital as of October 26,
1999
Part B--none
2. EXHIBITS
<TABLE>
<S> <C> <C>
(a)(1)(A) -- Declaration of Trust dated as of October 22, 1999 /**/
(a)(1)(B) -- Amended and Restated Declaration of Trust dated as of
November 9, 1999/*/
(a)(2)(A) -- Certificate of Trust dated October 22, 1999/**/
(a)(2)(B) -- Restated Certificate of Trust dated November 9, 1999/*/
(b) -- Not applicable
(c)(d)(1) -- Not applicable--Form of specimen certificate of DECS
(included in
Exhibit 2(a)(1)(B))/*/
(d)(2) -- Portions of the Amended and Restated Declaration of Trust
defining the rights of Holders of DECS (included in Exhibit
2(a)(1)(B))/*/
(e) -- Not applicable
(f) -- Not applicable
(g) -- Not applicable
(h) -- Form of Underwriting Agreement/*/
(i) -- Not applicable
(j) -- Form of Custodian Agreement/*/
(k)(1) -- Form of Administration Agreement/*/
(k)(2) -- Form of Paying Agent Agreement/*/
(k)(3) -- Form of Forward Contract/*/
(k)(4) -- Form of Collateral Agreement/*/
(k)(5) -- Form of Fund Expense Agreement/*/
(k)(6) -- Form of Fund Indemnity Agreement/*/
(l) -- Opinion and Consent of Counsel to the Trust/*/
(m) -- Not applicable
(n)(1) -- Tax Opinion of Counsel of the Trust (Consent contained in
Exhibit 2(n)(1))/*/
(n)(2) -- Consent of Independent Public Accountants/*/
(n)(3) -- Consents to being named as Trustee/*/
(o) -- Not applicable
(p) -- Form of Subscription Agreement/*/
(q) -- Not applicable
(r) -- Financial Data Schedule/**/
</TABLE>
- ------------------------
/*/ Filed herewith
/**/ Previously Filed
ITEM 25. MARKETING ARRANGEMENTS
See Exhibit 2(h) to this Registration Statement.
C-1
<PAGE>
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses to be incurred in
connection with the DECS offering described in this Registration Statement:
<TABLE>
<S> <C>
Registration fees........................................... $111,895
NASDAQ National Market application fee...................... $ 80,625
Printing (other than certificates).......................... $ 10,000
Engraving and printing certificates......................... $ 1,000
Fees and expenses of qualification under state securities
laws
(including fees of counsel)............................... $ 10,000
Accounting fees and expenses................................ $ 10,000
Legal fees and expenses..................................... $ 10,000
NASD fees................................................... $ 30,500
Miscellaneous............................................... $ 5,980
Total....................................................... $270,000
</TABLE>
- ------------------------
ITEM 27. PERSON CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
The trust will be internally managed and will not have an investment
adviser. The information in the Prospectus under the caption "Management and
Administration of the Trust" is incorporated herein by reference.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
As of the effective date of this Registration Statement:
<TABLE>
<CAPTION>
TITLE OF CLASS NUMBER OF RECORD HOLDERS
- -------------- ------------------------
<S> <C>
DECS representing shares of beneficial interest 1
</TABLE>
ITEM 29. INDEMNIFICATION
The Underwriting Agreement (Exhibit 2(h) to this Registration Statement)
provides for indemnification.
The Amended and Restated Declaration of Trust filed as Exhibit 2(a)(1)(C) to
this Registration Statement provides for indemnification to each Trustee against
any claim or liability incurred in acting as Trustee of the trust, except in the
case of willful misfeasance, bad faith, gross negligence or reckless disregard
of the trustee's duties. The Custodian Agreement, Administration Agreement and
Paying Agent Agreement filed as Exhibits 2(j), 2(k)(1) and 2(k)(2) to this
Registration Statement provide for indemnification to the Custodian,
Administrator and Paying Agent against any loss or expense incurred in the
performance of their obligations under the respective agreements, unless such
loss or expense is due to willful misfeasance, bad faith, gross negligence or
reckless disregard of their obligations. The Fund Indemnity Agreement filed as
Exhibit 2(k)(6) to this Registration Statement provides that Salomon Smith
Barney will indemnify the trust for certain indemnification expenses incurred
under the Amended and Restated Declaration of Trust, the Custodian Agreement,
the Administration Agreement and the Paying Agent Agreement.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant, pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other
C-2
<PAGE>
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Not applicable.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are
maintained as follows: journals, ledgers, securities records and other original
records are maintained principally at the offices of the Registrant, c/o
Puglisi & Associates, 850 Library Avenue, Suite 204, Newark, DE 19715 and at the
offices of The Bank of New York, the Registrant's Administrator, Custodian,
paying agent, transfer agent and registrar. All other records so required to be
maintained are maintained at the offices of the Registrant, c/o Puglisi &
Associates, 850 Library Avenue, Suite 204, Newark, DE 19715 York 10013.
ITEM 32. MANAGEMENT SERVICES
Not applicable.
ITEM 33. UNDERTAKINGS
(a) The Registrant hereby undertakes to suspend the offering of the shares
covered hereby until it amends its prospectus contained herein if
(1) subsequent to the effective date of this Registration Statement, its net
asset value per share declines more than ten percent from its net asset value
per share as of the effective date of this Registration Statement or (2) the net
asset value per share increases to an amount greater than its net proceeds as
stated in its prospectus contained herein.
(b) The Registrant hereby undertakes that (i) for the purpose of determining
any liability under the Securities Act, the information omitted from the form of
prospectus filed as part of this Registration Statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the registrant under
Rule 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective; (ii) for the
purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of the securities at that time shall be deemed to be the initial
bona fide offering thereof.
C-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York, on the
10th day of November, 1999.
DECS TRUST VI
By: /s/ Donald J. Puglisi
-----------------------------------
Donald J. Puglisi, Trustee
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following person, in
the capacities and on the date indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
Principal Executive
/s/ DONALD J. PUGLISI Officer, Principal
------------------------------------------- Financial Officer, November 10, 1999
Donald J. Puglisi Principal Accounting
Officer and Trustee
</TABLE>
C-4
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
SELLING SHAREHOLDER DECS SHARES
- ------------------- ----------------
<S> <C>
Metromedia Company 4,881,000 Shares
Steven A. Garofalo 4,844,000 Shares
Stuart Subotnick 276,000 Shares
</TABLE>
<PAGE>
SCHDULE II
UNDERWRITERS
Salomon Smith Barney Inc.
Credit Suisse First Boston Corporation
Deutsche Bank Securities Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
Goldman, Sachs & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NAME OF EXHIBIT
- ------- ------------------------------------------------------------
<S> <C>
(a)(1)(A) Declaration of Trust dated as of October 22, 1999/**/
(a)(1)(B) Amended and Restated Declaration of Trust dated as of,
November 9, 1999/*/
(a)(2)(A) Certificate of Trust dated October 22, 1999/**/
(a)(2)(B) Restated Certificate of Trust dated November 9, 1999/*/
(b) Not applicable
(c)(d)(1) Not applicable Form of specimen certificate of DECS
(included in Exhibit 2(a)(1)(B))/*/
(d)(2) Portions of the Amended and Restated Declaration of Trust
defining the rights of Holders of DECS (included in Exhibit
2(a)(1)(B))/*/
(e) Not applicable
(f) Not applicable
(g) Not applicable
(h) Form of Underwriting Agreement/*/
(i) Not applicable
(j) Form of Custodian Agreement/*/
(k)(1) Form of Administration Agreement/*/
(k)(2) Form of Paying Agent Agreement/*/
(k)(3) Form of Forward Contract/*/
(k)(4) Form of Collateral Agreement/*/
(k)(5) Form of Fund Expense Agreement/*/
(k)(6) Form of Fund Indemnity Agreement/*/
(l) Opinion and Consent of Counsel to the Trust/*/
(m) Not applicable
(n)(1) Tax Opinion of Counsel to the Trust (Consent contained in
Exhibit 2(n)(1))/*/
(n)(2) Consent of Independent Public Accountants/*/
(n)(3) Consents to being named as Trustee/*/
(o) Not applicable
(p) Form of Subscription Agreement/*/
(q) Not applicable
(r) Financial Data Schedule/**/
</TABLE>
- ------------------------
/*/ Filed herewith.
/**/ Previously filed.
<PAGE>
AMENDED AND RESTATED
DECLARATION OF
TRUST
CONSTITUTING
DECS TRUST VI
Dated as of November 9, 1999
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
ARTICLE II
TRUST DECLARATION; PURPOSES, POWERS AND DUTIES OF THE
TRUSTEES; ADMINISTRATION
<S> <C> <C>
SECTION 2.1 Name................................................................................................5
SECTION 2.2 Office..............................................................................................5
SECTION 2.3 Resignation of Initial Trustee; Transfer of Beneficial Interest.....................................5
SECTION 2.4 Declaration of Trust; Purposes of the Trust; Statement of Intent....................................6
SECTION 2.5 General Powers and Duties of the Trustees...........................................................7
SECTION 2.6 Portfolio Acquisition...............................................................................8
SECTION 2.7 Portfolio Administration............................................................................8
SECTION 2.8 Manner of Sales....................................................................................10
SECTION 2.9 Limitations on Trustees'Powers.....................................................................10
SECTION 2.10 Legal Title to Trust Property......................................................................11
SECTION 2.11 Situs of Trust.....................................................................................11
ARTICLE III
ACCOUNTS AND PAYMENTS
SECTION 3.1 The Trust Account..................................................................................11
SECTION 3.2 Payment of Fees and Expenses.......................................................................11
SECTION 3.3 Distributions to Holders...........................................................................11
SECTION 3.4 Segregation........................................................................................12
SECTION 3.5 Temporary Investments..............................................................................12
ARTICLE IV
REDEMPTION
SECTION 4.1 Redemption.........................................................................................12
ARTICLE V
ISSUANCE OF CERTIFICATES; REGISTRY; TRANSFER OF DECS
SECTION 5.1 Form of Certificate................................................................................12
SECTION 5.2 Transfer of DECS; Issuance, Transfer and Exchange of Certificates..................................13
SECTION 5.3 Replacement of Certificates........................................................................14
SECTION 5.4 Limitation on Liability............................................................................14
SECTION 5.5 General Provisions Regarding the DECS..............................................................14
ARTICLE VI
ISSUANCE OF THE CONTRACTS
SECTION 6.1 Execution of the Contracts.........................................................................15
<PAGE>
ARTICLE VII
TRUSTEES
SECTION 7.1 Trustees...........................................................................................15
SECTION 7.2 Vacancies..........................................................................................15
SECTION 7.3 Powers.............................................................................................16
SECTION 7.4 Meetings...........................................................................................16
SECTION 7.5 Resignation and Removal............................................................................16
SECTION 7.6 Liability..........................................................................................16
SECTION 7.7 Compensation.......................................................................................17
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Meetings of Holders................................................................................17
SECTION 8.2 Books and Records; Reports.........................................................................18
SECTION 8.3 Termination........................................................................................18
SECTION 8.4 Amendment and Waiver...............................................................................19
SECTION 8.5 Accountants........................................................................................20
SECTION 8.6 Nature of Holder's Interest........................................................................21
SECTION 8.7 Delaware Law to Govern.............................................................................21
SECTION 8.8 Notices............................................................................................21
SECTION 8.9 Severability.......................................................................................21
SECTION 8.10 Counterparts.......................................................................................22
SECTION 8.11 Successors and Assigns.............................................................................22
</TABLE>
<PAGE>
AMENDED AND RESTATED DECLARATION OF TRUST
This Amended and Restated Declaration of Trust, dated as of
November 9, 1999 (the "TRUST AGREEMENT"), by and between Salomon Smith Barney
Inc., as sponsor (the "SPONSOR"), Donald J. Puglisi, William R. Latham III and
James B. O'Neill as trustees (the "TRUSTEES"), Alan Rifkin, as initial sponsor,
Donald J. Puglisi, as initial trustee, and the Holders (as defined herein),
constituting DECS Trust VI (the "TRUST").
WITNESSETH:
WHEREAS, Alan Rifkin (the "INITIAL SPONSOR") and Donald J.
Puglisi, as trustee (the "INITIAL TRUSTEE"), have previously entered into a
Declaration of Trust dated as of October 22, 1999 (the "ORIGINAL AGREEMENT"),
creating the Trust;
WHEREAS, the Initial Sponsor desires to transfer his interest
in the Trust to the Sponsor;
WHEREAS, the Initial Trustee desires to resign as trustee of
the Trust, such resignation to be effective upon the appointment and acceptance
of the Trustees as provided herein;
WHEREAS, the Trustees hereby ratify and approve the transfer
of the interest of the Initial Sponsor in the Trust to the Sponsor;
WHEREAS, the parties hereto desire to amend and restate the
Original Agreement in certain respects; and
WHEREAS, the Initial Trustee, on behalf of the Trust, and the
Sponsor entered into a Subscription Agreement dated Ocober 27, 1999 (the
"SUBSCRIPTION AGREEMENT") pursuant to which the Trust issued to the Sponsor one
DECS in consideration of the aggregate purchase price therefor of $100.00;
NOW, THEREFORE, the parties hereto agree to amend and restate
the Original Agreement as provided herein. Upon the execution and delivery of
copies hereof by the parties hereto, the Original Agreement will be
automatically amended and restated in its entirety to read as provided herein.
ARTICLE I
DEFINITIONS
Whenever used in this Trust Agreement, the following words and
phrases shall have the meanings listed below. Any reference to any agreement
shall be a reference to such agreement as supplemented or amended from time to
time.
"ACT": The Delaware Business Trust Act, 12 Del. C.ss.3801 ET
SEQ.
<PAGE>
"ADDITIONAL PURCHASE PRICE": The Additional Purchase Price as
defined in the Contracts.
"ADJUSTMENT EVENT": An Adjustment Event as defined in the
Contracts.
"ADMINISTRATION AGREEMENT": The Administration Agreement,
dated as of the date hereof, between the Administrator and the Trust, and any
substitute agreement therefor entered into pursuant to Section 2.5(a) hereof.
"ADMINISTRATOR": The Bank of New York or its successor as
permitted under Section 6.1 of the Administration Agreement or appointed
pursuant to Section 2.5(a) hereof.
"BUSINESS DAY": A day on which the New York Stock Exchange,
Inc. is open for trading that is not a day on which banks in The City of New
York are authorized or obligated by law to close.
"CASH DELIVERY OPTION": The Cash Delivery Option as defined in
the Contracts.
"CERTIFICATE": Any certificate evidencing the ownership of
DECS substantially in the form of Exhibit A hereto.
"CLASS A COMMON STOCK": Class A Common Stock, $.01 par value,
of the Company.
"CLOSING DATE": The Closing Date as defined in the
Underwriting Agreement.
"CODE": The Internal Revenue Code of 1986, as amended from
time to time; each reference herein to any section of the Code or any regulation
thereunder shall constitute a reference to any successor provision thereto.
"COLLATERAL AGENT": The Bank of New York or its successor as
permitted under the Collateral Agreements.
"COLLATERAL AGREEMENTS": The Collateral Agreements among each
of the Sellers, the Trust and the Collateral Agent, securing the Sellers'
obligations under the Contracts, substantially in the form of Exhibit B hereto.
"COMMENCEMENT DATE": The day on which the Underwriting
Agreement is executed.
"COMMISSION": The United States Securities and Exchange
Commission.
"COMMON STOCK": Common Stock as defined in the Collateral
Agreements.
"COMPANY": Metromedia Fiber Network, Inc., a Delaware
corporation.
"CONTRACTS": The forward purchase agreements among the Trust
and one or more
<PAGE>
existing shareholders of the Company, substantially in the form of Exhibit C
hereto.
"CUSTODIAN": The Bank of New York or its successor as
permitted under paragraph 11 of the Custodian Agreement or appointed pursuant to
Section 2.5(a) hereof.
"CUSTODIAN AGREEMENT": The Custodian Agreement, dated as of
October 26 , 1999, between the Custodian and the Trust, and any substitute
agreement therefor entered into pursuant to Section 2.5(a) hereof.
"DECS": The DECS issued by the Trust evidencing a Holder's
undivided interest in the Trust and right to receive a pro rata distribution
upon liquidation of the Trust Estate.
"DEPOSITARY": The Depository Trust Company, or any successor
thereto.
"DISTRIBUTION DATE": Each ____________, ____________,
____________ and ____________ of each year commencing , 1999, to and including ,
2002 or if any such date is not a Business Day, then the first Business Day
thereafter.
"EVENT OF DEFAULT": An Event of Default as defined in the
Contracts.
"EXCHANGE": The distribution by the Trust to the Holders of
the Shares, Reported Securities and/or cash delivered to the Trust pursuant to
the Contracts (or, to the extent one or more Sellers elect the Cash Delivery
Option under the Contracts, the amount in cash specified in such Contracts as
payable in respect thereof), on the Exchange Date.
"EXCHANGE DATE": The Exchange Date as defined in the
Contracts.
"EXCHANGE RATE": The Exchange Rate as defined in the
Contracts.
"FIRM PURCHASE PRICE": The Firm Purchase Price as defined in
the Contracts.
"HOLDER": The registered owner of any DECS as recorded on the
books of the Paying Agent.
"INDEMNITY AGREEMENT": The Fund Indemnity Agreement dated as
of the date hereof between the Trust and the Sponsor substantially in the form
of Exhibit D hereto.
"INVESTMENT COMPANY ACT": The Investment Company Act of 1940,
as amended from time to time; each reference herein to any section of such Act
or any rule or regulation thereunder shall constitute a reference to any
successor provision thereto.
"MANAGING TRUSTEE": The Trustee designated as such by the
Trustees, who hereby initially designate Donald J. Puglisi as the Managing
Trustee.
"OPTION CLOSING DATE": The settlement date for the sale of any
Option DECS with respect to which the option provided for in Section 4(b) of the
Underwriting Agreement is exercised by the Underwriters.
<PAGE>
"ORIGINAL AGREEMENT": The meaning specified in the recitals
hereof.
"PARTICIPANT": A Person having an account with the Depositary.
"PAYING AGENT": The Bank of New York or its successor as
permitted under Section 6.6 of the Paying Agent Agreement or appointed pursuant
to Section 2.5(a) hereof.
"PAYING AGENT AGREEMENT": The Paying Agent Agreement, dated as
of the date hereof, between the Paying Agent and the Trust, and any substitute
agreement therefor entered into pursuant to Section 2.5(a) hereof.
"PERSON": An individual, a partnership, a corporation, a
trust, a limited liability company, an unincorporated association, a joint
venture or other entity or a government or any agency or political subdivision
thereof.
"PROSPECTUS": The prospectus of the Trust relating to the
offering of the DECS and constituting a part of the Registration Statement, as
first filed with the Commission pursuant to Rule 497(b) or (h) under the
Securities Act, and as subsequently amended or supplemented by the Trust.
"QUARTERLY DISTRIBUTION": $0. per DECS paid to each Holder on
each Distribution Date.
"RECORD DATE": Each , , , and of each year
commencing , 1999.
"REGISTRATION STATEMENT": Registration Statement on Form N-2
(Registration Nos. 333-89677 and 811-09647) of the Trust, as amended.
"REPORTED SECURITIES": Reported Securities as defined in the
Contracts.
"SECURITIES ACT": The Securities Act of 1933, as amended from
time to time.
"SELLERS": The Persons named as Sellers in the Contracts.
"SHARES": Shares of Class A Common Stock to be delivered by
the Sellers to the Trust pursuant to the Contracts, and by the Trust to the
Holders pursuant to the DECS, on the Exchange Date.
"TEMPORARY INVESTMENTS": Direct short-term U.S. government
obligations, as specified from time to time by the Trustees or through standing
instructions from the Trustees to the Administrator or the Paying Agent.
"TRANSFER AGENT AND REGISTRAR": With respect to the Common
Stock or any Reported Securities at any time, the Person then acting as Transfer
Agent and Registrar for such Common Stock or Reported Securities.
<PAGE>
"TREASURY SECURITIES": The meaning specified in Section 2.6(b)
hereof.
"TRUST ACCOUNT": The account created pursuant to Section 3.1
hereof.
"TRUST AGREEMENT": The meaning specified in the recitals
hereof.
"TRUST ESTATE": The Contracts and the Treasury Securities held
at any time by the Trust, together with any Temporary Investments held at any
time pursuant to Section 3.5 hereof, and any proceeds thereof or therefrom and
any other moneys held at any time in the Trust Account.
"TRUSTEE": The meaning specified in the recitals hereof.
"UNDERWRITERS": Salomon Smith Barney Inc., Credit Suisse First
Boston Corporation, Deutsche Bank Securities Inc., Donaldson, Lufkin & Jenrette
Securities Corporation, Goldman, Sachs & Co. and Merril, Lynch, Pierce, Fenner &
Smith Incorporated each in its capacity as an underwriter of the DECS pursuant
to the Underwriting Agreement.
"UNDERWRITING AGREEMENT": The Underwriting Agreement as
described in the Prospectus.
ARTICLE II
TRUST DECLARATION; PURPOSES, POWERS
AND DUTIES OF THE TRUSTEES; ADMINISTRATION
SECTION 2.1 NAME. The Trust is named "DECS Trust VI," as such
name may be modified from time to time by the Trustees following written notice
to the Holders and in which name the Trustees may conduct the affairs of the
Trust, make and execute contracts and other instruments on behalf of the Trust
and sue and be sued on behalf of the Trust. The Trust's activities may be
conducted under the name of the Trust or any other name deemed advisable by the
Trustees.
SECTION 2.2 OFFICE. The address of the principal office and
registered office for service of process of the Trust is Donald J. Puglisi, c/o
Puglisi & Associates, 850 Library Avenue, Suite 204, Newark, Delaware 19715. On
ten Business Days' written notice to the Holders, the Trustees may designate
another principal office.
SECTION 2.3 RESIGNATION OF INITIAL TRUSTEE; TRANSFER OF
BENEFICIAL INTEREST; RATIFICATION AND APPROVAL OF ACTION OF EITHER OR BOTH OF
THE INITIAL SPONSOR AND THE INITIAL TRUSTEE.
(a) The Initial Sponsor hereby assigns, transfers, conveys and
sets over to the Sponsor all of its rights and interests in, to and under the
Original Agreement. The Sponsor hereby accepts such assignment effective as of
the date hereof.
(b) The Initial Trustee hereby resigns as trustee of the
Trust, such resignation to
<PAGE>
be effective upon the appointment and acceptance of the Trustees pursuant to
Section 2.4(b) of this Agreement. The Initial Trustee hereby conveys, assigns
and transfers to the Trustees, effective as of the date hereof, and to their
successors and assigns, all the rights, powers and trusts of the Initial Trustee
as trustee, under and pursuant to the Original Agreement, and all property and
money held by the Initial Trustee as trustee under the Original Agreement. The
Initial Trustee hereby represents to the Sponsor and the Trustees that, at the
time the Trustees' appointment as such becomes effective, it will hold no monies
or other property as trustee under the Original Agreement.
(c) The Sponsor and the Trustees hereby ratify and approve any
and all actions taken by either or both of the Initial Sponsor and the Initial
Trustee on behalf of the Trust on or prior to the date hereof.
SECTION 2.4 DECLARATION OF TRUST; PURPOSES OF THE TRUST;
STATEMENT OF INTENT.
(a) The Sponsor hereby creates the Trust in order that it may
acquire the Treasury Securities, enter into the Contracts, issue and sell to the
Sponsor and the Underwriters the DECS, hold the Trust Estate in trust for the
use and benefit of all present and future Holders and otherwise carry out the
terms and conditions of this Trust Agreement, all for the purpose of achieving
the investment objectives set forth in the Prospectus.
(b) The Sponsor hereby appoints the Trustees of the Trust
effective as of the date hereof, to have all the rights, powers and duties set
forth herein and in the Act. Effective as of date hereof, the Trustees shall
have all rights, powers and duties set forth herein and in the Act with respect
to accomplishing the purposes of the Trust. The Trustees hereby accept such
appointment and agree to hold the Trust Estate in trust for the use and benefit
of all present and future Holders, subject to all trusts, conditions and
provisions of this Agreement, and accept, upon the trusts expressed in this
Agreement, all the rights, powers and trusts of the Initial Trustee as trustee
under and pursuant to the Original Agreement and agree to be bound by all the
terms of the Original Agreement and this Agreement, such acceptance and
agreement to be effective as of the close of business on the date hereof.
(c) The Trust shall not engage in any activities other than
those required or authorized by the terms of this Agreement relating to the
issuance, sale and payment of the DECS in accordance with their terms, and the
acquisition, management, collection and holding of the Trust Estate, all in
accordance with the terms of this Agreement.
(d) It is the intention of the parties hereto that the Trust
constitute a business trust under the Act and that this Trust Agreement
constitute the governing instrument of the Trust. It is the intention of the
parties hereto that, for purposes of federal income taxes, state and local
income and franchise taxes imposed upon, measured by, or based upon gross or net
income, the Trust shall be treated as a grantor trust owned solely by the
present and future Holders and the provisions of this Agreement shall be
interpreted in a manner consistent with such intention.
(e) The Trustees hereby declare that they will accept and hold
the Trust Estate in trust for the use and benefit of all present and future
Holders. The Initial Trustee hereby resigns
<PAGE>
effective upon the appointment and acceptance of the Trustees under the terms of
this Agreement. The Sponsor hereby waives the thirty (30) day notice requirement
of Section 5 of the Original Agreement. The Initial Sponsor has heretofore
deposited with the Initial Trustee the sum of $1 to accept and hold in trust
hereunder until the issuance and sale of the DECS to the Underwriters, whereupon
such sum shall be donated to an organization satisfying the requirements of
Section 170(c)(2) of the Code selected by unanimous consent of the Trustees.
SECTION 2.5 GENERAL POWERS AND DUTIES OF THE TRUSTEES. In
furtherance of the provisions of Section 2.4 hereof, the Sponsor authorizes and
directs the Trustees, on behalf of the Trust:
(a) to enter into and perform (and, in accordance with Section
8.4(a) hereof, amend), the Contracts, the Collateral Agreements, the
Underwriting Agreement, the Fund Indemnity Agreement, the Custodian
Agreement, the Administration Agreement and the Paying Agent Agreement
and to perform all obligations of the Trustees (including the
obligation to provide indemnity hereunder and thereunder) and enforce
all rights and remedies of the Trust under each of such agreements; and
if any of the Custodian Agreement, the Administration Agreement, the
Collateral Agreements and the Paying Agent Agreement terminates, or the
agent of the Trust thereunder resigns or is discharged, to appoint a
substitute agent and enter into a new agreement with such substitute
agent containing provisions substantially similar to those contained in
the agreement being terminated; provided that in any such new agreement
(i) the Custodian and the Paying Agent shall each be a commercial bank
or trust company organized and existing under the laws of the United
States of America or any state therein, shall have full trust powers
and shall have minimum capital, surplus and retained earnings of not
less than $100,000,000; and (ii) the Administrator and the Collateral
Agent shall each be a reputable financial institution qualified in all
respects to carry out its obligations under the Administration
Agreement or the Collateral Agreements, as the case may be;
(b) to hold the Trust Estate in trust, to create and
administer the Trust Account, to direct payments received by the Trust
to the Trust Account and to make payments out of the Trust Account as
set forth in Article III hereof;
(c) to issue and sell to the Underwriters an aggregate of up
to [11,500,000] DECS (including those DECS subject to the
over-allotment option of the Underwriters provided for in the
Underwriting Agreement) pursuant to the Underwriting Agreement and as
contemplated by the Prospectus; provided, however, that subsequent to
the determination of the public offering price per DECS and related
underwriting discount for the DECS to be sold to the Underwriters but
prior to the sale of the DECS to the Underwriters, the DECS originally
issued to the Sponsor shall be split into a greater number of DECS,
with any fractional shares being rounded down to the nearest integral
number, so that immediately following such split the value of each DECS
held by the Sponsor will equal the aforesaid public offering price;
(d) to select independent public accountants and, subject to
the provisions of
<PAGE>
Section 8.5 hereof, to engage such independent public accountants;
(e) to engage legal counsel and, to the extent required by
Section 2.7 hereof, to engage professional advisors and pay reasonable
compensation thereto;
(f) to defend any action commenced against the Trustees or the
Trust and to prosecute any action which the Trustees deem necessary to
protect the Trust and the rights and interests of Holders, and to pay
the costs thereof;
(g) to arrange for the bonding of officers and employees of
the Trust as required by Section 17(g) of the Investment Company Act
and the rules and regulations thereunder;
(h) to delegate any and all of its powers and duties hereunder
as contemplated by the Custodian Agreement, the Paying Agent Agreement
and the Administration Agreement, to the extent permitted by applicable
law; and
(i) to adopt and amend bylaws, and take any and all such other
actions as necessary or advisable to carry out the purposes of the
Trust, subject to the provisions hereof and applicable law, including,
without limitation, the Investment Company Act.
SECTION 2.6 PORTFOLIO ACQUISITION. In furtherance of the
provisions of Section 2.4 hereof, the Sponsor further specifically authorizes
and directs the Trustees, acting on behalf of the Trust:
(a) to enter into the Contracts with respect to the Shares
subject thereto with the Sellers on the Commencement Date for
settlement on the date or dates provided thereunder and, subject to
satisfaction of the conditions set forth in the Contracts, to pay the
Firm Purchase Price and the Additional Purchase Price, if any,
thereunder with the proceeds of the sale of the DECS, net of
underwriting commissions and net of the purchase price paid for the
Treasury Securities as provided in paragraph (b) below; and, subject to
the adjustments and exceptions set forth in the Contracts, the
Contracts shall entitle the Trust to receive from the Sellers on the
Exchange Date the Shares and/or Reported Securities subject thereto
(and/or, if one or more of the Sellers elects the Cash Delivery Option
under the Contracts, the amount in cash specified in such Contracts in
respect thereof) so that the Trust may execute the Exchange with the
Holders; and
(b) to purchase for settlement at the Closing Date, and at the
Option Closing Date, as appropriate, with the proceeds of the sale of
the DECS, net of underwriting commissions, U.S. Treasury securities
from such brokers or dealers as the Trustees shall designate in writing
to the Administrator having the terms set forth on Schedule I hereto
("TREASURY SECURITIES").
SECTION 2.7 PORTFOLIO ADMINISTRATION. In furtherance of the
provisions of Section 2.4 hereof, the Sponsor further specifically authorizes
and directs the Trustees:
<PAGE>
(a) DETERMINATION OF EXCHANGE RATE ADJUSTMENTS. Upon receipt
of any notice pursuant to Section 5.4(b) of the Contracts of an event
requiring an adjustment to the Exchange Rate, Exchange Price or Closing
Price, or upon otherwise acquiring knowledge of such an event, to
calculate the required adjustment and furnish notice thereof to the
Collateral Agent, the Sellers and the Administrator, or to request from
the Sellers or the Administrator such further information as may be
necessary to calculate or effect the required adjustment;
(b) SELECTION OF INDEPENDENT INVESTMENT BANK. At such times
and for such purposes as provided in the Contracts, to select and
retain a nationally recognized investment banking firm to determine the
market value of any property as provided in the Contracts, and to
deliver to the Sellers notice pursuant to Section 8.1 of the Contracts
identifying the firm proposed to be selected and retained, and to
consult with the Sellers on such selection and retention as provided in
such Section 8.1;
(c) ACCELERATION. In the event an Acceleration Date shall
occur due to an Event of Default as provided in Article VII of any of
the Contracts, to deliver the notice to the related Seller contemplated
in the last paragraph of Article VII of the Contracts, if applicable,
and to liquidate a proportionate amount of Treasury Securities and
distribute the proceeds thereof pro rata to each of the Holders of the
DECS, together with any shares of Class A Common Stock or other amounts
to be distributed to the Holders of the DECS, in each case in
accordance with the Contracts and the Collateral Agreements;
(d) DETERMINATION OF EXCHANGE DATE AMOUNTS. To calculate, on
the Exchange Date, the number of Shares and/or, if one or more Sellers
elect the Cash Delivery Option under his or her Contract, the amount in
cash required to be delivered by each of the Sellers under Sections 1.1
and 1.3 of the Contracts or, if an Adjustment Event shall have
occurred, the amount of cash required to be delivered by the Sellers,
and the number of Reported Securities permitted to be delivered by the
Sellers in lieu of all or a portion of such cash, all as provided in
Section 6.2 of the Contracts, and to furnish notice of the amounts so
determined to the Collateral Agent and the Sellers;
(e) DISTRIBUTION OF EXCHANGE CONSIDERATION. Unless an Event of
Default or an Adjustment Event shall have occurred or one or more
Sellers elect the Cash Delivery Option under the Contracts (in which
event the cash received in respect thereof shall be distributed pro
rata to the Holders of the DECS):
(i) DETERMINATION OF FRACTIONAL SHARES. To determine,
on the Exchange Date: (a) for each Holder of DECS, such
Holder's pro rata share of the total number of Shares
delivered to the Trust under the Contracts on the Exchange
Date; and (b) the number of fractional Shares allocable to
each Holder (including, in the case of the Depositary,
fractional shares allocable to beneficial owners of Securities
who own through Participants) and in the aggregate;
(ii) CASH FOR FRACTIONAL SHARES. To sell, in the
principal market therefor, on the Exchange Date, a number of
Shares equal to the aggregate number
<PAGE>
of fractional Shares determined pursuant to clause (i) (b)
above, rounded down to the nearest integral number; and to
distribute to the Holders, pro rata in accordance with the
fractional shares to which they would otherwise have been
entitled, the aggregate proceeds of such sale (net of any
brokerage or related expenses); and
(iii) DELIVERY OF SHARES. To deliver the remaining
Shares to the Transfer Agent and Registrar on the Exchange
Date, with instructions that such Shares be re-registered and
re-issued as follows: (a) for and in the name of each Holder
(other than the Depositary) who holds DECS in definitive form,
if any, the Transfer Agent and Registrar shall be instructed
to issue definitive certificates representing a number of
Shares equal to such Holder's pro rata share of the total
number of Shares delivered to the Trust under the Contracts,
rounded down to the nearest integral number and the Trustees
shall cause the delivery of such re-registered and re-issued
Shares to each respective Holder; and (b) the Transfer Agent
and Registrar shall be instructed to transfer all remaining
Shares to the account of the Custodian held through the
Depositary, who shall then be instructed to transfer and
credit such Shares to each Participant who holds DECS, with
each Participant receiving its pro rata share of the total
Shares delivered to the Trust on the Exchange Date, reduced by
the aggregate fractional shares allocable to such Participant
as described in (i) above;
(iv) DISTRIBUTION OF OTHER PROPERTY. To distribute on
the Exchange Date to each Holder of DECS such Holder's pro
rata share of the total number or amount of each other type of
property owned by the Trust at the Exchange Date, rounded to
the nearest integral number;
(v) RECORD DATE. The distributions described in this
paragraph (v) shall be made to Holders of record as of the
close of business on the Business Day preceding the Exchange
Date.
SECTION 2.8 MANNER OF SALES. Any sale of Trust property
permitted under Section 8.3(c) hereof shall be made through such executing
brokers or to such dealers as the Trustees, seeking best price and execution for
the Trust, shall designate in writing to the Paying Agent, taking into account
such factors as price, commission, size of order, difficulty of execution and
brokerage skill required.
SECTION 2.9 LIMITATIONS ON TRUSTEES' POWERS. The Trustees are
not permitted:
(a) to purchase or hold any securities or instruments except
for the Shares, the Contracts, the Treasury Securities, the Temporary
Investments contemplated by Section 3.5 hereof and any Reported
Securities, cash or other property delivered pursuant to the terms of
any Contract;
(b) to dispose of the Contracts prior to the Exchange Date;
<PAGE>
(c) to issue any securities or instruments except for the
DECS, or to issue any DECS other than the DECS sold to the Sponsor and
the DECS to be sold pursuant to the Underwriting Agreement;
(d) to make short sales or purchases on margin;
(e) to write put or call options;
(f) to borrow money;
(g) to underwrite securities;
(h) to purchase or sell real estate, commodities or
commodities contracts;
(i) to purchase restricted securities;
(j) to make loans; or
(k) to take any action, or direct or permit the Administrator,
the Paying Agent or the Custodian to take any action, that would vary
the investment of the Holders within the meaning of Treasury Regulation
Section 301.7701-4(c), or otherwise take any action or direct or permit
any action to be taken that would or could cause the Trust not to be a
"grantor trust" owned solely by the present and future Holders under
the Code.
SECTION 2.10 LEGAL TITLE TO TRUST PROPERTY. Legal title to the
Trust Estate shall be vested at all times in the Trust as a separate legal
entity except where applicable law in any jurisdiction requires title to any
part of the Trust Estate to be vested in a trustee or trustees, in which case
legal title shall be deemed to be vested in the Trustees, a co-trustee and/or a
separate trustee, as the case may be.
SECTION 2.11 SITUS OF TRUST. The Trust shall be located and
administered in, and all bank accounts of the Trust maintained in, the State of
Delaware or the State of New York. Payments shall be received by the Trust only
in the State of Delaware or the State of New York and payments will be made by
the Trust only from the State of Delaware or the State of New York.
ARTICLE III
ACCOUNTS AND PAYMENTS
SECTION 3.1 THE TRUST ACCOUNT. The Trustees shall, upon
issuance of the DECS, establish with the Paying Agent an account to be called
the "Trust Account". All moneys received by the Trust or the Trustees in respect
of the Contracts, the Treasury Securities and any Temporary Investments held
pursuant to Section 3.5 hereof, all moneys received from the sale of the DECS to
the Sponsor, and any proceeds from the sale of the DECS to the Underwriters
after the purchase of the Contracts and the Treasury Securities shall be
credited to the Trust Account.
<PAGE>
SECTION 3.2 PAYMENT OF FEES AND EXPENSES. The Sponsor will pay
the fees and expenses of the Trust incurred in connection with the offering of
the DECS and the costs and expenses incurred in the organization of the Trust.
SECTION 3.3 DISTRIBUTIONS TO HOLDERS. On or shortly after each
Distribution Date the Trust shall distribute to each Holder of record at the
close of business on the preceding Record Date, at the post office address of
the Holder appearing on the books of the Trust or Paying Agent or by any other
means mutually agreed upon by the Holder and the Trust, an amount equal to such
Holder's pro rata share of the Quarterly Distribution computed as of the close
of business on such Distribution Date.
SECTION 3.4 SEGREGATION. All moneys and other assets deposited
or received by the Trust or the Trustees hereunder shall be held by them in
trust as part of the Trust Estate until required to be disbursed or otherwise
disposed of in accordance with the provisions of this Trust Agreement, and the
Trust or the Trustees shall handle such moneys and other assets in such manner
as shall constitute the segregation and holding in trust within the meaning of
the Investment Company Act.
SECTION 3.5 TEMPORARY INVESTMENTS. To the extent necessary to
enable the Paying Agent to make the next succeeding Quarterly Distribution, any
moneys deposited with or received by the Trustees in the Trust Account shall be
invested as soon as possible by the Paying Agent in Temporary Investments
maturing no later than the Business Day preceding the next following
Distribution Date. Except as otherwise specifically provided herein or in the
Paying Agent Agreement, the Paying Agent shall not have the power to sell,
transfer or otherwise dispose of any Temporary Investment prior to the maturity
thereof, or to acquire additional Temporary Investments. The Paying Agent shall
hold any Temporary Investment to its maturity and shall apply the proceeds
thereof upon maturity to the payment of the next succeeding Quarterly
Distribution. All such Temporary Investments shall be selected from time to time
by the Trustees or pursuant to standing instructions from the Trustees to the
Administrator, and the Administrator and/or Paying Agent shall have no liability
to the Trust or any Holder or any other Person with respect to any such
Temporary Investment. Any interest or other income received on any moneys in the
Trust Account shall, upon receipt thereof, be deposited into the Trust Account
ARTICLE IV
REDEMPTION
SECTION 4.1 REDEMPTION. The Trustees shall have no right or
obligation to redeem DECS.
ARTICLE V
ISSUANCE OF CERTIFICATES; REGISTRY; TRANSFER OF DECS
SECTION 5.1 FORM OF CERTIFICATE. Each Certificate evidencing
DECS shall be
<PAGE>
countersigned manually or in facsimile by the Managing Trustee and countersigned
manually by the Paying Agent in substantially the form of Exhibit A hereto with
the blanks appropriately filled in, shall be dated the date of execution and
delivery by the Paying Agent and shall represent a fractional undivided interest
in the Trust, the numerator of which fraction shall be the number of DECS set
forth on the face of such Certificate and the denominator of which shall be the
total number of DECS outstanding at that time. All DECS shall be issued in
registered form and shall be numbered serially.
The DECS delivered to the Underwriters on the Closing Date and
on any settlement date under Section 5 of the Underwriting Agreement will be
issued in the form of a global Certificate or Certificates representing the DECS
issued to the Underwriters, to be delivered to the Depositary by or on behalf of
the Trust. Such Certificate or Certificates shall initially be registered on the
books and records of the Trust in the name of Cede & Co., the nominee of DTC,
and no beneficial owner of such DECS will receive a definitive Certificate
representing such beneficial owner's interest in such DECS, except as provided
in the next paragraph. Unless and until definitive, fully registered
Certificates have been issued pursuant to the next paragraph, the Trust shall be
entitled to deal with the Depositary for all purposes of this Agreement as the
Holder and the sole holder of the Certificates and shall have no obligation to
the beneficial owners thereof, and none of the Trust, the Trustees, or any agent
of the Trust or the Trustees shall have any liability with respect to or
responsibility for the records of the Depositary.
If the Depositary elects to discontinue its services as
securities depository and a successor depositary is not appointed by the Trust
within 90 days, then definitive Certificates shall be prepared by the Trust.
Upon surrender of the global Certificate or Certificates accompanied by
registration instructions, the Trustees shall cause definitive Certificates to
be delivered to the beneficial owners in accordance with the instructions of the
Depositary. Neither the Trustees nor the Trust shall be liable for any delay in
delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions.
Pending the preparation of definitive Certificates, the
Trustees may execute and the Paying Agent shall authenticate and deliver
temporary Certificates (printed, lithographed, typewritten or otherwise
reproduced, in each case in form satisfactory to the Paying Agent). Temporary
Certificates shall be issuable as registered Certificates substantially in the
form of the definitive Certificates but with such omissions, insertions and
variations as may be appropriate for temporary Certificates, all as may be
determined by the Trustees with the concurrence of the Paying Agent. Every
temporary Certificate shall be executed by the Managing Trustee and be
authenticated by the Paying Agent upon the same conditions and in substantially
the same manner, and with like effect, as the definitive Certificates. Without
unreasonable delay the Managing Trustee shall execute and shall furnish
definitive Certificates and thereupon temporary Certificates may be surrendered
in exchange therefor without charge at each office or agency of the Paying Agent
and the Paying Agent shall authenticate and deliver in exchange for such
temporary Certificates definitive Certificates for a like aggregate number of
DECS. Until so exchanged, the temporary Certificates shall be entitled to the
same benefits hereunder as definitive Certificates.
<PAGE>
SECTION 5.2 TRANSFER OF DECS; ISSUANCE, TRANSFER AND EXCHANGE
OF CERTIFICATES. DECS may be transferred by the Holder thereof by presentation
and surrender of properly endorsed Certificates at the office of the Paying
Agent, accompanied by such documents executed by the Holder or his authorized
attorney as the Paying Agent deems necessary to evidence the authority of the
person making the transfer. Certificates issued pursuant to this Trust Agreement
are exchangeable for one or more other Certificates representing an equal
aggregate number of DECS and all Certificates issued as may be requested by the
Holder and deemed appropriate by the Paying Agent shall be issued in
denominations of one DECS or any multiple thereof. The Paying Agent may deem and
treat the person in whose name any DECS shall be registered upon the books of
the Paying Agent as the owner of such DECS for all purposes hereunder and the
Paying Agent shall not be affected by any notice to the contrary. The transfer
books maintained by the Paying Agent for the purposes of this Section 5.2 hereof
shall include the name and address of the record owners of the DECS and shall be
closed in connection with the termination of the Trust pursuant to Section 8.3
hereof.
A sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such transfer shall be paid to the
Paying Agent by the Holder. A Holder may be required to pay a fee for each new
Certificate to be issued pursuant to the preceding paragraph in such amount as
may be specified by the Paying Agent and approved by the Trustees.
All Certificates cancelled pursuant to this Trust Agreement
may be voided by the Paying Agent in accordance with the usual practice of the
Paying Agent or in accordance with the instructions of the Trustees; provided,
however, that the Paying Agent shall not be required to destroy cancelled
Certificates.
The Paying Agent may adopt other reasonable rules and
regulations for the registration, transfer and tender of DECS as it may, in its
discretion, deem necessary.
SECTION 5.3 REPLACEMENT OF CERTIFICATES. In case any
Certificate shall become mutilated or be destroyed, stolen or lost, the Paying
Agent shall execute and deliver a new Certificate in exchange and substitution
therefor upon the Holder's furnishing the Paying Agent with proper
identification and satisfactory indemnity, complying with such other reasonable
regulations and conditions as the Paying Agent may prescribe and paying such
expenses and charges, including any bonding fee, as the Paying Agent may incur
or reasonably impose; provided that if the Trust has terminated or is in the
process of terminating, the Paying Agent, in lieu of issuing such new
Certificate, may, upon the terms and conditions set forth herein, make the
distributions set forth in Section 8.3(c) hereof. Any mutilated Certificate
shall be duly surrendered and cancelled before any duplicate Certificate shall
be issued in exchange and substitution therefor. Upon issuance of any duplicate
Certificate pursuant to this Section 5.3 hereof, the original Certificate
claimed to have been lost, stolen or destroyed shall become null and void and of
no effect, and any bona fide purchaser thereof shall have only such rights as
are afforded under Article 8 of the Uniform Commercial Code to a Holder
presenting a Certificate for transfer in the case of an overissue.
<PAGE>
SECTION 5.4 LIMITATION ON LIABILITY. Pursuant to Section
3803(a) of the Act, the Holders of the DECS shall be entitled to the same
limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the State
of Delaware.
SECTION 5.5. GENERAL PROVISIONS REGARDING THE DECS.
(a) The consideration received by the Trust for the issuance
of the DECS shall constitute a contribution to the capital of the Trust and
shall not constitute a loan to the Trust.
(b) Upon issuance of the DECS as provided in this Trust
Agreement, the DECS so issued shall be deemed to be validly issued, fully paid
and non-assessable.
(c) Every person, by virtue of having become a Holder in
accordance with the terms of this Trust Agreement, shall be deemed to have
expressly assented and agreed to the terms of, and shall be bound by, this Trust
Agreement.
ARTICLE VI
ISSUANCE OF THE CONTRACTS
SECTION 6.1 EXECUTION OF THE CONTRACTS. The Contracts shall be
countersigned manually or in facsimile by the Managing Trustee and executed
manually by each of the Sellers and shall be dated the date of execution and
delivery by each of the Sellers.
ARTICLE VII
TRUSTEES
SECTION 7.1 TRUSTEES. The Trust shall have three Trustees who
shall initially be elected by the Initial Trustee. One Trustee shall be the
Managing Trustee and, as such, is authorized to execute documents and
instruments on behalf of the Trust. The Managing Trustee will be appointed by
resolution of the Trustees. Each Trustee shall serve until the next regular
annual or special meeting of Holders called for the purpose of electing Trustees
and, then, until such Trustee's successor is duly elected and qualified. Holders
may not cumulate their votes in the election of Trustees. Each Trustee shall not
be considered to have qualified for the office unless such Trustee shall agree
to be bound by the terms of this Trust Agreement and shall evidence his consent
by executing this Trust Agreement or a supplement hereto.
SECTION 7.2 VACANCIES. Any vacancy in the office of a Trustee
may be filled in compliance with Sections 10 and 16 of the Investment Company
Act by the vote, within thirty days, of the remaining Trustees; provided that if
required by Section 16 of the Investment Company Act, the Trustees shall
forthwith cause to be held as promptly as possible and in any event within sixty
days (unless the Commission by order shall extend such period) a meeting of
Holders for the purpose of electing Trustees in compliance with Sections 10 and
16 of the Investment Company Act. Until a vacancy in the office of any Trustee
is filled as provided
<PAGE>
above, the remaining Trustees in office, regardless of their number, shall have
the powers granted to the Trustees and shall discharge all the duties imposed
upon the Trustees by this Trust Agreement. Election shall be by the affirmative
vote of Holders of a majority of the DECS entitled to vote present in person or
by proxy at a special meeting of Holders called for the purpose of electing any
Trustee. Each individual Trustee shall be at least 21 years of age and shall not
be under any legal disability. No Trustee who is an "interested person", as
defined in the Investment Company Act, may assume office if it would cause the
composition of the Trustees of the Trust not to be in compliance with the
percentage limitations on interested persons in Section 10 of the Investment
Company Act. Trustees need not be Holders. Notice of the appointment or election
of a successor Trustee shall be mailed promptly after acceptance of such
appointment by the successor Trustee to each Holder.
SECTION 7.3 POWERS. The Trust will be managed solely by the
Trustees, who will, subject to the provisions of Article II hereof, have
complete and exclusive control over the management, conduct and operation of the
Trust's business, and shall have the rights, powers and authority of a board of
directors of a corporation organized under Delaware law. The Trustees shall have
fiduciary responsibility for the safekeeping and use of all funds and assets of
the Trust and shall not employ, or permit another to employ, such funds or
assets in any manner except for the exclusive benefit of the Trust and except in
accordance with the terms of this Trust Agreement. Subject to the continuing
supervision of the Trustees and as permitted by applicable law, the functions of
the Trust shall be performed by the Custodian, the Paying Agent, the
Administrator and such other entities engaged to perform such functions as the
Trustees may determine, including, without limitation, any or all administrative
functions.
SECTION 7.4 MEETINGS. Meetings of the Trustees shall be held
from time to time upon the call of any Trustee on not less than 48 hours' notice
(which may be waived by any or all of the Trustees in writing either before or
after such meeting or by attendance at the meeting unless the Trustee attends
the meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting has not been lawfully called or
convened). The Trustees shall act either by majority vote of the Trustees
present at a meeting at which at least a majority of the Trustees then in office
are present or by a unanimous written consent of the Trustees without a meeting.
Except as otherwise required under the Investment Company Act, all or any of the
Trustees may participate in a meeting of the Trustees by means of a conference
telephone call or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by means of such communications equipment shall constitute presence in person at
such meeting.
SECTION 7.5 RESIGNATION AND REMOVAL. Any Trustee may resign
and be discharged of the trust created by the Trust Agreement by executing an
instrument in writing resigning as Trustee, filing the same with the
Administrator and sending notice thereof to the remaining Trustees, and such
resignation shall become effective immediately unless otherwise specified
therein. Any Trustee may be removed in the event of incapacity by vote of the
remaining Trustees and for any reason by written declaration or vote of the
Holders of more than 66 2/3% of the outstanding DECS, notice of which vote shall
be given to the remaining Trustees and the Administrator. The resignation,
removal or failure to reelect any Trustee shall not cause
<PAGE>
the termination of the Trust.
SECTION 7.6 LIABILITY. The Trustees shall not be liable to the
Trust or any Holder for any action taken or for refraining from taking any
action except in the case of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties of their office. Specifically, without
limitation, the Trustees shall not be responsible for or in respect of the
recitals herein or the validity or sufficiency of this Trust Agreement or for
the due execution hereof by any other Person, or for or in respect of the
validity or sufficiency of DECS or certificates representing DECS and shall in
no event assume or incur any liability, duty or obligation to any Holder or to
any other Person, other than as expressly provided for herein. The Trustees may
employ agents, attorneys, administrators, accountants and auditors, and shall
not be answerable for the default or misconduct of any such Persons if such
Persons shall have been selected with reasonable care. Action in good faith may
include action taken in good faith in accordance with an opinion of counsel. In
no event shall any Trustee be personally liable for any expenses with respect to
the Trust. Each Trustee shall be indemnified from the Trust Account with respect
to any claim, liability, loss or expense incurred in acting as Trustee of the
Trust, including the costs and expenses of the defense against any such claim or
liability, except in the case of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties of his office.
SECTION 7.7 COMPENSATION. Each Trustee, other than a Trustee
who is a director, officer or employee of the Sponsor, any Underwriter, or the
Administrator or any affiliate thereof, shall receive a one-time, up-front fee
of $10,800, in respect of its annual fee and anticipated out-of-pocket expenses.
In addition, the Managing Trustee shall receive an additional one-time, up-front
fee of $3,600 for serving in such capacity. The Trustees will not receive any
pension or retirement benefits. In the event of the resignation or removal of a
Trustee, such Trustee shall remit to the Trust the portion of its fee ratable
for the period from the day of such resignation or removal through the Exchange
Date.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 MEETINGS OF HOLDERS. The Trustees shall not hold
annual or regular meetings of Holders except as set forth herein. A special
meeting may be called at any time by the Trustees or upon petition of Holders of
not less than 51% of the DECS outstanding (unless substantially the same matter
was voted on during the preceding 12 months), and shall be called as provided in
Section 7.2 hereof (or as otherwise required by the Investment Company Act and
the rules and regulations thereunder, including, without limitation, when
requested by the Holders of not less than 10% of the DECS outstanding for the
purposes of voting upon the question of the removal of any Trustee or Trustees).
The Trustees shall establish, and notify the Holders in writing of, the record
date for each such meeting which shall be not less than 10 nor more than 50 days
before the meeting date. Holders at the close of business on the record date
will be entitled to vote at the meeting. The Administrator shall, as soon as
possible after any such record date (or prior to such record date if
appropriate), mail by first class mail to each
<PAGE>
Holder a notice of meeting and a proxy statement and form of proxy in the form
approved by the Trustees and complying with the Investment Company Act and the
rules and regulations thereunder. Except as otherwise specified herein or in any
provision of the Investment Company Act and the rules and regulations
thereunder, any action may be taken by vote of Holders of a majority of the DECS
outstanding present in person or by proxy if Holders of a majority of DECS
outstanding on the record date are so represented. Each DECS shall have one vote
and may be voted in person or by duly executed proxy. Any proxy may be revoked
by notice in writing, by a subsequently dated proxy or by voting in person at
the meeting, and no proxy shall be valid after eleven months following the date
of its execution. Any investment company (as defined in Section 3 of the
Investment Company Act) owning DECS in excess of the limits imposed by Sections
12(d)(1)(A)(i) and 12(d)(1)(c) of the Investment Company Act will be required to
vote its DECS in proportion to the votes of all other Holders.
SECTION 8.2 BOOKS AND RECORDS; REPORTS. (a) The Trustees shall
keep a certified copy or duplicate original of this Trust Agreement on file at
the office of the Trust and the office of the Administrator available for
inspection at all reasonable times during its usual business hours by any
Holder. The Trustees shall keep proper books of record and account for all the
transactions under this Trust Agreement at the office of the Trust and the
office of the Administrator, and such books and records shall be open to
inspection by any Holder at all reasonable times during usual business hours.
The Trustees shall retain all books and records in compliance with Section 31 of
the Investment Company Act and the rules and regulations thereunder.
(b) With each payment to Holders the Paying Agent shall set
forth, either in the instruments by means of which payment is made or in a
separate statement, the amount being paid from the Trust Account expressed as a
dollar amount per DECS and the other information required under Section 19 of
the Investment Company Act and the rules and regulations thereunder. The
Trustees shall prepare and file or distribute reports as required by Section 30
of the Investment Company Act and the rules and regulations thereunder. The
Trustees shall prepare and file such reports as may from time to time be
required to be filed or distributed to Holders under any applicable state or
Federal statute or rule or regulation thereunder, and shall file such tax
returns as may from time to time be required under any applicable state or
Federal statute or rule or regulation thereunder. One of the Trustees shall be
designated by resolution of the Trustees to make the filings and give the
notices required by Rule 17g-1 under the Investment Company Act.
(c) In calculating the net asset value of the Trust as
required by the Investment Company Act, (i) the Treasury Securities shall be
valued at the mean between the last current bid and asked prices or, if
quotations are not available, as determined in good faith by the Trustees, (ii)
short-term investments having a maturity of 60 days or shall be valued at cost
with accrued interest or discount earned included in interest receivable and
(iii) the Contracts shall be valued at the mean of the bid prices received by
the Administrator from at least three independent broker-dealer firms
unaffiliated with the Trust to be named by the Trustees who are in the business
of making bids on financial instruments similar to the Contracts and with terms
comparable thereto. In the event that the Trust (acting through the
Administrator) is unable to
<PAGE>
obtain valuations from three independent broker-dealer firms, as required by
clause (iii) of the preceding sentence, on a timely basis or without
unreasonable effort or expense, the Contracts shall be valued at the median of
bid prices received from two such broker-dealer firms. In the event that the
Trust (acting through the Administrator) is unable to obtain a valuation for the
Contracts that it believes to be reasonable through the above method, or on a
timely basis or without unreasonable effort or expense, valuation shall be
established at a level deemed to be fair and reflective of the market value for
the Contracts based on all appropriate factors relevant to the value of the
Contracts determined by an independent expert or appraiser retained by the
Trustees or the Administrator on their behalf.
SECTION 8.3 TERMINATION. (a) The Trust created hereby shall
dissolve, and its affairs be wound up, upon the earliest of (i) the date 90 days
after the execution of this Trust Agreement if (x) the DECS have not theretofore
been issued or (y) the net worth of the Trust is not at least $100,000 at such
time, (ii) the date of the repayment, sale or other disposition, as the case may
be, of all of the Contracts, the Treasury Securities and any other securities
held hereunder, (iii) the date 10 Business Days after the Exchange Date (or, if
the Contracts shall be accelerated pursuant to Article VII thereof, 10 Business
Days after the date on which the Trust shall receive the Shares, cash or other
property then required to be delivered by each of the Sellers, or the proceeds
of any sale of collateral pursuant to the Collateral Agreements), and (iv) the
date which is 21 years less 91 days after the death of the last survivor of all
of the descendants of Joseph P. Kennedy living on the date hereof. The Trust is
irrevocable, the Sponsor has no right to withdraw any assets constituting a
portion of the Trust Estate, and the dissolution of the Sponsor shall not
operate to terminate the Trust. The death or incapacity of any Holder shall not
operate to terminate this Trust Agreement, nor entitle his legal representatives
or heirs to claim an accounting or to take any action or proceeding in any court
for a partition or winding up of the Trust, and shall not otherwise affect the
rights, obligations and liabilities of the parties hereto.
(b) Written notice of any dissolution shall be sent to Holders
specifying the record date for any distribution to Holders and the time of
dissolution as determined by the Trustees, upon which the books maintained by
the Paying Agent pursuant to Section 5.2 hereof shall be closed.
(c) To the extent permitted by applicable law, for purposes of
dissolution under Sections 8.3(a)(ii), (iii) and (iv) hereof, within five
Business Days after such dissolution, the Trustees shall effect the sale of any
remaining property of the Trust, and the Paying Agent shall distribute pro rata
as soon as practicable thereafter to each Holder, upon surrender for
cancellation of its Certificates, its interest in the Trust Estate. Together
with the distribution to the Holders, the Trustees shall furnish the Holders
with a final statement as of the date of the distribution of the amount
distributable with respect to each DECS.
(d) Upon the winding up of the Trust and its dissolution, the
Managing Trustee shall cause the Certificate of Trust to be canceled by filing a
certificate of cancellation with the Office of the Secretary of State of the
State of Delaware in accordance with the provisions of Section 3810 of the Act.
Upon the dissolution of the Trust, the sale of Trust property and distribution
of the Trust Estate to the Holders, and the filing of the certificate of
cancellation, the Trust shall terminate and this Agreement shall be of no
further force or effect.
SECTION 8.4 AMENDMENT AND WAIVER. (a) This Trust Agreement,
and any of the agreements referred to in Section 2.5(a) hereof, may be amended
from time to time by the Trustees for any purpose prior to the issuance and sale
to the Underwriters of the DECS and thereafter without the consent of any of the
Holders (i) to cure any ambiguity or to correct or supplement any provision
contained herein or therein which may be defective or inconsistent with any
other provision contained herein or therein; (ii) to change any provision hereof
or thereof as may be required by applicable law or the Commission or any
successor governmental agency exercising similar authority; or (iii) to make
such other provisions in regard to matters or questions arising hereunder or
thereunder as shall not materially adversely affect the interests of the Holders
(as determined in good faith by the Trustees, who may rely on an opinion of
counsel).
(b) This Trust Agreement may also be amended from time to time
by the Trustees (or the performance of any of the provisions of the Trust
Agreement may be waived) with the consent by the required vote of the Holders in
accordance with Section 8.1 hereof; provided that this Trust Agreement may not
be amended (i) without the consent by vote of the Holders of all DECS then
outstanding, so as to increase the number of DECS issuable hereunder above the
number of DECS specified in Section 2.5(c) hereof or such lesser number as may
be outstanding at any time during the term of this Trust Agreement, (ii) to
reduce the interest in the Trust represented by DECS without the consent of the
Holders of such DECS, (iii) if such amendment is prohibited by the Investment
Company Act or other applicable law, (iv) without the consent by vote of the
Holders of all DECS then outstanding, if such amendment would effect a change in
the voting requirements set forth in Section 8.1 hereof or this Section 8.4, or
(v) without the consent by vote of the Holders of the lesser of (x) 67% or more
of the DECS represented at a special meeting of Holders, if more than 50% of the
DECS outstanding are represented at such meeting, and (y) more than 50% of the
DECS outstanding, if such amendment would effect a change in Section 2.4 or 2.9
hereof.
(c) Promptly after the execution of any amendment, the
Trustees shall furnish written notification of the substance of such amendment
to each Holder.
(d) Notwithstanding subsections (a) and (b) of this Section
8.4, no amendment hereof shall permit the Trust, the Trustees, the
Administrator, the Paying Agent or the Custodian to take any action or direct or
permit any Person to take any action that (i) would vary the investment of
Holders within the meaning of Treasury Regulation Section 301.7701-4(c), or (ii)
would or could cause the Trust, or direct or permit any action to be taken that
would or could cause the Trust, not to be a "grantor trust" under the Code.
SECTION 8.5 ACCOUNTANTS.
(a) The Trustees shall, in accordance with Section 30 of the
Investment Company Act, file annually with the Commission such information,
documents and reports as investment companies having securities registered on a
national securities exchange are required to file
<PAGE>
annually pursuant to Section 13(a) of the Securities Exchange Act of 1934, as
amended, and the rules and regulations issued thereunder. The Trustees shall
transmit to the Holders, at least semi-annually, the reports required by Section
30(d) of the Investment Company Act and the rules and regulations thereunder,
including, without limitation, a balance sheet accompanied by a statement of the
aggregate value of investments on the date of such balance sheet, a list showing
the amounts and values of such investments owned on the date of such balance
sheet, and a statement of income for the period covered by the report. Financial
statements contained in such annual reports shall be accompanied by a
certificate of independent public accounts based upon an audit not less in scope
or procedures than that which independent public accountants would ordinarily
make for the purpose of presenting comprehensive and dependable financial
statements and shall contain such information as the Commission may prescribe.
Each such report shall state that such independent public accountants have
verified investments owned, either by actual examination or by receipt of a
certificate from the Custodian.
(b) The independent public accountants referred to in
subsection (a) above shall be selected at a meeting held within thirty days
before or after the beginning of the fiscal year by the vote, cast in person, of
a majority of the Trustees who are not "interested persons" as defined in the
Investment Company Act and such selection shall be submitted for ratification at
the first meeting of Holders to be held as set forth in Section 8.1 hereof, and
thereafter as required by the Investment Company Act and the rules and
regulations thereunder. The employment of any independent public accountant for
the Trust shall be conditioned upon the right of the Holders by a vote of the
lesser of (i) 67% or more of the DECS present at a special meeting of Holders,
if Holders of more than 50% of DECS outstanding are present or represented by
proxy at such meeting or (ii) more than 50% of the DECS outstanding to terminate
such employment at any time without penalty.
(c) The foregoing provisions of this Section 8.5 are in
addition to any applicable requirements of the Investment Company Act and the
rules and regulations thereunder.
SECTION 8.6 NATURE OF HOLDER'S INTEREST. Each Holder holds at
any given time a beneficial interest in the Trust Estate, but does not have any
right to take title or possession of any portion of the Trust Estate. Each
Holder expressly waives any right he may have under any rule of law, or the
provisions of any statute, or otherwise, to require the Trustees at any time to
account, in any manner other than as expressly provided in this Trust Agreement,
for the Shares, the Contract, the Treasury Securities or other assets or monies
from time to time received, held and applied by the Trustees hereunder. No
Holder shall have any right except as provided herein to control or determine
the operation and management of the Trust or the obligations of the parties
hereto. Nothing set forth herein or in the certificates representing DECS shall
be construed to constitute the Holders from time to time as partners or members
of an association.
SECTION 8.7 DELAWARE LAW TO GOVERN. This Trust Agreement is
executed and delivered in the State of Delaware, and all laws or rules of
construction of the State of Delaware shall govern the rights of the parties
hereto and the Holders and the construction, validity and effect of the
provisions hereof.
<PAGE>
SECTION 8.8 NOTICES. Any notice, demand, direction or
instruction to be given to the Sponsor hereunder shall be in writing and shall
be duly given if mailed or delivered to the General Counsel of Salomon Smith
Barney Inc., 388 Greenwich Street, New York, New York 10013, Telephone: (212)
816-6000, Telecopier: (212) 816-8571, Attention: General Counsel. Any notice,
demand, direction or instruction to be given to the Trust and the Trustees
hereunder shall be in writing and shall be duly given if mailed or delivered to
the Trust at c/o Puglisi & Associates, 850 Library Avenue, Suite 204, Newark,
Delaware 19715, Telephone: (302) 738-6680, Telecopier: (302) 738-7210,
Attention: Donald J. Puglisi and to each Trustee at such Trustee's address set
forth beneath its signature below, or such other address as shall be specified
to the other parties hereto by such party in writing. Any notice to be given to
a Holder shall be duly given if mailed, first class postage prepaid, or by such
other substantially equivalent means as the Trustees may deem appropriate, or
delivered to such Holder at the address of such Holder appearing on the registry
of the Paying Agent.
SECTION 8.9 SEVERABILITY. If any one or more of the covenants,
agreements, provisions or terms of this Trust Agreement shall be for any reason
whatsoever held invalid, then such covenants, agreements, provisions or terms
shall be deemed severable from the remaining covenants, agreements, provisions
and terms of this Trust Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Trust Agreement or of the
Certificates, or the rights of the Holders thereof.
SECTION 8.10 COUNTERPARTS. This Trust Agreement may be
executed in several counterparts, each of which shall be an original and all of
which shall constitute one and the same instrument.
SECTION 8.11 SUCCESSORS AND ASSIGNS. Whenever in this Trust
Agreement any of the parties hereto is named or referred to, the successors and
assigns of such party shall be deemed to be included, and all covenants and
agreements in this Trust Agreement by the Sponsor and Trustees shall bind and
inure to the benefit of their respective successors and assigns, whether or not
so expressed.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed.
SPONSOR:
SALOMON SMITH BARNEY INC.
By:
TRUSTEES:
Managing Trustee
Name: Donald J. Puglisi
Address: 850 Library Avenue, Suite 204
Newark, Delaware 19715
Name: William R. Latham III
Address: 850 Library Avenue, Suite 204
Newark, Delaware 19715
Name: James B. O'Neill
Address: 850 Library Avenue, Suite 204
Newark, Delaware 19715
INITIAL SPONSOR:
Alan Rifkin
INITIAL TRUSTEE:
<PAGE>
Donald J. Puglisi
<PAGE>
Schedule I
TREASURY SECURITIES
All terms specified are for stripped principal or interest
components of U.S. Treasury debt obligations.
PAYMENT DATE Aggregate Face Amount, Per
------------ TREASURY, PAYABLE AT PAYMENT DATE
---------------------------------
, 1999
, 1999
, 2000
, 2000
, 2000
, 2000
, 2001
, 2001
, 2001
, 2001
, 2002
, 2002
<PAGE>
Exhibit A
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York Corporation ("DTC"),
to DECS Trust VI or its agent for registration of transfer, exchange, or
payment, and any certificate issued is registered in the name of Cede & Co. (or
in such other name as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein. This certificate may be exchanged by an authorized representative of DTC
in whole or in part for securities in definitive form, registered in the names
of such holders as such representative of DTC shall specify, in which case, a
new certificate will be issued in the name of Cede & Co. (or in such other name
as is requested by such authorized representative of DTC) representing the
securities not issued in definitive form.
THIS CERTIFICATE IS ISSUED UNDER AND IS SUBJECT TO THE TERMS,
PROVISIONS AND CONDITIONS OF THE TRUST AGREEMENT REFERRED TO BELOW TO WHICH THE
HOLDER OF THIS CERTIFICATE BY VIRTUE OF THE ACCEPTANCE HEREOF ASSENTS AND IS
BOUND.
$____ DECS
DECS TRUST VI
CUSIP NO. ___________
NO. 1 ______________ DECS
THIS CERTIFIES THAT CEDE & CO. IS THE RECORD OWNER OF
__________ DECS OF DECS TRUST VI CONSTITUTING FRACTIONAL UNDIVIDED INTERESTS IN
DECS TRUST VI, A TRUST CREATED UNDER THE LAWS OF THE STATE OF DELAWARE PURSUANT
TO AN AMENDED AND RESTATED DECLARATION OF TRUST BETWEEN SALOMON SMITH BARNEY
INC. AND THE TRUSTEES NAMED THEREIN. THIS CERTIFICATE IS ISSUED UNDER AND IS
SUBJECT TO THE TERMS, PROVISIONS AND CONDITIONS OF THE TRUST AGREEMENT TO WHICH
THE HOLDER OF THIS CERTIFICATE BY VIRTUE OF THE ACCEPTANCE HEREOF ASSENTS AND IS
BOUND, A COPY OF WHICH TRUST AGREEMENT IS AVAILABLE AT THE OFFICE OF THE TRUST'S
ADMINISTRATOR AND PAYING AGENT, THE BANK OF NEW YORK, 101 BARCLAY STREET, FLOOR
12E, NEW YORK 10286, ATTENTION: BETTY COCOZZA. THIS CERTIFICATE IS TRANSFERABLE
AND EXCHANGEABLE BY THE REGISTERED OWNER IN PERSON OR BY HIS DULY AUTHORIZED
ATTORNEY AT THE OFFICE OF THE PAYING AGENT UPON SURRENDER OF THIS CERTIFICATE
PROPERLY ENDORSED OR ACCOMPANIED BY A WRITTEN INSTRUMENT OF TRANSFER AND ANY
OTHER DOCUMENTS THAT THE PAYING AGENT MAY REQUIRE FOR TRANSFER, IN FORM
SATISFACTORY TO THE PAYING AGENT AND PAYMENT OF THE FEES AND EXPENSES PROVIDED
IN THE TRUST AGREEMENT.
THIS CERTIFICATE IS NOT VALID UNLESS MANUALLY COUNTERSIGNED BY
THE PAYING AGENT.
WITNESS THE FACSIMILE SIGNATURE OF THE MANAGING TRUSTEE.
DECS Trust VI
DATED:
By
Managing Trustee
COUNTERSIGNED:
The Bank of New York, as Paying Agent
By:
Authorized Signature
A-
<PAGE>
CERTIFICATE OF TRUST OF DECS TRUST VI
This Restated Certificate of Trust of DECS Trust VI (the
"Trust"), dated November 9, 1999, is being duly executed and filed by Donald J.
Puglisi, William R. Latham III and James B. O'Neill, as trustees, to restate the
amended and restated Certificate of Trust, which was filed on October 22, 1999,
with the Secretary of the State of Delaware under the Delaware Business Trust
Act (12 Del. C. ss. 3801, ET Seq.) (the "Original Certificate of Trust").
The Original Certificate of Trust is hereby restated in its
entirety to read as follows:
1. NAME. The name of the business trust formed hereby is
DECS Trust VI.
2. REGISTERED OFFICE; REGISTERED AGENT. The business
address of the registered office of the Trust in the State of Delaware is c/o
Puglisi & Associates, 850 Library Avenue, Suite 204, Newark, Delaware 19715. The
name of the Trust's registered agent at such address is Puglisi & Associates.
3. EFFECTIVE DATE. This Certificate of Trust shall be
effective upon the date and time of filing.
4. The Trust is to be registered under the Investment
Company Act of 1940, as amended, prior to the issuance of beneficial interests
in the Trust.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of
the Trust, has executed this Certificate of Trust as of the date first above
written.
Donald J. Puglisi, Managing Trustee
William R. Latham III, Trustee
James B. O'Neill, Trustee
<PAGE>
Exhibit 99.(h)
[FORM OF UNDERWRITING AGREEMENT]
DECS TRUST VI
10,000,000 DECS* SM
(Representing Beneficial Interests in Contracts
Relating to Shares of Class A Common Stock, $.01 par value, of
Metromedia Fiber Network, Inc.)
Underwriting Agreement
New York, New York
November __, 1999
Salomon Smith Barney Inc.
As Representative of the several Underwriters,
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
DECS Trust VI, a statutory business trust organized under the
Delaware Business Trust Act, 12 Del.C. ss. 3801 et seq. (the "DELAWARE Act"), of
the State of Delaware (such trust and the trustees thereof acting in their
capacities as such being referred to herein as the "TRUST"), proposes to issue
and to sell to the several underwriters named in Schedule I hereto (the
"UNDERWRITERS"), for whom you (the "REPRESENTATIVE") is acting as
representative, an aggregate of 10,000,000 DECS representing shares of
beneficial interest in the Trust (the "UNDERWRITTEN DECS"). In addition, the
Underwriters will have an option to purchase up to 1,500,000 DECS (the "OPTION
DECS" and, together with the Underwritten DECS, the "DECS") to cover
over-allotments, if any. The Option DECS and the Underwritten DECS, together
with the [1] DECS of the Trust subscribed for by Salomon Smith Barney Inc.
("SALOMON SMITH BARNEY") pursuant to the Subscription Agreement, dated October
26, 1999, between Salomon Smith Barney and the Trust (the "SUBSCRIPTION DECS"),
are referred to herein as the "SECURITIES." The Securities are to be issued
under an Amended and Restated Declaration of Trust, dated as of November 9,
1999 (the "TRUST AGREEMENT"), among the initial trustee and initial sponsor of
the Trust, trustees of the Trust (the "TRUSTEES") and Salomon Smith Barney, as
sponsor.
The Trust will enter into forward purchase contracts (the
"CONTRACTS") with the persons listed on Schedule II hereto (each a "SELLER" and
collectively, the "SELLERS"), pursuant to which each Seller has agreed to sell,
and the Trust has agreed to purchase, the number of shares of Class A Common
Stock, $.01 par value (the "SHARES"), of Metromedia Fiber Networks, Inc. (the
"COMPANY") specified therein on [ ], 2002 (the "EXCHANGE DATE") (subject to the
Sellers' right
- ----------
* Plus an option to purchase from DECS Trust VI up to 1,500,000
additional DECS to cover over-allotments.
<PAGE>
to extend and accelerate the Exchange Date and to deliver cash with a value
equivalent to the Shares, or other property, as provided in the Contracts). Each
Seller's obligations under its respective Contract will be secured by a pledge
of collateral under a collateral agreement (each a "COLLATERAL AGREEMENT") among
such Seller, the Trust and The Bank of New York ("BONY"), as collateral agent
(in such capacity, the "COLLATERAL AGENT").
In connection with the foregoing, the Company has filed with
the Commission a registration statement, including a related basic prospectus,
with respect to 10,000,000 Shares in respect of the Underwritten DECS, plus an
additional [1,500,000] Shares in respect of the Option DECS and an additional
[1] Share[s] in respect of the Subscription DECS, for delivery by the Sellers
pursuant to the Securities, which registration statement is referred to in
Section 2(a) of this Agreement.
To the extent there are no additional Underwriters listed on
Schedule I other than you, the term Representative as used herein shall mean
you, as Underwriters, and the terms Representative and Underwriters shall mean
either the singular or plural as the context requires. The use of the neuter in
this Agreement shall include the feminine and masculine wherever appropriate.
Certain terms used herein are defined in Section 23 hereof.
REPRESENTATIONS AND WARRANTIES OF THE TRUST. The Trust
represents and warrants to, and agrees with, each Underwriter as set forth below
in this Section 1.
(a) The Trust meets the requirements for use of Form N-2 under
the Act and has prepared and filed with the Commission (a) a
notification on Form N-8A (the "NOTIFICATION") of registration of the
Trust as an investment company under the Investment Company Act and (b)
a registration statement on Form N-2 (file numbers 333- 89677 and 811-
09647), including a related preliminary prospectus, for the
registration of the offering and sale of the DECS under the Act. The
Trust may have filed one or more amendments thereto, including the
related preliminary prospectus, each of which has previously been
furnished to you. The Trust will next file with the Commission one of
the following: either (1) prior to the Trust Effective Date of such
registration statement, a further amendment to such registration
statement (including the form of final prospectus); or (2) after the
Trust Effective Date of such registration statement, a final prospectus
in accordance with Rules 430A and 497(h). In the case of clause (2),
the Trust has included in such registration statement, as amended at
the Trust Effective Date, all information (other than Rule 430A
Information) required by the Act and the rules thereunder to be
included in such registration statement and the Trust Prospectus. As
filed, such amendment and form of final prospectus, or such final
prospectus, shall contain all Rule 430A Information, together with all
other such required information, and, except to the extent the
Representative shall agree in writing to a modification, shall be in
all substantive respects in the form furnished to you prior to the
Execution Time or, to the extent not completed at the Execution Time,
shall contain only such specific additional information and other
changes (beyond that contained in the latest Preliminary Trust
Prospectus) as the Trust has advised you, prior to the Execution Time,
will be included or made therein.
(b) On the Trust Effective Date, the Trust Registration
Statement and the Notification did or will, and when the Trust
Prospectus is first filed (if required) in accordance with Rule 497(h)
and on the Closing Date (as defined herein) and on any date on which
Option DECS are purchased, if such date is not the Closing Date (a
"SETTLEMENT
2
<PAGE>
DATE"), the Trust Prospectus (and any supplements thereto) will comply
in all material respects with the applicable requirements of the Act,
the Exchange Act and the Investment Company Act, and the respective
rules thereunder; on the Trust Effective Date and at the Execution
Time, the Trust Registration Statement did not or will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein not misleading; and, on the Trust Effective Date,
the Trust Prospectus, if not filed pursuant to Rule 497(h), did not or
will not, and on the date of any filing pursuant to Rule 497(h) and on
the Closing Date and any Settlement Date, the Trust Prospectus
(together with any supplement thereto) will not, include any untrue
statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(c) No stop order suspending the effectiveness of the Trust
Registration Statement is in effect, no order preventing or suspending
the use of any Preliminary Trust Prospectus has been issued by the
Commission, no notice or order under Section 8(e) of the Investment
Company Act has been issued, and no proceedings for any such purpose
are pending before or threatened by the Commission.
(d) The Trust has been duly created, is validly existing as a
business trust under the Delaware Act, has the power and authority to
own or lease, as the case may be, and to operate its properties and
conduct its business as described in the Trust Prospectus and to enter
into and perform its obligations under this Agreement, the Trust
Agreement and each of the Fundamental Documents (as defined below) and
is duly qualified to do business and is in good standing under the laws
of each jurisdiction in which it owns or leases properties or conducts
any business so as to require such qualification other than where the
failure to be so qualified would not have a material adverse effect on
the Trust or its assets. The Trust has no subsidiaries.
(e) The Trust is registered with the Commission as a
non-diversified, closed-end management investment company under the
Investment Company Act and no order of suspension or revocation of such
registration has been issued or proceedings therefor initiated or, to
the knowledge of the Trust, threatened by the Commission. No person is
serving or acting as an officer or trustee of the Trust except in
accordance with the provisions of the Investment Company Act.
(f) This Agreement has been duly authorized, executed and
delivered by the Trust.
(g) Each of the Contracts, the Collateral Agreements, the
Administration Agreement between BoNY and the Trust (the
"ADMINISTRATION AGREEMENT"), the Custodian Agreement between BoNY and
the Trust (the "CUSTODIAN AGREEMENT"), the Paying Agent Agreement
between BoNY and the Trust (the "PAYING AGENT AGREEMENT") and the Fund
Indemnity Agreement between Salomon Smith Barney and the Trust (the
"FUND INDEMNITY AGREEMENT") (the Contracts, the Collateral Agreements,
the Administration Agreement, the Custodian Agreement, the Paying Agent
Agreement and the Fund Indemnity Agreement are referred to herein,
collectively, as the "FUNDAMENTAL AGREEMENTS") has been duly
authorized, executed and delivered by the Trust and, assuming due
authorization, execution and delivery by the other parties thereto, is
a valid and binding agreement of the Trust, enforceable against
3
<PAGE>
the Trust in accordance with its terms except as such enforceability
may be limited by applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and by general equitable
principles.
(h) The execution and delivery by the Trust of, and the
performance by the Trust of its obligations under, this Agreement and
each Fundamental Agreement (including the issue and sale by the Trust
of the DECS as contemplated by this Agreement) do not and will not,
whether with or without the giving of notice or passage of time or
both, conflict with or constitute a breach or violation of, or default
under, or give the holder of any indebtedness of the Trust the right to
require the repurchase, redemption or repayment of all or a portion of
such indebtedness under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Trust
pursuant to, any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease or other agreement or instrument to which
the Trust is a party or by which it may be bound, or to which any of
the property or assets of the Trust is subject, nor will such action
result in any violation of the provisions of the Trust Agreement or any
applicable law, statute, rule, regulation, judgment, order, writ or
decree of any government, government instrumentality or court, domestic
or foreign, having jurisdiction over the Trust or any of its assets or
properties; and no consent, approval, authorization, order of, or
qualification or filing with, any governmental body or agency,
self-regulatory organization or court or other tribunal, whether
foreign or domestic, is required for the execution and delivery by the
Trust of this Agreement or the Fundamental Agreements or the
performance by the Trust of its obligations hereunder and thereunder,
except for the filing of a Certificate of Trust and the filing of one
or more Restated Certificates of Trust with the office of the Secretary
of State of the State of Delaware (which filings have been duly made)
and such as have been obtained and as may be required by the securities
or Blue Sky laws of the various states and foreign jurisdictions in
connection with the offer and sale of the DECS by the Underwriters.
(i) The DECS, the Trust Agreement and the Fundamental
Agreements conform in all material respects to the descriptions thereof
contained in the Trust Prospectus.
(j) The Trust Agreement and the Fundamental Agreements comply
with all applicable provisions of the Act, the Exchange Act and the
Investment Company Act, and all approvals of such documents required
under the Investment Company Act by the holders of the Securities and
the Trustees have been obtained and are in full force and effect.
(k) On the Closing Date, the Fundamental Agreements will be in
full force and effect and the Trust will not be in default thereunder
and, to the knowledge of the Trust, no event will have occurred which
with the passage of time or the giving of notice or both would
constitute a default thereunder. The Trust is not currently in breach
of, or in default under, the Trust Agreement or any other written
agreement or instrument to which it or its property is bound or
affected.
(l) All of the outstanding Securities have been duly
authorized and are validly issued, fully paid and nonassessable
undivided beneficial interests in the assets of the Trust, and the form
of certificate used to evidence the Securities is in due and proper
form and complies with all provisions of applicable law.
4
<PAGE>
(m) The DECS have been duly authorized by the Trust for
issuance to the Underwriters pursuant to this Agreement and, when
issued and delivered by the Trust in accordance with the terms of this
Agreement and the Trust Agreement against payment of the purchase price
therefor as provided herein, will be validly issued, fully paid and
nonassessable undivided beneficial interests in the assets of the
Trust, and the issuance of such DECS will not be subject to any
preemptive or similar rights. No person has rights to the registration
of any securities because of the filing of the Trust Registration
Statement, and no holder of the Securities will be subject to personal
liability by reason of being such a holder.
(n) The DECS have been approved for listing on the National
Market System of the National Association of Securities Dealers
Automated Quotation System (the "NASDAQ NATIONAL MARKET SYSTEM"),
subject to official notice of issuance. The Trust's Registration
Statement on Form 8-A under the Exchange Act is effective.
(o) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, of the Trust, or in the investment
objectives, investment policies, liabilities, business, prospects or
operations of the Trust from that set forth in the Trust Prospectus
(exclusive of any supplements thereto subsequent to the date of this
Agreement) and there have been no transactions entered into by the
Trust which are material to the Trust other than those in the ordinary
course of its business or as described in the Trust Prospectus
(exclusive of any supplements thereto subsequent to the date of this
Agreement).
(p) There are no legal or governmental proceedings pending or,
to the knowledge of the Trust, threatened against or affecting the
Trust that are required to be described in the Trust Registration
Statement or the Trust Prospectus and are not so described or any
statutes, regulations, contracts or other documents that are required
to be described in the Trust Registration Statement or the Trust
Prospectus or to be filed as exhibits to the Trust Registration
Statement that are not described or filed as required.
(q) The Trust has all necessary consents, authorizations,
approvals, orders (including exemptive orders), certificates and
permits of and from, and has made all declarations and filings with,
all governmental authorities, self-regulatory organizations and courts
and other tribunals, whether foreign or domestic, to own and use its
assets and to conduct its business in the manner described in the Trust
Prospectus, except to the extent that the failure to obtain or file the
foregoing would not have a material adverse effect on the Trust and
except such as may be required by the securities or Blue Sky laws of
the various states in connection with the offer and sale of the DECS.
(r) There are no material restrictions, limitations or
regulations with respect to the ability of the Trust to invest its
assets as described in the Trust Prospectus, other than as described
therein.
(s) The Trust has good title to all properties owned by it, in
each case, free and clear of all mortgages, pledges, liens, security
interests, claims, restrictions or encumbrances of any kind except such
as (a) are described in the Trust Prospectus or (b) do not, singly or
in the aggregate, materially affect the value of such property and do
not interfere with the use made and proposed to be made of such
property by the Trust.
5
<PAGE>
(t) There are no legal or governmental proceedings pending to
which the Trust is a party or of which any property of the Trust is the
subject which, if determined adversely to the Trust, would individually
or in the aggregate have a material adverse effect on the current or
future financial position or results of operations of the Trust; and,
to the best of the Trust's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened by
others.
(u) The statement of assets, liabilities and capital included
in the Trust Registration Statement and the Trust Prospectus, together
with the notes thereto, present fairly the financial position of the
Trust at the date indicated, and such financial statement has been
prepared in conformity with generally accepted accounting principles in
the United States.
(v) The accountants who certified the financial statements and
supporting schedules included in the Trust Registration Statement are
independent public accountants as required by the Act and the rules and
regulations of the Commission thereunder.
(w) The Trust has not taken and will not take, directly or
indirectly, any action designed to or which has constituted or which
might reasonably be expected to cause or result, under the Exchange Act
or otherwise, in stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the DECS or
the Shares, and has not effected any sales of the Company's common
stock which, if effected by the Company, would be required to be
disclosed in response to Item 701 of Regulation S-K.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, each Underwriter as set forth below
in this Section 2.
(a) The Company meets the requirements for use of Form S-3
under the Act and has prepared and filed with the Commission a
Registration Statement (File No. 333-89087) on Form S-3, including a
related preliminary prospectus and a related basic prospectus, for
registration under the Act of the offering and sale of the Shares. The
Company may have filed one or more amendments thereto, including a
Preliminary Company Prospectus, each of which has previously been
furnished to you. The Company will next file with the Commission one of
the following: (1) after the Effective Date of such Registration
Statement, a final prospectus supplement relating to the Shares in
accordance with Rules 430A and 424(b), (2) prior to the Effective Date
of such Registration Statement, an amendment to such Registration
Statement (including the form of final prospectus supplement) or (3) a
final prospectus in accordance with Rules 415 and 424(b). In the case
of clause (1), the Company has included in such Registration Statement,
as amended at the Effective Date, all information (other than Rule 430A
Information) required by the Act and the rules thereunder to be
included in such Company Registration Statement and the Company
Prospectus. As filed, such final prospectus supplement or such
amendment and form of final prospectus supplement shall contain all
Rule 430A Information, together with all other such required
information, and, except to the extent the Representative shall agree
in writing to a modification, shall be in all substantive respects in
the form furnished to you prior to the Execution Time or, to the extent
not completed at the Execution Time, shall contain only such specific
additional information and other changes (beyond that contained in the
Company Prospectus and any Preliminary Company Prospectus) as the
Company has advised you, prior to the Execution Time, will be included
or made therein. The Company
6
<PAGE>
Registration Statement, at the Execution Time, meets the requirements
set forth in Rule 415(a)(1)(x).
(b) On the Effective Date, the Company Registration Statement
did or will, and when the Company Prospectus is first filed (if
required) in accordance with Rule 424(b) and on the Closing Date (as
defined herein), the Company Prospectus (and any supplement thereto)
will, comply in all material respects with the applicable requirements
of the Act, the Exchange Act and the respective rules thereunder; on
the Execution Time, the Company Registration Statement, as supplemented
by any prospectus supplement filed pursuant to Rule 424(b), did not or
will not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading;
on the Effective Date, the Company Prospectus, if not filed pursuant to
Rule 424(b), will not, and on the date of any filing pursuant to Rule
424(b) and on the Closing Date, the Company Prospectus (together with
any supplement thereto) will not, include any untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; PROVIDED, HOWEVER, that the
Company and the Sellers make no representations or warranties as to the
information contained in or omitted from the Company Registration
Statement or the Company Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with information furnished
in writing to the Company by or on behalf of any Underwriter through
the Representative specifically for inclusion therein, it being
understood and agreed that the only such information is that described
as such in Section 8(b) of this Agreement.
(c) Each document incorporated by reference in the Company
Registration Statement or the Company Prospectus, when they were filed
(or, if any amendment with respect to any such document was filed, when
such amendment was filed), conformed in all material respects with the
requirements of the Exchange Act and the rules and regulations
thereunder, any further Incorporated Documents so filed will, when they
are filed, conform in all material respects with the requirements of
the Exchange Act and the rules and regulations thereunder; no such
document when it was filed (or, if an amendment with respect to any
such document was filed, when such amendment was filed), contained an
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading; and no such further
document, when it is filed, will contain an untrue statement of a
material fact or will omit to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading.
(d) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation or limited
liability company in good standing under the laws of the jurisdiction
in which it is chartered or organized with full corporate power and
authority to own or lease, as the case may be, and to operate its
properties and conduct its business as described in the Company
Prospectus (as then amended or supplemented), and is duly qualified to
do business as a foreign corporation or limited liability company and
is in good standing under the laws of each jurisdiction which requires
such qualification, except where the failure to be so qualified would
not have, singly or in the aggregate, a material adverse effect on the
condition (financial or otherwise), prospects, earnings, business or
properties of the Company and its subsidiaries, taken as a whole,
whether or not arising from transactions in the ordinary course of
business.
7
<PAGE>
(e) All the outstanding shares of capital stock of each
subsidiary that is a corporation have been duly and validly authorized
and issued and are fully paid and nonassessable, and, except as
otherwise set forth in the Company Prospectus, all outstanding shares
of capital stock of the subsidiaries are owned by the Company either
directly or through wholly owned subsidiaries free and clear of any
perfected security interest and, to the knowledge of the Company, any
other security interests, claims, liens or encumbrances.
(f) The Company's authorized capitalization is as set forth in
the Company Prospectus under the heading "Capitalization".
(g) There is no franchise, contract or other document of a
character required to be described in the Company Registration
Statement or Company Prospectus, or to be filed as an exhibit thereto,
which is not described or filed as required. The statements in the
Company Prospectus under the headings "Certain United States Federal
Income Tax Considerations", "Business--Regulation,"
"Business-Franchise, License and Related Agreements,"
"Business-Regulation of International Operations," "Description of the
Notes" and "Business--Legal Proceedings" fairly summarize the matters
therein described in all material respects.
(h) This Agreement has been duly authorized, executed and
delivered by the Company; the Shares have been duly and validly
authorized by the Company; except for [ ], the holders of outstanding
shares of capital stock of the Company are not entitled to preemptive
or other rights to subscribe for the Shares; and, except as set forth
in the Company Prospectus, no options, warrants or other rights to
purchase, agreements or other obligations to issue, or rights to
convert any obligation into or exchange any securities for, shares of
capital stock of or ownership interests in the Company are outstanding.
(i) The Company is not, and after giving effect to the
offering and sale of the Securities and the application of the proceeds
thereof as described in the Company Prospectus, will not be, an
"investment company" required to be registered under the Investment
Company Act of 1940, as amended, [without taking account of any
exemption arising out of the number of holders of the Company's
securities. ]
(j) No consent, approval, authorization, filing with or order
of any court or governmental agency or body is required in connection
with the transactions contemplated herein, except such as will be
obtained under the Act in connection with the registration of the
Securities and the DECS, and such as may be required under the blue sky
laws of any jurisdiction in connection with the purchase and
distribution of the DECS by the Underwriters in the manner contemplated
herein or in the Company Prospectus.
(k) None of the execution and delivery of this Agreement nor
the consummation of any of the transactions contemplated herein or the
fulfillment of the terms hereof, will conflict with, result in a breach
or violation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of its subsidiaries, pursuant
to (i) the charter or by-laws of the Company or any of its
subsidiaries; (ii) the terms of any indenture, contract, lease,
mortgage, deed of trust, note agreement, loan agreement or other
agreement, obligation, condition, covenant or instrument to which the
Company or any of its subsidiaries is a party or bound or to which its
or their property is subject; or (iii) any statute, law, rule,
regulation, judgment, order or decree applicable to the Company or any
of its subsidiaries of
8
<PAGE>
any court, regulatory body, administrative agency, governmental body,
arbitrator or other authority having jurisdiction over the Company or
any of its subsidiaries or any of its or their properties, except in
the case of clauses (ii) and (iii), as could not be reasonably expected
to have, singly or in the aggregate, a material adverse effect on the
condition (financial or otherwise), prospects, earnings, business or
properties of the Company and its subsidiaries, taken as a whole,
whether or not arising from transactions in the ordinary course of
business.
(l) The Shares conform as to legal matters to the description
thereof contained in the Company Prospectus.
(m) The consolidated historical financial statements of the
Company and its consolidated subsidiaries included in the Company
Prospectus present fairly in all material respects the financial
condition, results of operations and cash flows of the Company as of
the dates and for the periods indicated and have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis throughout the periods involved (except as otherwise
noted therein). The selected financial data set forth under the caption
"Selected Consolidated Financial Data" in the Company Prospectus fairly
present, on the basis stated in the Company Prospectus, the information
included therein.
(n) The pro forma financial statements included in the Company
Prospectus include assumptions that provide a reasonable basis for
presenting the significant effects directly attributable to the
transactions and events described therein, the related pro forma
adjustments give appropriate effect to those assumptions, and the pro
forma adjustments reflect the proper application of those adjustments
to the historical financial statement amounts in the pro forma
financial statements included in the Company Prospectus. The pro forma
financial statements included in the Company Prospectus comply as to
form in all material respects with the applicable accounting
requirements of Regulation S-X under the Act and the pro forma
adjustments have been properly applied to the historical amounts in the
compilation of those statements.
(o) No action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the
Company or any of its subsidiaries or its or their property is pending
or, to the best knowledge of the Company, threatened that (i) could
reasonably be expected to have a material adverse effect on the
performance of this Agreement or the consummation of any of the
transactions contemplated hereby or thereby; or (ii) could reasonably
be expected to have a material adverse effect on the condition
(financial or otherwise), prospects, earnings, business or properties
of the Company and its subsidiaries, taken as a whole, whether or not
arising from transactions in the ordinary course of business, except as
set forth in or contemplated in the Company Prospectus (exclusive of
any amendment or supplement thereto).
(p) Except as described in the Company Prospectus, each of the
Company and each of its subsidiaries owns, licenses, leases or has
obtained rights-of-way for all such properties as are necessary to the
conduct of its operations as presently conducted. The Company and each
of its subsidiaries has good and marketable title, free and clear of
all liens or encumbrances, to all property and assets described in the
Company Prospectus as being owned by it on the date hereof and such
properties and assets are in good repair and suitable for use as so
described except as set forth in the Company Prospectus. All leases to
which the Company or its subsidiaries are a party are valid and binding
(subject to applicable
9
<PAGE>
bankruptcy, reorganization, insolvency, moratorium, fraudulent
conveyance or other laws affecting creditors' rights generally from
time to time in effect and to general principles of equity) and no
default has occurred or is continuing thereunder which could have,
singly or in the aggregate, a material adverse effect on the condition
(financial or otherwise), prospects, earnings, business or properties
of the Company and its subsidiaries, taken as a whole, whether or not
arising from transactions in the ordinary course of business, and the
Company and each subsidiary enjoy peaceful and undisturbed possession
under all such leases to which any of them is a party as lessee with
such exceptions as do not interfere materially with the use made by the
Company or such subsidiary.
(q) Neither the Company nor any subsidiary is in violation or
default of (i) any provision of its charter or bylaws; (ii) the terms
of any indenture, contract, lease, mortgage, deed of trust, note
agreement, loan agreement or other agreement, obligation, condition,
covenant or instrument to which it is a party or bound or to which its
property is subject; or (iii) any statute, law, rule, regulation,
judgment, order or decree applicable to the Company or any of its
subsidiaries of any court, regulatory body, administrative agency,
governmental body, arbitrator or other authority having jurisdiction
over the Company or such subsidiary or any of its properties, as
applicable, except in the case of clauses (ii) and (iii) as could not
be reasonably expected to have, singly or in the aggregate, a material
adverse effect on the condition (financial or otherwise), prospects,
earnings, business or properties of the Company and its subsidiaries,
taken as a whole, whether or not arising from transactions in the
ordinary course of business.
(r) Each of (i) Deloitte & Touche LLP, (ii) Ernst & Young LLP,
and (iii) PriceWaterhouseCoopers LLP, each of whom have audited certain
financial statements of the Company and its consolidated subsidiaries
or its acquired entities, as the case may be, and delivered their
report with respect to the audited consolidated financial statements
included and/or incorporated by reference in the Company Prospectus are
independent public accountants with respect to the Company within the
meaning of the Act and the applicable published rules and regulations
thereunder.
(s) The Company and each subsidiary has filed all foreign,
federal, state and local tax returns that are required to be filed or
has requested extensions thereof except in any case in which the
failure so to file would not have, singly or in the aggregate, a
material adverse effect on the condition (financial or otherwise),
prospects, earnings, business or properties of the Company and its
subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business, and has paid all taxes
required to be paid by it and any other assessment, fine or penalty
levied against it, to the extent that any of the foregoing is due and
payable, except for any such assessment, fine or penalty that is
currently being contested in good faith or as would not have, singly or
in the aggregate, a material adverse effect on the condition (financial
or otherwise), prospects, earnings, business or properties of the
Company and its subsidiaries, taken as a whole, whether or not arising
from transactions in the ordinary course of business.
(t) No labor problem or dispute with the employees of the
Company or any of its subsidiaries exists or is threatened or imminent
that could have, singly or in the aggregate, a material adverse effect
on the condition (financial or otherwise), prospects, earnings,
business or properties of the Company and its subsidiaries, taken as a
whole, whether or not arising from transactions in the ordinary course
of business.
10
<PAGE>
(u) There are no transfer taxes or other similar fees or
charges under Federal law or the laws of any state, or any political
subdivision thereof, required to be paid in connection with the
execution and delivery of this Agreement.
(v) The Company and each of its subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the
businesses in which they are engaged; all policies of insurance and
fidelity or surety bonds insuring the Company or any of its
subsidiaries or their respective businesses, assets, employees,
officers and directors are in full force and effect; the Company and
its subsidiaries are in compliance with the terms of such policies and
instruments in all material respects; and there are no claims by the
Company or any of its subsidiaries under any such policy or instrument
as to which any insurance company is denying liability or defending
under a reservation of rights clause; neither the Company nor any such
subsidiary has been refused any insurance coverage sought or applied
for; and neither the Company nor any such subsidiary has any reason to
believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its
business at a cost that would not have, singly or in the aggregate, a
material adverse effect on the condition (financial or otherwise),
prospects, earnings, business or properties of the Company and its
subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business.
(w) Except as described in the Company Prospectus, no
subsidiary of the Company is currently prohibited, directly or
indirectly, from paying any dividends to the Company, from making any
other distribution on such subsidiary's capital stock, from repaying to
the Company any loans or advances to such subsidiary from the Company
or from transferring any of such subsidiary's property or assets to the
Company or any other subsidiary of the Company.
(x) Except as described in the Company Prospectus, the Company
and its subsidiaries (i) possess the certificates, authorizations,
approvals, franchises, licenses, rights-of-way and permits issued by
the appropriate federal, state, local or foreign regulatory authorities
necessary to conduct their respective businesses as presently
conducted, (ii) are not in violation of any such certificates,
authorizations, approvals, franchises, licenses, rights-of-way and
permits, except where such violation would not have a material adverse
effect on the condition (financial or otherwise), prospects, earnings,
business or properties of the Company and its subsidiaries, taken as a
whole, whether or not arising from transactions in the ordinary course
of business and (iii) have not received any notice of proceedings
relating to the revocation or modification of any such certificate,
authorization, approval, franchise, license, right-of-way or permit
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a material adverse effect on
the condition (financial or otherwise), prospects, earnings, business
or properties of the Company and its subsidiaries, taken as a whole,
whether or not arising from transactions in the ordinary course of
business.
(y) The Company and its subsidiaries possess or have applied
for the patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks and trade names (collectively,
"INTELLECTUAL
11
<PAGE>
PROPERTY") presently employed by them in connection with the businesses
now operated by them, and neither the Company nor any of the
Subsidiaries has received any notice of infringement of or conflict
with asserted rights of others with respect to the foregoing except as
could not have, singly or in the aggregate, a material adverse effect
on the condition (financial or otherwise), prospects, earnings,
business or properties of the Company and its subsidiaries, taken as a
whole, whether or not arising from transactions in the ordinary course
of business. To the Company's knowledge, the use of such Intellectual
Property in connection with the business and operations of the Company
and its subsidiaries does not infringe on the rights of any person.
(z) The Company and each of its subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted only
in accordance with management's general or specific authorization; and
(iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(aa) The Company and its subsidiaries are (i) in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"); (ii) have received and are in
compliance with all permits, licenses or other approvals required of
them under applicable Environmental Laws to conduct their respective
businesses as described in the Company Prospectus; and (iii) have not
received notice of any actual or potential liability for the
investigation or remediation of any disposal or release of hazardous or
toxic substances or wastes, pollutants or contaminants, except where
such non-compliance with Environmental Laws, failure to receive
required permits, licenses or other approvals, or liability would not,
individually or in the aggregate, have a material adverse effect on the
condition (financial or otherwise), prospects, earnings, business or
properties of the Company and its subsidiaries, taken as a whole,
whether or not arising from transactions in the ordinary course of
business; neither the Company nor any of the subsidiaries has been
notified that it has been named as a "potentially responsible party"
under the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended.
(bb) Except as described in the Company Prospectus, the
Company and its subsidiaries are implementing a comprehensive, detailed
program to analyze and address the risk that the computer hardware and
software used by them may be unable to recognize and properly execute
date-sensitive functions involving certain dates prior to and any dates
after December 31, 1999 (the "YEAR 2000 Problem"), and reasonably
believe that such risk will be remedied on a timely basis without
material expense and will not have a material adverse effect upon the
financial condition and results of operations of the Company and its
subsidiaries, taken as a whole.
(cc) Each of the Company and its subsidiaries has fulfilled
its obligations, if any, under the minimum funding standards of Section
302 of the United States Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and the regulations and
12
<PAGE>
published interpretations thereunder with respect to each "plan" (as
defined in Section 3(3) of ERISA and such regulations and published
interpretations) in which employees of the Company and its subsidiaries
are eligible to participate and each such plan is in compliance in all
material respects with the presently applicable provisions of ERISA and
such regulations and published interpretations; the Company and its
subsidiaries have not incurred any unpaid liability to the Pension
Benefit Guaranty Corporation (other than for the payment of premiums in
the ordinary course) or to any such plan under Title IV of ERISA.
(dd) The subsidiaries listed on Schedule III attached hereto
are the only significant subsidiaries of the Company as defined in Rule
1-02 of Regulation S-X (individually, a "SUBSIDIARY" and collectively,
the "SUBSIDIARIES").
(ee) None of the transactions contemplated by this Agreement
will violate or result in a violation of Section 7 of the Exchange Act,
or any regulation promulgated thereunder, including, without
limitation, Regulations T, U and X of the Board of Governors of the
Federal Reserve System.
(ff) Neither the Company nor any of the subsidiaries is a
"holding company" or a "subsidiary company" of a holding company, or an
"affiliate" thereof required to be registered under the Public Utility
Holding Company Act of 1935, as amended.
(gg) Neither the Company nor any of its subsidiaries nor, to
the Company's knowledge, any employee or agent of the Company or any
subsidiary has made any payment of funds of the Company or any
subsidiary or received or retained any funds in violation of any
provision of the Foreign Corrupt Practices Act of 1977, as amended.
(hh) No "nationally recognized statistical rating
organization" as such term is defined for purposes of Rule 436(g)(2)
under the Act has indicated to the Company that it is considering (i)
the downgrading, suspension or withdrawal of, or any review for a
possible change that does not indicate the direction of the possible
change in, any rating assigned to the Company or any securities of the
Company or (ii) any change in the outlook for any rating of the Company
or any securities of the Company.
(ii) No relationship, direct or indirect, exists between or
among the Company or any of its subsidiaries on the one hand, and the
directors, officers, stockholders, customers or suppliers of the
Company or any of its subsidiaries on the other hand, which is required
by the Act to be described in the Company Prospectus which is not so
described.
(jj) The Company has not taken, directly or indirectly, any
action designed to cause or which has constituted or which might
reasonably be expected to cause or result, under the Exchange Act or
otherwise, in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the DECS.
(kk) [To the knowledge of counsel to the Company, no holders
of securities of the Company have rights to the registration of such
securities under the Registration Statement.]
Any certificate signed by any officer of the Company and
delivered to the Representative or counsel for the Underwriters in connection
with the offering of the DECS shall be
13
<PAGE>
deemed a representation and warranty by the Company, as to matters covered
thereby, to each Underwriter.
3. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. Each of the
Sellers, severally and jointly, represents and warrants to, and agrees with,
each Underwriter, the Company and the Trust that:
(a) Such Seller is now and on the Exchange Date will be the
record and beneficial owner of the Shares to be sold by it hereunder
and under its Contract free and clear of all liens, encumbrances,
equities and claims, except for those created pursuant to its
Collateral Agreement, and, assuming that the Trust acquires its
interest in such Shares without notice of any adverse claim (within
the meaning of Section 8-105 of the New York Uniform Commercial Code
("UCC")), on the Exchange Date the Trust will have acquired either
the shares free of any adverse claims (within the meaning of Section
8-105 of the UCC) or a security entitlement (within the meaning of
Section 8-102(a)(17) of the UCC) to such Shares, in which case no
action based on an adverse claim (within the meaning of Section
8-105 of the UCC) may be asserted against the Trust with respect to
such Shares. Such Seller has the full right, power and authority,
and all authorization and approval required by law to pledge and
assign the Shares to be pledged and assigned by such Seller pursuant
to its Collateral Agreement. The sale, transfer and delivery of any
Shares to be delivered by a Seller pursuant to such Seller's
Contract is not, and at the time of delivery of such Shares will not
be, subject to any right of first refusal or similar rights of any
person pursuant to any contract to which such Seller or any
shareholder of such Seller is a party or by which any of them is
bound.
(b) Such Seller has not taken, directly or indirectly, any
action designed to or which has constituted or which might reasonably
be expected to cause or result, under the Exchange Act or otherwise, in
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the DECS.
(c) Certificates in negotiable form for such Seller's Shares
have been placed in custody, for delivery pursuant to the terms of such
Seller's Contract and Collateral Agreement, under a Custody Agreement
duly authorized, executed and delivered by such Seller, in the form
heretofore furnished to you (the "CUSTODY AGREEMENT") with The Bank of
New York, as Custodian (the "CUSTODIAN"); the Shares represented by the
certificates so held in custody for each Seller are subject to the
interests of the Trust pursuant to such Seller's Contract and
Collateral Agreement; the arrangements for custody and delivery of such
certificates, made by such Seller pursuant to such Seller's Contract
and Collateral Agreement and the Custody Agreement, are not subject to
termination by any acts of such Seller, or by operation of law, whether
by the death or incapacity of such Seller or the occurrence of any
other event; and if any such death, incapacity or any other such event
shall occur before the delivery of such Shares pursuant to such
Seller's Contract and Collateral Agreement, certificates for the Shares
will be delivered by the Custodian in accordance with the terms and
conditions of such Seller's Contract and Collateral Agreement and the
Custody Agreement as if such death, incapacity or other event had not
occurred, regardless of whether or not the Custodian shall have
received notice of such death, incapacity or other event.
(d) No consent, approval, authorization or order of any court
or governmental agency or body is required for the consummation by such
Seller of the transactions contemplated in this Agreement, each
Contract and Collateral Agreement to which such Seller is a party, and
the agreement among each of the Sellers and Salomon Smith Barney
relating to expenses of the Trust (the "REIMBURSEMENT AGREEMENT"),
except such as may have been obtained under the Act and such as may be
required under the blue sky laws of any jurisdiction in connection with
the purchase and distribution of the DECs by the Underwriters and the
distribution of the Shares pursuant to the terms of the DECs in the
manner contemplated in this Agreement and in the Trust Prospectus and
the Company Prospectus and such other approvals as have been obtained.
14
<PAGE>
(e) Neither the sale of the DECs being sold by such Seller and
the distribution of the Shares pursuant to the terms of the DECs in the
manner contemplated in this Agreement and in the Trust Prospectus and
the Company Prospectus nor the consummation of any other of the
transactions contemplated herein, or in such Seller's Contract or
Collateral Agreement by such Seller or the fulfillment of the terms
hereof or of such Seller's Contract or Collateral Agreement by such
Seller will conflict with, result in a breach or violation of, or
constitute a default under any law or the terms of any indenture or
other agreement or instrument to which such Seller or any of its
subsidiaries is a party or bound, or any judgment, order or decree
applicable to such Seller or any of its subsidiaries of any court,
regulatory body, administrative agency, governmental body or arbitrator
having jurisdiction over such Seller or any of its subsidiaries.
(f) Such Seller has no reason to believe that the
representations and warranties of the Company contained in Section 2 of
this Agreement are not true and correct, is familiar with the Company
Prospectus and the Company Registration Statement and has no knowledge
of any material fact, condition or information not disclosed in the
Company Prospectus or the Company Registration Statement or any
supplement thereto which has adversely affected or may adversely affect
the business of the Company or any of its subsidiaries; and the sale of
Shares by such Seller pursuant to its Contract is not prompted by any
information concerning the Company or any of its subsidiaries which is
not set forth in the Company Prospectus or the Company Registration
Statement or any supplement thereto.
(g) In respect of any statements in or omissions from the
Company Registration Statement or the Company Prospectus or any
supplements thereto made in reliance upon and in conformity with
information furnished in writing to the Company by any Seller
specifically for use in connection with the preparation thereof, such
Seller hereby makes the same representations and warranties to each
Underwriter as the Company makes to such Underwriter under Section 2 of
this Agreement.
(h) This Agreement has been duly authorized, executed and
delivered by each Seller. Each Contract and Collateral Agreement to
which each Seller is a party and the Reimbursement Agreement have been
duly authorized, executed and delivered by such Seller and, assuming
due authorization, execution and delivery by the other parties thereto,
is a valid and binding agreement of such Seller, enforceable against
such Seller in accordance with its terms.
(i) Amounts received by each of the Sellers, if any, at the
Closing Date and, if any Option DECS are purchased, at the time of
delivery thereof pursuant to Section 4(b), pursuant to such Seller's
Contract will not be used by such Seller for the purpose, whether
immediate, incidental or ultimate, of buying or carrying a margin
stock, as such terms are defined in Regulation G promulgated by the
Board of Governors of the Federal Reserve System.
(j) Metromedia Company is not and, after giving effect to the
transactions contemplated in each Contract and Collateral Agreement and
the offering and sale of the DECS contemplated by this Agreement, will
not be an "investment company" or an entity "controlled" by an
"investment company" as such terms are defined in the Investment
Company Act.
15
<PAGE>
Any certificate by any Seller or any officer of any Seller and
delivered to the Representative or counsel for the Underwriters in connection
with the sale of the DECs shall be deemed a representation and warranty by such
Seller, as to matters covered thereby, to each Underwriter.
Any certificate by or on behalf of any Seller or any officer
of any Seller, and delivered to the Representative or counsel for the
Underwriters in connection with the offering of the DECS shall be deemed a
representation and warranty by such Seller as to matters covered thereby, to
each Underwriter.
4. PURCHASE AND SALE.
(a) Subject to the terms and conditions and in reliance upon
the representations and warranties herein set forth, the Trust agrees
to sell to each Underwriter, and each Underwriter agrees, severally and
not jointly, to purchase from the Trust, at a purchase price of $[ ]
per DECS, the amount of the Underwritten DECS set forth opposite such
Underwriter's name in Schedule I hereto.
(b) Subject to the terms and conditions and in reliance upon
the representations and warranties herein set forth, the Trust hereby
grants an option to the several Underwriters to purchase, severally and
not jointly, up to 1,500,000 Option DECS at the same purchase price per
DECS as the Underwriters shall pay for the Underwritten DECS. The
option may be exercised only to cover over-allotments in the sale of
the Underwritten DECS by the Underwriters. The option may be exercised
in whole or in part at any time (but not more than once) on or before
the 30th day after the date of the Trust Prospectus upon written or
facsimile notice by the Representative to the Trust setting forth the
number of Option DECS as to which the several Underwriters are
exercising the option and the Settlement Date. Delivery of certificates
for the Option DECS by the Trust, and payment therefor to the Trust,
shall be made as provided in Section 5 hereof. The number of Option
DECS to be purchased by each Underwriter shall be the same percentage
of the total number of Option DECS to be purchased by the several
Underwriters as such Underwriter is purchasing of the Underwritten
DECS, subject to such adjustments as you in your absolute discretion
shall make to eliminate any fractional DECS.
(c) As compensation to the Underwriters for their commitment
hereunder, and in view of the fact that the proceeds of the sale of the
DECS will be used by the Trust as specified in the Contracts, the
Sellers agree, severally and jointly, to pay to Salomon Smith Barney,
at the time of each delivery of DECS pursuant to Section 5, an amount
equal to $[ ] per DECS being delivered at such time, plus $[ ] per DECS
for each Subscription DECS owned by Salomon Smith Barney after giving
effect to the subdivision of the Subscription DECS provided for in the
Subscription Agreement.
5. DELIVERY AND PAYMENT. Delivery of and payment for the
Underwritten DECS and the Option DECS (if the option provided for in Section
4(b) hereof shall have been exercised on or before the first Business Day prior
to the Closing Date) shall be made at 10:00 A.M., New York City time, on
November 17, 1999, or at such time on such later date not later than five
Business Days after the foregoing date as the Representative shall designate,
which date and time may be postponed by agreement among the Representative, the
Trust and the Sellers or as provided in Section 13 hereof
16
<PAGE>
(such date and time of delivery and payment for the DECS being herein called the
"CLOSING DATE"). Delivery of the DECS shall be made to the Representative for
the respective accounts of the several Underwriters against payment by the
several Underwriters through the Representative of the purchase price thereof to
or upon the order of the Trust by wire transfer payable in immediately available
same-day funds to an account specified by the Trust in writing at least two
Business Days in advance of the Closing Date. Delivery of the DECS shall be made
through the facilities of the Depository Trust Company unless the Representative
shall otherwise instruct.
The Trust agrees to have the DECS available for inspection and
checking by the Representative in New York, New York, not later than 1:00 P.M.
on the Business Day prior to the Closing Date.
If the option provided for in Section 4(b) hereof is exercised
after the first Business Day prior to the Closing Date, the Trust will deliver
the Option DECS (at the expense of the Trust) to the Representative, at 388
Greenwich Street, New York, New York, on the date specified by the
Representative (which shall be within three Business Days after exercise of said
option) for the respective accounts of the several Underwriters, against payment
by the several Underwriters through the Representative of the purchase price
thereof to or upon the order of the Trust by wire transfer payable in
immediately available same-day funds to an account specified by the Trust in
writing at least two Business Days in advance of such Settlement Date. If
settlement for the Option DECS occurs after the Closing Date, the Trust, the
Company and the Sellers will deliver to the Representative on the Settlement
Date for the Option DECS, and the obligation of the Underwriters to purchase the
Option DECS shall be conditioned upon receipt of, supplemental opinions,
certificates and letters confirming as of such date the opinions, certificates
and letters delivered on the Closing Date pursuant to Section 10 hereof.
6. OFFERING BY THE UNDERWRITERS. It is understood that the
several Underwriters propose to offer the DECS for sale to the public as set
forth in the Trust Prospectus.
7. AGREEMENTS OF THE TRUST. The Trust agrees with the several
Underwriters that:
(a) The Trust will use its best efforts to cause the Trust
Registration Statement, if not effective at the Execution Time, and any
amendment thereof, to become effective. Prior to the termination of the
offering of the DECS, the Trust will not file any amendment of the
Trust Registration Statement or supplement to the Trust Prospectus or
any Rule 462(b) Trust Registration Statement unless the Trust has
furnished you a copy for your review prior to filing and will not file
any such proposed amendment or supplement to which you object. Subject
to the foregoing sentence, if the Trust Registration Statement has
become or becomes effective pursuant to Rule 430A, or filing of the
Trust Prospectus is otherwise required under Rule 424(b), the Trust
will cause the Trust Prospectus, properly completed, and any supplement
thereto to be filed with the Commission pursuant to the applicable
paragraph of Rule 424(b) within the time period prescribed and will
provide evidence satisfactory to the Representative of such timely
filing. The Trust will promptly advise the Representative (1) when the
Trust Registration Statement, if not effective at the Execution Time,
shall have become effective, (2) when the Trust Prospectus, and any
supplement thereto, shall have been filed (if required) with the
Commission pursuant to Rule 424(b) or when any Rule 462(b) Trust
Registration Statement shall have been filed with the Commission, (3)
when, prior to termination of the offering of the DECS, any amendment
to the Trust Registration Statement
17
<PAGE>
or any Rule 462(b) Trust Registration Statement, shall have been filed
or become effective, (4) of any request by the Commission or its staff
for any amendment of the Trust Registration Statement, or any Rule
462(b) Trust Registration Statement, or for any supplement to the Trust
Prospectus or for any additional information, (5) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Trust Registration Statement or the institution or threatening of any
proceeding for that purpose and (6) of the receipt by the Trust of any
notification with respect to the suspension of the qualification of the
DECS for sale in any jurisdiction or the institution or threatening of
any proceeding for such purpose. The Trust will use its best efforts to
prevent the issuance of any such stop order or the suspension of any
such qualification and, if issued, to obtain as soon as possible the
withdrawal thereof.
(b) If, at any time when a prospectus relating to the DECS is
required to be delivered under the Act, any event occurs as a result of
which the Trust Prospectus as then supplemented would include any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, or if it shall
be necessary to amend the Trust Registration Statement or supplement
the Trust Prospectus to comply with the Act or the Exchange Act or the
respective rules thereunder, the Trust promptly will (1) notify the
Representative of any such event, (2) prepare and file with the
Commission, subject to the second sentence of paragraph (a) of this
Section 7, an amendment or supplement which will correct such statement
or omission or effect such compliance and (3) supply any supplemental
Trust Prospectus to you in such quantities as you may reasonably
request.
(c) The Trust will furnish to the Representative and counsel
for the Underwriters, without charge, signed copies of the Trust
Registration Statement (including exhibits thereto) and to each other
Underwriter a copy of the Trust Registration Statement (without
exhibits thereto). The Trust will furnish to the Underwriters not later
than (i) 6:00 P.M., New York City time, on the date of determination of
the public offering price of the DECS, if such determination occurred
at or prior to 12:00 noon, New York City time, on such date or (ii)
6:00 P.M., New York City time, on the Business Day following the date
on which the public offering price was determined, if such
determination occurred after 12:00 noon, New York City time, on such
date, as many copies of each Preliminary Trust Prospectus, the Trust
Prospectus and any supplement thereto as the Representative may
reasonably request; further, so long as delivery of a prospectus by an
Underwriter or any dealer may be required by the Act, as many copies of
each Preliminary Trust Prospectus and the Trust Prospectus and any
supplement thereto as the Representative may reasonably request.
(d) The Trust will arrange, if necessary, for the
qualification of the DECS and the Shares for sale under the laws of
such jurisdictions as the Representative may designate, will maintain
such qualifications in effect so long as required for the distribution
of the DECS and will pay any fee of the National Association of
Securities Dealers, Inc. (the "NASD") in connection with its review, if
any, of the Trust Registration Statement and the offering of the DECS.
8. AGREEMENTS OF THE COMPANY. The Company agrees with the
several Underwriters that:
18
<PAGE>
(a)The Company will use its best efforts to cause the Company
Registration Statement, if not effective at the Execution Time, and any
amendment thereof, to become effective. Prior to the termination of the
offering of the DECS, the Company will not file any amendment of the
Company Registration Statement or supplement to the Company Prospectus
or any Rule 462(b) Company Registration Statement unless the Company
has furnished you a copy for your review prior to filing and will not
file any such proposed amendment or supplement without the prior
consent of the Representative, which consent shall not be unreasonably
withheld, conditioned or delayed. Subject to the foregoing sentence, if
the Company Registration Statement has become or becomes effective
pursuant to Rule 430A, or filing of the Company Prospectus is otherwise
required under Rule 424(b), the Company will cause the Company
Prospectus, properly completed, and any supplement thereto to be filed
with the Commission pursuant to the applicable paragraph of Rule 424(b)
within the time period prescribed and will provide evidence
satisfactory to the Representative of such timely filing. If necessary
for the sale of the DECs or the sale of the Shares in connection with
the offering of the DECs, the Company will cause the Rule 462(b)
Registration Statement, completed in compliance with the Act and the
applicable rules and regulations thereunder, to be filed with the
Commission pursuant to Rule 462(b) and will provide evidence
satisfactory to the Representative of such filing. The Company will
promptly advise the Representative (1) when the Company Registration
Statement, if not effective at the Execution Time, shall have become
effective, (2) when the Company Prospectus, and any supplement thereto,
shall have been filed (if required) with the Commission pursuant to
Rule 424(b) or when any Rule 462(b) Company Registration Statement
shall have been filed with the Commission, (3) when, prior to
termination of the offering of the DECS, any amendment to the Company
Registration Statement shall have been filed or become effective, (4)
of any request by the Commission or its staff for any amendment of the
Company Registration Statement, or any Rule 462(b) Company Registration
Statement, or for any supplement to the Company Prospectus or for any
additional information, (5) of the issuance by the Commission of any
stop order suspending the effectiveness of the Company Registration
Statement or the institution or threatening of any proceeding for that
purpose and (6) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Shares for sale
in any jurisdiction or the institution or threatening of any proceeding
for such purpose. The Company will use its best efforts to prevent the
issuance of any such stop order or the suspension of any such
qualification and, if issued, to obtain as soon as possible the
withdrawal thereof. Prior to the completion of the sale of the DECs by
the Underwriters, the Company will not file any document under the
Exchange Act that is incorporated by reference in the Company
Registration Statement unless, prior to such proposed filing, the
Company has furnished the Representative with a copy of such document
for its review and the Representative has not reasonably objected to
the filing of such document within a reasonable period of time. The
Company will promptly advise the Representative when any document filed
under the Exchange Act that is incorporated by reference in the Company
Registration Statement shall have been filed with the Commission.
(b) If, at any time when a prospectus relating to the Shares
is required to be delivered under the Act (including in respect of the
offering and sale of the DECS), any event occurs as a result of which
the Company Prospectus as then amended or supplemented would include
any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it
should be necessary to amend the Company Registration Statement or
19
<PAGE>
supplement the Company Prospectus to comply with the Act or the
Exchange Act or the respective rules thereunder, the Company promptly
will (1) notify the Representative of such event, (2) prepare and file
with the Commission, subject to the second sentence of paragraph (a) of
this Section 8, an amendment or supplement which will correct such
statement or omission or effect such compliance and (3) supply any
supplemented Company Prospectus to you in such quantities as you may
reasonably request.
(c) In accordance with the requirements of the Exchange Act
and the Act applicable to the Company, the Company will make generally
available to its security holders and to the Representative an earnings
statement or statements of the Company and its subsidiaries which will
satisfy the provisions of Section 11(a) of the Act and Rule 158 under
the Act.
(d) Upon your request, the Company will furnish to the
Representative and counsel for the Underwriters, without charge, signed
copies of the Company Registration Statement (including exhibits
thereto) which is filed in connection with the sale of the DECs or the
sale of the Shares in connection with the offering of the DECs, and to
each other Underwriter a copy of the Company Registration Statement
(without exhibits thereto), which is filed in connection with the sale
of the DECs or the sale of the Shares in connection with the offering
of the DECs, and, so long as delivery of a prospectus by an Underwriter
or dealer may be required by the Act, as many copies of each Company
Prospectus and any supplement thereto as the Representative may
reasonably request. The Company will pay the expenses of printing or
other production of all documents relating to the offering and sale of
the DECS or the offering and sale of the Shares in connection with the
offering and sale of the DECS as provided in Section 8(h) herein.
(e) The Company will arrange, if necessary, for the
qualification of the DECS and the Shares for sale under the laws of
such jurisdictions as the Representative may designate, will maintain
such qualifications in effect so long as required for the distribution
of the DECS or the Shares and will pay any fee of the NASD in
connection with its review of the offering and sale of the DECS or the
offering and sale of the Shares in connection with the offering and
sale of the DECS; provided that in no event shall the Company be
obligated to qualify to do business in any jurisdiction where it is not
now so qualified or to take any action that would subject it to service
of process in suits, in each case, other than those arising out of the
offering or sale of the DECS or the offering and sale of the Shares in
connection with the offering of the DECS in any jurisdiction where it
is not now so subject. The Company will promptly advise the
Representative of the receipt by the Company of any notification with
respect to the suspension of the qualification of the DECs or the
Shares in connection with the offering of the DECs for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose. The Company shall use its best efforts to prevent the
issuance of any order suspending the qualification or exemption of the
DECs or the Shares in connection with the offering of the DECs under
any state securities or Blue Sky laws, and, if at any time any state
securities commission or any other regulatory authority shall issue an
order suspending the qualification or exemption of the DECs or the
Shares in connection with the offering of the DECs under any state
securities or Blue Sky laws, the Company shall use every reasonable
effort to obtain the withdrawal or lifting of such order at the
earliest possible time.
20
<PAGE>
(f) The Company will not, without the prior written consent of
Salomon Smith Barney, offer, sell, contract to sell, pledge, or
otherwise dispose of, (or enter into any transaction which is designed
to, or might reasonably be expected to, result in the disposition
(whether by actual disposition or effective economic disposition due to
cash settlement or otherwise) by the Company or any affiliate of the
Company or any person in privity with the Company or any affiliate of
the Company) directly or indirectly, including the filing (or
participation in the filing) of a registration statement with the
Commission in respect of, or establish or increase a put equivalent
position or liquidate or decrease a call equivalent position within the
meaning of Section 16 of the Exchange Act, any other shares of Common
Stock or any securities convertible into, or exercisable, or
exchangeable for, shares of Common Stock; or publicly announce an
intention to effect any such transaction, for a period of 90 days after
the date of this Agreement, provided, however, that the Company may (1)
issue and sell Common Stock pursuant to any employee stock option plan,
stock ownership plan or dividend reinvestment plan of the Company in
effect at the Execution Time, (2) issue Common Stock issuable upon the
conversion of securities or the exercise of warrants outstanding at the
Execution Time, (3) issue and sell Common Stock and convertible
subordinated notes to Bell Atlantic Investments Inc. pursuant to the
terms of that certain securities purchase agreement, dated October 7,
199[ ], and provided further, that, the Company will obtain the written
agreement of the stockholders listed on Schedule IV hereto that they
will not, without the prior written consent of Salomon Smith Barney,
offer, sell, contract to sell, pledge, or otherwise dispose of, (or
enter into any transaction which is designed to, or might reasonably be
expected to, result in the disposition (whether by actual disposition
or effective economic disposition due to cash settlement or otherwise)
by the Company or any affiliate of the Company or any person in privity
with the Company or any affiliate of the Company) directly or
indirectly, including the filing (or participation in the filing) of a
registration statement with the Commission in respect of, or establish
or increase a put equivalent position or liquidate or decrease a call
equivalent position within the meaning of Section 16 of the Exchange
Act, any other shares of Common Stock or any securities convertible
into, or exercisable, or exchangeable for, shares of Common Stock; or
publicly announce an intention to effect any such transaction, for a
period of 90 days after the date of this Agreement, provided, that, the
stockholders listed on Schedule IV hereto may sell Shares pursuant to
the Underwriting Agreement dated November [ ], 1999, between Metromedia
Fiber Network, Inc., Salomon Smith Barney Inc., Credit Suisse First
Boston Corporation, Deutsche Bank Securities Inc., Donaldson, Lufkin &
Jenrette Securities Corporation, Goldman, Sachs & Co. and Merrill
Lynch, Pierce, Fenner & Smith Incorporated as underwriters, and the
stockholders listed on Schedule IV hereto.
(g) The Company will not take, directly or indirectly, any
action designed to or which has constituted or which might reasonably
be expected to cause or result, under the Exchange Act or otherwise, in
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the DECs.
(h) The Company agrees to pay the costs and expenses relating
to the following matters: (i) the preparation, printing or reproduction
of the Company Registration Statement and the Company Prospectus and
each amendment or supplement to either of them; (ii) the printing (or
reproduction) and delivery (including postage, air freight charges and
charges for counting and packaging) of such copies of the Company
Registration Statement and the Company Prospectus and all amendments or
supplements to either of them, as may, in each case, be reasonably
requested for use in connection with the offering and sale of the DECs
or the offering and sale of the Shares in connection with the offering
and sale of the DECs; (iii) the preparation, printing, authentication,
issuance and delivery of certificates for the Shares and the DECs,
including any stamp or transfer taxes in connection with the Shares and
the DECs; (iv) the printing (or reproduction) and delivery of this
Agreement, the Custody Agreement, any blue sky memorandum and all other
agreements or documents printed (or reproduced) and delivered in
connection with the offering of the DECs or
21
<PAGE>
the offering and sale of the Shares in connection with the offering and
sale of the DECs; (v) any registration or qualification of the Shares
and the DECs for offer and sale under the securities or blue sky laws
of the several states (including filing fees and the reasonable fees
and expenses of one counsel for the Underwriters relating to such
registration and qualification); (vi) fees and expenses of the
Custodian ; (vii) the transportation and other expenses incurred by or
on behalf of Company representatives in connection with presentations
to prospective purchasers of the DECs; (viii) the fees and expenses of
the Company's accountants and the fees and expenses of counsel
(including local and special counsel) for the Company; and (ix) all
other costs and expenses incident to the performance by the Company of
its obligations hereunder; PROVIDED, HOWEVER, that, except as otherwise
provided for herein, the Underwriters shall pay their own costs and
expenses, including the fees of their counsel, any advertising expenses
connected with any offers they may make.
(i) The Company agrees to do and perform all things required
to be done and performed by it under this Agreement that are within its
control on or prior to or after the Closing Date, as applicable, and to
use its best efforts to satisfy all conditions precedent on its part to
the delivery of the Shares and the DECs.
9. AGREEMENTS OF THE SELLERS. Each Seller agrees with each of
the Underwriters that:
(a) Such Seller will not, without the prior written consent of
Salomon Smith Barney Inc. offer, sell, contract to sell, pledge or
otherwise dispose of, (or enter into any transaction which is designed
to, or might reasonably be expected to, result in the disposition
(whether by actual disposition or effective economic disposition due to
cash settlement or otherwise) by the Company or any affiliate of the
Company or any person in privity with the Company or any affiliate of
the Company) directly or indirectly, or file (or participate in the
filing of) a registration statement with the Commission in respect of,
or establish or increase a put equivalent position or liquidate or
decrease a call equivalent position within the meaning of Section 16 of
the Exchange Act with respect to, any shares of capital stock of the
Company or any securities convertible into or exercisable or
exchangeable for such capital stock, or publicly announce an intention
to effect any such transaction, for a period of 90 days after the date
of this Agreement, other than (1) shares of Common Stock disposed of as
bona fide gifts approved by Salomon Smith Barney Inc., (2) the Shares
sold to the Underwriters pursuant to the Underwriting Agreement between
Metromedia Fiber Network, Inc. and the Underwriters dated November [ ],
1999, and (3) the Sellers may engage in any of the transactions
described above in connection with the offering by the Trust of the
DECs or any delivery of Shares pursuant to the terms of the DECs.
(b) Such Seller will not take any action designed to or which
has constituted or which might reasonably be expected to cause or
result, under the Exchange Act or otherwise, in stabilization or
manipulation of the price of any security of the Company to facilitate
the sale or resale of the DECs or the Shares in connection with the
offering of the DECs.
22
<PAGE>
(c) Such Seller will advise you promptly, and if requested by
you, will confirm such advice in writing, so long as delivery of a
prospectus relating to the DECs or the Shares in connection with the
offering of the DECs by an underwriter or dealer may be required under
the Act, of (i) any material change in the Company's condition
(financial or otherwise), prospects, earnings, business or properties,
(ii) any change in information in the Company Registration Statement or
the Company Prospectus relating to such Seller or (iii) any new
material information relating to the Company or relating to any matter
stated in the Company Prospectus which comes to the attention of such
Seller.
10. CONDITIONS TO THE OBLIGATIONS OF THE UNDERWRITERS. The
obligations of the Underwriters to purchase the Underwritten DECS and the Option
DECS, as the case may be, shall be subject to the accuracy of the
representations and warranties on the part of the Trust, the Company and the
Sellers contained herein as of the Execution Time, the Closing Date and any
Settlement Date pursuant to Section 4(b) hereof, to the accuracy of the
statements of the Trust, the Company and the Sellers made in any certificates
pursuant to the provisions hereof, to the performance by each of the Trust, the
Company and the Sellers of their respective obligations hereunder and to the
following additional conditions:
(a) If the Trust Registration Statement or the Company
Registration Statement has not become effective prior to the Execution
Time, unless the Representative agrees in writing to a later time, such
Trust Registration Statement or Company Registration Statement will
become effective not later than (i) 6:00 P.M. New York City time on the
date of determination of the public offering price of the DECS, if such
determination occurred at or prior to 3:00 P.M. New York City time on
such date or (ii) 9:30 A.M. New York City time on the Business Day
following the day on which the public offering price of the DECS was
determined, if such determination occurred after 3:00 P.M. New York
City time on such date; if filing of the Trust Prospectus or the
Company Prospectus, or any supplement thereto, is required pursuant to
Rule 497(h) or Rule 424(b), such Trust Prospectus or Company
Prospectus, and any such supplement, will be filed in the manner and
within the time period required by such Rule; and no stop order
suspending the effectiveness of the Trust Registration Statement or the
Company Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or threatened.
(b) The Representative shall have received the opinion of
Richards, Layton & Finger, special Delaware counsel for the Trust,
dated the Closing Date and addressed to the Representative, with
respect to such matters as the Representative may reasonably request.
(c) The Company shall have requested and caused Arnold L.
Wadler, General Counsel of the Company, to furnish to the
Representative his opinion, dated the Closing Date and addressed to the
Representative, in the form of Exhibit A to this Agreement.
(d) The Company shall have requested and caused Paul, Weiss,
Rifkind, Wharton & Garrison, counsel for the Company, to furnish to the
Representative its opinion, dated the Closing Date and addressed to the
Representative, in the form of Exhibit B to this Agreement.
(e) The Company shall have furnished to the Representative the
opinion of Baker & McKenzie, special regulatory counsel for the
Company, dated the Closing Date, in the form of Exhibit C to this
Agreement.
23
<PAGE>
(f) The Sellers shall have requested and caused Paul, Weiss,
Rifkind, Wharton & Garrison, counsel for the Sellers, to have furnished
to the Representative their opinion dated the Closing Date and
addressed to the Representative, in the form of Exhibit D to this
Agreement.
(g) The Representative shall have received (i) from Cleary,
Gottlieb, Steen & Hamilton, counsel for the Underwriters and the Trust,
such opinion or opinions, dated the Closing Date and addressed to the
Representative, with respect to the issuance and sale of the DECS, the
Trust Registration Statement, the Trust Prospectus (together with any
supplement thereto), the Fundamental Documents and other related
matters as the Representative may reasonably require, and (ii) from
Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the Underwriters,
a negative assurance letter dated the Closing Date and addressed to the
Representative, the Company Registration Statement, the Company
Prospectus (together with any supplement thereto); and the Company and
the Sellers shall have furnished to such counsel such documents as they
reasonably request for the purpose of enabling them to pass upon such
matters.
(h) The Trust shall have furnished to the Representative a
certificate of the Trust, signed by the Managing Trustee and dated the
Closing Date, to the effect that:
(i) the representations and warranties of the Trust
in this Agreement are true and correct in all material
respects on and as of the Closing Date with the same effect as
if made on the Closing Date and the Trust has complied in all
material respects with all the agreements and satisfied all
the conditions on its part to be performed or satisfied at or
prior to the Closing Date; and
(ii) no stop order suspending the effectiveness of
the Trust Registration Statement or the use of the Trust
Prospectus has been issued and no proceedings for that purpose
have been instituted or, to the Trust's knowledge, threatened.
(i) The Company shall have furnished to the Representative a
certificate of the Company, signed by the Chairman of the Board or the
President and the principal financial or accounting officer of the
Company, dated the Closing Date, to the effect that the signers of such
certificate have carefully examined the Company Registration Statement,
the Company Prospectus, any supplements to the Company Prospectus and
this Agreement and that:
(i) the representations and warranties of the Company
in this Agreement are true and correct in all material
respects on and as of the Closing Date with the same effect as
if made on the Closing Date, and the Company has complied with
all the agreements and satisfied all the conditions on its
part to be performed or satisfied hereunder at or prior to the
Closing Date;
(ii) no stop order suspending the effectiveness of
the Company Registration Statement has been issued and no
proceedings for that purpose have been instituted or, to the
Company's knowledge, threatened; and
(iii) since the date of the most recent financial
statements included or incorporated by reference in the
Company Prospectus (exclusive of any amendment or supplement
thereto), there has been no material adverse effect on the
condition
24
<PAGE>
(financial or otherwise), prospects, earnings, business or
properties of the Company and its subsidiaries, taken as a
whole, whether or not arising from transactions in the
ordinary course of business, except as set forth in or
contemplated in the Company Prospectus (exclusive of any
amendment or supplement thereto).
(j) Each of the Sellers shall have furnished to the
Representative a certificate, signed by such Seller, dated the Closing
Date, to the effect that the signers of such certificate have carefully
examined the Company Registration Statement, the Company Prospectus,
any supplement to the Company Prospectus and this Agreement and that
the representations and warranties of such Seller in this Agreement are
true and correct in all material respects on and as of the Closing Date
with the same effect as if made on the Closing Date.
(k) Each of the Sellers, other than Metromedia Company, shall
have furnished a Certificate of Spouse, in the form attached as Exhibit
F to this Agreement, signed by such Seller's spouse, stating that such
spouse will not assert any claims to the Common Stock pledged by their
spouse under the Collateral Agreement.
(l) At the Execution Time and at the Closing Date, the Company
shall have requested and caused Ernst & Young LLP to furnish to the
Representative letters, dated respectively as of the Execution Time and
as of the Closing Date, in form and substance satisfactory to the
Representative, confirming that they are independent accountants within
the meaning of the Act and the Exchange Act and the applicable rules
and regulations thereunder, that they have performed a review of the
unaudited interim financial information of the Company for the nine
month period ended September 30, 1999 and as at September 30, 1999 and
stating in effect that:
(i) in their opinion the audited financial statements
and financial statement schedules included or incorporated in
the Company Registration Statement and the Company Prospectus
and reported on by them comply as to form in all material
respects with the applicable accounting requirements of the
Exchange Act and the related published rules and regulations
thereunder;
(ii) on the basis of a reading of the latest
unaudited financial statements made available by the Company
and its subsidiaries; their limited review in accordance with
the standards established under Statement on Auditing
Standards No. 71, of the unaudited interim financial
information for the nine month period ended September 30,
1999, and as at September 30, 1999, as indicated in their
report included or incorporated in the Company Registration
Statement and Company Final Prospectus; carrying out certain
specified procedures (but not an examination in accordance
with generally accepted auditing standards) which would not
necessarily reveal matters of significance with respect to the
comments set forth in such letter; a reading of the minutes of
the meetings of the stockholders, directors and committees of
the Company and the Subsidiaries; and inquiries of certain
officials of the Company who have responsibility for financial
and accounting matters of the Company and its subsidiaries as
to transactions and events subsequent to December 31, 1998
nothing came to their attention which caused them to believe
that:
(A) (1) any unaudited financial statements
included or incorporated by reference in the Company
Registration Statement and the
25
<PAGE>
Company Prospectus do not comply in form in all
material respects with applicable accounting
requirements and with the published rules and
regulations of the Commission with respect to
financial statements included or incorporated in
quarterly reports on Form 10-Q under the Exchange
Act; or that said unaudited financial statements are
not in conformity with generally accepted accounting
principles applied on a basis substantially
consistent with that of the audited financial
statements included or incorporated in the Company
Registration Statement and the Company Prospectus;
(2) with respect to the period subsequent to
September 30, 1999, there were any changes, at a
specified date not more than three days prior to the
date of the letter, in the capital stock, increase in
long-term debt of the Company and its subsidiaries or
decreases in net assets or stockholders' equity of
the Company as compared with the amounts shown on the
September 30, 1999 consolidated balance sheet
included in the Company Prospectus, or for the period
from October 1, 1999 to such specified date there
were any decreases, as compared with the
corresponding period in the preceding year in
revenues or in total or per share amounts of net
income of the Company and its subsidiaries, except in
all instances for changes or decreases set forth in
such letter, in which case the letter shall be
accompanied by an explanation by the Company as to
the significance thereof unless said explanation is
not deemed necessary by the Representative; or
(B) the information included under the
headings "Selected Consolidated Financial Data" and
"Management--Executive Compensation" is not in
conformity with the disclosure requirements of
Regulation S-K;
(iii) they have performed certain other specified
procedures as a result of which they determined that certain
information of an accounting, financial or statistical nature
(which is limited to accounting, financial or statistical
information derived from the general accounting records of the
Company and its subsidiaries) set forth in the Company
Prospectus, including the information set forth under the
captions "Risk Factors", "Use of Proceeds", "Capitalization",
"Selected Consolidated Financial Data", "Management's
Discussion and Analysis of Financial Condition and Results of
Operations", "Business", "Management", and "Certain
Relationships and Related Transactions" in the Company
Prospectus, the information included or incorporated in Items
1, 2, 6, 7 and 11 of the Company's Annual Report on Form 10-K
incorporated in the Company Prospectus and the information
included in the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included or
incorporated in the Company's Quarterly Reports on Form 10-Q,
incorporated in the Company Prospectus, agrees with the
accounting records of the Company and its subsidiaries,
excluding any questions of legal interpretation; and
(iv) on the basis of a reading of the unaudited pro
forma financial statements included or incorporated by
reference in the Company Registration Statement and the
Company Prospectus (the "pro forma financial statements");
carrying out certain specified procedures; inquiries of
certain officials of the Company and AboveNet Communications,
Inc. who have responsibility for financial
26
<PAGE>
and accounting matters; and proving the arithmetic accuracy of
the application of the pro forma adjustments to the historical
amounts in the pro forma financial statements, nothing came to
their attention which caused them to believe that the pro
forma financial statements do not comply as to form in all
material respects with the applicable accounting requirements
of Rule 11-02 of Regulation S-X or that the pro forma
adjustments have not been properly applied to the historical
amounts in the compilation of such statements.
(m) [Intentionally Deleted]
(n) At the Execution Time and at the Closing Date, Deloitte &
Touche LLP shall have furnished to the Representative letters, dated
respectively as of the Execution Time and as of the Closing Date, in
form and substance satisfactory to the Representative, confirming that
they are independent accountants within the meaning of the Act and the
applicable rules and regulations thereunder, and stating in effect
that:
(i) in their opinion the audited financial statements
and financial statement schedules included in the Company
Registration Statement and the Company Prospectus and reported
on by them comply in form in all material respects with the
applicable accounting requirements of the Act and the related
published rules and regulations; and
(ii) they have performed certain other specified
procedures as a result of which they determined that certain
information of an accounting, financial or statistical nature
(which is limited to accounting, financial or statistical
information derived from the general accounting records of the
Company and its subsidiaries) set forth in the Company
Registration Statement and the Company Prospectus agrees with
the accounting records of the Company and its subsidiaries,
excluding any questions of legal interpretation.
References to the Company Prospectus in this paragraph (l)
include any supplement thereto at the date of the letter.
(o) At the Execution Time and at the Closing Date,
PricewaterhouseCoopers LLP shall have furnished to the Representative a
letter or letters, dated respectively as of the Execution Time and as
of the Closing Date, in form and substance satisfactory to the
Representative, confirming that they are independent accountants within
the meaning of the Act and the applicable rules and regulations
thereunder, and stating in effect that:
(i) in their opinion the audited financial statements
and financial statement schedules included in the Company
Registration Statement and the Company Prospectus and reported
on by them comply in form in all material respects with the
accounting requirements of the Act and the related published
rules and regulations; and
(ii) they have performed certain other specified
procedures as a result of which they determined that certain
information of an accounting, financial or statistical nature
(which is limited to accounting, financial or statistical
information derived from the general accounting records of the
Company and its subsidiaries) set
27
<PAGE>
forth in the Registration Statement and the Company Prospectus
agrees with the accounting records of the Company and its
subsidiaries, excluding any questions of legal interpretation.
References to the Company Prospectus in this paragraph (m)
include any supplement thereto at the date of the letter.
(p) The Shares shall have been duly approved for listing
through the Nasdaq National Market System, and satisfactory evidence of
such action shall have been provided to the Representative.
(q) The DECS shall have been approved for listing on the
Nasdaq National Market System, subject only to official notice of
issuance.
(r) The NASD shall not have raised any objection with respect
to the fairness and reasonableness of the underwriting terms and
arrangements.
(s) Each Fundamental Agreement shall have been executed and
delivered by all parties thereto, and each Seller shall have delivered
to the Collateral Agent the number of Shares required by the Collateral
Agreement to which such Seller is a party to be initially pledged and
assigned by such Seller thereunder in accordance with the requirements
of such Collateral Agreement.
(t) Subsequent to the Execution Time or, if earlier, the dates
as of which information is given in the Company Registration Statement
(exclusive of any amendment thereof) and the Company Prospectus
(exclusive of any amendment or supplement thereto), there shall not
have been (i) any change or decrease specified in the letter or letters
referred to in paragraphs [(j), (l) or (m)] of this Section 10 or (ii)
any change, or any development involving a prospective change, in or
affecting the condition (financial or otherwise), prospects, earnings,
business or properties of the Company and its subsidiaries, taken as a
whole, whether or not arising from transactions in the ordinary course
of business, except as set forth in or contemplated in the Company
Prospectus (exclusive of any amendment or supplement thereto) the
effect of which, in any case referred to in clause (i) or (ii) above,
is, in the sole judgment of the Representative, so material and adverse
as to make it impractical or inadvisable to proceed with the offering
or delivery of the DECS as contemplated by the Trust Registration
Statement and the Company Registration Statement (in either case,
exclusive of any amendment thereof) and the Trust Prospectus and the
Company Prospectus (in either case, exclusive of any amendment or
supplement thereto).
(u) Subsequent to the Execution Time, there shall not have
been any decrease in the rating of any of the Company's debt securities
by any "nationally recognized statistical rating organization" (as
defined for purposes of Rule 436(g) under the Act) or any notice given
of any intended or potential decrease in any such rating or of a
possible change in any such rating that does not indicate the direction
of the possible change.
(v) (i) No stop order suspending the effectiveness of the
Company Registration Statement shall have been issued and no
proceedings for that purpose shall have been taken or, to the knowledge
of the Company, shall be contemplated by the Commission at or prior to
the Closing Date; (ii) there shall not have been any change in the
capital stock of the
28
<PAGE>
Company nor any material increase in the short-term or long-term debt
of the Company (other than in the ordinary course of business) from
that set forth or contemplated in the Company Registration Statement or
the Company Prospectus (or any amendment or supplement thereto); (iii)
there shall not have been, since the respective dates as of which
information is given in the Company Registration Statement and the
Company Prospectus (or any amendment or supplement thereto), except as
may otherwise be stated in the Company Registration Statement and
Company Prospectus (or any amendment or supplement thereto), any
material adverse change in the condition (financial or other),
business, prospects, properties, net worth or results of operations of
the Company and the Subsidiaries taken as a whole; (iv) the Company and
the Subsidiaries shall not have any liabilities or obligations, direct
or contingent (whether or not in the ordinary course of business), that
are material to the Company and the Subsidiaries, taken as a whole,
other than those reflected in the Company Registration Statement or the
Company Prospectus (or any amendment or supplement thereto); and (v)
all the representations and warranties of the Company contained in this
Agreement shall be true and correct on and as of the date hereof and on
and as of the Closing Date as if made on and as of the Closing Date and
you shall have received a certificate, dated the Closing Date and
signed by the chief executive officer and the chief financial officer
of the Company (or such other officers as are acceptable to you), to
the effect set forth in this Section 10(u) hereof.
(w) The Company shall not have failed at or prior to the
Closing Date to have performed or complied with any of its agreements
herein contained and required to be performed or complied with by it
hereunder at or prior to the Closing Date.
(x) At the Execution Time, the Company shall have furnished to
the Representative a letter substantially in the form of Exhibit E
hereto from each executive officer of the Company addressed to the
Representative relating to sales and certain other dispositions of the
shares of common stock of the Company or certain other securities, and
such letter agreements shall be in full force and effect on the Closing
Date.
(y) Prior to the Closing Date, the Company, the Trust and each
of the Sellers shall have furnished to the Representative such further
information, certificates and documents as the Representative may
reasonably request.
(z) If any of the conditions specified in this Section 10
shall not have been fulfilled in all material respects when and as
provided in this Agreement, or if any of the opinions and certificates
mentioned above or elsewhere in this Agreement shall not be in all
material respects reasonably satisfactory in form and substance to the
Representative and counsel for the Underwriters, this Agreement and all
obligations of the Underwriters hereunder may be canceled at, or at any
time prior to, the Closing Date by the Representative. Notice of such
cancellation shall be given to the Trust and the Company in writing or
by telephone or facsimile confirmed in writing.
(aa) The documents required to be delivered by this Section 10
shall be delivered at the office of Paul, Weiss, Rifkind, Wharton &
Garrison, counsel for the Company, at 1285 Avenue of the Americas, New
York, New York 10019, on the Closing Date.
11. EXPENSES.
29
<PAGE>
(a) Except as otherwise provided herein, each of the Sellers,
severally and jointly, will pay all expenses incident to the
performance by the Trust and each Seller of their respective
obligations under this Agreement and their Contracts and Collateral
Agreements, including (i) the preparation, printing and filing of the
Notification and the Trust Registration Statement (including financial
statements and exhibits) as originally filed and of each amendment
thereto, (ii) the preparation, printing and delivery of this Agreement,
the Trust Agreement, each of the Fundamental Agreements and such other
documents as may be required in connection with the offering, purchase,
sale, issuance or delivery of the DECS, (iii) the preparation, issuance
and delivery of the certificates for the DECS to the Representative,
(iv) the fees and disbursements of the Trust's counsel, accountants and
other advisors, (v) the fees and disbursements of the Sellers' counsel
and other advisors, (vi) the qualification of the DECS under state
securities laws in accordance with the provisions of Section 7(d)
hereof, including filing fees and the reasonable fees and disbursements
of the counsel for the Underwriters in connection therewith and in
connection with the preparation of the related blue sky survey and any
supplement thereto, (vii) the printing and delivery to the
Representative of copies of each Preliminary Trust Prospectus, the
Trust Prospectus and any amendments or supplements thereto, (viii) the
fees and expenses of any transfer agent or registrar for the DECS, (ix)
the filing fees incident to, and the reasonable fees and disbursements
of counsel to the Underwriters in connection with, securing any
required review by the NASD of the Trust Registration Statement and the
offering of the DECS in accordance with the provisions of Section 7(d)
hereof, (x) the fees and expenses incurred in connection with the
listing of the DECS on the Nasdaq National Market System and (xi) the
fees and expenses incurred in connection with the preparation and
filing of a registration statement under the Exchange Act relating to
the DECS. Each of the Sellers, severally and jointly, will reimburse
the Underwriters through Salomon Smith Barney on the Closing Date in
immediately available funds for the Up-Front Fee Amount and the
Up-Front Expense Amount (each as defined in the Fund Expense Agreement
dated as of the Closing Date between Salomon Smith Barney and BoNY) and
for the up-front fees of the trustees of the Trust paid by Salomon
Smith Barney.
(b) The Company will pay all expenses incident to the
performance by it of its obligations under this Agreement, including
(i) the preparation, printing and filing of the Company Registration
Statement (including financial statements and exhibits) as originally
filed and of each amendment thereto, (ii) the preparation, issuance and
delivery of the certificates for the Shares to the Trust, (iii) the
fees and disbursements of the Company's counsel, accountants and other
advisors, (iv) the qualification of the Shares under state securities
laws in accordance with the provisions of Section 8(e) hereof,
including filing fees and the reasonable fees and disbursements of
counsel for the Underwriters in connection therewith and in connection
with the preparation of any related blue sky survey and any supplement
thereto, (v) the printing and delivery to the Representative of copies
of each Preliminary Company Prospectus, the Company Prospectus and any
amendments or supplements thereto, (vi) the fees and expenses of any
transfer agent or registrar for the Shares, (vii) the filing fees
incident to, and the reasonable fees and disbursements of counsel to
the Underwriters in connection with, securing any required review by
the NASD of the Company Registration Statement and the offering of the
Shares in accordance with the provisions of Section 8(e) hereof and
(viii) the fees and expenses incurred in connection with the approval
of the Shares for listing through the Nasdaq National Market System.
30
<PAGE>
(c) If the sale of the DECS provided for herein is not
consummated because any condition to the obligations of the
Underwriters set forth in Section 10 hereof is not satisfied, because
of any termination pursuant to Section 15 hereof or because of any
refusal, inability or failure on the part of the Company or any Seller
to perform any agreement herein or comply with any provision hereof
other than by reason of a default by the Underwriters, each of the
Sellers, jointly and severally, will reimburse the Underwriters through
Salomon Smith Barney upon demand for all out-of-pocket expenses
(including reasonable fees and disbursements of counsel) that shall
have been incurred by the Underwriters in connection with the proposed
purchase and sale of the DECS.
12. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company and the Sellers jointly and severally agree to
indemnify and hold harmless each Underwriter, the directors, officers,
employees and agents of each Underwriter and each person who controls
any Underwriter within the meaning of either the Act or the Exchange
Act against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the
Act, the Exchange Act or other Federal or state statutory law or
regulation, at common law or otherwise ("LOSSES"), insofar as such
Losses arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the Company
Registration Statement as originally filed or in any amendment thereof,
or in any Preliminary Company Prospectus or the Company Prospectus, or
in any amendment thereof or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim,
damage, liability or action; PROVIDED, HOWEVER, that (i) the Company
and the Sellers will not be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based
upon any such untrue statement or alleged untrue statement or omission
or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company by or on behalf of
any Underwriter through the Representative specifically for inclusion
therein and (ii) with respect to any untrue statement or alleged untrue
statement of, or omission or alleged omission to state, a material fact
made in the Company Prospectus, the indemnity agreement contained in
this Section 12(a) shall not inure to the benefit of any Underwriter
(or any of the directors, officers, employees and agents of such
Underwriter or any controlling person of such Underwriter) from whom
the person asserting any such loss, claim, damage or liability
purchased the DECs concerned, to the extent that any such loss, claim,
damage or liability of such Underwriter occurs under the circumstances
where it shall have been determined by a court of competent
jurisdiction (or appropriate arbitral proceeding) by final and
nonappealable judgment that (w) the Company had previously furnished
copies of the Company Prospectus to the Underwriters, (x) delivery of
the Company Prospectus was required by the Act or under this Agreement
to be made to such person, (y) the untrue statement or omission of a
material fact contained in the Preliminary Company Prospectus was
corrected in the Company Prospectus and (z) there was not sent or given
to such person, at or prior to the written confirmation of the sale of
such DECS to such person, a copy of the Company Prospectus. This
indemnity agreement will be in addition to any liability which the
Company may otherwise have.
31
<PAGE>
(b) Each Seller severally agrees to indemnify and hold
harmless the Company, each of its directors, each of its officers,
employees, agents and each person who controls the Company within the
meaning of either the Act or the Exchange Act, each Underwriter, the
directors, officers, employees and agents of each Underwriter and each
person who controls the Company or any Underwriter within the meaning
of either the Act or the Exchange Act and each other Seller, if any,
against any and all Losses insofar as such Losses (or actions in
respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in
the Trust Registration Statement as originally filed or in any
amendment thereof, or in any Preliminary Trust Prospectus or the Trust
Prospectus, or in any amendment thereto or supplement thereto (each
such document a "TRUST REGISTRATION DOCUMENT") or the omission or
alleged omission to state in any Trust Registration Document a material
fact required to be stated therein or necessary to make the statements
therein not misleading; or (ii) written information furnished to the
Company by or on behalf of such Seller specifically for inclusion in
the Company Registration Statement as originally filed or in any
amendment thereof, or in any Preliminary Company Prospectus or the
Company Prospectus, or in any amendment thereof or supplement thereto.
This indemnity agreement will be in addition to any liability which any
Seller may otherwise have.
(c) Each Underwriter severally and not jointly agrees to
indemnify and hold harmless the Company, each of its directors, each of
its officers who signs the Company Registration Statement, and each
person who controls the Company within the meaning of either the Act or
the Exchange Act and each Seller, to the same extent as the foregoing
indemnity to each Underwriter, but only with reference to written
information relating to such Underwriter furnished to the Company by or
on behalf of such Underwriter through the Representative specifically
for inclusion in the documents referred to in the foregoing
indemnities. This indemnity agreement will be in addition to any
liability which any Underwriter may otherwise have. The Company and
each Seller acknowledge that the statements set forth in the last
paragraph of the cover page regarding delivery of the DECS and, under
the heading "Plan of Distribution," (i) the list of Underwriters and
their respective participation in the sale of the DECS, (ii) the
sentences related to concessions and reallowances and (iii) the
paragraph related to stabilization, syndicate covering transactions and
penalty bids in any Preliminary Company Prospectus, the Company
Prospectus, any Preliminary Trust Prospectus or the Trust Prospectus
constitute the only information furnished in writing by or on behalf of
the several Underwriters for inclusion in any Company Preliminary
Prospectus, Trust Preliminary Prospectus, the Company Prospectus or the
Trust Prospectus.
(d) Promptly after receipt by an indemnified party under this
Section 12 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party under this Section 12, notify the
indemnifying party in writing of the commencement thereof; but the
failure so to notify the indemnifying party (i) will not relieve it
from liability under paragraph (a), (b) or (c) above unless and to the
extent it did not otherwise learn of such action and such failure
results in the forfeiture by the indemnifying party of substantial
rights and defenses as determined by a court of competent jurisdiction
and (ii) will not, in any event, relieve the indemnifying party from
any obligations to any indemnified party other than the indemnification
obligation provided in paragraph (a), (b) or (c) above. The
indemnifying party shall be entitled to assume the defense of such
action and appoint counsel of the indemnifying party's choice at the
indemnifying party's expense to represent the indemnified party in any
action for which
32
<PAGE>
indemnification is sought (in which case the indemnifying party shall
not thereafter be responsible for the fees and expenses of any separate
counsel retained by the indemnified party or parties except as set
forth below); PROVIDED, HOWEVER, that such counsel shall be reasonably
satisfactory to the indemnified party. Notwithstanding the indemnifying
party's election to assume the defense of such action or appoint
counsel to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel
(including local counsel), and the indemnifying party shall bear the
reasonable fees, costs and expenses of such separate counsel if (i) the
use of counsel chosen by the indemnifying party to represent the
indemnified party would present such counsel with a conflict of
interest, which has not been waived; (ii) the actual or potential
defendants in, or targets of, any such action include both the
indemnified party and the indemnifying party and the indemnified party
shall have been reasonably advised by such counsel that there are legal
defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying
party; (iii) the indemnifying party shall not have assumed the defense
of the action or employed counsel reasonably satisfactory to the
indemnified party to represent the indemnified party within a
reasonable time after notice of the institution of such action; or (iv)
the indemnifying party shall authorize the indemnified party to employ
separate counsel at the expense of the indemnifying party. In any such
case, the indemnifying party shall not, in connection with any one
action or separate but substantially similar related actions in the
same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one
separate firm of attorneys (in addition to any local counsel) for all
indemnified parties. An indemnifying party will not, without the prior
written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any claim, action,
suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified parties are
actual or potential parties to such claim or action) unless such
settlement, compromise or consent includes an unconditional release of
each indemnified party from all liability arising out of such claim,
action, suit or proceeding.
(e) In the event that the indemnity provided in paragraph (a),
(b) or (c) of this Section 12 is unavailable to or insufficient to hold
harmless an indemnified party for any reason, the Company and the
Selling Stockholders, jointly and severally, and the Underwriters
severally agree to contribute to the aggregate losses, claims, damages
and liabilities (including legal or other expenses reasonably incurred
in connection with investigating or defending same) (collectively
"LOSSES") to which the Company, the Sellers and one or more of the
Underwriters may be subject in such proportion as is appropriate to
reflect the relative benefits received by the Company and the Sellers
on the one hand and by the Underwriters on the other from the offering
of the DECS; PROVIDED, HOWEVER, that in no case shall any Underwriter
(except as may be provided in any agreement among Underwriters relating
to the offering of the DECS) be responsible for any amount in excess of
the underwriting discount or commission applicable to the DECS
purchased by such Underwriter hereunder. If the allocation provided by
the immediately preceding sentence is unavailable for any reason, the
Company and the Sellers, jointly and severally, and the Underwriters
severally shall contribute in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of
the Company and the Sellers on the one hand and of the Underwriters on
the other in connection with the statements or omissions or alleged
statements or omissions which resulted in such Losses as well as any
other relevant equitable considerations. Benefits received by the
Company and the Sellers shall be deemed to be equal to the total net
proceeds from the offering (before deducting expenses) received
33
<PAGE>
by it, and benefits received by the Underwriters shall be deemed to be
equal to the total underwriting discounts and commissions, in each case
as set forth on the cover page of the Trust Prospectus. Relative fault
shall be determined by reference to, among other things, whether any
untrue or any alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information provided by the Company and the Sellers on the one hand or
the Underwriters on the other, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission or alleged untrue statement
or omission. The Company, the Sellers and the Underwriters agree that
it would not be just and equitable if contribution were determined by
pro rata allocation or any other method of allocation which does not
take account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (e), no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this
Section 12, each person who controls an Underwriter within the meaning
of either the Act or the Exchange Act and each director, officer,
employee and agent of an Underwriter shall have the same rights to
contribution as such Underwriter, and each person who controls the
Company within the meaning of either the Act or the Exchange Act and
each officer of the Company who shall have signed the Company
Registration Statement and each director of the Company shall have the
same rights to contribution as the Company, subject in each case to the
applicable terms and conditions of this paragraph (e).
(f) The liability of each Seller under the indemnity and
contribution agreements contained in Section 12(b)(ii) hereof shall be
limited to an amount equal to the public offering price of the DECS
sold by the Trust to the Underwriters. The Company and the Sellers may
agree, as among themselves and without limiting the rights of the
Underwriters under this Agreement, as to the respective amounts of such
liability for which they each shall be responsible.
13. DEFAULT BY AN UNDERWRITER. If any one or more Underwriters
shall fail to purchase and pay for any of the DECS agreed to be purchased by
such Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated severally to take up
and pay for (in the respective proportions which the amount of DECS set forth
opposite their names in Schedule I hereto bears to the aggregate amount of DECS
set forth opposite the names of all the remaining Underwriters) the DECS which
the defaulting Underwriter or Underwriters agreed but failed to purchase;
PROVIDED, HOWEVER, that in the event that the aggregate amount of DECS which the
defaulting Underwriter or Underwriters agreed but failed to purchase shall
exceed 10% of the aggregate amount of DECS set forth in Schedule I hereto, the
remaining Underwriters shall have the right to make arrangements for the
purchase of the DECS which such defaulting Underwriter or Underwriters agreed
but failed to purchase by other persons satisfactory to the Selling Stockholder
and the nondefaulting Underwriters, and/or (ii) purchase all, but shall not be
under any obligation to purchase any, of the DECS, and if such nondefaulting
Underwriters do not make such arrangements and/or purchase all the DECS, this
Agreement will terminate without liability to any nondefaulting Underwriter, the
Selling Stockholders or the Company. In the event of a default by any
Underwriter as set forth in this Section 13, the Closing Date shall be postponed
for such period, not exceeding five Business Days, as the Representative shall
determine in order that the required changes in the Company Registration
Statement, the Company Prospectus, the Trust Registration Statement and the
Trust Prospectus or in any other documents or arrangements may be effected.
Nothing contained in
34
<PAGE>
this Agreement shall relieve any defaulting Underwriter of its liability, if
any, to the Company or the Sellers and any nondefaulting Underwriter for damages
occasioned by its default hereunder.
14. TERMINATION. This Agreement shall be subject to
termination in the absolute discretion of the Representative, by notice given to
the Trust and the Company prior to delivery of and payment for the DECS, if at
any time prior to such time (i) trading in any class of the Company's Class A
Common Stock shall have been suspended by the Commission or the Nasdaq National
Market or trading in securities generally on the New York Stock Exchange or the
Nasdaq National Market shall have been suspended or limited or minimum prices
shall have been established on such Exchange or the Nasdaq National Market, (ii)
a banking moratorium shall have been declared by either Federal or New York
State authorities or (iii) there shall have occurred any outbreak or escalation
of hostilities, declaration by the United States of a national emergency or war
or other calamity or crisis, the effect of which on financial markets of the
United States is such as to make it, in the sole judgment of the Representative,
impractical or inadvisable to proceed with the offering or delivery of the DECS
as contemplated by the Trust Prospectus (exclusive of any supplement thereto).
15. REPRESENTATIONS AND INDEMNITIES TO SURVIVE. The respective
agreements, representations, warranties, indemnities and other statements of the
Trust, the Company, its officers, each Seller, and of the Underwriters set forth
in or made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation made by or on behalf of any Underwriter, the
Trust, the Company, any Seller, or any of the officers, directors, employees,
agents or controlling persons referred to in Section 12 hereof, and will survive
delivery of and payment for the DECS. The provisions of Sections 11, 12 and 17
hereof shall survive the termination or cancellation of this Agreement.
16. NOTICES. All communications hereunder will be in writing
and effective only on receipt, and, if sent to the Representative, will be
mailed, delivered or telefaxed to Salomon Smith Barney Inc. General Counsel (fax
no.: (212) 816-7912) and confirmed to the General Counsel, Salomon Smith Barney
Inc., at 388 Greenwich Street, New York, New York, 10013, Attention: General
Counsel; or, if sent to the Company, will be mailed, delivered or telefaxed to
Metromedia Fiber Network Services, Inc. c/o Metromedia Fiber Network, Inc., One
North Lexington Avenue, White Plains, New York 10601, Attention: Chief Financial
Officer (fax no.: (914) 421-6777) and confirmed to it at Metromedia Company, One
Meadowlands Plaza, East Rutherford, New Jersey 07073-2137, Attention: General
Counsel (fax no.: (201) 531-2803) and 215 East 67th Street, New York, New York
10021, Attention: Executive Vice President (fax no.: (212) 606-4337); or if sent
to any Selling Stockholders, will be mailed, delivered or telefaxed and
confirmed to it at the address set forth in Schedule I hereto.
17. SUCCESSORS. This Agreement will inure to the benefit of
and be binding upon the parties hereto and their respective successors and the
officers and directors and controlling persons referred to in Section 12 hereof,
and, except as expressly set forth in Section [8(h)] or Section 12 hereof, no
other person will have any right or obligation hereunder.
18. APPLICABLE LAW. This agreement will be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York.
35
<PAGE>
19. COUNTERPARTS. This Agreement may be executed by any one or
more of the parties in any number of counterparts, each of which shall be deemed
to be an original, but all such counterparts shall together constitute one and
the same agreement.
20. HEADINGS. The section headings used herein are for
convenience only and shall not affect the construction hereof.
21. DEFINITIONS. The terms which follow, when used in this
Agreement, shall have the meanings indicated.
"Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"Business Day" shall mean any day other than a Saturday, a
Sunday or a legal holiday or a day on which banking institutions or
trust companies are authorized or obligated by law to close in New York
City.
"Commission" shall mean the Securities and Exchange
Commission.
"Closing Date" shall have the meaning assigned to it in
Section 5 of this Agreement.
"Company Effective Date" shall mean each date and time that
the Company Registration Statement, any post-effective amendment or
amendments thereto and any Rule 462(b) Company Registration Statement
became or become effective.
"Company Prospectus" shall mean the prospectus relating to the
Shares that is used in connection with the offering and sale of the
DECS and that is first filed pursuant to Rule 424(b) together with the
basic prospectus after the Execution Time, or if no filing pursuant to
Rule 424(b) is required, shall mean the form of final prospectus
relating to the Shares that is used in connection with such offering
and sale and that is included in the Company Registration Statement at
the Company Effective Date.
"Company Registration Statement" shall mean the registration
statement referred to in Section 2(a) above including incorporated
documents, exhibits and financial statements, as amended at the
Execution Time (or, if not effective at the Execution Time, in the form
in which it shall become effective) and, in the event any
post-effective amendment thereto or any Rule 462(b) Company
Registration Statement becomes effective prior to the Closing Date,
shall also mean such registration statement as so amended or such Rule
462(b) Company Registration Statement, as the case may be. Such term
shall include any Rule 430A Information deemed to be included therein
at the Company Effective Date as provided by Rule 430A.
"Communications Act" shall mean the Communications Act of
1934, as amended (including amendments made by the Telecommunications
Act of 1996), 47 U.S.C. section 151 and the rules and regulations of
the FCC.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Commission promulgated
thereunder.
36
<PAGE>
"Execution Time" shall mean the date and time that this
Agreement is executed and delivered by the parties hereto.
"Investment Company Act" shall mean the Investment Company Act
of 1940, as amended, and the rules and regulations of the Commission
promulgated thereunder.
"Organizational Documents" shall mean, in respect of any
company, corporation, trust, partnership, limited liability company,
governmental agency or other enterprise, as applicable, its founding
act, charter, articles of incorporation and by-laws, deed of trust,
memorandum and articles of association, statute, certificate of
partnership, partnership agreement, limited liability company
agreement, or similar instrument.
"Preliminary Company Prospectus" shall mean any preliminary
prospectus referred to in Section 2(a) and any preliminary prospectus
included in the Company Registration Statement at the Company Effective
Date that omits Rule 430A Information.
"Preliminary Trust Prospectus" shall mean any preliminary
prospectus referred to in Section 1(a) above and any preliminary
prospectus included in the Trust Registration Statement at the Trust
Effective Date that omits Rule 430A Information.
"Rule 415," "Rule 424," "Rule 430A," "Rule 462," "Rule
497(h)", "Regulation S-K" and "Regulation S-X" refer to such rules and
regulations under the Act.
"Rule 430A Information" shall mean information with respect to
the DECS, the Shares and the offering thereof permitted to be omitted
from the Trust Registration Statement (or, as used in Section 2 above,
the Company Registration Statement) when it becomes effective pursuant
to Rule 430A.
"Rule 462(b) Company Registration Statement" shall mean a
registration statement and any amendments thereto filed pursuant to
Rule 462(b) relating to the offering covered by the initial
registration statement referred to in Section 2(a) above.
"Rule 462(b) Trust Registration Statement" shall mean a
registration statement and any amendments thereto filed pursuant to
Rule 462(b) relating to the offering covered by the initial
registration statement referred to in Section 1(a) above.
"Salomon Smith Barney" shall mean Salomon Smith Barney Inc.
"State Telecommunications Laws" shall mean the comparable
state statutes of all states in which the Company and/or its
subsidiaries is certified to provide services.
"Trust Effective Date" shall mean each date and time that the
Trust Registration Statement, any post-effective amendment or
amendments thereto and any Rule 462(b) Trust Registration Statement
became or become effective.
"Trust Prospectus" shall mean the prospectus relating to the
DECS that is first filed pursuant to Rule 497(h) after the Execution
Time or, if no filing pursuant to Rule 497(h) is required, shall mean
the form of final prospectus relating to the DECS included in the Trust
Registration Statement at the Trust Effective Date.
37
<PAGE>
"Trust Registration Statement" shall mean the registration
statement referred to in paragraph 1(a) above, including exhibits and
financial statements, as amended at the Trust Execution Time (or, if
not effective at the Trust Execution Time, in the form in which it
shall become effective) and, in the event any post-effective amendment
thereto or any Rule 462(b) Trust Registration Statement becomes
effective prior to the Closing Date, shall also mean such registration
statement as so amended or such Rule 462(b) Trust Registration
Statement, as the case may be. Such term shall include any Rule 430A
Information deemed to be included therein at the Trust Effective Date
as provided by Rule 430A.
As used herein, the terms "Trust Registration Statement,"
"Preliminary Trust Prospectus" and "Trust Prospectus" shall not include
the Company Prospectus attached thereto.
38
<PAGE>
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this letter and your acceptance shall represent a binding agreement
among the Trust, the Company, the Sellers and the several Underwriters.
Very truly yours,
DECS Trust VI
By:
-------------------------------
Name: Donald J. Puglisi
Title: Managing Trustee
Metromedia Fiber Network, Inc.
By: -------------------------------
Name:
Title:
Sellers:
Metromedia Company
By: -------------------------------
Name:
Title:
Steven A. Garofalo
-------------------------------------------
Stuart Subotnick
-------------------------------------------
<PAGE>
The foregoing Agreement is hereby
confirmed and accepted as of the date
first above written.
Salomon Smith Barney Inc.
By:
-----------------------------
Name:
Title:
For themselves and the other several
Underwriters, if any, named in
Schedule I to the foregoing Agreement
<PAGE>
SCHEDULE I
NUMBER OF UNDERWRITTEN
DECS TO BE
UNDERWRITERS PURCHASED
Salomon Smith Barney Inc. [ ]
Credit Suisse First Boston Corporation [ ]
Deutsche Bank Securities Inc. [ ]
Donaldson, Lufkin & Jenrette Securities
Corporation [ ]
Goldman, Sachs & Co. [ ]
Merrill Lynch, Pierce, Fenner & Smith
Incoporated [ ]
Total................................. [10,000,000]
============
1
<PAGE>
SCHEDULE II
List of Sellers
<TABLE>
<CAPTION>
Underwritten Option Total
Seller Shares Shares Shares
- ------------------------------- ------------------ --------------- --------------------
<S> <C> <C> <C>
Metromedia Company 4,880,000 [ ] [ ]
Steven A. Garofalo 4,844,000 [ ] [ ]
Stuart Subotnick 276,000 [ ] [ ]
Total 10,000,000 1,500,000 11,500,000
</TABLE>
2
<PAGE>
SCHEDULE III
SUBSIDIARIES OF THE COMPANY
1. Metromedia Fiber Network NYC, Inc.
2. Metromedia Fiber Network Services, Inc.
3. AboveNet Communications, Inc.
4. Metromedia Fiber Network Inc.
3
<PAGE>
SCHEDULE IV
Gerard Benedetto
Howard M. Finkelstein
Stephen A. Garofalo
Silvia Kessel
John Kluge
David Rockefeller
Stuart Subotnick
Arnold L. Wadler
4
<PAGE>
[Exhibits A - D to Come]
A-1
<PAGE>
Exhibit E
[Form of Lock-Up Agreement]
[Letterhead of officer, director or major stockholder of Corporation]
, 1999
Salomon Smith Barney Inc.
As Representatives of the several Underwriters,
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
This letter is being delivered to you in connection with the
proposed Underwriting Agreement (the "Underwriting Agreement"), between
Metromedia Fiber Network, Inc., a Delaware corporation (the "Company"), the
Selling Stockholders listed in Schedule I thereto and each of you as
representatives of a group of Underwriters named therein, relating to an
underwritten public offering of Common Stock, $.01 par value (the "Common
Stock"), of the Company.
In order to induce you and the other Underwriters to enter
into the Underwriting Agreement, the undersigned will not, without the prior
written consent of Salomon Smith Barney Inc., offer, sell, contract to sell,
pledge or otherwise dispose of, (or enter into any transaction which is designed
to, or might reasonably be expected to, result in the disposition (whether by
actual disposition or effective economic disposition due to cash settlement or
otherwise) by the Company or any affiliate of the Company or any person in
privity with the Company or any affiliate of the Company) directly or
indirectly, including the filing or participation in the filing of) a
registration statement with the Securities and Exchange Commission in respect
of, or establish or increase a put equivalent position or liquidate or decrease
a call equivalent position within the meaning of Section 16 of the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the
Securities and Exchange Commission promulgated thereunder with respect to, any
shares of capital stock of the Company or any securities convertible into, or
exercisable or exchangeable for such capital stock, or publicly announce an
intention to effect any such transaction, for a period of 90 days after the date
of this Agreement, other than (1) shares of Common Stock disposed of as bona
fide gifts approved by Salomon Smith Barney Inc., (2) the Securities sold to the
Underwriters pursuant to this Agreement, and (3) the Selling Stockholders may
enter into prepaid forward contracts with DECS Trust VI on the terms and
conditions set forth in those contracts to be dated November __, 1999.
A-2
<PAGE>
If for any reason the Underwriting Agreement shall be
terminated prior to the Closing Date (as defined in the Underwriting Agreement),
the agreement set forth above shall likewise be terminated.
Yours very truly,
By:
-------------------------------
Name:
Title:
<PAGE>
Exhibit F
CERTIFICATE OF SPOUSE
Reference is made to the Collateral Agreement (the COLLATERAL
AGREEMENT"), dated as of November [ ], 1999, among the undersigned person's
husband or wife (the "PLEDGOR"), the Bank of New York, as Collateral Agent, and
DECS Trust VI (the "TRUST"), and to the related Purchase Agreement (the
"PURCHASE AGREEMENT") between the Pledgor and the Trust. Terms defined in the
Collateral Agreement or the Purchase Agreement are used herein as defined
therein.
By his or her signature below, the undersigned hereby
acknowledges and consents to the transfers of Collateral by the Pledgor as
contemplated by the Collateral Agreement and agrees that his or her legal and/or
beneficial rights, if any, in any such collateral shall be subordinate to the
rights of the Trust in such Collateral as a secured party as provided in the
Collateral Agreement and as provided by applicable law. In accordance with the
terms of the Collateral Agreement, the Trust shall be entitled to apply the
Collateral (and any proceeds thereof) to satisfy the Pledgor's obligations to
the Trust under the Collateral Agreement and the Purchase Agreement prior to any
claim or right which the undersigned may have in the Collateral.
-----------------------------
[Spouse]
B-1
<PAGE>
[FORM OF CUSTODIAN AGREEMENT]
This CUSTODIAN AGREEMENT dated as of this 26th day of October,
1999, by and between The Bank of New York, a New York banking corporation (the
"CUSTODIAN"), and DECS Trust VI (such trust and the trustees thereof acting in
their capacity as such being referred to herein as the "TRUST"), a statutory
business trust organized under the Business Trust Act of the State of Delaware
pursuant to a Declaration of Trust dated as of October 22,1999 (as it may be
amended and restated from time to time, the "TRUST AGREEMENT").
WITNESSETH
WHEREAS the Trust is a non-diversified, closed-end management
investment company, as defined in the Investment Company Act of 1940 (the
"INVESTMENT COMPANY ACT"), formed to purchase and hold certain U.S. Treasury
securities (the "TREASURY SECURITIES"), to enter into and hold forward purchase
contracts with one or more existing shareholders of [ ] (individually, a
"CONTRACT" and collectively, the "CONTRACTS"), to hold security for the
performance of such selling shareholders of their obligations under the
Contracts pursuant to related collateral agreements (the "COLLATERAL
AGREEMENTS") and to issue DECS in accordance with the terms and conditions of
the Trust Agreement;
WHEREAS the Trustees desire to engage the services of the
Custodian to perform certain custodial duties for the Trust; and
WHEREAS the Custodian is qualified and willing to assume such
duties on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties agree as follows:
1. DEFINITIONS. Capitalized terms not otherwise defined herein
shall have the respective meanings specified in the Trust Agreement.
2. APPOINTMENT OF CUSTODIAN; TRANSFER OF ASSETS. The Trust
hereby constitutes and appoints the Custodian, and the Custodian accepts such
appointment, as agent of the Trust and as custodian of all of the property,
including but not limited to, the Contracts, the Treasury Securities, the
Temporary Investments, any cash and any other property at any time owned or held
by the Trust (other than Pledged Items (as defined in the Collateral Agreements)
held by the Collateral Agent thereunder) (collectively, the "ASSETS"). The Trust
hereby deposits the Assets owned by the Trust on the date hereof with the
Custodian and the Custodian hereby accepts such Assets into its custody, and the
Trust shall deliver to the Custodian all additional Assets, including all
monies, securities and other property, received by the Trust at any time during
the period of this Agreement, subject to the following terms and conditions. The
Custodian hereby agrees that it shall hold the Assets in a segregated custody
account, separate and distinct from all other accounts, in accordance with
Section 17(f) of, and in such manner as shall constitute the segregation and
holding in trust within the meaning of, the Investment Company Act and the rules
and regulations thereunder. The Trust authorizes the Custodian, for any Assets
held
<PAGE>
hereunder, to use the services of any United States securities depository
permitted to perform such services for registered investment companies and their
custodians under Rule 17f-4 under the Investment Company Act and which have been
approved by the Trust, including but not limited to, The Depository Trust
Company and the Federal Reserve Book Entry System. The Custodian shall be under
no duty or obligation to inspect, review or examine any Assets to determine that
they are genuine, enforceable, or appropriate for the represented purpose or
that they are other than what they purport to be on their face.
3. ASSET DISPOSITION; EXAMINATIONS. The Custodian shall have no
power or authority to assign, hypothecate, pledge or otherwise dispose of the
Assets, except pursuant to a written direction in accordance with paragraph 4
below and then only for the account of the Trust. The Assets shall be subject to
no lien or charge of any kind in favor of the Custodian for itself or for any
other Person claiming through the Custodian. The Custodian shall permit actual
examination of the Assets by the Trust's independent public accountant at the
end of each annual and semi-annual fiscal period of the Trust and at least one
other time during the fiscal year of the Trust chosen by such independent public
accountant and shall permit the inspection of the Assets by the Commission
through its employees or agents during the normal business hours of the
Custodian upon reasonable request.
4. AUTHORIZED ACTIONS. The Custodian shall take such actions with
respect to the Assets as directed in writing by any Trustee or by any officer of
the Administrator as may be received by the Custodian from time to time.
5. CUSTODIAN'S ACTIONS TAKEN IN GOOD FAITH. In connection with
the performance of its duties under this Agreement, the Custodian shall have no
duties or obligations other than those specifically set forth herein or in the
Trust Agreement or as may subsequently be agreed in writing by the parties
hereto and shall be under no liability to the Trust or any Holder for any action
taken in good faith in reliance on any paper, order, certification, list, demand
request, consent, affidavit, notice, opinion, direction, endorsement,
assignment, resolution, draft or other document, prima facie properly executed,
or for the disposition of the Assets pursuant to the Trust Agreement or in
respect of any action taken or suffered under the Trust Agreement in good faith,
in accordance with an opinion of counsel or at the direction of the Trustees
pursuant hereto; provided that this provision shall not protect the Custodian
against any liability to which it would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and duties
hereunder. Notwithstanding any other provision of this Agreement, the Custodian
shall under no circumstances be liable for any punitive, exemplary, indirect or
consequential damages.
6. TRUST AGREEMENT VALIDITY, The Custodian shall not be
responsible for the validity or sufficiency of the Trust Agreement or the due
execution thereof, or for the form, character, genuineness, sufficiency, value
or validity of any of the Assets and the Custodian shall in no event assume or
incur any liability, duty or obligation to any Holder or to the Trustees, other
than as expressly provided herein. The Custodian shall not be responsible for or
in respect of the validity of any signature by or on behalf of the Trustees.
7. LITIGATION OBLIGATIONS, COSTS AND INDEMNITY. The Custodian
shall not be under
<PAGE>
any obligation to appear in, prosecute or defend any action which in its opinion
may involve it in expense or liability, unless it shall be furnished with such
reasonable security and indemnity against such expense or liability as it may
require, and any pecuniary costs of the Custodian from such actions shall be
expenses which are reimbursable pursuant to paragraph 13 hereof.
8. TAXES; TRUST EXPENSES. In no event shall the Custodian be
personally liable for any taxes or other governmental charges imposed upon or in
respect of the Assets or upon the monies, securities or other properties
included therein. The Custodian shall be reimbursed and indemnified by the Trust
for all such taxes and charges, for any tax or charge imposed against the Trust
and for any expenses, including counsel fees, interest, penalties and additions
to tax which the Custodian may sustain or incur with respect to such taxes or
charges.
9. CUSTODIAN RESIGNATION, SUCCESSION. (a) The Custodian may
resign by executing an instrument in writing resigning as Custodian and
delivering the same to the Trustees, not less than 60 days before the date
specified in such instrument when, subject to clause (b) of this paragraph 9,
such resignation is to take effect. Upon receiving such notice of resignation,
the Trustees shall use their reasonable efforts promptly to appoint a successor
Custodian in the manner and meeting the qualifications provided in the Trust
Agreement, by written instrument or instruments delivered to the resigning
Custodian and the successor Custodian.
(b) In case no successor Custodian shall have been appointed
within 30 days after notice of resignation has been received by the Trustees,
the resigning Custodian may forthwith apply to a court of competent jurisdiction
for the appointment of a successor Custodian. Such court may thereupon, after
such notice, if any, as it may deem proper and prescribed, appoint a successor
Custodian.
10. CUSTODIAN REMOVAL. The Trust may remove the Custodian upon 60
days' prior written notice to the Custodian and appoint a successor Custodian.
In case at any time the Custodian shall not meet the requirements set forth in
the Trust Agreement or shall become incapable of acting or if a court having
jurisdiction shall enter a decree or order for relief in respect of the
Custodian in an involuntary case, or the Custodian shall commence a voluntary
case, under any applicable bankruptcy, insolvency, or other similar law now or
hereafter in effect, or any receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) for the Custodian or for any substantial part
of its property shall be appointed, or the Custodian shall make any general
assignment for the benefit of creditors, or shall generally fail to pay its
debts as they become due, the Trust may remove the Custodian immediately and
appoint a successor Custodian. The termination of the Administration Agreement
or the Paying Agent Agreement shall cause the removal of the Custodian
simultaneously therewith.
11. TRANSFERS TO SUCCESSOR CUSTODIAN. Upon the request of any
successor Custodian, the Custodian hereunder shall, upon payment of all amounts
due it, execute and deliver an instrument acknowledged by it transferring to
such successor Custodian all the rights and powers of the retiring Custodian;
and the retiring Custodian shall transfer, deliver and pay over to the successor
Custodian the Assets at the time held by it hereunder, if any, together with all
necessary instruments of transfer and assignment or other documents properly
executed necessary to effect such transfer and such of the records or copies
thereof maintained by the
<PAGE>
retiring Custodian in the administration hereof as may be requested by the
successor Custodian, and shall thereupon be discharged from all duties and
responsibilities hereunder. Any resignation or removal of the Custodian shall
become effective upon such acceptance of appointment by the successor Custodian.
The indemnification of the resigning Custodian provided for hereunder shall
survive any resignation, discharge or removal of the Custodian hereunder.
12. CUSTODIAN MERGER, CONSOLIDATION. Any corporation into which
the Custodian may be merged or convened or with which it may be consolidated, or
any corporation resulting from any merger, conversion or consolidation to which
the Custodian shall be a party, shall be the successor Custodian hereunder and
under the Trust Agreement without the execution or filing of any paper,
instrument or further act to be done on the part of the parties hereto or
thereto, provided that such corporation meets the requirements set forth in the
Trust Agreement.
13. COMPENSATION; EXPENSES. The Custodian shall receive
compensation for performing the usual, ordinary, normal and securing services
under this Custodian Agreement and, with the prior written approval of the
Trust, reimbursement for any and all expenses and disbursements incurred
hereunder, as provided in Section 3.1 of the Administration Agreement.
14. SECTION 17(F) QUALIFICATION. The Custodian hereby represents
that it is qualified to act as a custodian under Section 17(f) of the Investment
Company Act.
15. CUSTODIAN'S LIMITED LIABILITY. The Trust shall indemnify and
hold the Custodian harmless from and against any loss, damages, cost or expense
(including the costs of investigation, preparation for and defense of legal
and/or administrative proceedings related to a claim against it and reasonable
attorneys' fees and disbursements), liability or claim incurred by reason of any
inaccuracy in information furnished to the Custodian by the Trustees, or any act
or omission in the course of, connected with or arising out of any services to
be rendered hereunder, provided that the Custodian shall not be indemnified and
held harmless from and against any such loss, damages, cost, expense, liability
or claim arising from its willful misfeasance, bad faith or gross negligence in
the performance of its duties, or its reckless disregard of its duties and
obligations hereunder. Neither the Federal Reserve Book Entry System nor the
Depository Trust Company shall be deemed to be agents of the Custodian.
16. RIGHTS OF SET-OFF; BANKER'S LIEN. The Custodian hereby waives
all rights of set-off or banker's lien it may have with respect to the Assets
held by it as Custodian hereunder.
17. TERMINATION. This Agreement shall terminate upon the earlier
of the termination of the Trust or the appointment of a successor Custodian.
18. CHOICE OF LAW. This Agreement is executed and delivered in the
State of New York, and all laws or rules of construction of the State of New
York shall govern the right of the parties hereto and the interpretation of the
provisions hereof.
19. NOTICES. Any notice to be given to the Trust hereunder shall
be in writing and shall be duly given if mailed or delivered to DECS Trust VI,
c/o Alan Rifkin, Salomon Smith
<PAGE>
Barney Inc., 390 Greenwich Street, New York, New York 10013, Tel. (212)
723-7325, Fax, (212) 723-8874, and to the Custodian if mailed or delivered to
The Bank of New York, 101 Barclay Street, Floor 12E, New York, New York 10286,
Attention: Betty Cocozza, Tel.: (212) 815-5366, Fax: (212) 815-7157 or at such
other address as shall be specified by the addressee to the other party hereto
in writing.
20. NO THIRD PARTY BENEFICIARIES. Nothing herein, express or
implied, shall give to any Person, other than the Trust, the Custodian and their
respective successors and assigns, any benefit of any legal or equitable right,
remedy or claim hereunder.
21. AMENDMENTS; TRUST AGREEMENT CHANGES; WAIVER. This Agreement
shall not be deemed or construed to be modified, amended, rescinded, canceled or
waived, in whole or in part, except by a written instrument signed by a duly
authorized representative of the party to be charged. The Trustees shall notify
the Custodian of any change in the Trust Agreement prior to the effective date
of any such change. Failure of either party hereto to exercise any right or
remedy hereunder in the event of a breach hereof by the other party shall not
constitute a waiver of any such right or remedy with respect to any subsequent
breach.
22. COUNTERPARTS. This Agreement may be signed in any number of
counterparts with all counterparts constituting one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
DECS TRUST VI
By:______________________________
Donald J. Puglisi
as Trustee
THE BANK OF NEW YORK
By:______________________________
Name:
Title:
<PAGE>
[FORM OF ADMINISTRATION AGREEMENT]
This ADMINISTRATION AGREEMENT dated as of this [ ] day of
November, 1999 by and between The Bank of New York, a New York banking
corporation (the "ADMINISTRATOR"), and DECS Trust VI (such trust and the
trustees thereof acting in their capacity as such being referred to herein as
the "TRUST"), a statutory business trust organized under the Business Trust Act
of the State of Delaware pursuant to a Declaration of Trust dated as of October
22, 1999, as amended and restated as of November [ ], (the "TRUST AGREEMENT").
WITNESSETH
WHEREAS the Trust is a non-diversified, closed-end management
investment company, as defined in the Investment Company Act of 1940 (the
"INVESTMENT COMPANY ACT"), formed to purchase and hold certain U.S. treasury
securities (the "TREASURY SECURITIES"), to enter into and hold the forward
purchase contracts with one or more existing shareholders (the "SELLERS") of
Metromedia Fiber Network, Inc. (the "COMPANY") (individually, a "CONTRACT" and
collectively, the "CONTRACTS") and to issue DECS in accordance with the terms
and conditions of the Trust Agreement;
WHEREAS the Trust desires to engage the services of the
Administrator to assume certain duties and responsibilities of the Trust under
the Trust Agreement and the Investment Company Act and to undertake certain
services on behalf of and subject to the supervision of the Trust as provided
herein; and
WHEREAS the Administrator is qualified and willing to assume
such duties and responsibilities and to undertake to render such services,
subject to the supervision of the Trust, on the terms and conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1. DEFINITIONS. Capitalized terms not otherwise defined
herein shall have the respective meanings specified in the Trust Agreement.
ARTICLE II
ENGAGEMENT OF ADMINISTRATOR
2.1. ENGAGEMENT. The Trust hereby engages the Administrator,
and the Administrator hereby agrees to be so engaged, to provide or cause the
provision of the services hereinafter enumerated.
2.2. SERVICES OF ADMINISTRATOR. Subject to the supervision of
the Trust, the Administrator shall on behalf of the Trust take the actions set
forth in Sections 2.6, 2.7 and 2.8
<PAGE>
of the Trust Agreement, to the extent such responsibilities can lawfully be
delegated to the Administrator; provided, however, that the Administrator shall
not (i) render investment advisory services to the Trust as defined in the
Investment Company Act or the Investment Advisers Act of 1940; (ii) have the
power of the Trustees to sell the Treasury Securities except as provided in
[Section 2.8 of the Trust Agreement]; or (iii) have the power to select the
independent public accountants for the Trust. Additionally, the Administrator
shall be responsible for rendering the following services:
(a) instructing the Paying Agent on behalf of the Trust to
take the actions set forth in Sections 2.6, 2.7, 2.8 and 3.5 of the Trust
Agreement and to otherwise perform the duties of the Paying Agent referred to
in the Trust Agreement;
(b) with the approval of the Trustees, engaging legal and
other professional advisors, other than the Trust's independent accountants as
provided in clause 2.2 (iii) above;
(c) receiving all demands, bills and invoices for expenses
incurred by or on behalf of the Trust and pay the same, or cause the Paying
Agent to pay the same, out of moneys paid to the Administrator pursuant to the
Fund Expense Agreement dated the date hereof between Salomon Smith Barney Inc.
and The Bank of New York (the "FUND EXPENSE AGREEMENT") but in no event out of
any assets of the Trust, and give notice to Salomon Smith Barney Inc. pursuant
to the Fund Indemnity Agreement dated the date hereof between Salomon Smith
Barney Inc. and the Trust (the "FUND INDEMNITY AGREEMENT") of any claim for
Indemnification Expenses (as defined in the Fund Indemnity Agreement) or any
threatened claim for Indemnification Expenses;
(d) (i) keeping or causing to be kept all the books and
records of the Trust (other than those to be kept by the Paying Agent), and (ii)
preparing and, as necessary, mailing, filing or publishing, or, as appropriate,
directing the Paying Agent or cause the legal and other professional advisors
engaged pursuant to Section 2.2(b) to prepare and, as necessary, mail, file or
publish any and all notices, proxies, reports, tax returns and other
communications and documents as required under the Trust Agreement, the
Investment Company Act, the Securities Exchange Act of 1934, or the Code, or, as
reasonably requested by the Trustees, under any other applicable laws, rules or
regulations or otherwise; provided, however, that responsibility for the
adequacy and accuracy of any such reports, returns, etc. shall be that of the
Trustees and provided, further, that the Administrator shall have no liability
for the adequacy or accuracy of such reports, returns, etc.;
(e) at the request of the Trustees and upon being furnished
with such reasonable security and indemnity against any related expense or
liability as the Administrator may require, instituting and prosecuting, in
accordance with the instructions of the Trustees, legal or other appropriate
proceedings to enforce any and all rights and remedies of the Trust;
(f) receiving and reviewing on behalf of the Trust all
notices, reports, certificates and other documents regarding the Contracts and
the Treasury Securities;
(g) making or causing to be made all necessary arrangements
with respect to meetings of Trustees and meetings of Holders, including,
without limitation, the preparation of notices, proxies and minutes, subject
to the approval of the Trustees; and
(h) in conjunction with the Trustees, determining and
publishing, in such manner as the Trustees shall direct in writing, the Trust's
net asset value in accordance with [Section 8.2(c) of the Trust Agreement] and
the Trust's policy as set forth in the Prospectus.
2.3. CERTAIN RIGHTS OF THE ADMINISTRATOR. In connection with
the performance of its duties under this Agreement, the Administrator shall not
be liable to the Trust, the Trustees or any Holder (i) for any action taken or
for refraining from taking any action hereunder except in the case of its
willful misfeasance, bad faith, gross negligence or the reckless disregard of
its duties hereunder, (ii) with respect to any action taken or omitted to be
taken by it in good faith in accordance with the directions of the Trustees or
of any Trustee or (iii) in connection with the performance of its duties under
Section 2.2(h) hereof, for good faith reliance upon information furnished by
third parties selected by the Administrator with due care. The Administrator
shall under no circumstances be liable for any punitive, exemplary, indirect or
consequential damages. The Administrator may consult with counsel and the
written advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon. The Administrator may perform its duties
and exercise its rights hereunder either directly or by or through agents or
attorneys appointed with due care by it but shall be liable for the acts and
omissions of such persons to the same extent as if the functions had been
performed by the Administrator itself (except as to the extent that the Trustees
shall have directed the Administrator to retain such persons, in which event the
Administrator shall not be liable for such persons' acts or omissions). Without
limiting the generality of the preceding sentence, the Administrator (i) may
select and employ independent public accountants acceptable to the Trustees
(other than the independent public accountants referred to in clause (iii) of
Section 2.2 of this Agreement and [Section 2.5(d) of the Trust Agreement]) to
keep the financial books and records of the Trust, to prepare the financial
statements of the Trust and to prepare Trust tax returns, and (ii) may select
and engage attorneys acceptable to the Trustees to prepare annual, semiannual
and periodical reports, notices of meetings and proxy statements, annual reports
to Holders and other documents required under the Investment Company Act or the
Securities Exchange Act of 1934. The Administrator shall not be liable and shall
be fully protected in acting upon any writing or document reasonably believed by
it to be genuine and to have been given, signed or made by the proper person or
persons and shall not be held to have any notice of any change of authority of
any person until receipt of written notice thereof from a Trustee.
2.4. POWER OF ATTORNEY. The Trustees hereby appoint the
Administrator, acting through any duly appointed officer, the attorney-in-fact
and agent of the Trust for the purpose of performing the duties prescribed in
Sections 2.2(d)(ii) and 2.2(g) hereof.
2.5. DELIVERY OF CERTAIN DOCUMENTS. The Trust will deliver to
the Administrator, promptly following the execution hereof: (a) a complete
conformed copy of the registration statement of the Trust under the Securities
Act and the Investment Company Act, including all amendments, exhibits and
schedules thereto; and (b) the EDGAR access codes
<PAGE>
(Central Index Key, CIK Confirmation Code, Password and Password Modification
Access Code) employed to file such registration statement.
ARTICLE III
COMPENSATION OF ADMINISTRATOR
3.1. COMPENSATION. (a) For services to be rendered by the
Administrator (i) pursuant to this Agreement, (ii) as custodian under the
Custodian Agreement, dated as of October 26, 1999, between the Administrator,
as custodian, and the Trust, (iii) as paying agent under the Paying Agent
Agreement, dated as of November [ ], 1999, between the Administrator, as
paying agent, and the Trust, and (iv) as collateral agent under the
Collateral Agreements, dated as of November [ ], 1999, among the
Administrator, as collateral agent, each of the Sellers and the Trust, and
for the payment of Trust expenses pursuant to Section 2.2(c) hereof, the
Administrator shall receive only such fees and expenses as shall be paid to
it pursuant to the terms of the Fund Expense Agreement and shall have no
recourse to the assets of the Trust for the payment of any such amounts.
(b) In connection with the performance of the services
referred to in Section 3.1(a) hereof, the Administrator, as such or in any other
capacity, shall not be required to advance, expend or risk its own funds or
otherwise incur or become exposed to financial liability in the performance of
its duties hereunder or under the other agreements referred to in Section 3.1(a)
hereof.
3.2. ADDITIONAL SERVICES. If and to the extent that the
Trustees shall request the Administrator to render services for the Trust, other
than those to be rendered by the Administrator hereunder, and if the
Administrator agrees to render such services, such additional services shall be
compensated separately on terms to be agreed upon between the Administrator and
the Trustees from time to time.
ARTICLE IV
TERMINATION
4.1. TERMINATION.
(a) This Agreement shall terminate immediately upon written
notice of termination from the Trustees to the Administrator if any of the
following events shall occur:
(i) If the Administrator shall violate or default in the
performance of any provision of this Agreement, the Trust Agreement, or
the Investment Company Act, and after notice of such violation or
default, shall not cure such violation or default within 30 days; or
(ii) If the Administrator shall be adjudged bankrupt or
insolvent by a court of competent jurisdiction, or an order shall be
made by a court of competent jurisdiction for the appointment of a
receiver, liquidator, or trustee of the Administrator, or of all or
substantially all of its property by reason of the foregoing, or
approving any petition filed
<PAGE>
against the Administrator for its reorganization, and such adjudication
or order shall remain in force or unstayed for a period of 30 days; or
(iii) If the Administrator shall institute proceedings for
voluntary bankruptcy, or shall file a petition seeking reorganization
under the federal bankruptcy laws, or for relief under any law for the
relief of debtors, or shall consent to the appointment of a receiver of
the Administrator or of all or substantially all of its property, or
shall make a general assignment for the benefit of its creditors, or
shall admit in writing its inability to pay its debts generally as they
become due; or
(iv) Upon the voluntary or involuntary dissolution of the
Administrator, or unless the Trust shall have given its prior written
consent thereto, the merger or consolidation of the Administrator with
any other entity.
If any of the events specified in clauses (ii), (iii) or (iv)
of this Section 4.1(a) shall occur, the Administrator shall give immediate
written notice thereof to the Trustees.
(b) Notwithstanding anything to the contrary contained herein,
this Agreement shall terminate immediately (i) upon termination of the Trust
Agreement, (ii) upon termination of the Paying Agent Agreement, (iii) upon
termination of all Collateral Agreements, (iv) upon termination of the Custodian
Agreement or (v) upon the resignation or removal of the Custodian.
(c) The Trustees may remove the Administrator, or the
Administrator may resign, and thereby terminate this Agreement without penalty
upon 60 days' prior written notice to the other party hereto; provided that
neither party hereto may terminate this Agreement pursuant to this Section
4.1(c) unless a successor Administrator shall have been appointed and shall have
accepted the duties of the Administrator. If, within 30 days after notice by the
Administrator to the Trustees of termination of this Agreement, no successor
Administrator shall have been selected and accepted the duties of the
Administrator, the Administrator may apply to a court of competent jurisdiction
for the appointment of a successor Administrator.
4.2. EFFECT OF TERMINATION. The Administrator shall forthwith
upon termination of this Agreement deliver to the Trustees any records or other
property of the Trust then in the possession or custody of the Administrator.
Any obligation to indemnify the Administrator pursuant to Section 6.6 hereof
shall survive the termination of this Agreement.
ARTICLE V
RECORDS AND REPORTS
5.1. BOOKS AND RECORDS; INSPECTION AND COPYING. The
Administrator shall keep, or cause to be kept, appropriate, and reasonably
detailed and accurate, books and records of all its activities pursuant to this
Agreement. The Trustees shall have the right to inspect such books and records
during the Administrator's normal business hours upon reasonable request, and to
make copies of the same at the expense of the Trust.
5.2. ACCESS TO INFORMATION. The Administrator shall make
available to each of
<PAGE>
the Trustees all information it receives and compiles with respect to the
Contracts and the Treasury Securities, the moneys available to the Trust, the
financial condition of the Trust and all other relevant matters concerning the
Trust.
ARTICLE VI
MISCELLANEOUS
6.1. BINDING EFFECT. Any corporation into which the
Administrator may be merged or converted or with which it may be consolidated,
or any corporation resulting from any merger, conversion or consolidation to
which the Administrator shall be a party, shall be the successor Administrator
hereunder and under the Trust Agreement without the execution or filing of any
paper, instrument or further act to be done on the part of the parties hereto,
provided that such corporation meets the requirements set forth in the Trust
Agreement and provided further that the Trustees have given their prior written
consent to the Administrator with respect to any such merger, conversion or
consolidation. This Agreement shall be binding on and inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
6.2. ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties with respect to the matters contained herein and
supersedes all prior agreements or understandings, whether oral or written. This
Agreement shall not be amended, changed, modified, or discharged, in whole or in
part, except by an instrument in writing signed by both parties hereto, or their
respective successors or permitted assigns.
6.3. NOTICES. Any notice, report or other communication
required or permitted to be given hereunder shall be in writing, and shall,
unless some other method of giving such notice, report or other communication is
accepted by the party to whom it is to be given or is required by the Trust
Agreement or the Investment Company Act, be given by being mailed by U.S. first
class mail, certified or registered, return receipt requested, postage prepaid,
to the following addresses of the parties hereto:
The Trust: DECS Trust VI
c/o Puglisi & Associates
850 Library Avenue, Suite 204
Newark, Delaware 19715
Telephone: 302-738-6680
Telecopier: 302-738-7210
The Administrator: The Bank of New York
101 Barclay Street, Floor 12E
New York, New York 10286
Attn: Betty Cocozza
Telephone: 212-815-5366
Telecopier: 212-815-7157
<PAGE>
Any party may at any time give written notice to the other
party that it wishes to change its address for the purposes of this Section 6.3.
6.4. APPLICABLE LAW. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect except to the extent such law is preempted by federal
law.
6.5. NON-ASSIGNABILITY. This Agreement and the rights and
obligations of the parties hereunder may not be assigned or delegated by either
party without the prior written consent of the other party.
6.6. INDEMNIFICATION. The Trust shall indemnify and hold the
Administrator harmless from and against any loss, damages, cost or expense
(including the costs of investigation, preparation for and defense of legal
and/or administrative proceedings related to a claim against it and reasonable
attorneys' fees and disbursements), liability or claim incurred by reason of any
inaccuracy in information furnished to the Administrator by the Trustees, or any
act or omission in the course of, connected with or arising out of any services
to be rendered hereunder, provided that the Administrator shall not be
indemnified and held harmless from and against any such loss, damages, cost,
expense, liability or claim incurred by reason of its willful misfeasance, bad
faith, or gross negligence in the performance of its duties, or its reckless
disregard of its duties and obligations hereunder.
6.7. PROVISIONS OF LAW TO CONTROL. This Agreement shall be
subject to the applicable provisions of the Investment Company Act and the rules
and regulations of the Commission thereunder. To the extent that any provisions
herein contained conflict with any applicable provisions of the Investment
Company Act or such rules and regulations, the latter shall control.
6.8. COUNTERPARTS. This Agreement may be signed in
counterparts with all counterparts constituting one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto executed
this Administration Agreement as of the day and year first above written.
DECS TRUST VI
By:
Donald J. Puglisi
as Managing Trustee
850 Library Avenue, Suite 204
Newark, Delaware 19716
THE BANK OF NEW YORK
By:
Name:
Title:
<PAGE>
[FROM OF PAYING AGENT AGREEMENT]
This PAYING AGENT AGREEMENT dated as of this [ ] day of
November, 1999 by and between The Bank of New York, a New York banking
corporation (the "PAYING AGENT"), and DECS Trust VI (such trust and the trustees
thereof acting in their capacity as such being referred to herein as the
"TRUST"), a statutory business trust organized under the Business Trust Act of
the State of Delaware pursuant to a Declaration of Trust dated as of October 22,
1999, as amended and restated as of November 9, 1999 (the "TRUST AGREEMENT").
WITNESSETH
WHEREAS the Trust is a non-diversified, closed-end management
investment company, as defined in the Investment Company Act of 1940 (the
"INVESTMENT COMPANY ACT"), formed to purchase and hold the U.S. treasury
securities (the "TREASURY SECURITIES"), to enter into and hold forward purchase
contracts with one or more existing shareholders of Metromedia Fiber Network,
Inc. (individually, a "CONTRACT" and collectively, the "CONTRACTS") and to issue
DECS to the public in accordance with the terms and conditions of the Trust
Agreement;
WHEREAS the Trustees desire to engage the services of the
Paying Agent to assume certain responsibilities and to perform certain duties as
the transfer agent, registrar and paying agent with respect to the DECS upon the
terms and conditions of this Agreement; and
WHEREAS the Paying Agent is qualified and willing to assume
such responsibilities and to perform such duties, subject to the supervision of
the Trustees, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. Capitalized terms not otherwise defined
herein shall have the respective meanings specified in the Trust Agreement.
ARTICLE II
PAYING AGENT
2.1 APPOINTMENT OF PAYING AGENT AND ACCEPTANCE. The Trust
Agreement provides that The Bank of New York shall act as the initial Paying
Agent. The Bank of New York hereby accepts such appointment and agrees to act in
accordance with its standard procedures and the provisions of the Trust
Agreement and the provisions set forth in this Article II as Paying Agent with
respect to the DECS. Without limiting the generality of the foregoing, The Bank
of New York, as Paying Agent, agrees that it shall establish and maintain the
Trust Account, subject to the provisions of Section 2.3 hereof.
<PAGE>
2.2 CERTIFICATES AND NOTICES. The Trustees shall deliver to
the Paying Agent the certificates and notices required to be delivered to the
Paying Agent pursuant to the Trust Agreement, and the Paying Agent shall mail or
publish such certificates or notices as required by the Trust Agreement, but the
Paying Agent shall have no responsibility to confirm or verify the accuracy of
certificates or notices of the Trustees so delivered.
2.3 PAYMENTS AND INVESTMENTS. The Paying Agent shall make
payments out of the Trust Account as provided in Section 3.3 of the Trust
Agreement. The Paying Agent on behalf of the Trust shall effect the transactions
set forth in Sections 2.6, 2.7, 2.8, 3.5 and 8.3 of the Trust Agreement upon
instructions to do so from the Administrator (except that with respect to its
obligations under Section 8.3 of the Trust Agreement, the Paying Agent shall act
without instructions from the Administrator) and shall invest moneys on deposit
in the Trust Account in the Temporary Investments in accordance with Section 3.5
of the Trust Agreement. Except as otherwise specifically provided herein or in
the Trust Agreement, the Paying Agent shall not have the power to sell, transfer
or otherwise dispose of any Temporary Investment prior to the maturity thereof,
or to acquire additional Temporary Investments. The Paying Agent shall hold any
Temporary Investments to maturity and shall apply the proceeds thereof paid upon
maturity to the payment of the next succeeding Quarterly Distribution. All such
Temporary Investments shall be selected by the Trustees from time to time or
pursuant to standing instructions from the Trustees, and the Paying Agent shall
have no liability to the Trust or any Holder or any other Person with respect to
any such Temporary Investment.
2.4 INSTRUCTIONS FROM ADMINISTRATOR. The Paying Agent shall
execute all instructions received from an officer of the Administrator, except
to the extent that they conflict with or are contrary to the terms of the Trust
Agreement or this Agreement.
ARTICLE III
TRANSFER AGENT AND REGISTRAR
3.1 ORIGINAL ISSUE OF CERTIFICATES. On the date DECS sold
pursuant to the Underwriting Agreement are originally issued, certificates for
such DECS shall be issued by the Trust, and, at the request of the Trustees,
registered in such names and such denominations as the Underwriters shall have
previously requested of the Trustees, executed manually or in facsimile by the
Managing Trustee and countersigned by the Paying Agent. At no time shall the
aggregate number of DECS represented by such countersigned certificates exceed
the number of then outstanding DECS except as permitted by Section 3.4 hereof.
3.2 REGISTRY OF HOLDERS. The Paying Agent shall maintain a
registry of the Holders of the DECS.
3.3 REGISTRATION OF TRANSFER OF DECS. DECS shall be registered
for transfer or exchange, and new certificates shall be issued, in the name of
the designated transferee or transferees, upon surrender of the old certificates
in form deemed by the Paying Agent properly endorsed for transfer with (a) all
necessary endorsers' signatures guaranteed in such manner and form as the Paying
Agent may require by a guarantor reasonably believed by the Paying Agent to be
responsible, (b) such assurances as the Paying Agent shall deem necessary or
appropriate to
<PAGE>
evidence the genuineness and effectiveness of each necessary endorsement and (c)
satisfactory evidence of compliance with all applicable laws relating to the
collection of taxes or funds necessary for the payment of such taxes.
3.4 LOST CERTIFICATES. If there shall be delivered to the
Paying Agent (a) evidence to its satisfaction of the destruction, loss or theft
of any certificate for DECS and (b) such security or indemnity as may be
required by it to hold it and any of its agents harmless, then, in the absence
of notice to the Paying Agent that such certificate has been acquired by a
protected purchaser, the Managing Trustee shall execute and upon its request the
Paying Agent shall countersign and deliver, in lieu of any such destroyed, lost
or stolen certificate, a new certificate of like tenor bearing a number not
contemporaneously outstanding. Any request by the Managing Trustee to the Paying
Agent to issue a replacement or new certificate pursuant to this Section 3.4
shall be deemed to be a representation and warranty by the Trust to the Paying
Agent that such issuance will comply with provisions of law, the Trust Agreement
and the resolutions adopted by the Trustees with respect to lost securities. If,
after the delivery of such new certificate, a protected purchaser of the
original certificate in lieu of which such new certificate was issued presents
for payment such original certificate, the Trust and the Paying Agent shall be
entitled to recover such new certificate from the person to whom it was
delivered or any transferee thereof, except a protected purchaser, and shall be
entitled to recover upon the security or indemnity provided therefor to the
extent of any loss, damage, cost or expense incurred by the Trust or the Paying
Agent in connection therewith. Upon the issuance of any new certificate under
this Section 3.4, the Trust and the Paying Agent may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in relation thereto and any other expenses (including the fees and expenses of
the Paying Agent) connected therewith.
3.5 TRANSFER BOOKS. The Paying Agent shall maintain the
transfer books listing the Holders of the DECS. In case of any written request
or demand for the inspection of the transfer books of the Trust or any other
books in the possession of the Paying Agent, the Paying Agent will notify the
Trustees and secure instructions as to permitting or refusing such inspection.
The Paying Agent reserves the right, however, to exhibit the transfer books or
other books to any person in case it is advised by its counsel that its failure
to do so would be unlawful.
3.6 DISPOSITION OF CANCELED CERTIFICATES, RECORDS. The Paying
Agent shall retain certificates which have been canceled in transfer or in
exchange and accompanying documentation in accordance with applicable rules and
regulations of the Commission for six calendar years from the date of such
cancellation, and shall make such records available during this period at any
time, or from time to time, for reasonable periodic, special, or other
examinations by representatives of the Commission and the Board of Governors of
the Federal Reserve System. Thereafter such records shall not be destroyed by
the Paying Agent but will be safely stored for possible future reference. In
case of any request or demand for the inspection of the register of the Trust or
any other books in the possession of the Paying Agent, the Paying Agent will
notify the Trustees and secure instructions as to permitting or refusing such
inspection. The Paying Agent reserves the right, however, to exhibit the
register or other records to any person in case it is advised by its counsel
that its failure to do so would (i) be unlawful, or
<PAGE>
(ii) expose it to liability, unless the Trustees shall have offered
indemnification satisfactory to the Paying Agent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE TRUST
The Trust represents and warrants to the Paying Agent that:
(a) the Trust is a validly existing trust under the laws of
the State of Delaware and the Trustees have full power
under the Trust Agreement to execute and deliver this
Agreement and to authorize, create and issue the DECS;
(b) this Agreement has been duly and validly authorized,
executed and delivered by the Trust and constitutes the
valid and binding agreement of the Trust, enforceable
against the Trust in accordance with its terms, subject as
to such enforceability to bankruptcy, insolvency,
reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general
equitable principles;
(c) the form of the certificate evidencing the DECS complies
with all applicable laws of the State of Delaware and the
State of New York;
(d) the DECS have been duly and validly authorized, executed
and delivered by the Trust and are validly issued;
(e) the DECS have been registered under the Securities Act
of 1933, the Trust has been registered under the
Investment Company Act, and no further action by or before
any governmental body or authority of the United States or
of any state thereof is required in connection with the
execution and delivery of this Agreement or the issuance
of the DECS;
(f) the execution and delivery of this Agreement and the
issuance and delivery of the DECS do not and will not
conflict with, violate, or result in a breach of, the
terms, conditions or provisions of, or constitute a
default under, the Trust Agreement, any law or regulation,
any order or decree of any court or public authority
having jurisdiction over the Trust, or any mortgage,
indenture, contract, agreement or undertaking to which the
Trust is a party or by which it is bound; and
(g) no taxes are payable upon or in respect of the execution
of this Agreement or the issuance of the DECS.
ARTICLE V
DUTIES AND RIGHTS
5.1 DUTIES.
<PAGE>
(a) The Paying Agent is acting solely as agent for the Trust
hereunder and owes no fiduciary duties to any other Person
by reason of this Agreement.
(b) In the absence of bad faith, gross negligence or willful
misfeasance on its part in the performance of its duties
hereunder or its reckless disregard of its duties and
obligations hereunder, the Paying Agent shall not be
liable for any action taken, suffered, or omitted in the
performance of its duties under this Agreement or in
accordance with any direction or request of the Managing
Trustee not inconsistent with the provisions of this
Agreement. The Paying Agent shall under no circumstances
be liable for any punitive, exemplary, indirect or
consequential damages hereunder.
5.2. RIGHTS.
(a) The Paying Agent may rely and shall be protected in
acting or refraining from acting upon any communication
authorized hereby and upon any written instruction,
notice, request, direction, consent, report, certificate,
share certificate or other instrument, paper or document
reasonably believed by it to be genuine. The Paying Agent
shall not be liable for acting upon any telephone
communication authorized hereby which the Paying Agent
believes in good faith to have been given by the Trustees.
(b) The Paying Agent may consult with legal counsel and the
advice of such counsel shall be full and complete
authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith
and in reliance thereon.
(c) The Paying Agent may perform its duties and exercise its
rights hereunder either directly or by or through agents
or attorneys appointed with due care by it hereunder.
5.3 DISCLAIMER. The Paying Agent makes no representations as
to (a) the first two recitals of this Agreement or (b) the validity or adequacy
of the DECS.
5.4 COMPENSATION, EXPENSES AND INDEMNIFICATION.
(a) The Paying Agent shall receive for all services rendered
by it under this Agreement and, upon the prior written
approval of the Trustees, for all expenses, disbursements
and advances incurred or made by the Paying Agent in
accordance with any provision of this Agreement (including
the reasonable compensation and the expenses and
disbursements of its agents and counsel), the compensation
set forth in Section 3.1 of the Administration Agreement.
(b) The Trust shall indemnify the Paying Agent for and hold
it harmless against any loss, liability, claim or expense
(including the costs of investigation, preparation for and
defense of legal and/or administrative
<PAGE>
proceedings relating to a claim against it and reasonable
attorneys' fees and disbursements) arising out of or in
connection with the performance of its obligations under
this Agreement, provided such loss, liability or expense
is not the result of gross negligence, willful misfeasance
or bad faith on its part in the performance of its duties
hereunder or its reckless disregard of its duties or
obligations hereunder, including the costs and expenses of
defending itself against any claim or liability in
connection with its exercise or performance of any of its
duties or obligations hereunder and thereunder. The
indemnification provided by this Section 5.4(b) shall
survive the termination of this Agreement.
ARTICLE VI
MISCELLANEOUS
6.1 TERM OF AGREEMENT.
(a) The term of this Agreement is unlimited unless
terminated as provided in this Section 6.1 or unless the
Trust is terminated, in which case this Agreement shall
terminate ten days after the date of termination of the
Trust. This Agreement may be terminated by either party
hereto without penalty upon 60 days' prior written notice
to the other party hereto; provided that neither party
hereto may terminate this Agreement pursuant to this
Section 6.1(a) unless a successor Paying Agent shall have
been appointed and shall have accepted the duties of the
Paying Agent. The termination of the Administration
Agreement or the resignation or removal of the Custodian
shall cause the termination of this Agreement
simultaneously therewith. If, within 30 days after notice
by the Paying Agent of termination of this Agreement, no
successor Paying Agent shall have been selected and
accepted the duties of the Paying Agent, the Paying Agent
may apply to a court of competent jurisdiction for the
appointment of a successor Paying Agent.
(b) Except as otherwise provided in this paragraph (b), the
respective rights and duties of the Trust and the Paying
Agent under this Agreement shall cease upon termination of
this Agreement. The Trust's representations, warranties,
covenants and obligations to the Paying Agent under
Sections 4 and 5.4 hereof shall survive the termination
hereof. Upon termination of the Agreement, the Paying
Agent shall, at the Trust's request, promptly deliver to
the Trust or to any successor Paying Agent as requested by
the Trust (i) copies of all books and records maintained
by it and (ii) any funds deposited with the Paying Agent
by the Trust.
6.2 COMMUNICATIONS. Except for communications authorized to be
made by telephone pursuant to this Agreement, all notices, requests and other
communications to any party hereunder shall be in writing (including telecopy or
similar writing) and given to such person at its address or telecopy number set
forth below:
<PAGE>
DECS Trust VI
c/o Puglisi & Associates
850 Library Avenue, Suite 204
Newark, Delaware 19715
If to the Trust, Telephone: 302-738-6680
addressed: Telecopier: 302-738-7210
with a copy to the Administrator if the duties of the Administrator are being
performed by a Person other than the Person performing the obligations of the
Paying Agent.
The Bank of New York
101 Barclay Street, Floor 12E
New York, New York 10286
Attn: Betty Cocozza
If to the Paying Agent, Telephone: 212-815-5366
addressed: Telecopier: 212-815-7157
or such other address or telecopy number as such party may hereafter specify for
such purposes by notice to the other party. Each such notice, request or
communication shall be effective when delivered at the address specified herein.
Communications shall be given on behalf of the Trust by the Trustees (or by the
Administrator, provided that the Trust shall not have delivered to the Paying
Agent an instrument in writing revoking the authorization of the Administrator
to act for it pursuant hereto) and on behalf of the Paying Agent by a Senior
Vice President or Vice President of the Paying Agent assigned to its Corporate
Trust Department.
6.3 ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties relating to the subject matter hereof, and there
are no other representations, endorsements, promises, agreements or
understandings, oral, written or inferred, between the parties relating to the
subject matter hereof.
6.4 NO THIRD PARTY BENEFICIARIES. Nothing herein, express or
implied, shall give to any Person, other than the Trustees, the Paying Agent and
their respective successors and assigns, any benefit of any legal or equitable
right, remedy or claim hereunder.
6.5 AMENDMENT; WAIVER.
(a) This Agreement shall not be deemed or construed to be
modified, amended, rescinded, canceled or waived, in whole
or in part, except by a written instrument signed by a
duly authorized representative of the party to be charged.
The Trust shall notify the Paying Agent of any change in
the Trust Agreement prior to the effective date of any
such change.
(b) Failure of either party hereto to exercise any right or
remedy hereunder in the event of a breach hereof by the
other party shall not constitute a waiver of
<PAGE>
any such right or remedy with respect to any subsequent
breach.
6.6 SUCCESSORS AND ASSIGNS. Any corporation into which the
Paying Agent may be merged or converted or with which it may be consolidated, or
any corporation resulting from any merger, conversion or consolidation to which
the Paying Agent shall be a party, shall be the successor Paying Agent under the
Trust Agreement without the execution or filing of any paper, instrument or
further act to be done on the part of the parties hereto, provided that such
corporation meets the requirements set forth in the Trust Agreement and provided
further that the Trust has given its prior written consent to the Paying Agent
with respect to any such merger, conversion or consolidation. This Agreement
shall be binding upon, inure to the benefit of, and be enforceable by, the
respective successors of each of the Trust and the Paying Agent. This Agreement
shall not be assignable by either the Trust or the Paying Agent without the
prior written consent of the other party.
6.7 SEVERABILITY. If any clause, provision or section hereof
shall be ruled invalid or unenforceable by any court of competent jurisdiction,
the invalidity or unenforceability of such clause, provision or section shall
not affect any of the remaining clauses, provisions or sections hereof.
6.8 EXECUTION IN COUNTERPARTS. This Agreement may be executed
in several counterparts, each of which shall be an original and all of which
shall constitute but one and the same instrument.
6.9 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to principles of conflicts of law.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the date first above written.
DECS TRUST VI
By:
Donald J. Puglisi, as Managing Trustee
THE BANK OF NEW YORK
By:
Name:
Title:
<PAGE>
Exhibit (K)(3)
[FORM OF FORWARD PURCHASE AGREEMENT]
FORWARD PURCHASE AGREEMENT
Between
[METROMEDIA COMPANY]
[STEPHEN A. GAROFALO]
[STUART SUBOTNICK]
As Seller,
and
DECS TRUST VI, As Purchaser
Dated as of
November [ ], 1999
<PAGE>
FROM OF FORWARD PURCHASE AGREEMENT
THIS AGREEMENT is made as of this [ ]th day of November, 1999
among [Metromedia Company], a [general partnership organized under the laws of
the State of Delaware] [Stephen A. Garofalo] [Stuart Subotnick] ("SELLER"
and, together with the Other Sellers (as defined below), "SELLERS") and DECS
Trust VI, a business trust organized under the laws of the State of Delaware
under and by virtue of an amended and restated declaration of trust, dated as
of November [ ], 1999 (the "DECLARATION OF TRUST") (such trust and the
trustees thereof acting in their capacity as such being referred to herein as
"PURCHASER").
WHEREAS, Seller owns shares of Class A Common Stock, $.01 par
value (the "CLASS A COMMON Stock") or Class B Common Stock, $.01 par value
(the "Class B Common Stock" and together with the Class A Common Stock, the
"Common Stock") of Metromedia Fiber Network, Inc., a Delaware corporation
(including its successors) (the "COMPANY");
WHEREAS, the shares of Class B Common Stock are immediately
convertible into shares of Class A Common Stock at the option of the holder
of the shares of Class B Common Stock.
WHEREAS, Purchaser has filed with the Securities and Exchange
Commission a registration statement contemplating the offering of up to
11,500,000 DECS (the "DECS"), the terms of which contemplate delivery by
Purchaser to the holders thereof of a number of shares of Class A Common Stock
(or, if some or all of the Sellers exercise their cash settlement option, cash
in lieu of part or all thereof), on [ ], 2002 (as further defined herein, the
"EXCHANGE DATE");
WHEREAS, in exchange for certain consideration to be paid by
Purchaser hereunder and under other similar agreements, Purchaser and Seller
desire to provide for the future acquisition, sale and delivery of the aggregate
number of shares of Class A Common Stock contemplated to be delivered by
Purchaser in respect of the DECS on the Exchange Date, at a price to be
established under this Agreement and such other agreements;
WHEREAS, Seller has agreed to enter into a Collateral
Agreement (the "COLLATERAL AGREEMENT") to be dated as of November [ ], 1999,
among Purchaser, Seller and The Bank of New York, as collateral agent (the
"COLLATERAL AGENT"), to grant Purchaser a security interest in the shares of
Class A Common Stock or Class B Common Stock specified therein and in certain
other circumstances certain other collateral to secure the obligations of
Seller hereunder;
WHEREAS, Purchaser has agreed, pursuant to an underwriting
agreement, dated November [ ], 1999 (the "UNDERWRITING AGREEMENT"), among
Purchaser, Seller, the other entities named as "Sellers" therein (collectively,
the "OTHER SELLERS"), the Company, Salomon Smith Barney Inc., Credit Suisse
First Boston Corporation, Deutsche Bank Securities Inc., Donaldson, Lufkin &
Jenrette Securities Corporation, Goldman, Sachs & Co., and Merrill Lynch,
Pierce, Fenner & Smith Incorporated (each an "UNDERWRITER", and collectively,
the "UNDERWRITERS"), to issue and sell to the Underwriters an aggregate of
10,000,000 DECS (together with the [ ] DECS purchased by Salomon Smith Barney
Inc. in connection with the organization of the Purchaser, the "INITIAL DECS")
and, at the Underwriters' option, up to 1,500,000 additional DECS (the
"ADDITIONAL DECS") to cover over-allotments, if any.
NOW, THEREFORE, in consideration of their mutual covenants
herein contained, the parties hereto, intending to be legally bound, hereby
mutually covenant and agree
<PAGE>
as follows:
DEFINITIONS
As used herein, the following words and phrases shall have the
following meanings:
"ACCELERATION DATE" has the meaning provided in Article VII.
"ACCELERATION VALUE" has the meaning provided in Article VII.
"ACT" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"ADDITIONAL DECS" has the meaning provided in the recitals of
this Agreement.
"ADDITIONAL PURCHASE PRICE" has the meaning provided in
Section 1.2(b).
"ADDITIONAL SHARE BASE AMOUNT" means a number equal to
[insert proportion of overallotmant shares to be provided by this Seller] time
the number of Additional DECS that the Underwriters elect to purchase under the
Underwriting Agreement.
"ADDITIONAL SHARES" has the meaning provided in Section
1.1(b).
"ADDITIONAL STRIPS" means the U.S. Treasury obligations
purchased by Purchaser for settlement on the Option Closing Date.
"ADJUSTMENT EVENT" has the meaning provided in Section 6.2.
"ADMINISTRATOR" means The Bank of New York, administrator for
Purchaser under the Administration Agreement to be dated as of November [ ],
1999, or any successor thereto.
"AFFILIATE" means, as to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common control
with such Person or is a partner in, or a trustee, settlor, beneficiary, member,
manager, director or officer of, such Person and, with respect to any Person
that is a natural person, further includes such Person's immediate family
members, including his father, mother, spouse and children, the spouses of his
children, his siblings and their spouses and children. For purposes of this
definition, "CONTROL" (including the terms "CONTROLLED BY" or "UNDER COMMON
CONTROL WITH") means, as to any Person, the possession, direct or indirect, of
the power to vote ten percent or more of the corporate or beneficial interests
of such Person (or of the securities having ordinary voting power for the
election of directors of such Person), or the power to direct or cause the
direction of the management and policies of such Person, whether through
ownership of voting securities or by contract or otherwise.
"BANKRUPTCY CODE" has the meaning provided in Section 10.7.
"BUSINESS DAY" means any day that is not a Saturday, a Sunday
or a day on which the NYSE or banking institutions or trust companies in The
City of New York are authorized or
<PAGE>
obligated by law or executive order to close.
"CALCULATION PERIOD" means any period of Trading Days for
which an average security price must be determined pursuant to this Agreement.
"CASH DELIVERY OPTION" has the meaning provided in Section
1.3(d).
"CASH EQUIVALENTS" has the meaning provided in the Collateral
Agreement.
"CLOSING PRICE" means, for any security on any date of
determination, (i) the closing sale price (or, if no closing price is reported,
the last reported sale price) of such security (regular way) on the NYSE on such
date, (ii) if such security is not listed for trading on the NYSE on any such
date, as reported in the composite transactions for the principal United States
national securities exchange on which such security is so listed, (iii) if such
security is not so listed on a United States national or regional securities
exchange, as reported by The NASDAQ Stock Market, (iv) if such security is not
so reported, as reported in the composite transactions for the principal United
States regional securities exchange on which such security is so listed, (v) if
such security is not so listed on a United States regional security exchange,
the last quoted bid price for such security in the over-the-counter market as
reported by the National Quotation Bureau or similar organization or (vi) if
such security is not so quoted, the average of the mid-point of the last bid and
ask prices for such security from at least three nationally recognized
investment banking firms selected by the Administrator for such purpose. The
Closing Price as determined pursuant to the foregoing shall be subject to
adjustment in certain circumstances as provided in Section 6.1(c).
"COLLATERAL" has the meaning provided in the Collateral
Agreement.
"COLLATERAL AGENT" has the meaning provided in the recitals of
this Agreement.
"COLLATERAL AGREEMENT" has the meaning provided in the
recitals of this Agreement.
"COMMISSION" means the Securities and Exchange Commission.
"CLASS A COMMON STOCK" has the meaning provided in the
recitals of this Agreement.
"COMPANY" has the meaning provided in the recitals of this
Agreement.
"CONTRACT SHARES" has the meaning provided in Section 1.1.
"CUSTODIAN" means The Bank of New York, custodian for
Purchaser under the Custodian Agreement dated as of October 27, 1999, or any
successor thereto.
"DECLARATION OF TRUST" has the meaning provided in the
introductory paragraph of this Agreement.
<PAGE>
"DECS" has the meaning provided in the recitals of this
Agreement.
"DILUTION ADJUSTMENT" means any fraction or number by which
the Exchange Rate shall be multiplied pursuant to Section 6.1(a) or (b) or by
which Closing Prices may be divided pursuant to Section 6.1(c).
"EVENT OF DEFAULT" has the meaning provided in Article VII.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"EXCHANGE DATE" means [ ], 2002, subject to (i) extension by
Seller pursuant to Section 1.3(f) and (ii) subsequent acceleration by Seller
pursuant to Section 1.3(g).
"EXCHANGE PRICE" means the average Closing Price per share of
Class A Common Stock on the 20 Trading Days immediately prior to (but not
including) the Exchange Date; provided, however, that if there are not 20
Trading Days for the Class A Common Stock occurring later than the 60th calendar
day immediately prior to, but not including, the Exchange Date, Exchange Price
shall mean the market value per share of the Class A Common Stock as of the
Exchange Date as determined by a nationally recognized independent investment
banking firm retained for this purpose by the Administrator; PROVIDED that for
purposes of determining the payment required upon cash settlement of this
Agreement in connection with a Rollover Offering, "Exchange Price" means the
Closing Price per share of Class A 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 of Class A Common Stock on the Pricing
Date. The Exchange Price as determined pursuant to the foregoing shall be
subject to adjustment in certain circumstances as provided in Section 6.1(c).
"EXCHANGE RATE" has the meaning provided in Section 1.1(c).
"EXTENSION AMOUNT" means the product of (i) $[additional
payments due on all DECS for full extension period] and (ii) a fraction, the
numerator of which is the sum of the Firm Share Base Amount and the
Additional Share Base Amount and the denominator of which is the number of
Initial DECS and Additional DECS.
"FIRM PAYMENT DATE" has the meaning provided in Section
1.3(a).
"FIRM PURCHASE PRICE" has the meaning provided in Section
1.2(a).
"FIRM SHARE BASE AMOUNT" has the meaning provided in Section
1.1(a).
"FIRM SHARES" has the meaning provided in Section 1.1(a).
"FORWARD PURCHASE CONTRACT CHARACTERIZATION" has the meaning
provided in Section 5.2(a).
"INDEPENDENT DEALERS" has the meaning provided in Article VII.
"INITIAL DECS" has the meaning provided in the recitals of
this Agreement.
"INITIAL PRICE" has the meaning provided in Section 1.1(c).
<PAGE>
"LIEN" has the meaning provided in the Collateral Agreement.
"MARKET PRICE" means, as of any date of determination, the
average Closing Price per share of Class A 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 Class A Common Stock
occurring later than the 60th calendar day immediately prior to, but not
including, such date, the Market Price shall mean the market value per share of
Class A Common Stock as of such date as determined by a nationally recognized
investment banking firm retained for such purpose by the Administrator.
"NYSE" means the New York Stock Exchange Inc.
"OFFICER" shall mean the manager, trustee, president, any vice
president, the chief financial officer, the treasurer or the secretary of a
Person.
"OFFICER'S CERTIFICATE" means a certificate signed by an
Officer of a Person.
"OPINION OF COUNSEL" means a written opinion from legal
counsel who is acceptable to the Trust.
"OPTION CLOSING DATE" means the settlement dates for the
Additional DECS under Section 5 of the Underwriting Agreement.
"ORDINARY CASH DIVIDEND" means, with respect to any
consecutive 365-day period, any dividend with respect to Class A Common Stock
paid in cash to the extent that the amount of such dividend, together with the
aggregate amount of all other dividends on the Class A 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 Class A Common Stock over such 365-day
period; provided that, for purposes of the foregoing definition, the amount of
cash dividends paid on a per share basis shall be appropriately adjusted to
reflect the occurrence during such period of any event described in Article VI.
"OTHER ROLLOVER SELLER" has the meaning provided in Section
1.3(e).
"PERSON" means an individual, partnership, corporation
(including a business trust), joint stock company, trust, unincorporated
association, limited liability company, joint venture or other entity, or a
government or any political subdivision or agency thereof.
"PURCHASER" has the meaning provided in the introductory
paragraph of this Agreement.
"REIMBURSEMENT AGREEMENT" means the reimbursement agreement,
to be dated as of November [ ], 1999 among Salomon Smith Barney Inc. and the
Sellers.
"REPORTED SECURITIES" has the meaning provided in Section 6.2.
"ROLLOVER OFFERING" means a reoffering or refinancing of the
DECS effected by
<PAGE>
the Seller or Sellers not earlier than [ ], 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 or Sellers.
"ROLLOVER OFFERING ELECTION" means a written election made in
accordance with Section 1.3(e).
"SELLER" and "SELLERS" have the meaning provided in the
introductory paragraph of this Agreement.
"SHARE COMPONENTS" means the numbers of shares of Common Stock
per DECS specified in clauses (i), (ii) and (iii) of Section 1.1(c).
"THRESHOLD APPRECIATION PRICE" has the meaning provided in
Section 1.1(c).
"TRADING DAY" means, with respect to any security the Closing
Price of which is being determined, a day on which such security (A) is not
suspended from trading on any national or regional securities exchange or
association or over-the-counter market at the close of business and (B) has
traded at least once on the national or regional securities exchange or
association or over-the-counter market that is the primary market for the
trading of such security.
"TRANSACTION VALUE" has the meaning provided in Section 6.2.
"UNDERWRITER" and "UNDERWRITERS" have the meaning provided in
the recitals of this Agreement.
"UNDERWRITING AGREEMENT" has the meaning provided in the
recitals of this Agreement.
ARTICLE I
SALE AND PURCHASE
1.1 SALE AND PURCHASE.
(a) FIRM SHARES. Upon the terms and subject to the conditions
of this Agreement, Seller agrees to sell to Purchaser, and Purchaser agrees to
purchase and acquire from Seller, the number of shares of Class A Common Stock
(the "FIRM SHARES") equal to the product of [ ] (the "FIRM SHARE BASE AMOUNT")
and the Exchange Rate.
(b) ADDITIONAL SHARES. Upon the terms and subject to the
conditions of this Agreement, Seller agrees to sell to Purchaser, and Purchaser
agrees to purchase and acquire from Seller, a number of additional shares of
Class A Common Stock (the "ADDITIONAL SHARES") equal to the product of the
Additional Share Base Amount and the Exchange Rate. In addition to the other
conditions set forth herein, such purchase and sale shall be conditioned on the
<PAGE>
Underwriters' purchase of the Additional Share Base Amount of Additional DECS
pursuant to the Underwriting Agreement on the Option Closing Date. Promptly
after receipt by Purchaser of notice that the Underwriters are exercising their
option to purchase Additional DECS, Purchaser will provide Seller with written
notice of such exercise by the Underwriters, stating the related Additional
Share Base Amount and the date on which Purchaser shall deliver the purchase
price for the Additional Shares, which shall be the Option Closing Date for the
Additional DECS. The Firm Shares and the Additional Shares (if any) are
collectively referred to herein as the "CONTRACT SHARES").
(c) EXCHANGE RATE. The "EXCHANGE RATE" shall be determined in
accordance with the following formula, subject to adjustment as a result of
certain events as provided in Article VI: (i) if the Exchange Price is greater
than $[ ] (the "THRESHOLD APPRECIATION PRICE"), 0. [ ], (ii) if the Exchange
Price is less than or equal to the Threshold Appreciation Price but greater than
$[ ] (the "INITIAL Price"), a fraction (rounded upward or downward to the
nearest 1/10,000th or, if there is not a nearest 1/10,000th, to the next higher
1/10,000th) equal to the Initial Price divided by the Exchange Price and (iii)
if the Exchange Price is less than or equal to the Initial Price, 1.
1.2 PURCHASE PRICE.
(a) FIRM PURCHASE PRICE. The purchase price for the Firm
Shares (the "FIRM PURCHASE Price") shall be $[ ] in cash.
(b) ADDITIONAL PURCHASE PRICE. The purchase price for the
Additional Shares (the "ADDITIONAL PURCHASE PRICE") shall be an amount equal to
[proportion of overallotment shares to be provided by this Seller] times the
difference between (1) the aggregate proceeds to Purchaser from the sale of
the Additional DECS and (2) the aggregate cost to Purchaser, as notified by
Purchaser to Seller on the Option Closing Date for the Additional DECS, of
the Additional STRIPS.
1.3 PAYMENT FOR AND DELIVERY OF CONTRACT SHARES.
(a) FIRM PAYMENT DATE. Upon the terms and subject to the
conditions of this Agreement, Purchaser shall deliver to Seller the Firm
Purchase Price on [ ], 1999 (the "FIRM PAYMENT DATE") at the offices of Paul,
Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the Americas, New York,
New York 10019, or at such other place as shall be agreed upon by Purchaser
and Seller, paid by wire transfer of Federal (immediately available same-day)
funds to an account designated by Seller, against delivery by Seller to the
Collateral Agent of the number of shares of Class A Common Stock and/or cash,
securities and other property necessary to comply with Seller's obligations
under the Collateral Agreement.
(b) OPTION CLOSING DATE. Upon the terms and subject to the
conditions of this Agreement, Purchaser shall deliver to Seller the Additional
Purchase Price on the Option Closing Date at the offices of Paul, Weiss,
Rifkind, Wharton & Garrison, 1285 Avenue of the Americas, New York, New York
10019, or at such other place as shall be agreed upon by Purchaser and
Seller, paid by wire transfer of Federal (immediately available same-day)
funds to an account designated by Seller, against delivery by Seller to the
Collateral Agent of the additional number of shares of Common Stock and/or
cash,
<PAGE>
securities and other property necessary to comply with Seller's obligations
under the Collateral Agreement.
(c) DELIVERY OF CONTRACT SHARES.
(i) Seller agrees to deliver the Contract Shares to Purchaser
on the Exchange Date. Seller shall be deemed to have instructed the
Collateral Agent to deliver to the Custodian, for the account of
Purchaser, shares of Class A Common Stock then held by the Collateral
Agent as collateral under the Collateral Agreement, in an amount equal
to the number of Contract Shares, rounded down to the nearest whole
number. Instead of any fractional shares of Class A Common Stock that
would otherwise be deliverable (prior to rounding) to Purchaser at the
Exchange Date, Seller agrees to make a cash payment in respect of such
fractional shares of Class A Common Stock in an amount equal to the
value thereof at the Exchange Price. Notwithstanding the foregoing, if
an Adjustment Event shall have occurred prior to the Exchange Date
then, in lieu of the foregoing, Seller shall be deemed to have
instructed: (A) in the case of any cash required to be delivered on the
Exchange Date as provided in Section 6.2, the Collateral Agent to wire
transfer Federal (immediately available same-day) funds to an account
designated by Purchaser; and (B) in the case of any Reported Securities
required to be delivered by Seller in lieu of cash as provided in
Section 6.2, the Collateral Agent to deliver to the Custodian, for the
account of Purchaser, a specified number of Reported Securities then
held as collateral under the Collateral Agreement, as provided in
Section 6(g) of the Collateral Agreement.
(ii) In the event that by the Exchange Date any substitute
collateral has not been replaced by shares of Common Stock
(and/or, after an Adjustment Event, cash or Reported Securities)
sufficient to meet Seller's obligations hereunder, delivery shall be
effected by delivery by the Collateral Agent to the Custodian, for the
account of Purchaser, of the market value of the shares of Class A
Common Stock required to be delivered hereunder, in the form of any
shares of Class A Common Stock then pledged by Seller plus cash
generated from the liquidation of U.S. Government obligations and Cash
Equivalents then pledged by Seller (and/or, after an Adjustment Event,
the market value of the alternative consideration required to be
delivered hereunder, in the form of any Reported Securities then
pledged, plus any cash then pledged, plus cash generated from the
liquidation of U.S. Government obligations and Cash Equivalents then
pledged). In such event, Seller shall be deemed to have instructed the
Collateral Agent to liquidate and turn into cash the U.S. Government
obligations and Cash Equivalents then pledged by Seller to the extent
necessary to satisfy Seller's obligations hereunder.
(iii) Certificates representing Common Stock (or
Reported Securities) in registered form that are part of the Contract
Shares shall be indorsed in blank (together with all documents
necessary to permit the Purchaser to effect the re-registration
thereof without further action by the Seller) unless such Common
Stock (and/or Reported Securities) is represented by one or more
global certificates registered in the name of a depositary or a
nominee of a depositary or are book entry securities, in which event
Purchaser's interest
<PAGE>
in such securities shall be noted in a manner satisfactory to Purchaser
and its counsel.
(iv) Seller's right to deliver (or cause to be delivered) to
Purchaser hereunder Class A Common Stock and Reported Securities shall
be conditioned upon such Class A Common Stock and Reported Securities
to be so delivered being transferable (i) by Seller to Purchaser in
accordance with the provisions hereof and in accordance with the terms
of any agreement among shareholders applicable to such Class A Common
Stock or Reported Securities, and (ii) by Purchaser, following receipt
from Seller, without any restrictions not generally applicable to all
holders of such Class A Common Stock or Reported Securities, as the
case may be. If the conditions set forth in the preceding sentence
shall not be satisfied with respect to any Class A Common Stock or
Reported Securities to be delivered by Seller, then, notwithstanding
the provisions hereof, Seller shall exercise the Cash Delivery Option.
(d) CASH DELIVERY OPTION. At its option, Seller may deliver to
Purchaser on the Exchange Date, in lieu of some or all of the Contract Shares,
an amount in cash equal to, subject to adjustment as provided in Section 6.2,
the Exchange Price of the Contract Shares (the "CASH DELIVERY OPTION"), paid by
wire transfer to an account designated by Purchaser, in Federal (immediately
available same-day) funds; provided that in connection with a Rollover Offering
which is consummated and as to which Seller has duly elected the Cash Delivery
Option and has duly made a Rollover Offering Election, such cash payment shall
be made no later than the fifth Business Day after the Exchange Date. Seller may
elect the Cash Delivery Option in respect of all or a portion of the Contract
Shares and may do so by notice to Purchaser, the Collateral Agent and the
Custodian not less than 25 Business Days prior to the Exchange Date. If Seller
elects the Cash Delivery Option and so notifies Purchaser, Purchaser shall
promptly notify The Depository Trust Company and publish a notice in a daily
newspaper of national circulation stating whether the holders of DECS will
receive shares of Class A Common Stock, cash or a combination thereof (and
specifying whether any such cash settlement is being made in connection with a
Rollover Offering) and, if a combination of Class A Common Stock and cash, the
relative proportion of each.
(e) ROLLOVER OFFERING ELECTION. The provisions of Sections
1.3(f) and (g) shall be applicable if the Seller has made a Rollover Offering
Election by written notice given to the Purchaser not earlier than [ ], 2002 and
not later than [ ], 2002. Any Rollover Offering Election (i) shall be
irrevocable once made, (ii) may be made only if the Seller has also elected, or
simultaneously elects, the Cash Delivery Option, and (iii) shall be effective
only if each Seller electing the Cash Delivery Option (as defined in the
forward purchase agreements dated as of the date hereof between such Sellers
and the Purchaser) also makes a Rollover Offering Election pursuant to such
Seller's forward purchase agreements (each such other seller, an "OTHER
ROLLOVER Seller").
(f) EXTENSION OF EXCHANGE DATE. At its option, Seller may, by
notice given to Purchaser not earlier than [ ], 2002 and not later than [ ],
2002, elect to extend the Exchange Date to [ ], 2003, provided that such
extension shall be effective (i) only in connection with a Rollover
<PAGE>
Offering as to which the Seller shall have duly made a Rollover Offering
Election, (ii) only if Seller shall have delivered to the Collateral Agent, in
pledge under the Collateral Agreement direct obligations of the United States of
America or other Cash Equivalents which through the scheduled payment of
principal and interest in accordance with their terms will provide, not later
than one Business Day before [ ], 2003, money in an amount not less
than the Extension Amount (the "ADDITIONAL GOVERNMENT SECURITIES") (or, if
Seller is exercising the extension option as to less than all of the Contract
Shares, a proportion of the Extension Amount equal to the proportion of the
Contract Shares as to which Seller is exercising the extension option) and
(iii) only if each Other Rollover Seller, if any, has previously or
simultaneously elected to extend the Exchange Date (as such term is defined
in the forward purchase agreement dated as of the date hereof between such
Other Seller and the Purchaser) to the same date as is elected by the Seller
hereunder. Unless Seller has duly elected, in connection with a Rollover
Offering, to accelerate the Exchange Date in accordance with Section 1.3(g)
hereof, Seller shall on such extended Exchange Date pay to Purchaser by wire
transfer of Federal (immediately available same-day) funds an amount not less
than the Extension Amount (or, if Seller is exercising the extension option
as to less than all of the Contract Shares, a proportion of the Extension
Amount equal to the proportion of the Contract Shares as to which Seller is
exercising the extension option).
In addition, Seller hereby covenants and agrees to take all
other actions necessary to cause Purchaser to be a protected purchaser of such
Additional Government Securities and Cash Equivalents, within the meaning of
Article 8 of the New York Uniform Commercial Code, as amended.
If Seller elects to extend the Exchange Date and so notifies
Purchaser, Purchaser shall promptly notify the Depository Trust Company and
publish a notice in a daily newspaper of national circulation stating that the
Seller has elected to extend the Exchange Date.
(g) ACCELERATION OF EXCHANGE DATE. At any time after the
Exchange Date has been extended pursuant to Section 1.3(f) hereof, Seller may,
at its option but only in connection with the consummation of a Rollover
Offering, accelerate the Exchange Date to any date on or after [ ], 2002, by
notice to Purchaser not later than 10:00 a.m. on the date to which the Exchange
Date is accelerated; provided that such acceleration shall be effective only if
(i) each Other Rollover Seller, if any, has previously or simultaneously elected
to accelerate the Exchange Date (as such term is defined in the forward purchase
agreement dated as of the date hereof between such Other Rollover Seller and the
Purchaser), and (ii) at or prior to 10:00 a.m. on such accelerated Exchange
Date, Seller has paid to Purchaser, by wire transfer to an account designated by
Purchaser, in Federal (immediately available same-day) funds, an amount equal to
not less than the product of (1) the Extension Amount TIMES the number of
days in the period from (and including) [ ], 2002 to (but excluding) the
Exchange Date as accelerated, calculated on the basis of a 360 day year
consisting of twelve 30-day months divided by [90].
<PAGE>
If Seller elects to accelerate the Exchange Date and so
notifies Purchaser, Purchaser shall provide notice of such election to the
holders of the DECS not later than the accelerated Exchange Date.
(h) Seller represents, and Purchaser acknowledges, that it is
Seller's current intention to deliver Contract Shares to the Purchaser on the
Exchange Date and not to exercise the Cash Delivery Option; however, Seller
intends to consider all relevant economic, market and business factors in
ultimately determining whether to deliver Contract Shares on the Exchange Date
or to exercise the Cash Delivery Option.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser that each
representation and warranty made by Seller in Section 3 of the Underwriting
Agreement is true and correct on the date hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller that:
(a) each representation and warranty made by Purchaser in
Section 1 of the Underwriting Agreement is true and correct on the date hereof;
and
(b) it acknowledges that the Class A Common Stock delivered
pursuant to this Agreement and the Collateral Agreement may contain one or more
of the type of legends referred to in Section 3(e) of the Collateral Agreement
(which legend (i) will not be applicable to the delivery of any such Class A
Common Stock to the Trust pursuant to this Agreement and the Collateral
Agreement or to the delivery of any such Class A Common Stock by the Trust to
the holders of DECS pursuant to the DECS and (ii) will be removed at the request
of the Collateral Agent to the transfer agent for the Class A Common Stock prior
to any such delivery to holders of DECS).
ARTICLE IV
CONDITIONS TO PURCHASER'S OBLIGATIONS
(a) The obligation of Purchaser to deliver the Firm Purchase
Price on the Firm Payment Date is subject to the satisfaction of the following
conditions:
(i) the purchase by the Underwriters of the Initial DECS
pursuant to the
<PAGE>
Underwriting Agreement shall have been consummated as contemplated
under the Underwriting Agreement;
(ii) the representations and warranties of the Seller
contained in Article II hereof shall be true and correct as of the Firm
Payment Date;
(iii) the Collateral Agreement shall have been executed by the
Seller and the delivery of the Collateral thereunder shall have been
made; and
(iv) each Other Seller shall have executed and delivered a
forward purchase contract dated as of the date hereof between such
Other Seller and Purchaser;
(v) each Other Seller shall have executed and delivered a
collateral agreement dated as of the date hereof among such Other
Seller, the Purchaser and the collateral agent; and
(vi) the Reimbursement Agreement shall have been executed by
the Sellers.
(b) The obligation of Purchaser to deliver the Additional
Purchase Price on the Option Closing Date is subject to the satisfaction of the
following conditions:
(i) the purchase by the Underwriters of the Additional DECS
pursuant to the Underwriting Agreement shall have been consummated as
contemplated under the Underwriting Agreement;
(ii) the representations and warranties of the Seller
contained in Article II hereof shall be true and correct as of the
Option Closing Date; and
(iii) the delivery of any additional Collateral under the
Collateral Agreement shall have been made.
ARTICLE V
COVENANTS
5.1 TAXES. Seller shall pay any and all documentary, stamp,
transfer or similar taxes and charges that may be payable in respect of the
entry into this Agreement and the transfer and delivery of the Contract Shares,
cash, Cash Equivalents or Reported Securities pursuant hereto.
5.2 FORWARD PURCHASE CONTRACT. Each of Purchaser and Seller
hereby agrees that:
(a) it will treat this Agreement in its entirety as a forward
purchase contract for the delivery of the Contract Shares on the Exchange Date
(including as a result of acceleration or otherwise) (the "FORWARD PURCHASE
CONTRACT CHARACTERIZATION"), under the terms
<PAGE>
of which contract (i) at the time of issuance of the DECS, Purchaser deposits
irrevocably with Seller a fixed amount of cash equal to the Firm Purchase Price
(plus, if the Underwriters exercise their option to purchase Additional DECS,
the Additional Purchase Price) to assure the fulfillment of Purchaser's purchase
obligation described in clause (ii) below, which deposit will unconditionally
and irrevocably be applied at the Exchange Date to satisfy such obligation and
(ii) at the Exchange Date such cash deposit unconditionally and irrevocably will
be applied by Seller in full satisfaction of Purchaser's obligation under the
forward purchase contract, and Seller will deliver to Purchaser the number of
Contract Shares that Purchaser is entitled to receive at that time pursuant to
the terms of this Agreement (subject to Seller's right to deliver cash and/or
other property as provided in this Agreement in lieu of the Contract Shares);
(b) it will treat, consistent with the above characterization,
amounts paid to Seller in respect of this Agreement as allocable in their
entirety to the amount of the cash deposit attributable to such Agreement;
(c) it will not treat this Agreement, any portion of this
Agreement or any obligation hereunder as giving rise to any interest income or
other inclusions of ordinary income (in the case of Purchaser) or as giving rise
to any interest expense or other deductions of ordinary expense (in the case of
Seller);
(d) it will not treat the delivery of any portion of the
Contract Shares, cash or Reported Securities to be delivered pursuant to this
Agreement as the payment of interest or ordinary income; and
(e) it will not take any action (including filing any tax
return or form or taking any position in any tax proceeding) that is
inconsistent with the obligations contained in clauses (a) through (d), unless
such action or position is required by an applicable taxing authority or unless
such action or position is required by a change in statutory law or regulation
or by a judicial or other authoritative interpretation of the law enacted,
promulgated or published after the date of this Agreement.
5.3 LIMITATIONS ON TRADING DURING CERTAIN DAYS. Seller hereby
agrees that it will not, and will cause each of its Affiliates that is under its
control not to, buy or sell shares of Class A Common Stock of the Company or
Reported Securities for its own account during the 60 days prior to the Exchange
Date except for the purchase of Class A Common Stock or Reported Securities
under stock options held by Seller provided that Seller does not resell any
shares acquired upon exercise of such stock options during such 60-day period.
5.4 NOTICES. Seller will cause to be delivered to Purchaser:
(a) immediately upon the occurrence of any Event of Default
hereunder or under the Collateral Agreement; and
(b) promptly after Seller receives notice, or otherwise
obtains knowledge, at any time prior to the Exchange Date that any event
requiring that an adjustment be effected pursuant to Article VI hereof shall
have occurred or be pending;
<PAGE>
a notice identifying such event and stating, if known
to Seller, the date on which such event is to occur and, if applicable, the
record date relating to such event. Seller shall cause further notices to be
delivered to Purchaser if Seller shall subsequently receive notice, or shall
otherwise obtain knowledge, of any further or revised information regarding
the terms or timing of such event or any record date relating thereto.
5.5. AFFIRMATIVE COVENANTS. During the term of this Agreement,
Seller covenants and agrees that it will:
(a) Comply in all material respects with all applicable laws,
rules, regulations and orders to the extent noncompliance would have a material
adverse effect on the ability of any Seller to perform its obligations hereunder
or under the Collateral Agreement, such compliance to include, without
limitation, paying before the same become delinquent all taxes, assessments and
governmental charges imposed upon Seller or upon Seller's property, including
the collateral pledged under the Collateral Agreement, except to the extent
contested in good faith.
(b) Furnish to Purchaser as soon as possible and in any event
within twenty calendar days after Seller shall become aware of the occurrence of
any failure by Seller to comply with or perform any agreement or obligation
contained in this Agreement or the Collateral Agreement, a statement of Seller
describing such failure and setting forth details of such failure and the action
which Seller has taken and proposes to take with respect thereto.
5.6 FURTHER ASSURANCES. From time to time on and after the
date hereof through the Exchange Date (or, if later, the date on which this
Agreement has been fully performed), each of the parties hereto shall use its
reasonable best efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper and advisable to consummate and
make effective as promptly as practicable the transactions contemplated by this
Agreement in accordance with the terms and conditions hereof, including (i)
using reasonable best efforts to remove any legal impediment to the consummation
of such transactions and (ii) the execution and delivery of all such deeds,
agreements, assignments and further instruments of transfer and conveyance
necessary, proper or advisable to consummate and make effective the transactions
contemplated by the Agreement in accordance with the terms and conditions
hereof.
ARTICLE VI
ADJUSTMENT OF EXCHANGE RATE, EXCHANGE PRICE AND CLOSING PRICE
6.1 DILUTION ADJUSTMENTS. The Exchange Rate, Exchange Price
and Closing Price shall be subject to adjustment successively from time to time
as follows:
(a) STOCK DIVIDENDS, SPLITS, RECLASSIFICATIONS, ETC. If the
Company shall, after the date hereof,
(i) pay a stock dividend or make a distribution, in either
case, with respect to Class A Common Stock in shares of such stock;
<PAGE>
(ii) subdivide or split its outstanding shares of Class A
Common Stock into a greater number of shares;
(iii) combine its outstanding shares of Class A Common Stock
into a smaller number of shares;
(iv) issue by reclassification (other than a reclassification
pursuant to clause (b), (c), (d) or (e) of the definition of Adjustment
Event) of its shares of Class A Common Stock any other equity
securities of the Company; or
(v) be acquired by, consolidate with or merge into any other
entity in a transaction in which the holders of Class A Common Stock
receive common stock in exchange for their shares of Class A Common
Stock,
then, in the case of (i) through (iv), the Exchange Rate shall be multiplied by
a Dilution Adjustment equal to the number of shares of Class A Common Stock (or
the fraction thereof) that a holder who held one share of Class A Common Stock
immediately prior to such event would be entitled solely by reason of such event
to hold immediately after such event. In the case of (v), the Exchange Rate
shall be multiplied on the Exchange Date by a Dilution Adjustment equal to (x)
the number of shares of Class A Common Stock otherwise deliverable hereunder
plus (y) the number of shares of Class A Common Stock (including fractions of
shares) with a Closing Price as of the date of such acquisition, consolidation
or merger equal to [0.] times the amount of dividends, if any, that would have
been paid on the number of shares of such common stock received per share of
Class A Common Stock in connection with such transaction, for the period from
the date of such acquisition, consolidation or merger to the Exchange Date, at
the announced dividend rate for the common stock of the Person that is
consolidating or merging with the Company and that is received in such
transaction at the date of the consummation of such transaction; PROVIDED
that the Exchange Rate shall not be adjusted pursuant to clause (v) above to
more than one share of Class A Common Stock per DECS prior to the application
of all other adjustments to the Exchange Rate or the Share Components
provided by this Agreement.
In the case of the reclassification of any shares of Class A
Common Stock into any other equity securities of the Company other than the
Class A Common Stock, such other equity securities shall be deemed shares of
Class A Common Stock for all purposes hereunder. The Exchange Price and Closing
Price shall also be adjusted in the manner described in paragraph (c).
(b) RIGHT OR WARRANT ISSUANCES. If the Company shall, after
the date hereof, issue, or declare a record date in respect of an issuance of,
rights or warrants (other than rights to purchase Class A Common Stock pursuant
to a plan for the reinvestment of dividends or interest) to all holders of Class
A Common Stock entitling them to subscribe for or purchase shares of
<PAGE>
Class A Common Stock at a price per share less than the Market Price of the
Class A Common Stock on the Business Day next following the record date for the
determination of holders of Class A Common Stock entitled to receive such rights
or warrants, then, in each such case, the Exchange Rate shall be multiplied by
the following Dilution Adjustment: a fraction, of which the numerator shall be
(A) the number of shares of Class A Common Stock outstanding on the record date
for the issuance of such rights or warrants plus (B) the number of additional
shares of Class A Common Stock offered for subscription or purchase pursuant to
such rights or warrants, and of which the denominator shall be (x) the number of
shares of Class A Common Stock outstanding on the record date for the issuance
of such rights or warrants plus (y) the number specified in clause (B) above
multiplied by the quotient of the exercise price of such rights or warrants
divided by the Market Price of the Class A Common Stock on the Business Day next
following the record date for the determination of holders of Class A 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 Class A
Common Stock are delivered with respect to less than all of such rights or
warrants prior to such expiration, the Exchange Rate shall be readjusted to
the Exchange Rate which would then be in effect had such adjustments for the
issuance of such rights or warrants been made upon the basis of delivery of
only the number of shares of Class A Common Stock actually delivered pursuant
to such rights or warrants. For purposes of this Section 6.1(b), dividends
will be deemed to be paid as of the record date for such dividend. The
Exchange Price and Closing Price shall also be adjusted in the manner
described in paragraph (c).
(c) CORRESPONDING ADJUSTMENTS TO EXCHANGE PRICE; ADJUSTMENT OF
CLOSING PRICE IN CERTAIN CIRCUMSTANCES.
(i) If any adjustment is made to the Exchange Rate pursuant to
paragraph (a) or (b) of this Section 6.1, an adjustment shall also be
made to the Exchange Price as such term is used throughout the
definition of Exchange Rate. The required adjustment to the Exchange
Price shall be made at the Exchange Date by multiplying the Exchange
Price by the cumulative Dilution Adjustment.
(ii) If, during any Calculation Period used in calculating the
Exchange Price, the Market Price or the Transaction Value, there shall
occur any event requiring an adjustment to be effected pursuant to this
Section 6.1, then the Closing Price for each Trading Day in the
Calculation Period occurring prior to the day on which such adjustment
is effected shall be adjusted by being divided by the relevant Dilution
Adjustment.
(d) TIMING OF DILUTION ADJUSTMENTS. Each Dilution Adjustment
shall be effected:
(i) in the case of any dividend, distribution, or issuance of
rights or warrants, at the opening of business on the Business Day next
following the record date for determination of holders of Class A
Common Stock entitled to receive such dividend, distribution or
issuance or, if the announcement of any such dividend, distribution or
issuance is after such record date, at the time such dividend,
distribution or issuance shall be announced by the Company; and
(ii) in the case of any subdivision, split, combination or
reclassification, on the effective date of such transaction.
(e) GENERAL; FAILURE OF DILUTION EVENT TO OCCUR. All Dilution
Adjustments shall be rounded upward or downward to the nearest
<PAGE>
1/10,000th (or if there is not a nearest 1/10,000th to the next higher
1/10,000th). No adjustment in the Exchange Rate shall be required unless such
adjustment would require an increase or decrease of at least one percent
therein; provided, however, that any adjustments which by reason of this
sentence are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. If any announcement or declaration of a
record date in respect of a dividend, distribution or issuance requiring an
adjustment pursuant to this Section 6.1 shall subsequently be canceled by the
Company, or such dividend, distribution or issuance shall fail to receive
requisite approvals or shall fail to occur for any other reason, then, upon such
cancellation, failure of approval or failure to occur, the Exchange Rate shall
be readjusted to the Exchange Rate which would then have been in effect had
adjustment for such event not been made. If an Adjustment Event shall occur
after the occurrence of one or more events requiring an adjustment pursuant to
this Section 6.1, the Dilution Adjustments previously applied to the Exchange
Rate in respect of such events shall not be rescinded but shall be applied to
the new Exchange Rate provided for under Section 6.2.
6.2 ADJUSTMENT FOR CONSOLIDATION, MERGER OR OTHER ADJUSTMENT
EVENT. In the event of (a) any dividend or distribution by the Company to all
holders of Class A Common Stock of evidences of its indebtedness or other assets
(excluding any dividends or distributions referred to in Section 6.1(a)(i), any
other equity securities issued pursuant to a reclassification referred to in
Section 6.1(a)(iv) and any Ordinary Cash Dividends) or any issuance by the
Company to all holders of Class A Common Stock of rights or warrants to
subscribe for or purchase any of its securities (other than rights or warrants
referred to in Section 6.1(b)), (b) any consolidation or merger of the Company
with or into another entity (other than a merger or consolidation in which the
Company is the continuing corporation and in which the Class A Common Stock
outstanding immediately prior to the merger or consolidation is not exchanged
for cash, securities or other property of the Company or another corporation),
(c) any sale, transfer, lease or conveyance to another corporation of the
property of the Company as an entirety or substantially as an entirety, (d) any
statutory exchange of securities of the Company with another corporation (other
than in connection with a merger or acquisition) or (e) any liquidation,
dissolution or winding up of the Company (any such event described in clause
(a), (b), (c), (d) or (e), an "ADJUSTMENT EVENT"), the Exchange Rate shall be
adjusted so that on the Exchange Date Seller shall deliver to Purchaser, in lieu
of or (in the case of an Adjustment Event described in clause (a) above) in
addition to, the Contract Shares, cash in an amount equal to:
(A) if the Exchange Price is greater than the Threshold
Appreciation Price, [ ] 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 all
holders of Class A Common Stock in such Adjustment Event does not and may not at
the option of such holders
<PAGE>
include Reported Securities, then (except in the case of an Adjustment Event
solely of the type described in clause (a) above) (i) Seller's delivery
obligations hereunder will be accelerated and promptly upon consummation of the
Adjustment Event Seller will be required to deliver to Purchaser cash in an
amount equal to (x) if the Transaction Value is greater than the Threshold
Appreciation Price, [ ] 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 of the Contract Shares, and (z) if
the Transaction Value is less than or equal to the Initial Price, the
Transaction Value of the Contract Shares.
Following the occurence of an Adjustment Event, the
Exchange Price, as such term is used throughout the definition of Exchange
Rate, shall be deemed to equal (A) if shares of Class A Common Stock are
outstanding at the Exchange Date, the Exchange Price of the Class A Common
Stock, as adjusted pursuant to Section 6.1(c), otherwise zero, plus (B) the
Transaction Value.
Notwithstanding the foregoing, with respect to any Reported
Securities (as defined below) received by holders of Class A Common Stock in an
Adjustment Event, Seller shall, in lieu of delivering cash in respect of such
Reported Securities as described above, deliver a number of such Reported
Securities with a value, as determined in accordance with clause (ii) of the
definition of Transaction Value, equal to all cash amounts that would otherwise
be deliverable in respect of Reported Securities received in such Adjustment
Event, except to the extent Seller has made an election to exercise the Cash
Delivery Option or such Reported Securities have not yet been delivered to the
holders entitled thereto following such Adjustment Event or any record date with
respect thereto. If, following any Adjustment Event, any Reported Security
ceases to qualify as a Reported Security, then (x) Seller shall not deliver such
Reported Security but instead shall deliver of an equivalent amount of cash and
(y) notwithstanding clause (ii) of the definition of Transaction Value, the
Transaction Value of such Reported Security shall mean the fair market value of
such Reported Security on the date such security ceases to qualify as a Reported
Security, as determined by a nationally recognized investment banking firm
retained for this purpose by the Administrator.
"TRANSACTION VALUE" means (i) for any cash received in any
Adjustment Event, the amount of cash received per share of Class A Common Stock,
(ii) for any Reported Securities received in any Adjustment Event, an amount
equal to (x) the average Closing Price per security of such Reported Securities
on the 20 Trading Days immediately prior to (but not including) the Exchange
Date multiplied by (y) the number of such Reported Securities (as adjusted
pursuant to the definition thereof) received per share of Class A Common Stock
and (iii) for any property received in any Adjustment Event other than cash or
Reported Securities, an amount equal to the fair market value of the property
received per share of Class A Common Stock on the date such property is
received, as determined by a nationally recognized investment banking firm
retained for this purpose by the Administrator; provided, however, that in the
case of clause (ii), (x) with respect to securities that are Reported Securities
by virtue of only clause (iv) of the definition of Reported Securities,
Transaction Value with respect to any such Reported Security means the average
of the mid-point of the last bid and ask prices for such Reported Security as of
the Exchange Date from each of at least three nationally recognized investment
banking firms
<PAGE>
retained for such purpose by the Administrator multiplied by the number of such
Reported Securities (as adjusted pursuant to the definition thereof) received
per share of Class A Common Stock and (y) with respect to all other Reported
Securities, if there are not 20 Trading Days for any particular Reported
Security occurring after the 60th calendar day immediately prior to, but not
including, the Exchange Date, Transaction Value with respect to such Reported
Security means the fair market value per security of such Reported Security as
of the Exchange Date as determined by a nationally recognized investment banking
firm retained for such purpose by the Administrator multiplied by the number of
such Reported Securities (as adjusted pursuant to the definition thereof)
received per share of Class A Common Stock. For purposes of calculating the
Transaction Value, any cash, Reported Securities or other property receivable in
an Adjustment Event shall be deemed to have been received immediately prior to
the close of business on the record date for such Adjustment Event or, if there
is no record date for such Adjustment Event, immediately prior to the close of
business on the effective date of such Adjustment Event.
"REPORTED SECURITIES" means any securities received in an
Adjustment Event that (A) are (i) listed on a United States national securities
exchange, (ii) reported on a United States national securities system subject to
last sale reporting, (iii) traded in the over-the-counter market and reported on
the National Quotation Bureau or similar organization, (iv) for which bid and
ask prices are available from at least three nationally recognized investment
banking firms, or (v) are immediately convertible or exchangeable at the option
of the holder thereof, on a one-for-one basis, at all times from the date of
receipt to [ ], 2003, without any requirement of payment of consideration, for
any of the securities specified in clauses (i) through (iv); and (B) are either
(x) perpetual equity securities or (y) non-perpetual equity or debt securities
with a stated maturity after the Exchange Date. The number of shares of any
Reported Securities included in the calculation of Transaction Value pursuant to
clause (ii) of the definition thereof shall be subject to adjustment if any
event that would, had it occurred with respect to the Class A Common Stock or
the Company, have required an adjustment pursuant to Section 6.1 or 6.2, shall
occur with respect to such Reported Securities or the issuer thereof subsequent
to the date the Adjustment Event is consummated. Adjustment for such subsequent
events shall be as nearly equivalent as practicable to the adjustments provided
for in Section 6.1 or 6.2, as applicable.
ARTICLE VII
ACCELERATION
If one or more of the following events (each an "EVENT OF
DEFAULT") shall occur:
(a) Seller shall commence a voluntary case or other proceeding
seeking a liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, or shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against it, or shall take any action to authorize any of the
foregoing;
<PAGE>
(b) an involuntary case or other proceeding shall be commenced
against Seller seeking liquidation, reorganization or other relief with respect
to it or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property; or an order for relief shall be entered against any Seller under
the federal bankruptcy laws as now or hereafter in effect; or
(c) a Collateral Event of Default within the meaning of the
Collateral Agreement;
then an "ACCELERATION DATE" shall occur, Seller's rights under
Section 1.3(d), (e) (f) and (g) shall terminate immediately and (i) in
the case of clause (c), Seller shall become obligated to the extent
permitted by law to deliver to Purchaser (and shall be deemed to
instruct the Collateral Agent to deliver to the Custodian, for the
account of Purchaser, and to liquidate and turn into cash the U.S.
Government obligations and Cash Equivalents then pledged by Seller to
the extent necessary to satisfy such obligation) the Contract Shares,
in the form of the shares of Class A Common Stock then pledged by
Seller, or cash generated from the liquidation of U.S. Government
obligations and Cash Equivalents then pledged by Seller, or a
combination thereof (or, after an Adjustment Event, the alternate
consideration to be delivered, in the form of Reported Securities then
pledged, cash then pledged, cash generated from the liquidation of U.S.
Government obligations and Cash Equivalents then pledged, or a
combination thereof); or
(ii) in the case of clauses (a) or (b), Seller shall become
obligated to the extent permitted by law to deliver to Purchaser (and
shall be deemed to instruct the Collateral Agent to deliver to the
Custodian, for the account of Purchaser, and to liquidate and turn into
cash the U.S. Government obligations and Cash Equivalents then pledged
by Seller to the extent necessary to satisfy such obligation) a number
of shares of Class A Common Stock, in the form of the shares of Class A
Common Stock then pledged by Seller, or cash generated from the
liquidation of U.S. Government obligations and Cash Equivalents then
pledged by Seller, or a combination thereof (or, after an Adjustment
Event, the alternate consideration to be delivered, in the form of
Reported Securities then pledged, cash then pledged, cash generated
from the liquidation of U.S. Government obligations and Cash
Equivalents then pledged, or a combination thereof), with an aggregate
value (based on the Closing Price on the Acceleration Date) equal to
the Acceleration Value (as defined below).
"ACCELERATION VALUE" means an amount determined by the
Administrator on the basis of quotations from Independent Dealers (as defined
below). Each quotation will be for an amount that would be paid to the relevant
Independent Dealer in consideration of an agreement between Purchaser and such
Independent Dealer that would have the effect of preserving for Purchaser the
economic equivalent of the payments and deliveries that Purchaser would, but for
the occurrence of the Acceleration Date, have been entitled to receive after the
Acceleration Date hereunder (taking into account any adjustments to the Exchange
Rate that may have been effected on or prior to the Acceleration Date). On or as
soon as reasonably practicable following
<PAGE>
the Acceleration Date, the Administrator will request each Independent Dealer to
provide its quotation as soon as reasonably practicable, but in any event within
two Business Days. The Administrator shall compute the Acceleration Value upon
receipt of each Independent Dealer's quotation, provided that if, at the close
of business on the fourth Business Day following the Acceleration Date, the
Administrator shall have received quotations from fewer than four of the
Independent Dealers, the Administrator shall compute the Acceleration Value
using the quotations, if any, it shall have received at or prior to such time.
If four quotations are provided, the Acceleration Value will be the arithmetic
mean of the two quotations remaining after disregarding the highest and lowest
quotations. (For this purpose, if more than one quotation has the same highest
or lowest value, then one of such quotations shall be disregarded.) If two or
three quotations are provided, the Acceleration Value will be the arithmetic
mean of such quotations. If one quotation is provided, the Acceleration Value
will be equal to such quotation. If no quotations are provided, the Acceleration
Value will be the aggregate value (based on the Closing Price on the
Acceleration Date) of the number of shares of Class A Common Stock (or, after an
Adjustment Event, Reported Securities, cash or a combination thereof) that would
be required to be delivered hereunder on the Acceleration Date if the Exchange
Date were redefined to be the Acceleration Date.
"INDEPENDENT DEALERS" means four nationally recognized
independent investment banking firms selected in good faith by the
Administrator.
As promptly as reasonably practicable after receipt of the
quotations on which the Acceleration Value is based (or, as the case may be,
after failure to receive any such quotations within the time period prescribed
above), Purchaser shall deliver to Seller and the Collateral Agent a notice
specifying the number of shares of Class A Common Stock (or, after an Adjustment
Event, the alternate consideration) required to be delivered by Seller.
Purchaser and Seller agree that the obligations contained in clauses (i) and
(ii) above are a reasonable pre-estimate of loss and not a penalty. Such amount
is payable for the loss of bargain and Purchaser will not be entitled to recover
additional damage as a consequence of loss resulting from an Event of Default.
ARTICLE VIII
MISCELLANEOUS
8.1 ADJUSTMENTS; SELECTION OF INDEPENDENT INVESTMENT BANKING
FIRM. Purchaser shall be responsible for the effectuation and calculation of any
adjustment pursuant to Article VI hereof and shall furnish Seller notice of any
such adjustment and shall provide Seller reasonable opportunity to review the
calculations pertaining to any such adjustment. If, pursuant to the terms and
conditions hereof, the Administrator shall be required to retain a nationally
recognized independent investment banking firm for any purpose provided herein,
such nationally recognized independent investment banking firm shall be selected
and retained by the Administrator only after consultation with Seller; provided,
however, that Seller shall be deemed to have waived his right to consult if
Seller fails to consult within five Business Days of notice being sent by the
Administrator to Seller seeking consultation. Purchaser may delegate the
<PAGE>
effectuation and calculation of any such adjustments to its Administrator.
8.2 NOTICES. Notices to Purchaser shall be directed to it in
care of the Administrator for Purchaser, The Bank of New York, 101 Barclay
Street, New York, New York 10286, Telephone: (212) 816-5228, Telecopier: (212)
816-7157; notices to Seller shall be directed to care of Metromedia Fiber
Network Inc. [Address], copy to Paul, Weiss, Rifkind, Wharton & Garrison (fax
no.: (212-757-3990), Attention: Douglas A. Cifu, Esq. Notwithstanding the
foregoing, notices to a party shall be directed to such other address for
such party as shall be specified by such party in a like notice given
pursuant to this Section 8.2. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if either (i)
personally delivered (including delivery by courier service or by Federal
Express or any other nationally recognized overnight delivery service for
next day delivery) to the offices specified in the preceding sentence, in
which case they shall be deemed received on the first Business Day by which
delivery shall have been made to said offices; or (ii) sent by certified
mail, return receipt requested, in accordance with the preceding sentence, in
which case they shall be deemed received when receipted for unless
acknowledgment is refused (in which case delivery shall be deemed to have
been received on the first Business Day on which such acknowledgment is
refused). Any notice, demand or other communication to be provided by or on
behalf of Purchaser pursuant to this Agreement shall be sent to the address
of Seller, provided in this Section 8.2. Any failure by Seller or any
guardian, conservator, executor, administrator or other similarly appointed
person to receive any such notice, demand or communication shall in no way
abrogate, invalidate or otherwise affect the validity or enforceability of
the notice, demand or communication or the matters set forth therein.
8.3 COUNTERPARTS. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
8.4 ENTIRE AGREEMENT. Except as expressly set forth herein,
this Agreement constitutes the entire agreement among the parties with respect
to the subject matter hereof and supersedes all prior agreements, understandings
and negotiations, both written and oral, among the parties with respect to the
subject matter of this Agreement.
8.5 AMENDMENTS; WAIVERS. Any provision of this Agreement may
be amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by Purchaser and Seller, or, in the case of
a waiver, by the party or parties against whom the waiver is to be effective. No
failure or delay by either party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
8.6 NO THIRD PARTY RIGHTS; SUCCESSORS AND ASSIGNS. Except as
otherwise agreed in writing, this Agreement is not intended and shall not be
construed to create any rights in any person other than Seller and Purchaser and
their respective successors and assigns and no person shall assert any rights as
third party beneficiary hereunder. Whenever any of the parties
<PAGE>
hereto is referred to, such reference shall be deemed to include the successors
and permitted assigns of such party.
This Agreement will be binding on and enforceable against the
Seller despite the death or legal incapacity of any general partner of such
Seller.
8.7. APPLICATION OF BANKRUPTCY CODE. The parties hereto
acknowledge and agree that the Collateral Agent is a "financial institution"
within the meaning of Section 101(22) of Title 11 of the United States Code (the
"BANKRUPTCY CODE") and is acting as agent and custodian for Purchaser in
connection with this Agreement and that Purchaser is a "customer" of the
Collateral Agent within the meaning of said Section 101(22). The parties hereto
further acknowledge and agree that this Agreement is a "securities contract", as
such term is defined in Section 741(7) of the Bankruptcy Code, entitled to the
protection of Section 555 of the Bankruptcy Code.
8.8 GOVERNING LAW; JURISDICTION; SEVERABILITY; WAIVER OF JURY
TRIAL. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York. For the purpose of any suit, action or proceeding
arising out of or relating to this Agreement, the parties hereto hereby
expressly and irrevocably consent and submit to the non-exclusive jurisdiction
of any United States Federal or New York State court sitting in the Borough of
Manhattan, City and State of New York, and expressly and irrevocably waive, to
the extent permitted under applicable law, any immunity from the jurisdiction
thereof and any claim or defense in such suit, action or proceeding based on a
claim of improper venue, forum non conveniens or any similar basis to which it
might otherwise be entitled. To the extent permitted by law, the
unenforceability or invalidity of any provision or provisions of this Agreement
shall not render any other provision or provisions herein contained
unenforceable or invalid. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES
HERETO HEREBY WAIVE AND COVENANT THAT THEY WILL NOT ASSERT (WHETHER AS
PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN
RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING OUT OF OR
BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR TORT OR OTHERWISE. EACH
PARTY HERETO ACKNOWLEDGES THAT IT OR HE HAS BEEN INFORMED BY THE OTHER PARTY
HERETO THAT THE PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL INDUCEMENT UPON
WHICH SUCH OTHER PARTY HERETO HAS RELIED, IS RELYING AND WILL RELY IN ENTERING
INTO THIS AGREEMENT AND ANY DOCUMENT RELATED THERETO. EACH PARTY HERETO MAY FILE
AN ORIGINAL COUNTERPART OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF
THE CONSENT OF THE OTHER PARTY HERETO TO THE WAIVER OF ITS OR HIS RIGHTS TO
TRIAL BY JURY.
<PAGE>
IN WITNESS WHEREOF, the parties have signed this Agreement as
of the date and year first above written.
PURCHASER: SELLER:
DECS TRUST VI: [METROMEDIA COMPANY]
[STEPHEN A. GAROFALO]
[STAURT SUBOTNICK]
By: By:
Name: Name:
Title: Title:
<PAGE>
Exhibit (K)(4)
[FORM OF COLLATERAL AGREEMENT]
COLLATERAL AGREEMENT
Among
[METROMEDIA COMPANY]
[STEPHEN A. GAROFALO]
[STUART SUBOTNICK]
As Pledgor,
THE BANK OF NEW YORK, As Collateral Agent
and
DECS TRUST VI
Dated as of
November [ ], 1999
<PAGE>
The following Table of Contents has been inserted for
convenience of reference only and does not constitute a part of the Collateral
Agreement.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION
<S> <C>
1. The Security Interests..................................................................................1
2. Definitions.............................................................................................2
3. Representations and Warranties of the Pledgor...........................................................5
4. Representations and Warranties of the Collateral Agent..................................................6
5. Certain Covenants of the Pledgor........................................................................7
6. Administration of the Collateral and Valuation of the Securities........................................9
7. Income and Voting Rights on Collateral.................................................................13
8. Remedies upon Events of Default........................................................................14
9. The Collateral Agent...................................................................................16
10. Miscellaneous..........................................................................................19
11. Termination of Collateral Agreement....................................................................20
12. No Personal Liability of Trustees......................................................................20
</TABLE>
Exhibit A - Certificate for Substituted Collateral
Exhibit B - Certificate for Additional Government Securities
Exhibit C - Certificate for Additional Collateral
Exhibit D - Certificate of Spouse
<PAGE>
COLLATERAL AGREEMENT
THIS COLLATERAL AGREEMENT (the "AGREEMENT"), dated as of
November [ ] 1999, among [Metromedia, a general partnership organized under
the law of the State of Delaware] [Stephen A. Garofalo] [Stuart Subotnick]
(the "PLEDGOR"), The Bank of New York, a New York banking corporation, as
collateral agent (the "COLLATERAL AGENT") hereunder for the benefit of DECS
Trust VI, a statutory business trust organized under the Business Trust Act
of the State of Delaware (such trust and the trustees thereof acting in their
capacity as such being referred to herein as the "TRUST" or "PURCHASER"), and
the Trust;
W I T N E S S E T H:
WHEREAS, pursuant to the Forward Purchase Agreement (the
"PURCHASE AGREEMENT"), dated as of November [ ], 1999, between Pledgor and
Purchaser, the Pledgor has agreed to sell and Purchaser has agreed to purchase
Class A Common Stock, $.01 par value, of Metromedia Fiber Network, Inc., a
Delaware corporation (the "COMPANY"), subject to the terms and conditions of
the Purchase Agreement; and
NOW, THEREFORE, to secure the performance by the Pledgor of
its obligations under the Purchase Agreement and to secure the observance and
performance of the covenants and agreements contained herein and in the Purchase
Agreement, the parties hereto agree as follows:
1. THE SECURITY INTERESTS.
In order to secure the observance and performance of the
covenants and agreements contained herein and in the Purchase Agreement:
(a) SECURITY INTERESTS. The Pledgor hereby grants, sells,
conveys, assigns, transfers and pledges unto the Collateral Agent, as agent of
and for the benefit of the Trust, a security interest in and to, and a lien upon
and right of set-off against, all of Pledgor's right, title and interest in and
to (i) the Pledged Items described in paragraphs (b) and (d); (ii) all additions
to and substitutions for such Pledged Items; (iii) (subject to the remittance of
certain payments upon satisfaction of the conditions specified in Section 7(a)
hereof) all income, proceeds and collections received or to be received, or
derived or to be derived, now or any time hereafter from or in connection with
the Pledged Items (whether such proceeds arise before or after the commencement
of any proceeding under any applicable bankruptcy, insolvency or other similar
law, by or against the Pledgor with respect to the Pledgor); and (iv) all powers
and rights now owned or hereafter acquired under or with respect to the Pledged
Items (such Pledged Items, additions, substitutions, income, proceeds,
collections, powers and rights being herein collectively called the
"COLLATERAL"). The Collateral Agent shall have all of the rights, remedies and
recourses with respect to the Collateral afforded a secured party by the New
York Uniform
<PAGE>
Commercial Code, in addition to, and not in limitation of, the other rights,
remedies and recourses afforded to the Collateral Agent by this Agreement.
(b) FIRM PAYMENT DATE. At the Firm Payment Date, the Pledgor
shall deliver to the Collateral Agent in pledge hereunder one or more
certificates in registered form representing in the aggregate [ ] shares of
Common Stock, indorsed in blank or in the name of the Collateral Agent for the
benefit of the Trust (together with any other documents necessary to permit the
Collateral Agent to effect the re-registration of such Common Stock without
further action by the Pledgor) or, if such Common Stock is not issuable in
certificated form but is held in book entry form by The Depository Trust
Company, the Pledgor shall transfer such number of shares of Common Stock to an
account of the Collateral Agent or to an account (other than an account of the
Pledgor) designated by the Collateral Agent with The Depository Trust Company.
(c) OPTION CLOSING DATE. Effective upon and subject to the
receipt by the Pledgor of the Additional Purchase Price, at the Option Closing
Date, the Pledgor shall deliver to the Collateral Agent in pledge hereunder one
or more certificates in registered form representing in the aggregate a number
of shares of Common Stock equal to the Additional Share Base Amount, indorsed in
blank or in the name of the Collateral Agent for the benefit of the Trust
(together with all signature guarantees and any other documents necessary to
permit the Collateral Agent to effect the re-registration of such Common Stock
without further action by the Pledgor) or, if such Common Stock is not issuable
in certificated form but is held in book entry form by The Depository Trust
Company, the Pledgor shall transfer such number of shares of Common Stock to an
account of the Collateral Agent or to an account (other than an account of the
Pledgor) designated by the Collateral Agent with The Depository Trust Company.
(d) EXTENSION OF EXCHANGE DATE. Prior to, or simultaneously
with Pledgor's election to extend the Exchange Date pursuant to Section 1.3(f)
of the Purchase Agreement, the Pledgor shall deliver to the Collateral Agent in
pledge hereunder Additional Government Securities meeting the requirements of
Section 1.3(f) of the Purchase Agreement.
[(e) REREGISTRATION. Immediately following the Firm Payment
Date and any Option Closing Date, the Collateral Agent shall cause all
certificates for Common Stock delivered pursuant to Section 1(b) or 1(c) above
to be re-registered on the books of the transfer agent for the Common Stock into
the name of the Collateral Agent or its nominee, and shall thereafter maintain
them in such form until the termination of this Agreement; PROVIDED, HOWEVER,
that at any time following the Firm Payment Date, the Collateral Agent may cause
any such certificates for the Common Stock to be deposited with The Depository
Trust Company and thereafter hold such certificates in book entry form in an
account (other than an account of the Pledgor) designated by the Collateral
Agent.]
2. DEFINITIONS.
Capitalized terms used and not otherwise defined herein shall
have the meanings ascribed to them in the Purchase Agreement. Capitalized terms
used herein shall have the meanings as follows:
<PAGE>
"ADDITIONAL GOVERNMENT SECURITIES" means collateral that must
be pledged to the Collateral Agent in connection with a Seller's election to
extend the Exchange Date, consisting of direct obligations of the United States
of America or other Cash Equivalents (as defined below) which through the
scheduled payment of principal and interest in accordance with their terms will
provide, not later than one Business Day before the extended Exchange Date,
money in an amount not less than the Extension Amount.
"AUTHORIZED REPRESENTATIVE" of the Pledgor means any trustee,
officer or other representative as to whom Pledgor shall have delivered notice
to the Collateral Agent that such trustee or other representative is authorized
to act hereunder on behalf of Pledgor.
"BUSINESS DAY" means any day except a Saturday, Sunday or
other day on which banking institutions in New York City are authorized or
obligated by law or regulation to close or a day on which the New York Stock
Exchange, Inc. is closed.
"CASH DELIVERY OBLIGATIONS" means, at any time (A) if no
Adjustment Event shall have occurred prior to such time, zero, and (B) from and
after any Adjustment Event, the product of: (i) the Firm Share Base Amount plus
the Additional Share Base Amount (if any) and (ii) the Transaction Value of any
property other than Reported Securities received by the Pledgor in such
Adjustment Event, multiplied successively by each number by which the Exchange
Rate shall have been multiplied on or prior to the Adjustment Event pursuant to
the adjustments provided for under Section 6.1 of the Purchase Agreement.
"CASH EQUIVALENTS" means (i) United States dollars, (ii)
securities issued or directly and fully guaranteed or insured by (a) the United
States government or any agency or instrumentality thereof (provided that the
full faith and credit of the United States is pledged in support thereof) having
maturities of not more than six months from the date of acquisition, (iii)
certificates of deposit with maturities of six months or less from the date of
the acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any domestic commercial bank
having capital and surplus in excess of $500 million and a Thompson Bank Watch
Rating of "B" or better, (iv) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clause (ii)
above entered into with any financial institution meeting the qualifications
specified in clause (iii) above, (v) commercial paper having the highest rating
obtainable from Moody's Investors Service, Inc. or Standard & Poor's Ratings
Group and in each case maturing within six months after the date of acquisition
and (vi) money market funds at least 95% of the assets of which constitute Cash
equivalents of the kinds described in clauses (i)-(v) of this definition.
"COLLATERAL" has the meaning specified in Section 1(a).
"COLLATERAL AGENT" means the financial institution identified
as such in the preliminary paragraph hereof, or any successor appointed in
accordance with Section 9.
"COLLATERAL AGREEMENT" means this Collateral Agreement and any
exhibits hereto.
<PAGE>
"COLLATERAL EVENT OF DEFAULT" has the meaning specified in
Section 6(e).
"COLLATERAL REQUIREMENT" means, as of any date and with
respect to: (i) any Common Stock, 100%; (ii) any Reported Securities, 100%;
(iii) any U.S. Government Securities or Cash Equivalents pledged in respect of
Cash Delivery Obligations, 105%; and (iv) any other U.S. Government Securities
or Cash Equivalents, 150%, provided that upon and after any failure to cure an
Insufficiency Determination by 4:00 p.m. New York City time on the Business Day
following telephonic notice of such Insufficiency Determination as described in
Section 6(e), which insufficiency shall be continuing on such Business Day, the
Collateral Requirement relating to any U.S. Government Securities or Cash
Equivalents (other than (i) Additional Government Securities and (ii) U.S.
Government Securities or Cash Equivalents pledged in respect of Cash Delivery
Obligations) shall be 200%. The portion of any pledged U.S. Government
Securities or Cash Equivalents that shall be deemed at any time to be in respect
of Cash Delivery Obligations shall be as provided in Section 6(e).
"COMMON STOCK" means either Class A or Class B common stock of
Metromedia Fiber Network, Inc., either of which may be pledged as collateral
under this Collateral Agreement.
"DELIVERY DATE" has the meaning specified in Section 8(a).
"ELIGIBLE COLLATERAL" means (i) Common Stock, (ii) U.S.
Government Securities, (iii) Cash Equivalents, (iv) from and after Pledgor's
election to extend the Exchange Date pursuant to Section 1.3(f) of the Purchase
Agreement, Additional Government Securities, and (v) from and after any
Adjustment Event, Reported Securities, provided, in each case, that (A) the
Pledgor has good and marketable title thereto, free of all Liens (other than the
Liens created by this Collateral Agreement) and Transfer Restrictions and (B)
the Collateral Agent has a valid, first priority perfected security interest
therein and first lien thereon, and provided further that to the extent the
number of shares of Common Stock or Reported Securities pledged hereunder
exceeds at any time the Maximum Deliverable Number thereof, such excess shares
shall not be Eligible Collateral.
"EVENT OF DEFAULT" means the occurrence of: (i) an event
described in clause (a) or (b) of Article VII of the Purchase Agreement, (ii) a
Collateral Event of Default, (iii) a failure by Pledgor to have caused the
Collateral to meet the requirements described in Section 5(d), (iv) if an
Adjustment Event shall have occurred prior to the Exchange Date, failure by
Pledgor to cause to be delivered to Purchaser on the Exchange Date the
consideration then required to be delivered pursuant to Section 6.2 of the
Purchase Agreement or (v) if Pledgor shall have exercised its Cash Delivery
Option, a failure by the Pledgor to deliver cash on the Exchange Date in the
amount required under Section 1.3(d) of the Purchase Agreement.
"INELIGIBLE COLLATERAL" means Collateral that does not
constitute "Eligible Collateral".
"INSUFFICIENCY DETERMINATION" has the meaning specified in
Section 6(e).
<PAGE>
"LIEN" means any lien, mortgage, security interest, pledge,
charge or encumbrance of any kind.
"MARKET VALUE" means, as of any date: (a) with respect to any
Common Stock (except as otherwise provided in Section 6(e)(2)), the Closing
Price of the Class A Common Stock on such date; (b) with respect to any U.S.
Government Security, the product of (x)(i) the average unit bid price for
such security on the Trading Day prior to such date as published in the New
York edition of The Wall Street Journal or The New York Times or, if not so
published, (ii) the lower bid price quoted (which quotation shall be
evidenced in writing) on such date (or if such date is not a Trading Date, on
the preceding Trading Date) by either of two nationally recognized dealers
making a market in such security which are members of the National
Association of Securities Dealers, Inc. and (y) the number of such units
comprised in the outstanding principal amount of such U.S. Government
Security; and (c) with respect to any unit of Reported Securities, the
Closing Price thereof on such date; provided that the "Market Value" of any
Ineligible Collateral shall be zero; and (d) with respect to any Cash
Equivalent, the face value of such instrument.
"MAXIMUM DELIVERABLE NUMBER" means, on any date, with respect
to the Common Stock, the product of the Firm Share Base Amount plus the
Additional Share Base Amount (if any), multiplied successively by each number by
which the Exchange Rate shall have been multiplied on or prior to such date
pursuant to the adjustments provided for under Section 6.1 of the Purchase
Agreement. The Maximum Deliverable Number of Reported Securities means, on any
date, the product of (i) the Firm Share Base Amount plus the Additional Share
Base Amount (if any) and (ii) the number of Reported Securities received by the
Pledgor in the Adjustment Event for each share of Common Stock, multiplied
successively by each number by which the Exchange Rate shall have been
multiplied on or prior to such date and after the date of such Adjustment Event
pursuant to the adjustments provided for under Article VI of the Purchase
Agreement.
"PERSON" means an individual, a corporation, a partnership, an
association, a limited liability company, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"PLEDGE VALUE" means, as of any date and with respect to any
particular type of Collateral, an amount equal to the aggregate Market Value of
such Collateral divided by the Collateral Requirement for such Collateral.
"PLEDGE VALUE REQUIREMENT" means, as of any date, (a) the
aggregate Market Value on such date of the Maximum Deliverable Number of shares
of Common Stock or, from and after an Adjustment Event, Reported Securities, on
such date plus (b) from and after an Adjustment Event, the Cash Delivery
Obligations plus (c) from and after the Pledgor's extension of the Exchange Date
pursuant to Section 1.3(f) of the Purchase Agreement, the Additional Government
Securities.
"PLEDGED ITEMS" means, as of any date, any and all securities
and instruments delivered by the Pledgor to be held by the Collateral Agent
under this Collateral Agreement as Collateral, whether Eligible Collateral or
Ineligible Collateral.
<PAGE>
"PRIOR COLLATERAL" has the meaning specified in Section
6(b)(1).
"RESPONSIBLE OFFICER" means, when used with respect to the
Collateral Agent, any vice president, assistant vice president, assistant
treasurer or assistant secretary located in the division or department of the
Collateral Agent responsible for performing the obligations of the Collateral
Agent under this Collateral Agreement, or in any other division or department of
the Collateral Agent performing operations substantially equivalent to those
performed by such division or department pursuant hereto, or any other officer
of the Collateral Agent or any successor Collateral Agent customarily performing
functions similar to those performed by any of the aforesaid officers, and also
means, with respect to any matter relating to this Collateral Agreement or the
Collateral, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"TRANSFER RESTRICTION" means, with respect to any item of
Collateral, any condition to or restriction on the ability of the holder thereof
to sell, assign or otherwise transfer such item of Collateral or to enforce the
provisions thereof or of any document related thereto whether set forth in such
item of Collateral itself or in any document related thereto, including, without
limitation, (i) any requirement that any sale, assignment or other transfer or
enforcement of such item of Collateral be consented to or approved by any
Person, including, without limitation, the issuer thereof or any other obligor
thereon, (ii) any limitations on the type or status, financial or otherwise, of
any purchaser, pledgee, assignee or transferee of such item of Collateral, (iii)
any requirement of the delivery of any certificate, consent, agreement, opinion
of counsel, notice or any other document of any Person to the issuer of, any
other obligor on or any registrar or transfer agent for, such item of
Collateral, prior to the sale, pledge, assignment or other transfer or
enforcement of such item of Collateral and (iv) any registration or
qualification requirement for such item of Collateral pursuant to any federal or
state securities law; provided that the required delivery of any assignment from
the seller, pledgor, assignor or transferor of such item of Collateral, together
with any evidence of the corporate or other authority of such Person, shall not
constitute a "Transfer Restriction."
"TRUSTEE" or "TRUSTEES" means any trustee or trustees of the
Trust identified on the signature pages hereto, or any successor as such trustee
or trustees.
"UCC" means the Uniform Commercial Code as in effect in the
State of New York.
"U.S. GOVERNMENT SECURITIES" means direct obligations of the
United States of America that mature on a date that is one year or less from the
date such obligations are pledged hereunder, but in any event prior to the
Exchange Date.
3. REPRESENTATIONS AND WARRANTIES OF THE PLEDGOR.
The Pledgor hereby represents and warrants to the Collateral
Agent and the Trust that:
(a) POWER. The Pledgor has full power and authority
to execute and
<PAGE>
deliver this Collateral Agreement and to perform and observe the
provisions hereof;
(b) NON-CONTRAVENTION. The execution, delivery and
performance by the Pledgor of this Collateral Agreement do not and will
not violate, contravene or constitute a default under any provision of
applicable law or regulation or of any material agreement, judgment,
injunction, order, decree or other instrument binding upon the Pledgor.
The Pledgor is not in default under any agreement by which the
Collateral may be bound and no litigation, arbitration or
administrative proceedings are current or pending, which default,
litigation, arbitration or administrative proceedings are material to
the Collateral in the context of this Collateral Agreement.
(c) BINDING EFFECT. This Collateral Agreement
constitutes a valid and binding agreement of the Pledgor enforceable
against the Pledgor in accordance with its terms.
(d) SOLVENCY. The Pledgor is presently solvent and
able to pay, and paying its debts as they become due, and anticipates
that it will continue to be able to pay its debts as they become due
for the foreseeable future.
(e) NO TRANSFER RESTRICTIONS. Except for any legend
with respect to restrictions pursuant to applicable federal and state
securities laws on transfer of the Common Stock pledged by the Pledgor
hereunder which appears on the certificates representing such Common
Stock (and which (i) will not be applicable to the delivery of any
such Common Stock to the Trust pursuant to the Purchase Agreement
and this Agreement or to the delivery of any such Common Stock by
the Trust to the holders of DECS pursuant to the DECS and (ii) will
be removed at the request of the Collateral Agent to the transfer
agent for the Common Stock prior to any such delivery to the holders
of DECS) and except for a Notice of Conversion which is executed in
black and delivered to the Collateral Agent on the date hereof, no
Transfer Restrictions exist with respect to or otherwise apply to
the assignment of, or transfer by the Pledgor of possession of, any
items of Collateral to the Collateral Agent hereunder, or the
subsequent sale or transfer of such items of Collateral by the
Collateral Agent pursuant to the terms hereof.
(f) TITLE TO COLLATERAL; PERFECTED SECURITY INTEREST.
The Pledgor has good and marketable title to the Pledged Items, free of
all Liens (other than the Lien created by this Collateral Agreement)
and Transfer Restrictions (except for any legend as provided in Section
3(e) hereof and except for a Notice of Conversion which is executed
in black and delivered to the Collateral Agent on the date hereof).
Upon delivery of the Pledged Items described in paragraph (b) and
(d) of Section 1 to the Collateral Agent hereunder, the Collateral
Agent will obtain a valid, first priority perfected security
interest in, and a first lien upon, such Pledged Items subject to no
other Lien. None of the Collateral is or shall be pledged by the
Pledgor as collateral for any other purpose.
(g) OWNERSHIP OF PLEDGOR. John W. Kluge and Stuart
Subotnick or the related permissible Class B holders own 100% general
partnership interests in the Pledgor and the Pledgor has no other
equity interests outstanding.
<PAGE>
4. REPRESENTATIONS AND WARRANTIES OF THE COLLATERAL AGENT.
The Collateral Agent represents and warrants to the Pledgor
and the Trust that:
(a) CORPORATE EXISTENCE AND POWER. The Collateral
Agent is a banking corporation, duly incorporated, validly existing and
in good standing under the laws of the jurisdiction of its
incorporation, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required
to enter into, and perform its obligations under, this Collateral
Agreement.
(b) AUTHORIZATION AND NON-CONTRAVENTION. The
execution, delivery and performance by the Collateral Agent of this
Collateral Agreement have been duly authorized by all necessary
corporate action on the part of the Collateral Agent (no action by the
shareholders of the Collateral Agent being required) and do not and
will not violate, contravene or constitute a default under any
provision of applicable law or regulation or of the charter or by-laws
of the Collateral Agent or of any material agreement, judgment,
injunction, order, decree or other instrument binding upon the
Collateral Agent.
(c) BINDING EFFECT. This Collateral Agreement
constitutes a valid and binding agreement of the Collateral Agent
enforceable against the Collateral Agent in accordance with its terms.
5. CERTAIN COVENANTS OF THE PLEDGOR.
The Pledgor agrees that, so long as any of its obligations
under the Purchase Agreement remain outstanding:
(a) TITLE TO COLLATERAL. The Pledgor shall at all
times hereafter have good and marketable title to the Collateral
pledged hereunder, free of all Liens (other than the Liens created by
this Collateral Agreement) and Transfer Restrictions (except for
those permitted by Section 3(e) hereof), and, subject to the terms of
this Collateral Agreement, will at all times hereafter have good, right
and lawful authority to assign, transfer and pledge such Collateral and
all such additions thereto and substitutions therefor under this
Collateral Agreement.
(b) PLEDGE VALUE REQUIREMENT. The Pledgor shall cause
the aggregate Pledge Value of the Collateral to be equal to or greater
than the Pledge Value Requirement at all times, and shall pledge
additional Collateral in the manner described in Section 6(d) as
necessary to cause such requirement to be met.
(c) PLEDGE UPON ADJUSTMENT EVENT. Upon the occurrence
of an Adjustment Event, the Pledgor shall immediately cause to be
delivered to the Collateral Agent, in the manner provided in Section
6(d): (i) U.S. Government Securities or Cash Equivalents having an
aggregate Market Value at least equal to 105% of the Cash Delivery
Obligations, if any; and (ii) Reported Securities in an amount at least
equal to
<PAGE>
the Maximum Deliverable Number thereof (if any), or, at Pledgor's
election, U.S. Government Securities or Cash Equivalents having an
aggregate Market Value at least equal to 150% of such Maximum
Deliverable Number of Reported Securities; in each case to be held as
substitute or additional Collateral hereunder.
(d) COMPOSITION OF PLEDGED ITEMS. Notwithstanding the
Pledgor's right to substitute Collateral pursuant to Section 6(b), the
Pledgor shall cause the Collateral to include, on the Exchange Date,
except to the extent Pledgor shall have exercised its Cash Delivery
Option, a number of shares of Common Stock (and/or, if an Adjustment
Event shall have occurred, Reported Securities) at least equal to the
number of shares of Common Stock (and/or, if an Adjustment Event shall
have occurred, Reported Securities) required to be delivered under the
Purchase Agreement on the Exchange Date. To the extent the Pledgor
exercises its Cash Delivery Option, then the Pledgor shall cause the
Collateral for the Cash Delivery Obligations to consist entirely of
U.S. Government Securities or Cash Equivalents at all times from and
after the date 25 Business Days prior to the Exchange Date, and, if the
Pledgor shall have extended the Exchange Date pursuant to Section
1.3(f) of the Purchase Agreement, the Pledgor shall cause Collateral
for Pledgor's obligations in connection with Pledgor's extension of the
Exchange Date to consist entirely of Additional Government Securities.
(e) FURTHER ASSURANCES. The Pledgor shall, at its
expense and in such manner and form as the Trust or the Collateral
Agent may require, give, execute, deliver, file and record any
financing statement, notice, instrument, document, agreement or other
papers that may be necessary or desirable in order to create, preserve,
perfect, substantiate or validate any security interest granted
pursuant hereto or to enable the Collateral Agent to exercise and
enforce its rights and the rights of the Trust hereunder with respect
to such security interest. To the extent permitted by applicable law,
the Pledgor hereby authorizes the Collateral Agent to execute and file,
in the name of the Pledgor or otherwise, Uniform Commercial Code
financing or continuation statements (which may be carbon,
photographic, photostatic or other reproductions of this Agreement or
of a financing statement relating to this Agreement) which the
Collateral Agent in its sole discretion may deem necessary or
appropriate to further perfect, or maintain the perfection of the
security interests granted hereby.
(f) OWNERSHIP OF PLEDGOR. The Pledgor shall be
beneficially owned exclusively by John W. Kluge and/or Stuart
Subotnick or the related permissible Class B holders during the term
of this Agreement.
[(g) The Pledgor shall not consolidate with or merge
with or into, or transfer all or substantially of its assets to, any
other Person unless:
(i) either (x) the Pledgor shall be the resulting or
surviving entity or (y) such other Person is an entity
organized and existing under the laws of the
<PAGE>
United States, a State thereof or the District of Columbia,
such other Person expressly assumes by supplemental agreement
executed and delivered to the Trust, in form satisfactory to
counsel to the Trust, all the obligations of the Pledgor under
the Underwriting Agreement, Collateral Agreement, the
Reimbursement Agreement, and this Agreement (in which case all
such obligations of the Pledgor shall terminate); and
(ii) the Pledgor shall deliver to the Trust prior to
the proposed transaction an Officer's Certificate and an
Opinion of Counsel, each of which shall state that such
consolidation, merger or transfer and such supplemental
agreement comply with this Section 5(g) and that all
conditions precedent herein provided for relating to such
transaction have been complied with.
Upon any consolidation or merger, or any transfer of
all or substantially all of the assets of the Pledgor in accordance
with this Section 5(g), the successor entity formed by such
consolidation or into which the Pledgor is merged or to which such
transfer is made shall succeed to, and be substituted for, and may
exercise every right and power of the Pledgor under this Agreement with
the same effect as if such successor entity had been named as the
Pledgor herein, and the predecessor entity, shall be relieved of any
further obligation under this Agreement.]4
5A. COVENANT OF THE COLLATERAL AGENT. Other than in
connection with an Insufficiency Determination, a Collateral Event of
Default or the delivery of Class A Common Stock on the Exchange Date, the
Collateral Agent will not deliver the Notice of Conversion referred to in
Section 3(e) and 3(f) above.
6. ADMINISTRATION OF THE COLLATERAL AND VALUATION OF THE
SECURITIES.
(a) VALUATION OF COLLATERAL. The Collateral Agent shall
determine on each Business Day whether the Pledge Value is at least equal to the
Pledge Value Requirement and whether an Insufficiency Determination or
Collateral Event of Default shall have occurred and, from and after any
substitution of U.S. Government Securities or Cash Equivalents for pledged
Common Stock or Reported Securities pursuant to paragraph (b) of this Section 6,
shall determine the Pledge Value on each Business Day and shall provide written
notice of the Pledge Value to the Pledgor.
(b) SUBSTITUTION OF COLLATERAL. The Pledgor may substitute
Collateral in accordance with the following provisions:
(1) Unless an Event of Default or a failure by the
Pledgor to meet any of its obligations under Section 5(b) or (c) hereof
has occurred and is continuing, the Pledgor shall have the right at any
time and from time to time to deposit Eligible Collateral with the
Collateral Agent in substitution for Pledged Items previously deposited
hereunder ("PRIOR COLLATERAL") and to obtain the release from the Lien
hereof of such Prior Collateral.
(2) If the Pledgor wishes to deposit Eligible
Collateral with the
<PAGE>
Collateral Agent in substitution for Prior Collateral, the Pledgor
shall (i) give written notice to the Collateral Agent identifying the
Prior Collateral to be released from the Lien hereof, (ii) deliver to
the Collateral Agent concurrently with such Eligible Collateral a
certificate of the Pledgor substantially in the form of Exhibit A
hereto and dated the date of such delivery, (A) identifying the items
of Eligible Collateral being substituted for the Prior Collateral and
the Prior Collateral that is to be transferred to the Pledgor and (B)
certifying that the representations and warranties contained in such
Exhibit A hereto are true and correct on and as of the date thereof and
(iii) deliver to the Collateral Agent concurrently with such Eligible
Collateral an opinion (dated the date of such delivery) of counsel,
substantially similar to those delivered by Paul, Weiss, Rifkind,
Wharton & Garrison at the Firm Purchase Date, addressed to the
Collateral Agent that covers the matters contained in the second
sentence of paragraph 3(b) of Exhibit A hereto. The Pledgor hereby
covenants and agrees to take all actions required under Section 6(d)
and any other actions necessary to create for the benefit of the
Collateral Agent a valid, first priority perfected security interest
in, and a first lien upon, such Eligible Collateral deposited with the
Collateral Agent in substitution for Prior Collateral.
(3) No such substitution shall be made unless and
until the Collateral Agent shall have determined that the aggregate
Pledge Value of all of the Collateral at the time of such proposed
substitution, after giving effect to the proposed substitution, shall
at least equal the Pledge Value Requirement.
(c) ADDITIONAL COLLATERAL. The Pledgor may pledge additional
Collateral (excluding Additional Government Securities) hereunder at any time
and may pledge Additional Government Securities hereunder at any time prior to
or simultaneously with Pledgor's election to extend the Exchange Date pursuant
to Section 1.3(f) of the Purchase Agreement. Concurrently with the delivery of
any additional Eligible Collateral, the Pledgor shall deliver (i) in the case of
Eligible Collateral consisting of Additional Government Securities, a
certificate of the Pledgor substantially in the form of Exhibit B hereto, or in
the case of all other Eligible Collateral, a certificate of the Pledgor
substantially in the form of Exhibit C hereto and dated the date of such
delivery, in each case (A) identifying the additional items of Eligible
Collateral being pledged and (B) certifying that with respect to such items of
additional Eligible Collateral the representations and warranties contained in
such Exhibit B or Exhibit C, as the case may be, hereto are true and correct on
and as of the date thereof and (ii) an opinion, dated the date of such delivery,
of counsel addressed to the Collateral Agent, substantially similar to those
delivered by Paul, Weiss, Rifkind, Wharton & Garrison at the Firm Purchase Date
with respect to similar matters, that covers the matters (other than with
respect to priority or the creation of a first lien) contained in the second
sentence of paragraph 2(b) of Exhibit B or Exhibit C, as the case may be,
hereto. The Pledgor hereby covenants and agrees to take all actions required
under Section 6(d) and any other actions necessary to create for the benefit of
the Collateral Agent a valid, first priority perfected security interest in, and
a first lien upon, such additional Eligible Collateral.
(d) DELIVERY OF COLLATERAL. The Pledgor shall deliver all
Collateral to the Collateral Agent in accordance with the following provisions:
<PAGE>
(1) PLEDGED COMMON STOCK. In the case of Collateral
consisting of Common Stock, by delivery of certificates evidencing such
Common Stock, indorsed in blank (together with all documents necessary
to permit the Collateral Agent to effect the re-registration thereof
without further action by the Pledgor) or registered in the name of the
Collateral Agent or its nominee or, if such Common Stock is not
issuable in certificated form but is held in book entry form by The
Depository Trust Company, by transfer to an account of the Collateral
Agent or to an account (other than an account of the Pledgor)
designated by the Collateral Agent with The Depository Trust Company;
(2) PLEDGED GOVERNMENT SECURITIES. In the case of
Collateral consisting of U.S. Government Securities or Additional
Government Securities, by transfer thereof through the Book Entry
System of the Federal Reserve System to the account of the Collateral
Agent or to an account (other than an account of the Pledgor)
designated by the Collateral Agent; and
(3) PLEDGED REPORTED SECURITIES. In the case of
Collateral consisting of Reported Securities, by delivery of
certificates evidencing such Reported Securities, indorsed in blank
(together with all documents necessary to permit the Collateral Agent
to effect the re-registration thereof without further action by the
Pledgor) or registered in the name of the Collateral Agent or its
nominee or, if such Reported Securities are not issuable in
certificated form but are held in book entry form by The Depository
Trust Company, by transfer to an account of the Collateral Agent or to
an account (other than an account of the Pledgor) designated by the
Collateral Agent with The Depository Trust Company. Each such delivery
of Reported Securities shall be accompanied by an opinion of counsel,
substantially similar to those delivered by Paul, Weiss, Rifkind,
Wharton & Garrison at the Firm Purchase Date, satisfactory to the
Collateral Agent that the Collateral Agent has obtained a valid,
perfected security interest in, and lien upon, such Reported
Securities.
Upon delivery of any Pledged Item under this Collateral
Agreement, the Collateral Agent shall examine such Pledged Item and any opinions
and certificates delivered pursuant to Sections 6(b), 6(c), 6(d)(3) or otherwise
pursuant to the terms hereof in connection therewith to determine that they
comply as to form with the requirements for Eligible Collateral. Immediately
following the delivery to the Collateral Agent of any Collateral in the form of
certificates indorsed in blank, the Collateral Agent shall cause all such
certificates to be re-registered on the books of the applicable transfer agent
into the name of the Collateral Agent or its nominee, and shall thereafter
maintain all such Collateral in such form until the termination of this
Agreement; PROVIDED, HOWEVER, that at any time following such delivery to the
Collateral Agent, the Collateral Agent may cause any such certificates to be
deposited with The Depository Trust Company and thereafter hold such
certificates in book entry form in an account (other than an account of Pledgor)
designated by the Collateral Agent. The Pledgor hereby designates the Collateral
Agent as the person in whose name any Collateral held in book entry form in the
Federal Reserve System shall be registered.
(e) INSUFFICIENCY DETERMINATION.
<PAGE>
(1) If on any Business Day the Collateral Agent
determines that the aggregate Pledge Value of the Collateral is less
than the Pledge Value Requirement (any such determination, an
"INSUFFICIENCY DETERMINATION"), the Collateral Agent shall, by
telephone call to an Authorized Representative of the Pledgor followed
by a written confirmation of such call, promptly notify the Pledgor of
such determination and of the amount of the insufficiency.
(2) If, by 4:00 p.m., New York City time on the
Business Day following the day on which telephonic notice shall have
been given pursuant to the preceding paragraph (e)(1), the Pledgor
shall have failed to deliver, in the manner set forth in paragraphs (c)
and (d) of this Section 6, sufficient additional Eligible Collateral so
that, after giving effect to such delivery (and taking into account
that Common Stock and Reported Securities in excess of the Maximum
Deliverable Number thereof shall not constitute Eligible Collateral),
the aggregate Pledge Value of the Collateral, as of such Business Day,
is at least equal to the Pledge Value Requirement, then (x) the
Collateral Requirement with respect to any U.S. Government Securities
or Cash Equivalents pledged hereunder (other than in respect of Cash
Delivery Obligations) shall be increased from 150% to 200%, and (y)
unless a Collateral Event of Default shall have occurred and be
continuing, the Collateral Agent shall:
(i) commence sales, in the manner described in
paragraph (3) below, of such portion of the Collateral
consisting of U.S. Government Securities or Cash Equivalents
as may be required to be sold in order to generate proceeds
sufficient to purchase Common Stock and/or, after an
Adjustment Event, Reported Securities, as described in the
following clause (ii); and
(ii) commence purchases, in the manner described in
paragraph (3) below, of Common Stock and/or, after an
Adjustment Event, Reported Securities, in an amount sufficient
to cause the aggregate Pledge Value of the Collateral to be at
least equal to the Pledge Value Requirement.
Notwithstanding the foregoing, the Collateral Agent
shall discontinue sales and purchases pursuant to the preceding clauses
(i) and (ii), respectively, if at any time a Collateral Event of
Default shall have occurred and be continuing. The Collateral Agent
shall determine the Market Value and the Pledge Value of the Collateral
after each purchase of Common Stock or Reported Securities pursuant to
the preceding clause (ii) in order to determine whether the Pledge
Value Requirement is met and whether a Collateral Event of Default has
occurred. Solely for purposes of such calculation, the Market Value of
the Common Stock or Reported Securities shall be: (A) the most recent
sales price as reported in the composite transactions for the principal
securities exchange on which the Common Stock or Reported Securities,
as the case may be, are then listed or, if such securities are not so
listed, the last quoted ask price for such securities in the
over-the-counter market as reported by The NASDAQ National Market or,
if not so reported, by the National Quotation Bureau or a similar
organization; or (B) if higher, in
<PAGE>
the case of Common Stock, the most recent available Closing Price.
A "COLLATERAL EVENT OF DEFAULT" shall mean, at any
time, the occurrence of any of the following: (A) failure of the
aggregate Market Value of the Collateral to equal or exceed the Pledge
Value Requirement; (B) failure of the Market Value of any U.S.
Government Securities and Cash Equivalents pledged at such time (not
including any (i) Additional Government Securities or (ii) U.S.
Government Securities and Cash Equivalents pledged in respect of Cash
Delivery Obligations at such time) to have an aggregate Market Value of
at least 105% of the Market Value of a number of shares of Common Stock
(or, from and after any Adjustment Event, Reported Securities) equal to
(x) the Maximum Deliverable Number thereof minus (y) the number thereof
pledged as Collateral hereunder at such time; or (C) from and after any
Adjustment Event, failure of the U.S. Government Securities and Cash
Equivalents pledged in respect of Cash Delivery Obligations to have an
aggregate Market Value at least equal to 105% of the Cash Delivery
Obligations at such time, if, in the case of a failure described in
this clause (C), such failure shall continue to be in effect at 4:00
p.m., New York City time, on the Business Day following the day on
which telephonic notice in respect thereof shall have been given
pursuant to paragraph (e)(1) above. For purposes of this Agreement, the
portion of any pledged U.S. Government Securities and Cash Equivalents
that shall be deemed to be in respect of Cash Delivery Obligations at
any time shall be a portion having a Market Value equal to 105% of the
Cash Delivery Obligations at such time (or, if less, the aggregate
Market Value of all U.S. Government Securities and Cash Equivalents
pledged at such time). To the extent that any pledged U.S. Government
Securities and Cash Equivalents has a Market Value exceeding 105%, the
U.S. Government Securities shall be applied to satisfy the 105%
requirement in the first instance.
(3) Collateral sold and Common Stock or shares of
Reported Securities purchased by the Collateral Agent pursuant to the
preceding paragraphs (e)(2)(i) and (ii) may be sold and purchased on
any securities exchange or in any over-the-counter market or in any
private purchase transaction, and at such price or prices, in each case
as the Collateral Agent may deem satisfactory. The Pledgor covenants
and agrees that it will execute and deliver such documents and take
such other action as the Collateral Agent deems necessary or advisable
in order that any such sales and purchases may be made in compliance
with law.
(f) RELEASE OF EXCESS COLLATERAL. If on any Business Day the
Collateral Agent determines that the aggregate Pledge Value of the Pledgor's
Eligible Collateral exceeds the Pledge Value Requirement and no Event of Default
or failure by the Pledgor to meet any of its obligations under Sections 5 or 6
hereof has occurred and is continuing, the Pledgor may obtain the release from
the Lien hereof of any Collateral having an aggregate Pledge Value on such
Business Day less than or equal to such excess, upon delivery to the Collateral
Agent of a written notice from an Authorized Representative of the Pledgor
indicating the items of Collateral to be released. Such Collateral shall be
released only after the Collateral Agent shall have determined that the
aggregate Pledge Value of all of the Collateral remaining after such release as
<PAGE>
determined on such Business Day is at least equal to the Pledge Value
Requirement.
(g) DELIVERY OF PURCHASE AGREEMENT CONSIDERATION. On the
Exchange Date, except to the extent Pledgor shall have exercised its Cash
Delivery Option, the Collateral Agent shall deliver to the Trust Common Stock
(or, if an Adjustment Event shall have occurred, Reported Securities) then held
by it hereunder representing the number of shares of Common Stock (or, if an
Adjustment Event shall have occurred, Reported Securities) then required to be
delivered under the Purchase Agreement. Upon such delivery, the Trust shall hold
such Common Stock or Reported Securities, as the case may be, absolutely and
free from any claim or right whatsoever.
(h) INVESTMENT OF CASH COLLATERAL. The Collateral Agent shall
invest any cash received by it pursuant to Section 6.2 of the Purchase Agreement
in direct obligations of the United States of America maturing on or before the
Exchange Date.
7. INCOME AND VOTING RIGHTS ON COLLATERAL.
(a) Unless an Event of Default or failure by the Pledgor to
meet any of Pledgor's obligations under Section 5(b) or (c) hereof has occurred
and is continuing, the Pledgor shall be entitled to receive for Pledgor's own
account all dividends, interest and, if any, principal and premium relating to
all of the Collateral, unless the payment thereof to the Pledgor would reduce
the aggregate Pledge Value of the Collateral below the Pledge Value Requirement.
The Collateral Agent agrees to remit to the Pledgor on the Business Day received
or the first Business Day thereafter all such payments received by it. If an
Event of Default or failure by the Pledgor to meet any of its obligations under
Section 5(b) or (c) hereof has occurred and is continuing, all such payments
made or accrued after and during the continuance of such Event of Default or
failure shall be retained by the Collateral Agent, and any such payments which
are received by the Pledgor shall be received in trust for the benefit of the
Trust, shall be segregated from other funds of the Pledgor and shall forthwith
be paid over to the Collateral Agent. Any such payments so retained by, or paid
over to, the Collateral Agent shall be held by the Collateral Agent as
Collateral hereunder. If any such Event of Default or failure is no longer
continuing, then the Collateral Agent shall remit any such payments that are so
retained by, or paid to it, on the first Business Day after the Collateral Agent
shall have received notice from the Trust that such Event of Default or failure
is no longer continuing, unless the payment thereof to the Pledgor would reduce
the aggregate Pledge Value of the Collateral below the Pledge Value Requirement.
(b) Unless an Event of Default has occurred and is
continuing, the Pledgor shall retain beneficial ownership of all shares of
Common Stock and shall have the right, from time to time, to vote and to give
all approvals, consents, ratifications and waivers with respect to the
Collateral (including all shares of Common Stock), and the Collateral Agent
shall promptly deliver to the Pledgor such proxies, powers of attorney,
consents, ratifications and waivers in respect of any of the Collateral which
is registered in the name of the Collateral Agent or its nominee and shall
further deliver such documents and instruments as shall be specified in a
written request by the Pledgor. In the case of Collateral consisting of
Reported Securities of the type defined in clause (v) of the definition of
Reported Securities in Section 6.2 of the Purchase Agreement, the Pledgor
shall have the right to convert such Reported Securities.
<PAGE>
If an Event of Default shall have occurred and be continuing,
the Collateral Agent shall have the right to the extent permitted by law, and
the Pledgor shall take all such action as may be necessary or appropriate to
give effect to such right, to vote and to give all approvals, consents,
ratifications and waivers, and take any other action with respect to any or
all of the Collateral with the same force and effect as if the Collateral
Agent were the absolute and sole owner thereof. In the case of Collateral
consisting of Reported Securities of the type defined in clause (v) of the
definition of Reported Securities in Section 6.2 of the Purchase Agreement,
the Collateral Agent shall have the right to convert such Reported Securities.
8. REMEDIES UPON EVENTS OF DEFAULT.
(a) If any Event of Default shall have occurred and be
continuing, the Collateral Agent may exercise on behalf of the Trust all the
rights of a secured party under the UCC (whether or not in effect in the
jurisdiction where such rights are exercised) and, in addition, without being
required to give any notice, except as herein provided or as may be required by
mandatory provisions of law, shall: (i) deliver all Collateral consisting of
Common Stock or Reported Securities (but not, in either case, in excess of the
number of shares thereof deliverable under the Purchase Agreement at such time)
to the Trust on the date of the notice delivered to the Collateral Agent
pursuant to the last paragraph of Article VII of the Purchase Agreement relating
to such Event of Default (or, in the case of an Event of Default described in
clause (iii), (iv) or (v) of the definition thereof in this Agreement, on the
Exchange Date) (in either case, the "DELIVERY DATE"), whereupon the Trust shall
hold such Common Stock or Reported Securities absolutely free from any claim or
right of whatsoever kind, including any equity or right of redemption of the
Pledgor which may be waived, and the Pledgor, to the extent permitted by law,
hereby specifically waives all rights of redemption, stay or appraisal which
Pledgor has or may have under any law now existing or hereafter adopted; and
(ii) if such delivery shall be insufficient to satisfy in full all of the
obligations of Pledgor under the Purchase Agreement, sell all of the remaining
Collateral, or such lesser portion thereof as may be necessary to generate
proceeds sufficient to satisfy in full all of the obligations of Pledgor under
the Purchase Agreement, at public or private sale or at any broker's board or on
any securities exchange, for cash, upon credit or for future delivery, and at
such price or prices as the Collateral Agent may deem satisfactory. The Pledgor
covenants and agrees to execute and deliver such documents and take such other
action as the Collateral Agent deems necessary or advisable in order that any
such sale may be made in compliance with law. Upon any such sale the Collateral
Agent shall have the right to deliver, assign and transfer to the purchaser
thereof the Collateral so sold. Each purchaser at any such sale shall hold the
Collateral so sold absolutely and free from any claim or right of whatsoever
kind, including any equity or right of redemption of the Pledgor which may be
waived, and the Pledgor, to the extent permitted by law, hereby specifically
waives all rights of redemption, stay or appraisal which Pledgor has or may have
under any law now existing or hereafter adopted. The notice (if any) of such
sale required by Article 9 of the UCC shall (1) in case of a public sale, state
the time and place fixed for such sale, (2) in case of sale at a broker's board
or on a securities exchange, state the board or exchange at which such sale is
to be made and the day on which the Collateral, or the portion thereof so being
sold, will
<PAGE>
first be offered for sale at such board or exchange, and (3) in the case of a
private sale, state the day after which such sale may be consummated. Any such
public sale shall be held at such time or times within ordinary business hours
and at such place or places as the Collateral Agent may fix in the notice of
such sale. At any such sale the Collateral may be sold in one lot as an entirety
or in separate parcels, as the Collateral Agent may determine. The Collateral
Agent shall not be obligated to make any such sale pursuant to any such notice.
The Collateral Agent may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for the sale, and such sale may be made at any time
or place to which the same may be so adjourned. In case of any sale of all or
any part of the Collateral on credit or for future delivery, the Collateral so
sold may be retained by the Collateral Agent until the selling price is paid by
the purchaser thereof, but the Collateral Agent shall not incur any liability in
case of the failure of such purchaser to take up and pay for the Collateral so
sold and, in case of any such failure, such Collateral may again be sold upon
like notice. The Collateral Agent, instead of exercising the power of sale
herein conferred upon it, may proceed by a suit or suits at law or in equity to
foreclose the security interests and sell the Collateral, or any portion
thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
(b) POWER OF ATTORNEY. The Collateral Agent is hereby
irrevocably appointed the true and lawful attorney of the Pledgor with full
power and authority, in the name and stead of the Pledgor, to do all of the
following: (i) upon any delivery or sale of all or any part of any Collateral
made either under the power of delivery or sale given hereunder or under
judgment or decree in any judicial proceedings for foreclosure or otherwise for
the enforcement of this Collateral Agreement, to make all necessary deeds, bills
of sale and instruments of assignment, transfer or conveyance of the property
thus delivered or sold; (ii) upon the occurrence of an Adjustment Event while
any shares of Common Stock are Pledged Items, to take any necessary actions with
respect to such shares of Common Stock to cause the Pledged Items to conform to
the requirements of this Agreement following the occurrence of the Adjustment
Event, including, without limitation, the tender of shares of Common Stock and
the sale of property (other than Reported Securities) received in respect of
Common Stock. For such purposes the Collateral Agent may execute all necessary
documents and instruments. This power of attorney shall be deemed coupled with
an interest, and the Pledgor hereby ratifies and confirms all that its attorneys
acting under such power, or such attorneys' successors or agents, shall lawfully
do by virtue of this Collateral Agreement. If so requested by the Collateral
Agent, by the Trustees or by any purchaser of the Collateral or a portion
thereof, the Pledgor shall further ratify and confirm any such delivery or sale
by executing and delivering to the Collateral Agent, to the Trustees or to such
purchaser or purchasers at the expense of the Pledgor all proper deeds, bills of
sale, instruments of assignment, conveyance of transfer and releases as may be
designated in any such request. The Pledgor's obligations and authorizations
hereunder shall not be terminated by operation of law or the occurrence of any
event whatsoever, including the death or disability of the Pledgor, or the
occurrence of any other event.
(c) APPLICATION OF COLLATERAL AND PROCEEDS. In the case of
the occurrence and continuance of an Event of Default, the Collateral Agent
may proceed to realize upon the security interest in the Collateral against
any one or more of the types of Collateral, at any one time, as the
Collateral Agent shall
<PAGE>
determine in its sole discretion subject to the foregoing provisions of this
Section 8. The proceeds of any sale of, or other realization upon, or other
receipt from, any of the Collateral remaining after delivery to the Trust
pursuant to Section 8(a) shall be applied by the Collateral Agent in the
following order of priorities:
(1) first, to the payment to the Trust of an amount equal to: (A)
the aggregate Market Value of a number of shares of Common
Stock equal to (1) the number of shares of Common Stock
required to be delivered under the Purchase Agreement on the
Delivery Date minus (2) the number of shares of Common Stock
delivered by the Collateral Agent to the Trust on the Delivery
Date as described above; or (B) from and after an Adjustment
Event, the sum of (1) the Cash Delivery Obligations on the
Delivery Date and (2) the aggregate Market Value on the
Delivery Date of a number of Reported Securities (and, if
applicable, shares of Common Stock) equal to (x) the number
thereof required to be delivered on the Delivery Date under
Section 6.2 of the Purchase Agreement minus (y) the number
thereof delivered by the Collateral Agent to the Trust on the
Delivery Date as described above; and/or (C) to the extent the
Pledgor shall have exercised its Cash Delivery Option, the
amount of cash required to be delivered under Section 1.3(d)
of the Purchase Agreement minus the amount of cash so
delivered; and (D) if the Pledgor shall have extended the
Exchange Date pursuant to Section 1.3(f) of the Purchase
Agreement, the amount of cash required to be delivered under
said Section 1.3(f) (or, if the Pledgor shall have accelerated
the Exchange Date pursuant to Section 1.3(g) thereof, the
amount of cash deliverable pursuant to said Section 1.3(g));
(2) second, to the payment to the Collateral Agent of the expenses
of such sale or other realization, including reasonable
compensation to the Collateral Agent and its agents and
counsel, and all expenses, liabilities and advances incurred
or made by the Collateral Agent in connection therewith,
including brokerage fees in connection with the sale by the
Collateral Agent of any Pledged Item; and
(3) finally, if all of the obligations of the Pledgor hereunder
and under the Purchase Agreement have been fully discharged or
sufficient funds have been set aside by the Collateral Agent
at the request of the Pledgor for the discharge thereof, any
remaining proceeds shall be released to the Pledgor.
9. THE COLLATERAL AGENT.
The Collateral Agent accepts its duties and responsibilities
hereunder as agent for the Trust, on and subject to the following terms and
conditions:
(a) PERFORMANCE OF DUTIES. The Collateral Agent undertakes to
perform such duties and only such duties as are expressly set forth herein and,
beyond the exercise of reasonable care in the performance of such duties, no
implied covenants or obligations shall be read into this Collateral Agreement
against the Collateral Agent. No provision hereof shall be construed to relieve
the Collateral Agent from liability for its own grossly negligent action,
<PAGE>
grossly negligent failure to act or its own willful misconduct, subject to the
following:
(1) The Collateral Agent may consult with counsel,
and the advice or opinion of such counsel shall be full and complete
authorization and protection in respect of an action taken or suffered
hereunder in good faith and in accordance with such advice or opinion
of counsel.
(2) The Collateral Agent shall not be liable with
respect to any action taken, suffered or omitted by it in good faith
(i) reasonably believed by it to be authorized or within the discretion
or rights or powers conferred on it by this Collateral Agreement or
(ii) in accordance with any direction or request of the Trustees.
(3) The Collateral Agent shall not be liable for any
error of judgment made in good faith by any of its officers, unless the
Collateral Agent was grossly negligent in ascertaining the pertinent
facts.
(4) In the absence of bad faith on its part, the
Collateral Agent may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
any note, notice, resolution, consent, certificate, affidavit, letter,
telegram, teletype message, statement, order or other document believed
by it to be genuine and correct and to have been signed or sent by the
proper Person or Persons.
(5) No provision of this Collateral Agreement shall
require the Collateral Agent to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(6) The Collateral Agent may perform any duties
hereunder either directly or by or through agents or attorneys, and the
Collateral Agent shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care
by it hereunder. In furtherance thereof, any subsidiary owned or
controlled by the Collateral Agent, or its successors, as agent for the
Collateral Agent, may perform any or all of the duties of the
Collateral Agent relating to the valuation of securities and other
instruments constituting Collateral hereunder.
(7) In no event shall the Collateral Agent be
personally liable for any taxes or other governmental charges imposed
upon or in respect of (i) the collateral or (ii) the income or other
distributions thereon.
(8) Unless and until the Collateral Agent shall have
received notice from the Pledgor, or unless and until a Responsible
Officer of the Collateral Agent shall have actual knowledge to the
contrary, the Collateral Agent shall be entitled to deem and treat all
Collateral delivered to it hereunder as Eligible Collateral hereunder,
provided that the Collateral Agent has carried out the duties specified
in Section 6 with respect to such Collateral at the time of delivery
thereof.
<PAGE>
The Collateral Agent shall not be responsible for the
correctness of the recitals and statements herein which are made by the Pledgor
or for any statement or certificate delivered by the Pledgor pursuant hereto.
Except as specifically provided herein, the Collateral Agent shall not be
responsible for the validity, sufficiency, collectibility or marketability of
any Collateral given to or held by it hereunder or for the validity or
sufficiency of the Purchase Agreement or the Lien on the Collateral purported to
be created hereby.
(b) KNOWLEDGE. The Collateral Agent shall not be deemed to
have knowledge of any Event of Default (except a Collateral Event of Default),
unless and until a Responsible Officer of the Collateral Agent shall have actual
knowledge thereof or shall have received written notice thereof.
(c) MERGER. Any corporation or association into which the
Collateral Agent may be converted or merged, or with which it may be
consolidated, or to which it may sell or transfer its agency business and assets
as a whole or substantially as a whole, or any corporation or association
resulting from any such conversion, sale, merger, consolidation or transfer to
which it is a party, shall, subject to the prior written consent of the Trust,
be and become a successor Collateral Agent hereunder and vested with all of the
title to the Collateral and all of the powers, discretions, immunities,
privileges and other matters as was its predecessor without, except as provided
above, the execution or filing of any instrument or any further act, deed or
conveyance on the part of any of the parties hereto, anything herein to the
contrary notwithstanding.
(d) RESIGNATION. The Collateral Agent and any successor
Collateral Agent may at any time resign by giving thirty days' written notice by
registered or certified mail to the Pledgor and notice to the Trust in
accordance with the provisions of Section 10(d) hereof. Such resignation shall
take effect upon the appointment of a successor Collateral Agent by the Trust.
(e) REMOVAL. The Collateral Agent may be removed at any time
by an instrument or concurrent instruments in writing delivered to the
Collateral Agent and to the Pledgor and signed by the Trust.
(f) APPOINTMENT OF SUCCESSOR. (1) If the Collateral Agent
hereunder shall resign or be removed, or be dissolved or shall be in the course
of dissolution or liquidation or otherwise become incapable of action hereunder,
or if it shall be taken under the control of any public officer or officers or
of a receiver appointed by a court, a successor may be appointed by the Trust by
an instrument or concurrent instruments in writing signed by the Trust or by its
attorneys in fact fully authorized a copy of such instrument or concurrent
instruments shall be sent by registered mail to the Pledgor.
(2) Every such temporary or permanent successor Collateral
Agent appointed pursuant to the provisions hereof shall be a trust company or
bank in good standing, having a reported capital and surplus of not less than
$100,000,000 and capable of holding the Collateral in the State of New York, if
there be such an institution willing, qualified and able to accept the duties of
the Collateral Agent hereunder upon customary terms.
<PAGE>
(g) ACCEPTANCE BY SUCCESSOR. Every temporary or permanent
successor Collateral Agent appointed hereunder shall execute, acknowledge and
deliver to its predecessor and also to the Pledgor an instrument in writing
accepting such appointment hereunder, whereupon such successor, without any
further act, deed or conveyance, shall become fully vested with all the estates,
properties, rights, powers, duties and obligations of its predecessors. Such
predecessor shall, nevertheless, on the written request of its successor or the
Pledgor, execute and deliver an instrument transferring to such successor all
the estates, properties, rights and powers of such predecessor hereunder. Every
predecessor Collateral Agent shall deliver all Collateral held by it as the
Collateral Agent hereunder to its successor. Should any instrument in writing
from the Pledgor be required by a successor Collateral Agent for more fully and
certainly vesting in such successor the estates, properties, rights, powers,
duties and obligations hereby vested or intended to be vested in the
predecessor, any and all such instruments in writing shall, at the request of
the temporary or permanent successor Collateral Agent, be forthwith executed,
acknowledged and delivered by the Pledgor.
10. MISCELLANEOUS.
(a) BENEFIT OF AGREEMENT; SUCCESSORS AND ASSIGNS. Whenever any
of the parties hereto is referred to, such reference shall be deemed to include
the successors and assigns of such party. All the covenants and agreements
herein contained by or on behalf of the Pledgor and the Collateral Agent shall
bind, and inure to the benefit of, their respective successors and assigns
whether so expressed or not, and shall be enforceable by and inure to the
benefit of the Trust and its successors and assigns.
(b) SEPARABILITY. To the extent permitted by law, the
unenforceability or invalidity of any provision or provisions of this Collateral
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
(c) AMENDMENTS AND WAIVERS. Any term, covenant, agreement or
condition of this Collateral Agreement may be amended or compliance therewith
may be waived (either generally or in a particular instance and either
retrospectively or prospectively) but only by a writing signed by the Collateral
Agent, the Pledgor and the Trust.
(d) NOTICES.
(1) Any notice provided for herein, unless otherwise
specified, shall be in writing (including transmittals by telex or
telecopier) and shall be given to a party at the address set forth
opposite such party's name on the signature pages hereto or at such
other address as may be designated by notice duly given in accordance
with this Section 10(d) to each other party hereto.
(2) Each such notice given pursuant to paragraph (1)
shall be effective (i) if sent by certified mail (return receipt
requested), 72 hours after being deposited in the United States mail,
postage prepaid; (ii) if given by telex or telecopier, when such telex
or telecopied notice is transmitted; or (iii) if given by any other
means, when delivered at the address specified in this Section 10(d).
<PAGE>
(e) GOVERNING LAW. This Collateral Agreement shall in all
respects be construed in accordance with and governed by the laws of the State
of New York; provided that as to Pledged Items located in any jurisdiction other
than the State of New York, the Collateral Agent on behalf of the Trust shall
have all of the rights to which a secured party is entitled under the laws of
such other jurisdiction.
(f) COUNTERPARTS. This Collateral Agreement may be executed,
acknowledged and delivered in any number of counterparts and such counterparts
taken together shall constitute one and the same instrument.
(g) APPLICATION OF BANKRUPTCY CODE. The parties hereto
acknowledge and agree that the Collateral Agent is a "financial institution"
within the meaning of Section 101(22) of Title 11 of the United States Code (the
"BANKRUPTCY CODE") and is acting as agent and custodian for the Trust in
connection with the Purchase Agreement and that the Trust is a "customer" of the
Collateral Agent within the meaning of said Section 101(22).
(h) WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, THE PARTIES HERETO HEREBY WAIVE AND COVENANT THAT THEY WILL NOT
ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY
IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR
TORT OR OTHERWISE. EACH PARTY HERETO ACKNOWLEDGES THAT IT OR HE HAS BEEN
INFORMED BY THE OTHER PARTY HERETO THAT THE PROVISIONS OF THIS SECTION
CONSTITUTE A MATERIAL INDUCEMENT UPON WHICH SUCH OTHER PARTY HERETO HAS RELIED,
IS RELYING AND WILL RELY IN ENTERING INTO THIS AGREEMENT AND ANY DOCUMENT
RELATED THERETO. EACH PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE OTHER PARTY
HERETO TO THE WAIVER OF ITS RIGHTS TO TRIAL BY JURY.
11. TERMINATION OF COLLATERAL AGREEMENT.
This Collateral Agreement and the rights hereby granted by the
Pledgor in the Collateral shall cease, terminate and be void upon fulfillment of
all of the obligations of the Pledgor under the Purchase Agreement, and the
Pledgor shall have no further liability hereunder upon such termination. Any
Collateral remaining at the time of such termination shall be fully released and
discharged from the Lien hereof and delivered to the Pledgor by the Collateral
Agent, all at the expense of the Pledgor.
12. NO PERSONAL LIABILITY OF TRUSTEES.
By executing this Collateral Agreement none of the Trustees
assumes any personal liability hereunder.
<PAGE>
IN WITNESS WHEREOF, each of the Pledgor, the Collateral Agent
and the Trust has caused this Collateral Agreement to be duly executed on its
behalf as of the date hereof.
PLEDGOR:
[ ]
By:
Name:
Title:
Address for Notices:
[ ]
[ ]
[ ]
COPY TO
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
1285 Avenue of the Americas
New York, new York 1001900
Fax. No. (212) 757-3990
Attention: Douglas A. Cifu
THE TRUST:
DECS TRUST VI
By:
Donald J. Puglisi,
as Trustee
By:
William R. Latham, III,
as Trustee
<PAGE>
By:
James B. O'Neill,
as Trustee
Address for Notices:
c/o Puglisi & Associates
850 Library Avenue - Suite 204
Newark, DE 19715
Attention: Donald J. Puglisi
COLLATERAL AGENT:
The Bank of New York
as Collateral Agent
By:
Name:
Title:
Address for Notices:
101 Barclay Street, 12 E Floor
New York, NY 10286
Attention: Betty Cocozza
<PAGE>
Exhibit A
to
Collateral Agreement
CERTIFICATE FOR SUBSTITUTED COLLATERAL
The undersigned, _____________ (the "PLEDGOR"), hereby certifies, pursuant to
Section 6(b) of the Collateral Agreement dated as of November [ ], 1999 among
the Pledgor, The Bank of New York, as Collateral Agent, and DECS Trust VI (the
"COLLATERAL AGREEMENT"; terms defined in the Collateral Agreement being used
herein as defined therein), that:
1. The Pledgor is delivering the following securities to the
Collateral Agent to be held by the Collateral Agent as substituted Collateral
(the "SUBSTITUTED COLLATERAL"):
2. The Pledgor requests that the Collateral Agent transfer to
the Pledgor the following Prior Collateral, pursuant to Section 6(b) of the
Collateral Agreement:
3. The Pledgor hereby represents and warrants to the
Collateral Agent and the Trust that:
(a) CONSENTS TO TRANSFER. No Transfer Restrictions
exist with respect to or otherwise apply to the assignment of,
or transfer by the Pledgor of possession of, any items of
Substituted Collateral to the Collateral Agent under the
Collateral Agreement, or the subsequent sale or transfer of
such items of Substituted Collateral by the Collateral Agent
pursuant to the terms of the Collateral Agreement.
(b) TITLE TO COLLATERAL; PERFECTED SECURITY INTEREST.
The Pledgor has good and marketable title to the Substituted
Collateral, free of all Liens (other than the Lien created by
the Collateral Agreement) and Transfer Restrictions. Upon
delivery of the Collateral to the Collateral Agent, the
Collateral Agent will obtain a valid, first priority perfected
security interest in, and a first lien upon, such Substituted
Collateral subject to no other Lien. None of such Substituted
Collateral is or shall be pledged by the Pledgor as collateral
for any other purpose.
This Certificate may be relied upon by the Trust as fully and
to the same extent as if this Certificate had been specifically addressed to the
Trust.
A-
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this
Certificate this _____ day of ______, 1999.
Name:
Title:
A-
<PAGE>
Exhibit B
to
Collateral Agreement
CERTIFICATE FOR ADDITIONAL GOVERNMENT SECURITIES
The undersigned, __________________ (the "PLEDGOR"), hereby
certifies, pursuant to Section 6(c) of the Collateral Agreement, dated as of
November [ ], 1999, among the Pledgor, The Bank of New York, as Collateral
Agent, and DECS Trust VI (the "COLLATERAL AGREEMENT"; terms defined in the
Collateral Agreement being used herein as defined therein), that:
1. The Pledgor is delivering the following securities to the
Collateral Agent to be held by the Collateral Agent as Collateral deliverable in
connection with Pledgor's option to extend the Exchange Date in accordance with
Section 1.3(f) of the Purchase Agreement (the "ADDITIONAL GOVERNMENT
SECURITIES"):
2. The Pledgor hereby represents and warrants to the
Collateral Agent that:
(a) CONSENTS TO TRANSFER. No Transfer Restrictions
exist with respect to or otherwise apply to the assignment of, or
transfer by the Pledgor of possession of, any items of Additional
Government Securities to the Collateral Agent under the Collateral
Agreement, or the subsequent sale or transfer of such items of
Additional Government Securities by the Collateral Agent pursuant to
the terms of the Collateral Agreement.
(b) TITLE TO COLLATERAL; PERFECTED SECURITY INTEREST.
The Pledgor has good and marketable title to the Additional Government
Securities, free of all Liens (other than the Lien created by the
Collateral Agreement) and Transfer Restrictions. Upon delivery of the
Collateral to the Collateral Agent, the Collateral Agent will obtain a
valid, first priority perfected security interest in, and a first lien
upon, such Additional Government Securities subject to no other Lien.
None of such Additional Government Securities is or shall be pledged by
the Pledgor as collateral for any other purpose.
This Certificate may be relied upon by the Trust as fully and
to the same extent as if this Certificate had been specifically addressed to the
Trust.
B-
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this
Certificate this _____ day of _____ 1999.
Name:
Title:
<PAGE>
Exhibit C
to
Collateral Agreement
CERTIFICATE FOR ADDITIONAL COLLATERAL
The undersigned, __________________ (the "PLEDGOR"), hereby
certifies, pursuant to Section 6(c) of the Collateral Agreement, dated as of
November [ ], 1999, among the Pledgor, The Bank of New York, as Collateral
Agent, and DECS Trust VI (the "COLLATERAL AGREEMENT"; terms defined in the
Collateral Agreement being used herein as defined therein), that:
1. The Pledgor is delivering the following securities to the
Collateral Agent to be held by the Collateral Agent as additional Collateral
(the "ADDITIONAL COLLATERAL"):
2. The Pledgor hereby represents and warrants to the
Collateral Agent that:
(a) CONSENTS TO TRANSFER. No Transfer Restrictions
exist with respect to or otherwise apply to the assignment of, or
transfer by the Pledgor of possession of, any items of Additional
Collateral to the Collateral Agent under the Collateral Agreement, or
the subsequent sale or transfer of such items of Additional Collateral
by the Collateral Agent pursuant to the terms of the Collateral
Agreement.
(b) TITLE TO COLLATERAL; PERFECTED SECURITY INTEREST.
The Pledgor has good and marketable title to the Additional Collateral,
free of all Liens (other than the Lien created by the Collateral
Agreement) and Transfer Restrictions. Upon delivery of the Collateral
to the Collateral Agent, the Collateral Agent will obtain a valid,
first priority perfected security interest in, and a first lien upon,
such additional Collateral subject to no other Lien. None of such
Additional Collateral is or shall be pledged by the Pledgor as
collateral for any other purpose.
This Certificate may be relied upon by the Trust as fully and
to the same extent as if this Certificate had been specifically addressed to the
Trust.
C-
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this
Certificate this _____ day of _____ 1999.
Name:
Title:
C-
<PAGE>
Exhibit (K)(5)
[FORM OF FUND EXPENSE AGREEMENT]
Agreement dated as of November [ ], 1999 between Salomon Smith
Barney Inc. ("SALOMON SMITH BARNEY") and The Bank of New York (the "SERVICE
PROVIDER"), in its capacities as administrator, custodian, paying agent and
collateral agent for DECS Trust VI (the "TRUST").
WHEREAS the Trust is a statutory business trust organized
under the Business Trust Act of the State of Delaware pursuant to a Declaration
of Trust dated as of October 22, 1999, as amended and restated as of November 9,
1999 (the "TRUST AGREEMENT"); and
WHEREAS Salomon Smith Barney desires to make provision for the
payment of certain initial and ongoing expenses of the Trust.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained in this Agreement, the parties agree as follows:
1. DEFINITIONS. (a) Capitalized terms used herein and not
defined herein shall have the meanings ascribed thereto in the Trust Agreement.
(b) The following terms shall have the following meanings:
"ADDITIONAL EXPENSE" means the Ordinary Expense the incurring
of which will require the Service Provider to provide the Additional Expense
Notice pursuant to Section 3(a) hereof and any Ordinary Expense incurred
thereafter.
"ADDITIONAL EXPENSE NOTICE" means the notice required to be
given by the Service Provider to Salomon Smith Barney pursuant to Section
3(a)(i) hereof.
"CLOSING DATE" shall have the meaning ascribed thereto in the
Underwriting Agreement.
"ORDINARY EXPENSE" of the Trust means any expense of the Trust
other than any expense of the Trust arising under Sections 2.2(e) and 6.6 of the
Administration Agreement, Section 15 of the Custodian Agreement, Section 5.4(b)
of the Paying Agent Agreement and [Section 7.6] of the Trust Agreement.
"UP-FRONT FEE AMOUNT" means the amount set forth as such on
Schedule I hereto payable as a one-time payment to the Service Provider in
respect of its collective services as Administrator, Custodian, Paying Agent and
Collateral Agent for the entire term of the Trust.
"UP-FRONT EXPENSE AMOUNT" means the amount set forth as such
on Schedule I hereto payable as a one-time payment to the Service Provider in
respect of Ordinary Expenses anticipated to be incurred by the Administrator on
behalf of the Trust, pursuant to the Administration Agreement, during the term
of the Trust.
<PAGE>
2. AGREEMENT TO PAY UP-FRONT FEES AND EXPENSES. Salomon Smith
Barney agrees to pay to the Service Provider in New York Clearing House funds on
the Closing Date the Up-front Fee Amount and the Up-front Expense Amount.
3. AGREEMENT TO PAY ADDITIONAL EXPENSES. (a) Prior to
incurring any Ordinary Expense on behalf of the Trust that, together with all
prior Ordinary Expenses incurred by the Administrator on behalf of the Trust,
would cause the aggregate amount of Ordinary Expenses of the Trust to exceed the
Up-front Expense Amount, the Administrator shall provide to Salomon Smith Barney
(i) prompt written notice to the effect that the aggregate amount of Ordinary
Expenses of the Trust will exceed the Up-front Expense Amount, and (ii) an
accounting, in such detail as shall be reasonably acceptable to Salomon Smith
Barney, of all Ordinary Expenses incurred on behalf of the Trust through the
date of the Additional Expense Notice.
(b) From and after the date of the Additional Expense Notice,
the Service Provider agrees that it will not, without the prior written consent
of Salomon Smith Barney, incur on behalf of the Trust (i) any single expense in
excess of $3,000 or (ii) in any calendar quarter, expenses aggregating in excess
of $15,000. Subject to the foregoing, the Service Provider shall give notice to
Salomon Smith Barney in writing promptly following the incurring of any
Additional Expense. Such notice shall be accompanied by any demand, bill,
invoice or other similar document in respect of such Additional Expense.
(c) Subject to the first sentence of paragraph (b) of this
Section 3, Salomon Smith Barney agrees to pay to the Service Provider from time
to time the amount of any Additional Expense. Payment by Salomon Smith Barney of
any Additional Expense shall be made in New York Clearing House funds by the
later of (i) five Business Days after the receipt by Salomon Smith Barney of
written notice from the Service Provider of the incurring thereof or (ii) the
due date for the payment of such Additional Expense.
(d) Salomon Smith Barney may contest in good faith the
reasonableness of any Additional Expense and the parties shall attempt to
resolve amicably the disagreement; provided that if the parties cannot resolve
the dispute by the due date hereunder with respect to such Additional Expense,
subject to the first sentence of paragraph (b) of this Section 3, Salomon Smith
Barney shall pay the amount of such Additional Expense, subject to later
adjustment and credit if such dispute is resolved in favor of Salomon Smith
Barney.
4. CONDITION TO PAYMENT. The obligations of Salomon Smith
Barney hereunder shall be subject to the condition that the Trust's DECS shall
have been issued and paid for on the Closing Date.
5. TRUST TERMINATION; REFUND OF UNUSED EXPENSE FUNDS. If at
the termination of the Trust in accordance with [Section 8.3] of the Trust
Agreement the aggregate amount of Ordinary Expenses incurred by the Service
Provider on behalf of the Trust through the date of termination shall be less
than the Up-front Expense Amount, the Service Provider shall, promptly following
the date of such termination, pay to Salomon Smith Barney in New York Clearing
House funds the amount of such excess.
<PAGE>
6. TERMINATION OF ADMINISTRATION AGREEMENT. If the
Administration Agreement is terminated in accordance with Section 4.1 thereof,
the Service Provider shall promptly pay to Salomon Smith Barney (i) the ratable
portion of its Up-front Fee Amount for the period from the date of the
termination of the Administration Agreement to the Exchange Date and (ii) any
unexpended portion of the Up-front Expense Amount.
7. STATEMENTS AND REPORTS. The Service Provider shall collect
and safekeep all demands, bills, invoices or other written communications
received from third parties in connection with any Ordinary Expenses and
Additional Expenses and shall prepare and maintain adequate books and records
showing all receipts and disbursements of funds in connection therewith. Salomon
Smith Barney shall have the right to inspect and to copy, at its expense, all
such documents, books and records at all reasonable times and from time to time
during the term of this Agreement.
8. TERM OF CONTRACT. This Agreement shall continue in effect
until the termination of the Trust in accordance with [Section 8.3] of the Trust
Agreement.
9. NO ASSIGNMENT. No party to this Agreement may assign its
rights or delegate its duties hereunder without the prior written consent of the
other party.
10. AMENDMENTS. The Service Provider agrees that it will not
consent to any amendment to any of the Administration Agreement, the Custodian
Agreement, the Paying Agent Agreement or the Collateral Agreement without the
prior written consent of Salomon Smith Barney.
11. ENTIRE AGREEMENT. This Agreement contains the entire
agreement among the parties with respect to the matters contained herein and
supersedes all prior agreements or understandings. No amendment or modification
of this Agreement shall be valid unless the amendment or modification is in
writing and is signed by all the parties to this Agreement.
12. NOTICES. All notices, demands, reports, statements,
approvals or consents given by any party under this Agreement shall be in
writing and shall be delivered in person or by telecopy or other facsimile
communication or sent by first-class U.S. mail, registered or certified, postage
prepaid, to the appropriate party at its address on the signature pages hereof
or at such other address subsequently notified to the other parties hereto. A
copy of any communication to Salomon Smith Barney shall be furnished to Cleary,
Gottlieb, Steen & Hamilton, One Liberty Plaza, New York, New York 10006,
Attention: Raymond B. Check, provided that in each case the failure to furnish
such copy shall not affect the effectiveness of any such communication. Any
party may change its address for purposes hereof by delivering a written notice
of the change to the other parties. All notices given under this Agreement shall
be deemed received (a) in the case of hand delivery, on the day of delivery, (b)
in the case of telecopy or other facsimile communication, on the day of
transmission, and (c) in the case of mailing, on the third day after such notice
was deposited in the mail.
13. BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
<PAGE>
14. GOVERNING LAW. This Agreement shall be governed by and be
construed in accordance with the laws of the State of New York.
15. COUNTERPARTS. This Agreement may be signed in counterpart
with all of such counterparts constituting one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their authorized representatives as of the date first above
written.
SALOMON SMITH BARNEY INC.
By:
Name:
Title:
Address: 388 Greenwich Street
New York, New York 10013
Attention:
THE BANK OF NEW YORK
By:
Name:
Title:
Address: 101 Barclay Street
New York, New York 10286
<PAGE>
SCHEDULE I
to Fund Expense Agreement
Up-front Fee Amount: [$115,000.00]
Up-front Expense Amount: [$150,750.00]
<PAGE>
Exhibit (K)(6)
[FORM OF FUND INDEMNITY AGREEMENT]
Agreement dated as of November [ ], 1999 between Salomon Smith
Barney Inc. ("SALOMON SMITH BARNEY") and DECS Trust VI (such trust and the
trustees thereof acting in their capacity as such being referred to herein as
the "TRUST").
WHEREAS the Trust is a statutory business trust organized
under the Business Trust Act of the State of Delaware pursuant to a Declaration
of Trust dated as of October 22, 1999, as amended and restated as of November 9,
1999 (the "TRUST AGREEMENT"); and
WHEREAS, Salomon Smith Barney, as sponsor under the Trust
Agreement, desires to make provision for the payment of certain indemnification
expenses of the Trust.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained in this Agreement, the parties agree as follows:
1. DEFINITIONS. Capitalized terms used herein and not defined
herein shall have the meanings ascribed thereto in the Trust Agreement.
2. AGREEMENT TO PAY EXPENSES. Salomon Smith Barney agrees to
pay to the Trust, and hold the Trust harmless from, any expenses of the Trust
arising under Sections 2.2(e) and 6.6 of the Administration Agreement, Section
15 of the Custodian Agreement, Section 5.4(b) of the Paying Agent Agreement and
[Section 7.6] of the Trust Agreement (collectively, together with any amounts
paid pursuant to paragraph 4 of this Agreement, "INDEMNIFICATION EXPENSES").
Subject to paragraph 4 hereof, payment hereunder by Salomon Smith Barney shall
be made in New York Clearing House funds no later than five Business Days after
the receipt by Salomon Smith Barney, pursuant to paragraph 3 hereof, of written
notice of any claim for Indemnification Expenses.
3. NOTICE OF RECEIPT OF CLAIM. The Trust shall give notice to,
or cause notice to be given to, Salomon Smith Barney in writing of any claim for
Indemnification Expenses or any threatened claim for Indemnification Expenses
immediately upon the Trust acquiring knowledge thereof. Such written notice
shall be accompanied by any demand, bill, invoice or other communication
received from any third party claimant (a "CLAIMANT") in respect of such
Indemnification Expense.
4. RIGHT TO CONTEST. The Trust agrees that Salomon Smith
Barney may, and Salomon Smith Barney is authorized on behalf of the Trust to,
contest in good faith with any Claimant any amount contained in any claim for
Indemnification Expense, provided, that if, within such time period as Salomon
Smith Barney shall determine to be reasonable, Salomon Smith Barney and such
Claimant are unable to resolve amicably any disagreement regarding such claim
for Indemnification Expense, Salomon Smith Barney shall retain counsel
reasonably satisfactory to the Trustees to represent the Trustees in any
resulting proceeding and shall pay the fees and disbursements of such counsel
related to such proceeding. Notwithstanding any other
<PAGE>
provision herein, it is understood that (a) Salomon Smith Barney shall not, in
respect of the legal expenses of any indemnified party in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm (in addition to any local
counsel), and (b) Salomon Smith Barney shall not be liable for any settlement of
any proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the Claimant, Salomon Smith Barney
agrees to indemnify the Trust from and against any loss or liability by reason
of such settlement or judgment.
5. STATEMENTS AND REPORTS. The Trust shall collect and
safekeep all demands, bills, invoices or other written communications received
from third parties in connection with any claim for Indemnification Expenses and
shall prepare and maintain adequate books and records showing all receipts and
disbursements of funds in connection therewith. Salomon Smith Barney shall have
the right to inspect and to copy, at its expense, all such documents, books and
records at all reasonable times and from time to time during the term of this
Agreement.
6. TERM OF CONTRACT. This Agreement shall continue in effect
until the termination of the Trust in accordance with [Section 8.3] of the Trust
Agreement.
7. NO ASSIGNMENT. No party to this Agreement may assign its
rights or delegate its duties hereunder without the prior written consent of the
other parties, except that the Trust may delegate any and all duties hereunder
to the Administrator to the extent permitted by law.
8. ENTIRE AGREEMENT. This Agreement contains the entire
agreement among the parties with respect to the matters contained herein and
supersedes all prior agreements or understandings. No amendment or modification
of this Agreement shall be valid unless the amendment or modification is in
writing and is signed by all the parties to this Agreement.
9. NOTICES. All notices, demands, reports, statements,
approvals or consents given by any party under this Agreement shall be in
writing and shall be delivered in person or by telecopy or other facsimile
communication or sent by first-class U.S. mail, registered or certified, postage
prepaid, to the appropriate party at its address on the signature pages hereof
or at such other address subsequently notified to the other parties hereto. A
copy of any communication to Salomon Smith Barney shall be furnished to Cleary,
Gottlieb, Steen & Hamilton, One Liberty Plaza, New York, New York 10006,
Attention: Raymond B. Check, provided that the failure to furnish such copy
shall not affect the effectiveness of any such communication. Any party may
change its address for purposes hereof by delivering a written notice of the
change to the other parties. All notices given under this Agreement shall be
deemed received (a) in the case of hand delivery, on the day of delivery, (b) in
the case of telecopy or other facsimile communication, on the day of
transmission, and (c) in the case of mailing, on the third day after such notice
was deposited in the mail.
10. BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
<PAGE>
11. GOVERNING LAW. This Agreement shall be governed by and be
construed in accordance with the laws of the State of New York.
12. COUNTERPARTS. This Agreement may be signed in counterpart
with all of such counterparts constituting one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their authorized representatives the date first above written.
SALOMON SMITH BARNEY INC.
By:
Address: 388 Greenwich Street
New York, New York 10013
Attention:
DECS TRUST VI
By:
Donald J. Puglisi,
as Managing Trustee
Address: c/o Puglisi & Associates
850 Library Avenue,
Suite 204
Newark, Delaware 19716
<PAGE>
Exhibit 99.(L)
[Letterhead of Richard, Layton & Finger]
November 10, 1999
Salomon Smith Barney Inc.
Goldman, Sachs & Co.
388 Greenwich Street
New York, NY 10013
Re: DECS TRUST VI
Ladies and Gentlemen:
We have acted as special Delaware counsel for DECS Trust VI, a Delaware
business trust (the "TRUST"), in connection with the matters set forth herein.
At your request, this opinion is being furnished to you.
For purposes of giving the opinions hereinafter set forth, our
examination of documents has been limited to the examination of executed or
conformed counterparts, or copies otherwise proved to our satisfaction, of the
following:
(a) The Certificate of Trust of the Trust (the "ORIGINAL CERTIFICATE OF
TRUST"), dated October 22, 1999, as filed in the office of the Secretary of
State of the State of Delaware (the "SECRETARY OF STATE") on October 22, 1999;
(b) The Restated Certificate of Trust of the Trust (the "RESTATED
CERTIFICATE OF TRUST"; and together with the Original Certificate of Trust
the "CERTIFICATE OF TRUST"), dated November 9, 1999, as filed in the office
of the Secretary of State on November 10, 1999;
(c) The Declaration of Trust of the Trust, dated as of October 22, 1999,
between Alan Rifkin, as sponsor (the "INITIAL SPONSOR"), and Donald J. Puglisi,
as trustee;
(d) The Amended and Restated Declaration of Trust of the Trust, dated as
of November 9, 1999 (the "TRUST AGREEMENT"), among the Initial Sponsor, the
Initial Trustee, Salomon Smith Barney Inc., as sponsor, Donald J. Puglisi,
William R. Latham III and James B. O'Neill, as trustees (the "TRUSTEES"), and
the Holders (as defined in the Trust Agreement), including Exhibit A attached
thereto;
(e) The registration statement (the "INITIAL REGISTRATION STATEMENT") on
Form N-2, including a prospectus (the "PROSPECTUS"), relating to the issuance of
up to 11,500,000 DECS of the Trust representing undivided beneficial interests
in the assets of the Trust (the "DECS"), as filed by the Trust with the
Securities and Exchange Commission (the "SEC") on October 22, 1999, as amended
by Pre-Effective Amendment No. 1 to the Initial Registration Statement
("AMENDMENT NO. 1"), filed by the Trust with the SEC on October 27, 1999 (the
Initial Registration Statement, as amended by Amendment No. 1 being hereinafter
referred to as the "REGISTRATION STATEMENT");
(f) A Certificate of Good Standing for the Trust, dated November 10,
1999, obtained from the Secretary of State.
Initially capitalized terms used herein and not otherwise defined are
used as defined in the Trust Agreement.
For purposes of this opinion, we have not reviewed any documents other
than the documents listed above, and we have assumed that there exists no
provision in any document that we have not reviewed that bears upon or is
inconsistent with the opinions stated herein. We have conducted no independent
factual investigation of our own but rather have relied solely upon the
foregoing documents, the statements and information set forth therein and the
<PAGE>
additional matters recited or assumed herein, all of which we have assumed to be
true, complete and accurate in all material respects.
With respect to all documents examined by us, we have assumed that (i)
all signatures on documents examined by us are genuine, (ii) all documents
submitted to us as originals are authentic, and (iii) all documents submitted to
us as copies conform with the original copies of those documents.
For purposes of this opinion, we have assumed (i) that the Trust
Agreement and the Certificate of Trust constitute the entire agreement among the
parties thereto with respect to the subject matter thereof, including with
respect to the creation, operation and termination of the Trust, and that the
Trust Agreement and the Certificate of Trust are in full force and effect and
have not been amended, (ii) except to the extent provided in paragraph 1 below,
the due creation or due organization or due formation, as the case may be, and
valid existence in good standing of each party to the documents examined by us
under the laws of the jurisdiction governing its creation, organization or
formation, (iii) that at least one of the Trustees is a resident of the State of
Delaware, (iv) the legal capacity of natural persons who are parties to the
documents examined by us, (v) except as provided in paragraphs 2 and 4 below,
that each of the parties to the documents examined by us has the power and
authority to execute and deliver, and to perform its obligations under, such
documents, (vi) except as provided in paragraph 5 below, the due authorization,
execution and delivery by all parties thereto of all documents examined by us,
(vii) the receipt by each Person to whom a DECS is to be issued by the Trust
(collectively, the "DECS HOLDERS") of an interest in the DECS Certificate
(substantially in the form of Exhibit A to the Trust Agreement) and the payment
for the DECS acquired by it, in accordance with the Trust Agreement and the
Registration Statement, and (viii) that the DECS are issued and sold to the DECS
Holders in accordance with the Trust Agreement and the Registration Statement.
We have not participated in the preparation of the Registration Statement and
assume no responsibility for its contents.
This opinion is limited to the laws of the State of Delaware (excluding
the securities laws of the State of Delaware), and we have not considered and
express no opinions on the laws of any other jurisdiction, including federal
laws and rules and regulations relating thereto. Our opinions are rendered only
with respect to Delaware laws and rules, regulations and orders thereunder that
are currently in effect.
Based upon the foregoing, and upon our examination of such questions of
law and statutes of the State of Delaware as we have considered necessary or
appropriate, and subject to the assumptions, qualifications, limitations and
exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly created and is validly existing in good
standing as a business trust under the Delaware Business Trust Act, 12 DEL. C.
ss. 3801, eT SEq. (the "BUSINESS TRUST Act"), and all filings required under the
laws of the State of Delaware with respect to the creation and valid existence
of the Trust as a business trust have been made.
2. When issued and sold, the DECS will represent valid and, subject to
the qualifications set forth in paragraph 3 below, fully paid and nonassessable
undivided beneficial interests in the assets of the Trust.
3. The DECS Holders, as beneficial owners of the Trust, will be entitled
to the same limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the State
of Delaware. We note that the DECS Holders may be obligated to make payments as
set forth in the Declaration.
2
<PAGE>
We consent to the filing of this opinion with the SEC as an exhibit to
the Registration Statement. In addition, we hereby consent to the use of our
name under the heading "Legal Matters" in the Prospectus. In giving the
foregoing consent, we do not thereby admit that we come within the category of
Persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended, or the rules and regulations of the SEC thereunder. Except as stated
above, without our prior written consent, this opinion may not be furnished or
quoted to, or relied upon by, any other Person for any purpose.
Very truly yours,
By: /s/ Richards, Layton & Finger
-----------------------------
3
<PAGE>
Exhibit (n)(1)
[CLEARY, GOTTLIEB, STEEN, & HAMILTON LETTERHEAD]
NOVEMBER 9, 1999
DECS Trust VI
c/o Puglisi & Associates
850 Library Avenue, Suite 204
Newark, Delaware 19715
Ladies and Gentleman:
We have acted as special tax counsel to DECS Trust VI (the 'Trust') in
connection with the registration statement on Form N-2 of the Trust (the
'Registration Statement') with the Securities and Exchange Commission and hereby
confirm to you the discussion as set forth under the heading 'Certain United
States Federal Income Considerations' in the Prospectus included in the
Registration Statement.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the caption 'Legal
Matters' in the Prospectus. In giving such consent, we do not thereby admit that
we are in the capacity of persons whose consent is required under Section 7 of
the Act.
Very truly yours,
Cleary, Gottlieb, Steen & Hamilton
By: /s/ ERIKA W. NIJENHUIS
-----------------------------------
Erika W. Nijenhuis, a Partner
<PAGE>
Exhibit (n)(2)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in the Registration Statement of DECS Trust VI
on Form N-2 filed with the Securities and Exchange Commission on or about
November 9, 1999 of our report dated October 26, 1999 on our audit of the
Statement of Assets, Liabilities, and Capital of DECS Trust VI as of
October 26, 1999. We also consent to the reference to our firm under the caption
"Experts."
[LOGO]
New York, New York
November 9, 1999
<PAGE>
Exhibit (n)(3)
CONSENT TO BEING NAMED A TRUSTEE
The undersigned hereby consents to being named in the Registration Statement
on Form N-2 of DECS Trust VI (the "Trust") and any amendments thereto, as a
person about to become a Trustee of the Trust.
Dated: October 27, 1999
/s/ WILLIAM R. LATHAM, III
--------------------------------------
William R. Latham, III
<PAGE>
CONSENT TO BEING NAMED A TRUSTEE
The undersigned hereby consents to being named in the Registration Statement
on Form N-2 of DECS Trust VI (the "Trust") and any amendments thereto, as a
person about to become a Trustee of the Trust.
Dated: October 27, 1999
/s/ DONALD J. PUGLISI
--------------------------------------
Donald J. Puglisi
<PAGE>
CONSENT TO BEING NAMED A TRUSTEE
The undersigned hereby consents to being named in the Registration Statement
on Form N-2 of DECS Trust VI (the "Trust") and any amendments thereto, as a
person about to become a Trustee of the Trust.
Dated: October 27, 1999
/s/ JAMES B. O'NEILL
--------------------------------------
James B. O'Neill
<PAGE>
Exhibit 99.(P)
[FORM OF SUBSCRIPTION AGREEMENT]
This SUBSCRIPTION AGREEMENT dated as of the 25th day of
October, 1999, is entered into between DECS Trust VI, a statutory business trust
organized under the Business Trust Act of the State of Delaware (such trust and
the trustees thereof acting in their capacity as such being referred to herein
as the "TRUST"), and Salomon Smith Barney Inc. (the "PURCHASER").
WHEREAS, the Purchaser has heretofore transferred to the Trust
the amount of $100.00 (the "PURCHASE PRICE") for the purpose and with the intent
of purchasing one DECS (the "Subscription DECS"), representing an undivided
beneficial interest in the Trust; and
WHEREAS, the Trust wishes to transfer to the Purchaser, in
consideration of the Purchase Price, the Subscription DECS.
NOW THEREFORE, the parties hereto agree as follows:
1. PURCHASE AND SALE OF THE DECS.
1.1. SALE AND ISSUANCE OF DECS. Subject to the terms and
conditions of this Agreement, the Trust agrees to sell to the Purchaser in
consideration of the Purchaser's delivery to the Trust of the Purchase Price,
and the Purchaser agrees to purchase from the Trust, one DECS (the "SUBSCRIPTION
DECS"), representing an undivided beneficial interest in the Trust.
1.2. CLOSING. (a) The closing of the purchase and sale of the
Subscription DECS shall take place at the offices of Cleary, Gottlieb, Steen &
Hamilton, One Liberty Plaza, New York, New York 10006 at 10:00 a.m., on October
25, 1999, or at such other time (the "CLOSING DATE") and place as the Trust and
the Purchaser mutually agree upon. At or after the Closing Date, the Trust shall
deliver to the Purchaser a certificate representing the Subscription DECS,
registered in the name of the Purchaser or its nominee.
(b) The Trust hereby acknowledges Purchaser's delivery to the
Trust of the Purchase Price on October 25, 1999.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER.
The Purchaser hereby represents and warrants to, and covenants for the benefit
of, the Trust that:
2.1. PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made
by the Trust with the Purchaser in reliance upon the Purchaser's representation
to the Trust, which by the Purchaser's execution of this Agreement the Purchaser
hereby confirms, that the Purchaser is acquiring the Subscription DECS for
investment for the Purchaser's own account, and not as a nominee or agent and
not with a view to the resale or distribution by the Purchaser of such
Subscription DECS, and that the Purchaser has no present intention of selling,
granting any
<PAGE>
participation in, or otherwise distributing the Subscription DECS, in either
case in violation of any securities registration requirement under applicable
law, but subject nevertheless to any requirement of law that the disposition of
its property shall at all times be within its control. By executing this
Agreement, the Purchaser further represents that the Purchaser does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to such person, or to any third person, with
respect to the Subscription DECS.
2.2. INVESTMENT EXPERIENCE. The Purchaser acknowledges that it
can bear the economic risk of the investment for an indefinite period of time
and has such knowledge and experience in financial and business matters (and
particularly in the business in which the Trust operates) as to be capable of
evaluating the merits and risks of the investment in the Subscription DECS. The
Purchaser is an "accredited investor" as defined in Rule 501(a) of Regulation D
under the Securities Act of 1933 (the "ACT").
2.3. RESTRICTED SECURITIES. The Purchaser understands that the
Subscription DECS are characterized as "restricted securities" under the United
States securities laws inasmuch as they are being acquired from the Trust in a
transaction not involving a public offering and that under such laws and
applicable regulations such Subscription DECS may be resold without registration
under the Act only in certain circumstances. In this connection, the Purchaser
represents that it understands the resale limitations imposed by the Act and is
generally familiar with the existing resale limitations imposed by Rule 144
under the Act.
2.4. FURTHER LIMITATIONS ON DISPOSITION. The Purchaser further
agrees not to make any disposition directly or indirectly of all or any portion
of the Subscription DECS unless and until:
(a) There is then in effect a registration statement under the
Act covering such proposed disposition and such disposition is
made in accordance with such registration statement; or
(b) The Purchaser shall have furnished the Trust with an
opinion of counsel, reasonably satisfactory to the Trust, that
such disposition will not require registration of such
Subscription DECS under the Act.
(c) Notwithstanding the provisions of subsections (a) and (b)
above, no such registration statement or opinion of counsel
shall be necessary for a transfer by the Purchaser to any
affiliate of the Purchaser, if the transferee agrees in
writing to be subject to the terms hereof to the same extent
as if it were the original Purchaser hereunder.
2.5. LEGENDS. It is understood that the certificate evidencing
the Subscription
<PAGE>
DECS may bear either or both of the following legends:
(a) "These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered for
sale, pledged or hypothecated in the absence of a registration
statement in effect with respect to the securities under such
Act or an opinion of counsel reasonably satisfactory to the
Trustee of DECS Trust VI that such registration is not
required."
(b) Any legend required by the laws of any other applicable
jurisdiction.
The Purchaser and the Trust agree that the legend contained in
paragraph (a) above shall be removed at a holder's request when it is no longer
necessary to ensure compliance with federal securities laws.
2.6. SPLIT OF DECS. The Purchaser consents to the split of the
Subscription DECS subsequent to the determination of the public offering price
per DECS and related underwriting discount for the DECS to be sold to the
Underwriter (as defined in such Amended and Restated Declaration of Trust) but
prior to the sale of the DECS to the Underwriters into a greater number of DECS
so that immediately following such split the value of the Subscription DECS will
equal the aforesaid public offering price per DECS.
2.7. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
2.8. GOVERNING LAW. This Agreement shall be governed by and
construed and interpreted in accordance with the laws of the State of New York
applicable to agreements made and to be performed wholly within such state.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
DECS TRUST VI
By
Donald Puglisi, as Trustee
SALOMON SMITH BARNEY INC.
By
Name:
Title:
