<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 18, 2000.
REGISTRATION NO. 333-45684
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
EPOCH SECURITIES, INC.
INITIAL DEPOSITOR
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
------------------------
OPTICAL EQUIPMENT NETS(SM) TRUST
YET-TO-BE FORMED
(ISSUER WITH RESPECT TO THE RECEIPTS)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE (STATE OR OTHER 6211 (PRIMARY STANDARD INDUSTRIAL 94-3345622 (I.R.S. EMPLOYER
JURISDICTION OF INCORPORATION OR CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
ORGANIZATION)
</TABLE>
151 UNION STREET
ICEHOUSE TWO
SAN FRANCISCO, CA 94111
(415) 315-3100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
<TABLE>
<S> <C>
THOMAS C. JANSON, JR. COPIES TO:
EXECUTIVE VICE PRESIDENT LAWRENCE C. TONDEL
EPOCH SECURITIES, INC. BROWN & WOOD LLP
151 UNION STREET ONE WORLD TRADE CENTER
ICEHOUSE TWO NEW YORK, NEW YORK 10048
SAN FRANCISCO, CA 94111 (212) 839-5300
(415) 315-3100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER RECEIPT(1) PRICE(1) FEE(2)(3)
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Optical Equipment NETS.......... 500,000,000 receipts $50 $74,950,000 $19,787
-------------------------------------------------------------------------------------------------------------------------------
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act. 1,000,000 receipts are
estimated to be offered in the initial offering at $50 per receipt and
499,000,000 receipts are estimated to be offered continuously after the
initial offering at $0.05 per receipt.
(2) This Registration Statement also registers, where required, an indeterminate
amount of securities to be sold in market-making transactions expected to be
made by one or more of the underwriters from time to time.
(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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(a),
MAY DETERMINE.
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--------------------------------------------------------------------------------
<PAGE> 2
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 IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED DECEMBER 18, 2000
PROSPECTUS
--------------------
OPTICAL EQUIPMENT
[NETS LOGO]
500,000,000 DEPOSITARY RECEIPTS
OPTICAL EQUIPMENT NETS(SM) TRUST
------------------------
The Optical Equipment NETS(SM):
- Are depositary receipts that represent your undivided beneficial ownership in
shares of U.S.-traded common stock of a group of companies that, among other
things, design, manufacture and market products that enable voice and data
transmissions across communications networks using optical, or light-based,
signals.
- Represent your ownership of the companies and the number of shares of their
common stock found on page 2 of this prospectus.
- Are separate from the underlying shares of common stock that will be held by
the Optical Equipment NETS Trust.
- May only be acquired, traded or exchanged in a round-lot amount of 100 Optical
Equipment NETS or round-lot multiples.
The Optical Equipment NETS Trust:
- Has been formed to hold the underlying common stocks and issue the Optical
Equipment NETS.
- May issue additional Optical Equipment NETS on a continuous basis.
- Is not a registered investment company under the Investment Company Act of
1940.
-Will terminate on December 31, 2005, or earlier if a termination event occurs.
- Investors Bank & Trust Company will act as trustee.
- Optical Equipment NETS are interests in and obligations of the Optical
Equipment NETS Trust and not of Epoch Securities, Inc., or Investors Bank &
Trust Company or any of their affiliates.
------------------------
Prior to this offering no public market existed for the Optical Equipment
NETS. The Optical Equipment NETS have been approved for listing on the American
Stock Exchange under the symbol "OPN." In addition to this prospectus, there is
also an electronic version of this prospectus for the Optical Equipment NETS
that can be accessed on the Internet at www.epochnets.com as well as web sites
for one or more of the underwriters and dealers which contains information
formatted differently from this prospectus.
------------------------
INVESTING IN OPTICAL EQUIPMENT NETS INVOLVES SIGNIFICANT RISKS.
SEE "RISK FACTORS" STARTING ON PAGE 13 OF THIS PROSPECTUS.
------------------------
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>
INITIAL PRICE UNDERWRITING
TO PUBLIC FEE
------------- ------------
<S> <C> <C>
Per Optical Equipment NETS including the underwriting fee... $ 2%
</TABLE>
The initial public offering price for a round-lot of 100 Optical Equipment
NETS will equal the sum of the values of the deposited shares for all companies
as specified in this prospectus, which will be determined by multiplying the
closing market price for each security on the pricing date on the primary U.S.
trading market by the number of deposited shares for each company, plus an
underwriting fee.
-----------------------------
EPOCH PARTNERS
-----------------------------
The date of this prospectus is , 2001.
"NETS" and "New Era Trust Securities" are service marks of Epoch Partners, Inc.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary Information......................................... 1
Risk Factors................................................ 13
Description of the Trust.................................... 26
Description of Optical Equipment NETS....................... 26
Description of the Underlying Securities.................... 30
Description of the Depositary Trust Agreement............... 34
Federal Income Tax Consequences............................. 38
ERISA Considerations........................................ 40
Underwriting................................................ 41
Legal Matters............................................... 42
Where You Can Find More Information......................... 42
Exhibit A................................................... A-1
</TABLE>
------------------------
This prospectus contains information you should consider when making your
investment decision. With respect to information about Optical Equipment NETS,
you should rely only on the information contained in this prospectus. We have
not authorized any other person to provide you with different information. If
anyone provides you with different or inconsistent information, you should not
rely on it. We are not making an offer to sell Optical Equipment NETS in any
jurisdiction where the offer or sale is not permitted.
------------------------
Epoch Securities, Inc. conducts a significant part of its securities
business under the name "Epoch Partners," as also used on the cover page hereof.
See "Underwriting."
------------------------
This prospectus contains statistical data regarding the optical networking
industry that we obtained from industry publications, including reports
generated by RHK, Inc. These industry publications generally indicate that they
have obtained their information from sources believed to be reliable, but do not
guarantee the accuracy and completeness of their information. Although we
believe that the publications are reliable, we have not independently verified
their data.
i
<PAGE> 4
SUMMARY INFORMATION
This discussion summarizes information regarding the Optical Equipment
NETS. This discussion is not complete, and you should read the entire prospectus
carefully before you purchase any Optical Equipment NETS.
WHAT ARE THE OPTICAL EQUIPMENT NETS?
The Optical Equipment NETS are depositary receipts that represent your
undivided beneficial ownership interest in the shares of U.S.-traded common
stock held by the Optical Equipment NETS Trust. The Optical Equipment NETS
themselves are separate from the underlying securities. The specific companies
whose shares are represented by the Optical Equipment NETS are set forth in the
chart below. For the purposes of this preliminary prospectus, the number of
shares of each company's common stock represented by each round-lot of 100
Optical Equipment NETS and the initial weightings are set forth in the chart
below based on the equity market values as of October 26, 2000. The share
amounts were determined so that:
- the initial issue price will be approximately $40 - $50 per Optical
Equipment NETS,
- the initial weightings of each underlying security approximates the
relative equity market values of the specified companies, and
- the maximum initial weighting of any underlying security is 10%.
The final share amounts will be determined on , 2001, the
pricing date, using the same methodology. After the pricing date, the share
amounts will not change, except for changes due to corporate events, such as
stock splits or reverse stock splits on the underlying securities, or
reconstitution events. However, the weightings are expected to change
substantially over time because of price fluctuations.
The following chart provides the:
- names of the 21 companies whose shares of common stock are represented by
the Optical Equipment NETS,
- stock ticker symbols,
- number of shares of each company represented by a round-lot of 100
Optical Equipment NETS as of October 26, 2000,
- initial weightings as of October 26, 2000, and
- primary U.S. trading market on which the shares of common stock of the
selected companies are traded.
1
<PAGE> 5
<TABLE>
<CAPTION>
NUMBER OF
SHARES PER INITIAL PRIMARY U.S.
NAME OF COMPANY TICKER ROUND-LOT WEIGHTINGS TRADING MARKET
--------------- ------ ---------- ---------- --------------
<S> <C> <C> <C> <C>
Corning Incorporated GLW 7 9.96% NYSE
Lucent Technologies Inc. LU 23 9.84 NYSE
Cisco Systems, Inc. CSCO 9 9.79 Nasdaq NMS
Nortel Networks Corporation NT 10 9.22 NYSE
JDS Uniphase Corporation JDSU 6 9.07 Nasdaq NMS
CIENA Corporation CIEN 4 8.37 Nasdaq NMS
Juniper Networks, Inc. JNPR 2 7.73 Nasdaq NMS
Sycamore Networks, Inc. SCMR 4 5.22 Nasdaq NMS
Corvis Corporation CORV 4 4.92 Nasdaq NMS
SDL, Inc. SDLI 1 4.89 Nasdaq NMS
Redback Networks Inc. RBAK 2 4.67 Nasdaq NMS
ADC Telecommunications, Inc. ADCT 10 3.82 Nasdaq NMS
ONI Systems Corp. ONIS 2 2.88 Nasdaq NMS
Newport Corporation NEWP 1 2.26 Nasdaq NMS
Avanex Corporation AVNX 1 1.86 Nasdaq NMS
New Focus, Inc. NUFO 1 1.22 Nasdaq NMS
Finisar Corporation FNSR 2 1.06 Nasdaq NMS
Digital Lightwave, Inc. DIGL 1 1.04 Nasdaq NMS
Avici Systems Inc. AVCI 1 0.90 Nasdaq NMS
MRV Communications, Inc. MRVC 1 0.72 Nasdaq NMS
Stratos Lightwave, Inc. STLW 1 0.56 Nasdaq NMS
</TABLE>
These companies generally are considered to be among the largest and most
liquid companies with U.S.-traded common stock involved in the optical equipment
industry, as measured by equity market value and trading volume on October 26,
2000 in the primary U.S. trading market. The equity market value of a company is
determined by multiplying the price of its common stock by the number of
outstanding shares of its common stock.
On July 10, 2000, JDS Uniphase Corporation and SDL, Inc. announced their
definitive agreement to merge. The merger agreement provides for the exchange of
3.8 shares of JDS Uniphase common stock for each share of SDL common stock.
Completion of the transaction is subject to customary closing conditions,
including the approval of stockholders of both companies and regulatory
approvals. Upon completion of the merger, the stock of the surviving company
will be deposited into the Optical Equipment NETS Trust.
On July 20, 2000, Lucent Technologies Inc. announced plans to spin off its
microelectronics business, which includes the optoelectronics components and
integrated circuits (IC) divisions, into a separate, new company. In a press
release dated December 5, 2000, Lucent announced that the company will be named
Agere Systems. Lucent is planning an initial public offering for up to 20
percent of the new company in the quarter ended March 31, 2001 and intends to
spin off the remaining shares in a tax-free distribution by the summer of 2001.
Lucent intends to seek a ruling from the Internal Revenue Service with respect
to the tax-free treatment of the spin-off. The spin-off is subject to certain
conditions, including a favorable tax ruling. Shares of the spin-off company
will be retained by the Optical Equipment NETS Trust, unless either the
2
<PAGE> 6
distributed securities are not listed for trading on a U.S. national securities
exchange or through Nasdaq NMS or the distributed securities have a Standard &
Poor's sector classification that is different from the Standard & Poor's sector
classifications represented in the Optical Equipment NETS Trust at the time of
the distribution.
On October 6, 2000, MRV Communications, Inc.'s subsidiary, Optical Access,
Inc., filed a registration statement with the Securities and Exchange
Commission, or the SEC, for an initial public offering of common stock. Optical
Access designs, manufactures and markets an optical wireless solution that
delivers high-speed communications traffic to the portion of the communications
network commonly known as the last mile, which extends from the end user to the
service provider's central office. As part of this filing, MRV advised Optical
Access that at some time after this offering it may apply for a private letter
ruling from the Internal Revenue Service and permission from the Israeli tax
authority in connection with a proposed distribution to its stockholders of all
of Optical Access's common stock held by MRV. One condition to the proposed
distribution is the receipt of favorable rulings from these agencies to treat
the distribution as a tax-free transaction. MRV has not advised Optical Access
as to the timing of the distribution and gave no assurances as to whether or
when the distribution will occur; however, any distribution of Optical Access
shares will be retained by the Optical Equipment NETS Trust, unless either the
distributed securities are not listed for trading on a U.S. national securities
exchange or through Nasdaq NMS or the distributed securities have a Standard &
Poor's sector classification that is different from the Standard & Poor's sector
classifications represented in the Optical Equipment NETS Trust at the time of
the distribution.
On November 10, 2000, MRV's subsidiary, Luminent, Inc., commenced an
initial public offering of common stock. Luminent designs, manufactures and
sells a comprehensive line of fiber optic components that enable communications
equipment manufacturers to provide optical networking equipment for the rapidly
growing metropolitan and access segments of the communications networks. MRV has
announced that it currently plans to distribute the remainder of its shares of
Luminent common stock to MRV's stockholders on the later of three months after
the receipt of a favorable private letter ruling from the Internal Revenue
Service or six months after the initial public offering, although they are not
obligated to do so. There are various conditions that must be satisfied or
waived by MRV in their sole discretion, prior to the distribution. MRV will
determine the exact distribution formula and record date to qualify for any
distribution at a future date. Any distribution of Luminent shares will be
retained by the Optical Equipment NETS Trust, unless either the distributed
securities are not listed for trading on a U.S. national securities exchange or
through Nasdaq NMS or the distributed securities have a Standard & Poor's sector
classification that is different from the Standard & Poor's sector
classifications represented in the Optical Equipment NETS Trust at the time of
the distribution.
THE INCLUSION OF A COMPANY'S COMMON STOCK IN THE OPTICAL EQUIPMENT NETS IS
NOT A RECOMMENDATION OF THAT COMPANY OR ITS COMMON STOCK BY EPOCH SECURITIES,
INC., ADVANCED CLEARING, INC., CHARLES SCHWAB & CO., INC., THE OPTICAL EQUIPMENT
NETS TRUST, THE TRUSTEE, OR ANY OF THEIR AFFILIATES.
3
<PAGE> 7
WHAT IS THE OPTICAL EQUIPMENT INDUSTRY? WHAT DO COMPANIES IN THIS INDUSTRY
GENERALLY DO?
The optical equipment industry consists of numerous companies that design,
manufacture and market products that enable voice and data transmissions across
communications networks using optical, or light-based, signals.
Over the last three years, the volume of traffic across communications
networks has grown dramatically. Broadband or high-speed Internet access through
cable modems and digital subscriber line, also called DSL, connections combined
with new bandwidth-intensive applications such as streaming video and real-time
electronic commerce have placed significant strains on the capacity of existing
communications network infrastructures. These networks were initially designed
for low-speed voice traffic and not for large volumes of high-speed data
traffic. According to RHK, Inc., a telecommunications industry market research
firm, the data traffic across communications networks is expected to increase
from 350,000 terabytes per month in 1999 to more than 15 million terabytes per
month in 2003. Ten terabytes is the equivalent of all of the information
contained in the Library of Congress.
To handle the increasing volume of communications traffic, communications
service providers are rapidly expanding their networks and adding capacity by
using optical transmission and switching equipment. Optical equipment generally
provides higher capacity and greater network reliability than older electrical
transmission equipment because light signals can travel more quickly through
optical fibers than electrical signals can travel through copper wire, and
transmitting data using light is inherently more efficient.
Demand for optical equipment has also increased due to changing market
dynamics. The deregulation of the telecommunications industry has resulted in
the creation of a new generation of communications service providers that seek
to use the latest optical equipment in their communications networks. Incumbent
communications service providers must continue to install new optical equipment
that increases the capacity and the competitiveness of their networks while
maintaining or improving network reliability. According to RHK, Inc., the global
market for optical systems and subsystems is expected to grow 31% per year from
$38 billion in 1999 to $113 billion in 2003.
Optical equipment companies generally fall into three categories:
- SYSTEMS PROVIDERS. Systems providers undertake the complex task of
assembling different optical equipment building blocks developed by
subsystems providers and then combining them with software and additional
proprietary hardware to create complete optical equipment systems. These
systems providers sell their products to the communications service
providers for use in their networks. Optical systems include DWDM, or
dense wave division multiplexing, transport systems, which transmit
optical signals within fiber optic networks, and optical switches, which
connect disparate optical networks and route optical signals from one
location to another. These systems can be used in metropolitan areas or
for long-haul, or long-distance, applications.
4
<PAGE> 8
- SUBSYSTEMS PROVIDERS. The building blocks provided by subsystems
providers include computer chips or modules that typically perform a
specific function such as the amplification or steering of light signals.
Subsystems include erbium-doped fiber amplifiers, which reamplify all the
optical signals on an optical fiber without costly electrical
reamplification of the individual signals, optical muliplexers, which
combine individual optical signals to cost effectively transmit them
together in a single optical fiber, and add-drop multiplexers, which
manipulate optical signals to add or drop individual signals at
intermediate locations in the optical network.
- FIBER OPTIC CABLE PROVIDERS. Fiber optic cable providers sell fiber
optic cable to systems providers, subsystems providers and communications
service providers for use in optical equipment or in optical networks.
WHY WERE THE OPTICAL EQUIPMENT NETS CREATED?
Optical Equipment NETS are designed to achieve the following:
- INDUSTRY SPECIFIC DIVERSIFICATION. Optical Equipment NETS are designed
to allow you to diversify your investment across a group of companies
that focus on the optical equipment industry through a single,
exchange-listed instrument representing your undivided beneficial
ownership in the underlying securities.
- OWNERSHIP FLEXIBILITY. The beneficial owners of Optical Equipment NETS
have undivided beneficial ownership interests in each of the underlying
securities represented by the Optical Equipment NETS and can exchange
their Optical Equipment NETS for the underlying securities represented by
the Optical Equipment NETS at any time.
- LOWER TRANSACTION COSTS. The expenses associated with trading Optical
Equipment NETS are expected to be less than trading each of the
underlying securities separately.
- TAX BENEFITS. Because you indirectly own the underlying securities, you
can choose when to sell the Optical Equipment NETS or exchange the
Optical Equipment NETS for the underlying securities and sell one or more
of those securities in order to manage the timing of your recognition of
short-term or long-term capital gains, if any. You will not recognize a
gain on the exchange of the Optical Equipment NETS for the underlying
securities.
HOW IS THE INITIAL PUBLIC OFFERING PRICE OF THE OPTICAL EQUIPMENT NETS
DETERMINED?
The initial public offering price for a round-lot of 100 Optical Equipment
NETS will equal the sum of the values of the deposited shares for all companies
as specified in this prospectus, which will be determined by multiplying the
closing market price for each security on the pricing date on the primary U.S.
trading market by the number of deposited shares for each company, plus an
underwriting fee. We expect the initial public offering price to be between $40
and $50 per Optical Equipment NETS.
5
<PAGE> 9
CAN I PURCHASE OPTICAL EQUIPMENT NETS AFTER THE INITIAL PUBLIC OFFERING?
After the initial offering, you may acquire Optical Equipment NETS in two
ways:
- through a cash purchase in the secondary trading market, or
- through an in-kind deposit through the Depository Trust Company, referred
to as DTC, of the required number of shares of common stock of the
underlying issuers with the trustee.
WILL I BE CHARGED ANY TRANSACTION FEES OR EXPENSES WITH RESPECT TO THE PURCHASE
OR SALE OF THE OPTICAL EQUIPMENT NETS?
If you purchase Optical Equipment NETS in the initial public offering, you
will pay an underwriting fee equal to 2% of the initial public offering price.
You will not be charged any issuance fee or other sales commission in connection
with purchases of Optical Equipment NETS made in the initial public offering.
If you wish to create Optical Equipment NETS by delivering to the Optical
Equipment NETS Trust the requisite number of shares of all of the underlying
common stocks represented by a round-lot of 100 Optical Equipment NETS,
Investors Bank & Trust Company, as trustee, will charge you an issuance fee of
up to $5.00 for each round-lot of 100 Optical Equipment NETS. If you wish to
exchange your Optical Equipment NETS for the underlying securities, Investors
Bank & Trust Company, as trustee, will charge you an exchange fee of up to $5.00
for each round-lot of 100 Optical Equipment NETS. You may exchange your Optical
Equipment NETS for the underlying securities at any time after the initial
offering.
If you choose to receive Optical Equipment NETS through an in-kind deposit
of the underlying securities after the conclusion of the initial public
offering, you will not be charged the underwriting fee. However, in addition to
the issuance fee charged by the trustee described above, you will be responsible
for paying any sales commission associated with your purchase of the underlying
securities that is charged by your broker.
If you acquire Optical Equipment NETS through a cash purchase in the
secondary trading market, you will be responsible for paying any sales
commission associated with your purchase that is charged by your broker.
If you choose to transfer your ownership of the Optical Equipment NETS, you
will be responsible for the payment of any tax or other charges, and any stock
transfer or other registration fees, relating to the transfer and the trustee
may refuse to register any such transfers until such amounts are paid. In
addition, the trustee may sell the underlying securities to satisfy any unpaid
taxes or other charges owed to the trustee.
Investors Bank & Trust Company, as trustee and as custodian, will charge
you a quarterly custody fee of up to $1.00 for each round-lot of 100 Optical
Equipment NETS. This fee will only be deducted from any cash dividends and other
cash distributions on the underlying securities received by the Optical
Equipment NETS Trust. The quarterly custody fee will aggregate over the course
of each calendar year and unpaid fees from previous quarters within that
calendar year may be paid from cash dividends and other
6
<PAGE> 10
cash distributions made during the current quarter. However, the trustee will
waive any portion of the custody fee that exceeds the total cash dividends and
other cash distributions received, or to be received, and payable with respect
to such calendar year. After deducting the quarterly custody fee, the trustee
may charge you a handling fee of up to $.25 for each round-lot of 100 Optical
Equipment NETS each time a cash dividend or cash distribution is made. This
handling fee will only be deducted from the related cash dividend or cash
distribution. If the related cash dividend or cash distribution does not fully
pay the handling fee, the trustee will waive any remaining portion of the
handling fee. The custody fees and handling fees deducted from any cash
dividends and other cash distributions on the underlying securities received by
the Optical Equipment NETS Trust will be disclosed on the Internet at
www.epochnets.com on a quarterly basis. Because the issuers of the underlying
securities do not pay significant dividends, you may not receive any cash
dividends and other cash distributions after the deduction of the custody fees
and handling fees. Any distribution of cash related to the sale of fractional
shares of underlying securities will be treated as a cash distribution for the
purposes of determining the custody fees and handling fees, and any unpaid fees
will be deducted from the cash proceeds of the sale of such fractional shares.
In addition, applicable taxes and governmental charges relating to cash
dividends and cash distributions, including from the sale of fractional shares,
will be deducted from the related cash dividends and cash distributions.
WHAT ABOUT TAXES?
We recommend that you consult with your own tax advisor to insure that you
understand how the U.S. federal income tax laws may apply to your particular
situation. However, a general tax summary relating to the purchase and ownership
of Optical Equipment NETS is provided below. Please refer to the section
entitled "Federal Income Tax Consequences" on page 38 of this prospectus for a
more complete description.
A person purchasing and owning Optical Equipment NETS will be treated, for
U.S. federal income tax purposes, as directly owning a proportionate share of
the underlying securities represented by the Optical Equipment NETS. When
purchasing Optical Equipment NETS, a holder will determine its initial tax basis
in each of the underlying securities by allocating the purchase price for the
Optical Equipment NETS among the underlying securities based on their relative
fair market values at the time of the Optical Equipment NETS purchase.
Similarly, when selling Optical Equipment NETS, a holder will determine the
amount realized with respect to each security by allocating the sales price
among the underlying securities based on their relative fair market values at
the time of the Optical Equipment NETS sale. A holder's gain or loss with
respect to each underlying security will be computed by subtracting its basis in
the underlying security from the amount realized on that security.
The brokerage fee incurred in purchasing an Optical Equipment NETS will be
treated as part of the cost of the underlying securities. Accordingly, a holder
includes this fee in its tax basis in the underlying securities. A holder will
allocate the brokerage fee among the underlying securities using either a fair
market value allocation or pro rata
7
<PAGE> 11
based on the number of shares of each underlying security. Similarly, the
brokerage fee incurred in selling Optical Equipment NETS will reduce the amount
realized with respect to the underlying securities.
WHAT RIGHTS DO I HAVE AS A HOLDER OF THE OPTICAL EQUIPMENT NETS DEPOSITARY
RECEIPTS?
You have the right to exchange the Optical Equipment NETS for all, but not
less than all, of the underlying securities upon request at any time after the
initial offering through your broker or other financial intermediary that is a
participant of DTC, subject to suspension by the trustee in certain limited
instances, by delivering a round-lot or integral multiple of a round-lot of
Optical Equipment NETS to the trustee, during the trustee's business hours, and
paying the exchange fees, taxes and governmental charges. You should receive the
underlying securities no later than the business day after the trustee receives
a proper notice of exchange. The trustee will not deliver fractional shares of
underlying securities. To the extent that any exchange of Optical Equipment NETS
would otherwise require the delivery of a fractional share, the trustee will
sell such share in the market and the Optical Equipment NETS Trust, in turn,
will deliver cash in lieu of such share. In connection with any such sale, the
trustee, in its sole discretion, will take reasonable steps to obtain best
execution, and in connection therewith will select brokers to effect such sale,
which may include affiliates of the trustee, Epoch Securities, Inc. or any other
depositor. Any such distribution of cash related to the sale of such fraction
will be treated as a cash distribution for the purposes of the determination of
custody fees and handling fees payable to the trustee. Except with respect to
the right to vote for dissolution of the Optical Equipment NETS Trust, the
Optical Equipment NETS themselves will not have voting rights.
WHAT RIGHTS DO I HAVE RELATING TO THE UNDERLYING COMMON STOCKS AS A HOLDER
OF THE OPTICAL EQUIPMENT NETS?
You have the right to:
- receive all shareholder disclosure materials, including annual reports,
quarterly reports and proxy materials, distributed by the issuers of the
underlying securities,
- instruct the trustee to vote the underlying securities on all matters or
attend shareholder meetings and vote yourself, and
- receive dividends and other distributions on the underlying securities,
if any are declared and paid to the trustee by an issuer of the
underlying securities, net of trustee fees, any applicable taxes and
governmental charges.
If you wish to participate in a tender offer for any of the underlying
securities, you must obtain the underlying securities by surrendering your
Optical Equipment NETS and receiving all of your underlying securities.
If an issuer of underlying securities offers subscription rights on its
underlying securities, the trustee will distribute such rights to owners of the
Optical Equipment NETS unless prohibited by law. If such distribution is
prohibited, the trustee will sell such subscription rights and distribute the
proceeds thereof to the extent they exceed
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applicable trustee's fees. If neither of these alternatives is possible, the
trustee will allow the subscription rights to lapse.
In the event the Optical Equipment NETS Trust receives additional
securities as a result of a spin-off by an underlying issuer, the additional
securities will be retained by the Optical Equipment NETS Trust, unless either
the distributed securities are not listed for trading on a U.S. national
securities exchange or through Nasdaq NMS or the distributed securities have a
Standard & Poor's sector classification that is different from the Standard &
Poor's sector classifications represented in the Optical Equipment NETS Trust at
the time of the distribution.
WILL THE COMMON STOCKS, THE SHARE AMOUNTS OR THE WEIGHTINGS UNDERLYING THE
OPTICAL EQUIPMENT NETS EVER CHANGE?
The common stocks and the share amounts, set forth above, will not change,
except for changes due to corporate events, such as stock splits or reverse
stock splits on the underlying securities, or reconstitution events. However,
since the weightings depend on the prices of the underlying stocks, these
weightings are expected to change substantially over time as the prices of the
underlying stocks fluctuate.
Reconstitution events that can result in the delivery of the common shares
of a specific company represented by the Optical Equipment NETS to the Optical
Equipment NETS holders are:
- If an issuer of underlying securities no longer has a class of common
stock registered under Section 12 of the Securities Exchange Act of 1934,
then its securities will no longer be an underlying security and the
trustee will distribute the shares of that company to the owners of the
Optical Equipment NETS.
- If the SEC finds that an issuer of underlying securities should be
registered as an investment company under the Investment Company Act of
1940, and the trustee has actual knowledge of the SEC finding, then the
trustee will distribute the shares of that company to the owners of the
Optical Equipment NETS.
- If the underlying securities of an issuer cease to be outstanding as a
result of a merger, consolidation or other corporate combination, the
trustee will distribute the consideration paid by and received from the
acquiring company to the beneficial owners of Optical Equipment NETS,
unless the consideration received is securities that are listed for
trading on a U.S. national securities exchange or through Nasdaq NMS or
have a Standard & Poor's sector classification that is the same as the
Standard & Poor's sector classifications represented in the Optical
Equipment NETS Trust at the time of the distribution. In this case, the
securities received will be treated as additional underlying securities
and will be deposited into the trust.
- If an issuer's underlying securities are delisted from trading on a U.S.
national securities exchange or Nasdaq NMS and are not listed for trading
on another U.S. national securities exchange or Nasdaq NMS within five
business days from the date such securities are delisted.
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If a reconstitution event occurs, the trustee will deliver the underlying
security to you as promptly as practicable after the date that the trustee has
knowledge of the occurrence of a reconstitution event. However, any distribution
of securities that are listed for trading on a U.S. national securities exchange
or through Nasdaq NMS or have a Standard & Poor's sector classification that is
the same as the Standard & Poor's sector classification represented in the
Optical Equipment NETS Trust at the time of the distribution will be deposited
into the trust and will become part of the Optical Equipment NETS.
WHAT IS THE OPTICAL EQUIPMENT NETS TRUST?
The Optical Equipment NETS Trust is the issuer of the Optical Equipment
NETS. This Optical Equipment NETS Trust will be formed under the depositary
trust agreement, dated as of , 2001, among Investors Bank & Trust
Company, as trustee, Epoch Securities, Inc., as initial depositor and other
depositors, if any, and the owners of the Optical Equipment NETS. The Optical
Equipment NETS Trust is not a registered investment company under the Investment
Company Act of 1940.
The Optical Equipment NETS Trust will hold shares of common stock issued by
specified companies involved in the optical equipment industry. Except when a
reconstitution event occurs, the group of companies will not change.
Reconstitution events are described in this prospectus under the heading
"Description of the Depositary Trust Agreement -- Reconstitution events."
The Optical Equipment NETS Trust's assets and the number of Optical
Equipment NETS outstanding may increase or decrease as a result of in-kind
deposits or exchanges of the Optical Equipment NETS for the underlying
securities.
CAN THE OPTICAL EQUIPMENT NETS TRUST BE TERMINATED? WHAT HAPPENS THEN?
The Optical Equipment NETS Trust will terminate on December 31, 2005, or
earlier if a termination event occurs. If a termination event occurs, the
trustee will distribute the underlying securities to you as promptly as
practicable after the termination event subject to the payment of any trustee
fees, including a fee of up to $5.00 for each round-lot of 100 Optical Equipment
NETS, applicable taxes and governmental charges, if any. The underlying
securities may be obtained by your broker or other financial intermediary in
accordance with customary customer procedures. Termination events are:
- The Optical Equipment NETS are delisted from the American Stock Exchange
and are not listed for trading on another U.S. national securities
exchange or through Nasdaq NMS within five business days from the date
the Optical Equipment NETS are delisted.
- The trustee resigns and no successor trustee is appointed within 60 days
from the date the trustee provides notice to Epoch Securities, Inc., as
initial depositor, of its intent to resign.
- More than 50% of beneficial owners of outstanding Optical Equipment NETS
vote to dissolve and liquidate the Optical Equipment NETS Trust.
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- Less than nine issuers of underlying securities are represented by the
Optical Equipment NETS.
WILL THE OPTICAL EQUIPMENT NETS BE LISTED ON A STOCK EXCHANGE?
Prior to this offering, no public market existed for the Optical Equipment
NETS. The Optical Equipment NETS have been approved for listing on the American
Stock Exchange under the symbol "OPN". In the event that a fractional share
comes to be represented by a round-lot of Optical Equipment NETS, the Optical
Equipment NETS Trust may require a minimum of more than one round-lot of 100
Optical Equipment NETS for an issuance so that the Optical Equipment NETS Trust
will always receive whole share amounts for issuance of Optical Equipment NETS.
Trading will take place only in round-lots of 100 Optical Equipment NETS and
round-lot multiples. Bid and ask prices, however, will be quoted per single
Optical Equipment NETS. A minimum of 150,000 Optical Equipment NETS will be
required to be outstanding when trading begins on the American Stock Exchange.
WHAT IS THE ROLE OF EPOCH SECURITIES, INC.? WHO IS EPOCH SECURITIES, INC. AND
EPOCH PARTNERS?
Epoch Securities, Inc. will be the initial depositor of the underlying
common stocks to the Optical Equipment NETS Trust and the managing underwriter
for the offering of the Optical Equipment NETS. It is intended that Epoch
Securities, Inc. will have binding commitments from Advanced Clearing, Inc. and
Charles Schwab & Co., Inc. at the time it makes the initial deposit of the
underlying common stocks to the Optical Equipment NETS Trust to acquire from
Epoch Securities, Inc. all the Optical Equipment NETS that Epoch Securities,
Inc. obtains from the Optical Equipment NETS Trust upon making such deposit, and
to offer and sell directly or through their affiliates or other broker-dealers
the Optical Equipment NETS to public investors. It is not intended that Epoch
Securities, Inc. will directly sell any Optical Equipment NETS. Epoch
Securities, Inc., which does business as Epoch Partners, is an investment bank
formed in November 1999. In addition to this offering, Epoch Securities, Inc.
and its affiliates have engaged in the business of public and private equity
financing, private equity investing and financial advisory services since its
inception. Epoch Securities, Inc. may provide investment banking and other
financial services to the companies that issue the underlying securities, or
other companies engaged in the optical equipment industry, in the future, for
which it will receive customary fees and commissions. See "Underwriting."
WHAT IS THE ROLE OF THE TRUSTEE? WHO IS INVESTORS BANK & TRUST COMPANY?
The trustee will act as the custodian of the underlying securities,
generally through an account at DTC, and will perform the services specified in
the depositary trust agreement. Investors Bank & Trust Company, a Massachusetts
trust company, will be the trustee and receive compensation including that as
set forth in the depositary trust agreement. Investors Bank & Trust Company,
which is subject to supervision by the Massachusetts Commissioner of Banks, the
Federal Deposit Insurance Corporation and
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the Board of Governors of the Federal Reserve System, is a subsidiary of
Investors Financial Services Corp., a bank holding company, organized under the
laws of the state of Delaware. Investors Bank & Trust Company and its affiliates
provide global custody, multi-currency accounting, institutional transfer
agency, performance measurement, cash management, foreign exchange, securities
lending, mutual fund administration, institutional trust services and investment
advisory services. These services are generally provided to financial asset
managers, such as mutual fund complexes, investment advisors, banks and
insurance companies. As of December 31, 1999, Investors Bank & Trust Company and
its affiliates provided such services for net assets totaling approximately $290
billion, including approximately $17 billion of foreign assets. Services are
provided from offices in Boston, New York, Toronto, the Cayman Islands and
Dublin. The Optical Equipment NETS are not obligations of Investors Bank & Trust
Company and its assets are not available for payment on the Optical Equipment
NETS.
The trustee will receive the following fees for its services. Upon delivery
to the Optical Equipment NETS Trust of the requisite number of shares of
underlying common stocks represented by a round-lot of 100 Optical Equipment
NETS, the trustee will receive an issuance fee of up to $5.00 for each round-lot
of 100 Optical Equipment NETS. The trustee will also receive an exchange fee of
up to $5.00 for each round-lot of 100 Optical Equipment NETS exchanged for the
underlying securities. In addition, the trustee will charge you a quarterly
custody fee of up to $1.00 for each round-lot of 100 Optical Equipment NETS.
This fee will only be deducted from any cash dividends and other cash
distributions on the underlying securities received by the Optical Equipment
NETS Trust. The quarterly custody fee will aggregate over the course of each
calendar year and unpaid fees from previous quarters within that calendar year
may be paid from cash dividends and other cash distributions made during the
current quarter. However, the trustee will waive any portion of the custody fee
that exceeds the total cash dividends and other cash distributions received, or
to be received, and payable with respect to such calendar year. After deducting
the quarterly custody fee, the trustee may charge you a handling fee of up to
$.25 for each round-lot of 100 Optical Equipment NETS each time a cash dividend
or cash distribution is made. This handling fee will only be deducted from the
related cash dividend or cash distribution. If the related cash dividend or cash
distribution does not fully pay the handling fee, the trustee will waive any
remaining portion of the handling fee. In addition, the initial depositor has
agreed to pay additional amounts to the trustee to reimburse the trustee for
certain expenses on a non-accountable basis incurred in connection with the
creation of Optical Equipment NETS during the first four months following the
closing date.
ARE THERE ANY RISKS ASSOCIATED WITH MY INVESTMENT?
An investment in Optical Equipment NETS involves significant risks. Please
refer to the section entitled "Risk Factors" on page 13 of this prospectus for a
more complete description of these risks.
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RISK FACTORS
An investment in Optical Equipment NETS involves risks similar to investing
directly in each of the underlying securities, including risks associated with
concentrated investments in the optical equipment industry. The principal risks
are described below.
RISKS SPECIFIC TO THIS OFFERING AND OPTICAL EQUIPMENT NETS
YOU MAY LOSE YOUR INVESTMENT IN THE OPTICAL EQUIPMENT NETS.
Because the value of the Optical Equipment NETS is directly related to the
value of the underlying securities, which could decline in value, you may lose
all or a substantial portion of your investment in the Optical Equipment NETS.
THE OPTICAL EQUIPMENT NETS MAY TRADE AT A DISCOUNT TO THE AGGREGATE VALUE OF THE
UNDERLYING SECURITIES.
The Optical Equipment NETS may trade in the secondary market at prices that
are lower than the aggregate value of the corresponding underlying securities.
If, in such case, an owner of Optical Equipment NETS wishes to realize the
dollar value of the underlying securities, that owner will have to exchange the
Optical Equipment NETS. Investors will be required to pay an exchange fee of up
to $5.00 for each round-lot of 100 Optical Equipment NETS exchanged for the
underlying securities, as described in "Description of the Depositary Trust
Agreement -- Exchange of Optical Equipment NETS for the underlying securities."
Also, the underlying securities for 100 Optical Equipment NETS may be in lots of
less than 100 shares (generally referred to as "odd lots") and the cost of
liquidating such odd lots will increase the cost of any such exchange.
THE OPTICAL EQUIPMENT NETS MAY NOT BE REPRESENTATIVE OF THE OPTICAL EQUIPMENT
INDUSTRY.
Although the companies whose common shares are represented by the Optical
Equipment NETS are generally considered to be involved in the optical equipment
industry, the prices of these common shares may not reflect the price movements
of the entire optical equipment industry. As a result, your investment in the
Optical Equipment NETS may decline in value as the underlying common shares
decline in value, even if the stock prices of other companies in the optical
equipment industry increase in value over the same time period. The optical
equipment industry is also characterized by significant change. Therefore, after
the initial deposit, one or more of the issuers of the underlying securities may
no longer be involved in the optical equipment industry. In addition, as a
result of a merger, acquisition or stock distribution of one or more of the
companies included in the Optical Equipment NETS, the securities of a company
that is not presently part of the Optical Equipment NETS may be included in the
Optical Equipment NETS. In this case, the Optical Equipment NETS may no longer
consist of securities issued only by companies involved in the optical equipment
industry. In addition, the composition of the optical equipment industry as
comprised by Epoch Securities, Inc. may not reflect the composition of similarly
designated industries
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comprised by other parties. Accordingly, the past performance or prospects of
future performance of any similarly designated industry is not necessarily
comparable to the optical equipment industry as comprised by Epoch Securities,
Inc. and as represented by the Optical Equipment NETS.
THE INVESTMENT MERIT OF THE UNDERLYING SECURITIES HAS NOT BEEN INVESTIGATED.
The underlying securities included in the Optical Equipment NETS were
selected by Epoch Securities, Inc. based on objective measurements, including
equity market value and market liquidity, without regard to their value, price
performance, volatility or investment merit. Consequently, the Optical Equipment
NETS Trust, the trustee, Epoch Securities, Inc., the other underwriters and
their affiliates, have not performed any investigation or review of the selected
companies, including any review or analysis of the public filings by the
companies in connection with the offering of the Optical Equipment NETS. The
inclusion of the common shares of any company in the Optical Equipment NETS is
not an investment recommendation by any of these parties.
THE OPTICAL EQUIPMENT NETS MAY NOT CONTINUE TO REPRESENT A DIVERSIFIED
INVESTMENT IN THE OPTICAL EQUIPMENT INDUSTRY.
The optical equipment industry is characterized by significant change. As a
result of business developments, reorganizations or market fluctuations
affecting companies whose shares are represented by the Optical Equipment NETS,
the Optical Equipment NETS may not continue to represent a diversified
investment in the optical equipment industry. Instead, the Optical Equipment
NETS may come to represent a concentrated investment in one or more of the
underlying securities, which would reduce investment diversification and
increase your exposure to the risks of concentrated investments. New companies
within the optical equipment industry may also emerge, and these companies can
not become part of the Optical Equipment NETS.
YOU WILL HAVE TO EXCHANGE YOUR OPTICAL EQUIPMENT NETS TO SELL INDIVIDUAL
UNDERLYING SECURITIES OR PARTICIPATE IN A TENDER OFFER RELATING TO ONE OF THE
UNDERLYING SECURITIES.
In order to sell one or more of the underlying securities individually or
to participate in a tender offer relating to one or more of the underlying
securities, you will be required to exchange your Optical Equipment NETS in
order to receive delivery of each of the underlying securities. The exchange of
your Optical Equipment NETS will allow you to sell individual underlying
securities or to deliver individual underlying securities in a tender offer. The
exchange of Optical Equipment NETS will involve payment of an exchange fee to
the trustee. In addition, any brokerage, tax or trustee fees and governmental
charges incurred in connection with the sale of any related fractional shares
resulting from the exchange of the Optical Equipment NETS will be payable by the
related owners of the Optical Equipment NETS.
TRADING IN THE OPTICAL EQUIPMENT NETS MAY BE HALTED.
If trading is halted in one or more of the underlying securities, then
trading in the Optical Equipment NETS may be halted even if trading continues in
some or all of the
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other underlying securities. If trading in the Optical Equipment NETS is halted,
you will still be able to exchange your Optical Equipment NETS for the
underlying securities by delivering your Optical Equipment NETS to the trustee
and paying the applicable fees, related taxes and governmental charges, if any,
as described in this prospectus.
THIRD PARTIES MAY CLAIM THAT THE OPTICAL EQUIPMENT NETS INFRINGE UPON THEIR
INTELLECTUAL PROPERTY RIGHTS AND SUCH CLAIMS AND OTHER THIRD PARTY CLAIMS MAY BE
SATISFIED THROUGH THE SALE OF UNDERLYING SECURITIES.
We cannot assure you that third parties will not assert that the Optical
Equipment NETS or the Optical Equipment NETS Trust utilizes or incorporates
certain elements, which infringe upon their rights. Third parties are
increasingly seeking broad "business method" patents which purport to cover
expansive areas of operations. We are not aware of any infringement claims that
could be made; however, we have not conducted a search to determine whether the
Optical Equipment NETS or the Optical Equipment NETS Trust may be infringing
upon patent or other proprietary rights of third parties. Any infringement
claims, regardless of whether they have merit, could result in costly
litigation. The depositary trust agreement provides that litigation expenses
will constitute extraordinary expenses, as defined in the depositary trust
agreement, which Epoch Securities, Inc. has agreed to pay in an amount not to
exceed $50,000. If an infringement claim were successfully asserted against the
Optical Equipment NETS Trust, it may require that the Optical Equipment NETS
Trust enter into an arrangement to license the intellectual property covered by
any such claim. If so, the Optical Equipment NETS Trust may not be able to
obtain acceptable royalty or license agreements terms. The underlying securities
are at risk, in whole or in part, to satisfy expenses from litigation involving
the Optical Equipment NETS Trust, and judgments against the Optical Equipment
NETS Trust or to settle other claims made by third parties in excess of the
$50,000 of extraordinary expenses the initial depositor has agreed to pay.
THE OPTICAL EQUIPMENT NETS TRUST MAY BE TERMINATED EARLY.
Termination events can result in the delivery of the underlying securities
represented by the Optical Equipment NETS to the Optical Equipment NETS holders.
If the number of companies whose common stock is held in the Optical Equipment
NETS Trust falls below nine, the Trust will terminate. Any such early
termination may have a negative economic impact on the beneficial owners if the
Optical Equipment NETS are trading at a premium over the aggregate values of the
underlying securities or to the extent that the termination increases the
expenses related to the potential sale of the underlying securities, including
expenses related to sales of underlying securities in odd lots. See "Description
of the Depositary Trust Agreement -- Termination of the Optical Equipment NETS
Trust" on page 36 of this prospectus for a complete description of termination
events.
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EPOCH SECURITIES, INC. AND ITS AFFILIATES MAY FACE POSSIBLE CONFLICTS OF
INTEREST.
Epoch Securities, Inc. has selected the optical equipment industry and the
companies whose common shares are represented by the Optical Equipment NETS and
may face possible conflicts of interest in connection with its activities. For
example, Epoch Securities, Inc. may provide investment banking and other
services to issuers of the underlying securities in connection with its
business, or may make purchases or sales, including establishing long or short
positions, in the underlying securities for its own account, and may issue
research in respect thereof which may affect the market price of one or more of
the underlying securities. In addition, Epoch Securities, Inc., as initial
depositor, will purchase, directly or indirectly, in the secondary market, the
underlying securities that will be deposited into the Optical Equipment NETS
Trust. Epoch Securities, Inc. may make these purchases before the deposit into
the Optical Equipment NETS Trust, or it may borrow securities for the deposit
and subsequently purchase the securities to deliver to the lenders of the
securities previously borrowed. In either event, the purchases of the underlying
securities will be made at various prices. As the initial offering price for the
Optical Equipment NETS will be based on the closing market price of each of the
underlying securities on the pricing date, Epoch Securities, Inc. may recognize
a gain on its purchases of the underlying securities. Specifically, if the
closing market price for the underlying securities on the pricing date is higher
than the price at which Epoch Securities, Inc. purchases the underlying
securities then it will recognize a gain in connection with such purchases.
Epoch Securities, Inc. may recognize this gain on any or all of the underlying
securities that comprise the Optical Equipment NETS. The potential profit of
Epoch Securities, Inc. may also be affected by any hedging activities in which
it may engage while purchasing the underlying securities in the secondary market
for deposit into the Optical Equipment NETS Trust. These activities may result
in conflicts of interest for Epoch Securities, Inc. and its affiliates in
connection with the initial selection of the underlying securities included in
the Optical Equipment NETS, the selection of the optical equipment industry,
Epoch Securities, Inc.'s activity in the secondary market in the underlying
securities and the creation and exchange of Optical Equipment NETS by the
trustee.
THE PRICES OF THE UNDERLYING SECURITIES MAY TEMPORARILY INCREASE PRIOR TO THEIR
ACQUISITION BY THE OPTICAL EQUIPMENT NETS TRUST AND MAY DECLINE IMMEDIATELY
THEREAFTER.
Prices for the underlying securities may decline immediately after the
pricing date. If the trading prices for the underlying securities decline, the
trading price of Optical Equipment NETS will also decline. Purchasing activity
in the secondary trading market associated with acquiring the underlying
securities for deposit into the Optical Equipment NETS Trust may temporarily
increase the market price of the deposited shares, which will result in a higher
initial offering price for the Optical Equipment NETS. Large volumes of
purchasing activity, which may occur in connection with the issuance of Optical
Equipment NETS, particularly in connection with the initial issuance of the
Optical Equipment NETS, could temporarily increase the market price of the
underlying securities, resulting in a higher price on that date. This purchasing
activity could create a temporary imbalance between the supply and demand of the
underlying
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securities, thereby limiting the liquidity of the underlying securities due to a
temporary increased demand for them. Temporary increases in the market price of
the underlying securities may also occur as a result of purchasing activity by
other market participants. Other market participants may attempt to benefit from
the increases in the market price of the underlying securities that may occur as
a result of the increased purchasing activity in the underlying securities
resulting from the issuance of the Optical Equipment NETS. Consequently, prices
for the underlying securities may decline immediately after the pricing date. If
the trading prices for the underlying securities decline, the trading price of
the Optical Equipment NETS will also decline.
POTENTIAL ILLIQUIDITY OF THE OPTICAL EQUIPMENT NETS.
There is currently no market for the Optical Equipment NETS and no
assurance can be given that one will develop or, if an active secondary market
for the Optical Equipment NETS does develop, that it will continue to be
sufficiently active as to provide liquidity for the Optical Equipment NETS. In
the event the American Stock Exchange listing standards are not met once trading
has begun, the Optical Equipment NETS will be delisted from the American Stock
Exchange and the Optical Equipment NETS Trust may be terminated. See
"Description of the Depositary Trust Agreement -- Termination of the Optical
Equipment NETS Trust."
RISK FACTORS SPECIFIC TO COMPANIES INVOLVED IN THE OPTICAL EQUIPMENT INDUSTRY
THE STOCK PRICES OF SOME OF THE COMPANIES INCLUDED IN THE OPTICAL EQUIPMENT NETS
HAVE BEEN AND WILL LIKELY CONTINUE TO BE EXTREMELY VOLATILE, WHICH WILL DIRECTLY
AFFECT THE PRICE VOLATILITY OF THE OPTICAL EQUIPMENT NETS.
The trading prices of the securities of some companies included in the
Optical Equipment NETS have been volatile. These stock prices could be subject
to wide fluctuations in response to a variety of factors, including the
following:
- general market fluctuations,
- actual or anticipated variations in companies' quarterly operating
results,
- announcements of technological innovations or new products or services
offered by competitors of the companies included in the Optical Equipment
NETS, including companies whose shares are not included in the Optical
Equipment NETS,
- changes in financial estimates by securities analysts,
- legal or regulatory developments affecting the companies included in the
Optical Equipment NETS or the optical equipment industry generally,
- announcements by competitors of the companies included in the Optical
Equipment NETS of significant acquisitions, strategic partnerships, joint
ventures or capital commitments,
- departures of key personnel, and
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- sales of optical equipment companies' securities in the open market.
In addition, the trading prices of some optical equipment stocks in general
have experienced extreme price and volume fluctuations recently. These
fluctuations often have been unrelated or disproportionate to the operating
performance of these companies. The valuations of many optical equipment stocks
are high when measured by conventional valuation standards, such as price to
earnings and price to sales ratios. Some of the companies do not, or in the
future might not, have earnings. As a result, their trading prices may decline
substantially and valuations may not be sustained. Any negative change in the
public's perception of the prospects of optical equipment companies or
Internet-based companies generally could depress the stock prices of optical
equipment companies, regardless of their operating results. In addition, other
broad market and industry factors may decrease the stock prices of optical
equipment companies, regardless of their operating results. Market fluctuations,
as well as general political and economic conditions, such as an economic
slowdown, negative interest rate environments or currency rate fluctuations,
also may decrease the market price of optical equipment stocks.
THE MARKET FOR OPTICAL EQUIPMENT IS NEW AND UNCERTAIN.
A viable market for optical equipment may not develop or be sustainable.
Most communications service providers have made substantial investments in their
current communications network infrastructure. In order to install optical
equipment, they might have to replace their current network equipment and could
choose to adopt this new equipment in limited stages or over extended periods of
time. Because the purchase of optical equipment will involve significant capital
investments, these communications service providers could choose not to adopt
optical transmission technologies. If the optical equipment market does not
develop, or develops more slowly than expected, the businesses, financial
conditions and results of operations of optical equipment companies could be
seriously harmed.
OPTICAL EQUIPMENT COMPANIES WILL SUFFER IF THEY DO NOT RESPOND RAPIDLY TO
TECHNOLOGICAL CHANGES AND EVOLVING INDUSTRY STANDARDS.
The market for optical equipment is characterized by rapid technological
change, frequent new product introductions and changes in customer requirements.
Optical equipment companies may be unable to respond quickly or effectively to
these developments. They may experience design, manufacturing, marketing and
other difficulties that could delay or prevent the development, introduction or
marketing of new products and enhancements. The introduction of new products by
one or several optical equipment companies, the market acceptance of products
based on new or alternative technologies or the emergence of new industry
standards could render the existing or future products of other optical
equipment companies obsolete, which would harm their businesses, financial
conditions and results of operations.
In developing products, optical equipment companies have made, and may
continue to make, assumptions about the industry standards that may be adopted
by potential customers. If the standards adopted are different from those that a
company has chosen
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to support, market acceptance of their products may be significantly reduced or
delayed and their businesses will be seriously harmed. In addition, the
introduction of products incorporating new technologies and the emergence of new
industry standards could render existing products obsolete. In order to
introduce products incorporating new technologies and new industry standards,
optical equipment companies must be able to gain access to the latest
technologies of their suppliers, other network vendors and their potential
customers. Any failure to gain access to the latest technologies would seriously
harm their businesses, financial conditions and results of operations.
Optical equipment companies must also quickly develop, introduce and
deliver their products, or incur the risk that their competitors will introduce
the same or similar products or products which could make their product
obsolete. In addition, the widespread adoption of new Internet, networking or
telecommunications standards and other technological changes could require
substantial expenditures to modify or adapt the existing products offered by
optical equipment companies. Many optical equipment companies may not
successfully introduce new products, develop and maintain a loyal customer base
or achieve general market acceptance for their products, and failure to do so
could have a material adverse effect on their business, result of operations and
financial condition.
OPTICAL EQUIPMENT PRODUCTS HAVE RELATIVELY SHORT LIFE CYCLES.
The products of some optical equipment companies have relatively short life
cycles that could result in significant fluctuations in their operating results.
The products of some companies included in the Optical Equipment NETS have a
limited life cycle and it is difficult to estimate when they will become
obsolete. As a result, it is difficult to forecast future revenue growth or
sources of future revenue. If an optical equipment company does not develop and
introduce new products in order to insure existing customers continue to use
their products, it may not be possible for an optical equipment company to
sustain its current level of sales.
OPTICAL EQUIPMENT COMPANIES MAY NOT BE ABLE TO MANAGE THEIR RAPID GROWTH.
Inability to manage rapid growth could adversely affect systems, management
resources and revenues. Some optical equipment companies are, or plan to begin,
rapidly expanding their operations. Success of the marketing strategies of many
of these companies will place extraordinary demands on their network
infrastructure and technical support. This expansion has placed and will
continue to place a significant strain on the financial, operational,
management, marketing, and sales systems and resources of many optical equipment
companies. There can be no assurance that these companies will complete the
necessary improvements to their systems, procedures and controls necessary to
support their future operations in a timely manner or that management will be
able to hire, train, retain and manage required personnel to manage such rapid
growth.
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IF OPTICAL EQUIPMENT COMPANIES ARE UNABLE TO EXPAND MANUFACTURING CAPACITY IN A
TIMELY MANNER, OR IF THEY DO NOT ACCURATELY PROJECT DEMAND, THEY WILL HAVE
EXCESS CAPACITY OR INSUFFICIENT CAPACITY, EITHER OF WHICH WILL SERIOUSLY HARM
THEIR REVENUES.
Some optical equipment companies, including those companies whose shares
underlie the Optical Equipment NETS, have a limited number of manufacturing
facilities and capacity. While many of these companies plan to devote
significant resources to expand their manufacturing capacity, any delay in
adding new facilities or expanding existing facilities could result in delays of
product delivery. Furthermore, these companies could experience difficulties and
disruptions in the manufacture of their products while they transition to new
facilities, which could prevent them from achieving timely delivery of products
and could result in lost revenues. Optical equipment companies could also be
unable to procure and install the necessary capital equipment or to hire the
necessary manufacturing personnel to work in these facilities, which would
result in difficulties in achieving adequate yields or volumes from new
manufacturing lines. Any delays, disruptions, capacity constraints or quality
control problems in manufacturing operations would result in delayed product
shipments to customers, and the revenues, competitive positions and reputations
of these optical equipment companies would be negatively impacted.
MANY OPTICAL EQUIPMENT COMPANIES DEPEND ON A SINGLE OR A FEW SUPPLIERS FOR KEY
COMPONENTS AND MATERIALS IN THEIR PRODUCTS, WHICH MAKES THEM SUSCEPTIBLE TO
SUPPLY SHORTAGES OR PRICE FLUCTUATIONS THAT COULD ADVERSELY AFFECT THEIR
OPERATING RESULTS.
Many optical equipment companies, including some of the companies whose
common stock underlies the Optical Equipment NETS, typically purchase components
and materials through purchase orders, and in general, have no guaranteed supply
arrangements with any of these suppliers. In some cases, these companies
purchase key components and materials used in the manufacture of their products
from a single or a limited number of suppliers. These suppliers may be unable to
manufacture key components and materials that meet the necessary specifications
or may not be able to meet anticipated supply requirements. If a relationship
with a key supplier terminates, the optical equipment company may not be able to
find another manufacturer that can meet the necessary specifications or
anticipated supply requirements, in which case, that company may experience
difficulty identifying alternative sources of supply for certain components used
in its products. These optical equipment companies also would experience further
delays from evaluating and testing the products of potential alternative
suppliers. Furthermore, financial or other difficulties faced by suppliers or
significant changes in demand for these components or materials could limit the
availability. Any interruption or delay in the supply of any key components or
materials, or the inability to obtain key components or materials from alternate
sources at acceptable prices and within a reasonable amount of time, would
impair or delay scheduled product deliveries to customers and could cause
customers to cancel orders. In addition, optical equipment companies may need to
make advance payments against future orders in order to secure supply. If any
optical equipment company is required to make advance payments to suppliers,
this will reduce its working capital.
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THE OPTICAL EQUIPMENT MARKET IS HIGHLY COMPETITIVE AND MANY COMPANIES MAY NOT BE
ABLE TO ACHIEVE OR MAINTAIN PROFITABILITY.
Competition in the optical equipment market is intense. Large,
well-capitalized companies historically have dominated this market and the entry
of other such companies would further increase the level of competition. In
addition, a number of private companies have attracted significant financing and
have announced plans for new optical equipment products. Large scale deployment
of new optical equipment products is subject to significant risks due to several
factors including lengthy sales cycles, complex testing and deployment processes
and substantial manufacturing capacity constraints associated with large-scale
deployments of optical equipment products. As a result, any of the companies in
the Optical Equipment NETS may not be able to achieve or maintain profitability.
If any of the optical equipment companies whose stock underlie the Optical
Equipment NETS are unable to compete successfully against their current and
future competitors, they may have difficulty obtaining customers, and they could
experience price reductions, order cancellations, increased expenses and reduced
gross margins, any one of which would harm their businesses, financial
conditions and results of operations.
COMPANIES IN THE OPTICAL EQUIPMENT INDUSTRY MAY BE UNABLE TO PROTECT THEIR
INTELLECTUAL PROPERTY RIGHTS.
The competitive positions of optical equipment companies that are unable to
adequately protect their proprietary rights may be harmed. Many optical
equipment companies rely on a combination of patent, copyrights, trademark,
service mark and trade secret laws and contractual restrictions to establish and
protect proprietary rights in their products and services. There can be no
assurance that these companies will be able to protect their intellectual
property if they are unable to enforce their rights or if they do not detect
unauthorized use of their intellectual property. Furthermore, any steps taken to
protect intellectual property may be inadequate, time consuming and expensive.
In addition, optical equipment companies may be subject to claims that their
products and services infringe the intellectual property rights of others. Any
claim, whether meritorious or not, could be time consuming, result in costly
litigation, delay product or service introductions or require optical equipment
companies to enter into royalty or licensing agreements. Legal standards
relating to the scope of protection of intellectual property rights in optical
equipment and related industries are still evolving, and the future viability or
value of any of the intellectual property rights of optical equipment companies
is uncertain.
THE DEMAND FOR OPTICAL EQUIPMENT MAY DECLINE.
Demand for some of the products and services of optical equipment companies
will decline if Internet use fails to grow and be accepted as a medium for
online commerce and communication. If this demand does not materialize, future
revenues and any future profits of many optical equipment companies will be
jeopardized and these companies may not be able to expand their businesses.
Rapid growth in the use of and interest in the Internet and other online
services is a relatively recent phenomenon. There is no
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assurance that acceptance and use will continue to develop or that a
sufficiently broad base of consumers will adopt and continue to use the Internet
and other online services.
THE COMMUNICATIONS INDUSTRY IS SUBJECT TO GOVERNMENT REGULATIONS THAT COULD HARM
OPTICAL EQUIPMENT COMPANIES.
The Federal Communications Commission, or FCC, has jurisdiction over the
entire communications industry. As a result, optical equipment products and
communications service providers, the primary purchasers of optical equipment,
are subject to FCC rules and regulations. Current and future FCC rules and
regulations affecting communications services or optical equipment products
could negatively affect the businesses of one or more of the companies whose
shares underlie the Optical Equipment NETS. In addition, international
regulatory standards could impair or delay the ability of these companies to
develop products for international service providers in the future. Delays
caused by the need to comply with regulatory requirements could result in
postponements or cancellations of product orders, which would harm their
businesses, results of operations and financial conditions. Further, any of the
optical equipment companies whose shares underlie the Optical Equipment NETS may
not be successful in obtaining or maintaining any regulatory approvals that may,
in the future, be required to operate their businesses.
NEW LAWS AND REGULATIONS WITH RESPECT TO THE INTERNET COULD SLOW ITS GROWTH AND
AS A RESULT, HARM OPTICAL EQUIPMENT COMPANIES.
New laws and regulations with respect to the Internet could impede its
commercial development and adversely affect the business of many optical
equipment companies. Due to the increasing popularity and use of the Internet
and other online services, it is possible that a number of laws and regulations
may be adopted with respect to the Internet or other online services covering
issues such as user privacy, pricing, content, copyrights, distribution and
characteristics and quality of products and services. Furthermore, the growth
and development of the market for online interaction and commerce may result in
more stringent consumer protection laws that may impose additional burdens on
companies conducting business online. The adoption of any additional laws or
regulations may impede the growth of the Internet or other online services which
could have a material adverse effect on the business, results of operations and
financial condition of many companies included in the Optical Equipment NETS.
SOME OPTICAL EQUIPMENT COMPANIES HAVE FEW CUSTOMERS AND COULD BE HARMED IF ANY
OF THESE CUSTOMERS WERE TO REDUCE THEIR PURCHASES.
Some companies included in the Optical Equipment NETS depend on a few
customers for a significant portion of their revenues. For these companies, the
failure to retain these customers or to replace these lost customers could
affect negatively their businesses. In addition, if any of these significant
customers were to reduce their purchases, the revenues of these companies would
be substantially affected. Some of the companies included in the Optical
Equipment NETS do not have long-term contracts or specific volume purchase
contracts with significant customers and therefore cannot be
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sure that these customers will continue to purchase products at current levels
and, as a result, a customer that generates substantial revenue in a particular
period may not be a source of revenue in subsequent periods.
SOME OPTICAL EQUIPMENT COMPANIES HAVE FEW PRODUCTS AND IF THESE PRODUCTS ARE NOT
COMMERCIALLY SUCCESSFUL, THEIR REVENUE WILL NOT GROW AND THEY MAY NOT ACHIEVE
PROFITABILITY.
Some optical equipment companies, including some companies whose stock is
included in the Optical Equipment NETS, have only one or a few products. If
potential customers do not adopt, purchase and successfully deploy these
products in large numbers, the revenue of these optical equipment companies may
not grow and their businesses, financial conditions and results of operations
will be seriously harmed. Even if service providers do deploy these products
fully, they may not operate as expected, which could delay or prevent its
adoption.
OPTICAL EQUIPMENT COMPANIES FACE INTERNATIONAL RISKS.
Some of the optical equipment companies whose stock underlies the Optical
Equipment NETS have significant international operations that expose them to
risks associated with international political or economic instability and
changes in foreign economic and political conditions, foreign currency
fluctuations, changes in foreign regulations and other risks inherent to
international business. The risks of international business that the companies
are exposed to include the following:
- general economic, social and political conditions,
- the difficulty of enforcing intellectual property rights, agreements and
collecting receivables through certain foreign legal systems,
- differing tax rates, tariffs, exchange controls or other similar
restrictions, including the inability in some cases to repatriate foreign
earnings,
- foreign currency fluctuations, and
- changes in, and compliance with, domestic and foreign laws and
regulations which impose a range of restrictions on operations, trade
practices, foreign trade and international investment decisions.
Many optical equipment companies are developing strategies to generate
additional revenues for their products and services outside of the United States
and Western Europe as the volume of traffic across communications networks grows
globally. The expansion into international markets will require significant
management attention and financial resources to develop and expand international
sales and marketing activities. However, many optical equipment companies cannot
be certain that investments in establishing facilities in other countries will
produce anticipated revenues as they have limited experience developing
localized versions of their products and services and marketing products and
services internationally. The inability of some optical equipment companies,
including those companies whose stock underlies the Optical Equipment
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NETS, to successfully expand internationally may result in slower revenue growth
and the inability to achieve profitability.
Some of the companies included in the Optical Equipment NETS were
incorporated under the laws of a jurisdiction other than the United States and a
substantial portion of their assets are located outside the United States. As a
result, it may be impossible to effect service of process within the United
States on some of the companies included in the Optical Equipment NETS or
enforce judgments made against them in courts in the United States based on
civil liability provisions of the securities laws of the United States. In
addition, judgments obtained in the United States, especially those awarding
punitive damages, may not be enforceable in foreign countries.
SOME OPTICAL EQUIPMENT COMPANIES HAVE LIMITED OPERATING HISTORIES AND, AS A
RESULT, MAY BE UNABLE TO MAKE ACCURATE FINANCIAL FORECASTS.
Some companies included in the Optical Equipment NETS have a limited
operating history that makes financial forecasting difficult. These companies
are not able to forecast operating expenses based on their historical results.
Accordingly, these companies base their forecasts of operating expenses in part
on percentages of projected revenues. However, many expenses are fixed, at least
in the short term, and it may not be possible to quickly reduce spending if
revenues are lower than projected. Thus, lower than projected revenue growth
could result in the failure of optical equipment companies, including those
companies whose stock underlies the Optical Equipment NETS, to meet their income
or loss projections in a given quarter.
OPTICAL EQUIPMENT IS COMPLEX AND ANY DEFECTS OR ERRORS COULD BE COSTLY TO FIX.
The products of optical equipment companies are complex and must be
developed quickly to keep pace with the rapidly changing and highly competitive
optical equipment market. Despite extensive product testing, complex optical
equipment products and services are likely to contain undetected errors or
defects. In the past, some optical equipment companies have experienced delays
in releasing some versions of their products until optical equipment problems
were corrected. Some products may not be free from errors or defects after
commercial shipments have begun, which could result in the rejection of products
and damage to their reputations, as well as lost revenues, diverted development
resources, increased service and warranty costs and significant litigation and
related legal expenses, all of which could negatively affect the revenues and
expenses of a optical equipment company, as well as the market acceptance of its
products.
OPTICAL EQUIPMENT COMPANIES MAY BE UNABLE TO ATTRACT AND RETAIN THE NECESSARY
PERSONNEL NEEDED TO DEVELOP AND OPERATE THEIR BUSINESSES.
Many optical equipment companies are dependent on their ability to continue
to attract and retain highly skilled technical and managerial personnel to
develop and generate their businesses. Many optical equipment companies are
highly dependent on the experience, abilities and continued services of key
executive officers and key technical personnel. If these companies lose the
services of any of these officers or key
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technical personnel, their future success could be undermined. Competition for
skilled personnel in the technology field generally and in the optical equipment
industry in particular is intense. These optical equipment companies may not be
able to continue to attract and retain qualified personnel.
THE OPTICAL EQUIPMENT INDUSTRY HAS BEEN CHARACTERIZED BY FREQUENT MERGER AND
ACQUISITION ACTIVITY THAT COULD DISRUPT THE BUSINESSES AND FINANCIAL CONDITIONS
OF COMPANIES INVOLVED.
The optical equipment industry has been characterized by frequent merger
and acquisition activity. Some optical equipment companies have indicated that
they intend to make investments in complementary companies, products or
technologies. In the event of any such investments or acquisitions, these
companies could:
- issue stock that would dilute their current stockholders' percentage
ownership,
- incur debt,
- assume liabilities,
- incur amortization expenses related to goodwill and other intangible
assets, or
- incur large and immediate write-offs.
These acquisitions also involve numerous risks, including:
- problems combining the purchased operations, technologies or products,
- unanticipated costs,
- diversion of management's attention from its core business,
- adverse effects on existing business relationships with suppliers and
customers,
- risks associated with entering markets in which the acquiring companies
have no or limited prior experience, and
- potential loss of key employees, particularly those of the acquired
organizations.
These optical equipment companies, which may include companies whose stock
underlies the Optical Equipment NETS, may not be able to successfully integrate
any businesses, products, technologies or personnel that they might acquire in
the future. As a result, their businesses and financial conditions could be
harmed.
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DESCRIPTION OF THE TRUST
This discussion highlights information about the Optical Equipment NETS
Trust. You should read this information, information about the depositary trust
agreement and the depositary trust agreement before you purchase Optical
Equipment NETS. The material terms of the depositary trust agreement are
described in this prospectus under the heading "Description of the Depositary
Trust Agreement."
The Optical Equipment NETS Trust will be formed pursuant to the depositary
trust agreement, dated as of , 2001. Investors Bank & Trust
Company will be the trustee. The Optical Equipment NETS Trust is intended to
hold deposited shares for the benefit of owners of the Optical Equipment NETS,
and the Optical Equipment NETS Trust will issue Optical Equipment NETS. After
the initial offering, the Optical Equipment NETS Trust may issue additional
Optical Equipment NETS on a continuous basis when an investor deposits the
requisite underlying securities with the trustee. The trustee will perform only
administrative and ministerial acts. The property of the Optical Equipment NETS
Trust will consist of the underlying securities and all monies or other
property, if any, received by the trustee. The Optical Equipment NETS Trust will
not publish or otherwise calculate the aggregate value of the underlying
securities represented by an Optical Equipment NETS. The Optical Equipment NETS
Trust will terminate on December 31, 2005, or earlier if a termination event
occurs. The Optical Equipment NETS Trust is not a registered investment company
under the Investment Company Act of 1940.
DESCRIPTION OF OPTICAL EQUIPMENT NETS
Optical Equipment NETS will represent your individual and undivided
beneficial ownership interest in the common stock of the specified underlying
securities. The 21 companies to be included initially in this receipt program
are listed in the section entitled "Summary Information -- What are the Optical
Equipment NETS?"
You may only acquire, hold, trade and exchange Optical Equipment NETS in a
round-lot of 100 Optical Equipment NETS and round-lot multiples. The Optical
Equipment NETS Trust will only issue Optical Equipment NETS upon the deposit of
the whole shares of underlying securities that are represented by a round-lot of
100 Optical Equipment NETS. In the event of a stock split, reverse stock split,
or other distribution by the issuer of an underlying security that results in a
fractional share becoming represented by a round-lot of Optical Equipment NETS,
the Optical Equipment NETS Trust may require a minimum of more than one
round-lot of 100 Optical Equipment NETS for an issuance so that the Optical
Equipment NETS Trust will always receive whole share amounts for issuance of
Optical Equipment NETS.
Beneficial owners of Optical Equipment NETS will have the same rights and
privileges as they would have if they beneficially owned the underlying
securities outside of the Optical Equipment NETS Trust. These include the right
of investors:
- to receive all shareholder disclosure materials, including annual
reports, quarterly reports and proxy materials, distributed by the
issuers of the underlying securities,
- to instruct the trustee to vote the common stock,
- to receive dividends and other distributions on the underlying
securities, if any are declared and paid to the trustee by an issuer of
the underlying securities, net of trustee fees and any applicable taxes
and governmental charges,
- to exchange the Optical Equipment NETS for all, but not less than all, of
the underlying securities, and
- to proceed against an issuer of an underlying security without having to
act in concert with other beneficial owners of Optical Equipment NETS or
the trustee.
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In order to participate in a tender offer relating to one or more of the
underlying securities, you will be required to exchange your Optical Equipment
NETS in order to receive delivery of each of the underlying securities. The
exchange of your Optical Equipment NETS will allow you to deliver individual
underlying securities in a tender offer. The exchange of Optical Equipment NETS
will involve payment of an exchange fee to the trustee. Optical Equipment NETS
are not intended to change your beneficial ownership in the underlying
securities under federal securities laws, including Sections 13(d) and 16(a) of
the Securities Exchange Act of 1934.
If an issuer of underlying securities offers subscription rights on its
underlying securities, the trustee will distribute such rights to owners of the
Optical Equipment NETS unless prohibited by law. If such distribution is
prohibited, the trustee will sell such subscription rights and distribute the
proceeds thereof to the extent they exceed applicable trustee's fees. If neither
of these alternatives is possible, the trustee will allow the subscription
rights to lapse.
In the event the Optical Equipment NETS Trust receives additional
securities as a result of a spin-off by an underlying issuer, the additional
securities will be retained by the Optical Equipment NETS Trust, unless either
the distributed securities are not listed for trading on a U.S. national
securities exchange or through Nasdaq NMS or the distributed securities have a
Standard & Poor's sector classification that is different from the Standard &
Poor's sector classifications represented in the Optical Equipment NETS Trust at
the time of the distribution.
Optical Equipment NETS may trade in the secondary market at prices that are
lower than the aggregate value of the corresponding underlying securities. If,
in such case, an owner of Optical Equipment NETS wishes to realize the dollar
value of the underlying securities, that owner will have to exchange the Optical
Equipment NETS. Such exchange will require payment of fees and expenses as
described in "Description of the Depositary Trust Agreement -- Exchange of
Optical Equipment NETS for the underlying securities." See also "Risk
Factors -- Risks Specific to this Offering and Optical Equipment NETS".
DEPOSITORY
Description of the global certificates. Upon issuance, all of the Optical
Equipment NETS will be represented by one or more fully registered global
certificates. Each global certificate will be deposited with, or on behalf of,
DTC, as depository, and will be registered in the name of Cede & Co., DTC's
partnership nominee. Unless and until it is exchanged in whole or in part for
the Optical Equipment NETS in definitive form, no global certificate may be
transferred except as a whole by the depository to a nominee of the depository
or by a nominee of the depository to the depository or another nominee of the
depository or by the depository or any nominee to a successor of the depository
or a nominee of that successor.
So long as DTC, or its nominee, is a registered owner of a global
certificate, DTC or its nominee, as the case may be, will be considered the sole
owner or holder of the Optical Equipment NETS represented by the global
certificate for all purposes under the depositary trust agreement. Except as
provided below, the beneficial owners of the Optical Equipment NETS will not be
entitled to have the Optical Equipment NETS represented by a global certificate
registered in their names, will not receive or be entitled to receive physical
delivery of the Optical Equipment NETS in definitive form and will not be
considered the owners or holders of the Optical Equipment NETS, including for
purposes of receiving any reports delivered by Epoch Securities, Inc. or the
trustee under the depositary trust agreement. Accordingly, each person owning a
beneficial interest in a global security must rely on the procedures of DTC and,
if that person is not a participant of DTC, on the procedures of the participant
through which that person owns its interest, to exercise any rights of a holder
under the depositary trust agreement. Epoch Securities, Inc. understands that
under existing industry practices, in the event that Epoch Securities, Inc.
requests any action of holders or that an owner of a beneficial interest in a
global certificate desires to give or take any action which a holder is entitled
to give or take under the depositary trust agreement, DTC would
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authorize the participants holding the relevant beneficial interests to give or
take that action, and those participants would authorize beneficial owners
owning through those participants to give or take that action or would otherwise
act upon the instructions of beneficial owners. Conveyance of notices and other
communications by DTC to participants, by participants to indirect participants
and by participants and indirect participants to beneficial owners will be
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
DTC procedures. The following is based on information furnished by DTC:
DTC will act as securities depository for the Optical Equipment NETS. The
Optical Equipment NETS will be issued as fully registered securities registered
in the name of Cede & Co. (DTC's partnership nominee). One or more fully
registered global certificates will be issued for the Optical Equipment NETS in
the aggregate principal amount of such issue, and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC holds securities that its participants ("Direct Participants")
deposit with DTC. DTC also facilitates the settlement among Direct Participants
of securities transactions, such as transfers and pledges, in deposited
securities through electronic computerized book-entry changes in Direct
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants of DTC include securities brokers
and dealers, banks, trust companies, clearing corporations and certain other
organizations. DTC is owned by a number of its Direct Participants and by the
New York Stock Exchange, the American Stock Exchange and the National
Association of Securities Dealers, Inc. Access to DTC's system is also available
to others such as securities brokers and dealers, banks and trust companies that
clear through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants"). The rules applicable to
DTC and its Direct and Indirect Participants are on file with the SEC.
Purchases of the Optical Equipment NETS under DTC's system must be made by
or through Direct Participants, which will receive a credit for the Optical
Equipment NETS on DTC's records. The ownership interest of each beneficial owner
is in turn to be recorded on the records of Direct and Indirect Participants.
Beneficial owners will not receive written confirmation from DTC of their
purchase, but beneficial owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the Direct or Indirect Participants through which the beneficial
owner entered into the transaction. Transfers of ownership interests in the
Optical Equipment NETS are to be made by entries on the books of Direct and
Indirect Participants acting on behalf of beneficial owners.
To facilitate subsequent transfers, all the Optical Equipment NETS
deposited with DTC are registered in the name of DTC's partnership nominee, Cede
& Co. The deposit of the Optical Equipment NETS with DTC and their registration
in the name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual beneficial owners of the Optical Equipment NETS; DTC's
records reflect only the identity of the Direct Participants to whose accounts
the Optical Equipment NETS are credited, which may or may not be the beneficial
owners. The Direct and Indirect Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to beneficial owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to the Optical
Equipment NETS. Under its usual procedures, DTC mails an omnibus proxy to the
trustee as soon as possible after the applicable record date. The omnibus proxy
assigns Cede & Co.'s consenting or voting rights to those
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Direct Participants identified in a listing attached to the omnibus proxy to
whose accounts the Optical Equipment NETS are credited on the record date.
Dividends, if any, or other payments, if any, made in cash on the Optical
Equipment NETS will be made in immediately available funds to Cede & Co. DTC's
practice is to credit Direct Participants' accounts on the applicable payment
date in accordance with their respective holdings shown on the depository's
records unless DTC has reason to believe that it will not receive payment on
that date. Payments by participants to beneficial owners will be governed by
standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street
name", and will be the responsibility of that participant and not of DTC, the
trustee or Epoch Securities, Inc., subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of dividends, if
any, or other payments, if any, to Cede & Co. is the responsibility of the
trustee, disbursement of those payments to Direct Participants shall be the
responsibility of DTC, and disbursement of any payments to the beneficial owners
will be the responsibility of Direct Participants and Indirect Participants.
Exchange for certificated securities. If the depository is at any time
unwilling or unable to continue as depository and a successor depository is not
appointed by Epoch Securities, Inc. within 60 days, the global certificates will
be exchangeable for the Optical Equipment NETS in definitive form of like tenor
and of an equal aggregate amount. The definitive Optical Equipment NETS will be
registered in the name or names as the depository shall instruct the trustee. It
is expected that instructions may be based upon directions received by the
depository from participants with respect to ownership of beneficial interests
in the global certificates.
The information in this section concerning DTC and DTC's system has been
obtained from sources that Epoch Securities, Inc. believes to be reliable, but
Epoch Securities, Inc. takes no responsibility for its accuracy.
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DESCRIPTION OF THE UNDERLYING SECURITIES
The optical equipment industry. The optical equipment industry consists of
numerous companies that design, manufacture and market products that enable
voice and data transmissions across communications networks using optical, or
light-based, signals.
Over the last three years, the volume of traffic across communications
networks has grown dramatically. Broadband or high-speed Internet access through
cable modems and digital subscriber line, also called DSL, connections combined
with new bandwidth-intensive applications such as streaming video and real-time
electronic commerce have placed significant strains on the capacity of existing
communications network infrastructures. These networks were initially designed
for low speed voice traffic and not for large volumes of high-speed data
traffic. According to RHK, Inc., a telecommunications industry market research
firm, the data traffic across communications networks is expected to increase
from 350,000 terabytes per month in 1999 to more than 15 million terabytes per
month in 2003. Ten terabytes is the equivalent of all of the information
contained in the Library of Congress.
To handle the increasing volume of communications traffic, communications
service providers are rapidly expanding their networks and adding capacity by
using optical transmission and switching equipment. Optical equipment generally
provides higher capacity and greater network reliability than older electrical
transmission equipment because light signals can travel more quickly through
optical fibers than electrical signals can travel through copper wire, and
transmitting data using light is inherently more efficient.
Demand for optical equipment has also increased due to changing market
dynamics. The deregulation of the telecommunications industry has resulted in
the creation of a new generation of communications service providers that seek
to use the latest optical equipment in their communications networks. Incumbent
communications service providers must continue to install new optical equipment
that increases the capacity and the competitiveness of their networks while
maintaining or improving network reliability. According to RHK, Inc., the global
market for optical systems and subsystems is expected to grow 31% per year from
$38 billion in 1999 to $113 billion in 2003.
Optical equipment companies generally fall into three categories: systems
providers, subsystems providers or fiber optic cable providers. Systems
providers undertake the complex task of assembling different optical equipment
building blocks developed by subsystems providers and then combining them with
software and additional proprietary hardware to create complete optical
equipment systems. These systems providers sell their products to the
communications service providers for use in their networks. Optical systems
include DWDM, or dense wave division multiplexing, transport systems, which
transmit optical signals within fiber optic networks, and optical switches,
which connect disparate optical networks and route optical signals from one
location to another. These systems can be used in metropolitan areas or for
long-haul, or long distance, applications. The building blocks provided by
subsystems providers include computer chips or modules that typically perform a
specific function such as the amplification or steering of light signals.
Subsystems include erbium-doped fiber amplifiers, which reamplify all the
optical signals on an optical fiber without costly electrical reamplification of
the individual signals, optical muliplexors, which combine individual optical
signals to cost effectively transmit them together in a single optical fiber,
and add-drop multiplexers, which manipulate optical signals to add or drop
individual signals at intermediate locations in the optical network. Fiber optic
cable providers sell fiber optic cable to systems providers, subsystems
providers and communications service providers for use in optical equipment or
in optical networks.
Selection criteria. The underlying securities are the common stocks of a
group of 21 specified companies involved in various aspects of the optical
equipment industry and whose common stock is registered under Section 12 of the
Securities Exchange Act of 1934. The issuers of the underlying securities
generally are considered to be among the largest capitalized, most liquid
companies with U.S.-traded common stock registered under Section 12 of the
Securities Exchange Act of 1934 that are
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involved in the optical equipment industry, as measured by equity market value
and trading volume. The following criteria were used in selecting the underlying
securities on October 26, 2000:
- equity market value equal to or greater than $1.5 billion,
- average daily trading volume of at least 800,000 shares over the 60
trading days before October 26, 2000,
- average daily dollar volume (that is, the average daily trading volume
multiplied by the average closing price) of at least $40 million over the
60 trading days before October 26, 2000, and
- a trading history of at least 90 calendar days.
The equity market value of a company is determined by multiplying the price
of its common stock by the number of outstanding shares of its common stock.
Epoch Securities, Inc. examined available public information about each company,
including such items as analysts' reports and other independent market research,
solely to determine whether a company actively participates in the optical
equipment industry. See "No investigation" below. The ultimate determination of
the inclusion of the 21 specified companies, however, rested solely within the
discretion of Epoch Securities, Inc.
After the initial deposit, one or more of the issuers of the underlying
securities may no longer be substantially involved in the optical equipment
industry. In this case, the Optical Equipment NETS may no longer consist of
securities issued by companies involved in the optical equipment industry. In
addition, as a result of a reconstitution event or a distribution of securities,
the securities of a company not in the optical equipment industry may be
included in the Optical Equipment NETS. Epoch Securities, Inc. will determine,
in its sole discretion, whether the issuer of a particular underlying security
remains in the optical equipment industry and will undertake to make adequate
disclosure when necessary.
Underlying securities. For a list of the underlying securities represented
by Optical Equipment NETS, see "Summary Information -- What are the Optical
Equipment NETS?" If the underlying securities change because of a reconstitution
event or as a result of a distribution of securities, a revised list of
underlying securities will be disclosed in a related prospectus supplement and
will be available from the American Stock Exchange and through a widely-used
electronic information dissemination system such as Bloomberg or Reuters.
No investigation. In selecting the underlying securities, Epoch
Securities, Inc., the Optical Equipment NETS Trust, the trustee, the other
underwriters, and any affiliate of these entities, have not performed any
investigation or review of the selected companies, including the public filings
by the companies in connection with the offering of the Optical Equipment NETS,
other than to the extent required to determine whether the companies satisfied
the selection criteria outlined above. Accordingly, before you acquire Optical
Equipment NETS, you should consider publicly available financial and other
information about the issuers of the underlying securities. See "Risk Factors"
and "Where You Can Find More Information." THE INCLUSION OF A COMPANY'S COMMON
STOCK IN THE UNDERLYING SECURITIES OF THE OPTICAL EQUIPMENT NETS IS NOT A
RECOMMENDATION TO INVEST IN THAT COMPANY OR ITS COMMON STOCK BY EPOCH
SECURITIES, INC., ADVANCED CLEARING, INC., CHARLES SCHWAB & CO., INC., THE
OPTICAL EQUIPMENT NETS TRUST, THE TRUSTEE, OR ANY OF THEIR AFFILIATES.
General background and historical information. For a brief description of
the business of each of the issuers of the underlying securities and monthly
pricing information showing the historical performance of each underlying
issuer's securities see "Exhibit A."
The following table and graph set forth the composite performance of the
underlying securities represented by a single Optical Equipment NETS as of
October 26, 2000 based upon the share amounts set forth in the table on page 2
of this prospectus, measured at the close of each business day from January 4,
1999 to October 26, 2000. The graph shows the performance of the underlying
securities represented by a single Optical Equipment NETS relative to the Nasdaq
Composite with both
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indexed to 100. The performance table and graph data are adjusted for any splits
that may have occurred over the measurement period.
On January 4, 1999, ten of the underlying securities represented by the
Optical Equipment NETS were not publicly traded. In order to present the
historical performance of optical equipment companies' stocks beginning on
January 4, 1999, the composite price of the thirteen underlying securities that
were publicly traded on January 4, 1999 was calculated using the number of
shares per Optical Equipment NETS as shown in the table on page 2 increased on a
pro-rata basis using these thirteen securities' respective weightings on January
4, 1999 to represent an initial investment of $2,427. On the day each of the
additional ten underlying securities represented by the Optical Equipment NETS
became publicly traded, these securities were added to the composite
performance. On the day each security was added, the number of shares of this
security equaled the number of shares per Optical Equipment NETS as shown in the
table on page 2 increased on a pro-rata basis using this security's respective
weighting calculated using the closing prices on the day it began trading
publicly. At the same time, the other securities already included in the
composite price were adjusted, pro-rata for the inclusion of this new security.
As a result of these calculations, the number of shares used to calculate the
composite performance of the underlying securities represented by a single
Optical Equipment NETS equals the number of shares underlying a single Optical
Equipment NETS based on the table on page 2 on the day that all were publicly
traded.
Because on January 4, 1999, ten of the twenty-one underlying securities
were not publicly traded, the following table and graph only approximate the
historical performance of all the optical equipment companies' stocks that are
represented by the Optical Equipment NETS, and this information is not an exact
representation of how the Optical Equipment NETS would have traded if created on
January 4, 1999. Furthermore past performance of any security or composite of
securities, including the information provided in the table and graph below, is
not necessarily indicative of their future performance, and the table and graph,
set forth below, are not necessarily indicative of future Optical Equipment NETS
values.
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COMPOSITE PERFORMANCE OF THE SECURITIES REPRESENTED BY A SINGLE OPTICAL
EQUIPMENT NETS
FROM JANUARY 4, 1999 TO OCTOBER 26, 2000
[LINE GRAPH]
<TABLE>
<CAPTION>
INDEXED INDEXED
OPTICAL OPTICAL OPTICAL OPTICAL
INDEXED EQUIPMENT EQUIPMENT INDEXED EQUIPMENT EQUIPMENT
NASDAQ NETS NETS NASDAQ NETS NETS
NASDAQ COMPOSITE COMPOSITE COMPOSITE NASDAQ COMPOSITE COMPOSITE COMPOSITE
1999 COMPOSITE PERFORMANCE PRICES PRICES 2000 COMPOSITE PERFORMANCE PRICE PRICES
----------- --------- ----------- --------- --------- ----------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
JANUARY 4 2,208.05 100% $24.27 100% JANUARY 3 4,131.15 187% $55.32 228%
FEBRUARY 1 2,510.09 114 25.40 105 FEBRUARY 1 4,051.98 184 51.71 213
MARCH 1 2,295.18 104 24.09 99 MARCH 1 4,784.08 217 73.28 302
APRIL 1 2,493.37 113 26.53 109 APRIL 3 4,223.68 191 61.75 254
MAY 3 2,535.58 115 27.90 115 MAY 1 3,958.08 179 62.39 257
JUNE 1 2,412.03 109 27.22 112 JUNE 1 3,582.50 162 60.05 247
JULY 1 2,706.18 123 32.82 135 JULY 3 3,991.93 181 73.94 305
AUGUST 2 2,623.63 119 32.95 136 AUGUST 1 3,685.52 167 66.94 276
SEPTEMBER 1 2,750.80 125 32.95 136 SEPTEMBER 1 4,234.33 192 80.06 330
OCTOBER 1 2,736.85 124 33.48 138 OCTOBER 2 3,568.90 162 63.38 261
NOVEMBER 1 2,967.65 134 38.29 158 NOVEMBER 1 3,333.39 151 50.15 207
DECEMBER 1 3,353.71 152 46.02 190
</TABLE>
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<PAGE> 37
DESCRIPTION OF THE DEPOSITARY TRUST AGREEMENT
The material terms of the depositary trust agreement are described below.
This description is not complete. The form of this agreement has been filed as
an exhibit to the registration statement. You should read the entire depositary
trust agreement because it defines your rights as a holder of the Optical
Equipment NETS.
General. The depositary trust agreement, dated as of , 2001,
among Epoch Securities, Inc., Investors Bank & Trust Company, as trustee, other
depositors and the owners of the Optical Equipment NETS, provides that Optical
Equipment NETS will represent an owner's undivided beneficial ownership interest
in the common stock of the underlying companies.
The trustee. Investors Bank & Trust Company, a Massachusetts trust
company, will serve as trustee under the depositary trust agreement. Investors
Bank & Trust Company, which is subject to supervision by the Massachusetts
Commissioner of Banks, the Federal Deposit Insurance Corporation and the Board
of Governors of the Federal Reserve System, is a subsidiary of Investors
Financial Services Corp., a bank holding company organized under the laws of the
state of Delaware. Investors Bank & Trust Company and its affiliates provide
global custody, multi-currency accounting, institutional transfer agency,
performance measurement, cash management, foreign exchange, securities lending,
mutual fund administration, institutional trust services and investment advisory
services. These services are generally provided to financial asset managers,
such as mutual fund complexes, investment advisors, banks and insurance
companies. As of December 31, 1999, Investors Bank & Trust Company and its
affiliates provided such services for net assets totaling approximately $290
billion, including approximately $17 billion of foreign assets. Services are
provided from offices in Boston, New York, Toronto, the Cayman Islands and
Dublin, Ireland.
Creation and issuance of Optical Equipment NETS. If you are a DTC
accountholder or have made arrangements satisfactory to the trustee for the
deposit of the requisite underlying securities in the Optical Equipment NETS
Trust through DTC, you may create Optical Equipment NETS in round-lots of 100
Optical Equipment NETS by delivering to the trustee the requisite underlying
securities pursuant to a binding delivery obligation at an agreed price in
accordance with normal settlement procedures. The Optical Equipment NETS Trust
will only issue Optical Equipment NETS upon the deposit of the whole shares
represented by a round-lot of 100 Optical Equipment NETS. In the event that a
fractional share comes to be represented by a round-lot of Optical Equipment
NETS, the Optical Equipment NETS Trust may require a minimum of more than one
round-lot of 100 Optical Equipment NETS for an issuance so that the Optical
Equipment NETS Trust will always receive whole share amounts for issuance of
Optical Equipment NETS. The depositary trust agreement provides for further
issuances of Optical Equipment NETS on a continuous basis without your consent,
subject to suspension by the trustee in certain limited instances.
If you create Optical Equipment NETS, you will be deemed to represent and
warrant that the securities deposited are validly issued and fully paid, that
you are duly authorized to make such deposit and that, at the time of delivery,
such securities are free and clear of any lien, pledge, encumbrance, right,
charge or claim and further that such securities are not, and Optical Equipment
NETS representing such securities would not be, "restricted securities" under
the Securities Act of 1933. If such representations and warranties are
determined by the trustee, in its sole discretion, to be materially inaccurate
at the time deemed given and that the inaccuracy has or may adversely affect
other beneficial owners in any material respect, the depositary trust agreement
provides that the related deposit of securities will be null and void and, to
the extent lawful and feasible, the trustee will cause the related securities to
be redelivered to the party depositing such securities. The depositary trust
agreement also provides that any expense related to the trustee's actions in
this regard will be treated as extraordinary expenses, as defined in the
depositary trust agreement.
Exchange of Optical Equipment NETS for the underlying securities. You may
exchange Optical Equipment NETS in integral multiples of 100 Optical Equipment
NETS by surrendering them to the Optical Equipment NETS Trust in order to
receive all, but not less than all, of the deposited shares from
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<PAGE> 38
the Optical Equipment NETS Trust. You may exchange your Optical Equipment NETS
for the underlying securities at any time after the initial offering, subject to
suspension by the trustee in certain limited instances. The trustee will not
deliver fractional shares of underlying securities, to the extent that any
exchange of Optical Equipment NETS would otherwise require the delivery of
fractional shares. The Optical Equipment NETS Trust will deliver cash in lieu of
such shares. You may exchange your Optical Equipment NETS for the underlying
securities, during the trustee's normal business hours and upon the payment of
applicable fees, taxes or governmental charges, if any. Exchanges of Optical
Equipment NETS may only be accomplished through your broker or other financial
intermediary who is a participant of DTC, acting on your behalf. You should
receive your underlying securities no later than the business day after the
trustee receives your request.
Commissions, issuance and exchange fees. If you choose to create Optical
Equipment NETS through an in-kind deposit, you will not be charged the
underwriting fee. However, in addition to the issuance and exchange fees
described below, you will be responsible for paying any sales commissions
associated with your purchase of the underlying securities that is charged by
your broker.
If you wish to create Optical Equipment NETS by delivering to the Optical
Equipment NETS Trust the requisite underlying securities, the trustee will
charge you an issuance fee of up to $5.00 for each round-lot of 100 Optical
Equipment NETS. If you wish to exchange your Optical Equipment NETS for the
underlying securities, the trustee will charge you an exchange fee of up to
$5.00 for each round-lot of 100 Optical Equipment NETS issued.
Custody and handling fees. Investors Bank & Trust Company, as trustee and
as custodian, will charge you a quarterly custody fee of up to $1.00 for each
round-lot of 100 Optical Equipment NETS. This fee will only be deducted from any
cash dividends and other cash distributions on the underlying securities
received by the Optical Equipment NETS Trust. The quarterly custody fee will
aggregate over the course of each calendar year and unpaid fees from previous
quarters within that calendar year may be paid from cash dividends and other
cash distributions made during the current quarter. However, the trustee will
waive any portion of the custody fee that exceeds the total cash dividends and
other cash distributions received, or to be received, and payable with respect
to such calendar year. After deducting the quarterly custody fee, the trustee
may charge you a handling fee of up to $.25 for each round-lot of 100 Optical
Equipment NETS each time a cash dividend or cash distribution is made. This
handling fee will only be deducted from the related cash dividend or cash
distribution. If the related cash dividend or cash distribution does not fully
pay the handling fee, the trustee will waive any remaining portion of the
handling fee.
Voting rights. The trustee will deliver to you proxy-soliciting materials
provided by issuers of the deposited shares so as to permit you to give the
trustee instructions as to how to vote on matters to be considered at any annual
or special meetings held by issuers of the underlying securities or to vote
directly on such matters. If you wish to participate in a tender offer for
underlying securities, you must obtain the underlying securities by surrendering
your Optical Equipment NETS and receiving all of your underlying securities.
Under the depositary trust agreement, any beneficial owner of Optical
Equipment NETS, other than Epoch Securities, Inc., owning Optical Equipment NETS
for its own proprietary account as principal, will have the right to vote to
dissolve and liquidate the Optical Equipment NETS Trust.
Distributions. You will be entitled to receive, net of trustee fees,
governmental charges and taxes, if any, distributions of cash, including
dividends, securities or property, if any, made with respect to the underlying
securities. The trustee will use its reasonable efforts to make distributions as
promptly as practicable after receipt from the issuers of the related underlying
securities. Nevertheless, you may receive your distributions later than you
would have had you held the underlying securities directly. You will be
obligated to pay any tax or other charge that may become due with respect to
Optical Equipment NETS. The trustee may deduct the amount of any tax or other
governmental charge from a distribution before making payment to you. In
addition, the trustee will deduct its quarterly custody fee and handling fee as
described in "Custody and handling fees" above.
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<PAGE> 39
Record dates. With respect to dividend payments and voting instructions,
the trustee expects to fix the Optical Equipment NETS Trust's record dates as
close as possible to the record date fixed by the issuer of the underlying
securities.
Shareholder communications. The trustee promptly will forward to you all
shareholder communications that it receives from issuers of the underlying
securities.
Reconstitution events. The depositary trust agreement provides for the
automatic distribution of underlying securities of a specific company to you in
the following circumstances:
- If an issuer of underlying securities no longer has a class of common
stock registered under Section 12 of the Securities Exchange Act of 1934,
then its securities will no longer be an underlying security and the
trustee will distribute the shares of that company to the owners of the
Optical Equipment NETS.
- If the SEC finds that an issuer of underlying securities should be
registered as an investment company under the Investment Company Act of
1940, and the trustee has actual knowledge of the SEC finding, then the
trustee will distribute the shares of that company to the owners of the
Optical Equipment NETS.
- If the underlying securities of an issuer cease to be outstanding as a
result of a merger, consolidation or other corporate combination, the
trustee will distribute the consideration paid by and received from the
acquiring company to the beneficial owners of Optical Equipment NETS,
unless the consideration received is securities that are listed for
trading on a U.S. national securities exchange or through Nasdaq NMS or
have a Standard & Poor's sector classification that is the same as the
Standard & Poor's sector classifications represented in the Optical
Equipment NETS Trust at the time of the distribution. In this case, the
securities received will be treated as additional underlying securities
and will be deposited into the trust.
- If an issuer's underlying securities are delisted from trading on a U.S.
national securities exchange or Nasdaq NMS and are not listed for trading
on another U.S. national securities exchange or Nasdaq NMS within 5
business days from the date such securities are delisted.
If a reconstitution event occurs, the trustee will deliver the underlying
security to you as promptly as practicable after the date that the trustee has
knowledge of the occurrence of a reconstitution event. However, any distribution
of securities that are listed for trading on a U.S. national securities exchange
or through Nasdaq NMS or have a Standard & Poor's sector classification that is
the same as the Standard & Poor's sector classification represented in the
Optical Equipment NETS Trust at the time of the distribution will be deposited
into the trust and will become part of the Optical Equipment NETS.
Termination of the Optical Equipment NETS Trust. The Optical Equipment
NETS Trust will terminate on December 31, 2005, or earlier if a termination
event occurs. If a termination event occurs, the trustee will distribute the
underlying securities to you as promptly as practicable after the termination
event. The underlying securities may be obtained by your broker or other
financial intermediary in accordance with customary customer procedures. These
termination events are:
- The Optical Equipment NETS are delisted from the American Stock Exchange
and are not listed for trading on another U.S. national securities
exchange or Nasdaq NMS within five business days from the date the
Optical Equipment NETS are delisted.
- The trustee resigns and no successor trustee is appointed within 60 days
from the date the trustee provides notice to Epoch Securities, Inc., as
initial depositor, of its intent to resign.
- More than 50% of beneficial owners of outstanding Optical Equipment NETS,
other than Epoch Securities, Inc., vote to dissolve and liquidate the
Optical Equipment NETS Trust.
- Less than nine issuers of underlying securities are represented by the
Optical Equipment NETS.
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<PAGE> 40
Upon termination, the trustee will distribute the underlying securities to
the owners subject to the payment of any trustee fees, including a fee of up to
$5.00 for each round-lot of 100 Optical Equipment NETS, applicable taxes and
governmental charges.
Amendment of the depositary trust agreement. The trustee and Epoch
Securities, Inc., as initial depositor, may amend any provisions of the
depositary trust agreement without the consent of any other depositor or any of
the owners of the Optical Equipment NETS. Promptly after the execution of any
amendment to the agreement, the trustee must furnish or cause to be furnished
written notification of the substance of the amendment to each owner of Optical
Equipment NETS. Any amendment that imposes or increases any fees or charges,
subject to exceptions, or that otherwise prejudices any substantial existing
right of the beneficial owners of Optical Equipment NETS will not become
effective until 30 days after notice of the amendment is given to the owners of
Optical Equipment NETS.
Address of the trustee. Investors Bank & Trust Company, Hancock Tower, 200
Clarendon Street, Boston, Massachusetts 02116.
Governing law. The depositary trust agreement and Optical Equipment NETS
will be governed by the laws of the State of New York. The trustee will provide
the depositary trust agreement to any beneficial owner of the Optical Equipment
NETS free of charge upon written request.
Duties and immunities of the trustee. The trustee will act as fiduciary to
the Optical Equipment NETS Trust to the extent provided by the terms of the
depositary trust agreement. The trustee will assume no responsibility or
liability for, and makes no representations as to, the validity or sufficiency,
or as to the accuracy of the recitals, if any, set forth in the Optical
Equipment NETS.
The trustee undertakes to perform only those duties as are specifically set
forth in the depositary trust agreement and will not incur any liability if it
is delayed in or prevented from performing these duties because of any law or
regulation, corporate restriction of any company whose common stock is
represented by the Optical Equipment NETS or other circumstance beyond its
control, or if it may become subject to any penalty on account of so acting.
Subject to the preceding sentence, the trustee will be liable for its own
negligence or bad faith. The depositary trust agreement contains other customary
provisions limiting the liability of the trustee. In performing its obligations
under the depositary trust agreement, the trustee may consult with Epoch
Securities, Inc., in its sole discretion, from time to time, in its
determination of various matters arising under the terms of the depositary trust
agreement. Epoch Securities, Inc., as initial depositor, or owners of 25% or
more of the Optical Equipment NETS, may elect to remove the trustee as set forth
in the depositary trust agreement.
Epoch Securities, Inc. has agreed to indemnify the trustee against certain
civil liabilities related to acts performed or not performed by the trustee in
accordance with the depositary trust agreement and in connection with periodic
reports filed or not filed with the SEC with respect to the Optical Equipment
NETS. Should a court determine not to enforce the indemnification provision,
Epoch Securities, Inc. also has agreed to contribute to payments the trustee may
be required to make with respect to such liabilities.
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FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a summary of the U.S. federal income tax consequences
relating to the Optical Equipment NETS for:
- a citizen or resident of the United States;
- a corporation or partnership, including any entity treated as a
corporation or partnership for U.S. federal income tax purposes, created
in or organized under the laws of the United States, any state thereof or
the District of Columbia;
- an estate, the income of which is includible in gross income for U.S.
federal income tax purposes regardless of its source;
- a trust, if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more U.S.
persons have the authority to control all substantial decisions of the
trust (each of the above, a "U.S. holder"); and
- any person other than a U.S. holder (a "Non-U.S. holder").
This summary is based upon laws, regulations, rulings and decisions
currently in effect, all of which are subject to change, possibly on a
retroactive basis. The discussion does not deal with all U.S. federal income tax
consequences applicable to all categories of investors, some of which may be
subject to special rules. In addition, this summary generally is limited to
investors who will hold the Optical Equipment NETS as "capital assets"
(generally, property held for investment) within the meaning of Section 1221 of
the Internal Revenue Code of 1986, as amended. This summary does not address any
state, local or foreign tax consequences of an investment in the Optical
Equipment NETS. We strongly suggest that you consult with your own tax advisor
to ensure that you correctly understand how the U.S. federal income tax laws
will apply to your particular situation.
TAXATION OF THE OPTICAL EQUIPMENT NETS TRUST
The Optical Equipment NETS Trust will be treated as a grantor trust or
custodial arrangement for United States federal income tax purposes. This means
that the Optical Equipment NETS Trust will not be taxed, but any tax
consequences will flow through to the holders of the Optical Equipment NETS.
TAXATION OF OPTICAL EQUIPMENT NETS
A holder purchasing and owning Optical Equipment NETS will be treated, for
U.S. federal income tax purposes, as directly owning a proportionate share of
the underlying securities represented by the Optical Equipment NETS. Thus, a
holder will be taxed in the same manner as such holder would have been taxed if
the holder directly owned the underlying securities. Consequently, if there is a
taxable cash distribution on an underlying security, a holder will recognize
income with respect to the distribution at the time the distribution is received
by the trustee, not at the time that the holder receives the cash distribution
from the trustee.
When purchasing Optical Equipment NETS, a holder will determine its initial
tax basis in each of the underlying securities by allocating the purchase price
for the Optical Equipment NETS among the underlying securities based on their
relative fair market values at the time of the Optical Equipment NETS purchase.
Similarly, when selling Optical Equipment NETS, a holder will determine the
amount realized with respect to each security by allocating the sales price
among the underlying securities based on their relative fair market values at
the time of the Optical Equipment NETS sale. When a holder creates Optical
Equipment NETS through an in-kind deposit of the requisite number of underlying
securities with the trustee, the holder's initial tax basis in the underlying
securities represented by such Optical Equipment NETS will equal such holder's
tax basis in such underlying securities immediately prior to their delivery to
the trustee. A holder's gain or loss with respect to each underlying security
will be
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computed by subtracting its basis in the underlying security from the amount
realized on that security. Any such gain or loss for each underlying security
will be a long-term or short-term capital gain or loss, depending upon the
holder's holding period with respect to that underlying security. In general, a
holder's holding period with respect to each underlying security will include
any period during which the holder directly held that underlying security or
held the Optical Equipment NETS that represented the underlying security.
The distribution of any securities by the Optical Equipment NETS Trust upon
the surrender of Optical Equipment NETS, the occurrence of a reconstitution
event, or a termination event will not be a taxable event. The holder's holding
period with respect to the distributed securities will include the period that
the holder held the securities through the Optical Equipment NETS Trust, and, in
the case of a holder that created Optical Equipment NETS by delivering the
requisite number of underlying securities to the trustee, the period that the
holder held the underlying securities prior to delivering such underlying
securities to the trustee. The holder's tax basis in each of the distributed
securities will equal the holder's tax basis in that security immediately prior
to such distribution.
BROKERAGE FEES AND CUSTODIAN FEES
The brokerage fee incurred in purchasing an Optical Equipment NETS will be
treated as part of the cost of the underlying securities. Accordingly, a holder
includes this fee in its tax basis in the underlying securities. A holder will
allocate the brokerage fee among the underlying securities using either a fair
market value allocation or pro rata based on the number of shares of each
underlying security. Similarly, the brokerage fee incurred in selling Optical
Equipment NETS will reduce the amount realized with respect to the underlying
securities.
A holder will be required to include in its income the full amount of
dividends paid on the underlying securities, even though the depositary trust
agreement provides that the custodian fees will be deducted directly from any
dividends paid. These custodian fees will be treated as an expense incurred in
connection with a holder's investment in the underlying securities and may be
deductible. If a holder is an individual, estate or trust, however, the
deduction of its share of custodian fees will be a miscellaneous itemized
deduction that may be disallowed in whole or in part.
SPECIAL CONSIDERATIONS WITH RESPECT TO UNDERLYING SECURITIES OF FOREIGN ISSUERS
With respect to underlying securities of foreign issuers, the gross amount
of any taxable cash distribution will not be eligible for the dividends received
deduction generally allowed to corporate U.S. holders.
If a foreign issuer pays a dividend in a currency other than in U.S.
dollars, the amount of the dividend for U.S. federal income tax purposes will be
the U.S. dollar value (determined at the spot rate on the date of the payment)
of the currency payment, regardless of whether the payment is later converted
into U.S. dollars. In this case, the U.S. holder may recognize ordinary income
or loss as a result of currency fluctuations between the date on which the
dividend is paid and the date the dividend amount is converted into U.S.
dollars.
Subject to conditions and limitations, any foreign tax withheld on
dividends may be deducted from taxable income or credited against a U.S.
holder's U.S. federal tax liability. The limitation on foreign taxes eligible
for the U.S. foreign tax credit is calculated separately with respect to
specific classes of income. For this purpose, dividends distributed by a foreign
issuer generally will constitute passive income or, in the case of some U.S.
holders, financial services income. For purposes of the U.S. foreign tax credit
limitation, dividends received by a U.S. holder with respect to an underlying
security of a foreign issuer generally will be treated as foreign source income
while any gain or loss recognized from the sale of such security generally will
be treated as from sources within the United States. The rules relating to the
determination of the foreign tax credit are complex and we recommend that U.S.
holders consult their own tax advisors to determine whether and to what extent a
credit would be available.
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Dividends and distributions made by a foreign issuer may be subject to a
withholding tax. Some foreign issuers have made arrangements through which
holders of their American depositary shares can apply for a refund of withheld
taxes. It is expected that holders of Optical Equipment NETS will be able to use
these arrangements to apply for a refund of withheld taxes.
Additionally, special U.S. federal income tax rules apply to U.S. persons
owning shares of a "passive foreign investment company" (a "PFIC"). We do not
believe that any of the foreign issuers of the underlying securities is
currently a PFIC and do not anticipate that any issuer will become a PFIC in the
future, although no assurances can be made that the applicable tax law or other
relevant circumstances will not change in a manner which affects the PFIC
determination. A foreign corporation generally will be classified as a PFIC for
U.S. federal income tax purposes in any taxable year in which, after applying
relevant look-through rules, either:
- at least 75% of its gross income is "passive income"; or
- on average at least 50% of the gross value of its assets is attributable
to assets that produce "passive income" or are held for the production of
passive income.
Passive income for this purpose generally includes dividends, interest,
royalties, rents, and gains from commodities and securities transactions.
If a corporation were classified as a PFIC, a U.S. holder could be subject
to increased tax liability, possibly including an interest charge, upon the sale
or other disposition of the Optical Equipment NETS or of the underlying
securities or upon the receipt of "excess distributions", unless the U.S. holder
elected to be taxed currently on its pro rata portion of the corporation's
income, whether or not the income was distributed in the form of dividends or
otherwise.
NON-U.S. HOLDERS
Non-U.S. holders should consult their tax advisors regarding U.S.
withholding and other taxes that may apply to an investment in the underlying
securities through an investment in the Optical Equipment NETS.
ERISA CONSIDERATIONS
Any plan fiduciary which proposes to have a plan acquire Optical Equipment
NETS should consult with its counsel with respect to the potential applicability
of ERISA and the Internal Revenue Code of 1986, as amended, to this investment
and whether any exemption would be applicable and determine on its own whether
all conditions have been satisfied. Moreover, each plan fiduciary should
determine whether, under the general fiduciary standards of investment prudence
and diversification, an acquisition of Optical Equipment NETS is appropriate for
the plan, taking into account the overall investment policy of the plan and the
composition of the plan's investment portfolio.
40
<PAGE> 44
UNDERWRITING
In accordance with the depositary trust agreement on the closing date, the
Optical Equipment NETS Trust will issue to Epoch Securities, Inc., as
representative of the several underwriters, the Optical Equipment NETS after
Epoch Securities, Inc., as initial depositor, deposits the underlying securities
in the Optical Equipment NETS Trust. The underwriters, which include Advanced
Clearing, Inc. and Charles Schwab & Co., Inc., propose to offer the Optical
Equipment NETS to the public at the offering price set forth on the cover page
of this prospectus. Epoch Securities, Inc. expects the Optical Equipment NETS
Trust to deliver the initial Optical Equipment NETS against deposit of the
underlying securities through the facilities of DTC in New York, New York on
, 2001. After the initial offering, the public offering price may
be changed. The Optical Equipment NETS Trust may continue to issue Optical
Equipment NETS, in connection with deposits of underlying securities. This
offering is being made in compliance with Conduct Rule 2810 of the National
Association of Securities Dealers, Inc. Accordingly, sales will not be made to a
discretionary account without the prior written approval of a purchaser of
Optical Equipment NETS. The underwriters do not expect any sales made to
discretionary accounts to exceed 5% of the total number of Optical Equipment
NETS offered.
The corporate parents of Charles Schwab & Co., Inc., Advanced Clearing,
Inc., Ameritrade (Inc.), a broker-dealer affiliated with and whose transactions
are cleared on a fully disclosed basis through Advanced Clearing, Inc., and TD
Waterhouse Investor Services, Inc. are equity investors in Epoch Securities,
Inc.'s corporate parent, Epoch Partners, Inc. Charles Schwab & Co., Inc. and
Advanced Clearing, Inc. will commit to purchase from Epoch Securities, Inc.,
prior and subject to Epoch Securities, Inc.'s initial deposit of the underlying
securities in the Optical Equipment NETS Trust, all of the Optical Equipment
NETS acquired by Epoch Securities, Inc. as a result of such deposit, in the
amounts set forth below at the initial offering price, less a portion of the
underwriting fee, and to offer and sell the Optical Equipment NETS to public
investors or to other broker-dealers who will sell to public investors. It is
not intended that Epoch Securities, Inc. will directly sell any Optical
Equipment NETS. It is anticipated that a portion of the Optical Equipment NETS
acquired by Advanced Clearing, Inc. will be resold to TD Waterhouse Investor
Services, Inc., as dealer, at the initial public offering price less a portion
of the underwriting fee. The Optical Equipment NETS retained by Advanced
Clearing, Inc. will be distributed through Ameritrade (Inc.). Ameritrade (Inc.)
and TD Waterhouse Investor Services, Inc. are not underwriters under the
purchase agreement. Because of their current relationship to Epoch Securities,
Inc. and their role in the distribution of the Optical Equipment NETS, however,
Ameritrade (Inc.) and TD Waterhouse Investor Services, Inc. may be deemed to be
underwriters as that term is defined in the Securities Act of 1933, in
connection with this offering. They believe their activities fall within the
selling group exception to the definition and, therefore, believe they are not
"underwriters" under the Securities Act of 1933.
<TABLE>
<CAPTION>
NUMBER OF
OPTICAL EQUIPMENT
NETS
-----------------
<S> <C>
Advanced Clearing, Inc......................................
Charles Schwab & Co., Inc...................................
TOTAL.......................................................
</TABLE>
In addition to this prospectus, there is also an electronic version of this
prospectus for the Optical Equipment NETS that can be accessed on the Internet
at www.epochnets.com as well as web sites for one or more of the underwriters
and dealers which contains information formatted differently from this
prospectus.
Epoch Securities, Inc. will be the initial depositor of the underlying
common stocks to the Optical Equipment NETS Trust and the managing underwriter
for the offering of the Optical Equipment NETS. Epoch Securities, Inc. is an
investment bank formed in November 1999. In addition to this offering, Epoch
Securities, Inc. has engaged in the business of public and private equity
financing, private equity investing and financial advisory services since its
inception. The five senior members of Epoch Securities, Inc.'s investment
banking team have in the aggregate 40 years of investment banking experience in
the securities business. Epoch Securities, Inc. may provide investment banking
and other financial services to certain of these companies in the future, for
which it will receive customary fees and commissions.
41
<PAGE> 45
Advanced Clearing, Inc. and Charles Schwab & Co., Inc. may use this
prospectus, as updated from time to time, in connection with offers and sales
related to market-making transactions in the Optical Equipment NETS; however,
any such delivery is not an admission of affiliation with the Optical Equipment
NETS Trust as that term is used in applicable securities laws and the
regulations thereunder. Advanced Clearing, Inc. and Charles Schwab & Co., Inc.
may act as principal or agent in such transactions. Market-making sales will be
made at prices related to prevailing market prices at the time of sale.
LEGAL MATTERS
The validity of the Optical Equipment NETS, will be passed upon for Epoch
Securities, Inc., as the initial depositor and as the representative of the
several underwriters, by Brown & Wood LLP, New York, New York. Brown & Wood LLP,
New York, New York, as special U.S. tax counsel to the Optical Equipment NETS
Trust, also will render an opinion regarding the material federal income tax
consequences relating to the Optical Equipment NETS.
WHERE YOU CAN FIND MORE INFORMATION
A registration statement on Form S-1 has been filed with the SEC covering
the Optical Equipment NETS. While this prospectus is a part of the registration
statement, it does not contain all the exhibits filed as part of the
registration statement. You should consider reviewing the full text of those
exhibits.
The registration statement is available over the Internet at the SEC's Web
site at http://www.sec.gov. You also may read and copy the registration
statement at the SEC's public reference rooms in Washington, D.C., New York, New
York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for more
information on the public reference rooms and their copy charges. Epoch
Securities, Inc. will not file any reports pursuant to the Securities Exchange
Act of 1934 and the Optical Equipment NETS Trust will file modified reports
pursuant to the Securities Exchange Act of 1934.
Because the common stock of the issuers of the underlying securities is
registered under the Securities Exchange Act of 1934, the issuers of the
underlying securities are required to file periodically financial and other
information specified by the SEC. For more information about the issuers of the
underlying securities, information provided to or filed with the SEC by the
issuers of the underlying securities with respect to their registered securities
can be inspected at the SEC's public reference facilities or accessed through
the SEC's Web site referenced above.
However, some of the issuers of the underlying securities are considered
foreign issuers. The requirements for filing periodic financial and other
information for foreign issuers differ from that of domestic issuers. In
particular, foreign issuers are not required to file quarterly reports with the
SEC and are not required to file periodic financial and other information on
EDGAR. Therefore, this information may not be accessible through the SEC's Web
site. Information regarding the issuers of the underlying securities may also be
obtained from other sources including, but not limited to, press releases,
newspaper articles and other publicly disseminated information.
Epoch Securities, Inc., the Optical Equipment NETS Trust, the trustee and
their affiliates are not affiliated with the issuers of the underlying
securities, and the issuers of the underlying securities have no obligations
with respect to Optical Equipment NETS. This prospectus relates only to Optical
Equipment NETS and does not relate to the common stock or other securities of
the issuers of the underlying securities. The information in this prospectus
regarding the issuers of the underlying securities has been derived from the
publicly available documents described in the preceding paragraph. We have not
participated in the preparation of these documents or made any due diligence
inquiries with respect to the issuers of the underlying securities in connection
with Optical Equipment NETS. We make no representation that these publicly
available documents or any other publicly available information regarding the
issuers of the underlying securities are accurate or complete. Furthermore, we
cannot assure you that all events occurring prior to the date of this
prospectus, including events that would affect the accuracy or completeness of
the publicly available documents described above, that would affect the trading
price of the common stock of the issuers of the underlying securities, and
therefore the offering and trading prices of the Optical Equipment NETS, have
been publicly disclosed.
42
<PAGE> 46
EXHIBIT A
This exhibit forms an integral part of the prospectus.
The following tables provide a brief description of the business of each of
the issuers of the underlying securities and set forth the split-adjusted
closing market prices as of the last trading day of each month, as reported on
the applicable primary U.S. trading market, of each of the underlying securities
in each month during 1995, 1996, 1997, 1998, 1999 and 2000 through November
[--], 2000. All market prices in excess of one dollar are rounded to the nearest
one sixty-fourth of a dollar. A table outlining the primary U.S. stock market on
which the securities of the issuers are listed can be found on page 2 of this
prospectus. An asterisk (*) indicates that no shares of the issuer were trading
on a U.S. stock market during that month. The historical prices of the
underlying securities should not be taken as an indication of future
performance.
ADC TELECOMMUNICATIONS, INC. (ADCT)
ADC Telecommunications, Inc., or ADC, offers a broad range of network
equipment, software and integration services for broadband, multi-service
networks that deliver Internet/data, video and voice communications over
telephone, cable television, Internet, broadcast, wireless and enterprise
networks. ADC's broadband, multi-service network solutions enable local access,
high-speed transmission and software management of communications services from
service providers to consumers and businesses over fiber-optic, copper, coaxial
and wireless media.
ADC offers network equipment, software and integration services within the
following three product groups: Broadband Connectivity, Broadband Access and
Transport, and Integrated Solutions. Broadband Connectivity products include
broadband connection and access devices for copper, coaxial, fiber-optic,
wireless and broadcast communications networks. The group also supplies
fiber-optic and wireless components. Fiber-optic components include phase masks,
tunable laser, pump lasers, connectors, isolators, circulators, collimators,
couplers, splitters, and dense wavelength division multiplexing devices.
Broadband Access and Transport products include access and transport systems
that deliver broadband, multi-service communications to residences and
businesses over copper, coaxial, fiber-optic and wireless networks. ADC provides
the Optiworx family of fiber-optic transmitter and node products, along with
coaxial amplifiers that cable television operators use to upgrade their networks
to broader bandwidths for digital Internet/ data, video, and voice services. The
DV6000 system transmits a variety of signal types using a high-speed,
uncompressed digital format over fiber facilities, and is used in the long haul
portions of cable television, broadcast and interactive video networks,
including distance learning, government and campus networks. Integrated
Solutions products and services consist of systems integration services,
operations support systems software and enhanced services/intelligent network
software that position service providers to deliver broadband, multiservice
communications over wireline and wireless networks.
<TABLE>
<CAPTION>
CLOSING CLOSING CLOSING CLOSING
1995 PRICE 1996 PRICE 1997 PRICE 1998 PRICE
--------- ------- --------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
January $3 1/16 January $4 53/64 January $ 8 31/32 January $4 49/64
February 3 31/64 February 4 31/32 February 6 3/4 February 6 29/64
March 3 11/16 March 4 5/16 March 6 23/32 March 6 57/64
April 4 1/8 April 5 1/4 April 6 17/32 April 7 31/64
May 3 7/8 May 5 3/4 May 8 9/16 May 7 1/32
June 4 15/32 June 5 5/8 June 8 11/32 June 9 9/64
July 4 27/32 July 5 9/32 July 10 3/32 July 8 3/8
August 4 27/32 August 7 3/32 August 9 9/32 August 5 35/64
September 5 11/16 September 8 September 8 1/8 September 5 9/32
October 5 October 8 35/64 October 8 9/32 October 5 3/4
November 5 11/16 November 9 1/16 November 9 19/64 November 7 15/32
December 4 9/16 December 7 25/32 December 10 7/16 December 8 11/16
<CAPTION>
CLOSING CLOSING
1999 PRICE 2000 PRICE
--------- ------- --------- -------
<S> <C> <C> <C>
January $ 9 61/64 January $16 31/64
February 10 1/8 February 22 7/16
March 11 59/64 March 26 15/16
April 11 61/64 April 30 3/8
May 12 7/32 May 33 19/32
June 11 25/64 June 41 15/16
July 11 1/8 July 41 15/16
August 9 17/64 August 40 15/16
September 10 31/64 September 26 57/64
October 11 59/64 October 21 3/8
November 13 21/64
December 18 9/64
</TABLE>
The closing price on November, 2000 was $ .
A-1
<PAGE> 47
AVANEX CORPORATION (AVNX)
Avanex Corporation, or Avanex, designs, manufactures and markets fiber
optic-based products, known as photonic processors, which are designed to
increase the performance of optical networks. Avanex's photonic processors offer
communications service providers and optical systems manufacturers greater
levels of performance and miniaturization, reduced complexity and increased
cost-effectiveness as compared to current alternatives. Avanex's products are
designed to enable the transmission of more data in a wavelength of light, at
higher speeds and across greater distances in a network, than currently
available optical technologies. Avanex's PowerFilter and PowerMux products are
designed to overcome the technological challenges, such as chromatic dispersion
and attenuation, and the cost and deployment challenges inherent in optical
networks.
<TABLE>
<CAPTION>
CLOSING CLOSING CLOSING CLOSING CLOSING CLOSING
1995 PRICE 1996 PRICE 1997 PRICE 1998 PRICE 1999 PRICE 2000 PRICE
--------- ------- --------- ------- --------- ------- --------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January * January * January * January * January * January *
February * February * February * February * February * February $208 3/8
March * March * March * March * March * March 151 3/4
April * April * April * April * April * April 121 7/8
May * May * May * May * May * May 68
June * June * June * June * June * June 95 1/2
July * July * July * July * July * July 126 15/16
August * August * August * August * August * August 151 15/32
September * September * September * September * September * September 107 11/16
October * October * October * October * October * October 101 9/16
November * November * November * November * November *
December * December * December * December * December *
</TABLE>
The closing price on November, 2000 was $ .
AVICI SYSTEMS INC. (AVCI)
Avici Systems Inc, or Avici, develops and sells high-speed data networking
equipment that enables communications service providers to transmit high volumes
of information across their fiber optic networks. Avici's high-performance
solution is being marketed to telecommunications companies and Internet service
providers, referred to as carriers, that are creating next-generation optical
networks to address the increasing data traffic across the Internet. The Avici
Terabit Switch Router product, known as the TSR, is designed to address the
critical needs of carriers by:
- managing high volumes of network traffic at high speeds;
- providing the ability to incrementally add capacity to the network
without disrupting network performance, which Avici refers to as
in-service scalability;
- demonstrating high levels of operational availability and redundancy,
which Avici refers to as carrier-class reliability;
- prioritizing traffic types to facilitate the provisioning of new
revenue-generating services, such as video streaming and the transmission
of telephone calls over the Internet, referred to as voice-over-Internet
Protocol;
- operating with existing carrier equipment; and
- reducing network cost and complexity.
Avici's TSR provides these benefits through proprietary technologies,
including their application specific integrated circuits and distributed system
architecture, as well as its Composite Link technology, which enables the
addition of incremental bandwidth between the TSR and the carrier's network.
A-2
<PAGE> 48
<TABLE>
<CAPTION>
CLOSING CLOSING CLOSING CLOSING CLOSING
1995 PRICE 1996 PRICE 1997 PRICE 1998 PRICE 1999 PRICE
--------- ------- --------- ------- --------- ------- --------- ------- --------- -------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January * January * January * January * January *
February * February * February * February * February *
March * March * March * March * March *
April * April * April * April * April *
May * May * May * May * May *
June * June * June * June * June *
July * July * July * July * July *
August * August * August * August * August *
September * September * September * September * September *
October * October * October * October * October *
November * November * November * November * November *
December * December * December * December * December *
<CAPTION>
CLOSING
2000 PRICE
-------- -------
<C> <C>
January *
February *
March *
April *
May *
June *
July $ 98 3/8
August 149 13/16
September 95 1/8
October 43 3/8
</TABLE>
The closing price on November, 2000 was $ .
CIENA CORPORATION (CIEN)
CIENA Corporation, or CIENA, is a leader in the rapidly growing intelligent
optical networking equipment market. CIENA offers a comprehensive portfolio of
products for tele- and data-communications service providers worldwide. CIENA's
customers include long-distance carriers, competitive local exchange carriers,
Internet service providers and wholesale carriers. CIENA offers optical
transport, intelligent switching and multi-service delivery systems that enable
service providers to provision, manage and deliver high-bandwidth services to
their customers.
During its fiscal 1999 CIENA announced its LightWorks(TM) Initiative. CIENA
LightWorks is an optical networking architecture designed to change the
fundamental economics of building service provider networks. LightWorks focuses
on the three critical areas of optical networking: optical transport, core
switching and service delivery. The products in CIENA's LightWorks combine the
functionality of several current network elements into a single network element,
thereby lowering the capital equipment requirements of a service provider and
simplifying the network, in order to reduce a carrier's network operating costs.
The products of CIENA's LightWorks architecture can be sold together as a
complete network solution or separately as best-of-breed solutions. Products
include four generations of long distance optical transport systems: MultiWave
1600(TM), MultiWave Sentry 1600(TM), MultiWave Sentry 4000(TM), and MultiWave
CoreStream(TM). LightWorks also includes CIENA's short distance optical
transport products: MultiWave Firefly(TM) and MultiWave Metro(TM). CIENA's
LightWorks architecture also includes MultiWave CoreDirector. The MultiWave
CoreDirector is an intelligent optical core switch that allows carriers to
deliver a full range of transport services, without costly SONET/SDH
(synchronous optical networks/synchronous digital hierarchy) multiplexers or
inflexible "wavelength only" devices.
<TABLE>
<CAPTION>
CLOSING CLOSING CLOSING CLOSING CLOSING
1995 PRICE 1996 PRICE 1997 PRICE 1998 PRICE 1999 PRICE
--------- ------- --------- ------- --------- ------- --------- ------- --------- -------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January * January * January * January $27 17/32 January $10 3/32
February * February * February $19 5/8 February 20 31/32 February 13 15/16
March * March * March 14 7/32 March 21 5/16 March 11 1/4
April * April * April 15 5/8 April 27 7/8 April 11 3/4
May * May * May 23 3/8 May 26 May 14 3/8
June * June * June 23 9/16 June 34 13/16 June 15 3/32
July * July * July 28 1/16 July 37 1/32 July 16 7/8
August * August * August 23 7/8 August 14 1/16 August 17 9/16
September * September * September 24 49/64 September 7 5/32 September 18 1/4
October * October * October 27 1/2 October 8 19/32 October 17 5/8
November * November * November 27 November 8 1/2 November 21 31/32
December * December * December 30 9/16 December 7 5/16 December 28 3/4
<CAPTION>
CLOSING
2000 PRICE
--------- -------
<C> <C>
January $ 32 13/16
February 79 29/32
March 63 1/16
April 61 13/16
May 59 27/32
June 83 11/32
July 71 1/16
August 110 27/32
September 122 13/16
October 105 1/8
</TABLE>
The closing price on November, 2000 was $ .
A-3
<PAGE> 49
CISCO SYSTEMS, INC. (CSCO)
Cisco Systems, Inc., or Cisco, is the worldwide leader in networking for
the Internet. Cisco's hardware, software, and service offerings are used to
create Internet solutions so that individuals, companies, and countries have
seamless access to information -- regardless of differences in time and place.
Cisco solutions provide competitive advantage to their customers through more
efficient and timely exchange of information, which in turn leads to cost
savings, process efficiencies, and closer relationships with their customers,
prospects, business partners, suppliers, and employees. These solutions form the
networking foundation for companies, universities, utilities, and government
agencies worldwide.
The Cisco strategy is to provide end-to-end networking solutions to help
its customers improve productivity and gain a competitive advantage in today's
global economy. Cisco's acquisitions have furthered its commitment towards
providing this end-to-end networking solution. Cisco now has a broad set of
product offerings and technologies, which include Ethernet, Gigabit Ethernet
switching, Token Ring, ATM switching, SONET/SDH, xDSL, dial-up access, converged
data, voice, and video technologies, Tag Switching (currently also known as
multi-protocol label switching, optical transport, wireless, content networking,
call center and unified messaging solutions, network security, and network
management software solutions, among others.
<TABLE>
<CAPTION>
CLOSING CLOSING CLOSING CLOSING
1995 PRICE 1996 PRICE 1997 PRICE 1998 PRICE
-------- ------- --------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
January $ 1 55/64 January $ 4 5/8 January $ 7 3/4 January $ 10 33/64
February 1 7/8 February 5 9/32 February 6 3/16 February 10 63/64
March 2 1/8 March 5 5/32 March 5 11/32 March 11 25/64
April 2 7/32 April 5 49/64 April 5 3/4 April 12 13/64
May 2 7/16 May 6 5/64 May 7 17/32 May 12 39/64
June 2 13/16 June 6 19/64 June 7 29/64 June 15 11/32
July 3 3/32 July 5 3/4 July 8 27/32 July 15 61/64
August 3 41/64 August 5 55/64 August 8 3/8 August 13 41/64
September 3 53/64 September 6 57/64 September 8 1/8 September 15 29/64
October 4 5/16 October 6 7/8 October 9 7/64 October 15 3/4
November 4 43/64 November 7 35/64 November 9 37/64 November 18 27/32
December 4 9/64 December 7 1/16 December 9 19/64 December 23 13/64
<CAPTION>
CLOSING CLOSING
1999 PRICE 2000 PRICE
--------- ------- --------- -------
<C> <C> <C> <C>
January $27 57/64 January $54 3/4
February 24 29/64 February 66 3/32
March 27 25/64 March 77 5/16
April 28 33/64 April 69 21/64
May 27 1/4 May 56 15/16
June 32 7/32 June 63 9/16
July 31 1/16 July 65 7/16
August 33 29/32 August 68 5/8
September 34 9/32 September 55 1/4
October 37 October 53 7/8
November 44 19/32
December 53 9/16
</TABLE>
The closing price on November , 2000 was $ .
CORNING INCORPORATED (GLW)
Corning Incorporated, or Corning, is a global, technology-based
corporation, which operates in three broadly based business segments:
Telecommunications, Advanced Materials and Information Display. The
Telecommunications Segment produces optical fiber and cable, optical hardware
and equipment and photonic modules and components for the worldwide
telecommunications industry. The Advanced Materials Segment manufactures
specialized products with unique properties for customer applications utilizing
glass, glass ceramic and polymer technologies. The Information Display Segment
manufactures glass panels and funnels for televisions and CRTs, liquid crystal
display glass for flat panel displays and projection video lens assemblies.
Corning's Telecommunications segment offers a wide selection of fibers for
use in long-haul, utility, submarine, local exchange, cable TV and premises
applications. Corning provides a substantial portion of the world's optical
fiber, including LEAF-(R) optical fiber, a technologically advanced high-speed,
high-data-rate fiber. The Photonics Technologies business, which is part of the
Telecommunications segment, provides products that maximize the capacity,
flexibility, performance and reliability of communications networks worldwide.
Corning's photonics products boost, combine, separate and connect optical
signals transmitted over fiber-optic telecommunications networks. Corning is a
leading supplier of optical amplifiers and were among the first to offer an
innovative multiplexer module that allows optical signals to be added or dropped
as they travel through a communications network. Corning's photonics products,
primarily intended to enable the use of dense wavelength division multiplexing
technology, include cutting-
A-4
<PAGE> 50
edge PureGain(TM)-EDFA modules, PureGain(TM)-DCM(R)-modules and
PurePass(TM)-optical routing modules. Corning also offers MultiClad(R)-couplers,
variable optical attenuators, micro-optic filters and PureMode(TM)-engineered
fibers.
<TABLE>
<CAPTION>
CLOSING CLOSING CLOSING CLOSING
1995 PRICE 1996 PRICE 1997 PRICE 1998 PRICE
--------- ------- --------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
January $ 8 49/64 January $ 8 49/64 January $11 7/8 January $11 25/64
February 9 1/64 February 9 1/8 February 12 35/64 February 13 35/64
March 10 7/64 March 9 53/64 March 14 51/64 March 14 3/4
April 9 13/32 April 9 3/4 April 16 5/64 April 13 21/64
May 8 63/64 May 10 47/64 May 16 51/64 May 13 9/64
June 9 3/16 June 10 49/64 June 18 35/64 June 11 37/64
July 8 63/64 July 10 11/32 July 20 5/8 July 10 15/64
August 9 5/32 August 10 29/64 August 17 5/8 August 8 13/64
September 8 1/32 September 10 15/16 September 15 3/4 September 9 13/16
October 7 21/64 October 10 7/8 October 15 3/64 October 12 3/64
November 8 31/64 November 11 23/64 November 14 9/64 November 13 3/8
December 8 63/64 December 12 63/64 December 12 3/8 December 15
<CAPTION>
CLOSING CLOSING
1999 PRICE 2000 PRICE
--------- ------- --------- -------
<S> <C> <C> <C>
January $16 1/4 January $ 51 27/64
February 17 53/64 February 62 43/64
March 20 March 64 43/64
April 19 5/64 April 65 53/64
May 18 13/64 May 64 21/64
June 23 3/8 June 89 61/64
July 23 21/64 July 77 63/64
August 22 11/64 August 109 5/16
September 22 55/64 September 99
October 26 13/64 October 76 1/2
November 31 15/64
December 42 63/64
</TABLE>
The closing price on November , 2000 was $ .
CORVIS CORPORATION (CORV)
Corvis Corporation, or Corvis, designs, manufactures and markets products
that enable a fundamental shift in the design and efficiency of long distance,
fiber optic communication networks, or backbone networks, by allowing for the
transmission, switching and management of communications traffic entirely as
optical signals. Corvis's products enable the creation of these all-optical
backbone networks that support transmission over long distances and eliminate
the need for expensive and capacity-limiting electrical transmission and
switching equipment. Corvis's products include ultra-long distance optical
signal transmission, reception and amplification equipment, all-optical
switching equipment and software that enable the creation of all-optical
backbone networks that support transmission over long distances. Corvis's
products integrate three key technologies that enable the deployment of
all-optical backbone networks: ultra-long distance optical transmission,
all-optical switching and integrated network management.
Corvis's products include:
- Optical Network Gateway -- provides access to an all-optical network from
other networks.
- Optical Amplifier -- employs various amplification technologies to
support high capacity transmission over diverse fiber types. Corvis's
distributed and discrete amplification technologies allow them to tailor
their amplifiers to customers' fiber types and to provide longer optical
transmission distances than currently possible.
- Optical Add/Drop Multiplexer -- enables traffic to enter and exit the
network at a network intersection without requiring an
optical-to-electrical-to-optical conversion of traffic passing through
the intersection.
- Optical Switch -- provisions routes and has been designed to optically
switch up to 2.4 terabits per second of traffic between routes to
provision services, reconfigure the network or to restore services in the
event of a fiber cut. Corvis's Optical Switch is currently in trial and
is expected to be commercially available in the second half of 2000.
- CorManager Network Management System -- provides software-based network
management that is fully integrated with their transmission and switching
products.
A-5
<PAGE> 51
<TABLE>
<CAPTION>
CLOSING CLOSING CLOSING CLOSING CLOSING
1995 PRICE 1996 PRICE 1997 PRICE 1998 PRICE 1999 PRICE
--------- ------- --------- ------- --------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January * January * January * January * January *
February * February * February * February * February *
March * March * March * March * March *
April * April * April * April * April *
May * May * May * May * May *
June * June * June * June * June *
July * July * July * July * July *
August * August * August * August * August *
September * September * September * September * September *
October * October * October * October * October *
November * November * November * November * November *
December * December * December * December * December *
<CAPTION>
CLOSING
2000 PRICE
--------- -------
<C> <C>
January *
February *
March *
April *
May *
June *
July $ 82 21/64
August 103 13/16
September 61 3/64
October 65 5/8
</TABLE>
The closing price on November , 2000 was $ .
DIGITAL LIGHTWAVE, INC. (DIGL)
Digital Lightwave, Inc., or Digital Lightwave, designs, develops, markets
and supports diagnostic products that monitor, maintain and manage fiber
optic-based networks. Digital Lightwave's products provide telecommunications
service providers and equipment manufacturers with capabilities to cost-
effectively deploy and manage fiber optic networks to address the rapidly
increasing demand for bandwidth. In addition, Digital Lightwave's products are
used to qualify and verify service during network installation and to provide
ongoing real-time quality assurance for deployed networks. In contrast to most
existing telecommunications test equipment, Digital Lightwave's products are
based on modular and scaleable hardware and software platforms with a flexible
architecture that allows customers to readily upgrade existing systems to
accommodate new technologies.
Digital Lightwave's ASA 312 Network Information Computer provides engineers
and technicians with a truly portable, easy-to-use diagnostic product that
offers increased functionality for the installation and maintenance testing of
advanced, high-speed networks and transmission equipment. In 1998, Digital
Lightwave introduced its initial Network Access Agent, which incorporates the
technology developed for the Network Information Computer and is an unattended,
software-controlled performance monitoring and diagnostic product permanently
installed within optical-based networks for management from a central location.
<TABLE>
<CAPTION>
CLOSING CLOSING CLOSING CLOSING CLOSING
1995 PRICE 1996 PRICE 1997 PRICE 1998 PRICE 1999 PRICE
--------- ------- --------- ------- --------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January * January * January * January $3 13/16 January $ 4
February * February * February $ 8 February 3 3/4 February 3 13/16
March * March * March 7 5/8 March 6 3/32 March 2 3/4
April * April * April 5 1/4 April 5 April 4
May * May * May 7 1/4 May 4 May 6 1/8
June * June * June 8 3/4 June 3 1/4 June 6
July * July * July 12 5/8 July 3 7/32 July 7 1/4
August * August * August 15 3/8 August 1 7/8 August 6 15/16
September * September * September 16 1/4 September 1 27/32 September 7 1/8
October * October * October 18 1/4 October 2 19/32 October 17 1/4
November * November * November 20 1/2 November 2 1/8 November 31 3/4
December * December * December 13 1/8 December 2 5/16 December 64
<CAPTION>
CLOSING
2000 PRICE
--------- -------
<C> <C>
January $ 59
February 83 1/4
March 62 5/16
April 68 1/2
May 54 15/16
June 100 9/16
July 87 7/16
August 87 3/4
September 72 5/8
October 50 11/16
</TABLE>
The closing price on November , 2000 was $ .
FINISAR CORPORATION (FNSR)
Finisar Corporation, or Finisar, is a leading provider of fiber optic
subsystems and network performance test systems which enable high-speed data
communications over local area networks, or
A-6
<PAGE> 52
LANs, and storage area networks, or SANs. Additionally, Finisar has recently
developed products for digitizing the return path of a cable television, or
CATV, network and for aggregating data traffic in extended networks. Finisar is
focused on providing high-performance, reliable, value-added optical subsystems,
which convert electrical signals into optical signals, for networking and
storage equipment manufacturers that develop and market systems based on Gigabit
Ethernet and Fibre Channel, which are advanced transmission protocols used in
LAN and SAN applications.
Finisar's optical subsystems product line consists of three product
families -- optical data links, optical link extenders and Opticity 3000.
Finisar's optical data links are integrated into its customers' systems and used
for both short- and long-distance fiber optic communications. Finisar's FLX-2000
family of optical link extenders allows enterprises to extend the distance of
fiber optic links in Gigabit Ethernet and Fibre Channel-based networks while
preserving data integrity and reliability. Introduced in September 1999,
Finisar's Opticity 3000 is now being evaluated by several network service
providers ranging from application service providers to competitive local
exchange carriers and CATV operators. The Opticity 3000 combines cost-effective
wavelength division multiplexing with the ability to create reliable ring
network topologies. The Opticity 3000 allows enterprises and service providers
to build gigabit metropolitan data networks.
Finisar's GTX, GST and GLA family of network performance test systems
assist networking and storage system manufacturers in the efficient design of
reliable, high-speed networking systems and the testing and monitoring of the
performance of these systems.
<TABLE>
<CAPTION>
CLOSING CLOSING CLOSING
1995 PRICE 1996 PRICE 1997 PRICE
--------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
January * January * January *
February * February * February *
March * March * March *
April * April * April *
May * May * May *
June * June * June *
July * July * July *
August * August * August *
September * September * September *
October * October * October *
November * November * November *
December * December * December *
<CAPTION>
CLOSING CLOSING CLOSING
1998 PRICE 1999 PRICE 2000 PRICE
--------- ------- --------- ------- --------- -------
<C> <C> <C> <C> <C> <C>
January * January * January $20 3/16
February * February * February 47 5/64
March * March * March 48 27/32
April * April * April 37 5/16
May * May * May 22 5/16
June * June * June 26 3/16
July * July * July 26 9/16
August * August * August 46 3/8
September * September * September 48 3/8
October * October * October 28 13/16
November * November $38 27/64
December * December 29 61/64
</TABLE>
The closing price on November , 2000 was $ .
JDS UNIPHASE CORPORATION (JDSU)
JDS Uniphase Corporation, or JDS Uniphase, is the leading provider of
advanced fiber optic components and modules. These products are sold to leading
telecommunications and cable television system providers worldwide. JDS
Uniphase's components and modules are basic building blocks for fiber optic
networks and perform both optical-only (passive) and optoelectronic (active)
functions within these networks. JDS Uniphase's products include semiconductor
lasers, high-speed external modulators, transmitters, amplifiers, couplers,
multiplexers, circulators, tunable filters, optical switches and isolators for
fiber optic applications. JDS Uniphase also supplies its customers with test
instruments for both system production applications and network installation. In
addition, JDS Uniphase designs, manufactures and markets laser subsystems for a
broad range of OEM applications, optical display and projection products used in
computer displays and other similar applications and light interference pigments
used in security products and decorative surface treatments.
A-7
<PAGE> 53
<TABLE>
<CAPTION>
CLOSING CLOSING CLOSING
1995 PRICE 1996 PRICE 1997 PRICE
--------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
January $ 7/16 January $1 3/32 January $2 47/64
February 35/64 February 1 7/32 February 2 3/64
March 39/64 March 1 7/32 March 2 5/16
April 5/8 April 1 21/32 April 2 31/64
May 5/8 May 2 3/64 May 3 9/32
June 43/64 June 2 7/32 June 3 41/64
July 45/64 July 1 5/8 July 4 17/64
August 63/64 August 2 21/64 August 4 17/64
September 1 7/64 September 2 41/64 September 4 31/32
October 59/64 October 3 1/64 October 4 13/64
November 1 7/64 November 3 23/32 November 5 1/64
December 1 1/8 December 3 9/32 December 5 11/64
<CAPTION>
CLOSING CLOSING CLOSING
1998 PRICE 1999 PRICE 2000 PRICE
--------- ------- --------- ------- --------- -------
<C> <C> <C> <C> <C> <C>
January $4 19/32 January $11 25/64 January $101 31/32
February 5 1/64 February 11 1/64 February 131 13/16
March 5 17/64 March 14 25/64 March 120 9/16
April 6 25/32 April 15 11/64 April 103 11/16
May 6 3/8 May 16 3/4 May 88
June 7 27/32 June 20 3/4 June 119 7/8
July 6 1/4 July 22 19/32 July 118 1/8
August 5 August 26 33/64 August 124 31/64
September 5 1/8 September 28 29/64 September 94 11/16
October 6 3/16 October 41 23/32 October 81 7/16
November 6 25/32 November 57 3/16
December 8 43/64 December 80 21/32
</TABLE>
The closing price on November , 2000 was $ .
JUNIPER NETWORKS, INC. (JNPR)
Juniper Networks, Inc., or Juniper Networks, is a leading provider of
Internet Protocol, or IP, infrastructure solutions that enable Internet service
providers and other telecommunications service providers, to meet the demands of
the rapidly evolving optically-enabled IP networks. Juniper Networks' Internet
backbone routers are specifically designed and purpose-built, for service
provider networks and offer customers increased reliability, performance,
scalability, interoperability and flexibility, and reduced complexity and cost
compared to current alternatives. Juniper Networks' flagship product is the M40
Internet backbone router, and Juniper Networks recently introduced the M20, an
Internet backbone router purpose-built for emerging service providers. These
Internet backbone routers combine the features of Juniper Networks' JUNOS
Internet Software, high performance ASIC-based packet forwarding technology and
Internet-optimized architecture into a purpose-built solution for service
providers.
<TABLE>
<CAPTION>
CLOSING CLOSING CLOSING
1995 PRICE 1996 PRICE 1997 PRICE
--------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
January * January * January *
February * February * February *
March * March * March *
April * April * April *
May * May * May *
June * June * June *
July * July * July *
August * August * August *
September * September * September *
October * October * October *
November * November * November *
December * December * December *
<CAPTION>
CLOSING CLOSING CLOSING
1998 PRICE 1999 PRICE 2000 PRICE
--------- ------- --------- ------- --------- -------
<C> <C> <C> <C> <C> <C>
January * January * January $ 67 21/32
February * February * February 137 5/32
March * March * March 131 25/32
April * April * April 106 11/32
May * May * May 87 19/32
June * June $24 53/64 June 145 9/16
July * July 27 5/64 July 142 7/16
August * August 34 11/64 August 213 3/4
September * September 30 11/32 September 218 15/16
October * October 45 15/16 October 195
November * November 46 3/16
December * December 56 43/64
</TABLE>
The closing price on November , 2000 was $ .
LUCENT TECHNOLOGIES INC. (LU)
Lucent Technologies Inc., or Lucent, is one of the world's leading
designers, developers and manufacturers of communications systems, software and
products. Lucent is a global leader in the sale of public and private
communications systems, supplying systems and software to most of the world's
largest communications network operators and service providers. Lucent is also a
global leader in the sale of business communications systems and in the sale of
microelectronic components for communications applications to manufacturers of
communications systems and computers. Lucent's research and development
activities are conducted through Bell Laboratories, one of the world's foremost
industrial research and development organizations.
A-8
<PAGE> 54
On April 9, 2000, Lucent and TeraBeam Corporation entered into an agreement
to develop TeraBeam's fiberless optical networking system that provides
high-speed data networking between local and wide area networks. On June 16,
2000, Lucent acquired Herrmann, a supplier of optical devices for next
generation dense wave division multiplexing ("DWDM") networks. On June 28, 2000,
Lucent acquired Chromatis, a developer of metro optical networking products.
On July 20, 2000, Lucent announced plans to spin off its microelectronics
business, which includes the optoelectronics components and integrated circuits
(IC) divisions, into a separate, new company to be named later. Lucent is
planning an initial public offering for up to 20 percent of the new company in
the quarter ended March 31, 2001 and intends to spin off the remaining shares in
a tax-free distribution by the summer of 2001. Lucent intends to seek a ruling
from the Internal Revenue Service with respect to the tax-free treatment of the
spin-off. The spin-off is subject to certain conditions, including a favorable
tax ruling. The new company will include Lucent's microelectronics business
which makes silicon chips and optoelectronic components, such as lasers, that
are the building blocks for communications systems ranging from wireless phones
and modems to Internet equipment and optical networking systems.
On August 31, 2000, Lucent announced a 1 per 12 stock spin-off of Avaya
Inc. on its common stock to shareholders of record on September 20, 2000. This
spin-off is payable on September 29, 2000. The following table does not take
into account any adjustments for this spin-off.
<TABLE>
<CAPTION>
CLOSING CLOSING CLOSING
1995 PRICE 1996 PRICE 1997 PRICE
--------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
January * January * January $12 25/32
February * February * February 12 11/16
March * March * March 12 23/64
April * April $ 8 17/64 April 13 57/64
May * May 8 61/64 May 14 61/64
June * June 8 59/64 June 16 31/32
July * July 8 23/32 July 19 63/64
August * August 8 11/16 August 18 11/32
September * September 10 51/64 September 19 5/32
October * October 11 1/8 October 19 25/64
November * November 12 1/16 November 18 7/8
December * December 10 57/64 December 18 13/16
<CAPTION>
CLOSING CLOSING CLOSING
1998 PRICE 1999 PRICE 2000 PRICE
--------- ------- --------- ------- --------- -------
<C> <C> <C> <C> <C> <C>
January $20 27/32 January $53 1/64 January $52 9/32
February 25 33/64 February 47 53/64 February 56 3/64
March 30 7/64 March 50 55/64 March 57 11/16
April 35 29/32 April 56 33/64 April 58 37/64
May 33 13/32 May 53 37/64 May 53 59/64
June 39 11/64 June 63 33/64 June 55 13/16
July 43 1/2 July 61 9/32 July 41 13/64
August 33 3/8 August 60 11/32 August 39 25/64
September 32 39/64 September 61 7/64 September 28 25/32
October 37 49/64 October 60 33/64 October 23 5/16
November 40 17/32 November 68 7/8
December 51 25/32 December 70 41/64
</TABLE>
The closing price on November , 2000 was $ .
MRV COMMUNICATIONS, INC. (MRVC)
MRV Communications, Inc.'s or MRV's core operations include the design,
manufacture and sale of two groups of products:
- optical networking and internet infrastructure products, primarily
subscribers' management, network element management, and physical layer,
switching and routing management systems in fiber optic metropolitan
networks, and
- fiber optic components for the transmission of voice, video and data
across enterprise, telecommunications and cable TV networks.
MRV's advanced optical networking and Internet infrastructure solutions
greatly enhance the functionality of carrier and network service provider
networks. MRV's fiber optic components incorporate proprietary technology, which
delivers high performance under demanding environmental conditions.
MRV's business units offer active optical components, optical networking
and Internet infrastructure products, including network element management and
physical layer management in fiber optic metropolitan networks. MRV's In-Reach
product line manages Internet elements through secure remote monitoring of large
service providers' sites. MRV's Optical Networks family of products consist of
multi-layer traffic management: at Layer 1 with the Fiber Driver, at Layer 2
with the OptiSwitch and at Layer 3
A-9
<PAGE> 55
and above, with the OSR8000, Linux Router. MRV complements its optical
networking and Internet infrastructure products with a family of optical
transmission components and modules designed for transmission over fiber optic
cable. These products enable the transmission of voice, data, and video across
fiber and are also used in optical fiber test equipment. MRV's products include
discrete components, such as laser diodes and LEDs, and integrated components
such as transmitters, receivers and transceivers.
On October 6, 2000, MRV Communications, Inc.'s subsidiary, Optical Access,
Inc., filed a registration statement with the Securities and Exchange Commission
for an initial public offering of common stock. Optical Access designs,
manufactures and markets an optical wireless solution that delivers high-speed
communications traffic to the portion of the communications network commonly
known as the last mile, which extends from the end user to the service
provider's central office. As part of this filing, MRV advised Optical Access
that at some time after this offering it may apply for a private letter ruling
from the Internal Revenue Service and permission from the Israeli tax authority
in connection with a proposed distribution to its stockholders of all of Optical
Access's common stock held by MRV. One condition to the proposed distribution is
the receipt of favorable rulings from these agencies to treat the distribution
as a tax-free transaction. MRV has not advised Optical Access as to the timing
of the distribution and gave no assurances as to whether or when the
distribution will occur.
On November 10, 2000, MRV's subsidiary, Luminent, Inc., commenced an
initial public offering of common stock. Luminent designs, manufactures and
sells a comprehensive line of fiber optic components that enable communications
equipment manufacturers to provide optical networking equipment for the rapidly
growing metropolitan and access segments of the communications networks. MRV has
announced that it currently plans to distribute the remainder of its shares of
Luminent common stock to MRV's stockholders on the later of three months after
the receipt of a favorable private letter ruling from the Internal Revenue
Service or six months after the initial public offering, although they are not
obligated to do so. There are various conditions that must be satisfied or
waived by MRV in their sole discretion, prior to the distribution. MRV will
determine the exact distribution formula and record date to qualify for any
distribution at a future date.
<TABLE>
<CAPTION>
CLOSING CLOSING CLOSING
1995 PRICE 1996 PRICE 1997 PRICE
--------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
January $2 1/16 January $ 5 43/64 January $13 13/16
February 2 1/4 February 6 15/64 February 12 1/8
March 2 29/64 March 7 59/64 March 11 1/8
April 2 25/64 April 10 3/8 April 10 5/16
May 2 21/64 May 16 13/16 May 12 3/8
June 2 15/64 June 10 11/16 June 14 3/4
July 2 13/16 July 9 5/32 July 15 7/16
August 3 37/64 August 10 August 14 11/16
September 3 9/16 September 12 7/8 September 18 1/4
October 3 11/64 October 10 7/8 October 14 5/8
November 4 23/64 November 11 7/16 November 14 1/8
December 4 15/64 December 10 7/8 December 11 15/16
<CAPTION>
CLOSING CLOSING CLOSING
1998 PRICE 1999 PRICE 2000 PRICE
--------- ------- --------- ------- --------- -------
<C> <C> <C> <C> <C> <C>
January $11 23/32 January $ 4 9/16 January $36 3/8
February 11 5/8 February 3 11/32 February 78 13/32
March 11 11/16 March 3 1/64 March 45 13/16
April 13 7/16 April 5 April 34 15/32
May 11 5/8 May 5 27/32 May 26 5/8
June 10 3/8 June 6 9/16 June 67 1/4
July 10 11/32 July 7 5/8 July 57 7/8
August 2 51/64 August 9 7/32 August 77 1/16
September 3 3/32 September 11 27/32 September 45 5/16
October 3 15/32 October 10 27/32 October 39 1/2
November 3 9/32 November 16
December 3 3/32 December 31 7/16
</TABLE>
The closing price on November , 2000 was $ .
NEW FOCUS, INC. (NUFO)
New Focus, Inc. or New Focus, designs, manufactures and markets innovative
fiber optic products for next-generation optical networks under the Smart Optics
for Networks(TM) brand. New Focus leverages their ten years of experience in
developing advanced optical products to enable networking solutions with
increased channel counts, higher data rates, longer reach lengths and new
services, all of which reduce overall network cost of ownership. New Focus's
high performance products are compact, consume less power and are designed to be
manufacturable in high volumes.
New Focus's Smart Optics for Networks(TM) products enable systems providers
to meet the dynamic demands of next-generation optical networks. New Focus's
fiber amplifier products are widely deployed in
A-10
<PAGE> 56
optical networks to enable the transmission of an increased amount of
information at very high speeds over extended distances. New Focus's wavelength
management products, which process and control the many wavelengths on an
optical fiber, enable network equipment providers to increase the number of
channels transmitted and to accurately, efficiently and reliably manage a vast
number of optical signals. New Focus offers high-speed opto-electronic products,
or products that process both optical and electrical signals, that enable
interconnections between equipment in a network service provider's site at 10
gigabits per second. New Focus's high performance tunable laser modules, or
laser modules that have a dynamically adjustable wavelength, enable rapid
development, manufacturing and testing of fiber optic components and systems.
New Focus also offers advanced photonics, or optical, tools that enable network
service and equipment providers to develop their next-generation products.
<TABLE>
<CAPTION>
CLOSING CLOSING CLOSING CLOSING CLOSING CLOSING
1995 PRICE 1996 PRICE 1997 PRICE 1998 PRICE 1999 PRICE 2000 PRICE
--------- ------- --------- ------- --------- ------- --------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January * January * January * January * January * January *
February * February * February * February * February * February *
March * March * March * March * March * March *
April * April * April * April * April * April *
May * May * May * May * May * May $ 64 5/8
June * June * June * June * June * June 82 1/8
July * July * July * July * July * July 100 3/8
August * August * August * August * August * August 138 1/16
September * September * September * September * September * September 79 1/16
October * October * October * October * October * October 63 1/2
November * November * November * November * November *
December * December * December * December * December *
</TABLE>
The closing price on November , 2000 was $ .
NEWPORT CORPORATION (NEWP)
Newport Corporation, or Newport, is a global supplier of high-precision
test, measurement and automation systems and subsystems that enable
manufacturers of fiber optic components, semiconductor capital equipment,
industrial metrology, aerospace and other high-precision products to automate
their manufacturing processes, enhance product performance, and improve
manufacturing efficiencies and yields. Using Newport's systems and subsystems,
manufacturers of fiber optic components, semiconductors, computer peripherals
and other high precision products can reduce the need for labor-intensive manual
manufacturing tasks and implement new technologies and designs more readily,
thereby reducing manufacturing costs and shortening time to market.
Newport develops and manufactures its products within three distinct
business units, organized around customer and manufacturing requirements:
- Fiber Optics and Photonics. This division offers a complete suite of
automated manufacturing solutions. These products address a broad
spectrum of applications in the fiber optic component manufacturing
process, from Pre-Test to Assembly and Packaging to Final Device Testing
and Burn-In.
- Video Metrology. These systems and subsystems provide a broad range of
non-contact video-based measurement and inspection products for the
semiconductor equipment manufacturing market as well as other industrial
markets, such as computer peripherals and life and health sciences
markets.
- Industrial and Scientific Technologies. This division sells elements of
Newport's core technology such as micropositioning, vibration isolation
and optical components, systems, and accessories. These products are used
across a wide range of industrial markets for applications that range
from basic research and development activities to high-precision,
low-volume manufacturing. As part of this division, Newport manufactures
and markets a line of high-precision optics and optomechanical
components. These products include lenses, mirrors, prisms, laser beam
expanders, collimators,
A-11
<PAGE> 57
attenuators, variable beam splitters and spatial filters. Newport has the
capability to produce custom optical designs and coatings for specific
applications.
<TABLE>
<CAPTION>
CLOSING CLOSING CLOSING CLOSING CLOSING
1995 PRICE 1996 PRICE 1997 PRICE 1998 PRICE 1999 PRICE
--------- ------- --------- ------- --------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January $2 29/64 January $2 35/64 January $2 15/16 January $4 7/8 January $ 4 61/64
February 2 1/2 February 2 59/64 February 3 February 6 19/64 February 5 11/16
March 2 7/8 March 3 3/64 March 3 March 6 37/64 March 4 1/8
April 2 51/64 April 3 13/64 April 2 3/4 April 6 51/64 April 4 11/64
May 2 35/64 May 3 3/16 May 4 May 7 19/64 May 5 3/64
June 3 1/8 June 3 19/64 June 3 3/4 June 6 37/64 June 5 11/64
July 3 27/64 July 2 1/2 July 4 19/64 July 5 53/64 July 5 1/4
August 3 1/4 August 2 43/64 August 4 21/64 August 3 37/64 August 6 19/64
September 3 5/64 September 2 53/64 September 5 11/64 September 4 43/64 September 5 35/64
October 2 51/64 October 2 3/4 October 5 27/64 October 4 3/4 October 6 1/2
November 2 3/4 November 2 61/64 November 5 43/64 November 5 43/64 November 8 31/64
December 2 45/64 December 2 61/64 December 4 11/16 December 5 5/8 December 15 1/4
<CAPTION>
CLOSING
2000 PRICE
--------- -------
<C> <C>
January $ 23 45/64
February 53 21/64
March 45
April 40 7/16
May 56 55/64
June 107 3/8
July 97 7/8
August 159
September 159 17/64
October 114 13/64
</TABLE>
The closing price on November , 2000 was $ .
NORTEL NETWORKS CORPORATION (NT)
Nortel Networks Corporation, or Nortel, is a leading global supplier of
networking solutions and services that support voice, data and video
transmission over wireless and wireline technologies. Nortel is focused on
building the infrastructure service enabling solutions and applications for the
new, high-performance Internet. Nortel's business consists of the design,
development, assembly, manufacture, marketing, sale, financing, installation,
servicing and support of network solutions and services for Service Provider and
Carrier customers and Enterprise customers.
Nortel carries on business in two operating segments:
- Service Provider and Carrier Segment. Key products include:
high-capacity fiber-optic systems that incorporate dense wavelength
division multiplexing, synchronous optical network and synchronous
digital hierarchy capabilities; high-end packet switching platforms that
include frame-relay and asynchronous transfer mode switching fabrics,
high-speed Internet Protocol routing and packet telephony gateways;
wireless voice and data networking solutions; high-speed access
networking solutions that include remote access switches and solutions
utilizing copper wire, coaxial cable, or wireless media; and software for
the management of network infrastructure and service.
- Enterprise Segment. Key products include: solutions for electronic
business, including customer relationship management solutions, call
center products, voice messaging solutions and interactive voice response
systems; Internet and data networking solutions, including high-speed
frame and cell switching products; Open IP systems, including routing
products, virtual private network products and wide area network
switches; Enterprise telephony solutions, including digital switches and
key systems; in-building wireless data and telephony solutions; and a
broad range of voice and data communications solutions for small
business.
A-12
<PAGE> 58
<TABLE>
<CAPTION>
CLOSING CLOSING CLOSING CLOSING CLOSING
1995 PRICE 1996 PRICE 1997 PRICE 1998 PRICE 1999 PRICE
--------- ------- --------- ------- --------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January $4 17/64 January $5 5/8 January $ 9 13/64 January $11 9/32 January $15 25/32
February 4 17/64 February 5 15/16 February 8 63/64 February 13 5/16 February 14 33/64
March 4 47/64 March 5 31/32 March 8 11/64 March 16 5/32 March 15 17/32
April 4 35/64 April 6 7/16 April 9 5/64 April 15 7/32 April 17 3/64
May 4 51/64 May 6 25/32 May 10 1/2 May 16 May 18 3/4
June 4 9/16 June 6 51/64 June 11 3/8 June 14 3/16 June 21 45/64
July 4 45/64 July 5 7/8 July 13 5/64 July 14 23/32 July 22 5/32
August 4 19/32 August 6 15/64 August 12 25/64 August 11 7/8 August 20 17/32
September 4 29/64 September 7 7/32 September 13 September 8 1/64 September 25 1/2
October 4 1/2 October 8 9/64 October 11 7/32 October 10 45/64 October 30 31/32
November 5 3/64 November 8 7/32 November 11 15/64 November 11 43/64 November 36 15/16
December 5 3/8 December 7 47/64 December 11 3/32 December 12 1/2 December 50 1/2
<CAPTION>
CLOSING
2000 PRICE
--------- -------
<C> <C>
January $47 3/4
February 55 7/8
March 63 1/16
April 56
May 54 1/8
June 68 1/4
July 74 3/8
August 81 9/16
September 59 9/16
October 45 1/2
</TABLE>
The closing price on November , 2000 was $ .
ONI SYSTEMS CORP (ONIS)
ONI Systems Corp., or ONI Systems, develops, markets and sells
communications networking equipment, based entirely on optical technology, for
metropolitan area and regional networks. ONI Systems' customers are
communication service providers. ONI Systems' products enable customers to
relieve traffic bottlenecks in their metropolitan and regional networks and to
deliver new data communication services sought by their subscribers. ONI Systems
also helps customers to rapidly build high-capacity metro networks that are
flexible, easy to expand and capable of supporting multiple services for
end-users.
ONI Systems' first product, the ONLINE 9000(TM), has been generally
available since January 2000. ONI Systems' second product, the ONLINE 7000(TM),
has been generally available since June 2000. These products incorporate ONI
Systems' OPTX(TM) network operating system, its OPTX(TM) inter-network operating
system and its OLMP(TM) inter-network communications protocol to manage and
support a diverse mix of service offerings by its customers. The benefits of
these products include:
- Multi-service capability. ONI Systems' products allow service providers
to introduce and support a changing mix of services without deploying
dedicated equipment for each service type. ONI Systems' products are also
compatible with existing services based on the synchronous optical
network, or SONET, standard.
- Manageability and flexibility. ONI Systems' products enable real time
end-to-end management, surveillance, service activation, network
inventory management and billing within the OPTX network operating
system.
- Cost effectiveness and scalability. ONI Systems' products eliminate
costly optical-to-electrical conversions within a metro network, and the
scalability of ONI Systems' products allows service providers to build
metro networks in a pay-as-you-grow fashion.
- Rapid and efficient service restoration. ONI Systems' products provide
for rapid restoration of mission critical services without the need to
dedicate network capacity carrying duplicated traffic for this
capability.
A-13
<PAGE> 59
<TABLE>
<CAPTION>
CLOSING CLOSING CLOSING CLOSING CLOSING CLOSING
1995 PRICE 1996 PRICE 1997 PRICE 1998 PRICE 1999 PRICE 2000 PRICE
--------- ------- --------- ------- --------- ------- --------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January * January * January * January * January * January *
February * February * February * February * February * February *
March * March * March * March * March * March *
April * April * April * April * April * April *
May * May * May * May * May * May *
June * June * June * June * June * June $117 13/64
July * July * July * July * July * July 88 9/16
August * August * August * August * August * August 95 5/16
September * September * September * September * September * September 86 5/16
October * October * October * October * October * October 81 1/16
November * November * November * November * November *
December * December * December * December * December *
</TABLE>
The closing price on November , 2000 was $ .
REDBACK NETWORKS, INC. (RBAK)
Redback Networks, Inc., or Redback, is a leading provider of advanced
networking systems that enable carriers, cable operators and service providers
to rapidly deploy high-speed access to the Internet and corporate networks.
Redback's product lines, which consist of the Subscriber Management System(TM)
family combine, and the SmartEdge(TM) family will combine, networking hardware
with sophisticated software. Together, these product families are designed to
enable customers to create end-to-end regional networks that will support all
major broadband access technologies, as well as the new services that these
high-speed connections will enable. Redback's Subscriber Management System, or
SMS, products connect and manage large numbers of subscribers across all major
high-speed access technologies, including digital subscriber line, cable and
wireless. Redback's SmartEdge optical networking and multi-service products are
being developed to simplify the architecture of today's regional voice and data
networks, as well as improve their capacity and performance.
Redback announced its new family of SmartEdge products during the second
quarter of 2000 and anticipates its first customer shipments to begin in the
second half of 2000. The SmartEdge family will enable carriers, cable operators
and service providers to create high capacity, very flexible regional fiber
optic networks. Telecommunications providers will be able to use the SmartEdge
platform to upgrade their regional voice and data networks to support the extra
traffic generated by the growing availability of broadband Internet access.
Additionally, regional networks based on the SmartEdge products will be less
complex and more flexible in design, and thus telecommunications providers will
be able to deliver high-speed data services more rapidly.
<TABLE>
<CAPTION>
CLOSING CLOSING CLOSING CLOSING CLOSING
1995 PRICE 1996 PRICE 1997 PRICE 1998 PRICE 1999 PRICE
--------- ------- --------- ------- --------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January * January * January * January * January *
February * February * February * February * February *
March * March * March * March * March *
April * April * April * April * April *
May * May * May * May * May $27 3/8
June * June * June * June * June 31 25/64
July * July * July * July * July 38 11/16
August * August * August * August * August 53 3/4
September * September * September * September * September 54
October * October * October * October * October 57 3/4
November * November * November * November * November 69 31/32
December * December * December * December * December 88 3/4
<CAPTION>
CLOSING
2000 PRICE
--------- -------
<C> <C>
January $ 93 3/32
February 149 1/4
March 149 31/32
April 79 3/8
May 83 7/8
June 179 1/8
July 130
August 149 3/8
September 164
October 106 7/16
</TABLE>
The closing price on November , 2000 was $ .
A-14
<PAGE> 60
SDL, INC. (SDLI)
SDL, Inc., or SDL, is a leader in providing products for optical
communications and related markets worldwide. SDL designs, manufactures and
markets semiconductor lasers, fiber optic related products and optoelectronic
modules and systems. SDL's products enable the transmission of data, voice, and
Internet information over fiber optic networks to meet the needs of
telecommunication, cable television and metro communications applications
primarily using technologies relating to dense wavelength division multiplexing,
or DWDM. SDL's products enable customers to meet the growing need for increasing
bandwidth by expanding their fiber optic communication networks more quickly and
efficiently than by using conventional electronic and optical technologies.
SDL derives revenue from two principal markets:
- Fiber Optic Communications. SDL supplies Erbium-Doped Fiber
Amplifiers (EDFA) that are designed for OEM integration into high
performance analog or digital communications systems. SDL supplies
high power 980nm single mode pump lasers to provide power to optical
amplifiers used in terrestrial and undersea fiber optic systems. As
new high power DWDM optical amplifier technology has developed, SDL
has introduced pump lasers to meet the needs of this emerging
technology. SDL supplies 980nm pump modules that lead the industry
in output power and uses fiber Bragg grating technology to stabilize
the pump module. Grating stabilization delivers superior wavelength
stability and enables precise wavelength specification. During 1999,
SDL introduced a Raman amplifier pump module that won the Laser
Focus World Optical Product of the Year Award. These amplifiers,
designed to work in both the 1310nm and 1550nm windows, offer higher
power potential and lower crosstalk potential than EDFAs. With SDL's
acquisition of IOC International in May 1999, SDL expanded into the
transmission sector of DWDM systems with lithium niobate external
modulators and drivers. The use of external modulation enables very
high channel count systems and very long propagation distances.
- Industrial Products. The tremendous growth of the fiber optic
market has tended to overshadow the non-communications applications
where SDL's semiconductor lasers, fiber lasers and laser-based
systems have historically enjoyed success. It is important to note,
however, that revenues from these segments of SDL's business grew at
9 percent in 1999. These markets include such applications as
printing and materials processing.
<TABLE>
<CAPTION>
CLOSING CLOSING CLOSING CLOSING CLOSING
1995 PRICE 1996 PRICE 1997 PRICE 1998 PRICE 1999 PRICE
--------- ------- --------- ------- --------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January * January $4 11/64 January $5 11/16 January $4 25/64 January $ 12 1/2
February * February 5 1/16 February 5 1/8 February 5 3/16 February 13 5/8
March $4 19/64 March 5 March 4 9/32 March 5 15/16 March 22 11/16
April 4 1/4 April 6 51/64 April 3 1/4 April 6 3/16 April 27 5/16
May 4 5/16 May 7 5/64 May 5 May 5 1/2 May 23 1/4
June 5 June 6 15/16 June 4 25/32 June 5 31/32 June 25 17/32
July 5 3/4 July 6 1/8 July 5 3/16 July 4 31/32 July 33 31/32
August 5 19/64 August 4 13/16 August 4 7/16 August 4 1/4 August 40 15/16
September 4 5/64 September 5 1/8 September 5 1/16 September 3 1/8 September 38 5/32
October 4 1/4 October 4 1/4 October 4 1/2 October 5 1/2 October 61 21/32
November 3 3/4 November 5 3/4 November 4 5/32 November 5 37/64 November 81 3/8
December 4 December 6 9/16 December 3 5/8 December 9 29/32 December 109
<CAPTION>
CLOSING
2000 PRICE
--------- -------
<C> <C>
January $129 19/32
February 205
March 212 7/8
April 195
May 226 9/16
June 285 3/16
July 347 1/16
August 397 5/16
September 309 5/16
October 259 1/4
</TABLE>
The closing price on November , 2000 was $ .
STRATOS LIGHTWAVE, INC. (STLW)
Stratos Lightwave, Inc., or Stratos, develops, manufactures and sells
optical subsystems and components for high data rate networking, data storage
and telecommunication applications. Stratos' optical subsystems convert
electronic signals into optical signals and back into electronic signals,
thereby
A-15
<PAGE> 61
facilitating the transmission of information over optical communication
networks. These optical subsystems are designed for use in local area networks,
storage area networks, metropolitan area networks, wide area networks and
central office networking in telecommunication markets. Stratos' optical
subsystems are compatible with the transmission protocols used in these
networks, including Gigabit Ethernet, Fast Ethernet, Fibre Channel and
asynchronous transfer mode. Stratos also designs, manufactures, and sells a full
line of optical components and cable assemblies for use in these networks.
Stratos' products are designed for the various fiber optic interfaces on
the market today, including the SC and LC interfaces. The SC fiber optic
interface is one of the most common interfaces used in optical network
applications. This interface was designed to be used over the entire range of
optical network applications. The LC fiber optic interface is one-half the size
of the SC interface and was designed to meet the higher port density
requirements of space restricted applications. The LC interface is an
evolutionary version of the SC interface that shares proven connector
technology.
Stratos' product can be divided into two categories:
- Optical Subsystems. Stratos' optical subsystems consist of a broad range
of optical transceivers. Stratos' optical transceivers serve as high data
rate interconnects between network devices, such as hubs, switches,
servers and storage elements. Stratos' broad line of optical transceivers
are available in a variety of fiber optic interfaces, or form factors,
and support a wide range of data rates, protocols, wavelengths, modes and
transmission distances.
- Optical Components. Stratos' optical components include an extensive
range of fiber optic connectors, cable assemblies and related
accessories. Stratos' connector products include a variety of form
factors for single and multi-fiber applications. In addition to standard
SC connectors and legacy standard connectors, Stratos offers small form
factor LC and MT-RJ connectors that meet the needs of Stratos' customers
to connect higher numbers of interface ports in the same or smaller
space.
<TABLE>
<CAPTION>
CLOSING CLOSING CLOSING CLOSING CLOSING CLOSING
1995 PRICE 1996 PRICE 1997 PRICE 1998 PRICE 1999 PRICE 2000 PRICE
--------- ------- --------- ------- --------- ------- --------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January * January * January * January * January * January *
February * February * February * February * February * February *
March * March * March * March * March * March *
April * April * April * April * April * April *
May * May * May * May * May * May *
June * June * June * June * June * June $27 7/8
July * July * July * July * July * July 37 1/2
August * August * August * August * August * August 47
September * September * September * September * September * September 32 1/4
October * October * October * October * October * October 26 7/16
November * November * November * November * November *
December * December * December * December * December *
</TABLE>
The closing price on November , 2000 was $ .
SYCAMORE NETWORKS, INC (SCMR)
Sycamore Networks, Inc., or Sycamore, develops and markets software-based
intelligent optical networking products that enable network providers to quickly
and cost effectively provide bandwidth and create new high-speed data services.
Sycamore's intelligent optical networking products are designed to allow service
providers to deploy, manage and optimize the performance of their fiber optic
networks. Sycamore has designed its products to protect service providers'
existing investment in fiber optic and transmission equipment and provide a
migration path to the next generation optical public network infrastructure.
A-16
<PAGE> 62
Sycamore's intelligent optical networking products incorporate the
following features:
- Intelligent Optical Networking Software. Sycamore's entire product line
shares a common software base. This software foundation allows it to
minimize product development time by leveraging its software architecture
across multiple product lines.
- SONET/SDH Functionality. Sycamore's products are designed to provide the
optical interfaces and management and restoration capabilities
traditionally offered on SONET/SDH equipment.
- DWDM Technology. Sycamore integrates commercially available DWDM optical
technology into its products, providing a comprehensive solution for its
customers' multiplexing needs.
- Network Management. Sycamore's network management products will provide
end-to-end management and control of the intelligent optical network.
Network management functions include fault management, configuration
management, accounting management, performance management and security
management. Comprised of SilvxManager, a network management platform, and
SilvxSource, a system-resident management application, Sycamore's network
management products constitute a distributed solution designed to provide
end-to-end management of the intelligent optical network.
Sycamore has offers or will offer the following current and planned
products:
- SN 6000. The SN 6000 is an intelligent optical transport product designed
specifically to work within an existing SONET/SDH network.
- SN 8000. The SN 8000 is an intelligent optical network node that will be
used to provide high speed services over fiber optic wavelengths for
access, interoffice, regional and backbone networks.
- SilvxSource and SilvxManager. The SILVX optical network management system
provides end-to-end management of data communications services across a
service provider's optical network. SILVX simplifies network
configuration, network provisioning and network management by
implementing many of today's manual and labor-intensive network
management processes within software.
- SN 16000. The SN 16000 is an intelligent optical switch for end-to-end
wavelength switching and routing, which is necessary for the creation of
a meshed topology network.
- SN 10000. The SN 10000 is an intelligent optical network node that will
be used to provide high speed services over fiber optic wavelengths in
long distance backbone networks. The SN 10000 is being designed to
provide a complete stand-alone optical networking solution and to be
capable of being configured in point-to-point, linear, ring or mesh
applications. This product is currently in development.
<TABLE>
<CAPTION>
CLOSING CLOSING CLOSING CLOSING CLOSING CLOSING
1995 PRICE 1996 PRICE 1997 PRICE 1998 PRICE 1999 PRICE 2000 PRICE
--------- ------- --------- ------- --------- ------- --------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January * January * January * January * January * January $106 21/64
February * February * February * February * February * February 148
March * March * March * March * March * March 129
April * April * April * April * April * April 78 1/2
May * May * May * May * May * May 83 5/8
June * June * June * June * June * June 110 3/8
July * July * July * July * July * July 123 5/16
August * August * August * August * August * August 137 1/2
September * September * September * September * September * September 108
October * October * October * October * October $ 71 43/64 October 63 1/4
November * November * November * November * November 74
December * December * December * December * December 102 43/64
</TABLE>
The closing price on November , 2000 was $ .
A-17
<PAGE> 63
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
OPTICAL EQUIPMENT
[NETS(SM) LOGO]
500,000,000 DEPOSITARY RECEIPTS
OPTICAL EQUIPMENT NETS(SM) TRUST
------------------------
PROSPECTUS
------------------------
[EPOCH PARTNERS LOGO]
, 2001
Until , 2001 (25 days after the date of this prospectus),
all dealers effecting transactions in the offered Optical Equipment NETS,
whether or not participating in this distribution, may be required to deliver a
prospectus. This requirement is in addition to the obligations of dealers to
deliver a prospectus when acting as underwriters and with respect to unsold
allotments or subscriptions.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 64
APPENDIX A
Prospective investors will be able to view a website at www.epochnets.com,
maintained by Epoch Securities, Inc., where a prospectus will be available for
review. A description of this website and the text of this website is set forth
below and will be included as Appendix A to the prospectus. Each page of this
website will contain a hyperlink to a copy of the entire prospectus in a
Portable Document Format, or PDF, and a hyperlink to the Meet the Product
Presentation that will provide access to the online multimedia presentation of
the information set forth in textual format in Appendix B. This website
summarizes information regarding the Optical Equipment NETS and is not complete.
You should carefully read the entire prospectus, which includes this web site,
the Optical Equipment NETS presentation and the pdf format prospectus, before
you purchase any Optical Equipment NETS.
WEB SITE HOME PAGE: COVER PAGE
Imagery: NETS logo in the upper left corner. A tab labeled "Optical
Equipment" highlighted on the upper right of the page. A square icon consisting
of two intertwined arrows provides a link to the prospectus in a PDF format. A
square icon consisting of an arrow pointing to the right provides a link to the
Optical Equipment NETS wrapper. A square icon consisting of three touching
sphere shapes provides a link to the Optical Equipment NETS presentation. NETS
logo in the top center of the right of the web page. A table appears on the
middle of the right of the web page that contains the information on the initial
price to the public and the underwriting fee as it appears on the front cover of
the prospectus. Epoch Partners' logo on the bottom center of the right of the
web page. Border around the web page.
Hyperlinks: On the middle left of the page below the NETS logo and
additional text, described below, are hyperlinks to the prospectus in a PDF
format, the Optical Equipment NETS wrapper and the Optical Equipment NETS
presentation. These hyperlinks include the icons described above and are labeled
respectively as follows: "Download the pdf format prospectus", "View the Optical
Equipment NETS wrapper, which is Appendix A of the pdf format prospectus" and
"View the Optical Equipment NETS presentation, which is Appendix B of the pdf
format prospectus". The text in two places on the right of the page that reads,
"pdf format prospectus," contains a hyperlink to the prospectus in a PDF format.
Text. No Title. The top left of the web page below the NETS logo reads in
bold letters: "This web site is part of the prospectus." Below this text on the
top left reads: "This web site summarizes information regarding the Optical
Equipment NETS and is not complete. You should carefully read the entire
prospectus, which includes this web site, the Optical Equipment NETS
presentation and the pdf format prospectus, before you purchase any Optical
Equipment NETS."
The text on the right of the web page is similar to the front cover of the
pdf format prospectus. At the top the following text appears in red and reads:
"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 is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus dated December 18, 2000".
The following text appears below the red text:
"PROSPECTUS
Optical Equipment
NETS
New Era Trust Securities
500,000,000 Depositary Receipts
Optical Equipment NETS(SM) Trust
<PAGE> 65
The Optical Equipment NETS(SM):
- Are depositary receipts that represent your undivided beneficial
ownership in shares of U.S.-traded common stock of a group of companies
that, among other things, design, manufacture and market products that
enable voice and data transmissions across communications networks using
optical, or light-based, signals.
- Represent your ownership of the companies and the number of shares of
their common stock found in the pdf format prospectus.
- Are separate from the underlying shares of common stock that will be held
by the Optical Equipment NETS Trust.
- May only be acquired, traded or exchanged in a round-lot amount of 100
Optical Equipment NETS or round-lot multiples.
The Optical Equipment NETS Trust:
- Has been formed to hold the underlying common stocks and issue the
Optical Equipment NETS.
- May issue additional Optical Equipment NETS on a continuous basis.
- Is not a registered investment company under the Investment Company Act
of 1940.
- Will terminate on December 31, 2005, or earlier if a termination event
occurs.
- Investors Bank & Trust Company will act as trustee.
- Optical Equipment NETS are interests in and obligations of the Optical
Equipment NETS Trust and not of Epoch Securities, Inc., or Investors Bank
& Trust Company or any of their affiliates.
Prior to this offering no public market existed for the Optical Equipment
NETS. The Optical Equipment NETS have been approved for listing on the American
Stock Exchange under the symbol "OPN." In addition to this prospectus, there is
also an electronic version of this prospectus for the Optical Equipment NETS
that can be accessed on the Internet at www.epochnets.com as well as web sites
for one or more of the underwriters and dealers which contains information
formatted differently from this prospectus.
Investing in Optical Equipment NETS involves significant risks. Please
refer to the section entitled "Risk Factors" in the pdf format prospectus for a
more complete description of these risks.
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>
INITIAL PRICE UNDERWRITING
TO PUBLIC FEE
------------- ------------
<S> <C> <C>
Per Optical Equipment NETS including the underwriting
fee................................................... $ 2%
</TABLE>
The initial public offering price for a round-lot of 100 Optical Equipment
NETS will equal the sum of the values of the deposited shares for all companies
as specified in this prospectus, which will be determined by multiplying the
closing market price for each security on the pricing date on the primary U.S.
trading market by the number of deposited shares for each company, plus an
underwriting fee.
Epoch Partners
The date of this prospectus is , 2001."
Below this text, the web page border contains the text: "NETS and New Era
Trust Securities are service markets of Epoch Partners, Inc. Copyright(C) 2000."
2
<PAGE> 66
WEB PAGE 1: OPTICAL EQUIPMENT NETS WRAPPER MAIN PAGE
Imagery: NETS logo in the upper left corner. A tab labeled "Optical
Equipment" highlighted on the upper right of the page. A square icon consisting
of three touching sphere shapes provides a link to the Optical Equipment NETS
presentation. A square icon consisting of two intertwined arrows provides a link
to the prospectus in a PDF. Border around the web page.
Hyperlinks: On the left of the page below the NETS logo are hyperlinks to
the web pages listed below. These hyperlinks are labeled based on the page to
which they link. These hyperlinks include: "What are they?," "What companies'
stocks are represented by them?," "What is the optical equipment industry?,"
"What features do they offer investors?," "Who should consider investing in
them?" and "What are the risks of this investment?" The middle right of the page
contains hyperlinks to the Optical Equipment NETS presentation and the
prospectus in a PDF. These hyperlinks include the icons described above and are
labeled respectively as follows: "View the Optical Equipment NETS presentation"
and "Download the pdf format prospectus."
Text: Title: "Optical Equipment NETS were created to provide." Below this
title are the following bullet pointed items: "Industry specific
diversification," "Ownership flexibility," "Lower transaction fees," "Reduced
annual fees and no hidden costs" and "Tax benefits."
The bottom right of the page reads: "This website summarizes information
regarding the Optical Equipment NETS and is not complete. You should carefully
read the entire prospectus, which includes this web site, the Optical Equipment
NETS presentation and the pdf format prospectus, before you purchase any Optical
Equipment NETS." And below this text, the web page border contains the text:
"NETS and New Era Trust Securities are service marks of Epoch Partners, Inc.
Copyright(C) 2000."
GENERAL: GENERAL ITEMS INCLUDED ON WEB PAGES 2 - 7 BELOW
Imagery: NETS logo in the upper left corner. A tab labeled "Optical
Equipment" highlighted on the upper right of the page. A square icon consisting
of three touching sphere shapes provides a link to the Optical Equipment NETS
presentation. A square icon consisting of two intertwined arrows provides a link
to the prospectus in a PDF. Border around the web page.
Hyperlinks: On the left of the web page below the NETS logo are hyperlinks
to the web pages listed below. These hyperlinks are labeled based on the web
page to which they link. These hyperlinks include: "What are they?," "What
companies' stocks are represented by them?," "What is the optical equipment
industry?," "What features do they offer investors?," "Who should consider
investing in them?" and "What are the risks of this investment?" On the bottom
left of the web page are hyperlinks to the Optical Equipment NETS presentation
and the prospectus in a PDF. These hyperlinks include the icons described above
and are labeled respectively as follows: "View the Optical Equipment NETS
presentation" and "Download the pdf format prospectus."
Text: The bottom left of the web page reads: "This website summarizes
information regarding the Optical Equipment NETS and is not complete. You should
carefully read the entire prospectus, which includes this web site, the Optical
Equipment NETS presentation and the pdf format prospectus, before you purchase
any Optical Equipment NETS." The web page border on the bottom right contains
the text: "NETS and New Era Trust Securities are service marks of Epoch
Partners, Inc. Copyright(C) 2000."
WEB PAGE 2: WHAT ARE THE OPTICAL EQUIPMENT NETS?
Imagery: See General.
Hyperlinks: See General. Below the text on the right of the web page,
described below, a hyperlink labeled, "next" with two arrows pointing right,
hyperlinks to Web Page 3.
Text: Title: "Optical Equipment NETS." Subtitle: "What are the Optical
Equipment NETS?" Below this title on the right side of the web page is the
following text: "NETS are depositary receipts that represent your ownership of a
group of companies' common stocks. These companies generally are
3
<PAGE> 67
considered to be among the largest and most liquid companies with U.S.-traded
common stock in a particular industry.
NETS are NOT index funds, exchange traded funds or mutual funds. The NETS
structure enables you to own a single security that represents a diversified
portfolio of stocks in a specific industry. But unlike an actively managed fund,
the stocks represented by the NETS will not change based on the decisions of an
investment manager, to match an index or to satisfy fund investment constraints,
which eliminates the hidden costs associated with the turnover of stocks in
managed funds and the associated tax consequences.
The Optical Equipment NETS represent a group of 21 companies involved in
the optical equipment industry."
WEB PAGE 3: WHAT COMPANIES' STOCKS ARE REPRESENTED BY THE OPTICAL EQUIPMENT
NETS?
Imagery: See General.
Hyperlinks: See General. Below the text on the right of the web page,
described below, a link labeled, "next" with two arrows pointing right,
hyperlinks to Web Page 4.
Text: Title: "Optical Equipment NETS." Subtitle: "What Companies' Stocks
are Represented by the Optical Equipment NETS?" Below this title on the right
side of the web page is the following text and table: "For illustration
purposes, the number of shares of each company's common stock represented by
each round-lot of 100 Optical Equipment NETS and the initial weightings are set
forth in the chart below based on the equity market values as of October 26,
2000.
<TABLE>
<CAPTION>
NUMBER OF PRIMARY U.S.
SHARES PER INITIAL TRADING
NAME OF COMPANY TICKER ROUND-LOT WEIGHTINGS MARKET
--------------- ------ ---------- ---------- ------------
<S> <C> <C> <C> <C>
Corning Incorporated GLW 7 9.96% NYSE
Lucent Technologies Inc. LU 23 9.84 NYSE
Cisco Systems, Inc. CSCO 9 9.79 Nasdaq NMS
Nortel Networks Corporation NT 10 9.22 NYSE
JDS Uniphase Corporation JDSU 6 9.07 Nasdaq NMS
CIENA Corporation CIEN 4 8.37 Nasdaq NMS
Juniper Networks, Inc. JNPR 2 7.73 Nasdaq NMS
Sycamore Networks, Inc. SCMR 4 5.22 Nasdaq NMS
Corvis Corporation CORV 4 4.92 Nasdaq NMS
SDL, Inc. SDLI 1 4.89 Nasdaq NMS
Redback Networks Inc. RBAK 2 4.67 Nasdaq NMS
ADC Telecommunications, Inc. ADCT 10 3.82 Nasdaq NMS
ONI Systems Corp. ONIS 2 2.88 Nasdaq NMS
Newport Corporation NEWP 1 2.26 Nasdaq NMS
Avanex Corporation AVNX 1 1.86 Nasdaq NMS
New Focus, Inc. NUFO 1 1.22 Nasdaq NMS
Finisar Corporation FNSR 2 1.06 Nasdaq NMS
Digital Lightwave, Inc. DIGL 1 1.04 Nasdaq NMS
Avici Systems Inc. AVCI 1 0.90 Nasdaq NMS
MRV Communications, Inc. MRVC 1 0.72 Nasdaq NMS
Stratos Lightwave, Inc. STLW 1 0.56 Nasdaq NMS
</TABLE>
The share amounts were determined so that:
- the initial issue price will be approximately $40 - $50 per Optical
Equipment NETS,
- the initial weightings of each underlying security approximates the
relative equity market values of the specified companies, and
- the maximum initial weighting of any underlying security is 10%.
The final share amounts will be determined on the pricing date, using the
same methodology. After the pricing date, the share amounts will not change,
except for changes due to corporate events, such as
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stock splits or reverse stock splits on the underlying securities, or
reconstitution events. However, the weightings are expected to change
substantially over time because of price fluctuations.
On July 10, 2000, JDS Uniphase Corporation and SDL, Inc. announced their
definitive agreement to merge. The merger agreement provides for the exchange of
3.8 shares of JDS Uniphase common stock for each common share of SDL. Completion
of the transaction is subject to customary closing conditions, including the
approval of stockholders of both companies and regulatory approvals. Upon
completion of the merger, the stock of the surviving company will be deposited
into the Optical Equipment NETS Trust.
On July 20, 2000, Lucent Technologies Inc. announced plans to spin off its
microelectronics business, which includes the optoelectronics components and
integrated circuits (IC) divisions, into a separate, new company to be named
later. Lucent is planning an initial public offering for up to 20 percent of the
new company in the quarter ended March 31, 2001 and intends to spin off the
remaining shares in a tax-free distribution by the summer of 2001. Shares of the
spin-off company will be retained by the Optical Equipment NETS Trust, unless
either the distributed securities are not listed for trading on a U.S. national
securities exchange or through Nasdaq NMS or the distributed securities have a
Standard & Poor's sector classification that is different from the Standard &
Poor's sector classifications represented in the Optical Equipment NETS Trust at
the time of the distribution.
On October 6, 2000, MRV Communications, Inc.'s ("MRV") subsidiary, Optical
Access, Inc., filed a registration statement with the Securities and Exchange
Commission, or the SEC, for an initial public offering of common stock. Optical
Access designs, manufactures and markets an optical wireless solution that
delivers high-speed communications traffic to the portion of the communications
network commonly known as the last mile, which extends from the end user to the
service provider's central office. As part of this filing, MRV advised Optical
Access that at some time after this offering it may apply for a private letter
ruling from the Internal Revenue Service and permission from the Israeli tax
authority in connection with a proposed distribution to its stockholders of all
of Optical Access's common stock held by MRV. One condition to the proposed
distribution is the receipt of favorable rulings from thee agencies to treat the
distribution as a tax-free transaction. MRV has not advised Optical Access as to
the timing of the distribution and gave no assurances as to whether or when the
distribution will occur; however, any distribution of Optical Access shares will
be retained by the Optical Equipment NETS Trust, unless either the distributed
securities are not listed for trading on a U.S. national securities exchange or
through Nasdaq NMS or the distributed securities have a Standard & Poor's sector
classification that is different from the Standard & Poor's sector
classifications represented in the Optical Equipment NETS Trust at the time of
the distribution.
On November 10, 2000, MRV's subsidiary, Luminent, Inc., commenced an
initial public offering of common stock. Luminent designs, manufactures and
sells a comprehensive line of fiber optic components that enable communications
equipment manufacturers to provide optical networking equipment for the rapidly
growing metropolitan and access segments of the communications networks. MRV has
announced that it currently plans to distribute the remainder of its shares of
Luminent common stock to MRV's stockholders on the later of three months after
the receipt of a favorable private letter ruling from the Internal Revenue
Service or six months after the initial public offering, although they are not
obligated to do so. There are various conditions that must be satisfied or
waived by MRV in their sole discretion, prior to the distribution. MRV will
determine the exact distribution formula and record date to qualify for any
distribution at a future date. Any distribution of Luminent shares will be
retained by the Optical Equipment NETS Trust, unless either the distributed
securities are not listed for trading on a U.S. national securities exchange or
through Nasdaq NMS or the distributed securities have a Standard & Poor's sector
classification that is different from the Standard & Poor's sector
classifications represented in the Optical Equipment NETS Trust at the time of
the distribution.
The inclusion of a company's common stock in the Optical Equipment NETS is
not a recommendation of that company or its common stock by Epoch Securities,
Inc., Advanced Clearing, Inc., Charles Schwab & Co., Inc., the Optical Equipment
NETS Trust, the trustee or any of their affiliates."
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WEB PAGE 4: WHAT IS THE OPTICAL EQUIPMENT INDUSTRY?
Imagery: See General.
Hyperlinks: See General. Below the text on the right of the web page,
described below, a link labeled, "next" with two arrows pointing right,
hyperlinks to Web Page 5.
Text: Title: "Optical Equipment NETS." Subtitle: "What is the optical
equipment industry?" Below this title on the right side of the web page is the
following text: "The optical equipment industry consists of numerous companies
that design, manufacture and market products that enable voice and data
transmissions across communications networks using optical, or light-based,
signals. According to RHK, Inc., a telecommunications industry market research
firm, the global market for optical systems and subsystems is expected to grow
31% per year from $38 billion in 1999 to $113 billion in 2003.
Over the last three years, the volume of traffic across communications
networks has grown dramatically. Broadband or high-speed Internet access through
cable modems and digital subscriber line, also called DSL, connections combined
with new bandwidth-intensive applications such as streaming video and real-time
electronic commerce have placed significant strains on the capacity of existing
communications network infrastructures. These networks were initially designed
for low speed voice traffic and not for large volumes of high-speed data
traffic. According to RHK, Inc., the data traffic across communications networks
is expected to increase from 350,000 terabytes per month in 1999 to more than 15
million terabytes per month in 2003. Ten terabytes is the equivalent of all of
the information contained in the Library of Congress.
To handle the increasing volume of communications traffic, communications
service providers are rapidly expanding their networks and adding capacity by
using optical transmission and switching equipment. Optical equipment generally
provides higher capacity and greater network reliability than older electrical
transmission equipment because light signals can travel more quickly through
optical fibers than electrical signals can travel through copper wire, and
transmitting data using light is inherently more efficient.
Optical equipment companies generally fall into three categories:
- Systems providers undertake the complex task of assembling different
optical equipment building blocks and then combining them with software
and additional proprietary hardware to create complete optical equipment
systems. These systems providers sell their products to the
communications service providers for use in their networks. Optical
systems include DWDM, or dense wave division multiplexing, transport
systems, which transmit optical signals within fiber optic networks, and
optical switches, which connect disparate optical networks and route
optical signals from one location to another. These systems can be used
in metropolitan areas or for long-haul, or long distance, applications.
- Subsystems providers develop the building blocks used by systems
providers. These building blocks include computer chips or modules that
typically perform a specific function such as the amplification or
steering of light signals. Subsystems include erbium-doped fiber
amplifiers, which reamplify all the optical signals on an optical fiber
without costly electrical reamplification of the individual signals,
optical muliplexers, which combine individual optical signals to cost
effectively transmit them together in a single optical fiber, and
add-drop multiplexers, which manipulate optical signals to add or drop
individual signals at intermediate locations in the optical network.
- Fiber optic cable providers sell fiber optic cable to systems providers,
subsystems providers and communications service providers for use in
optical equipment or in optical networks."
WEB PAGE 5: WHAT ARE THE FEATURES OF OPTICAL EQUIPMENT NETS?
Imagery: See General.
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<PAGE> 70
Hyperlinks: See General. Below the text on the right of the web page,
described below, a link labeled, "next" with two arrows pointing right,
hyperlinks to Web Page 6.
Text: Title: "Optical Equipment NETS." Subtitle: "What are the features of
Optical Equipment NETS?" Below this title on the right side of the web page is
the following text: "Optical Equipment NETS enable investors to easily diversify
their holdings through the purchase of a single security that represents a group
of companies involved in the optical equipment industry. Optical Equipment NETS
are not mutual funds, index funds or exchange traded funds. Instead, Optical
Equipment NETS give you control over your investments.
Optical Equipment NETS offer investors:
- Industry specific diversification
Optical Equipment NETS are designed to enable you to diversify your
investment across a group of companies that focus on the optical equipment
industry through a single security.
- Investor control
Unlike index and exchange traded funds, these companies and the number of
shares represented by the Optical Equipment NETS will not change to satisfy
changes in an index or any market value limits if a stock appreciates too much.
Because Optical Equipment NETS are not mutual funds, no portfolio manager will
be making decisions on where to invest your money and you will always know which
stocks are represented by the Optical Equipment NETS.
- Ownership flexibility
The owners of Optical Equipment NETS can exchange their Optical Equipment
NETS for the underlying stocks at any time.
- Lower transaction fees
The expenses associated with trading Optical Equipment NETS are expected to
be less than trading each of the underlying securities separately.
- Reduced annual fees and no hidden costs
Optical Equipment NETS minimize annual fees. Only 4 cents per Optical
Equipment NETS will be deducted from any cash dividends and cash distributions
you receive in any calendar year plus 1/4 cent per Optical Equipment NETS each
time a cash dividend or cash distribution is paid. Unlike an actively managed
fund, the stocks represented by the NETS will not change based on the decisions
of an investment manager, to match an index or to satisfy fund investment
constraints, which eliminates the hidden costs associated with the turnover of
stocks in managed funds and the associated tax consequences.
- Tax benefits
Because you indirectly own the underlying securities, you can choose when
to sell the Optical Equipment NETS or exchange the Optical Equipment NETS for
the underlying securities and sell one or more of those securities in order to
better manage tax gains or losses. You will not recognize a gain on the exchange
of the Optical Equipment NETS for the underlying stocks under U.S. Federal
income tax law."
WEB PAGE 6: WHO SHOULD CONSIDER OPTICAL EQUIPMENT NETS?
Imagery: See General.
Hyperlinks: See General. Below the text on the right of the web page,
described below, a link labeled, "next" with two arrows pointing right,
hyperlinks to Web Page 7.
Text: Title: "Optical Equipment NETS." Subtitle: "Who should consider
Optical Equipment NETS?" Below this title on the right side of the web page is
the following text: "Since the performance of the Optical Equipment NETS depends
on the performance of companies in the optical equipment industry
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<PAGE> 71
and, in particular, the group of underlying companies and their stocks, they may
be appropriate for investors who seek:
- a diversified investment in the optical equipment industry,
- equity returns from U.S.-traded common stocks,
- control over their investments, and
- lower transaction fees and annual fees related to trading and owning
groups of stocks."
WEB PAGE 7: WHAT ARE THE RISKS OF INVESTING IN THE OPTICAL EQUIPMENT NETS?
Imagery: See General.
Hyperlinks: See General. Below the text on the right of the web page,
described below, a link labeled, "next" with two arrows pointing right,
hyperlinks to Web Page 1.
Text: Title: "What are the risks of investing in the Optical Equipment
NETS?" Below this title on the right side of the web page is the following text:
"An investment in Optical Equipment NETS involves risks similar to investing
directly in each of the underlying securities, including risks associated with
concentrated investments in the optical equipment industry. In addition,
investment in the Optical Equipment NETS involves industry-specific risks.
Please refer to the section entitled "Risk Factors" in the prospectus for a more
complete description of these risks."
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<PAGE> 72
APPENDIX B
Prospective investors will be able to view a website at www.epochnets.com,
maintained by Epoch Securities, Inc., where a prospectus will be available for
review. A description of this website has been included as Appendix A to the
prospectus. Each page of the website will contain a hyperlink to a copy of the
entire prospectus in a Portable Document Format, or PDF, and a hyperlink to the
Meet the Product Presentation, an online multimedia presentation. The text set
forth below provides a description of the Meet the Product Presentation and will
be included as Appendix B to the prospectus. The Meet the Product Presentation
summarizes information regarding the Optical Equipment NETS and is not complete.
You should carefully read the entire prospectus, which includes this web site,
the Optical Equipment NETS presentation and the pdf format prospectus, before
you purchase any Optical Equipment NETS.
VISUAL 1: DISCLAIMER
Imagery: NETS logo in upper right corner, Epoch Partners logo in bottom
left corner and border.
Visual Text: Title Disclaimer, Slide Text: "The Meet the Product
Presentation is part of our prospectus. This presentation summarizes information
regarding the Optical Equipment NETS and is not complete. You should read the
entire prospectus carefully before you purchase any Optical Equipment NETS."
Below this disclaimer is the following text: "NETS" and "New Era Trust
Securities" are service marks of Epoch Partners, Inc."
Script: The Meet the Product Presentation is part of our prospectus. The
presentation summarizes information regarding the Optical Equipment NETS and is
not complete. You should read the entire prospectus carefully before you
purchase any Optical Equipment NETS.
VISUAL 2: WHAT ARE OPTICAL EQUIPMENT NETS?
Imagery: NETS logo in upper right corner, Epoch Partners logo in bottom
left corner and border.
Visual Text: Title. What are the Optical Equipment NETS? Slide text
contains the following bullet points: "Depositary receipts that represent your
undivided beneficial ownership in the shares of the U.S.-traded common stock of
21 companies involved in the optical equipment industry." "The underlying
securities are bought in the public market and deposited into a trust." "The
trust then issues the Optical Equipment NETS." "Initial issue price will be
approximately $40-$50 per Optical Equipment NETS." "Application has been
approved to list them on the American Stock Exchange under the symbol "OPN."
Script: Welcome to the Optical Equipment NETS "Meet the Product"
Presentation, my name is [ ] from Epoch Partners. Today I am going to
talk about a new issuance of securities called Optical Equipment NETS. NETS
stands for "New Era Trust Securities." In this presentation, we will talk about
why Optical Equipment NETS were created, the optical equipment industry, which
securities are represented by the Optical Equipment NETS, how the securities
were chosen, how you can purchase the Optical Equipment NETS, related fees,
certain tax considerations and the risks related to the Optical Equipment NETS.
First, let's summarize the Optical Equipment NETS. Optical Equipment NETS
are depositary receipts that represent ownership in the shares of 21 U.S.-traded
common stocks involved in the optical equipment industry. To create this
product, these 21 stocks will be bought in the public market by Epoch
Securities, Inc. and deposited into the Optical Equipment NETS Trust. The Trust
then issues a receipt. Your purchase of this receipt represents your ownership
of these 21 companies. In short, the Trust is created to simplify your ownership
of these 21 stocks into a single security.
The final number of shares of each of the 21 companies will be determined
so the initial issue price will be approximately $40 to $50 per Optical
Equipment NETS. However, you may only purchase this product in round-lots of 100
Optical Equipment NETS or multiples thereof. The Optical Equipment NETS have
been approved for listing on the American Stock Exchange under the symbol "OPN."
<PAGE> 73
VISUAL 3: SECURITIES UNDERLYING THE OPTICAL EQUIPMENT NETS
Imagery: NETS logo in upper right corner, Epoch Partners logo in bottom
left corner and border. Table with text in center of page.
Visual Text: Title: Securities Underlying the Optical Equipment NETS. A
table containing the following text:
<TABLE>
<CAPTION>
NUMBER OF PRIMARY U.S.
SHARES PER INITIAL TRADING
NAME OF COMPANY TICKER ROUND-LOT WEIGHTINGS MARKET
--------------- ------ ---------- ---------- ------------
<S> <C> <C> <C> <C>
Corning Incorporated GLW 7 9.96% NYSE
Lucent Technologies Inc. LU 23 9.84 NYSE
Cisco Systems, Inc. CSCO 9 9.79 Nasdaq NMS
Nortel Networks Corporation NT 10 9.22 NYSE
JDS Uniphase Corporation JDSU 6 9.07 Nasdaq NMS
CIENA Corporation CIEN 4 8.37 Nasdaq NMS
Juniper Networks, Inc. JNPR 2 7.73 Nasdaq NMS
Sycamore Networks, Inc. SCMR 4 5.22 Nasdaq NMS
Corvis Corporation CORV 4 4.92 Nasdaq NMS
SDL, Inc. SDLI 1 4.89 Nasdaq NMS
Redback Networks Inc. RBAK 2 4.67 Nasdaq NMS
ADC Telecommunications, Inc. ADCT 10 3.82 Nasdaq NMS
ONI Systems Corp. ONIS 2 2.88 Nasdaq NMS
Newport Corporation NEWP 1 2.26 Nasdaq NMS
Avanex Corporation AVNX 1 1.86 Nasdaq NMS
New Focus, Inc. NUFO 1 1.22 Nasdaq NMS
Finisar Corporation FNSR 2 1.06 Nasdaq NMS
Digital Lightwave, Inc. DIGL 1 1.04 Nasdaq NMS
Avici Systems Inc. AVCI 1 0.90 Nasdaq NMS
MRV Communications, Inc. MRVC 1 0.72 Nasdaq NMS
Stratos Lightwave, Inc. STLW 1 0.56 Nasdaq NMS
</TABLE>
Script: The Optical Equipment NETS represent your ownership of the
following 21 common stocks in the amounts shown. These companies generally are
considered to be among the largest and most liquid companies with U.S.-traded
common stock involved in the optical equipment industry as measured on October
26, 2000. The number of shares of the companies, and thus their weightings, will
be changed at the time of pricing to approximate their relative equity market
values subject to a maximum weighting of 10% for any one company. The number of
shares of the companies will not change thereafter except for changes due to
corporate events, such as stock splits or reconstitution events, such as JDS
Uniphase's proposed merger with SDL. Of course, the weightings are expected to
change substantially over time because of price fluctuations in the underlying
securities.
VISUAL 4: ILLUSTRATIVE HISTORICAL PERFORMANCE
Imagery: NETS logo in upper right corner, Epoch Partners logo in bottom
left corner and border. Chart as shown on page 25 of the prospectus in the
center of page.
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<PAGE> 74
Visual Text: (See "Description of the Underlying Securities," the graph of
historical Optical Equipment NETS performance). Title: Illustrative Historical
Performance. Chart title: Composite Performance of the Securities Represented by
a Single Optical Equipment NETS.(1) Footnote at the bottom of the page: (1)
Measured from the close of each business day from January 4, 1999 to November
[--], 2000. In the event that an underlying security was not publicly traded on
January 4, 1999, the value of that security on the day it became publicly traded
was distributed, pro-rata, among the other publicly traded constituent stocks.
Constituent stocks that were added after January 4, 1999 were incorporated into
the graph as of their IPO date.
Script: The chart you are looking at depicts the performance of the
Optical Equipment stocks in the Optical Equipment NETS since January 4, 1999.
You will notice that it is benchmarked against the Nasdaq Composite Index. Not
all 21 stocks of the Optical Equipment NETS were public since January 4, 1999.
For purposes of calculating this graph, if a constituent stock became public
after January 4, 1999, it was added at that time to the value of the Optical
Equipment NETS.
VISUAL 5: WHY WERE THE OPTICAL EQUIPMENT NETS CREATED?
Imagery: NETS logo in upper right corner, Epoch Partners logo in bottom
left corner and border.
Visual Text: Title: Why were the Optical Equipment NETS Created? To the
right of the first bullet reads, "Industry Specific Diversification. The Optical
Equipment NETS are designed to allow you to diversify your investment in optical
equipment companies through a single, exchange-listed instrument representing
your undivided beneficial ownership of the underlying securities." To the right
of the second bullet reads, "Transaction Fees. The expenses associated with
trading the Optical Equipment NETS are expected to be less than trading each of
the underlying securities separately." To the right of the third bullet reads,
"Flexibility and Control. The beneficial owners of Optical Equipment NETS have
ownership interests in each of the underlying securities represented by the
Optical Equipment NETS, can exchange their Optical Equipment NETS for the
underlying securities represented by the Optical Equipment NETS, and can control
ownership of constituent stocks and manage the timing of taxable events." To the
right of the fourth bullet reads, "Low Fees and Taxes. Unlike index or exchange
listed funds, which have to change stocks to match an index, the NETS have no
ongoing management, minimizing costs and taxes that result from turnover."
Script: The Optical Equipment NETS were created for several reasons. The
first is diversification. Optical Equipment NETS allows for diversification in
the optical equipment sector. As we all are aware, certain stock and their
representative sectors are very volatile these days. Investing in a sector by
purchasing a single stock is very risky because you are subject not only to the
risks of the sector, but also to the company specific risks. Optical Equipment
NETS allow you to purchase a diversified group of stocks in a sector through one
instrument.
Second, the Optical Equipment NETS may allow for lower transaction costs.
If an individual attempted to diversify himself or herself among the constituent
stocks of the optical equipment sector, that individual would pay commission on
all the stocks, increasing brokerage costs by more than 4 times. However,
because the Optical Equipment NETS trades as a single instrument, that cost is
reduced.
Third, the Optical Equipment NETS give you flexibility and control. Since
you hold a receipt representing your ownership of the 21 optical equipment
stocks, you can, at any time turn in that receipt and receive the underlying
securities. This gives you flexibility over trading and timing of taxable
events. You can also create new Optical Equipment NETS by depositing to the
trustee the approximate number of shares.
The NETS may also have lower costs compared to most mutual funds and
exchange traded funds. Typical mutual funds may have one or more of the
following: ongoing management fees, 12-b-1 fees, trailers and expenses. The NETS
have none of these. The Trustee will charge up to $1.00 per quarter custody fee
and a $.25 handling fee per 100 shares which is only taken if there are
sufficient funds
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<PAGE> 75
available for distribution from the underlying stocks after deduction of the
quarterly custody fee. Only $.04 per Optical Equipment NETS will be deducted
from any cash dividends or cash distributions you receive in any calendar year
plus $.0025 per Optical Equipment NETS each time an additional cash dividend or
cash distribution is paid but only if there are sufficient funds available for
distribution after payment of the quarterly custody fee.
Finally, as most of us are aware, managers of mutual funds and exchange
traded funds trade their underlying stocks. A Portfolio Manager does this when
he or she changes stocks. An Index Fund is forced to buy or sell when the index
changes. This has two adverse impacts. First, it creates more hidden costs since
the managers pay commissions. Second, it can create adverse taxable
distributions at the end of the year. The NETS have a static portfolio and will
not generate the adverse costs or taxes associated with trading the underlying
constituent stocks.
VISUAL 6: OPTICAL EQUIPMENT INDUSTRY OVERVIEW
Imagery: NETS log in upper right corner, Epoch Partners logo in bottom
left corner and border.
Visual Text: Title: Optical Equipment Industry Overview: To the right of
the first bullet reads, "The Optical Equipment NETS are composed of companies
that, among other things, design, manufacture and market products that enable
the transmission of communications traffic using optical, or light based,
signals." To the right of the second bullet reads, "The volume growth of traffic
and new bandwidth intensive applications have placed significant strains on the
capacity of existing communications infrastructures." To the right of the third
bullet reads, "Optical equipment generally provides higher capacity and greater
network reliability than older electronic transmission equipment." To the right
of the fourth bullet reads, "According to RHK, Inc. the data traffic across
communications networks is expected to increase from 350,000 terabytes per month
from 1999 to more than 15 million terabytes per month in 2003. Ten terabytes is
equal to all the information in the Library of Congress." To the right of the
fifth bullet reads, "According to RHK, Inc. the global market for optical
systems and subsystems is expected to grow 31% per year from $38 billion in 1999
to $113 billion in 2003."
Script: The Optical Equipment NETS are composed of companies that design,
manufacture and market products that enable the transmission of communications
traffic using optical, or light based, signals. Broadband or high-speed Internet
access through cable modems and digital subscriber line, also called DSL,
connections combined with new bandwidth-intensive applications such as streaming
video and real-time electronic commerce have placed significant strains on the
capacity of existing communications network infrastructures. These networks were
initially designed for low speed voice traffic and not for large volumes of
high-speed data traffic. According to RHK, Inc., a telecommunications industry
market research firm, the data traffic across communications networks is
expected to increase from 350,000 terabytes per month in 1999 to more than 15
million terabytes per month in 2003. Ten terabytes is the equivalent of all of
the information contained in the Library of Congress.
Fiber optics competes with copper wire, coaxial cable, and wireless
communications technologies. Optical equipment generally provides higher
capacity and greater network reliability than older electrical transmission
equipment because light signals can travel more quickly through optical fibers
than electrical signals can travel through copper wire. According to RHK, Inc.,
the global market for optical systems and subsystems is expected to grow 31% per
year from $38 billion in 1999 to $113 billion in 2003.
VISUAL 7: SELECTION CRITERIA
Imagery: NETS logo in upper right corner, Epoch Partners logo in bottom
left corner and border.
Visual Text: Title: Selection Criteria. To the right of the first bullet
reads, "The common stocks of 21 specified companies involved in various aspects
of the optical equipment industry." To the right of the second bullet reads,
"Considered to be among the largest capitalized, most liquid companies with
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<PAGE> 76
U.S.-traded common stock involved in the optical equipment industry, as measured
by equity market value and trading volume on October 26, 2000." To the right of
the third bullet point reads, "The following criteria were used in selecting the
underlying securities on October 26, 2000." The first indentation under the
third bullet reads, "Equity market value equal to or greater than $1.5 billion."
The second indentation under the third bullet reads, "Average daily trading
volume of at least 800,000 shares over the 60 trading days before October 26,
2000." The third indentation under the third bullet reads, "Average daily dollar
volume of at least $40 million over the 60 trading days before October 26,
2000." The fourth indentation under the third bullet reads, "A trading history
of at least 90 calendar days."
Script: The 21 component stocks of the Optical Equipment NETS are involved
in various aspects of the optical equipment industry. They are considered to be
among the largest capitalized, most liquid companies with U.S.-traded common
stock involved in this industry.
The constituent stocks were selected using several criteria: 1) An equity
market value equal to or greater than $1.5 billion. 2) An average daily trading
volume of at least 800,000 shares over 60 trading days before October 26, 2000.
3) An average daily dollar volume of at least $40 million over 60 trading days
before October 26, 2000. The equity market value of a company is determined by
multiplying the price of its common stock by the number of outstanding shares of
its common stock. Finally, a constituent stock must have a trading history of at
least 90 calendar days.
VISUAL 8: YOUR RIGHTS AS AN OWNER OF NETS
Imagery: NETS logo in upper right corner, Epoch Partners logo in bottom
left corner and border.
Visual Text: Title: Your Rights as an Owner of NETS. To the right of the
first bullet reads, "No active management of the Optical Equipment NETS." To the
right of the second bullet reads, "Investors in Optical Equipment NETS have the
right to:." The first indentation under the second bullet reads, "Receive
company reports." The second indentation under the second bullet reads, "Receive
dividends and other distributions on the underlying securities (net of fees or
expenses)." The third indentation under the second bullet reads, "Instruct the
trustee to vote the underlying securities on all matters or attend shareholder
meetings and vote yourself." The fourth indentation under the second bullet
reads, "Participate in a tender offer for underlying securities by obtaining all
of the underlying securities." To the right of the third bullet reads, "See
"Description of Optical Equipment NETS" in the prospectus for more information."
Script: There will be no active management of the Optical Equipment NETS
and therefore no management fees charged to Optical Equipment NETS owners. The
companies and share amounts will remain fixed; changes will generally only be
made due to reconstitution events or corporate actions.
Investors in Optical Equipment NETS will have the same rights as owners of
the underlying securities. An Optical Equipment NETS investor has the right to
receive company reports including annual reports, quarterly reports and proxy
materials, which will be distributed by the issuer of the underlying securities.
Investors will be able to instruct the trustee to vote on the underlying
securities on all matters. If any dividends or distributions are declared and
paid to the trustee by an issuer, Optical Equipment NETS owners will receive
those distributions, net of any fees or expenses. Investors will be able to
participate in tender offers for underlying securities by surrendering their
Optical Equipment NETS to receive all of their underlying securities.
VISUAL 9: HOW CAN I PURCHASE OPTICAL EQUIPMENT NETS
Imagery: NETS logo in upper right corner, Epoch Partners logo in bottom
left corner and border.
Visual Text: Title: How Can I Purchase Optical Equipment NETS? The first
bullet point reads, "The NETS are expected to price the week of
[ ]." The second bullet reads, "The initial public offering price
for an Optical Equipment NETS will approximately be $40 to $50." The third
bullet
5
<PAGE> 77
reads, "You can purchase the NETS in round-lots of 100." The fourth bullet point
reads, "The initial public offering price for a round-lot of 100 Optical
Equipment NETS will equal the sum of the values of the deposited shares for all
companies as specified in this prospectus, which will be determined by
multiplying the closing market price for each security on the pricing date on
the primary U.S. trading market by the number of deposited shares for each
company, plus an underwriting fee." The fifth bullet reads, "After the initial
offering the NETS will trade on the American Stock Exchange."
Script: Optical Equipment NETS can be purchased at the Initial Offering
which is expected the week of [ ]. The initial public offering
price for the Optical Equipment NETS is expected to be between $40 and $50 and
they can only be purchased in round-lots of 100. The initial price of a round-
lot of Optical Equipment NETS was determined by simply multiplying a constituent
stock's value on the pricing date times the number of shares of that constituent
stock in a round-lot of Optical Equipment NETS. This will give you the
individual company's stock value as a part of the Optical Equipment NETS. If you
add all 21 individual stock values and the gross spread, you will have the value
of a round-lot of 100 Optical Equipment NETS.
After the initial offering, the Optical Equipment NETS will trade on the
American Stock Exchange.
VISUAL 10: FEES AND TAXES
Imagery: NETS logo in upper right corner, Epoch Partners log in bottom
left corner and border.
Visual Text: Title: Fees and Taxes. To the right of the first bullet
reads, "Fees." The first indentation under the first bullet point reads, "Unlike
mutual funds, the NETS have no ongoing management fee." The second indentation
under the first bullet point reads, "Underwriting fee: 2%." The third
indentation under the first bullet point reads, "Ongoing maintenance costs per
100 NETS: Quarterly custody fees of up to $1.00 and a $0.25 handling fee for
each cash dividend and other cash distributions made on the underlying shares.
(This fee is deducted from dividends and other cash distributions paid on the
underlying shares.)" The fourth indentation under the first bullet point reads,
"Creation/Cancellation Fees: This fee is approximately $5 per 100 NETS." To the
right of the second bullet point reads, "Tax Structure." The first indentation
under the second bullet point reads, "For U.S. federal income tax purposes:
Directly owning a proportionate share of the underlying securities." The second
indentation under the second bullet point reads, "When purchasing or selling the
Optical Equipment NETS, a holder will determine its initial tax basis in each of
the underlying securities." The third indentation under the second bullet point
reads, "It is not contemplated that NETS will have tax distributions in the
manner that some mutual funds do."
Script: Unlike mutual funds, the Optical Equipment NETS have no ongoing
management fee. Optical Equipment NETS investors will pay an upfront fee,
instead of a sales commission or issuance fee, at the initial offering to
purchase the Optical Equipment NETS. This 2% fee compensates the Underwriter and
Trustee for the cost associated with creating and marketing the Optical
Equipment NETS.
Ongoing maintenance costs of administering the program are borne by the
Trustee. The Trustee will charge ongoing quarterly custody fees of up to $1.00
and a $.25 handling fee per 100 shares. These fees are deducted from dividends
and other cash distributions made on the underlying shares. In this way, the
owner of the Optical Equipment NETS only pays a custody fee if a distribution is
made. The Trustee will typically charge a fee for creation and/or cancellation
of the Receipts. This fee is approximately $5 per 100 NETS.
A person purchasing and owning Optical Equipment NETS will be treated, for
U.S. federal income tax purposes, as directly owning a proportionate share of
the underlying securities represented by the Optical Equipment NETS. When
purchasing or selling Optical Equipment NETS, a holder will determine its
initial tax basis in each of the underlying securities by allocating the
purchase price for the Optical Equipment NETS among the underlying securities
based on their relative fair market values at the time of
6
<PAGE> 78
the Optical Equipment NETS purchase. It is not contemplated that NETS will have
tax distributions, in the manner that some mutual funds do.
VISUAL 11: RISK FACTORS
Imagery: NETS logo in upper right corner, Epoch Partners log in bottom
left corner and border.
Visual Text: Title: Risk Factors. The center of the page reads: "An
investment in the Optical Equipment NETS involves risks similar to investing in
each of the underlying securities outside of the Optical Equipment NETS,
including the risk associated with concentrated investments in the optical
equipment industry. In addition, an investment in the Optical Equipment NETS
involves industry-specific risks. Please refer to the section entitled "Risk
Factors" of the prospectus for a more complete description of these risks."
Script: An investment in the Optical Equipment NETS involves risks similar
to investing in each of the underlying securities outside of the Optical
Equipment NETS, including the risk associated with concentrated investments in
the optical equipment industry. In addition, an investment in the Optical
Equipment NETS involves industry-specific risks. Please refer to the section
entitled "Risk Factors" of the prospectus for a more complete description of
these risks.
7
<PAGE> 79
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The expenses expected to be incurred in connection with the issuance and
distribution of the securities being registered, other than underwriting
compensation, are as set forth below. Except for the registration fee payable to
the Securities and Exchange Commission, all such expenses are estimated:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $19,787
Printing and engraving expenses............................. 50,000
Legal fees and expenses..................................... *
Miscellaneous............................................... *
-------
Total.................................................. $ *
=======
</TABLE>
---------------
* To be added by amendment.
Item 15. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware, as
amended, provides that under certain circumstances a corporation may indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation or is
or was serving at its request in such capacity in another corporation or
business association, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding if such person acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such person's
conduct was unlawful.
Paragraph Ninth of the Certificate of Incorporation of Epoch Securities,
Inc. provides in effect that, subject to certain limited exceptions, Epoch
Securities, Inc. shall indemnify its directors and officers to the full extent
authorized or permitted by law.
The directors and officers of Epoch Securities, Inc. are insured under
policies of insurance maintained by Epoch Securities, Inc., subject to the
limits of the policies, against certain losses arising from any claim made
against them by reason of being or having been such directors or officers.
Item 16. Exhibits.
See Exhibit Index.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
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<PAGE> 80
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of the prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) For purposes of determining any liability under the Securities Act
of 1933, 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 pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this registration statement as of the time it was declared effective.
(5) For purposes of determining any liability under the Securities Act
of 1933, 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 such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(6) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to Item 15 of this
registration statement, 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
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
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<PAGE> 81
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
hereby certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-1 and has duly caused this Amendment No. 2
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, on December 18, 2000.
Epoch Securities, Inc.
By: /s/ STANTON GREEN
------------------------------------
Name: Stanton Green
Title: Managing Director
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<PAGE> 82
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities indicated on December 18, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
* President, Chief Executive Officer and
----------------------------------------------------- Director
Scott Ryles
* Controller and Financial Operations Principal
-----------------------------------------------------
Randall Schwed,
chief financial officer
/s/ STANTON GREEN Attorney-in-fact
-----------------------------------------------------
Stanton Green
</TABLE>
II-4
<PAGE> 83
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS
--------
<C> <S>
**1.1 Form of Underwriting Agreement
4.1 Standard Terms for Depositary Trust Agreements between Epoch
Securities, Inc. and Investors Bank & Trust Company, as
trustee, dated as of , 2001, and included as
exhibits thereto, form of Depositary Trust Agreement and
form of NETS
*5.1 Opinion of Brown & Wood LLP regarding the validity of the
Optical Equipment NETS Receipts
*8.1 Opinion of Brown & Wood LLP, as special U.S. tax counsel
regarding the material federal income tax consequences
**24.1 Power of Attorney (included in Part II of Registration
Statement)
</TABLE>
---------------
*To be filed by amendment.
** Previously filed.
