<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
__________
FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
PAINE WEBBER GROUP INC.
(Exact name of registrant as specified in its charter)
Delaware 13-2760086
(State of incorporation or organization) (I.R.S. Employer
Identification No.)
1285 Avenue of the Americas, New York, New York 10019
(Address of principal executive offices) (Zip Code)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
AMEX Hong Kong 30 Index The American Stock Exchange
Call Warrants Expiring January
17, 1996
AMEX Hong Kong 30 Index The American Stock Exchange
Put Warrants Expiring January
17, 1996
Securities to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
<PAGE> 2
Item 1. Description of Registrant's Securities to be Registered.
For a description of the Amex Hong Kong 30 Index Call Warrants
Expiring January 17, 1996 of Registrant (the "Call Warrants")
and the AMEX Hong Kong 30 Index Put Warrants Expiring January
17, 1996 of Registrant (the "Put Warrants" and, together with
the Call Warrants, the "Warrants") to be registered hereunder,
reference is made to the information under the headings "Risk
Factors" and "Description of Warrants" on pages 3 through 9 and
on pages 11 through 14, respectively, of the Registrant's
prospectus dated October 14, 1993 (the "Prospectus"), and the
information under the headings "Prospectus Summary", "Certain
Important Information Concerning the Warrants" and "Description
of the Warrants" on pages S-3 through S-27 of the draft
prospectus supplement dated January __, 1994, relating to the
Call Warrants (the "Call Warrant Prospectus Supplement") and on
pages S-3 through S-28 of the draft prospectus supplement dated
January __, 1994, relating to the Put Warrants (the "Put
Warrant Prospectus Supplement" and, together with the Call
Warrant Prospectus Supplement, the "Prospectus Supplements"),
each of which is attached as an exhibit hereto. The Company expects
to file the Prospectus Supplements shortly with the Commission
pursuant to Rule 424(b) under the 1933 Act. The description of
the Warrants is hereby incorporated herein and made part of
this registration statement in its entirety.
Item 2. Exhibits.
1. Forms of Warrant Certificates (included within Exhibit 2)
relating to the Call Warrants.
2. Form of Warrant Agreement relating to the Call Warrants
among the Registrant, Citibank, N.A., as Warrant Agent
and PaineWebber Incorporated, as Determination Agent,
including as Exhibits A and A-1 thereto the forms of the
Call Warrant Certificates.
3. Forms of Warrant Certificates (included within Exhibit 4)
relating to the Put Warrants.
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4. Form of Warrant Agreement relating to the Put Warrants
among the Registrant, Citibank, N.A., as Warrant Agent,
and PaineWebber Incorporated, as Determination Agent,
including as Exhibits A and A-1 thereto the forms of the
Put Warrant Certificates.
5. Prospectus (incorporated by reference to the Prospectus
dated October 14, 1993 relating to the Registrant's
Registration Statement on Form S-3 (No. 33-33613)).
6. Draft Call Warrant Prospectus Supplement.
7. Draft Put Warrant Prospectus Supplement.
8. Warrant Agreement dated as of November 2, 1993 between
the Registrant and Citibank, N.A. as Warrant Agent and
PaineWebber Incorporated as Determination Agent relating to
the Registrants AMEX Hong Kong 30 Index Put Warrants
(incorporated by reference to Exhibit 4.1 to the Registrant's
Form 8-K dated October 26, 1993.
9. Warrant Agreement dated as of November 2, 1993 between the
Registrant and Citibank, N.A. as Warrant Agent and PainWebber
Incorporated as Determination Agent relating to the
Registrants AMEX Hong Kong 30 Index Call Warrants
(incorporated by reference of Exhibit 4.2 to the
Registrant's Form 8-K dated October 26, 1993.
10. Warrant Agreement dated as of April 25, 1990 between
Registrant and Citibank, N.A. as Warrant Agent, and Barr
Rosenberg Associates, Inc., as Determination Agent
relating to Registrant's Nikkei Stock Average Put
Warrants (incorporated by reference to Exhibit 4.1 to
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1990).
11. Warrant Agreement dated as of April 25, 1990 between
Registrant and Citibank, N.A. as Warrant Agent, and Barr
Rosenberg Associates, Inc., as Determination Agent
relating to Registrant's Nikkei Stock Average Call
Warrants (incorporated by reference to Exhibit 4.2 to
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1990).
12. Warrant Agreement dated as of November 28, 1990 between
Registrant and Citibank, N.A. as Warrant Agent, and Barr
Rosenberg Associates, Inc., as Determination Agent
relating to Registrant's CAC 40 Stock Index Put Warrants
(incorporated by reference to Exhibit 4.3 to Registrant's
Annual Report on Form 10-K for the year ended December
31, 1990).
13. Warrant Agreement dated as of January 27, 1993 between
Registrant, Citibank, N.A. as Warrant Agent and
PaineWebber Incorporated as Determination Agent relating
to Registrant's U.S. Dollar Increase Warrants on the
Major Market Currency Index (incorporated by
<PAGE> 4
reference to Exhibit 4.3 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1992).
14. Indenture dated as of March 15, 1988, between Registrant
and Chemical Bank (Delaware), as Trustee, relating to the
Registrant's Subordinated Debt Securities (incorporated
by reference to Exhibit 4.2b in Registrant's Registration
Statement No. 33-29253 on Form S-3 filed with the SEC on
June 14, 1989).
15. Supplemental Indenture dated as of September 22, 1989, to
the Indenture dated as of March 15, 1988, between the
Registrant and Chemical Bank Delaware, as Trustee,
relating to Registrant's Subordinated Debt Securities
(incorporated by reference to Exhibit 4.2d to
Registrant's Form 8-K dated September 30, 1989).
16. Supplemental Indenture dated as of March 22, 1991, to the
Indenture dated as of March 15, 1988, and supplemented as
of September 22, 1989, between Registrant and Chemical
Bank Delaware, as Trustee, relating to Registrant's
Subordinated Debt Securities (incorporated by reference
to Exhibit 4.2f to Registrant's Registration Statement
No. 33-39818 on Form S-3 filed with the SEC on April 5,
1991).
17. Form of Book-Entry Global Security relating to Stock
Index Return Securities on the S&P Midcap 400 Index due
June 2, 2000 (incorporated by reference to Exhibit 4.1g
to Registrant's Form 8-K dated June 2, 1993).
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the registrant has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: January 7, 1994
PAINE WEBBER GROUP INC.
By: /s/ Theodore A. Levine
Name: Theodore A. Levine
Title: Vice President,
General Counsel
and Secretary
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Exhibit Index
-------------
Exhibit
No.
-------
2. Form of Warrant Agreement relating to the Call Warrants
among the Registrant, Citibank, N.A., as Warrant Agent
and PaineWebber Incorporated, as Determination Agent,
including as Exhibits A and A-1 thereto the forms of the
Call Warrant Certificates.
4. Form of Warrant Agreement relating to the Put Warrants
among the Registrant, Citibank, N.A., as Warrant Agent,
and PaineWebber Incorporated, as Determination Agent,
including as Exhibits A and A-1 thereto the forms of the
Put Warrant Certificates.
6. Draft Call Warrant Prospectus Supplement.
7. Draft Put Warrant Prospectus Supplement.
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______________________________________________________________________________
______________________________________________________________________________
EXHIBIT 2
PAINE WEBBER GROUP INC.
and
CITIBANK, N.A., Warrant Agent
and
PAINEWEBBER INCORPORATED, Determination Agent
___________________
WARRANT AGREEMENT
dated as of January ___, 1994
___________________
AMEX Hong Kong 30 Index Call Warrants
Expiring January 17, 1996
______________________________________________________________________________
______________________________________________________________________________
<PAGE> 2
i
TABLE OF CONTENTS1/
Page
PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
ISSUANCE OF WARRANTS AND FORM,
EXECUTION, DELIVERY AND REGISTRATION
OF WARRANT CERTIFICATES AND
GLOBAL WARRANT CERTIFICATE
SECTION 1.01. Issuance of Warrants . . . . . . . . . . . . . . . . 1
SECTION 1.02. Form, Execution and Delivery of
Warrant Certificates . . . . . . . . . . . . . . . 3
SECTION 1.03. Warrant Certificates . . . . . . . . . . . . . . . . 3
SECTION 1.04. Registration of Transfers and
Exchanges . . . . . . . . . . . . . . . . . . . . . 4
SECTION 1.05. Mutilated or Missing Warrant
Certificates . . . . . . . . . . . . . . . . . . . 5
SECTION 1.06. Registered Holders . . . . . . . . . . . . . . . . . 6
SECTION 1.07. Global Warrant Certificate . . . . . . . . . . . . . 6
ARTICLE II
DURATION AND EXERCISE OF WARRANTS
SECTION 2.01. Duration of Warrants; Minimum
Exercise Amounts; Notice
of Exercise . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.02. Exercise and Delivery of
Warrants . . . . . . . . . . . . . . . . . . . . 10
1/ The Table of Contents is not a part of the Warrant Agreement.
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ii
SECTION 2.03. Automatic Exercise of Warrants;
Exercise upon an Extraordinary Event
or Exercise Limitation Event . . . . . . . . . . 21
SECTION 2.04. Limitation of Number of Exercisable
Warrants . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.05. Covenant of the Company . . . . . . . . . . . . . . 28
SECTION 2.06. Return of Money Held Unclaimed for
Two Years . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.07. Return of Global Warrant
Certificate . . . . . . . . . . . . . . . . . . . 29
ARTICLE III
OTHER PROVISIONS RELATING TO
RIGHTS OF WARRANTHOLDERS
SECTION 3.01. Warrantholder of Warrant May Enforce
Rights . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE IV
WARRANTS ACQUIRED BY THE COMPANY;
PAYMENT OF TAXES
SECTION 4.01. Warrants Acquired by the Company . . . . . . . . . 29
SECTION 4.02. Payment of Taxes . . . . . . . . . . . . . . . . . 30
ARTICLE V
CONCERNING THE WARRANT AGENT
SECTION 5.01. Warrant Agent . . . . . . . . . . . . . . . . . . . 30
SECTION 5.02. Conditions of Warrant Agent's
Obligations . . . . . . . . . . . . . . . . . . . 30
SECTION 5.03. Resignation and Appointment of
Successor . . . . . . . . . . . . . . . . . . . . 33
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iii
ARTICLE IV
MISCELLANEOUS
SECTION 6.01. Amendment . . . . . . . . . . . . . . . . . . . . . 34
SECTION 6.02. Notices and Demands to the Company,
the Warrant Agent and the
Determination Agent . . . . . . . . . . . . . . . 35
SECTION 6.03. Addresses for Notices . . . . . . . . . . . . . . . 35
SECTION 6.04. Notices to Holders . . . . . . . . . . . . . . . . 35
SECTION 6.05 Obtaining of Approvals . . . . . . . . . . . . . . . . 36
SECTION 6.06. Persons Having Rights Under This
Agreement . . . . . . . . . . . . . . . . . . . . 36
SECTION 6.07. Inspection of Agreement . . . . . . . . . . . . . . 36
SECTION 6.08. Headings . . . . . . . . . . . . . . . . . . . . . 36
SECTION 6.09. Counterparts . . . . . . . . . . . . . . . . . . . 37
SECTION 6.10. APPLICABLE LAW . . . . . . . . . . . . . . . . . . 37
TESTIMONIUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
EXHIBIT A - Form of Warrant Certificate
EXHIBIT A-1 - Form of Global Warrant Certificate
EXHIBIT A-2 - Notice of Exercise
[For Warrants Represented by the Global
Warrant Certificate]
EXHIBIT B - Confirmation of Exercise and Notice
of Rejection [For Warrants Represented by
Warrant Certificates]
EXHIBIT B-1 - Confirmation of Exercise and Notice of
Rejection [For Warrants Represented by the Global
Warrant Certificate]
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iv
EXHIBIT C-1 - Notice of Rejection Relating to Limit Option
[For Warrants Represented by Warrant
Certificates]
EXHIBIT C-2 - Notice of Rejection Relating to Limit Option
[For Warrants Represented by the Global
Warrant Certificate]
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1
WARRANT AGREEMENT
THIS AGREEMENT, dated as of January ___, 1994, among PAINE
WEBBER GROUP INC., a corporation organized and existing under the laws of
the State of Delaware (the "Company"), CITIBANK, N.A., a national banking
association organized and existing under the laws of the United States of
America (the "Warrant Agent"), and PAINEWEBBER INCORPORATED, a corporation
organized and existing under the laws of the State of Delaware (the
"Determination Agent").
WHEREAS the Company proposes to sell call warrants (the
"Warrants" or, individually, a "Warrant") representing the right to receive
from the Company the amount, if any, in U.S. dollars determined by
reference to increases in the Index (as defined herein) on the terms and
conditions set forth in this Agreement; and
WHEREAS the Company desires the Warrant Agent to act on
behalf of the Company, and the Warrant Agent is willing so to act, in
connection with the issuance, transfer and exercise of the Warrants, and
the Company desires to set forth herein, among other things, the provisions
of the Warrants and the terms and conditions on which they may be issued,
transferred, exercised and canceled;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
ISSUANCE OF WARRANTS AND FORM,
EXECUTION, DELIVERY AND REGISTRATION
OF WARRANT CERTIFICATES AND
GLOBAL WARRANT CERTIFICATE
SECTION 1.01. Issuance of Warrants. (a) The Warrants
will constitute direct, unconditional and unsecured obligations of the
Company and will rank on a parity with the Company's other unsecured
contractual obligations and with the Company's unsecured and unsubordinated
debt.
(b) Each Warrant shall represent the right, subject to
the provisions contained herein, to receive the Cash Settlement Value or
the Alternative Settlement Amount, as the case may be (each as defined
herein), of such Warrant. In no event shall a registered or beneficial
holder of a Warrant (each a "Warrantholder") be entitled to receive any
interest on any Cash Settlement Value or Alternative Settlement Amount.
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2
(c) Forty-five calendar days after January ___, 1994,
each Warrantholder will have the option to convert the form in which such
Warrantholder holds his Warrants from definitive to book-entry form (the
"Conversion Option"). The Conversion Option will be available for
forty-five calendar days from ___________, 1994 through __________, 1994
(the "Conversion Option Period"). To utilize the Conversion Option a
Warrantholder must deliver or arrange to deliver his Warrants to an entity
(a "Participant") entitled to execute, clear and settle transactions
through the Depository (as defined herein) through which such
Warrantholder's beneficial interest after electing the Conversion Option
will be maintained, who will then deposit the Warrants with the Depository
or its nominee. Once a Warrantholder has elected the Conversion Option such
Warrantholder may hold his Warrants only in book-entry form and will not be
able to change his election or withdraw from the book-entry system during
the Conversion Option Period or thereafter. Accordingly, except as
hereinafter provided, ownership of the Warrants in certificated form will
no longer be available to Warrantholders who have elected the Conversion
Option and ownership of the Warrants surrendered under the Conversion
Option will be represented by a single certificate (the "Global Warrant
Certificate"); provided, however, that if the Depository is at any time
unwilling or unable to continue as securities depository for the Warrants
and a successor Depository is not appointed by the Company within 90 days,
the Company will reissue Warrant Certificates in exchange for the Global
Warrant Certificate. In addition, the Company may at any time determine
not to have the Warrants represented by a Global Warrant Certificate and,
in such event, will issue Warrant Certificates in exchange for the Global
Warrant Certificate. In either instance, and in accordance with the
provisions of this Agreement, each Warrantholder will be entitled to have a
number of Warrants equivalent to such Warrantholder's beneficial interest
in the Global Warrant Certificate registered in the name of the
Warrantholder and will be entitled to physical delivery of such Warrants in
definitive form by a Participant. The provisions of Section 1.07 shall
apply only if and when the Conversion Option is utilized and a Global
Warrant Certificate is issued hereunder. Unless the context shall
otherwise require, and subject to the provisions of Section 1.07, all
references in this Agreement to the Warrant Certificates (other than in
Sections 1.02, 1.03, 1.04, 1.05, 1.06 and 1.07) shall include the Global
Warrant Certificate in the event that the Global Warrant Certificate is
issued.
SECTION 1.02. Form, Execution and Delivery of Warrant
Certificates. (a) The Warrants, whenever issued,
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3
shall be represented by certificates in registered form substantially in
the form set forth in Exhibit A hereto (the "Warrant Certificates"), with
such appropriate insertions, omissions, substitutions and other variations
as are required or permitted by this Agreement, and may represent any
number of whole Warrants. The Warrant Certificates may have imprinted or
otherwise reproduced thereon such letters, numbers or other marks of
identification or designation and such legends or endorsements as the
officers of the Company executing the same may approve (execution thereof
to be conclusive evidence of such approval) and which are not inconsistent
with the provisions of this Agreement, or as may be required to comply with
any law or with any rule or regulation made pursuant thereto, or with any
rule or regulation of any stock exchange on which the Warrants may be
listed, or of any securities depository, or to conform to usage. Warrant
Certificates shall be signed on behalf of the Company by its chairman, its
president or one of its vice presidents and under its corporate seal
reproduced thereon and attested by its secretary or an assistant secretary.
The signature of any of such officers may be either manual or facsimile.
Typographical and other minor errors or defects in any such signature shall
not affect the validity or enforceability of any Warrant Certificate that
has been duly countersigned and delivered by the Warrant Agent.
(b) In case any officer of the Company who shall have
signed a Warrant Certificate, either manually or by facsimile signature,
shall cease to be such officer before such Warrant Certificate shall have
been countersigned and delivered by the Warrant Agent to the Company or
delivered by the Company, such Warrant Certificate nevertheless may be
countersigned and delivered as though the person who signed such Warrant
Certificate had not ceased to be such officer of the Company; and the
Warrant Certificate may be signed on behalf of the Company by any person
who, at the actual date of the execution of such Warrant Certificate, shall
be a proper officer of the Company to sign such Warrant Certificate,
although at the date of the execution of this Warrant Agreement any such
person was not such officer.
SECTION 1.03. Warrant Certificates. Each Warrant
Certificate, when signed on behalf of the Company in accordance with
Section 1.02, shall be delivered to the Warrant Agent, which shall manually
countersign and deliver the same to or upon the order of the Company. Each
Warrant Certificate shall be dated the date of its countersignature. A
Warrant Certificate shall not be valid for any purpose, and no Warrant
evidenced thereby shall be exercisable, unless and until such Warrant
Certificate has been countersigned by
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4
the manual signature of the Warrant Agent. Such countersignature by the
Warrant Agent upon any Warrant Certificate signed by the Company in
accordance with Section 1.02 shall be conclusive evidence that the Warrant
Certificate so countersigned has been duly issued hereunder.
SECTION 1.04. Registration of Transfers and Exchanges.
(a) Except as otherwise provided herein or in the Warrant Certificate, the
Warrant Agent shall from time to time register the transfer of any
outstanding Warrant Certificates upon the records to be maintained by it
for that purpose (the "Warrant Register") at the Warrant Agent's Office (as
defined herein), subject to such reasonable regulations as the Company or
the Warrant Agent may prescribe, upon surrender thereof, duly endorsed, or
accompanied by a written instrument or instruments of transfer in form
satisfactory to the Warrant Agent and the Company, duly executed, by the
registered holder(s) thereof or by the duly appointed legal representative
thereof or by a duly authorized attorney, such signature to be guaranteed
by a bank or trust company with a correspondent office in The City of New
York or by a member of a national securities exchange. Upon any such
registration of transfer, a new Warrant Certificate shall be issued to the
transferee(s) and the surrendered Warrant Certificate shall be canceled by
the Warrant Agent.
(b) At the option of a Warrantholder, Warrant
Certificates may be exchanged for other Warrant Certificates, representing
a like number of Warrants, upon surrender to the Warrant Agent of the
Warrant Certificates to be exchanged at its offices maintained for such
purpose (the location of which shall be provided to the Company), which
shall be south of Chambers Street in the Borough of Manhattan, The City of
New York (the "Warrant Agent's Office"), and which are, on the date of this
Agreement, 111 Wall Street, New York, New York 10043, Attention: Corporate
Trust Department, or at the office of any successor Warrant Agent (as
provided in Section 5.03). Upon surrender of any Warrant Certificate for
exchange, the Warrant Agent shall cancel such Warrant Certificate, and the
Company shall execute, and the Warrant Agent shall countersign and deliver,
in accordance with Sections 1.02 and 1.03, one or more new Warrant
Certificates of like tenor and representing a like number of unexercised
Warrants.
(c) Warrant Certificates issued upon transfer or
exchange pursuant to Section 1.04(a) or (b) shall be valid obligations of
the Company, evidencing the same obligations of the Company as the Warrant
Certificates surrendered for transfer or exchange, and entitled to the same
benefits
<PAGE> 10
5
under this Agreement as were such Warrant Certificates prior to such
surrender.
(d) Except as provided in Section 1.05, no service
charge shall be made for any registration of transfer or exchange of
Warrant Certificates, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of
Warrant Certificates, other than exchanges pursuant to this Section 1.04
not involving any transfer.
(e) In the event that upon any exercise of Warrants
evidenced by a Warrant Certificate the number of Warrants exercised shall
be less than the total number of Warrants evidenced by such Warrant
Certificate, there shall be issued to the holder thereof or his assignee a
new Warrant Certificate evidencing the number of Warrants not exercised.
SECTION 1.05. Mutilated or Missing Warrant Certificates.
(a) If any Warrant Certificate is mutilated, lost, stolen or destroyed,
the Company may in its discretion execute, and the Warrant Agent may
countersign and deliver, in exchange and substitution for and upon
cancellation of the mutilated Warrant Certificate, or in lieu of the
Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of
like tenor and representing an equivalent number of Warrants, bearing an
identification number not contemporaneously outstanding, but only (in case
of loss, theft or destruction) upon receipt of evidence satisfactory to the
Company and the Warrant Agent of such loss, theft or destruction of such
Warrant Certificate and security or indemnity, if requested, also
satisfactory to them. Applicants for such substitute Warrant Certificates
shall also comply with such other reasonable regulations and pay such other
reasonable charges as the Company or the Warrant Agent may prescribe.
(b) In case any such mutilated, lost, stolen or
destroyed Warrant Certificate has been or is about to be exercised, or
deemed to be exercised, the Company in its absolute discretion may, instead
of issuing a new Warrant Certificate, direct the Warrant Agent to treat the
same as if it had received irrevocable notice of exercise in proper form in
respect thereof, as provided herein, or as being subject to automatic
exercise, as the case may be.
(c) Each new Warrant Certificate issued pursuant to this
Section 1.05 in lieu of any lost, stolen or destroyed Warrant Certificate
shall be an original, addi-
<PAGE> 11
6
tional contractual obligation of the Company, whether or not, in the case
of any lost, stolen or destroyed Warrant Certificate, such Warrant
Certificate shall at any time be enforceable by anyone, and shall be
entitled to the same benefits under this Agreement as the Warrant
Certificate that was lost, stolen or destroyed.
(d) Upon the issuance of any new Warrant Certificate in
accordance with this Section 1.05, the Company may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other expenses (including the fees and
expenses of the Warrant Agent) connected therewith.
(e) The provisions of this Section 1.05 are exclusive
and shall preclude (to the extent lawful) any other rights and remedies
with respect to the replacement or payment of mutilated, lost, stolen or
destroyed Warrant Certificates.
SECTION 1.06. Registered Holders. Prior to due
presentment for registration of transfer, the Company, the Warrant Agent,
and any agent of the Company or the Warrant Agent, may deem and treat the
person in whose name a Warrant Certificate shall be registered in the
Warrant Register (a "Registered Holder") as the absolute owner of the
Warrants evidenced thereby (notwithstanding any notation of ownership or
other writing thereon) for any purpose whatsoever, and as the person
entitled to exercise the rights represented by the Warrants evidenced
thereby, and neither the Company nor the Warrant Agent, nor any agent of
the Company or the Warrant Agent, shall be affected by any notice to the
contrary. This Section 1.06 shall be without prejudice to the rights of
Warrantholders as described elsewhere herein.
SECTION 1.07. Global Warrant Certificate. (a) Any
Global Warrant Certificate issued in accordance with this Section 1.07
shall be substantially in the form set forth in Exhibit A-1 hereto, with
such appropriate insertions, omissions, substitutions and other variations
as are required or permitted by this Agreement, and may represent any
number of whole Warrants. The Global Warrant Certificate may have
imprinted or otherwise reproduced thereon such letters, numbers or other
marks of identification or designation and such legends or endorsements as
the officers of the Company executing the same may approve (execution
thereof to be conclusive evidence of such approval) and which are not
inconsistent with the provisions of this Agreement, or as may be required
to comply with any law or with any rule or regulation made pursuant
thereto, or with any rule or regulation of any stock exchange on which
<PAGE> 12
7
the Warrants may be listed or of any Depository referred to herein, or to
conform to usage. The Global Warrant Certificate shall be signed on behalf
of the Company upon the same conditions, in substantially the same manner
and with the same effect as the Warrant Certificates.
(b) The Warrant Agent is authorized, from time to time
during the Conversion Option Period, upon receipt of a Global Warrant
Certificate from the Company, duly executed on behalf of the Company, to
countersign such Global Warrant Certificate. The Global Warrant
Certificate shall be manually countersigned and dated the date of its
countersignature by the Warrant Agent and shall not be valid for any
purpose unless so countersigned. The Warrant Agent shall deliver the
Global Warrant Certificate to or upon the order of the Company against
receipt of an appropriate amount of Certificated Warrants (such
Certificated Warrants shall be destroyed or otherwise disposed of in
accordance with instructions provided by the Company). One or more Global
Warrant Certificates may be executed by the Company and delivered to the
Warrant Agent on or after the date of execution of this Agreement; provided
that only one Global Warrant Certificate shall be outstanding at any one
time.
The Company reserves the right to issue, from time to
time after the date of execution of this Agreement, additional Warrants,
which Warrants shall in all respects be identical to Warrants previously
issued and outstanding under this Agreement, and in connection therewith
the Global Warrant Certificate may be exchanged for a new Global Warrant
Certificate to reflect the issuance by the Company of such additional
Warrants. To effect such an exchange the Company shall deliver to the
Warrant Agent a new Global Warrant Certificate duly executed on behalf of
the Company as provided in Section 1.02. The Warrant Agent shall
authenticate the new Global Warrant Certificate as provided in this Section
and shall deliver the new Global Warrant Certificate to the Depository in
exchange for, and upon receipt of, the Global Warrant Certificate then held
by the Depository. The Warrant Agent shall cancel the Global Warrant
Certificate delivered to it by the Depository, destroy such Global Warrant
Certificate and provide a certificate of destruction to the Company.
(c) The Global Warrant Certificate will initially be
registered in the name of a nominee of The Depository Trust Company, New
York, New York (the "Depository", which term, as used herein, includes any
successor securities depository selected by the Company). The Warrant
holdings of the Participants will be recorded on the books of the
Depository. The holdings of customers of the Participants
<PAGE> 13
8
and the identity of the Warrantholders will be reflected on the books and
records of such Participants and will not be known to the Warrant Agent,
the Company or the Depository. The Global Warrant Certificate will be held
by the Depository or its agent.
The Company may from time to time select a new entity to
act as Depository with respect to the Warrants and, if such selection is
made, the Company shall promptly give the Warrant Agent notice to such
effect identifying the new Depository, and the Global Warrant Certificate
shall be delivered to the Warrant Agent and shall be transferred to the new
Depository as provided below as promptly as possible. Appropriate changes
may be made in the forms of the Global Warrant Certificate, the notice of
exercise and the related notices to be delivered in connection with an
exercise to reflect the selection of the new Depository.
(d) Except as otherwise provided herein or in the Global
Warrant Certificate, the Warrant Agent shall from time to time register the
transfer of the Global Warrant Certificate in its records (which may be
maintained electronically), subject to such reasonable regulations as the
Company or the Warrant Agent may prescribe, only to the Depository, to
another nominee of the Depository, to a successor Depository or to a
nominee of a successor Depository, upon surrender of such Global Warrant
Certificate, duly endorsed, or accompanied by a written instrument or
instruments of transfer in form satisfactory to the Warrant Agent and the
Company, duly executed, by the registered holder thereof or by the duly
appointed legal representative thereof, or by its duly authorized attorney,
such signature to be guaranteed by a bank or trust company with a corre-
spondent office in The City of New York or by a member of a national
securities exchange. Upon any such registration of transfer, a new Global
Warrant Certificate shall be issued to the transferee and the surrendered
Global Warrant Certificate shall be canceled by the Warrant Agent.
The Global Warrant Certificate may be transferred as
provided above at the option of the holder thereof, when surrendered to the
Warrant Agent's Office, or at the office of any successor Warrant Agent (as
provided in Section 5.03), for another Global Warrant Certificate of like
tenor and representing a like number of unexercised Warrants.
<PAGE> 14
9
ARTICLE II
DURATION AND EXERCISE OF WARRANTS
SECTION 2.01. Duration of Warrants; Minimum Exercise
Amounts; Notice of Exercise. Subject to the limitations set forth herein
and in Section 2.03, each Warrant may be irrevocably exercised, in whole
but not in part, at or prior to 3:00 p.m., New York City time, on any New
York Business Day (as defined herein) from its date of issuance until 3:00
p.m., New York City time, on the earlier of (i) the New York Business Day
immediately preceding January 17, 1996 (the "Expiration Date"), and (ii)
the Delisting Date (as defined herein). Except in the case of automatic
exercise, each Warrant shall be irrevocably exercised either (i) in the
case of Warrants represented by Warrant Certificates ("Certificated War-
rants"), including Certificated Warrants held through CEDEL (as defined
herein) or Euroclear (as defined herein), by surrender to the Warrant Agent
(at its address as set forth in the Notice of Exercise (as defined below)
or at such other address as the Warrant Agent may specify from time to
time) of the Warrant Certificate representing such Warrant, with the Notice
of Exercise duly completed and executed by the Registered Holder of such
Warrant (or, in the case of Certificated Warrants held through the
facilities of CEDEL or Euroclear, by CEDEL or a Euroclear participant, as
the case may be) or (ii) in the case of Warrants represented by the Global
Warrant Certificate ("Book-Entry Warrants") upon receipt by the Warrant
Agent of such Warrant delivered free on the records of the Depository to
the Warrant Agent's Depository Participant Account (entitled Citibank, N.A.
Corporate Trust Warrant Agent Account, No. 2659, or such other account at
the Depository as the Warrant Agent shall designate in writing to the
Depository) (the "Warrant Account") pursuant to a Notice of Exercise to the
Warrant Agent from a Participant, in the case of Book-Entry Warrants held
through the Depository, CEDEL, in the case of such Warrants held through
CEDEL, or a Euroclear participant, in the case of such Warrants held
through Euroclear, acting, directly or indirectly, on behalf of the
Warrantholder; provided, however, that Notices of Exercise are subject to
rejection by the Warrant Agent as provided herein. Not fewer than 500
Warrants in either certificated or book-entry form may be exercised by or
on behalf of any one Warrantholder at any one time, except that no such
minimum exercise amount shall apply in the case of automatic exercise on
the Expiration Date or the Delisting Date, or in the case of cancellation
of the Warrants as a result of an Extraordinary Event (as defined herein).
Each Notice of Exercise shall be unconditional. Except as provided in
Section 2.02(b), the
<PAGE> 15
10
Warrant Agent shall be entitled, with no duty of inquiry, to rely conclu-
sively on any Notice of Exercise received by it. "Notice of Exercise"
means an irrevocable notice of exercise to the Warrant Agent at its
address, which notice (A) for Certificated Warrants, shall be on the
reverse of the Warrant Certificate or such other form as the Company and
the Warrant Agent may approve, and (B) for Book-Entry Warrants, shall be
substantially in the form set forth in Exhibit A-2 hereto or such other
form as the Company and the Warrant Agent may approve and may be given by
facsimile transmission. For purposes of this Agreement, "New York Business
Day" means any day other than a Saturday, Sunday or a day on which either
the American Stock Exchange or the New York Stock Exchange is not open for
securities trading or commercial banks in New York City are required or
authorized by law or executive order to remain closed.
SECTION 2.02. Exercise and Delivery of Warrants. (a)
Except in the case of exercise on the Expiration Date or the Delisting
Date, or in the event an Extraordinary Event or Exercise Limitation Event
is declared, or in the case of a postponement pursuant to Section 2.04, or
as a result of the exercise of a number of Warrants exceeding the limits on
exercise set forth in Section 2.04, the valuation date (the "Valuation
Date") for a Warrant shall be the first Index Calculation Date (as defined
herein) following the applicable Exercise Date (as defined herein). The
"Exercise Date" for a Warrant will be the New York Business Day on which
the Warrant Agent has received (A) in the case of Warrants other than those
held through the facilities of Centrale de Livraison de Valeurs Mobilieres
S.A. ("CEDEL") or the Euroclear System ("Euroclear"), either (i) for
Certificated Warrants, the Warrant Certificate representing such Warrant,
with the Notice of Exercise or (ii) for Book-Entry Warrants, the Warrant
with the Notice of Exercise duly completed and executed, in either case, at
or prior to 3:00 p.m., New York City time (the "Notice Date"); and if the
Warrant Agent shall receive any such Warrant Certificate or Warrant or
Notice of Exercise after 3:00 p.m., New York City time, on such date, then
such Warrant Certificate or Warrant shall be deemed to have been received
at or prior to 3:00 p.m., New York City time, on the next succeeding New
York Business Day (which shall be considered the Notice Date), and in such
event the Valuation Date shall be the next Index Calculation Date following
the New York Business Day on which the Warrant Agent is deemed to have
received such Warrant Certificate or Warrant together with the Notice of
Exercise or (B) in the case of Warrants held through the facilities of
CEDEL or Euroclear, the Notice of Exercise (by facsimile transmission) at
or prior to 3:00 p.m., New York City time; provided that the Warrant or
Warrant Certificate
<PAGE> 16
11
is received by the Warrant Agent by 3:00 p.m., New York City time, on the
applicable Valuation Date; and if the Warrant Agent shall receive such
Notice of Exercise after 3:00 p.m., New York City time, on any New York
Business Day, then the Notice of Exercise shall be deemed to have been
received at or prior to 3:00 p.m., New York City time, on the next
succeeding New York Business Day (which shall be considered the Notice
Date), and in such event the Valuation Date shall be the next Index
Calculation Date following the New York Business Day on which the Warrant
Agent is deemed to have received such Notice of Exercise; provided, that if
the Warrant Agent receives the Warrant or Warrant Certificate after 3:00
p.m., New York City time, on the Valuation Date, then the Exercise Date for
such Warrant shall be the day on which such Warrant is received or, if such
day is not a New York Business Day, the next succeeding New York Business
Day, and the Valuation Date for such Warrant shall be the first Index
Calculation Date following such Exercise Date; provided, further, however
that in the case of exercises by Euroclear participants, Euroclear must by
tested telex to the Warrant Agent by 9:00 a.m., New York City time, on the
Valuation Date confirm (a "Euroclear Confirmation") that the Warrants will
be received by the Warrant Agent by 3:00 p.m., New York City time, on such
Date. If such Euroclear Confirmation is received after 9:00 a.m., New York
City time, on the Valuation Date, the Company will be entitled to direct
the Warrant Agent to reject the related Notice of Exercise or waive the
requirement for timely delivery of such Euroclear Confirmation. Any
Warrant Certificate or Warrant received after 3:00 p.m., New York City
time, on (i) the New York Business Day immediately preceding the Expiration
Date or (ii) the last New York Business Day prior to the effective date on
which the Warrants are delisted from, or permanently suspended from trading
(within the meaning of the Securities Exchange Act of 1934 and the rules
and regulations of the Securities and Exchange Commission thereunder) on,
the American Stock Exchange and not accepted at the same time for listing
on another United States national securities exchange (such New York
Business Day being the "Delisting Date") (or, in the case of Warrants held
through the facilities of CEDEL or Euroclear, after 3:00 p.m., New York
City time, on the first Index Calculation Date following such Dates), shall
be deemed not to have been delivered and the related Notice of Exercise
shall be void and of no effect; provided, however, that if the Company
first receives notice of the delisting or suspension of the Warrants on the
same day on which such Warrants are delisted or suspended, such day will be
deemed the Delisting Date for purposes of this Agreement. For purposes of
this Agreement, "Index Calculation Date" means
<PAGE> 17
12
any day the Index (as herein defined) or any Successor Index (as herein
defined) is calculated and published.
(b) The Warrant Agent shall, in the case of Warrants
other than Warrants held through CEDEL or Euroclear, following receipt of
proper delivery of a Warrant in accordance with Section 2.02(a),
accompanied by a completed Notice of Exercise, and, in the case of Warrants
held through CEDEL or Euroclear, following receipt of proper delivery of a
completed Notice of Exercise in accordance with Section 2.02(a):
(i) promptly (1) for Certificated Warrants not held
through CEDEL or Euroclear, determine whether such Notice of
Exercise has been duly completed and is in proper form duly
executed by the Registered Holder thereof or by the duly
appointed legal representative thereof or by a duly authorized
attorney, (2) for Certificated Warrants held through CEDEL or
Euroclear, determine whether such Notice of Exercise has been
duly completed and is in proper form duly executed by CEDEL or
the Euroclear participant tendering such Warrant, as
applicable, (3) for Book-Entry Warrants not held through CEDEL
or Euroclear, determine whether such Notice of Exercise has
been duly completed and is in proper form and (4) for
Book-Entry Warrants held through CEDEL or Euroclear, determine
whether such Notice of Exercise has been duly completed and is
in proper form duly executed by CEDEL or the Euroclear
participant tendering such Warrant, as applicable; and if the
Warrant Agent determines that the Notice of Exercise has not
been duly completed or is not in proper form or, in the case of
Certificated Warrants, has not been so executed, the Warrant
Agent promptly (X) shall reject such Notice of Exercise and
shall send to the entity that executed such Notice of Exercise
a notice of rejection substantially in the form set forth in
Exhibit B or Exhibit B-1 hereto, as the case may be, and,
in the case of Certificated Warrants, shall return to the
Registered Holder that submitted such Notice of Exercise,
by first class mail, the Warrant Certificates evidencing
such Warrants (to the extent received, in the case of Warrants
held through CEDEL or Euroclear), or, in the case of Book-
Entry Warrants, shall redeliver such Warrants (to the extent
received in the case of Warrants held through CEDEL or Euroclear)
free through the facilities of the Depository to the account
from which they were transferred to the Warrant Agent and
(Y) in either case, shall not take the actions required by
clauses (ii)-(ix) below with respect to such Notice of Exercise
or the related Warrants; provided, however,
<PAGE> 18
13
that the Warrant Agent shall deliver a copy of the Notice
of Exercise relating to such Warrants to the Company as
required by Section 2.02(b)(ix) below and the Company may
waive any defect in the form of such Notice of Exercise;
(ii) promptly telephone Euroclear to determine whether
Euroclear anticipates that it will be able to provide a
Euroclear Confirmation with respect to each Warrant held
through Euroclear for which a Notice of Exercise was received;
(iii) notify the Company and the Determination Agent (and
such other parties (not to exceed two) as the Company shall
designate in writing) by 5:00 p.m., New York City time, on the
New York Business Day that such Notice of Exercise has been
received (or shall be deemed to have been received) of (A) the
total number of Warrants covered by such Notice of Exercise,
(B) the number of such Warrants subject to the Limit Option (as
defined herein) ("Contingently Tendered Warrants"), (C) the
number of such Warrants not subject to the Limit Option and (D)
the number of such Warrants, if any, as to which Euroclear has
not advised the Warrant Agent that it anticipates being able to
provide a Euroclear Confirmation;
(iv) with respect to Warrants held through Euroclear,
determine whether the Warrant Agent has received by 9:00 a.m.,
New York City time, on the Valuation Date relating to such
Warrants (or if the Valuation Date is not a New York Business
Day, on the next succeeding New York Business Day), Euroclear
Confirmations with respect to such Warrants, and if the Warrant
Agent has not received any such Euroclear Confirmation by such
time, notify the Company (and such other parties (not to exceed
two) as the Company shall designate in writing) by 10:00 a.m.,
New York City time, on such Valuation Date (or if the Valuation
Date is not a New York Business Day on the next succeeding New
York Business Day) of the number of such Warrants in respect of
which the Warrant Agent has not received such Euroclear
Confirmations and (except to the extent the Company has
notified the Warrant Agent that it has waived the timing
requirement of timely delivery of such Euroclear Confirmation)
send to the Euroclear participant that executed such Notice of
Exercise for which no related Euroclear Confirmation was
received (at the address specified in such notice) a notice of
rejection substantially in the form set forth in Exhibit B or
Exhibit B-1 hereto, as the case may be;
<PAGE> 19
14
(v) if any of the Warrants covered by such Notice of
Exercise constitute Contingently Tendered Warrants, the Warrant
Agent shall, by 5:00 p.m., New York City time, on the Valuation
Date, (or, if such Valuation Date is not a New York Business
Day, on the next succeeding New York Business Day) (A)
determine the Reference Index (as defined herein) for such
Warrants and the Spot Index (as defined herein) for the Index
Calculation Date that, but for the provisions of Section
2.02(h), would be the Valuation Date for such Warrants; (B)
determine in accordance with Section 2.02(h) whether such
Contingently Tendered Warrants will be subject to exercise
after giving effect to the Limit Option and, if such Warrants
will not be subject to exercise, send to the Registered Holder
(or the entity that executed the Notice of Exercise, in the
case of Certificated Warrants held through CEDEL or Euroclear),
in the case of Certificated Warrants, or to the Participant, in
the case of Book-Entry Warrants, that submitted such Notice of
Exercise a notice of rejection substantially in the form set
forth in Exhibit C-1 or Exhibit C-2 hereto, as appropriate,
with respect to such Warrants and return to the Registered
Holder (or the entity that executed the Notice of Exercise, in
the case of Certificated Warrants held through CEDEL or
Euroclear) that submitted such Notice of Exercise, by first
class mail, the Warrant Certificates (to the extent received,
in the case of Warrants held through CEDEL or Euroclear)
evidencing such Warrants, or, in the case of Book-Entry
Warrants (to the extent received, in the case of Warrants held
through CEDEL or Euroclear), redeliver the Warrants free
through the facilities of the Depository to the account of such
Participant; and (C) notify the Company and the Determination
Agent as to whether such Contingently Exercised Warrants will
be subject to exercise;
(vi) by 5:00 p.m., New York City time, on the Valuation
Date (or, if such Valuation Date is not a New York Business
Day, on the next succeeding New York Business Day) (A)
determine the sum of (1) the number of such Warrants not
subject to the Limit Option (i.e., the number of Warrants
determined pursuant to clause (iii)(C) above) plus (2) the
number of such Warrants that are Contingently Exercised
Warrants that will be subject to exercise notwithstanding the
Limit Option (i.e., the number of Warrants so identified
pursuant to clause (v)(B) above) (all of such Warrants, the
"Exercised Warrants") and (B) notify the Company and the
Determination Agent of the total number of Exercised Warrants
so determined (if such number is zero, the Warrant Agent shall
not take the actions required by
<PAGE> 20
15
clauses (vii) and (viii) with respect to such Notice of
Exercise or the related Warrants);
(vii) calculate the Cash Settlement Value of the
Exercised Warrants (excluding any Warrants held through CEDEL
or Euroclear as to which timely delivery of the related Warrant
has not been made) as of their Valuation Date in the manner set
forth in Section 2.02(d) by no later than 5:00 p.m., New York
City time, on the New York Business Day next succeeding the
Valuation Date (or, if such Valuation Date is not a New York
Business Day, on the next succeeding New York Business Day)
(unless the Cash Settlement Value shall be calculated by the
Determination Agent);
(viii) notify the Company (and such other parties (not
to exceed two) as the Company shall designate in writing) by
12:00 noon, New York City time, on the New York Business Day
next succeeding the Valuation Date (or, if such Valuation Date
is not a New York Business Day, on the New York Business Day
following the New York Business Day next succeeding the
Valuation Date) of the Cash Settlement Value payable in respect
of the exercise of such Exercised Warrants, and send notices of
confirmation substantially in the form included in Exhibit B or
Exhibit B-1 hereto, as the case may be, to the appropriate
Registered Holder (or the entity that executed the related
Notice of Exercise, in the case of Certificated Warrants held
through CEDEL or Euroclear) or Participant specifying therein
the reference number assigned by the Warrant Agent to each
accepted Notice of Exercise; and
(ix) promptly deliver a copy of each Notice of Exercise
to the Company and advise the Company of such other matters
relating to the Exercised Warrants as the Company shall
reasonably request. Any notice to be given to the Company by
the Warrant Agent pursuant to this Section 2.02 or Section 2.03
shall be by telephone (promptly confirmed in writing) or
telecopy.
Except in the case of Warrants subject to automatic
exercise and for Warrants that upon exercise entitle the holder thereof to
receive an Alternative Settlement Amount in lieu of the Cash Settlement
Value, if on any Valuation Date the Cash Settlement Value for any Warrants
then exercised would be zero, then in such case, the exercise of such
Warrants shall be ignored and either (i) for Certificated Warrants, the
Warrant Certificate evidencing such Warrants (to the extent received, in
the case of Warrants held through CEDEL or Euroclear) shall be promptly
<PAGE> 21
16
returned by the Warrant Agent to the Registered Holder (or the entity that
executed the related Notice of Exercise, in the case of Certificated
Warrants held through CEDEL or Euroclear) by first class mail or (ii) for
Book-Entry Warrants, the Warrants will be transferred by the Warrant Agent
back to the Participant that submitted them free on the records of the
Depository (to the extent received, in the case of Warrants held through
CEDEL or Euroclear) and, in either case such Warrantholder shall be
permitted to exercise such Warrants prior to the Expiration Date or the
Delisting Date, as the case may be.
(c) Provided that the Company has made adequate funds
available to the Warrant Agent in a timely manner, which shall (a) in the
case of Warrants not held through the facilities of the Depository, CEDEL
or Euroclear, in no event be later than 3:00 p.m., New York City time, on
the fifth New York Business Day following a Valuation Date (or, if the
Valuation Date is not a New York Business Day, on the fifth New York
Business Day following the New York Business Day next succeeding the
Valuation Date) and (b) in the case of Warrants held through the facilities
of the Depository, CEDEL or Euroclear, in no event be later than 3:00 p.m.,
New York City time, on the sixth New York Business Day following a
Valuation Date (or, if the Valuation Date is not a New York Business Day,
on the sixth New York Business Day following the New York Business Day next
succeeding the Valuation Date) (the "Settlement Date"), the Warrant Agent
will be responsible for making its payment available either (i) for
Certificated Warrants, to each appropriate Registered Holder in the form of
a cashier's check or an official bank check, or (in the case of payments of
at least $100,000) by wire transfer to a U.S. dollar account maintained by
such Registered Holder in the United States (at such Registered Holder's
election as specified in the applicable Notice of Exercise), after 3:00
p.m., New York City time, but prior to the close of business, on the first
New York Business Day immediately succeeding such Settlement Date or (ii)
for Book-Entry Warrants, to each appropriate Participant in the form of a
cashier's check or an official bank check, or (in the case of payments of
at least $100,000) by wire transfer to a U.S. Dollar account maintained by
such Participant in the United States (at the Participant's election as
specified in the Notice of Exercise), after 3:00 p.m., New York City time,
but prior to the close of business, on the first New York Business Day
immediately succeeding such Settlement Date. For either clause (i) or (ii)
above, such payment shall be in the amount of the aggregate Cash Settlement
Value in respect of the Warrant Certificates or Warrants that were
delivered to
<PAGE> 22
17
the Warrant Agent (together with the related Notice of Exercise) as
provided in Sections 2.01 and 2.02(a) and (b).
(d) The "Cash Settlement Value" of an exercised Warrant
shall be an amount in U.S. dollars equal to the quotient (rounded down to
the nearest cent) of (A) the amount, if any, by which the closing level of
the Index, as compiled and published by the AMEX, on the applicable
Valuation Date for such Warrant (the "Spot Index"), exceeds ______ (the
"Strike Index"), divided by (B) three, divided by (C) the exchange rate of
H.K. $______ per $1.00; provided, however, that if such amount is less than
zero, then the Cash Settlement Value shall be zero.
The "Index" is the AMEX Hong Kong 30 Index designed,
developed, maintained and operated by the American Stock Exchange (the
"AMEX"). References in this Agreement to "U.S. dollars", "U.S.$" or "$"
are to the lawful currency of the United States of America, and references
to "Hong Kong dollars" or "H.K.$" are to the lawful currency of Hong Kong.
(e) In the event a Global Warrant Certificate is issued,
the Warrant Agent shall cause its records, which may be kept
electronically, to be marked to reflect the reduction in the number of
Warrants represented by the Global Warrant Certificate by the number of
Warrants that were delivered to the Warrant Account and for which payment
has been made as provided in Section 2.02(c) promptly after such delivery
and payment. Absent manifest error, the Warrant Agent's records shall be
conclusive evidence of such matters.
(f) The Company hereby appoints PaineWebber
Incorporated, and PaineWebber Incorporated accepts such appointment, to be
the Company's Determination Agent to make such calculations as may be
required upon the occurrence of any of the circumstances described in Sec-
tion 2.02(g) or 2.03, including, without limitation, calculation of the
Cash Settlement Value or the Alternative Settlement Amount, as applicable,
of a Warrant. The Determination Agent shall act as an independent expert
and not as an agent of the Company, and, unless otherwise provided by this
Agreement, its calculations and determinations under this Agreement shall,
absent manifest error, be final and binding on the Company, the Warrant
Agent, the Warrantholders and any Participant. Any such calculations will
be made available to a Warrantholder for inspection at the Warrant Agent's
Office.
The Company agrees, for the benefit of the Warrantholders
from time to time of the Warrants, that there
<PAGE> 23
18
shall at all times be a Determination Agent hereunder until all the
Warrants are no longer outstanding or until moneys for the payment of all
outstanding Warrants, if any, shall have been paid to the Warrant Agent and
shall have been returned to the Company as provided in Section 2.06, which-
ever occurs earlier. Resignation, removal and appointment of the
Determination Agent shall be in accordance with the procedures set forth
for the resignation, removal and appointment of the Warrant Agent, as
provided in Section 5.03, except that a successor Determination Agent need
not be a banking institution with offices south of Chambers Street in the
Borough of Manhattan, The City of New York, and may only be appointed if
such successor has been nominated by the Company and approved by the
predecessor Determination Agent.
The Company agrees promptly to pay the Determination
Agent the compensation to be agreed upon with the Company for all services
rendered by the Determination Agent hereunder. The Company also agrees to
indemnify the Determination Agent for, and to hold it harmless against, any
loss, liability, cost or expense (including reasonable attorneys' fees and
expenses) incurred by the Determination Agent by reason of its being made a
party to a suit or claim arising out of this Agreement; provided, however,
that such indemnity shall in no event apply to the extent that any such
loss, liability, cost or expense is a result of the negligence, bad faith
or breach of this Agreement on its part in connection with the services
rendered by it hereunder. The indemnity obligation of the Company shall
continue notwithstanding the termination of this Agreement or the
resignation or removal of the Determination Agent.
(g) In the event that the Index is not calculated and
publicly announced by the AMEX on a Valuation Date but is calculated and
publicly announced by another person or party not affiliated with the
Company and acceptable to the Company (the "Third Party"), the applicable
Cash Settlement Value shall nevertheless be calculated by reference to the
value of the closing quotation for the Index so announced by the Third
Party.
In the event that prior to a Valuation Date the AMEX or
the Third Party makes a material change in the formula for, or the method
of calculating the Index, the Determination Agent shall make such
calculations as may be required to determine the applicable Cash Settlement
Value using the formula and method of calculating the Index as was in
effect prior to such change or modification.
<PAGE> 24
19
If on a Valuation Date either the AMEX or any Third Party
discontinues publication of the Index and publishes a successor or
substitute index that the Company determines, in its sole discretion, to be
comparable to the Index (any such index being a "Successor Index"), the
Determination Agent shall determine the Spot Index for any date thereafter
based on the closing level of the Successor Index on such date. If the
AMEX and/or any Third Party discontinues publication of the Index and/or
any Successor Index, the Company will cause the Determination Agent to
determine the applicable Cash Settlement Value based on the formula and
method used in calculating the Index or any Successor Index as in effect on
the date the Index or such Successor Index was last published.
If calculation or publication of the Index or a Successor
Index is modified, discontinued or suspended, as provided in this Section
2.02(g), then the Determination Agent shall promptly notify the Warrant
Agent, and the Warrant Agent shall in turn promptly notify the Warrant-
holders in accordance with Section 6.04 hereof, of such modification,
discontinuance or suspension and of any modification or adjustment to be
made with respect to calculation of the Cash Settlement Value or
Alternative Settlement Amount, as applicable.
The Determination Agent will have no responsibility for
good faith errors or omissions in calculating or disseminating information
regarding the Index, any Successor Index, adjustments or calculations by
the Determination Agent (as provided above) in order to arrive at a
calculation of a stock index comparable to the Index or any Successor
Index, or the Cash Settlement Value or the Alternative Settlement Amount,
as applicable.
(h) Except in the case of an automatic exercise (as
provided in Section 2.03 below) and except upon the occurrence of an
Extraordinary Event as a result of which an Alternative Settlement Amount
is payable (as provided in Section 2.03 below) in connection with any
exercise of Warrants, the related Notice of Exercise may specify that such
exercise (including any exercise following a postponed Valuation Date
pursuant to Section 2.03(b), if the Cash Settlement Value is to be paid
with respect to such Warrants), be subject to the condition that the Spot
Index that would otherwise be used to determine the Cash Settlement Value
of such Warrants not be 20 or more points lower than the Reference Index
for such Warrants. "Reference Index", with respect to any Contingently
Tendered Warrants, means the Spot Index on the New York Business Day that
such Notice of Exercise has been received (or shall be deemed to have
<PAGE> 25
20
been received) (or, if such New York Business Day is not an Index
Calculation Date, on the first Index Calculation Date preceding such New
York Business Day). The option of a Warrantholder to condition an exercise
of Warrants as provided in this Section 2.02(h) is herein referred to as
the "Limit Option". If a Warrantholder elects the Limit Option in
connection with any exercise of Warrants, the following provisions shall
apply:
(i) To be valid, such election must be specified in the
related Notice of Exercise. Each of the Warrant Agent and the
Company shall be entitled to rely conclusively on such Notice
of Exercise, as received by the Warrant Agent, in determining
whether such election has been validly made. In connection
with any exercise of 500 or more Warrants, a Warrantholder may
elect to subject only a portion of such Warrants to the Limit
Option; provided that the number of such Warrants subject to
the Limit Option and the number of such Warrants not subject to
the Limit Option shall in each case not be less than 500.
Registered Holders and Participants shall be required to
certify that the number of Warrants exercised on behalf of any
Warrantholder pursuant to the related Notice of Exercise that
are subject to the Limit Option is an amount that is not less
than 500.
(ii) The Reference Index shall be determined by the
Warrant Agent, which determination shall be conclusive and
binding for all purposes relating to such exercise.
(iii) In the event that the Spot Index for the first
Index Calculation Date following the New York Business Day that
such Notice of Exercise has been received (or shall be deemed
to have been received) (i.e., for the day that, but for the
provisions of Section 2.02(h), would be the Valuation Date for
such Warrants) is 20 or more points lower than the Reference
Index for such Warrants, such Warrants (A) shall not be subject
to exercise and shall be treated for all purposes of this
Agreement and the Warrant Certificates and Global Warrant
Certificate as if the related Notice of Exercise had never been
received by the Warrant Agent, and (B) shall not constitute
"Exercised Warrants" for purposes of Section 2.02(b). If such
Spot Index is not 20 or more points lower than such Reference
Index, such Warrants shall be subject to exercise as provided
in this Section 2.02 and shall be deemed to be "Exercised
Warrants" for such purposes. The Warrant
<PAGE> 26
21
Agent's determination shall be conclusive and binding for all
purposes relating to such Warrants.
(iv) Except as provided in Section 2.03(b), the Limit
Option (based on the Reference Index as determined for the New
York Business Day that such Notice of Exercise has been
received (or shall be deemed to have been received) or, if
applicable, the first Index Calculation Date preceding such New
York Business Day) shall continue to be applicable to any
Exercised Warrant for which the Valuation Date has been
postponed as a result of the occurrence of an Extraordinary
Event or an Exercise Limitation Event until the Warrants are
canceled as provided in Section 2.03(b) or until the Expiration
Date or the Delisting Date.
SECTION 2.03. Automatic Exercise of Warrants; Exercise
upon an Extraordinary Event or Exercise Limitation Event. (a) All
Warrants for which the Warrant Agent has not received a Notice of Exercise
in proper form by 3:00 p.m., New York City time, on (i) the New York
Business Day immediately preceding the Expiration Date or (ii) the
Delisting Date, as the case may be, or for which the Warrant Agent has
received a Notice of Exercise in proper form but with respect to which
timely delivery of the relevant Warrants has not been made, and which have
not been canceled prior to such time, will be deemed automatically
exercised on such date without any requirement of a Notice of Exercise to
the Warrant Agent. The Exercise Date for such Warrants shall be the
Expiration Date or the Delisting Date, as the case may be, or, if such Date
is not a New York Business Day, the next succeeding New York Business Day,
and the Valuation Date for such Warrants shall be the first Index
Calculation Date following the Exercise Date for such Warrants.
The Warrant Agent shall by 5:00 p.m., New York City time,
on the Expiration Date or the Delisting Date, as the case may be, (or if
such date is not a New York Business Day, on the next succeeding New York
Business Day) notify the Company (and such other parties (not to exceed
two) as the Company shall designate in writing) of the number of Warrants
to be automatically exercised on such day. On the Valuation Date for such
Warrants (or, if such Valuation Date is not a New York Business Day, on the
next succeeding New York Business Day), the Warrant Agent shall (i)
determine the Cash Settlement Value (in the manner provided in Section
2.02(d)) of the Warrants to be automatically exercised; (ii) by 5:00 p.m.,
New York City time, on the New York Business Day next succeeding such
Valuation Date, notify the Company (and such other parties (not to exceed
two) as the Company
<PAGE> 27
22
shall designate in writing) of the Cash Settlement Value payable in respect
of such exercised Warrants; and (iii) advise the Company of such other
matters relating to the exercised Warrants as the Company shall reasonably
request.
If the Company determines that an Extraordinary Event or
an Exercise Limitation Event (as defined herein) has occurred and is
continuing on the Expiration Date or the Delisting Date, the Company shall
so notify the Warrant Agent and the Determination Agent, and the Cash
Settlement Value with respect to the exercised Warrants shall be equal to,
and be calculated in the same manner as, an "Alternative Settlement
Amount", in accordance with Section 2.03(b) herein (treating the Expiration
Date or the Delisting Date, as the case may be, as the date on which the
Warrants were canceled for the purposes of Section 2.03(b)).
With respect to all Warrants subject to automatic
exercise (other than Book-entry Warrants and Warrants subject to postponed
exercise following the occurrence of an Extraordinary Event or an Exercise
Limitation Event as described in Section 2.03(b)), the Company shall make
available to the Warrant Agent, not later than 3:00 p.m., New York City
time, on the fourth New York Business Day following the Valuation Date for
automatically exercised Warrants (or if such Valuation Date is not a New
York Business Day, on the fourth New York Business Day following the New
York Business Day next succeeding the Valuation Date) (in any such case,
the "Automatic Settlement Date"), funds in an amount equal to, and for the
payment of, the aggregate Cash Settlement Value of such Warrants. Subject
to such funds having been made available as provided in the preceding
sentence, the Warrant Agent will be responsible for making its payment
available to the appropriate Registered Holder in the form of a cashier's
check or an official bank check, or (in the case of payments of at least
$100,000) by wire transfer to a U.S. dollar account maintained by such
Registered Holder in the United States (at such Registered Holder's
election), after 3:00 p.m., New York City time, but prior to the close of
business, on the Automatic Settlement Date, against receipt by the Warrant
Agent at the Warrant Agent's Office from such Registered Holder of its
Warrant Certificates. Such payment shall be in the amount of the aggregate
Cash Settlement Value in respect of the Warrants, evidenced by such Warrant
Certificates, that were exercised automatically on the Expiration Date or
the Delisting Date, as the case may be. Warrant Certificates delivered to
the Warrant Agent shall thereafter be promptly canceled by the Warrant
Agent.
<PAGE> 28
23
In the case of Book-Entry Warrants subject to automatic
exercise (other than Warrants subject to postponed exercise following the
occurrence of an Extraordinary Event or an Exercise Limitation Event as
described in Section 2.03(b)), the Company shall make available to the
Warrant Agent, not later than 3:00 p.m., New York City time, on the
Automatic Settlement Date, funds in an amount equal to, and for the payment
of, the aggregate Cash Settlement Value of such Warrants. Subject to such
funds having been made available as provided in the preceding sentence, the
Warrant Agent will be responsible for making funds available to the
Depository, against receipt of the Global Warrant Certificate, after 3:00
p.m., New York City time, but prior to the close of business, on the
Automatic Settlement Date, such check to be in an amount equal to the
aggregate Cash Settlement Value of the Warrants subject to such automatic
exercise.
The Company will advise the Warrant Agent as soon as
practicable of the date of any expected delisting or permanent suspension
of trading of the Warrants and will immediately inform the Warrant Agent
after the Company has received notice that such delisting or suspension has
occurred, but in no event will notice of such delisting or suspension be
given to the Warrant Agent later than 9:30 a.m., New York City time, on the
New York Business Day following the date that such delisting or suspension
occurs. The Company will use its best efforts to notify the Warrant-
holders, or cause the Warrantholders to be notified, as promptly as
practicable of any expected delisting or suspension of trading of the
Warrants.
(b) Upon the occurrence of an Extraordinary Event or an
Exercise Limitation Event, the Company shall use its best efforts to notify
the Warrant Agent and the Determination Agent promptly that an
Extraordinary Event or Exercise Limitation Event, as the case may be, has
occurred and shall promptly notify the Warrantholders, through publication
in a United States newspaper with a national circulation, or through other
means deemed appropriate by the Company ("Publication"), that an
Extraordinary Event or an Exercise Limitation Event has occurred. Anything
in this Agreement to the contrary notwithstanding, if the Company
determines that an Extraordinary Event or Exercise Limitation Event has
occurred and is continuing on the Hong Kong Business Day with respect to
which the Spot Index on a Valuation Date is to be determined (the
"Applicable Hong Kong Business Day"), then the Cash Settlement Value of any
Warrants shall be calculated on the basis that the Valuation Date shall be
the next Index Calculation Date following an Applicable Hong Kong Business
Day on which there is no Extraordinary Event
<PAGE> 29
24
or Exercise Limitation Event; provided, however, that if the Cash
Settlement Value of such Warrants is not calculated on or prior to the
Expiration Date or the Delisting Date, then the Warrantholders shall
receive the Alternative Settlement Amount in lieu of the Cash Settlement
Value which shall be calculated as if such Warrants had been canceled on
the Expiration Date or the Delisting Date, as the case may be.
If the Company determines that an Extraordinary Event has
occurred and is continuing, and if it is expected by the Company to
continue, the Company may immediately cancel the Warrants by notifying the
Warrant Agent of such cancellation (the date such notice is given being the
"Cancellation Date"), and each Warrantholder's rights with respect to the
Warrants and under this Agreement shall thereupon cease; provided, however,
that each Warrant shall be exercised (even if such Warrant would not
otherwise be exercisable on such Date because of the Limit Option) on the
basis that the Valuation Date for such Warrant shall be the Cancellation
Date and each Warrantholder shall have the right to receive an Alternative
Settlement Amount (as defined herein) with respect to its Warrants. The
Company shall use its best efforts to promptly notify the Warrantholders
through Publication of such cancellation.
With respect to all Warrants as to which the Valuation
Date has been postponed or which have been canceled as described above, the
Company shall make available to the Warrant Agent not later than 3:00 p.m.,
New York City time, on the third New York Business Day following the date
on which the Cash Settlement Value or Alternative Settlement Amount, as the
case may be, has been calculated (the "Alternative Settlement Date"), funds
in an amount equal to, and for the payment of, the aggregate Cash
Settlement Value or Alternative Settlement Amount, as applicable, of such
Warrants. Subject to such funds having been made available as provided in
the preceding sentence, the Warrant Agent will be responsible for making a
payment (i) in the case of Certificated Warrants, to each Registered Holder
that submitted a warrant Certificate for exercise or (ii) in the case of
Book-Entry Warrants, to the Depository, after 3:00 p.m., New York City
time, but prior to the close of business on, the Alternative Settlement
Date, in an amount equal to the aggregate Cash Settlement Value or
Alternative Settlement Amount of such exercised Warrants.
The "Alternative Settlement Amount" shall be an amount,
determined by the Determination Agent, which is equal to the amount "X"
calculated using the formula set forth below:
<PAGE> 30
25
T x A
X = I + - -
2 B
where
I = the Cash Settlement Value of the Warrants determined as
described under Section 2.02(d), but calculated with a
Spot Index determined by the Determination Agent which,
subject to approval by the Company (such approval not to
be unreasonably withheld), in the reasonable opinion of
the Determination Agent, fairly reflects the value of the
stocks which comprise the Index or any Successor Index on
the Cancellation Date;
T = U.S. $____
A = the total number of days from but excluding the
Cancellation Date for such Warrants to and including the
Expiration Date; and
B = the total number of days from but excluding the date the
Warrants were initially sold to and including the
Expiration Date.
For purposes of determining "I" in the above formula, in
the event that the Determination Agent and the Company are required, but
have not, after good faith consultation with each other and within five
days following the first day on which such Alternative Settlement Amount
may be calculated in accordance with the above formula, agreed upon a Spot
Index which fairly reflects the value of the stocks which comprise the
Index on the Cancellation Date, then the Determination Agent shall promptly
nominate a third party, subject to approval by the Company (such approval
not to be unreasonably withheld), to determine such figure and calculate
the Alternative Settlement Amount in accordance with the above formula.
Such party shall act as an independent expert and not as an agent of the
Company or the Determination Agent, and its calculation and determination
of the Alternative Settlement Amount shall, absent manifest error, be final
and binding on the Company, the Warrant Agent, the Determination Agent and
the Warrantholders. Any such calculations will be made available to a
Warrantholder for inspection at the Warrant Agent's Office. Neither the
Company nor such third party shall have any responsibility for good faith
errors or omissions in calculating the Alternative Settlement Amount.
<PAGE> 31
26
(c) For purposes of this Agreement, an "Extraordinary
Event" shall mean any one of the events, circumstances or causes listed
below:
(i) a suspension or absence of trading on the Hong Kong
Stock Exchange Ltd. (the "HKSE") of all the stocks which then
comprise the Index or a successor index; or
(ii) the enactment, publication, decree or other
promulgation of any statute, regulation, rule or order of any
court or any other U.S. or non-U.S. governmental authority
which would make it unlawful for the Company to perform any of
its obligations under this Agreement or the Warrants; or
(iii) any outbreak or escalation of hostilities or other
national or international calamity or crisis (including,
without limitation, natural calamities which in the opinion of
the Company may materially and adversely affect the economy of
Hong Kong or the trading of securities generally on the HKSE)
which has or will have a material adverse effect on the ability
of the Company to perform its obligations under the Warrants or
to modify the hedge of its position with respect to the Index.
For the purposes of determining whether an Extraordinary
Event has occurred: (1) a limitation on the hours or number of days of
trading will not constitute an Extraordinary Event if it results from an
announced change in the regular business hours of the HKSE, and (2) an
"absence of trading" on the HKSE will not include any time when the HKSE
itself is closed for trading under ordinary circumstances.
(d) For purposes of this Agreement, an "Exercise
Limitation Event" shall mean any one of the events, circumstances or causes
listed below:
(i) a suspension or absence of trading on the HKSE of (a)
20% or more of the stocks which then comprise the Index or a
Successor Index and/or (b) the stocks of any three of the four
most highly capitalized companies included in the stocks which
then comprise the Index or a Successor Index; or
(ii) the suspension or material limitation on the Hong
Kong Futures Exchange Ltd. (the "HK Futures Exchange") or any
other major futures or securities market of trading in futures
or options contracts
<PAGE> 32
27
related to the Hang Seng Index, the Index or a Successor Index.
For the purposes of determining whether an Exercise
Limitation Event has occurred: (1) a limitation on the hours or number of
days of trading will not constitute an Exercise Limitation Event if it
results from an announced change in the regular business hours of the
relevant exchange, (2) a decision to permanently discontinue trading in the
relevant contract will not constitute an Exercise Limitation Event, (3) a
suspension in trading in a futures or options contract on the Hang Seng
Index, the Index or a Successor Index by the HK Futures Exchange or other
major futures or securities market by reason of (x) a price change
violating limits set by the HK Futures Exchange or such futures or
securities market, (y) an imbalance of orders relating to such contracts or
(z) a disparity in bid and ask quotes relating to such contracts will
constitute a suspension or material limitation of trading in futures or
options contracts related to the Hang Seng Index, the Index, or a Successor
Index (4) an "absence of trading" on the HK Futures Exchange or a major
futures or securities market on which futures or options contracts related
to the Hang Seng Index, the Index or a Successor Index are traded will not
include any time when the HK Futures Exchange or such futures or securities
market, as the case may be, itself is closed for trading under ordinary
circumstances and (5) the occurrence of an Extraordinary Event described in
clause (i) of the definition of Extraordinary Event will not constitute,
and will supersede the occurrence of, an Exercise Limitation Event.
SECTION 2.04. Limitation of Number of Exercisable
Warrants. All exercises of Warrants (other than on the Expiration Date or
the Delisting Date or upon cancellation of the Warrants as provided in
Section 2.03(b)) shall be subject, at the Company's option, to the
limitation that not more than 1,000,000 Warrants in total may be exercised
on any Exercise Date and not more than 250,000 Warrants may be exercised by
or on behalf of any person or entity, either individually or in concert
with any other person or entity, on any Exercise Date. If any New York
Business Day would otherwise, under the terms hereof, be the Exercise Date
in respect of more than 1,000,000 Warrants, then upon the Company's
exercising such option (by giving notice thereof to the Warrant Agent not
later than 5:00 p.m., New York City time, on such Exercise Date), 1,000,000
of such Warrants shall be deemed exercised on such Exercise Date (selected
by the Warrant Agent on a pro rata basis, but if, as a result of such pro
rata selection, any Registered Holders would be deemed to have exercised
less than 500 Warrants, then the
<PAGE> 33
28
Warrant Agent shall first select additional of such holders, Warrants so
that no holder shall be deemed to have exercised less than 500 Warrants),
and the remainder of such Warrants (the "Remaining Warrants") shall be
deemed exercised on the following New York Business Day (subject to
successive applications of this Section 2.04); provided that any Remaining
Warrant in respect of which a Notice of Exercise was delivered on a given
Notice Date shall be deemed exercised before any other Warrants in respect
of which a Notice of Exercise was delivered on a later Notice Date. If any
individual Warrantholder attempts to exercise more than 250,000 Warrants on
any New York Business Day, then at the Company's election (as notified to
the Warrant Agent by giving notice thereof to the Warrant Agent not later
than 5:00 p.m., New York City time, on such New York Business Day) 250,000
of such Warrants shall be deemed exercised on such New York Business Day
and the remainder shall be deemed exercised on the following New York
Business Day (subject to successive applications of this Section 2.04).
The date on which any Warrant is deemed exercised under the preceding
sentences shall for all purposes of this Agreement be the "Exercise Date"
in respect of such Warrants.
SECTION 2.05. Covenant of the Company. The Company
covenants, for the benefit of the Warrantholders, that it will not seek the
delisting of the Warrants from, or suspension of their trading on, the AMEX
unless the Company has, at the same time, arranged for listing on another
United States national securities exchange.
SECTION 2.06. Return of Money Held Unclaimed for Two
Years. Except as otherwise provided herein, any money deposited with or
paid to the Warrant Agent for the payment of the Cash Settlement Value or
Alternative Settlement Amount of any Warrants and not applied but remaining
unclaimed for two years after the date upon which such Cash Settlement
Value or Alternative Settlement Amount shall have become due and payable
shall be repaid by the Warrant Agent to the Company and the holders of such
Warrants shall thereafter look only to the Company for any payment which
such holders may be entitled to collect and all liability of the Warrant
Agent with respect to such money shall thereupon cease; provided that the
Warrant Agent, before making any such repayment, may at the expense of the
Company notify (i) in the case of Certificated Warrants, the Registered
Holders or (ii) in the case of Book-Entry Warrants, the Participants
concerned, that said money has not been so applied and remains unclaimed
and that after a date named in the notification any unclaimed balance of
said money then remaining will be returned to the Company.
<PAGE> 34
29
SECTION 2.07. Return of Global Warrant Certificate. In
the event a Global Warrant Certificate is issued, at such time as all of
the Warrants evidenced by such Certificate have been exercised (including
pursuant to an automatic exercise) or otherwise canceled and all payments
to the Participants made as provided herein, the Warrant Agent shall
destroy the canceled Global Warrant Certificate (unless instructed by the
Company to deliver the Global Warrant Certificate to the Company) and shall
provide a certificate of destruction to the Company.
ARTICLE III
OTHER PROVISIONS RELATING TO
RIGHTS OF WARRANTHOLDERS
SECTION 3.01. Warrantholder of Warrant May Enforce
Rights. Notwithstanding any of the provisions of this Agreement, any
Warrantholder, without the consent of the Warrant Agent, may, in and for
its own behalf, enforce, and may institute and maintain, any suit, action
or proceeding against the Company suitable to enforce, or otherwise in
respect of, its right to exercise, and to receive payment for, its Warrants
as provided in this Agreement.
ARTICLE IV
WARRANTS ACQUIRED BY THE COMPANY;
PAYMENT OF TAXES
SECTION 4.01. Warrants Acquired by the Company. In the
event the Company shall purchase or otherwise acquire Warrants, such
Warrants may, at the option of the Company, be (i) in the case of
Certificated Warrants, delivered to the Warrant Agent, and if so delivered,
the Warrant Agent shall promptly note the cancellation of such Warrants on
the records of the Warrant Agent or (ii) in the case of Book-Entry Warrants,
surrendered free through a Participant to the Depository for credit to the
account of the Warrant Agent maintained at the Depository, and if so
credited, the Warrant Agent shall promptly note the cancellation of such
Warrants by notation on the records of the Warrant Agent. In the case of
Book-Entry Warrants, such Warrants may also, at the option of the Company,
be resold by the Company directly or to or through any of its affiliates in
lieu of being surrendered to the Depository. No Warrant Certificate shall
be countersigned in lieu of or in exchange for any Warrant which is
canceled as provided herein, except as otherwise expressly permitted by
this Agreement which tax or
<PAGE> 35
30
other governmental charge shall be paid by the appropriate Warrantholder or
Registered Holder.
Any canceled Warrant Certificate held by the Warrant
Agent under this Agreement shall be destroyed by the Warrant Agent unless
otherwise directed by the Company, and the Warrant Agent shall deliver a
certificate of destruction to the Company evidencing the same.
SECTION 4.02. Payment of Taxes. The Company will pay all
stamp, withholding and other duties, if any, attributable to the initial
issuance of Warrants; provided, however, that, anything in this Agreement
to the contrary notwithstanding, the Company shall not be required to pay
any tax or other governmental charge which may be payable in respect of any
transfer involving any beneficial or record interest in, or ownership
interest of, any Warrants, Warrant Certificates or Global Warrant
Certificate which tax or other governmental charge shall be paid by the
appropriate Warrantholder or Registered Holder.
ARTICLE V
CONCERNING THE WARRANT AGENT
SECTION 5.01. Warrant Agent. (a) The Company hereby
appoints Citibank, N.A. ("Citibank") as Warrant Agent of the Company in
respect of the Warrants upon the terms and subject to the conditions set
forth herein; and Citibank hereby accepts such appointment. The Warrant
Agent shall have the powers and authority granted to and conferred upon it
in this Agreement and such further powers and authority to act on behalf of
the Company as the Company may hereafter grant to or confer upon it. All
of the terms and provisions with respect to such powers and authority con-
tained in any Warrant Certificates or the Global Warrant Certificate are
subject to and governed by the terms and provisions hereof.
(b) Citibank covenants and agrees to maintain an office,
staffed by qualified personnel, with adequate facilities for the discharge
of its responsibilities under this Agreement, including, without
limitation, the computation of the Cash Settlement Value and the timely
settlement of the Warrants upon exercise thereof.
SECTION 5.02. Conditions of Warrant Agent's Obligations.
The Warrant Agent accepts its obligations herein set forth upon the terms
and conditions hereof, including the following, to all of which the Company
agrees and to all
<PAGE> 36
31
of which the rights hereunder of the holders from time to time of the
Warrants shall be subject:
(a) The Company agrees promptly to pay the Warrant Agent
the compensation to be agreed upon with the Company for all
services rendered by the Warrant Agent and to reimburse the
Warrant Agent for its reasonable out-of-pocket expenses
(including attorneys' fees and expenses) incurred by the
Warrant Agent without negligence, bad faith or breach of this
Agreement on its part in connection with the services rendered
by it hereunder. The Company also agrees to indemnify the
Warrant Agent for, and to hold it harmless against, any loss,
liability or expense (including reasonable attorneys' fees and
expenses) incurred without negligence, bad faith or breach of
this Agreement on the part of the Warrant Agent, arising out of
or in connection with its acting as such Warrant Agent
hereunder, as well as the reasonable costs and expenses of
defending against any claim of liability in the premises.
(b) In acting under this Agreement, the Warrant Agent is
acting solely as agent of the Company and does not assume any
obligation or relationship of agency or trust for or with any
of the owners or holders of the Warrants.
(c) The Warrant Agent may consult with counsel
satisfactory to it, and the opinion of such counsel shall be
full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in good
faith and in accordance with the opinion of such counsel.
(d) The Warrant Agent shall be protected and shall incur
no liability for or in respect of any action taken or thing
suffered by it in reliance upon any notice, direction, consent,
certificate, affidavit, statement or other paper or document
reasonably believed by it to be genuine and to have been
presented or signed by the proper parties.
(e) The Warrant Agent, and its officers, directors and
employees, may become the owner of, or acquire any interest in,
any Warrants or other obligations of the Company, with the same
rights that it or they would have if it were not the Warrant
Agent hereunder and, to the extent permitted by applicable law,
it or they may engage or be interested in any financial or
other transaction with the Company and may act on, or as
depository, trustee or agent for, any committee or body
<PAGE> 37
32
of holders of Warrants or other obligations of the Company as
freely as if it were not the Warrant Agent hereunder.
(f) The Warrant Agent shall not be under any liability
for interest on any moneys at any time received by it pursuant
to any of the provisions of this Agreement nor shall it be
obligated to segregate such moneys from other moneys held by
it, except as required by law. The Warrant Agent shall not be
responsible for advancing funds on behalf of the Company.
(g) The Warrant Agent shall not be under any
responsibility with respect to the validity or sufficiency of
this Agreement or the execution and delivery hereof (except the
due authorization, execution and delivery hereof by the Warrant
Agent) or with respect to the validity or execution of the
Warrant Certificates or the Global Warrant Certificate (except
its countersignature thereof).
(h) The recitals contained herein and in the Warrant
Certificates or the Global Warrant Certificate (except as to
the Warrant Agent's countersignature thereon) shall be taken as
the statements of the Company, and the Warrant Agent assumes no
responsibility for the correctness of the same.
(i) The Warrant Agent shall be obligated to perform such
duties as are herein specifically set forth, and no implied
duties or obligations shall be read into this Agreement against
the Warrant Agent. The Warrant Agent shall not be under any
obligation to take any action hereunder likely to involve it in
any expense or liability, the payment of which is not, in its
reasonable opinion, assured to it. The Warrant Agent shall not
be accountable or under any duty or responsibility for the
application by the Company of any proceeds. The Warrant Agent
shall have no duty or responsibility in case of any default by
the Company in the performance of its covenants or agreements
contained in any Warrant Certificate or the Global Warrant
Certificate or in the case of the receipt of any written demand
from a holder of a Warrant with respect to such default,
including, without limiting the generality of the foregoing,
any duty or responsibility to initiate or attempt to initiate
any proceedings at law or otherwise or, except as provided in
Section 6.02 hereof, to make any demand upon the Company.
<PAGE> 38
33
SECTION 5.03. Resignation and Appointment of Successor.
(a) The Company agrees, for the benefit of the holders from time to time
of the Warrants, that there shall at all times be a Warrant Agent hereunder
until all the Warrants are no longer outstanding or until moneys for the
payment of all outstanding Warrants, if any, shall have been paid to the
Warrant Agent and shall have been returned to the Company as provided in
Section 2.06, whichever occurs earlier.
(b) The Warrant Agent may at any time resign as such
agent by giving written notice to the Company of such intention on its
part, specifying the date on which its desired resignation shall become
effective, subject to the appointment of a successor Warrant Agent and
acceptance of such appointment by such successor Warrant Agent as herein-
after provided. The Warrant Agent hereunder may be removed at any time by
the filing with it of an instrument in writing signed by or on behalf of
the Company and specifying such removal and the date when it shall become
effective. Such resignation or removal shall take effect upon the appoint-
ment by the Company, as hereinafter provided, of a successor Warrant Agent
(which shall be a banking institution organized under the laws of the
United States of America or one of the states thereof and having an office
south of Chambers Street in the Borough of Manhattan, The City of New York)
and the acceptance of such appointment by such successor Warrant Agent. In
the event a successor Warrant Agent has not been appointed and accepted its
duties within 90 days of the Warrant Agent's notice of resignation, the
Warrant Agent may apply to any court of competent jurisdiction for the
designation of a successor Warrant Agent. The obligation of the Company
under Section 5.02(a) shall continue to the extent set forth therein
notwithstanding the resignation or removal of the Warrant Agent.
(c) In case at any time the Warrant Agent shall give
notice of its intent to resign, or shall be removed, or shall become
incapable of acting, or shall be adjudged bankrupt or insolvent, or make an
assignment for the benefit of its creditors, or consent to the appointment
of a receiver or custodian of all or any substantial part of its property,
or shall admit in writing its inability to pay or meet its debts as they
mature, or if a receiver or custodian of it or of all or any substantial
part of its property shall be appointed, or if any public officer shall
have taken charge or control of the Warrant Agent or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, a
successor Warrant Agent, qualified as aforesaid, shall be promptly
appointed by the Company by an instrument in writing, filed with the suc-
<PAGE> 39
34
cessor Warrant Agent. Upon the appointment as aforesaid of a successor
Warrant Agent and acceptance by the latter of such appointment, the Warrant
Agent so superseded shall cease to be Warrant Agent hereunder.
(d) Any successor Warrant Agent appointed hereunder
shall execute, acknowledge and deliver to its predecessor and to the
Company an instrument accepting such appointment hereunder, and thereupon
such successor Warrant Agent, without any further act, deed or conveyance,
shall become vested with all the authority, rights, powers, trust,
immunities, duties and obligations of such predecessor with like effect as
if originally named as Warrant Agent hereunder, and such predecessor, upon
payment of its charges and disbursements then unpaid, shall thereupon
become obligated to transfer, deliver and pay over, and such successor
Warrant Agent shall be entitled to receive, all moneys, securities and
other property on deposit with or held by such predecessor (including,
without limitation, the Warrant Register), as Warrant Agent hereunder.
(e) Any corporation into which the Warrant Agent here-
under may be merged or converted or any corporation with which the Warrant
Agent may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Warrant Agent shall be a party, or
any corporation to which the Warrant Agent shall sell or otherwise transfer
all or substantially all the assets and business of the Warrant Agent,
provided that it shall be qualified as aforesaid, shall be the successor
Warrant Agent under this Agreement without the execution or filing of any
paper or any further act on the part of any of the parties hereto.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. Amendment. (a) This Agreement and the
terms of the Warrants may be amended by the Company, the Warrant Agent and
the Determination Agent, without the consent of the Warrantholders, for the
purpose of curing any ambiguity, or of curing, correcting or supplementing
any defective or inconsistent provision contained herein or therein or in
any other manner which the Company may deem necessary or desirable and
which will not adversely affect the interests of the holders of the
Warrants. Notwithstanding anything in this Section 6.01 to the contrary,
this Agreement may not be amended to provide for the countersigning by the
Warrant Agent of Warrant Certificates evidencing in the aggregate in excess
of 2,000,000 Warrants
<PAGE> 40
35
unless and until the Warrant Agent has received notice from the AMEX or any
successor United States national securities exchange that the additional
Warrants in excess of 2,000,000 have been approved for listing on such
exchange.
(b) The Company, the Warrant Agent and the Determination
Agent may modify or amend this Agreement, with the consent of
Warrantholders holding not less than a majority in number of the then
outstanding Warrants affected by such modification or amendment, for any
purpose; provided, however, that no such modification or amendment that
decreases the Strike Index, shortens the period of time during which the
Warrants may be exercised, or otherwise materially and adversely affects
the exercise rights of the Warrantholders or reduces the percentage of the
number of outstanding Warrants, the consent of whose holders is required
for modification or amendment of this Agreement, may be made without the
consent of each Warrantholder affected thereby.
SECTION 6.02. Notices and Demands to the Company, the
Warrant Agent and the Determination Agent. If the Warrant Agent or the
Determination Agent shall receive any notice or demand addressed to the
Company by any Warrantholder pursuant to the provisions of this Agreement,
the Warrant Agent or the Determination Agent, as the case may be, shall
promptly forward such notice or demand to the Company.
SECTION 6.03. Addresses for Notices. Any communications
to the Warrant Agent with respect to this Agreement shall be addressed to
Citibank, N.A., 120 Wall Street, New York, New York 10043, Attention:
Corporate Trust Department (telephone: (212) 412-6209; facsimile:
(212) 480-1613), and any communications to the Company with respect to this
Agreement shall be addressed to Paine Webber Group Inc., 1285 Avenue of the
Americas, New York, New York 10019, Attention: Secretary (telephone:
(212) 713-6277; facsimile: (212) 713-6119), and any communications to the
Determination Agent with respect to this Agreement shall be addressed to
PaineWebber Incorporated, 185 Avenue of the Americas, New York, New York
10019, Attention: John Braddock (telephone: (212) 713-3508; facsimile:
(212) 582-1650) such other address as shall be specified in writing by the
Warrant Agent, the Company or the Determination Agent, respectively).
SECTION 6.04. Notices to Holders. The Company may cause
to have notice given to the holders of Warrants by providing the Warrant
Agent with a form of notice to be distributed by (i) in the case of
Certificated Warrants, the
<PAGE> 41
36
Warrant Agent to the Warrantholders or (ii) in the case of Book-Entry
Warrants, the Depository with a form of such notice to be distributed by
the Depository to Participants in accordance with the custom and practices
of the Depository.
SECTION 6.05. Obtaining of Approvals. The Company will
from time to time take all action which may be necessary to obtain and keep
effective (a) any and all permits, consents and approvals of governmental
agencies and authorities and the AMEX or any successor national securities
exchange and (b) any and all filings or notices under United States Federal
and state securities laws, which may be or become required in connection
with the issuance, sale, trading, transfer or delivery of the Warrant
Certificates, the Global Warrant Certificate or the exercise of the
Warrants.
SECTION 6.06. Persons Having Rights Under This
Agreement. Nothing in this Agreement expressed or implied and nothing that
may be inferred from any of the provisions hereof is intended, or shall be
construed, to confer upon, or give to, any person or corporation other than
the Company, the Warrant Agent, the registered holder of the Global Warrant
Certificate and the Warrantholders any right, remedy or claim under or by
reason of this Agreement or of any covenant, condition, stipulation,
promise or agreement hereof; and all covenants, conditions, stipulations,
promises and agreements contained in this Agreement shall be for the sole
and exclusive benefit of the Company, the Warrant Agent, and their
respective successors, the registered holder of the Global Warrant
Certificate and of the Warrantholders.
SECTION 6.07. Inspection of Agreement. A copy of this
Agreement shall be available at all reasonable times at the Warrant Agent's
Office for inspection by the Warrantholders, Participants or any person
certified by any Participant to be an indirect participant of the
Depository or any person certified by any Participant to be a
Warrantholder, in each case, on behalf of whom such Participant holds
Warrants.
SECTION 6.08. Headings. The descriptive headings of the
several Articles and Sections of this Agreement are inserted for
convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.
<PAGE> 42
37
SECTION 6.09. Counterparts. This Agreement may be
executed in any number of counterparts, each of which so executed shall be
deemed to be an original; but such counterparts shall together constitute
but one and the same instrument.
SECTION 6.10. APPLICABLE LAW. THIS AGREEMENT AND EACH
WARRANT SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, this Agreement has been duly executed
by the parties hereto as of the day and year first above written.
PAINE WEBBER GROUP INC.
By
Name:
Title:
CITIBANK, N.A.
By
Name:
Title:
PAINEWEBBER INCORPORATED
By
Name:
Title:
<PAGE> 43
A-1
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
[FACE]
No. C- CUSIP No. ___________
PAINE WEBBER GROUP INC.
AMEX Hong Kong 30 Index Call Warrants
Expiring January 17, 1996
This Warrant Certificate certifies that
, or registered assigns, is the registered holder of
AMEX Hong Kong 30 Index Call Warrants
Expiring January 17, 1996 (the "Warrants"). Upon receipt by the Warrant
Agent of this Warrant Certificate and the notice of exercise on the reverse
hereof (or a notice of exercise in substantially identical form delivered
herewith), duly completed and executed, at the offices of the Warrant Agent
in the Borough of Manhattan, The City of New York, each Warrant entitles
the beneficial owner thereof (each a "Warrantholder") to receive, subject
to the conditions set forth herein and in the Warrant Agreement, from Paine
Webber Group Inc. (the "Company") the cash settlement value in U.S. dollars
(the "Cash Settlement Value") equal to the quotient (rounded down to the
nearest cent) of (A) the amount, if any, by which the closing level of the
AMEX Hong Kong 30 Index (the "Index"), as compiled and published by the
American Stock Exchange ("AMEX"), on the applicable Valuation Date for such
Warrant (the "Spot Index") exceeds ______ (the "Strike Index"), divided by
(B) three, divided by (C) a fixed Hong Kong dollar/U.S. dollar exchange rate
of H.K.$ ______ per U.S. $1.00; provided, however, that if such amount is
less than or equal to zero, then the Cash Settlement Value shall be zero.
In no event shall a Warrantholder be entitled to any interest on any Cash
Settlement Value.
Subject to the terms of the Warrant Agreement, each
Warrant may be irrevocably exercised, in whole but not in part, at or prior
to 3:00 p.m., New York City time, on any New York Business Day from its
date of issuance until 3:00 p.m., New York City time, on the earlier of (i)
the New York Business Day immediately preceding January 17, 1996 (the
"Expiration Date") and (ii) the Delisting Date (as defined herein), at
which time the Warrants shall expire and
<PAGE> 44
A-2
all Warrants evidenced hereby shall be automatically exercised and
otherwise shall be void. Except in the case of automatic exercise or
cancellation of the Warrants, as set forth herein and in the Warrant
Agreement, not fewer than 500 Warrants may be exercised by or on behalf of
any one Warrantholder at any one time.
Reference is hereby made to the further provisions
of this Warrant Certificate set forth on the reverse hereof and such
further provisions shall for all purposes have the same effect as though
fully set forth at this place.
This Warrant Certificate shall not be valid unless
countersigned by the Warrant Agent.
IN WITNESS WHEREOF, Paine Webber Group Inc. has
caused this instrument to be duly executed.
Dated: January, 1994 PAINE WEBBER GROUP INC.
By______________________
Donald B. Marron
Chairman and Chief
Executive Officer
[SEAL]
Attest:
By________________________
Theodore A. Levine
Secretary
Countersigned as of the
date above written:
CITIBANK, N.A.,
as Warrant Agent
By_________________________
Authorized Officer
<PAGE> 45
A-3
[FORM OF WARRANT CERTIFICATE]
[REVERSE]
PAINE WEBBER GROUP INC.
The Warrants evidenced by this Warrant Certificate are
part of a duly authorized issue of Warrants issued by the Company pursuant
to a Warrant Agreement, dated as of January , 1994 (the "Warrant
Agreement"), among the Company, Citibank, N.A. (the "Warrant Agent") and
PaineWebber Incorporated (the "Determination Agent") and is subject to the
terms and provisions contained in the Warrant Agreement, to all of which
terms and provisions each Warrantholder consents by acceptance of this
Warrant Certificate and which Warrant Agreement is hereby incorporated by
reference in and made a part of this Warrant Certificate. A copy of the
Warrant Agreement is on file at the Warrant Agent's Office (as defined
herein).
The Warrants constitute direct, unconditional and
unsecured obligations of the Company and rank on a parity with the
Company's other unsecured contractual obligations and with the Company's
unsecured and unsubordinated debt.
Subject to the provisions hereof and of the Warrant
Agreement, each Warrant may be irrevocably exercised, in whole but not in
part, at or prior to 3:00 p.m., New York City time, on any New York
Business Day (as defined herein) from its date of issuance until 3:00 p.m.,
New York City time, on the earlier of (i) the New York Business Day
immediately preceding the Expiration Date and (ii) the Delisting Date (as
defined herein). The holder of Warrants evidenced by this Warrant
Certificate may exercise them by surrendering this Warrant Certificate and
attached notice of exercise (or a notice of exercise in substantially
identical form), duly completed and executed, to the Warrant Agent's
offices in the Borough of Manhattan, The City of New York (the "Warrant
Agent's Office"), which are, on the date hereof, located at 111 Wall
Street, New York, New York 10043, Attention: Corporate Trust Department.
Not fewer than 500 Warrants may be exercised by or on behalf of any one
Warrantholder at any one time.
The "Cash Settlement Value" of an exercised Warrant shall
be an amount in U.S. Dollars equal to the quotient (rounded down to the
nearest cent) of (A) the amount, if any, by which the closing level of the
Index, as compiled and published by the AMEX, on the applicable Valuation
Date (as defined herein) for such Warrant (the "Spot Index") exceeds ______
(the "Strike Index"), divided by (B) three, divided by (C) a fixed Hong Kong
dollar/U.S.
<PAGE> 46
A-4
dollar exchange rate of H.K.$______ per U.S. $1.00; provided, however, that
if such amount is less than or equal to zero, then the Cash Settlement
Value shall be zero.
The Company has appointed PaineWebber Incorporated to be
its Determination Agent to make such calculations as may be required upon
the occurrence of certain circumstances, as described in the Warrant
Agreement and herein, including, without limitation, calculation of the
Cash Settlement Value under certain circumstances or the Alternative
Settlement Amount (as defined herein), as applicable, of a Warrant. The
Determination Agent shall act as an independent expert and not as an agent
of the Company, and, unless otherwise provided by the Warrant Agreement,
its calculations and determinations under the Warrant Agreement and this
Warrant Certificate shall, absent manifest error, be final and binding on
the Company, the Warrant Agent and the Warrantholders.
In the event that the Index is not publicly announced by
the AMEX on a Valuation Date, but is publicly announced by another person
or party not affiliated with the Company and acceptable to the Company (the
"Third Party"), the applicable Cash Settlement Value shall nevertheless be
calculated by reference to the value of the closing quotation for the Index
so announced by the Third Party.
In the event that prior to a Valuation Date the AMEX or
the Third Party makes a material change in the formula for or the method of
calculating the Index, the Determination Agent shall make such calculations
as may be required to determine the applicable Cash Settlement Value using
the formula and method of calculating the Index as was in effect prior to
such change or modification.
If on a Valuation Date either the AMEX or any Third Party
discontinues publication of the Index and publishes a successor or
substitute index that the Company determines, in its sole discretion, to be
comparable to the Index (any such index being a "Successor Index"), then
the Determination Agent shall determine the Spot Index for any date
thereafter based on the closing level of the Successor Index on such date.
If the AMEX and/or any Third Party discontinues publication of the Index
and/or any Successor Index, the Company will cause the Determination Agent
to determine the applicable Cash Settlement Value based on the formula and
method used in calculating the Index or any Successor Index as in effect on
the date the Index or such Successor Index was last published.
<PAGE> 47
A-5
The Determination Agent will have no responsibility for
good faith errors or omissions in calculating or disseminating information
regarding the Index, any Successor Index, adjustments or calculations by
the Determination Agent in order to arrive at a calculation of a stock
index comparable to the Index or any Successor Index, or the Cash
Settlement Value or the Alternative Settlement Amount, as applicable.
Subject to the Warrant Agreement and this Warrant
Certificate, and except in the case of exercise (whether automatic or by
notice of exercise) on the Expiration Date or the Delisting Date, or in the
event an Extraordinary Event or Exercise Limitation Event (as such terms
are defined herein) is declared, or in the case of a postponement due to
there being exercised a number of Warrants in excess of the maximum
permitted number on a given day, the valuation date (the "Valuation Date")
for a Warrant shall be the first Index Calculation Date (as defined herein)
following the applicable Exercise Date (as defined in the Warrant
Agreement) on which the Warrant Agent has received (i) in the case of
Warrants other than those held through the facilities of Centrale de
Livraison de Valeurs Mobilieres S.A. ("CEDEL") or the Euroclear System
("Euroclear"), the Warrant Certificate representing such Warrant, with the
notice of exercise below (or a notice of exercise in substantially
identical form delivered herewith), duly completed and executed, at or
prior to 3:00 p.m., New York City time (the "Notice Date"); and if the
Warrant Agent shall receive any such Warrant Certificate after 3:00 p.m.,
New York City time, on such date, then such Warrant Certificate shall be
deemed to have been received at or prior to 3:00 p.m., New York City time,
on the next succeeding New York Business Day (which shall be considered the
Notice Date), and in such event the Valuation Date shall be the next Index
Calculation Date following the New York Business Day on which the Warrant
Agent is deemed to have received such Warrant Certificate together with the
notice of exercise or (ii) in the case of Warrants held through the
facilities of CEDEL or Euroclear, the notice of exercise (by facsimile
transmission) at or prior to 3:00 p.m., New York City time; provided that
the Warrant Certificate is received by the Warrant Agent by 3:00 p.m., New
York City time, on the Index Calculation Date next succeeding the Exercise
Date; and if the Warrant Agent shall receive such notice of exercise after
3:00 p.m., New York City time, on such date, then the notice of exercise
shall be deemed to have been received at or prior to 3:00 p.m., New York
City time, on the next succeeding New York Business Day (which shall be
considered the Notice Date), and in such event the Valuation Date shall be
the next Index Calculation Date following the
<PAGE> 48
A-6
New York Business Day on which the Warrant Agent is deemed to have received
such notice of exercise; provided, however, that if the Warrant Agent
receives the Warrant Certificate after 3:00 p.m., New York City time, on
the Valuation Date, then the Exercise Date for such Warrant shall be the
day on which such Warrant Certificate is received or, if such day is not a
New York Business Day, the next succeeding New York Business Day, and the
Valuation Date for such Warrant shall be the first Index Calculation Date
following such Exercise Date; provided, further, however, in the case of
exercises by Euroclear participants, Euroclear must by tested telex to the
Warrant Agent by 9:00 a.m., New York City time, on the Valuation Date
confirm that the Warrants will be received by the Warrant Agent on such
Date, provided that if such telex communication is received after 9:00
a.m., New York City time, on the Valuation Date, the Company will be
entitled to direct the Warrant Agent to reject the related Notice of
Exercise or waive the requirement for timely delivery of such telex
communication. Any Warrant Certificate received after 3:00 p.m., New York
City time, on (i) the New York Business Day immediately preceding the
Expiration Date or (ii) the last New York Business Day prior to the
effective date on which the Warrants are delisted from, or permanently
suspended from trading (within the meaning of the Securities Exchange Act
of 1934 and the rules and regulations of the Securities and Exchange
Commission thereunder) on, the American Stock Exchange and not accepted at
the same time for listing on another United States national securities
exchange (such New York Business Day being the "Delisting Date") or, in the
case of Warrants held through the facilities of CEDEL or Euroclear, after
3:00 p.m., New York City time, on the first Index Calculation Date
following such Dates), shall be deemed not to have been delivered and the
related notice of exercise shall be void and of no effect; provided,
however, that if the Company first receives notice of the delisting or
suspension of the Warrants on the same day on which such Warrants are
delisted or suspended, such day will be deemed the Delisting Date for
purposes of the Warrant Agreement and this Warrant Certificate.
If the notice of exercise is not rejected as provided in
the Warrant Agreement, then the Warrant Agent or the Determination Agent,
as the case may be, will determine the Cash Settlement Value of the
exercised Warrants in accordance with the terms of the Warrant Agreement.
Except in the case of Warrants subject to automatic exercise and for
Warrants that upon exercise entitle the holder thereof to receive an
Alternative Settlement Amount in lieu of the Cash Settlement Value, if on
any Valuation Date the Cash Settlement Value for any Warrants then
exercised would be
<PAGE> 49
A-7
zero, then in such case, the exercise of such Warrants shall be ignored and
the Warrant Certificate evidencing such Warrants will be promptly returned
by the Warrant Agent to the registered holder of the Warrant by first class
mail at the Company's expense and such holder shall be permitted to
re-exercise such Warrants prior to the Expiration Date or the Delisting
Date.
Except in the case of Warrants subject to automatic
exercise and for Warrants that upon exercise entitle the holder thereof to
receive an Alternative Settlement Amount in lieu of the Cash Settlement
Value, payment shall be made available to the appropriate holders on the
fifth New York Business Day following the Valuation Date for such Warrants
(or, if the Valuation Date is not a New York Business Day, on the fifth New
York Business Day following the New York Business Day next succeeding the
Valuation Date) in the form of a cashier's check or an official bank check,
or (in the case of payments of at least $100,000) by wire transfer to a
U.S. dollar bank account maintained by such holder in the United States (at
the holder's election as specified in the notice of exercise), in an amount
equal to the aggregate Cash Settlement Value of the exercised Warrants.
All Warrant Certificates for which the Warrant Agent has
not received a notice of exercise in proper form by 3:00 p.m., New York
City time, on (i) the New York Business Day preceding the Expiration Date
or (ii) the Delisting Date, as the case may be, or for which the Warrant
Agent has received a notice of exercise in proper form but with respect to
which timely delivery of the relevant Warrant Certificate has not been
made, and which have not been canceled prior to such time, will be deemed
automatically exercised on such Date without any requirement of a notice of
exercise to the Warrant Agent. The Valuation Date for such Warrants shall
be the first Index Calculation Date following the Expiration Date or the
Delisting Date, as the case may be.
If the Company determines that an Extraordinary Event or
an Exercise Limitation Event has occurred and is continuing on the
Expiration Date or the Delisting Date, the Cash Settlement Value with
respect to the exercised Warrants shall be equal to, and be calculated in
the same manner as, an Alternative Settlement Amount (treating the
Expiration Date or the Delisting Date, as the case may be, as the date on
which the Warrants were canceled), as provided below and in the Warrant
Agreement.
<PAGE> 50
A-8
Payment with respect to automatically exercised Warrants
shall be made available to the appropriate registered holders of the
Warrants in the form of a cashier's check or an official bank check, or (in
the case of payments of at least $100,000) by wire transfer to a U.S.
dollar bank account maintained by such holder in the United States (at such
holder's election), on the fourth New York Business Day following the
Valuation Date for automatically exercised Warrants (or if such Valuation
Date is not a New York Business Day, on the fourth New York Business Day
following the New York Business Day next succeeding such Valuation Date),
against receipt by the Warrant Agent at the Warrant Agent's Office from the
holder of its Warrant Certificates. Such payment shall be in the amount of
the aggregate Cash Settlement Value in respect of the Warrants, evidenced
by the Warrant Certificates, that were exercised (whether automatically or
by notice of exercise) on the Expiration Date or the Delisting Date, as the
case may be.
Anything in the Warrant Agreement or in this Warrant
Certificate to the contrary notwithstanding, if the Company determines that
an Extraordinary Event or an Exercise Limitation Event has occurred and is
continuing on the Hong Kong Business Day (as defined herein) with respect
to which the Spot Index on a Valuation Date is to be determined (the
"Applicable Hong Kong Business Day") then the Cash Settlement Value of such
Warrants in respect of an exercise shall be calculated on the basis that
the Valuation Date shall be the next Index Calculation Date following an
Applicable Hong Kong Business Day on which there is no Extraordinary Event
or Exercise Limitation Event; provided, however, that if the Cash
Settlement Value of such Warrants is not calculated on or prior to the
Expiration Date or the Delisting Date, then the Warrantholders will receive
the Alternative Settlement Amount in lieu of the Cash Settlement Value
which shall be calculated as if the Warrants had been canceled on the
Expiration Date or the Delisting Date, as the case may be.
If the Company determines that an Extraordinary Event has
occurred and is continuing and if it is expected by the Company to
continue, the Company may immediately cancel the Warrants by notifying the
Warrant Agent of such cancellation (the date such Warrants are canceled
being the "Cancellation Date"), and each Warrantholder's rights with
respect to the Warrants and under the Warrant Agreement shall thereupon
cease; provided, however, that each Warrant shall be exercised (even if
such Warrant would not otherwise be exercisable on such Date because of the
Limit Option) on the basis that the Valuation Date for such Warrant shall
be the Cancellation Date and each Warrantholder shall have the
<PAGE> 51
A-9
right to receive an Alternative Settlement Amount with respect to its
Warrants. The Company shall use its best efforts to notify the
Warrantholders promptly of such cancellation.
With respect to all Warrant Certificates as to which the
Valuation Date has been postponed or which have been canceled as described
above, payment shall be made available to the appropriate registered
holders of the Warrants in the form of a cashier's check or an official
bank check, or (in the case of payments of at least $100,000) by wire
transfer to a U.S. dollar bank account maintained by such holder in the
United States (at such holder's election), on the third New York Business
Day following the date on which the Cash Settlement Value or Alternative
Settlement Amount, as the case may be, has been calculated, against receipt
by the Warrant Agent at the Warrant Agent's Office from such holder of its
Warrant Certificates. Such payment shall be in the amount of the aggregate
Cash Settlement Value or Alternative Settlement Amount, as the case may be,
in respect of the Warrants evidenced by such Warrant Certificates.
The "Alternative Settlement Amount" shall be an amount,
determined by the Determination Agent, which is equal to the amount "X"
calculated using the formula set forth below:
T x A
X = I + - -
2 B
where
I = the Cash Settlement Value of the Warrants
determined as described above, but calculated with
a Spot Index determined by the Determination Agent
which, subject to approval by the Company (such
approval not to be unreasonably withheld), in the
reasonable opinion of the Determination Agent,
fairly reflects the value of the stocks which
comprise the Index or any Successor Index on the
Cancellation Date;
T = U.S. $____, the initial offering price per Warrant;
<PAGE> 52
A-10
A = the total number of days from but excluding the
Cancellation Date for such Warrants to and
including the Expiration Date; and
B = the total number of days from but excluding the
date the Warrants were initially sold to and
including the Expiration Date.
For purposes of determining "I" in the above formula, in
the event that the Determination Agent and the Company are required, but
have not, after good faith consultation with each other and within five
days following the first day upon which such Alternative Settlement Amount
may be calculated in accordance with the above formula, agreed upon a Spot
Index which fairly reflects the value of the stocks which comprise the
Index on the Cancellation Date, then the Determination Agent shall promptly
nominate a third party, subject to approval by the Company (such approval
not to be unreasonably withheld), to determine such figure and calculate
the Alternative Settlement Amount in accordance with the above formula.
Such party shall act as an independent expert and not as an agent of the
Company or the Determination Agent, and its calculation and determination
of the Alternative Settlement Amount shall, absent manifest error, be final
and binding on the Company, the Warrant Agent, the Determination Agent and
the Warrantholders. Any such calculations will be made available to a
Warrantholder for inspection at the Warrant Agent's Office. Neither the
Company nor such third party shall have any responsibility for good faith
errors or omissions in calculating the Alternative Settlement Amount.
An "Extraordinary Event" shall mean any one of the
events, circumstances or causes listed below:
(i) a suspension or absence of trading on the Hong
Kong Stock Exchange Ltd. (the "HKSE") of all of the stocks
which then comprise the Index or a successor or substitute
index that the Company determines, in its sole discretion, to
be comparable to the Index (a "Successor Index"); or
(ii) the enactment, publication, decree or other
promulgation of any statute, regulation, rule or order of any
court or any other U.S. or non-U.S. governmental authority
which would render it unlawful for the Company to perform any
of its obligations under the Warrant Agreement or the Warrants;
or
(iii) any outbreak or escalation of hostilities or other
national or international calamity or crisis
<PAGE> 53
A-11
(including, without limitation, natural calamities which in the
opinion of the Company may materially and adversely affect the
economy of Hong Kong or the trading of securities generally on
the HKSE) which has or will have a material adverse effect on
the ability of the Company to perform its obligations under the
Warrants or to modify the hedge of its position with respect to
the Index.
An "Exercise Limitation Event" shall mean any one of the
events, circumstances or causes listed below:
(i) a suspension or absence of trading on the HKSE of
(a) 20% or more of the stocks which then comprise the Index or
a Successor Index and/or (b) the stocks of any three of the
four most highly capitalized companies included in the stocks
which then comprise the Index or a Successor Index; or
(ii) the suspension or material limitation on the Hong
Kong Futures Exchange Ltd. (the "HK Futures Exchange") or any
other major futures or securities market of trading in futures
or options contracts related to the Hang Seng Index, the Index
or a Successor Index.
All exercises of Warrants (other than on the Expiration
Date or the Delisting Date or upon cancellation of the Warrants as
described above) shall be subject, at the Company's option, to the
limitation that not more than 1,000,000 Warrants in total may be exercised
on any Exercise Date and not more than 250,000 Warrants may be exercised by
or on behalf of any person or entity, either individually or in concert
with any other person or entity, on any Exercise Date. If any New York
Business Day would otherwise, under the terms hereof, be the Exercise Date
in respect of more than 1,000,000 Warrants, then upon the Company's
exercising such option (by giving notice thereof to the Warrant Agent not
later than 5:00 p.m., New York City time, on such Exercise Date), 1,000,000
of such Warrants shall be deemed exercised on such Exercise Date (selected
by the Warrant Agent on a pro rata basis, but if, as a result of such pro
rata selection, any registered holders of the Warrants would be deemed to
have exercised less than 500 Warrants, then the Warrant Agent shall first
select additional of such holders' Warrants so that no holder shall be
deemed to have exercised less than 500 Warrants), and the remainder of such
Warrants (the "Remaining Warrants") shall be deemed exercised on the
following New York Business Day (subject to successive applications of this
paragraph); provided that any Remaining Warrant in respect of which a
notice of exercise was
<PAGE> 54
A-12
delivered on a given Notice Date shall be deemed exercised before any other
Warrants in respect of which a notice of exercise was delivered on a later
Notice Date. If any individual Warrantholder attempts to exercise more
than 250,000 Warrants on any New York Business Day, then at the Company's
election (as notified to the Warrant Agent by giving notice thereof to the
Warrant Agent not later than 5:00 p.m., New York City time, on such New
York Business Day), 250,000 of such Warrants shall be deemed exercised on
such New York Business Day and the remainder shall be deemed exercised on
the following New York Business Day (subject to successive applications of
this paragraph). The date on which any Warrant is deemed exercised under
the preceding sentences shall for all purposes of this Warrant Certificate
be deemed to be the "Exercise Date" in respect of such Warrants.
Prior to due presentment for registration of transfer,
the Company, the Warrant Agent, and any agent of the Company or the Warrant
Agent, may deem and treat the registered owner hereof as the absolute owner
of the Warrants evidenced hereby (notwithstanding any notation of ownership
or other writing hereon) for any purpose whatsoever, and as the person
entitled to exercise the rights represented by the Warrants evidenced
hereby, and neither the Company nor the Warrant Agent, nor any agent of the
Company or the Warrant Agent, shall be affected by any notice to the
contrary.
The Warrant Agent shall, in accordance with the Warrant
Agreement, from time to time register the transfer of this Warrant
Certificate upon the records to be maintained by it for that purpose at the
Warrant Agent's Office upon surrender hereof, duly endorsed, or accompanied
by a written instrument or instruments of transfer in form satisfactory to
the Warrant Agent, duly executed by the registered holder(s) hereof or by
their duly appointed legal representative or duly authorized attorney, such
signature to be guaranteed by a bank or trust company with a correspondent
office in The City of New York or by a member of a national securities
exchange. Upon any such registration of transfer, a new Warrant
Certificate shall be issued to the transferee(s).
As provided in the Warrant Agreement and subject to
certain limitations, this Warrant Certificate may be exchanged for other
Warrant Certificates, representing a like number of Warrants, upon
surrender to the Warrant Agent of this Warrant Certificate at the Warrant
Agent's Office.
<PAGE> 55
A-13
No service charge shall be made for any registration of
transfer or exchange of this Warrant Certificate, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer
or exchange of this Warrant Certificate, other than exchanges pursuant to
the Warrant Agreement not involving any transfer.
Capitalized terms included herein but not defined herein
have the meanings assigned thereto in the Warrant Agreement.
References herein to "U.S. dollars", "U.S. $" or "$" are
to the lawful currency of the United States of America, and references to
"Hong Kong dollars" or "H.K.$" are to the lawful currency of Hong Kong. As
used herein, a "New York Business Day" means any day other than a Saturday,
Sunday or a day on which either the AMEX or the New York Stock Exchange is
not open for securities trading or commercial banks in New York City are
required or authorized by law or executive order to remain closed; a "Hong
Kong Business Day" means any day other than a Saturday or a Sunday or a day
on which commercial banks in Hong Kong are not open for a full day of
business; and an "Index Calculation Date" means any day on which the Index
or any Successor Index is calculated and published.
The Warrant Agreement and the terms of the Warrants are
subject to amendment, as provided in the Warrant Agreement.
THIS WARRANT CERTIFICATE SHALL BE GOVERNED BY, AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
<PAGE> 56
A-14
NOTICE OF EXERCISE
Citibank, N.A.
Corporate Trust Department, 5th Floor
111 Wall Street
New York, New York 10043
1. This Notice [ ] DOES [ ] DOES NOT relate to
"Contingently Tendered Warrants" subject to a Limit Option, as provided for
in the Warrant Agreement. If this Notice of Exercise relates to 500 or
more Warrants and any of such Warrants are Contingently Tendered Warrants,
of such Warrants are Contingently Tendered Warrants and are not.
If the Spot Index used to determine the Cash Settlement Value of Contingently
Tendered Warrants is lower than the Reference Index by 20 points or more, a
Notice of Exercise with respect to such Contingently Tendered Warrants
shall be void and of no effect (and shall be disregarded for all purposes
of the Warrant Agreement).
2. Subject to paragraph 1, the undersigned (the "Owner")
hereby irrevocably exercises Warrants (the "Exercised
Warrants") and delivers to you herewith a Warrant Certificate or
Certificates, registered in the Owner's name, representing a number of
Warrants at least equal to the number of Exercised Warrants. Each
beneficial owner of Warrants that is exercising Warrants pursuant to this
Notice of Exercise is exercising no fewer than 500 Warrants.
3. The Owner hereby directs the Warrant Agent (a) to pay
the Cash Settlement Value, if any, with respect to the Exercised Warrants:
[ ] By cashier's check or an official bank
check;
or
[ ] By wire transfer to the following U.S.
dollar bank account in the United
States:
(Minimum payments of $100,000 only)
Bank: __________________________________
<PAGE> 57
A-15
ABA Routing No.:___________________________
Account No.:__________ Reference:__________
;and (b) if the number of Exercised Warrants is less than the number of
Warrants represented by the enclosed Warrant Certificate, to deliver a
Warrant Certificate representing the unexercised Warrants to .
Dated: , 19
_____________________________
(Owner)
by
_________________________
Authorized Signature
Address:
Telephone: ( )
<PAGE> 58
A-1-1
EXHIBIT A-1
[FORM OF GLOBAL WARRANT CERTIFICATE]
No. GC___________________ CUSIP No. ___________
PAINE WEBBER GROUP INC.
Global Warrant Certificate Representing
AMEX Hong Kong 30 Index Call Warrants
Expiring January 17, 1996
This certifies that CEDE & CO., or registered assigns, is
the registered holder of AMEX Hong Kong 30 Index Call
Warrants Expiring January 17, 1996 (the "Warrants"). Each Warrant entitles
the beneficial owner thereof (each a "Warrantholder") to receive, subject
to the conditions set forth herein and in the Warrant Agreement, from Paine
Webber Group Inc. (the "Company") the cash settlement value in U.S. dollars
(the "Cash Settlement Value") equal to the quotient (rounded down to the
nearest cent) of (A) the amount, if any, by which the closing level of the
AMEX Hong Kong 30 Index (the "Index"), as compiled and published by the
American Stock Exchange (the "AMEX"), on the applicable Valuation Date for
such Warrant (the "Spot Index") exceeds ______ (the "Strike Index"),
divided by (B) three, divided by (C) a fixed Hong Kong dollar/U.S. dollar
exchange rate of H.K.$______ per U.S. $1.00; provided, however, that if
such amount is less than or equal to zero, then the Cash Settlement Value
shall be zero. In no event shall a Warrantholder be entitled to any
interest on any Cash Settlement Value.
Subject to the terms of the Warrant Agreement, each
Warrant may be irrevocably exercised, in whole but not in part, at or prior
to 3:00 p.m., New York City time, on any New York Business Day (as defined
herein) from its date of issuance until 3:00 p.m., New York City time, on
the earlier of (i) the New York Business Day immediately preceding
January 17, 1996 (the "Expiration Date") and (ii) the Delisting Date (as
defined herein), at which time the Warrants shall expire and all Warrants
evidenced hereby shall be automatically exercised and otherwise shall be void.
The holder of Warrants evidenced by this Warrant Certificate may exercise them
only upon the delivery of such Warrant free to the Warrant Account (as
defined in the Warrant Agreement) and pursuant to an irrevocable Notice of
Exercise to the Warrant Agent from a Participant (as defined in the Warrant
Agreement) acting on behalf of such Warrantholder. Except in the case of
automatic exercise or
<PAGE> 59
A-1-2
cancellation of the Warrants, as set forth herein and in the Warrant
Agreement, not fewer than 500 Warrants may be exercised by or on behalf of
any one Warrantholder at any one time.
This Global Warrant Certificate shall not be valid unless
countersigned by the Warrant Agent.
The Warrants evidenced by this Global Warrant Certificate
are part of a duly authorized issue of Warrants issued by the Company
pursuant to a Warrant Agreement, dated as of January , 1994 (the "Warrant
Agreement"), among the Company, Citibank, N.A. (the "Warrant Agent"), and
PaineWebber Incorporated (the "Determination Agent"), and is subject to the
terms and provisions contained in the Warrant Agreement, to all of which
terms and provisions the Warrantholders, the entities through which such
Warrantholders hold their beneficial interests in the Warrants and the
registered holder of this Global Warrant Certificate consent by acceptance
of this Warrant Certificate by the Depository and which Warrant Agreement
is hereby incorporated by reference in and made a part of this Warrant
Certificate. A copy of the Warrant Agreement is on file at the Warrant
Agent's Office, which is located at 111 Wall Street, 5th Floor, New York,
New York 10043.
The Warrants constitute direct, unconditional and
unsecured obligations of the Company and rank on a parity with the
Company's other unsecured contractual obligations and with the Company's
unsecured and unsubordinated debt.
Subject to the Warrant Agreement and this Global Warrant
Certificate, and except in the case of exercise (whether automatic or by
notice of exercise), on the Expiration Date or the Delisting Date, or in
the event an Extraordinary Event or Exercise Limitation Event (as such
terms are defined in the Warrant Agreement) is declared, or in the case of
a postponement due to there being exercised a number of Warrants in excess
of the maximum permitted number on a given day, the valuation date (the
"Valuation Date") for a Warrant shall be the Index Calculation Date (as
defined herein) following the Exercise Date (as defined in the Warrant
Agreement) on which the Warrant Agent has received (i) in the case of
Warrants other than those held through the facilities of Centrale de
Livraison de Valeurs Mobilieres S.A. ("CEDEL") or the Euroclear System
("Euroclear"), the Warrant, with the Notice of Exercise (as defined in the
Warrant Agreement) (or a Notice of Exercise in substantially identical form
delivered herewith), duly completed and executed, at or prior to 3:00 p.m.,
New York City time (the "Notice Date"); and if the Warrant Agent
<PAGE> 60
A-1-3
shall receive any such Warrant after 3:00 p.m., New York City time, on such
date, then such Warrant shall be deemed to have been received at or prior
to 3:00 p.m., New York City time, on the next succeeding New York Business
Day (which shall be considered the Notice Date), and in such event the
Valuation Date shall be the next Index Calculation Date following the New
York Business Day on which the Warrant Agent is deemed to have received
such Warrant together with the Notice of Exercise or (ii) in the case of
Warrants held through the facilities of CEDEL or Euroclear, the notice of
exercise (by facsimile transmission) at or prior to 3:00 p.m., New York
City time; provided that the Warrant is received by the Warrant Agent by
3:00 p.m., New York City time, on the Index Calculation Date next
succeeding the Exercise Date; and if the Warrant Agent shall receive such
notice of exercise after 3:00 p.m., New York City time, on such date, then
the notice of exercise shall be deemed to have been received at or prior to
3:00 p.m., New York City time, on the next succeeding New York Business Day
(which shall be considered the Notice Date), and in such event the
Valuation Date shall be the next Index Calculation Date following the New
York Business Day on which the Warrant Agent is deemed to have received
such notice of exercise; provided, however, that if the Warrant Agent
receives the Warrant after 3:00 p.m., New York City time, on the Valuation
Date, then the Exercise Date for such Warrant shall be the day on which
such Warrant is received or, if such day is not a New York Business Day,
the next succeeding New York Business Day, and the Valuation Date for such
Warrant shall be the first Index Calculation Date following such Exercise
Date; provided, further, however, in the case of exercises by Euroclear
participants, Euroclear must by tested telex to the Warrant Agent by 9:00
a.m., New York City time, on the Valuation Date confirm that the Warrants
will be received by the Warrant Agent on such Date, provided that if such
telex communication is received after 9:00 a.m., New York City time, on the
Valuation Date, the Company will be entitled to direct the Warrant Agent to
reject the related Notice of Exercise or waive the requirement for timely
delivery of such telex communication. Any Warrant received after 3:00
p.m., New York City time, on (i) the New York Business Day immediately
preceding the Expiration Date or (ii) the last New York Business Day prior
to the effective date on which the Warrants are delisted from, or
permanently suspended from trading (within the meaning of the Securities
Exchange Act of 1934 and the rules and regulations of the Securities and
Exchange Commission thereunder) on, the American Stock Exchange and not
accepted at the same time for listing on another United States national
securities exchange (such New York Business Day being the "Delisting Date")
(or, in the case of Warrants
<PAGE> 61
A-1-4
held through the facilities of CEDEL or Euroclear, after 3:00 p.m., New
York City time, on the first Index Calculation Date following such Dates),
shall be deemed not to have been delivered and the related Notice of
Exercise shall be void and of no effect; provided, however, that if the
Company first receives notice of the delisting or suspension of the
Warrants on the same day on which such Warrants are delisted or suspended,
such day will be deemed the Delisting Date for purposes of the Warrant
Agreement and this Global Warrant Certificate.
All Warrants for which the Warrant Agent has not received
a Notice of Exercise in proper form by 3:00 p.m., New York City time, on
(i) the New York Business Day preceding the Expiration Date or (ii) the
Delisting Date, as the case may be, or for which the Warrant Agent has
received a notice of exercise in proper form but with respect to which
timely delivery of the related Warrant has not been made, and which have
not been canceled prior to such time, will be deemed automatically
exercised on such Date without any requirement of a Notice of Exercise to
the Warrant Agent. The Valuation Date for such Warrants shall be the first
Index Calculation Date following the Expiration Date or the Delisting Date,
as the case may be.
If the Company determines that an Extraordinary Event or
an Exercise Limitation Event has occurred and is continuing on the
Expiration Date or the Delisting Date, the Cash Settlement Value with
respect to the exercised Warrants shall be equal to, and be calculated in
the same manner as, an Alternative Settlement Amount (treating the
Expiration Date or the Delisting Date, as the case may be, as the date on
which the Warrants were canceled), as provided below and in the Warrant
Agreement.
Anything in the Warrant Agreement or in this Global
Warrant Certificate to the contrary notwithstanding, if the Company
determines that an Extraordinary Event or an Exercise Limitation Event has
occurred and is continuing on the Hong Kong Business Day (as defined
herein) with respect to which the Spot Index on a Valuation Date is to be
determined (the "Applicable Hong Kong Business Day"), then the Cash
Settlement Value of such Warrants in respect of an exercise shall be
calculated on the basis that the Valuation Date shall be the next Index
Calculation Date following an Applicable Hong Kong Business Day on which
there is no Extraordinary Event or Exercise Limitation Event; provided,
however, that if the Cash Settlement Value of such Warrants is not
calculated on or prior to the Expiration Date or the Delisting Date, then
the Warrantholders will receive the Alternative Settlement Amount in lieu
of the Cash Settlement
<PAGE> 62
A-1-5
Value which shall be calculated as if the Warrants had been canceled on the
Expiration Date or the Delisting Date, as the case may be.
If the Company determines that an Extraordinary Event has
occurred and is continuing and if it is expected by the Company to
continue, the Company may immediately cancel the Warrants by notifying the
Warrant Agent of such cancellation (the date such Warrants are canceled
being the "Cancellation Date"), and each Warrantholder's rights with
respect to the Warrants and under the Warrant Agreement shall thereupon
cease; provided, however, that each Warrant shall be exercised (even if
such Warrant would not otherwise be exercisable on such Date because of the
Limit Option) on the basis that the Valuation Date for such Warrant shall
be the Cancellation Date and each Warrantholder shall have the right to
receive an Alternative Settlement Amount with respect to its Warrants. The
Company shall use its best efforts to notify the Warrantholders promptly of
such cancellation.
All exercises of Warrants (other than on the Expiration
Date or the Delisting Date or upon cancellation of the Warrants as
described above) shall be subject, at the Company's option, to the
limitation that not more than 1,000,000 Warrants in total may be exercised
on any Exercise Date and not more than 250,000 Warrants may be exercised by
or on behalf of any person or entity, either individually or in concert
with any other person or entity, on any Exercise Date. If any New York
Business Day would otherwise, under the terms hereof, be the Exercise Date
in respect of more than 1,000,000 Warrants, then upon the Company's
exercising such option (by giving notice thereof to the Warrant Agent not
later than 5:00 p.m., New York City time, on such Exercise Date), 1,000,000
of such Warrants shall be deemed exercised on such Exercise Date (selected
by the Warrant Agent on a pro rata basis, but if, as a result of such pro
rata selection, any Warrantholders would be deemed to have exercised less
than 500 Warrants, then the Warrant Agent shall first select additional of
such holders' Warrants so that no holder shall be deemed to have exercised
less than 500 Warrants), and the remainder of such Warrants (the "Remaining
Warrants") shall be deemed exercised on the following New York Business Day
(subject to successive applications of this paragraph); provided that any
Remaining Warrant in respect of which notice of exercise was delivered on a
given Notice Date shall be deemed exercised before any other Warrants in
respect of which a notice of exercise was delivered on a later Notice Date.
If any individual Warrantholder attempts to exercise more than 250,000
Warrants on any New York Business Day, then at the Company's
<PAGE> 63
A-1-6
election (as notified to the Warrant Agent by giving notice thereof to the
Warrant Agent not later than 5:00 p.m., New York City time, on such New
York Business Day) 250,000 of such Warrants shall be deemed exercised on
such New York Business Day and the remainder shall be deemed exercised on
the following New York Business Day (subject to successive applications of
this paragraph). The date on which any Warrant is deemed exercised under
the preceding sentences shall for all purposes of this Global Warrant
Certificate be deemed to be the "Exercise Date" in respect of such
Warrants.
Prior to due presentment for registration of transfer,
the Company, the Warrant Agent, and any agent of the Company or the Warrant
Agent, may deem and treat the registered owner hereof as the absolute owner
of the Warrants evidenced hereby (notwithstanding any notation of ownership
or other writing hereon) for any purpose whatsoever, and as the person
entitled to exercise the rights represented by the Warrants evidenced
hereby, and neither the Company nor the Warrant Agent, nor any agent of the
Company or the Warrant Agent, shall be affected by any notice to the
contrary.
The Warrant Agent shall, in accordance with the Warrant
Agreement, from time to time register the transfer of this Global Warrant
Certificate in its records (which may be maintained electronically) to be
maintained by it for that purpose at the Warrant Agent's Office upon
surrender hereof, duly endorsed, or accompanied by a written instrument or
instruments of transfer in form satisfactory to the Warrant Agent, duly
executed by the registered holder hereof or by the duly appointed legal
representative or duly authorized attorney thereof, such signature to be
guaranteed by a bank or trust company with a correspondent office in The
City of New York or by a member of a national securities exchange. Upon
any such registration of transfer, a new Global Warrant Certificate shall
be issued to the transferee(s).
Exercises of Warrants are subject to the Limit Option as
provided in the Warrant Agreement.
Capitalized terms included herein but not defined herein
have the meanings assigned thereto in the Warrant Agreement.
References herein to "U.S. dollars", "U.S.$" or "$" are
to the lawful currency of the United States of America, and references to
"Hong Kong dollars" or "H.K.$" are to the lawful currency of Hong Kong. As
used herein, a
<PAGE> 64
A-1-7
"New York Business Day" means any day other than a Saturday, Sunday or a
day on which either the AMEX or the New York Stock Exchange is not open for
securities trading or commercial banks in New York City are required or
authorized by law or executive order to remain closed; a "Hong Kong
Business Day" means any day other than a Saturday or a Sunday or a day on
which commercial banks in Hong Kong are not open for a full day of
business; and an "Index Calculation Date" means any day on which the AMEX
Index or any Successor Index is calculated and published.
The Warrant Agreement and the terms of the Warrants are
subject to amendment, as provided in the Warrant Agreement.
<PAGE> 65
A-1-8
THIS GLOBAL WARRANT CERTIFICATE SHALL BE GOVERNED BY, AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, Paine Webber Group Inc. has caused
this instrument to be duly executed.
Dated: , 1994 PAINE WEBBER GROUP INC.
By_________________________
Name:
Title:
[Corporate Seal]
Attest:
By__________________________
Assistant Secretary
Countersigned as of the
date above written:
CITIBANK, N.A.,
as Warrant Agent
By__________________________
Authorized Officer
<PAGE> 66
A-2-1
EXHIBIT A-2
NOTICE OF EXERCISE
[For Warrants Represented by the Global Warrant Certificate]
Citibank, N.A.
[c/o Citicorp Data Distribution Inc.
404 Sette Drive
Paramus, New Jersey 07652
(Facsimile: (201) 262-7521)
(Telephone: (201) 262-5444)]
1. We refer to the Warrant Agreement dated as of
January , 1994 (the "Warrant Agreement"), among Paine Webber Group Inc.
(the "Company"), Citibank, N.A., as warrant agent (the "Warrant Agent"),
and PaineWebber Incorporated, as determination agent (the "Determination
Agent"). On behalf of certain beneficial owners, each of whom is
exercising no fewer than 500 Warrants that are covered by this Notice of
Exercise and whose Warrants have been, or will be, transferred to the
Warrant Agent's DTC Participant Account--Citibank, N.A. Corporate Trust
Warrant Agent Account, No. 2659 (the "Warrant Account"), we hereby
irrevocably exercise Warrants (the "Tendered Warrants"). We
hereby acknowledge that the Warrants being exercised and this Notice of
Exercise must be received by you by 3:00 p.m., New York City time, on a New
York Business Day in order for the Valuation Date for the Tendered Warrants
to be the Index Calculation Date following such New York Business Day and
that, if the Warrants being exercised and this Notice of Exercise are
received by you after 3:00 p.m., New York City time, on a New York Business
Day (or, in the case of Warrants held through CEDEL or Euroclear, if the
Warrants are not received by 3:00 p.m., New York City time, on the first
Index Calculation Date following such New York Business Day), the Valuation
Date of the Tendered Warrants shall be the next Index Calculation Date next
succeeding such New York Business Day, in each case subject to certain
provisions of the Warrant Agreement.
2. If you determine that this Notice of Exercise has not
been duly completed or is not in proper form, this Notice of Exercise will
be void and of no effect and will be deemed not to have been delivered.
<PAGE> 67
A-2-2
3. We hereby direct you to make payment to us of amounts
payable to our clients as a result of the exercise of the Warrants
hereunder as follows:
[ ] By cashier's check or an official bank
check;
or
[ ] By wire transfer to the following U.S.
dollar bank account in the United
States:
(Minimum payments of $100,000 only)
Bank: _________________________________
Account No.: __________________________
ABA Routing No.: ______________________
Reference: ____________________________
4. The Exercised Warrants covered hereby [are] [are not]
subject to the Limit Option.1/
5. Each client on whose behalf we are exercising
Warrants pursuant to this Notice of Exercise has certified to us that it is
not exercising in excess of 250,000 Warrants on behalf of any single person
or entity.
[For Participants] [6. We hereby certify that we are a
Participant of The Depository Trust Company (the Depository") with the
present right to use and receive its services.]
1/ Separate Notice of Exercise shall be submitted with respect to
Warrants subject to the Limit Option and Warrants not subject to the Limit
Option.
<PAGE> 68
A-2-3
Capitalized terms used but not defined herein have the
meanings assigned thereto in the Warrant Agreement.
Dated: , 19
[NAME OF DEPOSITORY
PARTICIPANT]
[Participant Number]
[NAME OF EUROCLEAR
PARTICIPANT]
[Centrale de Livraison de
Valeurs Mobilieres S.A.]
By________________________
Authorized Signature
Address:
Telephone: ( )
<PAGE> 69
B-1
EXHIBIT B
CONFIRMATION OF EXERCISE
[For Warrants Represented by Warrant Certificates]
We hereby confirm receipt of your Notice of Exercise with
respect to Warrants (the "Exercised Warrants") and the
related Warrant Certificates, which we have found to be duly completed and
in proper form. The Valuation Date of the Exercised Warrants was the close
of business on ____________, 19__.
We hereby confirm that the aggregate Cash Settlement
Value of the Exercised Warrants is $ ($ per Warrant),
which will be made available to you [in the form of a cashiers check or an
official bank check] [by wire transfer to the bank account designated in
your Irrevocable Notice of Exercise], in New York Clearing House funds, for
payment on the fifth New York Business Day following the Valuation Date for
such Warrants (or, if such Valuation Date is not a New York Business Day,
on the fifth New York Business Day following the New York Business Day next
succeeding the Valuation Date for such Warrants).
Capitalized terms included herein but not defined have
the meanings assigned thereto in the Warrant Agreement, dated as of
January , 1994, among Paine Webber Group Inc., Citibank, N.A., and
PaineWebber Incorporated.
Dated: , 19
CITIBANK, N.A., as Warrant
Agent,
By_______________________
Authorized Signature
<PAGE> 70
B-2
NOTICE OF REJECTION
You are hereby notified that [the Notice of Exercise
delivered by you was determined by us not to have been [duly completed] [in
proper form]] [we did not receive from Euroclear a Euroclear Confirmation
that proper delivery of the Warrants to which the Notice of Exercise
delivered by you relates would be made on a timely basis], as set forth in
the Warrant Agreement, dated as of January , 1994, among Paine Webber
Group Inc., Citibank, N.A., and PaineWebber Incorporated. Accordingly, we
have rejected your Notice of Exercise [as being unsatisfactory as to form].
Capitalized terms used but not defined herein have the
meanings assigned thereto in the Warrant Agreement.
Dated: , 19
CITIBANK, N.A., as Warrant
Agent,
By__________________________
Authorized Signature
<PAGE> 71
B-1-1
EXHIBIT B-1
CONFIRMATION OF EXERCISE
[For Warrants Represented by the Global Warrant Certificate]
[Name of Depository Participant]
[Name of Euroclear Participant]
[Centrale de Livraison de Valeurs
Mobilieres S.A.]
[Address]
We hereby confirm receipt of your Notice of Exercise with
respect to Warrants (the "Exercised Warrants") which
were transferred by you (or on your behalf) to our DTC Participant Account
No. [ ]. Such Notice we have found to be duly completed and in proper
form. The Valuation Date of the Exercised Warrants was the close of
business on ______________, 19__.
[As set forth in your Notice of Exercise, none of the
Warrants covered thereby is subject to the Limit Option. Accordingly, for
purposes hereof, all such Warrants shall constitute Exercised Warrants,
which number we hereby confirm to be .] [Your Notice of
Exercise stated that the Warrants covered thereby are subject to the Limit
Option. The applicable Reference Index for such Warrants is
and the Spot Index for the date that would otherwise be the Valuation Date
for such Warrants is . Such Spot Index does is not lower than such
Reference Index by 20 or more points. Accordingly, for purposes hereof,
all such Warrants shall constitute Exercised Warrants. We hereby confirm
the number of such Exercised Warrants to be .]
We hereby confirm that the aggregate Cash Settlement
Value of the Exercised Warrants is $ ($ per Warrant),
which will be made available to you [in the form of a cashiers check or an
official bank check] [by wire transfer to the bank account designated in
your Irrevocable Notice of Exercise], in New York Clearing House funds, for
payment on the sixth New York Business Day following the Valuation Date for
such Warrants (or, if such Valuation Date is not a New York Business Day,
on the sixth New York Business Day following the New York Business Day next
succeeding the Valuation Date for such Warrants).
<PAGE> 72
B-1-2
Capitalized terms included herein but not defined have
the meanings assigned thereto in the Warrant Agreement dated as of January
, 1994, among Paine Webber Group Inc., Citibank, N.A., as Warrant Agent,
and PaineWebber Incorporated, as Determination Agent.
Dated: , 19
CITIBANK, N.A., as Warrant
Agent,
By________________________
Authorized Signature
<PAGE> 73
B-1-3
NOTICE OF REJECTION
[Name of Depository Participant]
[Name of Euroclear Participant]
[Centrale de Livraison de Valeurs
Mobilieres S.A.]
[Address]
You are hereby notified that [the Notice of Exercise
delivered by you was determined by us not to have been [duly completed] [in
proper form]], [such Warrants were not transferred to our DTC Participant
Account No. [ ] [we did not receive from Euroclear a Euroclear
Confirmation that proper delivery of the Warrants to which the Notice of
Exercise delivered by you relates would be made on a timely basis], as set
forth in the Warrant Agreement, dated as of January , 1994, among Paine
Webber Group Inc., Citibank, N.A., and PaineWebber Incorporated.
Accordingly, we have rejected your Notice of Exercise as being
unsatisfactory as to form.
Capitalized terms used but not defined herein have the
meanings assigned thereto in the Warrant Agreement.
Dated: , 19
CITIBANK, N.A., as Warrant
Agent,
By______________________
Authorized Signature
<PAGE> 74
C-1-1
EXHIBIT C-1
NOTICE OF REJECTION
RELATING TO LIMIT OPTION
[For Warrants Represented
by Warrant Certificates]
We refer to your Notice of Exercise dated
, 19 , with respect to Warrants that were subject to
the Limit Option. The applicable Reference Index for such Warrants is
and the Spot Index for the date that would otherwise be the
Valuation Date for such Warrants is . Such Spot Index is lower
than the Reference Index on the Exercise Date (or if such date was not an
Index Calculation Date, on the Index Calculation Date prior to the Exercise
Date for such Warrants) by 20 points or more. Accordingly, we have rejected
such Notice of Exercise pursuant to the Limit Option.
Capitalized terms included herein but not defined have
the meanings assigned thereto in the Warrant Agreement dated as of January
, 1994, among Paine Webber Group Inc., Citibank, N.A., and PaineWebber
Incorporated.
Dated: , 19
CITIBANK, N.A., as Warrant
Agent,
By_______________________
Authorized Signature
<PAGE> 75
C-2-1
EXHIBIT C-2
NOTICE OF REJECTION
RELATING TO LIMIT OPTION
[For Warrants Represented
by the Global Warrant Certificate]
[Name of Depository Participant]
[Name of Euroclear Participant]
[Centrale de Livraison de Valeurs
Mobilieres S.A.]
[Address]
We refer to your Notice of Exercise dated
, 19 , with respect to Warrants that were subject to
the Limit Option. The applicable Reference Index for such Warrants is
and the Spot Index for the date that would otherwise be the Valuation Date for
such Warrants is . Such Spot Index is lower than the
Reference Index on the Exercise Date (or if such date was not an Index
Calculation Date, on the Index Calculation Date prior to the Exercise Date
for such Warrants) by 20 points or more. Accordingly, we have rejected
such Notice of Exercise pursuant to the Limit Option.
Capitalized terms included herein but not defined have
the meanings assigned thereto in the Warrant Agreement dated as of January
, 1994, among Paine Webber Group Inc., Citibank, N.A., and PaineWebber
Incorporated.
Dated: , 19
CITIBANK, N.A., as Warrant Agent,
By_______________________
Authorized Signature
<PAGE> 1
EXHIBIT 4
PAINE WEBBER GROUP INC.
and
CITIBANK, N.A., Warrant Agent
and
PAINEWEBBER INCORPORATED, Determination Agent
WARRANT AGREEMENT
dated as of January __, 1994
AMEX Hong Kong 30 Index Put Warrants
Expiring January 17, 1996
<PAGE> 2
i
TABLE OF CONTENTS1/
Page
PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
ISSUANCE OF WARRANTS AND FORM,
EXECUTION, DELIVERY AND REGISTRATION
OF WARRANT CERTIFICATES AND
GLOBAL WARRANT CERTIFICATE
SECTION 1.01. Issuance of Warrants . . . . . . . . . . . 1
SECTION 1.02. Form, Execution and Delivery of
Warrant Certificates . . . . . . . . . . 3
SECTION 1.03. Warrant Certificates . . . . . . . . . . . 3
SECTION 1.04. Registration of Transfers and
Exchanges . . . . . . . . . . . . . . . . 4
SECTION 1.05. Mutilated or Missing Warrant
Certificates . . . . . . . . . . . . . . 5
SECTION 1.06. Registered Holders . . . . . . . . . . . . 6
SECTION 1.07. Global Warrant Certificate . . . . . . . . 6
ARTICLE II
DURATION AND EXERCISE OF WARRANTS
SECTION 2.01. Duration of Warrants; Minimum
Exercise Amounts; Notice
of Exercise . . . . . . . . . . . . . . . 9
SECTION 2.02. Exercise and Delivery of
Warrants . . . . . . . . . . . . . . . . 10
1/ The Table of Contents is not a part of the Warrant
Agreement.
<PAGE> 3
ii
SECTION 2.03. Automatic Exercise of Warrants;
Exercise upon an Extraordinary Event
or Exercise Limitation Event . . . . . . 21
SECTION 2.04. Limitation of Number of Exercisable
Warrants . . . . . . . . . . . . . . . . 28
SECTION 2.05. Covenant of the Company . . . . . . . . . . 29
SECTION 2.06. Return of Money Held Unclaimed for
Two Years . . . . . . . . . . . . . . . . 29
SECTION 2.07. Return of Global Warrant
Certificate . . . . . . . . . . . . . . . 29
ARTICLE III
OTHER PROVISIONS RELATING TO
RIGHTS OF WARRANTHOLDERS
SECTION 3.01. Warrantholder of Warrant May Enforce
Rights . . . . . . . . . . . . . . . . . 30
ARTICLE IV
WARRANTS ACQUIRED BY THE COMPANY;
PAYMENT OF TAXES
SECTION 4.01. Warrants Acquired by the Company . . . . . 30
SECTION 4.02. Payment of Taxes . . . . . . . . . . . . . 30
ARTICLE V
CONCERNING THE WARRANT AGENT
SECTION 5.01. Warrant Agent . . . . . . . . . . . . . . . 31
SECTION 5.02. Conditions of Warrant Agent's
Obligations . . . . . . . . . . . . . . . 31
SECTION 5.03. Resignation and Appointment of
Successor . . . . . . . . . . . . . . . . 33
<PAGE> 4
iii
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. Amendment . . . . . . . . . . . . . . . . . 35
SECTION 6.02. Notices and Demands to the Company,
the Warrant Agent and the
Determination Agent . . . . . . . . . . . 36
SECTION 6.03. Addresses for Notices . . . . . . . . . . . 36
SECTION 6.04. Notices to Holders . . . . . . . . . . . . 36
SECTION 6.05 Obtaining Approvals . . . . . . . . . . . . 36
SECTION 6.06. Persons Having Rights Under This
Agreement . . . . . . . . . . . . . . . . 37
SECTION 6.07. Inspection of Agreement . . . . . . . . . . 37
SECTION 6.08. Headings . . . . . . . . . . . . . . . . . 37
SECTION 6.09. Counterparts . . . . . . . . . . . . . . . 37
SECTION 6.10. APPLICABLE LAW . . . . . . . . . . . . . . 37
TESTIMONIUM . . . . . . . . . . . . . . . . . . . . . . . . 38
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . 38
EXHIBIT A - Form of Warrant Certificate
EXHIBIT A-1 - Form of Global Warrant Certificate
EXHIBIT A-2 - Notice of Exercise
[For Warrants Represented by the Global
Warrant Certificate]
EXHIBIT B - Confirmation of Exercise and Notice
of Rejection [For Warrants Represented
by Warrant Certificates]
EXHIBIT B-1 - Confirmation of Exercise and Notice of
Rejection [For Warrants Represented by the
Global Warrant Certificate]
<PAGE> 5
iv
EXHIBIT C-1 - Notice of Rejection Relating to Limit Option
[For Warrants Represented by Warrant
Certificates]
EXHIBIT C-2 - Notice of Rejection Relating to Limit Option
[For Warrants Represented by the Global
Warrant Certificate]
<PAGE> 6
1
WARRANT AGREEMENT
THIS AGREEMENT, dated as of January __, 1994,
among PAINE WEBBER GROUP INC., a corporation organized and
existing under the laws of the State of Delaware (the "Com-
pany"), CITIBANK, N.A., a national banking association
organized and existing under the laws of the United States of
America (the "Warrant Agent"), and PAINEWEBBER INCORPORATED, a
corporation organized and existing under the laws of the State
of Delaware (the "Determination Agent").
WHEREAS the Company proposes to sell put
warrants (the "Warrants" or, individually, a "Warrant")
representing the right to receive from the Company the amount,
if any, in U.S. dollars determined by reference to decreases
in the Index (as defined herein) on the terms and conditions
set forth in this Agreement; and
WHEREAS the Company desires the Warrant Agent
to act on behalf of the Company, and the Warrant Agent is
willing so to act, in connection with the issuance, transfer
and exercise of the Warrants, and the Company desires to set
forth herein, among other things, the provisions of the
Warrants and the terms and conditions on which they may be
issued, transferred, exercised and canceled;
NOW, THEREFORE, the parties hereto agree as
follows:
ARTICLE I
ISSUANCE OF WARRANTS AND FORM,
EXECUTION, DELIVERY AND REGISTRATION
OF WARRANT CERTIFICATES AND
GLOBAL WARRANT CERTIFICATE
SECTION 1.01. Issuance of Warrants. (a) The
Warrants will constitute direct, unconditional and unsecured
obligations of the Company and will rank on a parity with the
Company's other unsecured contractual obligations and with the
Company's unsecured and unsubordinated debt.
(b) Each Warrant shall represent the right,
subject to the provisions contained herein, to receive the
Cash Settlement Value or the Alternative Settlement Amount, as
the case may be (each as defined herein), of such Warrant. In
no event shall a registered or beneficial holder of a Warrant
(each a "Warrantholder") be entitled to receive any interest
on any Cash Settlement Value or Alternative Settlement Amount.
<PAGE> 7
2
(c) Forty-five calendar days after January __,
1994, each Warrantholder will have the option to convert the
form in which such Warrantholder holds his Warrants from
definitive to book-entry form (the "Conversion Option"). The
Conversion Option will be available for forty-five calendar
days from 1994 through , 1994 (the
"Conversion Option Period"). To utilize the Conversion Option
a Warrantholder must deliver or arrange to deliver his
Warrants to an entity (a "Participant") entitled to execute,
clear and settle transactions through the Depository (as
defined herein) through which such Warrantholder's beneficial
interest after electing the Conversion Option will be
maintained, who will then deposit the Warrants with the
Depository or its nominee. Once a Warrantholder has elected
the Conversion Option such Warrantholder may hold his Warrants
only in book-entry form and will not be able to change his
election or withdraw from the book-entry system during the
Conversion Option Period or thereafter. Accordingly, except
as hereinafter provided, ownership of the Warrants in
certificated form will no longer be available to
Warrantholders who have elected the Conversion Option and
ownership of the Warrants surrendered under the Conversion
Option will be represented by a single certificate (the
"Global Warrant Certificate"); provided, however, that if the
Depository is at any time unwilling or unable to continue as
securities depository for the Warrants and a successor
Depository is not appointed by the Company within 90 days, the
Company will reissue Warrant Certificates in exchange for the
Global Warrant Certificate. In addition, the Company may at
any time determine not to have the Warrants represented by a
Global Warrant Certificate and, in such event, will issue
Warrant Certificates in exchange for the Global Warrant
Certificate. In either instance, and in accordance with the
provisions of this Agreement, each Warrantholder will be
entitled to have a number of Warrants equivalent to such
Warrantholder's beneficial interest in the Global Warrant
Certificate registered in the name of the Warrantholder and
will be entitled to physical delivery of such Warrants in
definitive form by a Participant. The provisions of Section
1.07 shall apply only if and when the Conversion Option is
utilized and a Global Warrant Certificate is issued hereunder.
Unless the context shall otherwise require, and subject to the
provisions of Section 1.07, all references in this Agreement
to the Warrant Certificates (other than in Sections 1.02,
1.03, 1.04, 1.05, 1.06 and 1.07) shall include the Global
Warrant Certificate in the event that the Global Warrant
Certificate is issued.
SECTION 1.02. Form, Execution and Delivery of
Warrant Certificates. (a) The Warrants, whenever issued,
<PAGE> 8
3
shall be represented by certificates in registered form
substantially in the form set forth in Exhibit A hereto (the
"Warrant Certificates"), with such appropriate insertions,
omissions, substitutions and other variations as are required
or permitted by this Agreement, and may represent any number
of whole Warrants. The Warrant Certificates may have
imprinted or otherwise reproduced thereon such letters,
numbers or other marks of identification or designation and
such legends or endorsements as the officers of the Company
executing the same may approve (execution thereof to be
conclusive evidence of such approval) and which are not
inconsistent with the provisions of this Agreement, or as may
be required to comply with any law or with any rule or
regulation made pursuant thereto, or with any rule or regula-
tion of any stock exchange on which the Warrants may be
listed, or of any securities depository, or to conform to
usage. Warrant Certificates shall be signed on behalf of the
Company by its chairman, its president or one of its vice
presidents and under its corporate seal reproduced thereon and
attested by its secretary or an assistant secretary. The
signature of any of such officers may be either manual or
facsimile. Typographical and other minor errors or defects in
any such signature shall not affect the validity or
enforceability of any Warrant Certificate that has been duly
countersigned and delivered by the Warrant Agent.
(b) In case any officer of the Company who
shall have signed a Warrant Certificate, either manually or by
facsimile signature, shall cease to be such officer before
such Warrant Certificate shall have been countersigned and
delivered by the Warrant Agent to the Company or delivered by
the Company, such Warrant Certificate nevertheless may be
countersigned and delivered as though the person who signed
such Warrant Certificate had not ceased to be such officer of
the Company; and the Warrant Certificate may be signed on
behalf of the Company by any person who, at the actual date of
the execution of such Warrant Certificate, shall be a proper
officer of the Company to sign such Warrant Certificate,
although at the date of the execution of this Warrant
Agreement any such person was not such officer.
SECTION 1.03. Warrant Certificates. Each
Warrant Certificate, when signed on behalf of the Company in
accordance with Section 1.02, shall be delivered to the
Warrant Agent, which shall manually countersign and deliver
the same to or upon the order of the Company. Each Warrant
Certificate shall be dated the date of its countersignature.
A Warrant Certificate shall not be valid for any purpose, and
no Warrant evidenced thereby shall be exercisable, unless and
until such Warrant Certificate has been countersigned by
<PAGE> 9
4
the manual signature of the Warrant Agent. Such countersig-
nature by the Warrant Agent upon any Warrant Certificate
signed by the Company in accordance with Section 1.02 shall be
conclusive evidence that the Warrant Certificate so counter-
signed has been duly issued hereunder.
SECTION 1.04. Registration of Transfers and
Exchanges. (a) Except as otherwise provided herein or in the
Warrant Certificate, the Warrant Agent shall from time to time
register the transfer of any outstanding Warrant Certificates
upon the records to be maintained by it for that purpose (the
"Warrant Register") at the Warrant Agent's Office (as defined
herein), subject to such reasonable regulations as the Company
or the Warrant Agent may prescribe, upon surrender thereof,
duly endorsed, or accompanied by a written instrument or
instruments of transfer in form satisfactory to the Warrant
Agent and the Company, duly executed, by the registered
holder(s) thereof or by the duly appointed legal
representative thereof or by a duly authorized attorney, such
signature to be guaranteed by a bank or trust company with a
correspondent office in The City of New York or by a member of
a national securities exchange. Upon any such registration of
transfer, a new Warrant Certificate shall be issued to the
transferee(s) and the surrendered Warrant Certificate shall be
canceled by the Warrant Agent.
(b) At the option of a Warrantholder, Warrant
Certificates may be exchanged for other Warrant Certificates,
representing a like number of Warrants, upon surrender to the
Warrant Agent of the Warrant Certificates to be exchanged at
its offices maintained for such purpose (the location of which
shall be provided to the Company), which shall be south of
Chambers Street in the Borough of Manhattan, The City of New
York (the "Warrant Agent's Office"), and which are, on the
date of this Agreement, 111 Wall Street, New York, New York
10043, Attention: Corporate Trust Department, or at the
office of any successor Warrant Agent (as provided in Section
5.03). Upon surrender of any Warrant Certificate for
exchange, the Warrant Agent shall cancel such Warrant
Certificate, and the Company shall execute, and the Warrant
Agent shall countersign and deliver, in accordance with
Sections 1.02 and 1.03, one or more new Warrant Certificates
of like tenor and representing a like number of unexercised
Warrants.
(c) Warrant Certificates issued upon transfer
or exchange pursuant to Section 1.04(a) or (b) shall be valid
obligations of the Company, evidencing the same obligations of
the Company as the Warrant Certificates surrendered for
transfer or exchange, and entitled to the same benefits
<PAGE> 10
5
under this Agreement as were such Warrant Certificates prior
to such surrender.
(d) Except as provided in Section 1.05, no
service charge shall be made for any registration of transfer
or exchange of Warrant Certificates, but the Company may
require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any
registration of transfer or exchange of Warrant Certificates,
other than exchanges pursuant to this Section 1.04 not
involving any transfer.
(e) In the event that upon any exercise of
Warrants evidenced by a Warrant Certificate the number of
Warrants exercised shall be less than the total number of
Warrants evidenced by such Warrant Certificate, there shall be
issued to the holder thereof or his assignee a new Warrant
Certificate evidencing the number of Warrants not exercised.
SECTION 1.05. Mutilated or Missing Warrant
Certificates. (a) If any Warrant Certificate is mutilated,
lost, stolen or destroyed, the Company may in its discretion
execute, and the Warrant Agent may countersign and deliver, in
exchange and substitution for and upon cancellation of the
mutilated Warrant Certificate, or in lieu of the Warrant
Certificate lost, stolen or destroyed, a new Warrant Certifi-
cate of like tenor and representing an equivalent number of
Warrants, bearing an identification number not contemporane-
ously outstanding, but only (in case of loss, theft or
destruction) upon receipt of evidence satisfactory to the
Company and the Warrant Agent of such loss, theft or
destruction of such Warrant Certificate and security or
indemnity, if requested, also satisfactory to them. Appli-
cants for such substitute Warrant Certificates shall also
comply with such other reasonable regulations and pay such
other reasonable charges as the Company or the Warrant Agent
may prescribe.
(b) In case any such mutilated, lost, stolen
or destroyed Warrant Certificate has been or is about to be
exercised, or deemed to be exercised, the Company in its
absolute discretion may, instead of issuing a new Warrant
Certificate, direct the Warrant Agent to treat the same as if
it had received irrevocable notice of exercise in proper form
in respect thereof, as provided herein, or as being subject to
automatic exercise, as the case may be.
(c) Each new Warrant Certificate issued
pursuant to this Section 1.05 in lieu of any lost, stolen or
destroyed Warrant Certificate shall be an original,
<PAGE> 11
6
additional contractual obligation of the Company, whether or not,
in the case of any lost, stolen or destroyed Warrant
Certificate, such Warrant Certificate shall at any time be
enforceable by anyone, and shall be entitled to the same
benefits under this Agreement as the Warrant Certificate that
was lost, stolen or destroyed.
(d) Upon the issuance of any new Warrant
Certificate in accordance with this Section 1.05, the Company
may require the payment of a sum sufficient to cover any tax
or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and
expenses of the Warrant Agent) connected therewith.
(e) The provisions of this Section 1.05 are
exclusive and shall preclude (to the extent lawful) any other
rights and remedies with respect to the replacement or payment
of mutilated, lost, stolen or destroyed Warrant Certificates.
SECTION 1.06. Registered Holders. Prior to
due presentment for registration of transfer, the Company, the
Warrant Agent, and any agent of the Company or the Warrant
Agent, may deem and treat the person in whose name a Warrant
Certificate shall be registered in the Warrant Register (a
"Registered Holder") as the absolute owner of the Warrants
evidenced thereby (notwithstanding any notation of ownership
or other writing thereon) for any purpose whatsoever, and as
the person entitled to exercise the rights represented by the
Warrants evidenced thereby, and neither the Company nor the
Warrant Agent, nor any agent of the Company or the Warrant
Agent, shall be affected by any notice to the contrary. This
Section 1.06 shall be without prejudice to the rights of
Warrantholders as described elsewhere herein.
SECTION 1.07. Global Warrant Certificate.
(a) Any Global Warrant Certificate issued in accordance with
this Section 1.07 shall be substantially in the form set forth
in Exhibit A-1 hereto, with such appropriate insertions,
omissions, substitutions and other variations as are required
or permitted by this Agreement, and may represent any number
of whole Warrants. The Global Warrant Certificate may have
imprinted or otherwise reproduced thereon such letters,
numbers or other marks of identification or designation and
such legends or endorsements as the officers of the Company
executing the same may approve (execution thereof to be
conclusive evidence of such approval) and which are not
inconsistent with the provisions of this Agreement, or as may
be required to comply with any law or with any rule or
regulation made pursuant thereto, or with any rule or
regulation of any stock exchange on which
<PAGE> 12
7
the Warrants may be listed or of any Depository referred to
herein, or to conform to usage. The Global Warrant Certifi-
cate shall be signed on behalf of the Company upon the same
conditions, in substantially the same manner and with the same
effect as the Warrant Certificates.
(b) The Warrant Agent is authorized, from time
to time during the Conversion Option Period, upon receipt of a
Global Warrant Certificate from the Company, duly executed on
behalf of the Company, to countersign such Global Warrant
Certificate. The Global Warrant Certificate shall be manually
countersigned and dated the date of its countersignature by
the Warrant Agent and shall not be valid for any purpose
unless so countersigned. The Warrant Agent shall deliver the
Global Warrant Certificate to or upon the order of the Company
against receipt of an appropriate amount of Certificated
Warrants (such Certificated Warrants shall be destroyed or
otherwise disposed of in accordance with instructions provided
by the Company). One or more Global Warrant Certificates may
be executed by the Company and delivered to the Warrant Agent
on or after the date of execution of this Agreement; provided
that only one Global Warrant Certificate shall be outstanding
at any one time.
The Company reserves the right to issue, from
time to time after the date of execution of this Agreement,
additional Warrants, which Warrants shall in all respects be
identical to Warrants previously issued and outstanding under
this Agreement, and in connection therewith the Global Warrant
Certificate may be exchanged for a new Global Warrant
Certificate to reflect the issuance by the Company of such
additional Warrants. To effect such an exchange the Company
shall deliver to the Warrant Agent a new Global Warrant
Certificate duly executed on behalf of the Company as provided
in Section 1.02. The Warrant Agent shall authenticate the new
Global Warrant Certificate as provided in this Section and
shall deliver the new Global Warrant Certificate to the
Depository in exchange for, and upon receipt of, the Global
Warrant Certificate then held by the Depository. The Warrant
Agent shall cancel the Global Warrant Certificate delivered to
it by the Depository, destroy such Global Warrant Certificate
and provide a certificate of destruction to the Company.
(c) The Global Warrant Certificate will
initially be registered in the name of a nominee of The
Depository Trust Company, New York, New York (the
"Depository", which term, as used herein, includes any
successor securities depository selected by the Company). The
Warrant holdings of the Participants will be recorded on the
books of the Depository. The holdings of customers of the
Participants
<PAGE> 13
8
and the identity of the Warrantholders will be reflected on
the books and records of such Participants and will not be
known to the Warrant Agent, the Company or the Depository.
The Global Warrant Certificate will be held by the Depository
or its agent.
The Company may from time to time select a new
entity to act as Depository with respect to the Warrants and,
if such selection is made, the Company shall promptly give the
Warrant Agent notice to such effect identifying the new
Depository, and the Global Warrant Certificate shall be
delivered to the Warrant Agent and shall be transferred to the
new Depository as provided below as promptly as possible.
Appropriate changes may be made in the forms of the Global
Warrant Certificate, the notice of exercise and the related
notices to be delivered in connection with an exercise to
reflect the selection of the new Depository.
(d) Except as otherwise provided herein or in
the Global Warrant Certificate, the Warrant Agent shall from
time to time register the transfer of the Global Warrant
Certificate in its records (which may be maintained electroni-
cally), subject to such reasonable regulations as the Company
or the Warrant Agent may prescribe, only to the Depository, to
another nominee of the Depository, to a successor Depository
or to a nominee of a successor Depository, upon surrender of
such Global Warrant Certificate, duly endorsed, or accompanied
by a written instrument or instruments of transfer in form
satisfactory to the Warrant Agent and the Company, duly
executed, by the registered holder thereof or by the duly
appointed legal representative thereof, or by its duly
authorized attorney, such signature to be guaranteed by a bank
or trust company with a correspondent office in The City of
New York or by a member of a national securities exchange.
Upon any such registration of transfer, a new Global Warrant
Certificate shall be issued to the transferee and the
surrendered Global Warrant Certificate shall be canceled by
the Warrant Agent.
The Global Warrant Certificate may be
transferred as provided above at the option of the holder
thereof, when surrendered to the Warrant Agent's Office, or at
the office of any successor Warrant Agent (as provided in Sec-
tion 5.03), for another Global Warrant Certificate of like
tenor and representing a like number of unexercised Warrants.
<PAGE> 14
9
ARTICLE II
DURATION AND EXERCISE OF WARRANTS
SECTION 2.01. Duration of Warrants; Minimum
Exercise Amounts; Notice of Exercise. Subject to the limita-
tions set forth herein and in Section 2.03, each Warrant may
be irrevocably exercised, in whole but not in part, at or
prior to 3:00 p.m., New York City time, on any New York
Business Day (as defined herein) from its date of issuance
until 3:00 p.m., New York City time, on the earlier of (i) the
New York Business Day immediately preceding January 17, 1996
(the "Expiration Date"), and (ii) the Delisting Date (as
defined herein). Except in the case of automatic exercise,
each Warrant shall be irrevocably exercised either (i) in the
case of Warrants represented by Warrant Certificates
("Certificated Warrants"), including Certificated Warrants
held through CEDEL (as defined herein) or Euroclear (as
defined herein), by surrender to the Warrant Agent (at its
address as set forth in the Notice of Exercise (as defined
below) or at such other address as the Warrant Agent may
specify from time to time) of the Warrant Certificate
representing such Warrant, with the Notice of Exercise duly
completed and executed by the Registered Holder of such
Warrant (or, in the case of Certificated Warrants held through
the facilities of CEDEL or Euroclear, by CEDEL or a Euroclear
participant, as the case may be) or (ii) in the case of
Warrants represented by the Global Warrant Certificate
("Book-Entry Warrants") upon receipt by the Warrant Agent of
such Warrant delivered free on the records of the Depository
to the Warrant Agent's Depository Participant Account
(entitled Citibank, N.A. Corporate Trust Warrant Agent
Account, No. 2659, or such other account at the Depository as
the Warrant Agent shall designate in writing to the
Depository) (the "Warrant Account") pursuant to a Notice of
Exercise to the Warrant Agent from a Participant, in the case
of Book-Entry Warrants held through the Depository, CEDEL, in
the case of such Warrants held through CEDEL, or a Euroclear
participant, in the case of such Warrants held through
Euroclear, acting, directly or indirectly, on behalf of the
Warrantholder; provided, however, that Notices of Exercise are
subject to rejection by the Warrant Agent as provided herein.
Not fewer than 500 Warrants in either certificated or
book-entry form may be exercised by or on behalf of any one
Warrantholder at any one time, except that no such minimum
exercise amount shall apply in the case of automatic exercise
on the Expiration Date or the Delisting Date, or in the case
of cancellation of the Warrants as a result of an
Extraordinary Event (as defined herein). Each Notice of
Exercise shall be unconditional. Except as provided in
Section 2.02(b), the
<PAGE> 15
10
Warrant Agent shall be entitled, with no duty of inquiry, to
rely conclusively on any Notice of Exercise received by it.
"Notice of Exercise" means an irrevocable notice of exercise
to the Warrant Agent at its address, which notice (A) for
Certificated Warrants, shall be on the reverse of the Warrant
Certificate or such other form as the Company and the Warrant
Agent may approve, and (B) for Book-Entry Warrants, shall be
substantially in the form set forth in Exhibit A-2 hereto or
such other form as the Company and the Warrant Agent may
approve and may be given by facsimile transmission. For
purposes of this Agreement, "New York Business Day" means any
day other than a Saturday, Sunday or a day on which either the
American Stock Exchange or the New York Stock Exchange is not
open for securities trading or commercial banks in New York
City are required or authorized by law or executive order to
remain closed.
SECTION 2.02. Exercise and Delivery of
Warrants. (a) Except in the case of exercise on the
Expiration Date or the Delisting Date, or in the event an
Extraordinary Event or Exercise Limitation Event is declared,
or in the case of a postponement pursuant to Section 2.04, or
as a result of the exercise of a number of Warrants exceeding
the limits on exercise set forth in Section 2.04, the valua-
tion date (the "Valuation Date") for a Warrant shall be the
first Index Calculation Date (as defined herein) following the
applicable Exercise Date (as defined herein). The "Exercise
Date" for a Warrant will be the New York Business Day on which
the Warrant Agent has received (A) in the case of Warrants
other than those held through the facilities of Centrale de
Livraison de Valeurs Mobilieres S.A. ("CEDEL") or the Euro-
clear System ("Euroclear"), either (i) for Certificated
Warrants, the Warrant Certificate representing such Warrant,
with the Notice of Exercise or (ii) for Book-Entry Warrants,
the Warrant with the Notice of Exercise duly completed and
executed, in either case, at or prior to 3:00 p.m., New York
City time (the "Notice Date"); and if the Warrant Agent shall
receive any such Warrant Certificate or Warrant or Notice of
Exercise after 3:00 p.m., New York City time, on such date,
then such Warrant Certificate or Warrant shall be deemed to
have been received at or prior to 3:00 p.m., New York City
time, on the next succeeding New York Business Day (which
shall be considered the Notice Date), and in such event the
Valuation Date shall be the next Index Calculation Date
following the New York Business Day on which the Warrant Agent
is deemed to have received such Warrant Certificate or Warrant
together with the Notice of Exercise or (B) in the case of
Warrants held through the facilities of CEDEL or Euroclear,
the Notice of Exercise (by facsimile transmission) at or prior
to 3:00 p.m., New York City time; provided that the Warrant or
Warrant Certificate
<PAGE> 16
11
is received by the Warrant Agent by 3:00 p.m., New York City
time, on the applicable Valuation Date; and if the Warrant
Agent shall receive such Notice of Exercise after 3:00 p.m.,
New York City time, on any New York Business Day, then the
Notice of Exercise shall be deemed to have been received at or
prior to 3:00 p.m., New York City time, on the next succeeding
New York Business Day (which shall be considered the Notice
Date), and in such event the Valuation Date shall be the next
Index Calculation Date following the New York Business Day on
which the Warrant Agent is deemed to have received such Notice
of Exercise; provided, that if the Warrant Agent receives the
Warrant or Warrant Certificate after 3:00 p.m., New York City
time, on the Valuation Date, then the Exercise Date for such
Warrant shall be the day on which such Warrant is received or,
if such day is not a New York Business Day, the next
succeeding New York Business Day, and the Valuation Date for
such Warrant shall be the first Index Calculation Date
following such Exercise Date; provided, further, however, that
in the case of exercises by Euroclear participants, Euroclear
must by tested telex to the Warrant Agent by 9:00 a.m., New
York City time, on the Valuation Date confirm (a "Euroclear
Confirmation") that the Warrants will be received by the
Warrant Agent by 3:00 p.m., New York City time, on such Date.
If such Euroclear Confirmation is received after 9:00 a.m.,
New York City time, on the Valuation Date, the Company will be
entitled to direct the Warrant Agent to reject the related
Notice of Exercise or waive the requirement for timely
delivery of such Euroclear Confirmation. Any Warrant
Certificate or Warrant received after 3:00 p.m., New York City
time, on (i) the New York Business Day immediately preceding
the Expiration Date or (ii) the last New York Business Day
prior to the effective date on which the Warrants are delisted
from, or permanently suspended from trading (within the
meaning of the Securities Exchange Act of 1934 and the rules
and regulations of the Securities and Exchange Commission
thereunder) on, the American Stock Exchange and not accepted
at the same time for listing on another United States national
securities exchange (such New York Business Day being the
"Delisting Date") (or, in the case of Warrants held through
the facilities of CEDEL or Euroclear, after 3:00 p.m., New
York City time, on the first Index Calculation Date following
such Dates), shall be deemed not to have been delivered and
the related Notice of Exercise shall be void and of no effect;
provided, however, that if the Company first receives notice
of the delisting or suspension of the Warrants on the same day
on which such Warrants are delisted or suspended, such day
will be deemed the Delisting Date for purposes of this
Agreement. For purposes of this Agreement, "Index Calculation
Date" means
<PAGE> 17
12
any day the Index (as herein defined) or any Successor Index
(as herein defined) or is calculated and published.
(b) The Warrant Agent shall, in the case of
Warrants other than Warrants held through CEDEL or Euroclear,
following receipt of proper delivery of a Warrant in accor-
dance with Section 2.02(a), accompanied by a completed Notice
of Exercise, and, in the case of Warrants held through CEDEL
or Euroclear, following receipt of proper delivery of a
completed Notice of Exercise in accordance with Section
2.02(a):
(i) promptly (1) for Certificated Warrants not
held through CEDEL or Euroclear, determine whether
such Notice of Exercise has been duly completed and
is in proper form duly executed by the Registered
Holder thereof or by the duly appointed legal
representative thereof or by a duly authorized
attorney, (2) for Certificated Warrants held through
CEDEL or Euroclear, determine whether such Notice of
Exercise has been duly completed and is in proper
form duly executed by CEDEL or the Euroclear
participant tendering such Warrant, as applicable,
(3) for Book-Entry Warrants not held through CEDEL
or Euroclear, determine whether such Notice of
Exercise has been duly completed and is in proper
form and (4) for Book-Entry Warrants held through
CEDEL or Euroclear, determine whether such Notice of
Exercise has been duly completed and is in proper
form duly executed by CEDEL or the Euroclear
participant tendering such Warrant, as applicable;
and if the Warrant Agent determines that the Notice
of Exercise has not been duly completed or is not in
proper form or, in the case of Certificated
Warrants, has not been so executed, the Warrant
Agent promptly (X) shall reject such Notice of Exercise
and shall send to the entity that executed such Notice of
Exercise a notice of rejection substantially in the
form set forth in Exhibit B or Exhibit B-1 hereto,
as the case may be, and, in the case of Certificated
Warrants, shall return to the Registered Holder that
submitted such Notice of Exercise, by first class
mail, the Warrant Certificates evidencing such
Warrants (to the extent received, in the case of
Warrants held through CEDEL or Euroclear), or, in
the case of Book-Entry Warrants, shall redeliver
such Warrants (to the extent received in the case of
Warrants held through CEDEL or Euroclear) free
through the facilities of the Depository to the
account from which they were transferred to the
Warrant Agent and (Y) in either case, shall not take
the actions required by clauses (ii)-(ix) below with
respect to such Notice of Exercise or the related
Warrants; provided, however,
<PAGE> 18
13
that the Warrant Agent shall deliver a copy of the
Notice of Exercise relating to such Warrants to the
Company as required by Section 2.02(b)(ix) below and
the Company may waive any defect in the form of such
Notice of Exercise;
(ii) promptly telephone Euroclear to determine
whether Euroclear anticipates that it will be able
to provide a Euroclear Confirmation with respect to
each Warrant held through Euroclear for which a
Notice of Exercise was received;
(iii) notify the Company and the Determination
Agent (and such other parties (not to exceed two) as
the Company shall designate in writing) by 5:00
p.m., New York City time, on the New York Business
Day that such Notice of Exercise has been received
(or shall be deemed to have been received) of (A)
the total number of Warrants covered by such Notice
of Exercise, (B) the number of such Warrants subject
to the Limit Option (as defined herein)
("Contingently Tendered Warrants"), (C) the number
of such Warrants not subject to the Limit Option and
(D) the number of such Warrants, if any, as to which
Euroclear has not advised the Warrant Agent that it
anticipates being able to provide a Euroclear
Confirmation;
(iv) with respect to Warrants held through
Euroclear, determine whether the Warrant Agent has
received by 9:00 a.m., New York City time, on the
Valuation Date relating to such Warrants (or if the
Valuation Date is not a New York Business Day, on
the next succeeding New York Business Day),
Euroclear Confirmations with respect to such
Warrants, and if the Warrant Agent has not received
any such Euroclear Confirmation by such time, notify
the Company (and such other parties (not to exceed
two) as the Company shall designate in writing) by
10:00 a.m., New York City time, on such Valuation
Date (or if the Valuation Date is not a New York
Business Day, on the next succeeding New York
Business Day) of the number of such Warrants in
respect of which the Warrant Agent has not received
such Euroclear Confirmations and (except to the
extent the Company has notified the Warrant Agent
that it has waived the timing requirement of timely
delivery of such Euroclear Confirmation) send to the
Euroclear participant that executed such Notice of
Exercise for which no related Euroclear Confirmation
was received (at the address specified in such
notice) a notice of rejection substantially in the
form set forth in Exhibit B or Exhibit B-1 hereto,
as the case may be;
<PAGE> 19
14
(v) if any of the Warrants covered by such
Notice of Exercise constitute Contingently Tendered
Warrants, the Warrant Agent shall, by 5:00 p.m., New
York City time, on the Valuation Date (or, if such
Valuation Date is not a New York Business Day, on
the next succeeding New York Business Day) (A)
determine the Reference Index (as defined herein)
for such Warrants and the Spot Index (as defined
herein) for the Index Calculation Date that, but for
the provisions of Section 2.02(h), would be the
Valuation Date for such Warrants; (B) determine in
accordance with Section 2.02(h) whether such Contin-
gently Tendered Warrants will be subject to exercise
after giving effect to the Limit Option and, if such
Warrants will not be subject to exercise, send to
the Registered Holder (or the entity that executed
the Notice of Exercise, in the case of Certificated
Warrants held through CEDEL or Euroclear), in the
case of Certificated Warrants, or to the
Participant, in the case of Book-Entry Warrants,
that submitted such Notice of Exercise a notice of
rejection substantially in the form set forth in
Exhibit C-1 or Exhibit C-2 hereto, as appropriate,
with respect to such Warrants and return to the
Registered Holder (or the entity that executed the
Notice of Exercise, in the case of Certificated
Warrants held through CEDEL or Euroclear) that
submitted such Notice of Exercise, by first class
mail, the Warrant Certificates (to the extent
received, in the case of Warrants held through CEDEL
or Euroclear) evidencing such Warrants, or, in the
case of Book-Entry Warrants (to the extent received,
in the case of Warrants held through CEDEL or
Euroclear), redeliver the Warrants free through the
facilities of the Depository to the account of such
Participant; and (C) notify the Company and the
Determination Agent as to whether such Contingently
Exercised Warrants will be subject to exercise;
(vi) by 5:00 p.m., New York City time, on the
Valuation Date (or, if such Valuation Date is not a
New York Business Day, on the next succeeding New
York Business Day) (A) determine the sum of (1) the
number of such Warrants not subject to the Limit
Option (i.e., the number of Warrants determined
pursuant to clause (iii)(C) above) plus (2) the
number of such Warrants that are Contingently
Exercised Warrants that will be subject to exercise
notwithstanding the Limit Option (i.e., the number
of Warrants so identified pursuant to clause (v)(B)
above) (all of such Warrants, the "Exercised
Warrants") and (B) notify the Company and the
Determination Agent of the total number of Exercised
Warrants so determined (if such number is zero, the
Warrant Agent shall not take the actions required by
<PAGE> 20
15
clauses (vii) and (viii) with respect to such Notice
of Exercise or the related Warrants);
(vii) calculate the Cash Settlement Value of
the Exercised Warrants (excluding any Warrants held
through CEDEL or Euroclear as to which timely
delivery of the related Warrant has not been made)
as of their Valuation Date in the manner set forth
in Section 2.02(d) by no later than 5:00 p.m., New
York City time, on the New York Business Day next
succeeding the Valuation Date (or, if such Valuation
Date is not a New York Business Day, on the next
succeeding New York Business Day) (unless the Cash
Settlement Value shall be calculated by the
Determination Agent);
(viii) notify the Company (and such other
parties (not to exceed two) as the Company shall
designate in writing) by 12:00 noon, New York City
time, on the New York Business Day next succeeding
the Valuation Date (or, if such Valuation Date is
not a New York Business Day, on the New York
Business Day following the New York Business Day
next succeeding the Valuation Date) of the Cash
Settlement Value payable in respect of the exercise
of such Exercised Warrants, and send notices of
confirmation substantially in the form included in
Exhibit B or Exhibit B-1 hereto, as the case may be,
to the appropriate Registered Holder (or the entity
that executed the related Notice of Exercise, in the
case of Certificated Warrants held through CEDEL or
Euroclear) or Participant specifying therein the
reference number assigned by the Warrant Agent to
each accepted Notice of Exercise; and
(ix) promptly deliver a copy of each Notice of
Exercise to the Company and advise the Company of
such other matters relating to the Exercised
Warrants as the Company shall reasonably request.
Any notice to be given to the Company by the Warrant
Agent pursuant to this Section 2.02 or Section 2.03
shall be by telephone (promptly confirmed in
writing) or telecopy.
Except in the case of Warrants subject to auto-
matic exercise and for Warrants that upon exercise entitle the
holder thereof to receive an Alternative Settlement Amount in
lieu of the Cash Settlement Value, if on any Valuation Date
the Cash Settlement Value for any Warrants then exercised
would be zero, then in such case, the exercise of such
Warrants shall be ignored and either (i) for Certificated
Warrants, the Warrant Certificate evidencing such Warrants (to
the extent received, in the case of Warrants held through
CEDEL or Euroclear) shall be promptly
<PAGE> 21
16
returned by the Warrant Agent to the Registered Holder (or the
entity that executed the related Notice of Exercise, in the
case of Certificated Warrants held through CEDEL or Euroclear)
by first class mail or (ii) for Book-Entry Warrants, the
Warrants will be transferred by the Warrant Agent back to the
Participant that submitted them free on the records of the
Depository (to the extent received, in the case of Warrants
held through CEDEL or Euroclear) and, in either case such
Warrantholder shall be permitted to exercise such Warrants
prior to the Expiration Date or the Delisting Date, as the
case may be.
(c) Provided that the Company has made
adequate funds available to the Warrant Agent in a timely
manner, which shall (a) in the case of Warrants not held
through the facilities of the Depository, CEDEL or Euroclear,
in no event be later than 3:00 p.m., New York City time, on
the fifth New York Business Day following a Valuation Date
(or, if the Valuation Date is not a New York Business Day, on
the fifth New York Business Day following the New York
Business Day next succeeding the Valuation Date) and (b) in
the case of Warrants held through the facilities of the
Depository, CEDEL or Euroclear, in no event be later than 3:00
p.m., New York City time, on the sixth New York Business Day
following a Valuation Date (or if the Valuation Date is not a
New York Business Day, on the sixth New York Business Day
following the New York Business Day next succeeding the
Valuation Date (the "Settlement Date"), the Warrant Agent will
be responsible for making its payment available either (i) for
Certificated Warrants, to each appropriate Registered Holder
in the form of a cashier's check or an official bank check, or
(in the case of payments of at least $100,000) by wire
transfer to a U.S. dollar account maintained by such
Registered Holder in the United States (at such Registered
Holder's election as specified in the applicable Notice of
Exercise), after 3:00 p.m., New York City time, but prior to
the close of business, on the first New York Business Day
immediately succeeding such Settlement Date or (ii) for
Book-Entry Warrants, to each appropriate Participant in the
form of a cashier's check or an official bank check, or (in
the case of payments of at least $100,000) by wire transfer to
a U.S. Dollar account maintained by such Participant in the
United States (at the Participant's election as specified in
the Notice of Exercise), after 3:00 p.m., New York City time,
but prior to the close of business, on the first New York
Business Day immediately succeeding such Settlement Date. For
either clause (i) or (ii) above, such payment shall be in the
amount of the aggregate Cash Settlement Value in respect of
the Warrant Certificates or Warrants that were delivered to
the Warrant Agent (together
<PAGE> 22
17
with the related Notice of Exercise) as provided in Sections
2.01 and 2.02(a) and (b).
(d) The "Cash Settlement Value" of an
exercised Warrant shall be an amount in U.S. dollars equal to
the quotient (rounded down to the nearest cent) of (A) the
amount, if any, by which ______ (the "Strike Index") exceeds
the closing level of the Index as compiled and published by
the AMEX, on the applicable Valuation Date for such Warrant
(the "Spot Index"), divided by three, divided by (C) the
exchange rate of H.K. $______ per $1.00; provided, however,
that if such amount is less than zero, then the Cash Settle-
ment Value shall be zero.
The "Index" is the AMEX Hong Kong 30 Index
designed, developed, maintained and operated by the American
Stock Exchange (the "AMEX"). References in this Agreement to
"U.S. dollars", "U.S.$" or "$" are to the lawful currency of
the United States of America, and references to "Hong Kong
dollars" or "H.K.$" are to the lawful currency of Hong Kong.
(e) In the event a Global Warrant Certificate
is issued, the Warrant Agent shall cause its records, which
may be kept electronically, to be marked to reflect the reduc-
tion in the number of Warrants represented by the Global
Warrant Certificate by the number of Warrants that were
delivered to the Warrant Account and for which payment has
been made as provided in Section 2.02(c) promptly after such
delivery and payment. Absent manifest error, the Warrant
Agent's records shall be conclusive evidence of such matters.
(f) The Company hereby appoints PaineWebber
Incorporated, and PaineWebber Incorporated accepts such
appointment, to be the Company's Determination Agent to make
such calculations as may be required upon the occurrence of
any of the circumstances described in Section 2.02(g) or 2.03,
including, without limitation, calculation of the Cash
Settlement Value or the Alternative Settlement Amount, as
applicable, of a Warrant. The Determination Agent shall act
as an independent expert and not as an agent of the Company,
and, unless otherwise provided by this Agreement, its calcu-
lations and determinations under this Agreement shall, absent
manifest error, be final and binding on the Company, the
Warrant Agent, the Warrantholders and any Participant. Any
such calculations will be made available to a Warrantholder
for inspection at the Warrant Agent's Office.
The Company agrees, for the benefit of the War-
rantholders from time to time of the Warrants, that there
<PAGE> 23
18
shall at all times be a Determination Agent hereunder until
all the Warrants are no longer outstanding or until moneys for
the payment of all outstanding Warrants, if any, shall have
been paid to the Warrant Agent and shall have been returned to
the Company as provided in Section 2.06, whichever occurs
earlier. Resignation, removal and appointment of the
Determination Agent shall be in accordance with the procedures
set forth for the resignation, removal and appointment of the
Warrant Agent, as provided in Section 5.03, except that a
successor Determination Agent need not be a banking
institution with offices south of Chambers Street in the
Borough of Manhattan, The City of New York, and may only be
appointed if such successor has been nominated by the Company
and approved by the predecessor Determination Agent.
The Company agrees promptly to pay the
Determination Agent the compensation to be agreed upon with
the Company for all services rendered by the Determination
Agent hereunder. The Company also agrees to indemnify the
Determination Agent for, and to hold it harmless against, any
loss, liability, cost or expense (including reasonable
attorneys' fees and expenses) incurred by the Determination
Agent by reason of its being made a party to a suit or claim
arising out of this Agreement; provided, however, that such
indemnity shall in no event apply to the extent that any such
loss, liability, cost or expense is a result of the
negligence, bad faith or breach of this Agreement on its part
in connection with the services rendered by it hereunder. The
indemnity obligation of the Company shall continue
notwithstanding the termination of this Agreement or the
resignation or removal of the Determination Agent.
(g) In the event that the Index is not
calculated and publicly announced by the AMEX on a Valuation
Date but is calculated and publicly announced by another
person or party not affiliated with the Company and acceptable
to the Company (the "Third Party"), the applicable Cash
Settlement Value shall nevertheless be calculated by reference
to the value of the closing quotation for the Index so
announced by the Third Party.
In the event that prior to a Valuation Date the
AMEX or the Third Party makes a material change in the formula
for, or the method of calculating the Index, the Determination
Agent shall make such calculations as may be required to
determine the applicable Cash Settlement Value using the
formula and method of calculating the Index as was in effect
prior to such change or modification.
<PAGE> 24
19
If on a Valuation Date either the AMEX or any
Third Party discontinues publication of the Index and
publishes a successor or substitute index that the Company
determines, in its sole discretion, to be comparable to the
Index (any such index being a "Successor Index"), the
Determination Agent shall determine the Spot Index for any
date thereafter based on the closing level of the Successor
Index on such date. If the AMEX and/or any Third Party
discontinues publication of the Index and/or any Successor
Index, the Company will cause the Determination Agent to
determine the applicable Cash Settlement Value based on the
formula and method used in calculating the Index or any
Successor Index as in effect on the date the Index or such
Successor Index was last published.
If calculation or publication of the Index or a
Successor Index is modified, discontinued or suspended, as
provided in this Section 2.02(g), then the Determination Agent
shall promptly notify the Warrant Agent, and the Warrant Agent
shall in turn promptly notify the Warrantholders in accordance
with Section 6.04 hereof, of such modification, discontinuance
or suspension and of any modification or adjustment to be made
with respect to calculation of the Cash Settlement Value or
Alternative Settlement Amount, as applicable.
The Determination Agent will have no responsi-
bility for good faith errors or omissions in calculating or
disseminating information regarding the Index, any Successor
Index, adjustments or calculations by the Determination Agent
(as provided above) in order to arrive at a calculation of a
stock index comparable to the Index or any Successor Index, or
the Cash Settlement Value or the Alternative Settlement
Amount, as applicable.
(h) Except in the case of an automatic
exercise (as provided in Section 2.03 below) and except upon
the occurrence of an Extraordinary Event as a result of which
an Alternative Settlement Amount is payable (as provided in
Section 2.03 below) in connection with any exercise of
Warrants, the related Notice of Exercise may specify that such
exercise (including any exercise following a postponed
Valuation Date pursuant to Section 2.03(b), if the Cash
Settlement Value is to be paid with respect to such Warrants),
be subject to the condition that the Spot Index that would
otherwise be used to determine the Cash Settlement Value of
such Warrants not be 20 or more points higher than the
Reference Index for such Warrants. "Reference Index", with
respect to any Contingently Tendered Warrants, means the Spot
Index on the New York Business Day that such Notice of
Exercise has been received (or shall be deemed to have
<PAGE> 25
20
been received) (or, if such New York Business Day is not an
Index Calculation Date, on the first Index Calculation Date
preceding such New York Business Day). The option of a
Warrantholder to condition an exercise of Warrants as provided
in this Section 2.02(h) is herein referred to as the "Limit
Option". If a Warrantholder elects the Limit Option in
connection with any exercise of Warrants, the following
provisions shall apply:
(i) To be valid, such election must be
specified in the related Notice of Exercise. Each
of the Warrant Agent and the Company shall be
entitled to rely conclusively on such Notice of
Exercise, as received by the Warrant Agent, in
determining whether such election has been validly
made. In connection with any exercise of 500 or
more Warrants, a Warrantholder may elect to subject
only a portion of such Warrants to the Limit Option;
provided that the number of such Warrants subject to
the Limit Option and the number of such Warrants not
subject to the Limit Option shall in each case not
be less than 500. Registered Holders and
Participants shall be required to certify that the
number of Warrants exercised on behalf of any
Warrantholder pursuant to the related Notice of
Exercise that are subject to the Limit Option is an
amount that is not less than 500.
(ii) The Reference Index shall be determined
by the Warrant Agent, which determination shall be
conclusive and binding for all purposes relating to
such exercise.
(iii) In the event that the Spot Index for the
first Index Calculation Date following the New York
Business Day that such Notice of Exercise has been
received (or shall be deemed to have been received)
(i.e., for the day that, but for the provisions of
Section 2.02(h), would be the Valuation Date for
such Warrants) is 20 or more points higher than the
Reference Index for such Warrants, such Warrants (A)
shall not be subject to exercise and shall be
treated for all purposes of this Agreement and the
Warrant Certificates and Global Warrant Certificate
as if the related Notice of Exercise had never been
received by the Warrant Agent, and (B) shall not
constitute "Exercised Warrants" for purposes of
Section 2.02(b). If such Spot Index is not 20 or
more points higher than such Reference Index, such
Warrants shall be subject to exercise as provided in
this Section 2.02 and shall be deemed to be
"Exercised Warrants" for such purposes. The Warrant
<PAGE> 26
21
Agent's determination shall be conclusive and
binding for all purposes relating to such Warrants.
(iv) Except as provided in Section 2.03(b),
the Limit Option (based on the Reference Index as
determined for the New York Business Day that such
Notice of Exercise has been received (or shall be
deemed to have been received) or, if applicable, the
first Index Calculation Date preceding such New York
Business Day) shall continue to be applicable to any
Exercised Warrant for which the Valuation Date has
been postponed as a result of the occurrence of an
Extraordinary Event or an Exercise Limitation Event
until the Warrants are canceled as provided in
Section 2.03(b) or until the Expiration Date or the
Delisting Date.
SECTION 2.03. Automatic Exercise of Warrants;
Exercise upon an Extraordinary Event or Exercise Limitation
Event. (a) All Warrants for which the Warrant Agent has not
received a Notice of Exercise in proper form by 3:00 p.m., New
York City time, on (i) the New York Business Day immediately
preceding the Expiration Date or (ii) the Delisting Date, as
the case may be, or for which the Warrant Agent has received a
Notice of Exercise in proper form but with respect to which
timely delivery of the relevant Warrants has not been made,
and which have not been canceled prior to such time, will be
deemed automatically exercised on such date without any
requirement of a Notice of Exercise to the Warrant Agent. The
Exercise Date for such Warrants shall be the Expiration Date
or the Delisting Date, as the case may be, or, if such Date is
not a New York Business Day, the next succeeding New York
Business Day, and the Valuation Date for such Warrants shall
be the first Index Calculation Date following the Exercise
Date for such Warrants.
The Warrant Agent shall by 5:00 p.m., New York
City time, on the Expiration Date or the Delisting Date, as
the case may be (or if such date is not a New York Business
Day on the next succeeding New York Business Day), notify the
Company (and such other parties (not to exceed two) as the
Company shall designate in writing) of the number of Warrants
to be automatically exercised on such day. On the Valuation
Date for such Warrants (or, if such Valuation Date is not a
New York Business Day, on the next succeeding New York
Business Day), the Warrant Agent shall (i) determine the Cash
Settlement Value (in the manner provided in Section 2.02(d))
of the Warrants to be automatically exercised; (ii) by 5:00
p.m., New York City time, on the New York Business Day next
succeeding such Valuation Date, notify the Company (and such
other parties (not to exceed two) as the Company
<PAGE> 27
22
shall designate in writing) of the Cash Settlement Value
payable in respect of such exercised Warrants; and (iii)
advise the Company of such other matters relating to the
exercised Warrants as the Company shall reasonably request.
If the Company determines that an Extraordinary
Event or an Exercise Limitation Event (as defined herein) has
occurred and is continuing on the Expiration Date or the
Delisting Date, the Company shall so notify the Warrant Agent
and the Determination Agent, and the Cash Settlement Value
with respect to the Exercised Warrants shall be equal to, and
be calculated in the same manner as, an "Alternative
Settlement Amount", in accordance with Section 2.03(b) herein
(treating the Expiration Date or the Delisting Date, as the
case may be, as the date on which the Warrants were canceled
for the purposes of Section 2.03(b)).
With respect to all Warrants subject to
automatic exercise (other than Book-entry Warrants and
Warrants subject to postponed exercise following the occur-
rence of an Extraordinary Event or an Exercise Limitation
Event as described in Section 2.03(b)), the Company shall make
available to the Warrant Agent, not later than 3:00 p.m., New
York City time, on the fourth New York Business Day following
the Valuation Date for automatically Exercised Warrants (or if
such Valuation Date is not a New York Business Day, on the
fourth New York Business Day following the New York Business
Day next succeeding the Valuation Date) (in any such case, the
"Automatic Settlement Date"), funds in an amount equal to, and
for the payment of, the aggregate Cash Settlement Value of
such Warrants. Subject to such funds having been made
available as provided in the preceding sentence, the Warrant
Agent will be responsible for making its payment available to
the appropriate Registered Holder in the form of a cashier's
check or an official bank check, or (in the case of payments
of at least $100,000) by wire transfer to a U.S. dollar
account maintained by such Registered Holder in the United
States (at such Registered Holder's election), after 3:00
p.m., New York City time, but prior to the close of business,
on the Automatic Settlement Date, against receipt by the
Warrant Agent at the Warrant Agent's Office from such
Registered Holder of its Warrant Certificates. Such payment
shall be in the amount of the aggregate Cash Settlement Value
in respect of the Warrants, evidenced by such Warrant Certifi-
cates, that were exercised automatically on the Expiration
Date or the Delisting Date, as the case may be. Warrant
Certificates delivered to the Warrant Agent shall thereafter
be promptly canceled by the Warrant Agent.
<PAGE> 28
23
In the case of Book-Entry Warrants subject to
automatic exercise (other than Warrants subject to postponed
exercise following the occurrence of an Extraordinary Event or
an Exercise Limitation Event as described in Section 2.03(b)),
the Company shall make available to the Warrant Agent, not
later than 3:00 p.m., New York City time, on the Automatic
Settlement Date, funds in an amount equal to, and for the
payment of, the aggregate Cash Settlement Value of such
Warrants. Subject to such funds having been made available as
provided in the preceding sentence, the Warrant Agent will be
responsible for making funds available to the Depository,
against receipt of the Global Warrant Certificate, after 3:00
p.m., New York City time, but prior to the close of business,
on the Automatic Settlement Date, such check to be in an
amount equal to the aggregate Cash Settlement Value of the
Warrants subject to such automatic exercise.
The Company will advise the Warrant Agent as
soon as practicable of the date of any expected delisting or
permanent suspension of trading of the Warrants and will
immediately inform the Warrant Agent after the Company has
received notice that such delisting or suspension has
occurred, but in no event will notice of such delisting or
suspension be given to the Warrant Agent later than 9:30 a.m.,
New York City time, on the New York Business Day following the
date that such delisting or suspension occurs. The Company
will use its best efforts to notify the Warrantholders, or
cause the Warrantholders to be notified, as promptly as
practicable of any expected delisting or suspension of trading
of the Warrants.
(b) Upon the occurrence of an Extraordinary
Event or an Exercise Limitation Event, the Company shall use
its best efforts to notify the Warrant Agent and the
Determination Agent promptly that an Extraordinary Event or
Exercise Limitation Event, as the case may be, has occurred
and shall promptly notify the Warrantholders, through
publication in a United States newspaper with a national
circulation, or through other means deemed appropriate by the
Company ("Publication"), that an Extraordinary Event or an
Exercise Limitation Event has occurred. Anything in this
Agreement to the contrary notwithstanding, if the Company
determines that an Extraordinary Event or Exercise Limitation
Event has occurred and is continuing on the Hong Kong Business
Day with respect to which the Spot Index on a Valuation Date
is to be determined (the "Applicable Hong Kong Business Day"),
then the Cash Settlement Value of any Warrants shall be
calculated on the basis that the Valuation Date shall be the
next Index Calculation Date following an Applicable Hong Kong
Business Day on which there is no Extraordinary Event
<PAGE> 29
24
or Exercise Limitation Event; provided, however, that if the
Cash Settlement Value of such Warrants is not calculated on or
prior to the Expiration Date or the Delisting Date, then the
Warrantholders shall receive the Alternative Settlement Amount
in lieu of the Cash Settlement Value, which shall be calculated
as if such Warrants had been canceled on the Expiration Date
or the Delisting Date, as the case may be.
If the Company determines that an Extraordinary
Event has occurred and is continuing, and if it is expected by
the Company to continue, the Company may immediately cancel
the Warrants by notifying the Warrant Agent of such
cancellation (the date such notice is given being the "Cancel-
lation Date"), and each Warrantholder's rights with respect to
the Warrants and under this Agreement shall thereupon cease;
provided, however, that each Warrant shall be exercised (even
if such Warrant would not otherwise be exercisable on such
Date because of the Limit Option) on the basis that the
Valuation Date for such Warrant shall be the Cancellation Date
and each Warrantholder shall have the right to receive an
Alternative Settlement Amount (as defined herein) with respect
to its Warrants. The Company shall use its best efforts to
promptly notify the Warrantholders through Publication of such
cancellation.
With respect to all Warrants as to which the
Valuation Date has been postponed or which have been canceled
as described above, the Company shall make available to the
Warrant Agent not later than 3:00 p.m., New York City time, on
the third New York Business Day following the date on which
the Cash Settlement Value or Alternative Settlement Amount, as
the case may be, has been calculated (the "Alternative
Settlement Date"), funds in an amount equal to, and for the
payment of, the aggregate Cash Settlement Value or Alternative
Settlement Amount, as applicable, of such Warrants. Subject
to such funds having been made available as provided in the
preceding sentence, the Warrant Agent will be responsible for
making a payment (i) in the case of Certificated Warrants, to
each Registered Holder that submitted a Warrant Certificate
for exercise or (ii) in the case of Book-Entry Warrants, to
the Depository, after 3:00 p.m., New York City time, but prior
to the close of business, on the Alternative Settlement Date,
in an amount equal to the aggregate Cash Settlement Value or
Alternative Settlement Amount of such Exercised Warrants.
The "Alternative Settlement Amount" shall be an
amount, determined by the Determination Agent, which is the
greater of (i) the average of the last sale prices, as
available, of the Warrants on the AMEX (or any successor
securities exchange on which the Warrants are listed) on the
<PAGE> 30
25
30 trading days preceding the date on which such Extraordinary
Event was declared; provided that, if the Warrants were not
traded on the AMEX (or such successor securities exchange) on
at least 20 of such trading days, no effect will be given to
this clause (i) for the purpose of determining the Alternative
Settlement Amount, and (ii) the amount "X" calculated using
the formula set forth below:
X = I + T x A
- -
2 B
where
I = the Cash Settlement Value of the Warrants
determined as described under Section 2.02(d),
but subject to the following modifications:
(1) if the Calculation Date for such Warrants
is a date on which the Index or a Successor Index is
calculated and published, for the purpose of
determining such Cash Settlement Value, the Spot
Index will be determined as of such Cancellation
Date except that, if the Spot Index as of such day
is less than 90% of the Spot Index as of the
immediately preceding Index Calculation Day, then
the Spot Index will be deemed to be 90% of the Spot
Index on such preceding Index Calculation Day; or
(2) if the Calculation Date for such Warrants
is a date on which the Index or a Successor Index is
not calculated or published, for the purpose of
determining such Cash Settlement Value, the Spot
Index will be deemed to be the lesser of (i) the
Spot Index as of the first Index Calculation Day
immediately preceding the Cancellation Date except
that, if the Spot Index as of such day is less than
90% of the Spot Index as of the second Index
Calculation Day immediately preceding such
Cancellation Date, 90% of the Spot Index as of such
second Index Calculation Day and (ii) the arithmetic
average of four amounts, being (a) the Spot Index at
each of the three successive Index Calculation Days
immediately preceding the Cancellation Date and (b)
the Spot Index at the next Index Calculation Day;
provided that if an Extraordinary Event described in
clause (i) of the definition of Extraordinary Event
continues for 30 consecutive days immediately
following such Cancellation Date, then the
Determination Agent shall calculate an amount which,
in its reasonable opinion, fairly reflects the value
of the stocks which comprise the Index or any
Successor Index on the Index Calculation Day
immediately following such Cancellation
<PAGE> 31
26
Date which, subject to approval by the Company (such
approval not to be unreasonably withheld), shall for
purposes of calculating the amount under this clause
(2)(ii) be treated as the figure arrived at under
clause (2)(ii)(b);
T = U.S. $_____
A = the total number of days from but excluding the
Cancellation Date for such Warrants to and
including the Expiration Date; and
B = the total number of days from but excluding the
date the Warrants were initially sold to and
including the Expiration Date.
For purposes of determining "I" in the above
formula, in the event that the Determination Agent and the
Company are required, but have not, after good faith consul-
tation with each other and within five days following the
first day on which such Alternative Settlement Amount may be
calculated in accordance with the above formula, agreed upon a
figure under clause 2(ii)(b) above which fairly reflects the
value of the stocks which comprise the Index on the Cancella-
tion Date, then the Determination Agent shall promptly
nominate a third party, subject to approval by the Company
(such approval not to be unreasonably withheld), to determine
such figure and calculate the Alternative Settlement Amount in
accordance with the above formula. Such party shall act as an
independent expert and not as an agent of the Company or the
Determination Agent, and its calculation and determination of
the Alternative Settlement Amount shall, absent manifest
error, be final and binding on the Company, the Warrant Agent,
the Determination Agent and the Warrantholders. Any such
calculations will be made available to a Warrantholder for
inspection at the Warrant Agent's Office. Neither the Company
nor such third party shall have any responsibility for good
faith errors or omissions in calculating the Alternative
Settlement Amount.
(c) For purposes of this Agreement, an "Extra-
ordinary Event" shall mean any one of the events, circum-
stances or causes listed below:
(i) a suspension or absence of trading on the
Hong Kong Stock Exchange Ltd. (the "HKSE") of all
the stocks which then comprise the Index or a
successor index; or
(ii) the enactment, publication, decree or
other promulgation of any statute, regulation, rule
or order
<PAGE> 32
27
of any court or any other U.S. or non-U.S.
governmental authority which would make it unlawful
for the Company to perform any of its obligations
under this Agreement or the Warrants; or
(iii) any outbreak or escalation of
hostilities or other national or international
calamity or crisis (including, without limitation,
natural calamities which in the opinion of the
Company may materially and adversely affect the
economy of Hong Kong or the trading of securities
generally on the HKSE) which has or will have a
material adverse effect on the ability of the
Company to perform its obligations under the
Warrants or to modify the hedge of its position with
respect to the Index.
For the purposes of determining whether an
Extraordinary Event has occurred: (1) a limitation on the
hours or number of days of trading will not constitute an
Extraordinary Event if it results from an announced change in
the regular business hours of the HKSE, and (2) an "absence of
trading" on the HKSE will not include any time when the HKSE
itself is closed for trading under ordinary circumstances.
(d) For purposes of this Agreement, an
"Exercise Limitation Event" shall mean any one of the events,
circumstances or causes listed below:
(i) a suspension or absence of trading on the
HKSE of (a) 20% or more of the stocks which then
comprise the Index or a Successor Index and/or (b)
the stocks of any three of the four most highly
capitalized companies included in the stocks which
then comprise the Index or a Successor Index; or
(ii) the suspension or material limitation on
the Hong Kong Futures Exchange Ltd. (the "HK Futures
Exchange") or any other major futures or securities
market of trading in futures or options contracts
related to the Hang Seng Index, the Index or a
Successor Index.
For the purposes of determining whether an
Exercise Limitation Event has occurred: (1) a limitation on
the hours or number of days of trading will not constitute an
Exercise Limitation Event if it results from an announced
change in the regular business hours of the relevant exchange,
(2) a decision to permanently discontinue trading in the
relevant contract will not constitute an Exercise Limitation
Event, (3) a suspension in trading in a futures or options
contract on the Hang Seng Index, the Index or a
<PAGE> 33
28
Successor Index by the HK Futures Exchange or other major
futures or securities market by reason of (x) a price change
violating limits set by the HK Futures Exchange or such
futures or securities market, (y) an imbalance of orders
relating to such contracts or (z) a disparity in bid and ask
quotes relating to such contracts will constitute a suspension
or material limitation of trading in futures or options con-
tracts related to the Hang Seng Index, the Index or a
Successor Index, (4) an "absence of trading" on the HK Futures
Exchange or a major futures or securities market on which
futures or options contracts related to the Hang Seng Index,
the Index or a Successor Index are traded will not include any
time when the HK Futures Exchange or such futures or
securities market, as the case may be, itself is closed for
trading under ordinary circumstances and (5) the occurrence of
an Extraordinary Event described in clause (i) of the
definition of Extraordinary Event will not constitute, and
will supersede the occurrence of, an Exercise Limitation
Event.
SECTION 2.04. Limitation of Number of
Exercisable Warrants. All exercises of Warrants (other than
on the Expiration Date or the Delisting Date or upon
cancellation of the Warrants as provided in Section 2.03(b))
shall be subject, at the Company's option, to the limitation
that not more than 1,000,000 Warrants in total may be
exercised on any Exercise Date and not more than 250,000
Warrants may be exercised by or on behalf of any person or
entity, either individually or in concert with any other
person or entity, on any Exercise Date. If any New York
Business Day would otherwise, under the terms hereof, be the
Exercise Date in respect of more than 1,000,000 Warrants, then
upon the Company's exercising such option (by giving notice
thereof to the Warrant Agent not later than 5:00 p.m., New
York City time, on such Exercise Date), 1,000,000 of such
Warrants shall be deemed exercised on such Exercise Date
[(selected by the Warrant Agent on a pro rata basis, but if, as
a result of such pro rata selection, any Registered Holders
would be deemed to have exercised less than 500 Warrants, then
the Warrant Agent shall first select additional of such
holders, Warrants so that no holder shall be deemed to have
exercised less than 500 Warrants)], and the remainder of such
Warrants (the "Remaining Warrants") shall be deemed exercised
on the following New York Business Day (subject to successive
applications of this Section 2.04); provided that any Remain-
ing Warrant in respect of which a Notice of Exercise was
delivered on a given Notice Date shall be deemed exercised
before any other Warrants in respect of which a Notice of
Exercise was delivered on a later Notice Date. If any
individual Warrantholder attempts to exercise more than
250,000 Warrants on any New York Business Day, then at the
<PAGE> 34
29
Company's election (as notified to the Warrant Agent by giving
notice thereof to the Warrant Agent not later than 5:00 p.m.,
New York City time, on such New York Business Day) 250,000 of
such Warrants shall be deemed exercised on such New York
Business Day and the remainder shall be deemed exercised on
the following New York Business Day (subject to successive
applications of this Section 2.04). The date on which any
Warrant is deemed exercised under the preceding sentences
shall for all purposes of this Agreement be the "Exercise
Date" in respect of such Warrants.
SECTION 2.05. Covenant of the Company. The
Company covenants, for the benefit of the Warrantholders, that
it will not seek the delisting of the Warrants from, or
suspension of their trading on, the AMEX unless the Company
has, at the same time, arranged for listing on another United
States national securities exchange.
SECTION 2.06. Return of Money Held Unclaimed
for Two Years. Except as otherwise provided herein, any money
deposited with or paid to the Warrant Agent for the payment of
the Cash Settlement Value or Alternative Settlement Amount of
any Warrants and not applied but remaining unclaimed for two
years after the date upon which such Cash Settlement Value or
Alternative Settlement Amount shall have become due and
payable shall be repaid by the Warrant Agent to the Company
and the holders of such Warrants shall thereafter look only to
the Company for any payment which such holders may be entitled
to collect and all liability of the Warrant Agent with respect
to such money shall thereupon cease; provided that the Warrant
Agent, before making any such repayment, may at the expense of
the Company notify (i) in the case of Certificated Warrants,
the Registered Holders or (ii) in the case of Book-Entry
Warrants, the Participants concerned, that said money has not
been so applied and remains unclaimed and that after a date
named in the notification any unclaimed balance of said money
then remaining will be returned to the Company.
SECTION 2.07. Return of Global Warrant
Certificate. In the event a Global Warrant Certificate is
issued, at such time as all of the Warrants evidenced by such
Certificate have been exercised (including pursuant to an
automatic exercise) or otherwise canceled and all payments to
the Participants made as provided herein, the Warrant Agent
shall destroy the canceled Global Warrant Certificate (unless
instructed by the Company to deliver the Global Warrant
Certificate to the Company) and shall provide a certificate of
destruction to the Company.
<PAGE> 35
30
ARTICLE III
OTHER PROVISIONS RELATING TO
RIGHTS OF WARRANTHOLDERS
SECTION 3.01. Warrantholder of Warrant May
Enforce Rights. Notwithstanding any of the provisions of this
Agreement, any Warrantholder, without the consent of the
Warrant Agent, may, in and for its own behalf, enforce, and
may institute and maintain, any suit, action or proceeding
against the Company suitable to enforce, or otherwise in
respect of, its right to exercise, and to receive payment for,
its Warrants as provided in this Agreement.
ARTICLE IV
WARRANTS ACQUIRED BY THE COMPANY;
PAYMENT OF TAXES
SECTION 4.01. Warrants Acquired by the
Company. In the event the Company shall purchase or otherwise
acquire Warrants, such Warrants may, at the option of the
Company, be (i) in the case of Certificated Warrants,
delivered to the Warrant Agent, and if so delivered, the
Warrant Agent shall promptly note the cancellation of such
Warrants on the records of the Warrant Agent or (ii) in the
case of Book-Entry Warrants, surrendered free through a
Participant to the Depository for credit to the account of the
Warrant Agent maintained at the Depository, and if so
credited, the Warrant Agent shall promptly note the
cancellation of such Warrants by notation on the records of
the Warrant Agent. In the case of Book-Entry Warrants, such
Warrants may also, at the option of the Company, be resold by
the Company directly or to or through any of its affiliates in
lieu of being surrendered to the Depository. No Warrant
Certificate shall be countersigned in lieu of or in exchange
for any Warrant which is canceled as provided herein, except
as otherwise expressly permitted by this Agreement which tax
or other governmental charge shall be paid by the appropriate
Warrantholder or Registered Holder.
Any canceled Warrant Certificate held by the
Warrant Agent under this Agreement shall be destroyed by the
Warrant Agent unless otherwise directed by the Company, and
the Warrant Agent shall deliver a certificate of destruction
to the Company evidencing the same.
SECTION 4.02. Payment of Taxes. The Company
will pay all stamp, withholding and other duties, if any,
attributable to the initial issuance of Warrants; provided,
<PAGE> 36
31
however, that, anything in this Agreement to the contrary
notwithstanding, the Company shall not be required to pay any
tax or other governmental charge which may be payable in
respect of any transfer involving any beneficial or record
interest in, or ownership interest of, any Warrants, Warrant
Certificates or Global Warrant Certificate which tax or other
governmental charge shall be paid by the appropriate
Warrantholder or Registered Holder.
ARTICLE V
CONCERNING THE WARRANT AGENT
SECTION 5.01. Warrant Agent. (a) The Company
hereby appoints Citibank, N.A. ("Citibank") as Warrant Agent
of the Company in respect of the Warrants upon the terms and
subject to the conditions set forth herein; and Citibank
hereby accepts such appointment. The Warrant Agent shall have
the powers and authority granted to and conferred upon it in
this Agreement and such further powers and authority to act on
behalf of the Company as the Company may hereafter grant to or
confer upon it. All of the terms and provisions with respect
to such powers and authority contained in any Warrant
Certificates or the Global Warrant Certificate are subject to
and governed by the terms and provisions hereof.
(b) Citibank covenants and agrees to maintain
an office, staffed by qualified personnel, with adequate
facilities for the discharge of its responsibilities under
this Agreement, including, without limitation, the computation
of the Cash Settlement Value and the timely settlement of the
Warrants upon exercise thereof.
SECTION 5.02. Conditions of Warrant Agent's
Obligations. The Warrant Agent accepts its obligations herein
set forth upon the terms and conditions hereof, including the
following, to all of which the Company agrees and to all of
which the rights hereunder of the holders from time to time of
the Warrants shall be subject:
(a) The Company agrees promptly to pay the
Warrant Agent the compensation to be agreed upon
with the Company for all services rendered by the
Warrant Agent and to reimburse the Warrant Agent for
its reasonable out-of-pocket expenses (including
attorneys' fees and expenses) incurred by the
Warrant Agent without negligence, bad faith or
breach of this Agreement on its part in connection
with the services rendered by it hereunder. The
Company also agrees to indemnify the Warrant Agent
for, and to hold it harmless against, any
<PAGE> 37
32
loss, liability or expense (including reasonable
attorneys' fees and expenses) incurred without
negligence, bad faith or breach of this Agreement on
the part of the Warrant Agent, arising out of or in
connection with its acting as such Warrant Agent
hereunder, as well as the reasonable costs and
expenses of defending against any claim of liability
in the premises.
(b) In acting under this Agreement, the
Warrant Agent is acting solely as agent of the
Company and does not assume any obligation or
relationship of agency or trust for or with any of
the owners or holders of the Warrants.
(c) The Warrant Agent may consult with counsel
satisfactory to it, and the opinion of such counsel
shall be full and complete authorization and
protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in
accordance with the opinion of such counsel.
(d) The Warrant Agent shall be protected and
shall incur no liability for or in respect of any
action taken or thing suffered by it in reliance
upon any notice, direction, consent, certificate,
affidavit, statement or other paper or document
reasonably believed by it to be genuine and to have
been presented or signed by the proper parties.
(e) The Warrant Agent, and its officers,
directors and employees, may become the owner of, or
acquire any interest in, any Warrants or other
obligations of the Company, with the same rights
that it or they would have if it were not the
Warrant Agent hereunder and, to the extent permitted
by applicable law, it or they may engage or be
interested in any financial or other transaction
with the Company and may act on, or as depository,
trustee or agent for, any committee or body of
holders of Warrants or other obligations of the
Company as freely as if it were not the Warrant
Agent hereunder.
(f) The Warrant Agent shall not be under any
liability for interest on any moneys at any time
received by it pursuant to any of the provisions of
this Agreement nor shall it be obligated to
segregate such moneys from other moneys held by it,
except as required by law. The Warrant Agent shall
not be responsible for advancing funds on behalf of
the Company.
<PAGE> 38
33
(g) The Warrant Agent shall not be under any
responsibility with respect to the validity or
sufficiency of this Agreement or the execution and
delivery hereof (except the due authorization,
execution and delivery hereof by the Warrant Agent)
or with respect to the validity or execution of the
Warrant Certificates or the Global Warrant
Certificate (except its countersignature thereof).
(h) The recitals contained herein and in the
Warrant Certificates or the Global Warrant
Certificate (except as to the Warrant Agent's
countersignature thereon) shall be taken as the
statements of the Company, and the Warrant Agent
assumes no responsibility for the correctness of the
same.
(i) The Warrant Agent shall be obligated to
perform such duties as are herein specifically set
forth, and no implied duties or obligations shall be
read into this Agreement against the Warrant Agent.
The Warrant Agent shall not be under any obligation
to take any action hereunder likely to involve it in
any expense or liability, the payment of which is
not, in its reasonable opinion, assured to it. The
Warrant Agent shall not be accountable or under any
duty or responsibility for the application by the
Company of any proceeds. The Warrant Agent shall
have no duty or responsibility in case of any
default by the Company in the performance of its
covenants or agreements contained in any Warrant
Certificate or the Global Warrant Certificate or in
the case of the receipt of any written demand from a
holder of a Warrant with respect to such default,
including, without limiting the generality of the
foregoing, any duty or responsibility to initiate or
attempt to initiate any proceedings at law or other-
wise or, except as provided in Section 6.02 hereof,
to make any demand upon the Company.
SECTION 5.03. Resignation and Appointment of
Successor. (a) The Company agrees, for the benefit of the
holders from time to time of the Warrants, that there shall at
all times be a Warrant Agent hereunder until all the Warrants
are no longer outstanding or until moneys for the payment of
all outstanding Warrants, if any, shall have been paid to the
Warrant Agent and shall have been returned to the Company as
provided in Section 2.06, whichever occurs earlier.
(b) The Warrant Agent may at any time resign
as such agent by giving written notice to the Company of such
intention on its part, specifying the date on which its
<PAGE> 39
34
desired resignation shall become effective, subject to the
appointment of a successor Warrant Agent and acceptance of
such appointment by such successor Warrant Agent as herein-
after provided. The Warrant Agent hereunder may be removed at
any time by the filing with it of an instrument in writing
signed by or on behalf of the Company and specifying such
removal and the date when it shall become effective. Such
resignation or removal shall take effect upon the appointment
by the Company, as hereinafter provided, of a successor
Warrant Agent (which shall be a banking institution organized
under the laws of the United States of America or one of the
states thereof and having an office south of Chambers Street
in the Borough of Manhattan, The City of New York) and the
acceptance of such appointment by such successor Warrant
Agent. In the event a successor Warrant Agent has not been
appointed and accepted its duties within 90 days of the
Warrant Agent's notice of resignation, the Warrant Agent may
apply to any court of competent jurisdiction for the designa-
tion of a successor Warrant Agent. The obligation of the
Company under Section 5.02(a) shall continue to the extent set
forth therein notwithstanding the resignation or removal of
the Warrant Agent.
(c) In case at any time the Warrant Agent
shall give notice of its intent to resign, or shall be
removed, or shall become incapable of acting, or shall be
adjudged bankrupt or insolvent, or make an assignment for the
benefit of its creditors, or consent to the appointment of a
receiver or custodian of all or any substantial part of its
property, or shall admit in writing its inability to pay or
meet its debts as they mature, or if a receiver or custodian
of it or of all or any substantial part of its property shall
be appointed, or if any public officer shall have taken charge
or control of the Warrant Agent or of its property or affairs
for the purpose of rehabilitation, conservation or
liquidation, a successor Warrant Agent, qualified as
aforesaid, shall be promptly appointed by the Company by an
instrument in writing, filed with the successor Warrant Agent.
Upon the appointment as aforesaid of a successor Warrant Agent
and acceptance by the latter of such appointment, the Warrant
Agent so superseded shall cease to be Warrant Agent hereunder.
(d) Any successor Warrant Agent appointed
hereunder shall execute, acknowledge and deliver to its
predecessor and to the Company an instrument accepting such
appointment hereunder, and thereupon such successor Warrant
Agent, without any further act, deed or conveyance, shall
become vested with all the authority, rights, powers, trust,
immunities, duties and obligations of such predecessor with
like effect as if originally named as Warrant Agent hereun-
<PAGE> 40
35
der, and such predecessor, upon payment of its charges and
disbursements then unpaid, shall thereupon become obligated to
transfer, deliver and pay over, and such successor Warrant
Agent shall be entitled to receive, all moneys, securities and
other property on deposit with or held by such predecessor
(including, without limitation, the Warrant Register), as
Warrant Agent hereunder.
(e) Any corporation into which the Warrant
Agent hereunder may be merged or converted or any corporation
with which the Warrant Agent may be consolidated, or any
corporation resulting from any merger, conversion or
consolidation to which the Warrant Agent shall be a party, or
any corporation to which the Warrant Agent shall sell or
otherwise transfer all or substantially all the assets and
business of the Warrant Agent, provided that it shall be
qualified as aforesaid, shall be the successor Warrant Agent
under this Agreement without the execution or filing of any
paper or any further act on the part of any of the parties
hereto.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. Amendment. (a) This Agreement
and the terms of the Warrants may be amended by the Company,
the Warrant Agent and the Determination Agent, without the
consent of the Warrantholders, for the purpose of curing any
ambiguity, or of curing, correcting or supplementing any
defective or inconsistent provision contained herein or
therein or in any other manner which the Company may deem
necessary or desirable and which will not adversely affect the
interests of the holders of the Warrants. Notwithstanding
anything in this Section 6.01 to the contrary, this Agreement
may not be amended to provide for the countersigning by the
Warrant Agent of Warrant Certificates evidencing in the
aggregate in excess of 2,000,000 Warrants unless and until the
Warrant Agent has received notice from the AMEX or any
successor United States national securities exchange that the
additional Warrants in excess of 2,000,000 have been approved
for listing on such exchange.
(b) The Company, the Warrant Agent and the
Determination Agent may modify or amend this Agreement, with
the consent of Warrantholders holding not less than a majority
in number of the then outstanding Warrants affected by such
modification or amendment, for any purpose; provided, however,
that no such modification or amendment that decreases the
Strike Index, shortens the period of time during which the
Warrants may be exercised, or otherwise
<PAGE> 41
36
materially and adversely affects the exercise rights of the
Warrantholders or reduces the percentage of the number of
outstanding Warrants, the consent of whose holders is required
for modification or amendment of this Agreement, may be made
without the consent of each Warrantholder affected thereby.
SECTION 6.02. Notices and Demands to the
Company, the Warrant Agent and the Determination Agent. If the
Warrant Agent or the Determination Agent shall receive any
notice or demand addressed to the Company by any Warrantholder
pursuant to the provisions of this Agreement, the Warrant
Agent or the Determination Agent, as the case may be, shall
promptly forward such notice or demand to the Company.
SECTION 6.03. Addresses for Notices. Any
communications to the Warrant Agent with respect to this
Agreement shall be addressed to Citibank, N.A., 120 Wall
Street, New York, New York 10043, Attention: Corporate Trust
Department (telephone: (212) 412-6209; facsimile:
(212) 480-1613), and any communications to the Company with
respect to this Agreement shall be addressed to Paine Webber
Group Inc., 1285 Avenue of the Americas, New York, New York
10019, Attention: Secretary (telephone: (212) 713-6277;
facsimile: (212) 713-6119), and any communications to the
Determination Agent with respect to this Agreement shall be
addressed to PaineWebber Incorporated, 1285 Avenue of the
Americas, New York, New York 10019, Attention: John Braddock
(telephone (212) 713-3508; facsimile: (212) 582-1650) (or such
other address as shall be specified in writing by the Warrant
Agent, the Company or the Determination Agent, respectively).
SECTION 6.04. Notices to Holders. The Company
may cause to have notice given to the holders of Warrants by
providing the Warrant Agent with a form of notice to be
distributed by (i) in the case of Certificated Warrants, the
Warrant Agent to the Warrantholders or (ii) in the case of
Book-Entry Warrants, the Depository with a form of such notice
to be distributed by the Depository to Participants in
accordance with the custom and practices of the Depository.
SECTION 6.05. Obtaining of Approvals. The
Company will from time to time take all action which may be
necessary to obtain and keep effective (a) any and all
permits, consents and approvals of governmental agencies and
authorities and the AMEX or any successor national securities
exchange and (b) any and all filings or notices under United
States Federal and state securities laws, which
<PAGE> 42
37
may be or become required in connection with the issuance,
sale, trading, transfer or delivery of the Warrant
Certificates, the Global Warrant Certificate or the exercise
of the Warrants.
SECTION 6.06. Persons Having Rights Under This
Agreement. Nothing in this Agreement expressed or implied and
nothing that may be inferred from any of the provisions hereof
is intended, or shall be construed, to confer upon, or give
to, any person or corporation other than the Company, the
Warrant Agent, the registered holder of the Global Warrant
Certificate and the Warrantholders any right, remedy or claim
under or by reason of this Agreement or of any covenant,
condition, stipulation, promise or agreement hereof; and all
covenants, conditions, stipulations, promises and agreements
contained in this Agreement shall be for the sole and
exclusive benefit of the Company, the Warrant Agent, and their
respective successors, the registered holder of the Global
Warrant Certificate and of the Warrantholders.
SECTION 6.07. Inspection of Agreement. A copy
of this Agreement shall be available at all reasonable times
at the Warrant Agent's Office for inspection by the Warrant-
holders, Participants or any person certified by any Partic-
ipant to be an indirect participant of the Depository or any
person certified by any Participant to be a Warrantholder, in
each case, on behalf of whom such Participant holds Warrants.
SECTION 6.08. Headings. The descriptive
headings of the several Articles and Sections of this
Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the
provisions hereof.
SECTION 6.09. Counterparts. This Agreement
may be executed in any number of counterparts, each of which
so executed shall be deemed to be an original; but such
counterparts shall together constitute but one and the same
instrument.
SECTION 6.10. APPLICABLE LAW. THIS AGREEMENT
AND EACH WARRANT SHALL BE GOVERNED BY, AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
<PAGE> 43
38
IN WITNESS WHEREOF, this Agreement has been
duly executed by the parties hereto as of the day and year
first above written.
PAINE WEBBER GROUP INC.
By ____________________
Name:
Title:
CITIBANK, N.A.
By ____________________
Name:
Title:
PAINEWEBBER INCORPORATED
By ___________________
Name:
Title:
<PAGE> 44
1
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
[FACE]
No. P- CUSIP No.___________
PAINE WEBBER GROUP INC.
AMEX Hong Kong 30 Index Put Warrants
Expiring January 17, 1996
This Warrant Certificate certifies that
, or registered assigns, is the registered
holder of AMEX Hong
Kong 30 Index Put Warrants Expiring January 17, 1996 (the
"Warrants"). Upon receipt by the Warrant Agent of this
Warrant Certificate and the notice of exercise on the reverse
hereof (or a notice of exercise in substantially identical
form delivered herewith), duly completed and executed, at the
offices of the Warrant Agent in the Borough of Manhattan, The
City of New York, each Warrant entitles the beneficial owner
thereof (each a "Warrantholder") to receive, subject to the
conditions set forth herein and in the Warrant Agreement, from
Paine Webber Group Inc. (the "Company") the cash settlement
value in U.S. dollars (the "Cash Settlement Value") equal to
the quotient (rounded down to the nearest cent) of (A) the
amount, if any, by which _____ (the "Strike Index") exceeds
the closing level of the AMEX Hong Kong 30 Index (the
"Index"), as compiled and published by the American Stock
Exchange ("AMEX"), on the applicable Valuation Date for such
Warrant (the "Spot Index"), divided by (B) three, divided by (C)
a fixed Hong Kong dollar/U.S. dollar exchange rate of H.K.$
______ per U.S. $1.00; provided, however, that if such amount
is less than or equal to zero, then the Cash Settlement Value
shall be zero. In no event shall a Warrantholder be entitled
to any interest on any Cash Settlement Value.
Subject to the terms of the Warrant Agreement,
each Warrant may be irrevocably exercised, in whole but not in
part, at or prior to 3:00 p.m., New York City time, on any New
York Business Day from its date of issuance until 3:00 p.m.,
New York City time, on the earlier of (i) the New York
Business Day immediately preceding January 17, 1996 (the
"Expiration Date") and (ii) the Delisting Date (as defined
herein), at which time the Warrants shall expire and
<PAGE> 45
A-2
all Warrants evidenced hereby shall be automatically exercised
and otherwise shall be void. Except in the case of automatic
exercise or cancellation of the Warrants, as set forth herein
and in the Warrant Agreement, not fewer than 500 Warrants may
be exercised by or on behalf of any one Warrantholder at any
one time.
Reference is hereby made to the further
provisions of this Warrant Certificate set forth on the
reverse hereof and such further provisions shall for all
purposes have the same effect as though fully set forth at
this place.
This Warrant Certificate shall not be valid
unless countersigned by the Warrant Agent.
IN WITNESS WHEREOF, Paine Webber Group Inc. has
caused this instrument to be duly executed.
Dated: January __, 1994 PAINE WEBBER GROUP INC.
By______________________
Donald B. Marron
Chairman and Chief
Executive Officer
[SEAL]
Attest:
By________________________
Theodore A. Levine
Secretary
Countersigned as of the
date above written:
CITIBANK, N.A.,
as Warrant Agent
By_________________________
Authorized Officer
<PAGE> 46
A-3
[FORM OF WARRANT CERTIFICATE]
[REVERSE]
PAINE WEBBER GROUP INC.
The Warrants evidenced by this Warrant
Certificate are part of a duly authorized issue of Warrants
issued by the Company pursuant to a Warrant Agreement, dated
as of January __, 1994 (the "Warrant Agreement"), among the
Company, Citibank, N.A. (the "Warrant Agent") and PaineWebber
Incorporated (the "Determination Agent") and is subject to the
terms and provisions contained in the Warrant Agreement, to
all of which terms and provisions each Warrantholder consents
by acceptance of this Warrant Certificate and which Warrant
Agreement is hereby incorporated by reference in and made a
part of this Warrant Certificate. A copy of the Warrant
Agreement is on file at the Warrant Agent's Office (as defined
herein).
The Warrants constitute direct, unconditional
and unsecured obligations of the Company and rank on a parity
with the Company's other unsecured contractual obligations and
with the Company's unsecured and unsubordinated debt.
Subject to the provisions hereof and of the
Warrant Agreement, each Warrant may be irrevocably exercised,
in whole but not in part, at or prior to 3:00 p.m., New York
City time, on any New York Business Day (as defined herein)
from its date of issuance until 3:00 p.m., New York City time,
on the earlier of (i) the New York Business Day immediately
preceding the Expiration Date and (ii) the Delisting Date (as
defined herein). The holder of Warrants evidenced by this
Warrant Certificate may exercise them by surrendering this
Warrant Certificate and attached notice of exercise (or a
notice of exercise in substantially identical form), duly
completed and executed, to the Warrant Agent's offices in the
Borough of Manhattan, The City of New York (the "Warrant
Agent's Office"), which are, on the date hereof, located at
[111 Wall Street, New York, New York 10043, Attention:
Corporate Trust Department]. Not fewer than 500 Warrants may
be exercised by or on behalf of any one Warrantholder at any
one time.
The "Cash Settlement Value" of an exercised
Warrant shall be an amount in U.S. Dollars equal to the
quotient (rounded down to the nearest cent) of (A) the amount,
if any, by which ______ (the "Strike Index") exceeds the
closing level of the Index, as compiled and published by the
AMEX, on the applicable Valuation Date (as defined herein) for
such Warrant (the "Spot Index"), divided by (B) three, divided
by (C) a fixed Hong Kong dollar/U.S. dollar
<PAGE> 47
A-4
exchange rate of H.K.$______ per U.S. $1.00; provided,
however, that if such amount is less than or equal to zero,
then the Cash Settlement Value shall be zero.
The Company has appointed PaineWebber
Incorporated to be its Determination Agent to make such
calculations as may be required upon the occurrence of certain
circumstances, as described in the Warrant Agreement and
herein, including, without limitation, calculation of the Cash
Settlement Value under certain circumstances or the
Alternative Settlement Amount (as defined herein), as
applicable, of a Warrant. The Determination Agent shall act
as an independent expert and not as an agent of the Company,
and, unless otherwise provided by the Warrant Agreement, its
calculations and determinations under the Warrant Agreement
and this Warrant Certificate shall, absent manifest error, be
final and binding on the Company, the Warrant Agent and the
Warrantholders.
In the event that the Index is not publicly
announced by the AMEX on a Valuation Date, but is publicly
announced by another person or party not affiliated with the
Company and acceptable to the Company (the "Third Party"), the
applicable Cash Settlement Value shall nevertheless be
calculated by reference to the value of the closing quotation
for the Index so announced by the Third Party.
In the event that prior to a Valuation Date the
AMEX or the Third Party makes a material change in the formula
for or the method of calculating the Index, the Determination
Agent shall make such calculations as may be required to
determine the applicable Cash Settlement Value using the
formula and method of calculating the Index as was in effect
prior to such change or modification.
If on a Valuation Date either the AMEX or any
Third Party discontinues publication of the Index and
publishes a successor or substitute index that the Company
determines, in its sole discretion, to be comparable to the
Index (any such index being a "Successor Index"), then the
Determination Agent shall determine the Spot Index for any
date thereafter based on the closing level of the Successor
Index on such date. If the AMEX and/or any Third Party
discontinues publication of the Index and/or any Successor
Index, the Company will cause the Determination Agent to
determine the applicable Cash Settlement Value based on the
formula and method used in calculating the Index or any
Successor Index as in effect on the date the Index or such
Successor Index was last published.
<PAGE> 48
A-5
The Determination Agent will have no
responsibility for good faith errors or omissions in
calculating or disseminating information regarding the Index,
any Successor Index, adjustments or calculations by the
Determination Agent in order to arrive at a calculation of a
stock index comparable to the Index or any Successor Index, or
the Cash Settlement Value or the Alternative Settlement
Amount, as applicable.
Subject to the Warrant Agreement and this
Warrant Certificate, and except in the case of exercise
(whether automatic or by notice of exercise) on the Expiration
Date or the Delisting Date, or in the event an Extraordinary
Event or Exercise Limitation Event (as such terms are defined
herein) is declared, or in the case of a postponement due to
there being exercised a number of Warrants in excess of the
maximum permitted number on a given day, the valuation date
(the "Valuation Date") for a Warrant shall be the first Index
Calculation Date (as defined herein) following the applicable
Exercise Date (as defined in the Warrant Agreement) on which
the Warrant Agent has received (i) in the case of Warrants
other than those held through the facilities of Centrale de
Livraison de Valeurs Mobilieres S.A. ("CEDEL") or the
Euroclear System ("Euroclear"), the Warrant Certificate
representing such Warrant, with the notice of exercise below
(or a notice of exercise in substantially identical form
delivered herewith), duly completed and executed, at or prior
to 3:00 p.m., New York City time (the "Notice Date"); and if
the Warrant Agent shall receive any such Warrant Certificate
after 3:00 p.m., New York City time, on such date, then such
Warrant Certificate shall be deemed to have been received at
or prior to 3:00 p.m., New York City time, on the next
succeeding New York Business Day (which shall be considered
the Notice Date), and in such event the Valuation Date shall
be the next Index Calculation Date following the New York
Business Day on which the Warrant Agent is deemed to have
received such Warrant Certificate together with the notice of
exercise or (ii) in the case of Warrants held through the
facilities of CEDEL or Euroclear, the notice of exercise (by
facsimile transmission) at or prior to 3:00 p.m., New York
City time; provided that the Warrant Certificate is received
by the Warrant Agent by 3:00 p.m., New York City time, on the
Index Calculation Date next succeeding the Exercise Date; and
if the Warrant Agent shall receive such notice of exercise
after 3:00 p.m., New York City time, on such date, then the
notice of exercise shall be deemed to have been received at or
prior to 3:00 p.m., New York City time, on the next succeeding
New York Business Day (which shall be considered the Notice
Date), and in such event the Valuation Date shall be the next
Index Calculation Date following the
<PAGE> 49
A-6
New York Business Day on which the Warrant Agent is deemed to
have received such notice of exercise; provided, however, that
if the Warrant Agent receives the Warrant Certificate after
3:00 p.m., New York City time, on the Valuation Date, then the
Exercise Date for such Warrant shall be the day on which such
Warrant Certificate is received or, if such day is not a New
York Business Day, the next succeeding New York Business Day,
and the Valuation Date for such Warrant shall be the first
Index Calculation Date following such Exercise Date; provided,
further, however, in the case of exercises by Euroclear
participants, Euroclear must by tested telex to the Warrant
Agent by 9:00 a.m., New York City time, on the Valuation Date
confirm that the Warrants will be received by the Warrant
Agent on such Date, provided that if such telex communication
is received after 9:00 a.m., New York City time, on the
Valuation Date, the Company will be entitled to direct the
Warrant Agent to reject the related Notice of Exercise or
waive the requirement for timely delivery of such telex
communication. Any Warrant Certificate received after 3:00
p.m., New York City time, on (i) the New York Business Day
immediately preceding the Expiration Date or (ii) the last New
York Business Day prior to the effective date on which the
Warrants are delisted from, or permanently suspended from
trading (within the meaning of the Securities Exchange Act of
1934 and the rules and regulations of the Securities and
Exchange Commission thereunder) on, the American Stock
Exchange and not accepted at the same time for listing on
another United States national securities exchange (such New
York Business Day being the "Delisting Date") or, in the case
of Warrants held through the facilities of CEDEL or Euroclear,
after 3:00 p.m., New York City time, on the first Index
Calculation Date following such Dates), shall be deemed not to
have been delivered and the related notice of exercise shall
be void and of no effect; provided, however, that if the
Company first receives notice of the delisting or suspension
of the Warrants on the same day on which such Warrants are
delisted or suspended, such day will be deemed the Delisting
Date for purposes of the Warrant Agreement and this Warrant
Certificate.
If the notice of exercise is not rejected as
provided in the Warrant Agreement, then the Warrant Agent or
the Determination Agent, as the case may be, will determine
the Cash Settlement Value of the exercised Warrants in
accordance with the terms of the Warrant Agreement. Except in
the case of Warrants subject to automatic exercise and for
Warrants that upon exercise entitle the holder thereof to
receive an Alternative Settlement Amount in lieu of the Cash
Settlement Value, if on any Valuation Date the Cash Settlement
Value for any Warrants then exercised would be
<PAGE> 50
A-7
zero, then in such case, the exercise of such Warrants shall
be ignored and the Warrant Certificate evidencing such
Warrants will be promptly returned by the Warrant Agent to the
registered holder of the Warrant by first class mail at the
Company's expense and such holder shall be permitted to
re-exercise such Warrants prior to the Expiration Date or the
Delisting Date.
Except in the case of Warrants subject to auto-
matic exercise and for Warrants that upon exercise entitle the
holder thereof to receive an Alternative Settlement Amount in
lieu of the Cash Settlement Value, payment shall be made
available to the appropriate holders on the fifth New York
Business Day following the Valuation Date for such Warrants
(or, if the Valuation Date is not a New York Business Day, on
the fifth New York Business Day following the New York
Business Day next succeeding the Valuation Date) in the form
of a cashier's check or an official bank check, or (in the
case of payments of at least $100,000) by wire transfer to a
U.S. dollar bank account maintained by such holder in the
United States (at the holder's election as specified in the
notice of exercise), in an amount equal to the aggregate Cash
Settlement Value of the exercised Warrants.
All Warrant Certificates for which the Warrant
Agent has not received a notice of exercise in proper form by
3:00 p.m., New York City time, on (i) the New York Business
Day preceding the Expiration Date or (ii) the Delisting Date,
as the case may be, or for which the Warrant Agent has
received a notice of exercise in proper form but with respect
to which timely delivery of the relevant Warrant Certificate
has not been made, and which have not been canceled prior to
such time, will be deemed automatically exercised on such Date
without any requirement of a notice of exercise to the Warrant
Agent. The Valuation Date for such Warrants shall be the
first Index Calculation Date following the Expiration Date or
the Delisting Date, as the case may be.
If the Company determines that an Extraordinary
Event or an Exercise Limitation Event has occurred and is
continuing on the Expiration Date or the Delisting Date, the
Cash Settlement Value with respect to the exercised Warrants
shall be equal to, and be calculated in the same manner as, an
Alternative Settlement Amount (treating the Expiration Date or
the Delisting Date, as the case may be, as the date on which
the Warrants were canceled), as provided below and in the
Warrant Agreement.
<PAGE> 51
A-8
Payment with respect to automatically exercised
Warrants shall be made available to the appropriate registered
holders of the Warrants in the form of a cashier's check or an
official bank check, or (in the case of payments of at least
$100,000) by wire transfer to a U.S. dollar bank account
maintained by such holder in the United States (at such
holder's election), on the fourth New York Business Day
following the Valuation Date for automatically exercised
Warrants (or if such Valuation Date is not a New York Business
Day, on the fourth New York Business Day following the New
York Business Day next succeeding such Valuation Date),
against receipt by the Warrant Agent at the Warrant Agent's
Office from the holder of its Warrant Certificates. Such
payment shall be in the amount of the aggregate Cash
Settlement Value in respect of the Warrants, evidenced by the
Warrant Certificates, that were exercised (whether
automatically or by notice of exercise) on the Expiration Date
or the Delisting Date, as the case may be.
Anything in the Warrant Agreement or in this
Warrant Certificate to the contrary notwithstanding, if the
Company determines that an Extraordinary Event or an Exercise
Limitation Event has occurred and is continuing on the Hong
Kong Business Day (as defined herein) with respect to which
the Spot Index on a Valuation Date is to be determined (the
"Applicable Hong Kong Business Day") then the Cash Settlement
Value of such Warrants in respect of an exercise shall be
calculated on the basis that the Valuation Date shall be the
next Index Calculation Date following an Applicable Hong Kong
Business Day on which there is no Extraordinary Event or
Exercise Limitation Event; provided, however, that if the Cash
Settlement Value of such Warrants is not calculated on or
prior to the Expiration Date or the Delisting Date, then the
Warrantholders will receive the Alternative Settlement Amount
in lieu of the Cash Settlement Value which shall be calculated
as if the Warrants had been canceled on the Expiration Date or
the Delisting Date, as the case may be.
If the Company determines that an Extraordinary
Event has occurred and is continuing and if it is expected by
the Company to continue, the Company may immediately cancel
the Warrants by notifying the Warrant Agent of such
cancellation (the date such Warrants are canceled being the
"Cancellation Date"), and each Warrantholder's rights with
respect to the Warrants and under the Warrant Agreement shall
thereupon cease; provided, however, that each Warrant shall be
exercised (even if such Warrant would not otherwise be
exercisable on such Date because of the Limit Option) on the
basis that the Valuation Date for such Warrant shall be the
Cancellation Date and each Warrantholder shall have the
<PAGE> 52
A-9
right to receive an Alternative Settlement Amount with respect
to its Warrants. The Company shall use its best efforts to
notify the Warrantholders promptly of such cancellation.
With respect to all Warrant Certificates as to
which the Valuation Date has been postponed or which have been
canceled as described above, payment shall be made available
to the appropriate registered holders of the Warrants in the
form of a cashier's check or an official bank check, or (in
the case of payments of at least $100,000) by wire transfer to
a U.S. dollar bank account maintained by such holder in the
United States (at such holder's election), on the third New
York Business Day following the date on which the Cash
Settlement Value or Alternative Settlement Amount, as the case
may be, has been calculated, against receipt by the Warrant
Agent at the Warrant Agent's Office from such holder of its
Warrant Certificates. Such payment shall be in the amount of
the aggregate Cash Settlement Value or Alternative Settlement
Amount, as the case may be, in respect of the Warrants
evidenced by such Warrant Certificates.
The "Alternative Settlement Amount" shall be an
amount, calculated by the Determination Agent, which shall be
determined by the Determination Agent, which is the greater of
(i) the average of the last sale prices, as available, of the
Warrants on the AMEX (or any successor securities exchange on
which the Warrants are listed) on the 30 trading days
preceding the date on which such Extraordinary Event was
declared, provided that, if the Warrants were not traded on
the AMEX (or such successor securities exchange) on at least
20 of such trading days, no effect will be given to this
clause (i) for the purpose of determining the Alternative
Settlement Amount, and (ii) the amount "X" calculated using
the formula set forth below:
T A
X = I + - x -
2 B
where
I = the Cash Settlement Value of the Warrants
determined as described above but, subject
to the following modifications:
(1) if the Calculation Date for such
Warrants is a date on which the Index or a
Successor Index is calculated and published,
for
<PAGE> 53
A-10
the purpose of determining such Cash Settlement
Value, the Spot Index will be determined as of
such Cancellation Date except that, if the Spot
Index as of such day is less than 90% of the
Spot Index as of the immediately preceding
Index Calculation Day, then the Spot Index will
be deemed to be 90% of the Spot Index on such
preceding Index Calculation Day; or
(2) if the Calculation Date for such
Warrants is a date on which the Index or a
Successor Index is not calculated or published,
for the purpose of determining such Cash
Settlement Value, the Spot Index will be deemed
to be the lesser of (i) the Spot Index as of
the first Index Calculation Day immediately
preceding the Cancellation Date except that, if
the Spot Index as of such day is less than 90%
of the Spot Index as of the second Index
Calculation Day immediately preceding such
Cancellation Date, 90% of the Spot Index as of
such second Index Calculation Day and (ii) the
arithmetic average of four amounts, being (a)
the Spot Index at each of the three successive
Index Calculation Days immediately preceding
the Cancellation Date and (b) the Spot Index at
the next Index Calculation Day; provided, that
if an Extraordinary Event described in clause
(i) of the definition of Extraordinary Event
continues for 30 consecutive days immediately
following such Cancellation Date, then the
Determination Agent shall calculate an amount
which, in its reasonable opinion, fairly
reflects the value of the stocks which comprise
the Index or any Successor Index on the Index
Calculation Day immediately following such
Cancellation Date which, subject to approval by
the Company (such approval not to be
unreasonably withheld), shall for purposes of
calculating the amount under this clause
(2)(ii) be treated as the figure arrived at
under clause (2)(ii)(b);
T = U.S. $_____, the initial offering price
per Warrant;
A = the total number of days from but
excluding the Cancellation Date for such
Warrants to and including the Expiration
Date; and
B = the total number of days from but
excluding the date the Warrants were
initially sold to and including the
Expiration Date.
<PAGE> 54
A-11
For purposes of determining "I" in the above
formula, in the event that the Determination Agent and the
Company are required, but have not, after good faith consul-
tation with each other and within five days following the
first day upon which such Alternative Settlement Amount may be
calculated in accordance with the above formula, agreed upon a
figure under clause 2(ii)(b) above which fairly reflects the
value of the stocks which comprise the Index on the
Cancellation Date, then the Determination Agent shall promptly
nominate a third party, subject to approval by the Company
(such approval not to be unreasonably withheld), to determine
such figure and calculate the Alternative Settlement Amount in
accordance with the above formula. Such party shall act as an
independent expert and not as an agent of the Company or the
Determination Agent, and its calculation and determination of
the Alternative Settlement Amount shall, absent manifest
error, be final and binding on the Company, the Warrant Agent,
the Determination Agent and the Warrantholders. Any such
calculations will be made available to a Warrantholder for
inspection at the Warrant Agent's Office. Neither the Company
nor such third party shall have any responsibility for good
faith errors or omissions in calculating the Alternative
Settlement Amount.
An "Extraordinary Event" shall mean any one of
the events, circumstances or causes listed below:
(i) a suspension or absence of trading on
the Hong Kong Stock Exchange Ltd. (the "HKSE") of
all of the stocks which then comprise the Index or a
successor or substitute index that the Company
determines, in its sole discretion, to be comparable
to the Index (a "Successor Index"); or
(ii) the enactment, publication, decree or
other promulgation of any statute, regulation, rule
or order of any court or any other U.S. or non-U.S.
governmental authority which would render it
unlawful for the Company to perform any of its
obligations under the Warrant Agreement or the
Warrants; or
(iii) any outbreak or escalation of
hostilities or other national or international
calamity or crisis (including, without limitation,
natural calamities which in the opinion of the
Company may materially and adversely affect the
economy of Hong Kong or the trading of securities
generally on the HKSE) which has or will have a
material adverse effect on the ability of the
Company to perform its obligations under the
Warrants or to modify the hedge of its position with
respect to the Index.
<PAGE> 55
A-12
An "Exercise Limitation Event" shall mean any
one of the events, circumstances or causes listed below:
(i) a suspension or absence of trading on the
HKSE of (a) 20% or more of the stocks which then
comprise the Index or a Successor Index and/or (b)
the stocks of any three of the four most highly
capitalized companies included in the stocks which
then comprise the Index or a Successor Index; or
(ii) the suspension or material limitation on
the Hong Kong Futures Exchange Ltd. (the "HK Futures
Exchange") or any other major futures or securities
market of trading in futures or options contracts
related to the Hang Seng Index, the Index or a
Successor Index.
All exercises of Warrants (other than on the
Expiration Date or the Delisting Date or upon cancellation of
the Warrants as described above) shall be subject, at the
Company's option, to the limitation that not more than
1,000,000 Warrants in total may be exercised on any Exercise
Date and not more than 250,000 Warrants may be exercised by or
on behalf of any person or entity, either individually or in
concert with any other person or entity, on any Exercise Date.
If any New York Business Day would otherwise, under the terms
hereof, be the Exercise Date in respect of more than 1,000,000
Warrants, then upon the Company's exercising such option (by
giving notice thereof to the Warrant Agent not later than 5:00
p.m., New York City time, on such Exercise Date), 1,000,000 of
such Warrants shall be deemed exercised on such Exercise Date
(selected by the Warrant Agent on a pro rata basis, but if, as
a result of such pro rata selection, any registered holders of
the Warrants would be deemed to have exercised less than 500
Warrants, then the Warrant Agent shall first select additional
of such holders' Warrants so that no holder shall be deemed to
have exercised less than 500 Warrants), and the remainder of
such Warrants (the "Remaining Warrants") shall be deemed
exercised on the following New York Business Day (subject to
successive applications of this paragraph); provided that any
Remaining Warrant in respect of which a notice of exercise was
delivered on a given Notice Date shall be deemed exercised
before any other Warrants in respect of which a notice of
exercise was delivered on a later Notice Date. If any
individual Warrantholder attempts to exercise more than
250,000 Warrants on any New York Business Day, then at the
Company's election (as notified to the Warrant Agent by giving
notice thereof to the Warrant Agent not later than 5:00 p.m.,
New York City time, on such New York Business Day), 250,000 of
such Warrants shall be deemed exercised on
<PAGE> 56
A-13
such New York Business Day and the remainder shall be deemed
exercised on the following New York Business Day (subject to
successive applications of this paragraph). The date on which
any Warrant is deemed exercised under the preceding sentences
shall for all purposes of this Warrant Certificate be deemed
to be the "Exercise Date" in respect of such Warrants.
Prior to due presentment for registration of
transfer, the Company, the Warrant Agent, and any agent of the
Company or the Warrant Agent, may deem and treat the
registered owner hereof as the absolute owner of the Warrants
evidenced hereby (notwithstanding any notation of ownership or
other writing hereon) for any purpose whatsoever, and as the
person entitled to exercise the rights represented by the
Warrants evidenced hereby, and neither the Company nor the
Warrant Agent, nor any agent of the Company or the Warrant
Agent, shall be affected by any notice to the contrary.
The Warrant Agent shall, in accordance with the
Warrant Agreement, from time to time register the transfer of
this Warrant Certificate upon the records to be maintained by
it for that purpose at the Warrant Agent's Office upon
surrender hereof, duly endorsed, or accompanied by a written
instrument or instruments of transfer in form satisfactory to
the Warrant Agent, duly executed by the registered holder(s)
hereof or by their duly appointed legal representative or duly
authorized attorney, such signature to be guaranteed by a bank
or trust company with a correspondent office in The City of
New York or by a member of a national securities exchange.
Upon any such registration of transfer, a new Warrant
Certificate shall be issued to the transferee(s).
As provided in the Warrant Agreement and
subject to certain limitations, this Warrant Certificate may
be exchanged for other Warrant Certificates, representing a
like number of Warrants, upon surrender to the Warrant Agent
of this Warrant Certificate at the Warrant Agent's Office.
No service charge shall be made for any
registration of transfer or exchange of this Warrant
Certificate, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that
may be imposed in connection with any registration of transfer
or exchange of this Warrant Certificate, other than exchanges
pursuant to the Warrant Agreement not involving any transfer.
<PAGE> 57
A-14
Capitalized terms included herein but not
defined herein have the meanings assigned thereto in the
Warrant Agreement.
References herein to "U.S. dollars", "U.S. $"
or "$" are to the lawful currency of the United States of
America, and references to "Hong Kong dollars" or "H.K.$" are
to the lawful currency of Hong Kong. As used herein, a "New
York Business Day" means any day other than a Saturday, Sunday
or a day on which either the AMEX or the New York Stock
Exchange is not open for securities trading or commercial
banks in New York City are required or authorized by law or
executive order to remain closed; a "Hong Kong Business Day"
means any day other than a Saturday or a Sunday or a day on
which commercial banks in Hong Kong are not open for a full
day of business; and an "Index Calculation Date" means any day
on which the Index or any Successor Index is calculated and
published.
The Warrant Agreement and the terms of the War-
rants are subject to amendment, as provided in the Warrant
Agreement.
THIS WARRANT CERTIFICATE SHALL BE GOVERNED BY,
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.
<PAGE> 58
A-15
NOTICE OF EXERCISE
Citibank, N.A.
Corporate Trust Department, 5th Floor
111 Wall Street
New York, New York 10043
1. This Notice DOES DOES NOT relate to
"Contingently Tendered Warrants" subject to a Limit Option, as
provided for in the Warrant Agreement. If this Notice of
Exercise relates to 500 or more Warrants and any of such
Warrants are Contingently Tendered Warrants, of such
Warrants are Contingently Tendered Warrants and are
not. If the Spot Index used to determine the Cash Settlement
Value of Contingently Tendered Warrants exceeds the Reference
Index by 20 points or more, a Notice of Exercise with respect
to such Contingently Tendered Warrants shall be void and of no
effect (and shall be disregarded for all purposes of the
Warrant Agreement).
2. Subject to paragraph 1, the undersigned
(the "Owner") hereby irrevocably exercises
Warrants (the "Exercised Warrants") and delivers to you
herewith a Warrant Certificate or Certificates, registered in
the Owner's name, representing a number of Warrants at least
equal to the number of Exercised Warrants. Each beneficial
owner of Warrants that is exercising Warrants pursuant to this
Notice of Exercise is exercising no fewer than 500 Warrants.
3. The Owner hereby directs the Warrant Agent
(a) to pay the Cash Settlement Value, if any, with respect to
the Exercised Warrants:
By cashier's check or an official
bank check;
or
By wire transfer to the following
U.S. dollar bank account in the United
States:
(Minimum payments of $100,000 only)
Bank:
<PAGE> 59
A-16
ABA Routing No.:
Account No.: Reference:
;and (b) if the number of Exercised Warrants is less than the
number of Warrants represented by the enclosed Warrant
Certificate, to deliver a Warrant Certificate representing the
unexercised Warrants to .
Dated: , 19
_____________________________
(Owner)
by
_________________________
Authorized Signature
Address:
Telephone: ( )
<PAGE> 60
EXHIBIT A-1
[FORM OF GLOBAL WARRANT CERTIFICATE]
No. GP___________________ CUSIP No. ___________
PAINE WEBBER GROUP INC.
Global Warrant Certificate Representing
AMEX Hong Kong 30 Index Put Warrants
Expiring January 17, 1996
This certifies that CEDE & CO., or registered
assigns, is the registered holder of AMEX Hong Kong 30
Index Put Warrants Expiring January 17, 1996 (the "Warrants").
Each Warrant entitles the beneficial owner thereof (each a
"Warrantholder") to receive, subject to the conditions set
forth herein and in the Warrant Agreement, from Paine Webber
Group Inc. (the "Company") the cash settlement value in U.S.
dollars (the "Cash Settlement Value") equal to the quotient
(rounded down to the nearest cent) of (A) the amount, if any,
by which (the "Strike Index") exceeds the closing
level of the AMEX Hong Kong 30 Index (the "Index"), as
compiled and published by the American Stock Exchange (the
"AMEX"), on the applicable Valuation Date for such Warrant
(the "Spot Index"), divided by (B) three, divided by (C) a fixed
Hong Kong dollar/U.S. dollar exchange rate of H.K.$______ per
U.S. $1.00; provided, however, that if such amount is less
than or equal to zero, then the Cash Settlement Value shall be
zero. In no event shall a Warrantholder be entitled to any
interest on any Cash Settlement Value.
Subject to the terms of the Warrant Agreement,
each Warrant may be irrevocably exercised, in whole but not in
part, at or prior to 3:00 p.m., New York City time, on any New
York Business Day (as defined herein) from its date of
issuance until 3:00 p.m., New York City time, on the earlier
of (i) the New York Business Day immediately preceding January
17, 1996 (the "Expiration Date") and (ii) the Delisting Date
(as defined herein), at which time the Warrants shall expire
and all Warrants evidenced hereby shall be automatically
exercised and otherwise shall be void. The holder of Warrants
evidenced by this Warrant Certificate may exercise them only
upon the delivery of such Warrant free to the Warrant Account
(as defined in the Warrant Agreement) and pursuant to an
irrevocable Notice of Exercise to the Warrant Agent from a
Participant (as defined in the Warrant Agreement) acting on
behalf of such Warrant-
<PAGE> 61
A-1-2
holder. Except in the case of automatic exercise or
cancellation of the Warrants, as set forth herein and in the
Warrant Agreement, not fewer than 500 Warrants may be
exercised by or on behalf of any one Warrantholder at any one
time.
This Global Warrant Certificate shall not be
valid unless countersigned by the Warrant Agent.
The Warrants evidenced by this Global Warrant
Certificate are part of a duly authorized issue of Warrants
issued by the Company pursuant to a Warrant Agreement, dated
as of January __, 1994 (the "Warrant Agreement"), among the
Company, Citibank, N.A. (the "Warrant Agent"), and PaineWebber
Incorporated (the "Determination Agent"), and is subject to
the terms and provisions contained in the Warrant Agreement,
to all of which terms and provisions the Warrantholders, the
entities through which such Warrantholders hold their
beneficial interests in the Warrants and the registered holder
of this Global Warrant Certificate consent by acceptance of
this Warrant Certificate by the Depository and which Warrant
Agreement is hereby incorporated by reference in and made a
part of this Warrant Certificate. A copy of the Warrant
Agreement is on file at the Warrant Agent's Office, which is
located at 111 Wall Street, 5th Floor, New York, New York
10043.
The Warrants constitute direct, unconditional
and unsecured obligations of the Company and rank on a parity
with the Company's other unsecured contractual obligations and
with the Company's unsecured and unsubordinated debt.
Subject to the Warrant Agreement and this
Global Warrant Certificate, and except in the case of exercise
(whether automatic or by notice of exercise), on the Expira-
tion Date or the Delisting Date, or in the event an Extraor-
dinary Event or Exercise Limitation Event (as such terms are
defined in the Warrant Agreement) is declared, or in the case
of a postponement due to there being exercised a number of
Warrants in excess of the maximum permitted number on a given
day, the valuation date (the "Valuation Date") for a Warrant
shall be the Index Calculation Date (as defined herein)
following the Exercise Date (as defined in the Warrant
Agreement) on which the Warrant Agent has received (i) in the
case of Warrants other than those held through the facilities
of Centrale de Livraison de Valeurs Mobilieres S.A. ("CEDEL")
or the Euroclear System ("Euroclear"), the Warrant, with the
Notice of Exercise (as defined in the Warrant Agreement) (or a
Notice of Exercise in substantially identical form delivered
herewith), duly completed and executed, at or prior to 3:00
p.m., New York
<PAGE> 62
A-1-3
City time (the "Notice Date"); and if the Warrant Agent shall
receive any such Warrant after 3:00 p.m., New York City time,
on such date, then such Warrant shall be deemed to have been
received at or prior to 3:00 p.m., New York City time, on the
next succeeding New York Business Day (which shall be
considered the Notice Date), and in such event the Valuation
Date shall be the next Index Calculation Date following the
New York Business Day on which the Warrant Agent is deemed to
have received such Warrant together with the Notice of
Exercise or (ii) in the case of Warrants held through the
facilities of CEDEL or Euroclear, the notice of exercise (by
facsimile transmission) at or prior to 3:00 p.m., New York
City time; provided that the Warrant is received by the
Warrant Agent by 3:00 p.m., New York City time, on the Index
Calculation Date next succeeding the Exercise Date; and if the
Warrant Agent shall receive such notice of exercise after 3:00
p.m., New York City time, on such date, then the notice of
exercise shall be deemed to have been received at or prior to
3:00 p.m., New York City time, on the next succeeding New York
Business Day (which shall be considered the Notice Date), and
in such event the Valuation Date shall be the next Index
Calculation Date following the New York Business Day on which
the Warrant Agent is deemed to have received such notice of
exercise; provided, however, that if the Warrant Agent
receives the Warrant after 3:00 p.m., New York City time, on
the Valuation Date, then the Exercise Date for such Warrant
shall be the day on which such Warrant is received or, if such
day is not a New York Business Day, the next succeeding New
York Business Day, and the Valuation Date for such Warrant
shall be the first Index Calculation Date following such
Exercise Date; provided, further, however, in the case of
exercises by Euroclear participants, Euroclear must by tested
telex to the Warrant Agent by 9:00 a.m., New York City time,
on the Valuation Date confirm that the Warrants will be
received by the Warrant Agent on such Date, provided that if
such telex communication is received after 9:00 a.m., New York
City time, on the Valuation Date, the Company will be entitled
to direct the Warrant Agent to reject the related Notice of
Exercise or waive the requirement for timely delivery of such
telex communication. Any Warrant received after 3:00 p.m.,
New York City time, on (i) the New York Business Day
immediately preceding the Expiration Date or (ii) the last New
York Business Day prior to the effective date on which the
Warrants are delisted from, or permanently suspended from
trading (within the meaning of the Securities Exchange Act of
1934 and the rules and regulations of the Securities and
Exchange Commission thereunder) on, the American Stock
Exchange and not accepted at the same time for listing on
another United States national securities exchange (such New
York Business Day
<PAGE> 63
A-1-4
being the "Delisting Date") (or, in the case of Warrants held
through the facilities of CEDEL or Euroclear, after 3:00 p.m.,
New York City time, on the first Index Calculation Date
following such Dates), shall be deemed not to have been
delivered and the related Notice of Exercise shall be void and
of no effect; provided, however, that if the Company first
receives notice of the delisting or suspension of the Warrants
on the same day on which such Warrants are delisted or
suspended, such day will be deemed the Delisting Date for
purposes of the Warrant Agreement and this Global Warrant
Certificate.
All Warrants for which the Warrant Agent has
not received a Notice of Exercise in proper form by 3:00 p.m.,
New York City time, on (i) the New York Business Day preceding
the Expiration Date or (ii) the Delisting Date, as the case
may be, or for which the Warrant Agent has received a notice
of exercise in proper form but with respect to which timely
delivery of the related Warrant has not been made, and which
have not been canceled prior to such time, will be deemed
automatically exercised on such Date without any requirement
of a Notice of Exercise to the Warrant Agent. The Valuation
Date for such Warrants shall be the first Index Calculation
Date following the Expiration Date or the Delisting Date, as
the case may be.
If the Company determines that an Extraordinary
Event or an Exercise Limitation Event has occurred and is
continuing on the Expiration Date or the Delisting Date, the
Cash Settlement Value with respect to the exercised Warrants
shall be equal to, and be calculated in the same manner as, an
Alternative Settlement Amount (treating the Expiration Date or
the Delisting Date, as the case may be, as the date on which
the Warrants were canceled), as provided below and in the
Warrant Agreement.
Anything in the Warrant Agreement or in this
Global Warrant Certificate to the contrary notwithstanding, if
the Company determines that an Extraordinary Event or an
Exercise Limitation Event has occurred and is continuing on
the Hong Kong Business Day (as defined herein) with respect to
which the Spot Index on a Valuation Date is to be determined
(the "Applicable Hong Kong Business Day"), then the Cash
Settlement Value of such Warrants in respect of an exercise
shall be calculated on the basis that the Valuation Date shall
be the next Index Calculation Date following an Applicable
Hong Kong Business Day on which there is no Extraordinary
Event or Exercise Limitation Event; provided, however, that if
the Cash Settlement Value of such Warrants is not calculated
on or prior to the Expiration Date or the Delisting Date, then
the Warrantholders will receive the
<PAGE> 64
A-1-5
Alternative Settlement Amount in lieu of the Cash Settlement
Value which shall be calculated as if the Warrants had been
canceled on the Expiration Date or the Delisting Date, as the
case may be.
If the Company determines that an Extraordinary
Event has occurred and is continuing and if it is expected by
the Company to continue, the Company may immediately cancel
the Warrants by notifying the Warrant Agent of such
cancellation (the date such Warrants are canceled being the
"Cancellation Date"), and each Warrantholder's rights with
respect to the Warrants and under the Warrant Agreement shall
thereupon cease; provided, however, that each Warrant shall be
exercised (even if such Warrant would not otherwise be
exercisable on such Date because of the Limit Option) on the
basis that the Valuation Date for such Warrant shall be the
Cancellation Date and each Warrantholder shall have the right
to receive an Alternative Settlement Amount with respect to
its Warrants. The Company shall use its best efforts to
notify the Warrantholders promptly of such cancellation.
All exercises of Warrants (other than on the
Expiration Date or the Delisting Date or upon cancellation of
the Warrants as described above) shall be subject, at the
Company's option, to the limitation that not more than
1,000,000 Warrants in total may be exercised on any Exercise
Date and not more than 250,000 Warrants may be exercised by or
on behalf of any person or entity, either individually or in
concert with any other person or entity, on any Exercise Date.
If any New York Business Day would otherwise, under the terms
hereof, be the Exercise Date in respect of more than 1,000,000
Warrants, then upon the Company's exercising such option (by
giving notice thereof to the Warrant Agent not later than 5:00
p.m., New York City time, on such Exercise Date), 1,000,000 of
such Warrants shall be deemed exercised on such Exercise Date
(selected by the Warrant Agent on a pro rata basis, but if, as
a result of such pro rata selection, any Warrantholders would
be deemed to have exercised less than 500 Warrants, then the
Warrant Agent shall first select additional of such holders'
Warrants so that no holder shall be deemed to have exercised
less than 500 Warrants), and the remainder of such Warrants
(the "Remaining Warrants") shall be deemed exercised on the
following New York Business Day (subject to successive
applications of this paragraph); provided that any Remaining
Warrant in respect of which notice of exercise was delivered
on a given Notice Date shall be deemed exercised before any
other Warrants in respect of which a notice of exercise was
delivered on a later Notice Date. If any individual
Warrantholder attempts to exercise more than 250,000
<PAGE> 65
A-1-6
Warrants on any New York Business Day, then at the Company's
election (as notified to the Warrant Agent by giving notice
thereof to the Warrant Agent not later than 5:00 p.m., New
York City time, on such New York Business Day) 250,000 of such
Warrants shall be deemed exercised on such New York Business
Day and the remainder shall be deemed exercised on the
following New York Business Day (subject to successive
applications of this paragraph). The date on which any Warrant
is deemed exercised under the preceding sentences shall for
all purposes of this Global Warrant Certificate be deemed to
be the "Exercise Date" in respect of such Warrants.
Prior to due presentment for registration of
transfer, the Company, the Warrant Agent, and any agent of the
Company or the Warrant Agent, may deem and treat the
registered owner hereof as the absolute owner of the Warrants
evidenced hereby (notwithstanding any notation of ownership or
other writing hereon) for any purpose whatsoever, and as the
person entitled to exercise the rights represented by the
Warrants evidenced hereby, and neither the Company nor the
Warrant Agent, nor any agent of the Company or the Warrant
Agent, shall be affected by any notice to the contrary.
The Warrant Agent shall, in accordance with the
Warrant Agreement, from time to time register the transfer of
this Global Warrant Certificate in its records (which may be
maintained electronically) to be maintained by it for that
purpose at the Warrant Agent's Office upon surrender hereof,
duly endorsed, or accompanied by a written instrument or
instruments of transfer in form satisfactory to the Warrant
Agent, duly executed by the registered holder hereof or by the
duly appointed legal representative or duly authorized
attorney thereof, such signature to be guaranteed by a bank or
trust company with a correspondent office in The City of New
York or by a member of a national securities exchange. Upon
any such registration of transfer, a new Global Warrant
Certificate shall be issued to the transferee(s).
Exercises of Warrants are subject to the Limit
Option as provided in the Warrant Agreement.
Capitalized terms included herein but not
defined herein have the meanings assigned thereto in the
Warrant Agreement.
References herein to "U.S. dollars", "U.S.$" or
"$" are to the lawful currency of the United States of
America, and references to "Hong Kong dollars" or "H.K.$"
<PAGE> 66
A-1-7
are to the lawful currency of Hong Kong. As used herein, a
"New York Business Day" means any day other than a Saturday,
Sunday or a day on which either the AMEX or the New York Stock
Exchange is not open for securities trading or commercial
banks in New York City are required or authorized by law or
executive order to remain closed; a "Hong Kong Business Day"
means any day other than a Saturday or a Sunday or a day on
which commercial banks in Hong Kong are not open for a full
day of business; and an "Index Calculation Date" means any day
on which the AMEX Index or any Successor Index is calculated
and published.
The Warrant Agreement and the terms of the War-
rants are subject to amendment, as provided in the Warrant
Agreement.
<PAGE> 67
A-1-8
THIS GLOBAL WARRANT CERTIFICATE SHALL BE
GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK.
IN WITNESS WHEREOF, Paine Webber Group Inc. has
caused this instrument to be duly executed.
Dated: , 1994 PAINE WEBBER GROUP INC.
By_________________________
Name:
Title:
[Corporate Seal]
Attest:
By__________________________
Assistant Secretary
Countersigned as of the
date above written:
CITIBANK, N.A.,
as Warrant Agent
By__________________________
Authorized Officer
<PAGE> 68
EXHIBIT A-2
NOTICE OF EXERCISE
[For Warrants Represented by the Global Warrant Certificate]
Citibank, N.A.
c/o Citicorp Data Distribution Inc.
404 Sette Drive
Paramus, New Jersey 07652
(Facsimile: (201) 262-7521)
(Telephone: (201) 262-5444)
1. We refer to the Warrant Agreement dated as
of January __, 1994 (the "Warrant Agreement"), among Paine
Webber Group Inc. (the "Company"), Citibank, N.A., as warrant
agent (the "Warrant Agent"), and PaineWebber Incorporated, as
determination agent (the "Determination Agent"). On behalf of
certain beneficial owners, each of whom is exercising no fewer
than 500 Warrants that are covered by this Notice of Exercise
and whose Warrants have been, or will be, transferred to the
Warrant Agent's DTC Participant Account--Citibank, N.A.
Corporate Trust Warrant Agent Account, No. 2659 (the "Warrant
Account"), we hereby irrevocably exercise Warrants
(the "Tendered Warrants"). We hereby acknowledge that the
Warrants being exercised and this Notice of Exercise must be
received by you by 3:00 p.m., New York City time, on a New
York Business Day in order for the Valuation Date for the
Tendered Warrants to be the Index Calculation Date following
such New York Business Day and that, if the Warrants being
exercised and this Notice of Exercise are received by you
after 3:00 p.m., New York City time, on a New York Business
Day (or, in the case of Warrants held through CEDEL or
Euroclear, if the Warrants are not received by 3:00 p.m., New
York City time, on the first Index Calculation Date following
such New York Business Day), the Valuation Date of the
Tendered Warrants shall be the next Index Calculation Date
next succeeding such New York Business Day, in each case
subject to certain provisions of the Warrant Agreement.
2. If you determine that this Notice of
Exercise has not been duly completed or is not in proper form,
this Notice of Exercise will be void and of no effect and will
be deemed not to have been delivered.
<PAGE> 69
A-2-2
3. We hereby direct you to make payment to us
of amounts payable to our clients as a result of the exercise
of the Warrants hereunder as follows:
By cashier's check or an official
bank check;
or
By wire transfer to the following
U.S. dollar bank account in the United
States:
(Minimum payments of $100,000 only)
Bank:
Account No.:
ABA Routing No.:
Reference:
4. The Exercised Warrants covered hereby [are]
[are not] subject to the Limit Option.1/
5. Each client on whose behalf we are
exercising Warrants pursuant to this Notice of Exercise has
certified to us that it is not exercising in excess of 250,000
Warrants on behalf of any single person or entity.
[For Participants] [6. We hereby certify that
we are a Participant of The Depository Trust Company (the
Depository") with the present right to use and receive its
services.]
1/ Separate Notice of Exercise shall be submitted with
respect to Warrants subject to the Limit Option and Warrants
not subject to the Limit Option.
<PAGE> 70
A-2-3
Capitalized terms used but not defined herein
have the meanings assigned thereto in the Warrant Agreement.
Dated: , 19
[NAME OF DEPOSITORY
PARTICIPANT]
[Participant Number]
[NAME OF EUROCLEAR
PARTICIPANT]
[Centrale de Livraison
de Valeurs Mobilieres
S.A.]
By________________________
Authorized Signature
Address:
Telephone: ( )
<PAGE> 71
EXHIBIT B
CONFIRMATION OF EXERCISE
[For Warrants Represented by Warrant Certificates]
We hereby confirm receipt of your Notice of
Exercise with respect to Warrants (the
"Exercised Warrants") and the related Warrant Certificates,
which we have found to be duly completed and in proper form.
The Valuation Date of the Exercised Warrants was the close of
business on ____________, 19__.
We hereby confirm that the aggregate Cash
Settlement Value of the Exercised Warrants is $ ($
per Warrant), which will be made available to you [in the form
of a cashiers check or an official bank check] [by wire
transfer to the bank account designated in your Irrevocable
Notice of Exercise], in New York Clearing House funds, for
payment on the fifth New York Business Day following the
Valuation Date for such Warrants (or, if such Valuation Date
is not a New York Business Day, on the fifth New York Business
Day following the New York Business Day next succeeding the
Valuation Date for such Warrants).
Capitalized terms included herein but not
defined have the meanings assigned thereto in the Warrant
Agreement, dated as of January __, 1994, among Paine Webber
Group Inc., Citibank, N.A., and PaineWebber Incorporated.
Dated: , 19
CITIBANK, N.A., as Warrant
Agent,
By_______________________
Authorized Signature
<PAGE> 72
B-2
NOTICE OF REJECTION
You are hereby notified that [the Notice of
Exercise delivered by you was determined by us not to have
been [duly completed] [in proper form]] [we did not receive
from Euroclear a Euroclear Confirmation that proper delivery
of the Warrants to which the Notice of Exercise delivered by
you relates would be made on a timely basis], as set forth in
the Warrant Agreement, dated as of January __, 1994, among
Paine Webber Group Inc., Citibank, N.A., and PaineWebber
Incorporated. Accordingly, we have rejected your Notice of
Exercise [as being unsatisfactory as to form].
Capitalized terms used but not defined herein
have the meanings assigned thereto in the Warrant Agreement.
Dated: , 19
CITIBANK, N.A., as Warrant
Agent,
By__________________________
Authorized Signature
<PAGE> 73
EXHIBIT B-1
CONFIRMATION OF EXERCISE
[For Warrants Represented by the Global Warrant Certificate]
[Name of Depository Participant]
[Name of Euroclear Participant]
[Centrale de Livraison de Valeurs
Mobilieres S.A.]
[Address]
We hereby confirm receipt of your Notice of
Exercise with respect to Warrants (the
"Exercised Warrants") which were transferred by you (or on
your behalf) to our DTC Participant Account No. [ ]. Such
Notice we have found to be duly completed and in proper form.
The Valuation Date of the Exercised Warrants was the close of
business on ______________, 19__.
[As set forth in your Notice of Exercise, none
of the Warrants covered thereby is subject to the Limit
Option. Accordingly, for purposes hereof, all such Warrants
shall constitute Exercised Warrants, which number we hereby
confirm to be .] [Your Notice of Exercise stated
that the Warrants covered thereby are subject to the Limit
Option. The applicable Reference Index for such Warrants is
and the Spot Index for the date that would otherwise
be the Valuation Date for such Warrants is . Such
Spot Index does not exceed such Reference Index by 20 or more
points. Accordingly, for purposes hereof, all such Warrants
shall constitute Exercised Warrants. We hereby confirm the
number of such Exercised Warrants to be .]
We hereby confirm that the aggregate Cash
Settlement Value of the Exercised Warrants is $ ($
per Warrant), which will be made available to you [in the form
of a cashiers check or an official bank check] [by wire
transfer to the bank account designated in your Irrevocable
Notice of Exercise], in New York Clearing House funds, for
payment on the sixth New York Business Day following the
Valuation Date for such Warrants (or, if such Valuation Date
is not a New York Business Day, on the sixth New York Business
Day following the New York Business Day next succeeding the
Valuation Date for such Warrants).
Capitalized terms included herein but not
defined have the meanings assigned thereto in the Warrant
Agreement dated as of January __, 1994, among Paine Webber
Group Inc., Citibank, N.A., as Warrant Agent, and PaineWebber
Incorporated, as Determination Agent.
<PAGE> 74
B-1-2
Dated: , 19
CITIBANK, N.A., as Warrant
Agent,
By________________________
Authorized Signature
<PAGE> 75
B-1-3
NOTICE OF REJECTION
[Name of Depository Participant]
[Name of Euroclear Participant]
[Centrale de Livraison de Valeurs
Mobilieres S.A.]
[Address]
You are hereby notified that [the Notice of
Exercise delivered by you was determined by us not to have
been [duly completed] [in proper form]], [such Warrants were
not transferred to our DTC Participant Account No. [ ] [we
did not receive from Euroclear a Euroclear Confirmation that
proper delivery of the Warrants to which the Notice of
Exercise delivered by you relates would be made on a timely
basis], as set forth in the Warrant Agreement, dated as of
January __, 1994, among Paine Webber Group Inc., Citibank,
N.A., and PaineWebber Incorporated. Accordingly, we have
rejected your Notice of Exercise as being unsatisfactory as to
form.
Capitalized terms used but not defined herein
have the meanings assigned thereto in the Warrant Agreement.
Dated: , 19
CITIBANK, N.A., as Warrant
Agent,
By______________________
Authorized Signature
<PAGE> 76
EXHIBIT C-1
NOTICE OF REJECTION
RELATING TO LIMIT OPTION
[For Warrants Represented
by Warrant Certificates]
We refer to your Notice of Exercise dated
, 19 , with respect to Warrants
that were subject to the Limit Option. The applicable
Reference Index for such Warrants is and the
Spot Index for the date that would otherwise be the Valuation
Date for such Warrants is . Such Spot Index
exceeds the Reference Index on the Exercise Date (or if such
date was not an Index Calculation Date, on the Index
Calculation Date prior to the Exercise Date for such Warrants)
by 20 points or more. Accordingly, we have rejected such
Notice of Exercise pursuant to the Limit Option.
Capitalized terms included herein but not
defined have the meanings assigned thereto in the Warrant
Agreement dated as of Janaury __, 1994, among Paine Webber
Group Inc., Citibank, N.A., and PaineWebber Incorporated.
Dated: , 19
CITIBANK, N.A., as Warrant
Agent,
By_______________________
Authorized Signature
<PAGE> 77
EXHIBIT C-2
NOTICE OF REJECTION
RELATING TO LIMIT OPTION
[For Warrants Represented
by the Global Warrant Certificate]
[Name of Depository Participant]
[Name of Euroclear Participant]
[Centrale de Livraison de Valeurs
Mobilieres S.A.]
[Address]
We refer to your Notice of Exercise dated
, 19 , with respect to Warrants
that were subject to the Limit Option. The applicable
Reference Index for such Warrants is and the Spot
Index for the date that would otherwise be the Valuation Date
for such Warrants is . Such Spot Index exceeds
the Reference Index on the Exercise Date (or if such date was
not an Index Calculation Date, on the Index Calculation Date
prior to the Exercise Date for such Warrants) by 20 points or
more. Accordingly, we have rejected such Notice of Exercise
pursuant to the Limit Option.
Capitalized terms included herein but not
defined have the meanings assigned thereto in the Warrant
Agreement dated as of January , 1994 among Paine Webber
Group Inc., Citibank, N.A., and PaineWebber Incorporated.
Dated: , 19
CITIBANK, N.A., as Warrant
Agent,
By_______________________
Authorized Signature
<PAGE> 1
EXHIBIT 6
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED OCTOBER 14, 1993)
2,000,000 WARRANTS
PAINE WEBBER GROUP INC.
AMEX HONG KONG 30 INDEX* CALL WARRANTS
EXPIRING JANUARY 17, 1996
------------------------
Each Warrant will entitle the holder thereof to receive from Paine Webber
Group Inc. (the "Company"), upon exercise (including automatic exercise), an
amount in U.S. dollars computed by reference to increases in the American Stock
Exchange Hong Kong 30 Index (the "AMEX Hong Kong 30 Index"). Such amount (the
"Cash Settlement Value") will equal the quotient (rounded down to the nearest
cent) of (A) the amount, if any, by which the Spot AMEX Hong Kong 30 Index (as
defined herein) exceeds the Strike AMEX Hong Kong 30 Index for the applicable
Valuation Date (as defined herein) following exercise, divided by (B) three,
divided by (C) a fixed Hong Kong dollar/U.S. dollar exchange rate of
H.K.$ per U.S.$1.00. If the Strike AMEX Hong Kong 30 Index for such
Valuation Date equals or exceeds the Spot AMEX Hong Kong 30 Index, the Cash
Settlement Value will be zero; in which case, the Warrantholder will be
permitted, subject to certain exceptions, to re-exercise such Warrant prior to
the Expiration Date or the Delisting Date (as defined herein). The Strike AMEX
Hong Kong 30 Index is , which was the closing level of the AMEX Hong Kong
30 Index on January , 1994. As of January , 1994, the Spot AMEX Hong Kong 30
Index is and the Cash Settlement Value of the Warrants is zero. The AMEX
Hong Kong 30 Index was established on June 25, 1993, on which date it was set at
a value of 350.00.
The Warrants are unsecured contractual obligations of the Company and will
rank on a parity with the Company's other unsecured contractual obligations and
with the Company's unsecured and unsubordinated debt.
THE WARRANTS INVOLVE A HIGH DEGREE OF RISK, INCLUDING THE RISK OF EXPIRING
WORTHLESS IF THE LEVEL OF THE AMEX HONG KONG 30 INDEX DOES NOT INCREASE PRIOR TO
THE EXPIRATION DATE. PURCHASERS SHOULD BE PREPARED TO SUSTAIN A TOTAL LOSS OF
THE PURCHASE PRICE OF THEIR WARRANTS AND ARE ADVISED TO CONSIDER CAREFULLY THE
INFORMATION UNDER "CERTAIN IMPORTANT INFORMATION CONCERNING THE WARRANTS" HEREIN
AND "RISK FACTORS" IN THE PROSPECTUS, AS WELL AS THE OTHER INFORMATION HEREIN
AND IN THE PROSPECTUS.
Application has been made to list the Warrants on the American Stock
Exchange (the "AMEX"). The AMEX symbol for the Warrants is HCW.WS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Price to Underwriting Discounts Proceeds to
Public and Commissions(1) Company(2)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Warrant..................... $ $ $
- -----------------------------------------------------------------------------------------------------
Total........................... $ $ $
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) See "Underwriting" herein.
(2) Before deducting expenses estimated at $ , which are payable by the
Company.
------------------------
The Warrants are offered by the Underwriters, subject to prior sale, when,
as and if delivered to and accepted by the Underwriters, and subject to their
right to reject any order in whole or in part. It is expected that delivery of
the Warrants will be made in New York City on or about January , 1994.
------------------------
PAINEWEBBER INCORPORATED
OPPENHEIMER & CO., INC.
KEMPER SECURITIES, INC.
------------------------
* The use of and reference to the term "AMEX Hong Kong 30 Index" herein has
been consented to by the American Stock Exchange, Inc. The "AMEX Hong Kong 30
Index" is a service mark of the American Stock Exchange, Inc.
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS JANUARY , 1994.
<PAGE> 2
The valuation of and payment for any exercised Warrant (including in the
case of automatic exercise) may be postponed as a result of an Exercise
Limitation Event or an Extraordinary Event or as a result of the exercise of a
number of Warrants exceeding the limits on exercise described herein under
"Description of the Warrants -- Maximum Exercise Amount", in which case the
Warrantholder will receive a Cash Settlement Value or, under certain
circumstances, the Alternative Settlement Amount (as defined herein) for such
Warrant, in either case determined as of a later date. See "Description of the
Warrants -- Extraordinary Events and Exercise Limitation Events" and "-- Maximum
Exercise Amount" herein.
The Warrants will be exercisable immediately upon issuance and may be
exercised until 3:00 P.M., New York City time, on the New York Business Day (as
defined herein) immediately preceding the Expiration Date for the Warrants,
which is January 17, 1996, or until their earlier expiration on the last New
York Business Day prior to the effective date of their delisting from, or
permanent suspension from trading on, the AMEX and failure to list on another
United States national securities exchange (the "Delisting Date"). Any Warrant
not exercised at or before 3:00 P.M., New York City time, on such New York
Business Day will be automatically exercised on such date. A Warrantholder may
exercise no fewer than 500 Warrants at any one time, except in the case of
automatic exercise. A Warrantholder tendering Warrants for exercise will have
the option of specifying that, unless an Alternative Settlement Amount is
payable in respect of such Warrants, such Warrants are not to be exercised if
the Spot AMEX Hong Kong 30 Index as of the applicable Valuation Date is 20 or
more points lower than the most recent closing level of the AMEX Hong Kong 30
Index prior to exercise. All exercises of Warrants (other than on the Expiration
Date, the Delisting Date or upon the occurrence of certain extraordinary
circumstances) are subject, at the Company's option, to the limitation that not
more than 1,000,000 Warrants in total may be exercised on any Exercise Date (as
defined herein) and not more than 250,000 Warrants may be exercised by or on
behalf of any person or entity, either individually or in concert with any other
person or entity, on any Exercise Date. See "Certain Important Information
Concerning the Warrants" and "Description of the Warrants" herein and
"Description of Warrants" in the Prospectus.
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE WARRANTS
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
------------------------
FOR NORTH CAROLINA INVESTORS ONLY: THE COMMISSIONER OF INSURANCE OF THE
STATE OF NORTH CAROLINA HAS NOT APPROVED OR DISAPPROVED THIS OFFERING, NOR HAS
THE COMMISSIONER PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS.
------------------------
S-2
<PAGE> 3
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in the Prospectus and this Prospectus Supplement
and in the documents incorporated therein and herein by reference. Appendix B
hereto (the "Index of Key Terms") contains a listing of defined terms and pages
on which they are defined in this Prospectus Supplement.
PAINE WEBBER GROUP INC.
Paine Webber Group Inc. (the "Company") is a holding company which,
together with its operating subsidiaries, forms one of the largest full-service
securities firms in the industry. Founded in 1879, the Company has offices
located throughout the United States and in many major foreign cities. The
Company's principal line of business is to serve the investment and capital
needs of individual, corporate, institutional and public agency clients through
its broker-dealer subsidiary, PaineWebber Incorporated ("PaineWebber"), and
other specialized subsidiaries. The Company is comprised of four interrelated
core business groups -- Retail Sales and Marketing, Asset Management,
Institutional Sales and Trading, and Investment Banking.
See "Selected Consolidated Financial Data" in the Prospectus for
information concerning the Company's earnings and financial condition.
THE OFFERING
<TABLE>
<S> <C>
SECURITIES OFFERED...................... AMEX Hong Kong 30 Index Call Warrants Expiring
January 17, 1996 (the "Warrants"). Each Warrant
will entitle the beneficial owner thereof to
receive from the Company, upon exercise (including
automatic exercise), an amount in U.S. dollars
computed by reference to increases in the American
Stock Exchange Hong Kong 30 Index (the "AMEX Hong
Kong 30 Index"). Such amount (the "Cash Settlement
Value") will equal the quotient (rounded down to
the nearest cent) of (A) the amount, if any, by
which the Spot AMEX Hong Kong 30 Index (as
hereinafter defined) exceeds the Strike AMEX Hong
Kong 30 Index (as hereinafter defined) for the
applicable Valuation Date (as hereinafter defined)
following exercise, divided by (B) three, divided
by (C) a fixed Hong Kong dollar/U.S. dollar
exchange rate of H.K.$ per U.S.$1.00. If the
Strike AMEX Hong Kong 30 Index for a Valuation Date
equals or exceeds the Spot AMEX Hong Kong 30 Index,
the corresponding Cash Settlement Value will be
zero; in which case, the Warrantholder will be
permitted, subject to certain exceptions, to
re-exercise such Warrant prior to the Expiration
Date or the Delisting Date (as hereinafter
defined). The Strike AMEX Hong Kong 30 Index is
, which was the closing level of the AMEX
Hong Kong 30 Index on January , 1994. As of
January , 1994, the Spot AMEX Hong Kong 30 Index
is and the Cash Settlement Value of the
Warrants is zero.
PRICE................................... U.S.$ per Warrant.
THE AMEX HONG KONG 30 INDEX............. The AMEX Hong Kong 30 Index is a new
capitalization-weighted stock index designed,
developed, maintained and operated by, and is a
service mark of, the American Stock Exchange (the
"AMEX"). The AMEX Hong Kong 30
</TABLE>
S-3
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
Index is being used by the Company with the
permission of the AMEX. The AMEX Hong Kong 30 Index
measures the composite price performance of 30
selected stocks trading on The Stock Exchange of
Hong Kong Ltd. (the "HKSE"), and is designed to
represent a substantial segment of the Hong Kong
stock market. Business sector representation in the
AMEX Hong Kong 30 Index consists primarily of
finance, property development, utilities and
conglomerates and also includes food retailing,
hotel/leisure, property investment, airlines and
luxury retailing. The AMEX Hong Kong 30 Index was
established on June 25, 1993, on which date it was
set at a value of 350.00.
Stocks that comprise the AMEX Hong Kong 30 Index
may be changed or substituted by the AMEX based on
certain criteria. The AMEX is under no obligation
to continue the calculation or the dissemination of
the AMEX Hong Kong 30 Index. See "The AMEX Hong
Kong 30 Index" herein. If the AMEX discontinues
publication of the AMEX Hong Kong 30 Index or any
Successor Index (as hereinafter defined), the
Determination Agent (as hereinafter defined) shall
determine the applicable Cash Settlement Value
based on the formula and method used in calculating
the AMEX Hong Kong 30 Index or any Successor Index
as in effect on the date the AMEX Hong Kong 30
Index or such Successor Index was last published.
See "Certain Important Information Concerning the
Warrants" herein
EXERCISE OF WARRANTS.................... The Warrants will be immediately exercisable upon
issuance (subject to postponement as described
herein under "Description of the
Warrants -- Extraordinary Events and Exercise
Limitation Events") and may be exercised until 3:00
P.M., New York City time, on the earlier of (i) the
New York Business Day (as hereinafter defined)
immediately preceding the Expiration Date for the
Warrants, which is January 17, 1996 (the
"Expiration Date"), or (ii) the last New York
Business Day prior to the effective date of their
delisting from, or permanent suspension from
trading on (within the meaning of the Securities
Exchange Act of 1934 and the rules and regulations
thereunder), the AMEX and failure to list on
another United States national securities exchange
(the "Delisting Date"). See "Description of the
Warrants -- Exercise and Settlement of Warrants"
herein.
EXERCISE AMOUNT......................... A Warrantholder may exercise no fewer than 500
Warrants at any one time, except in the case of
automatic exercise. See "Description of the
Warrants -- Minimum Exercise Amount" herein. All
exercises of Warrants (other than on the Expiration
Date or the Delisting Date or upon the cancellation
of Warrants as described herein under "Description
of the Warrants -- Extraordinary Events and
Exercise Limitation Events") are subject, at the
Company's option, to the limitation that not more
than 1,000,000
</TABLE>
S-4
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C>
Warrants in total may be exercised on any Exercise
Date and not more than 250,000 Warrants may be
exercised by or on behalf of any person or entity,
either individually or in concert with any other
person or entity, on any Exercise Date. See
"Description of the Warrants -- Maximum Exercise
Amount" herein.
EXTRAORDINARY EVENTS AND EXERCISE
LIMITATION EVENTS..................... See "Description of the Warrants -- Extraordinary
Events and Exercise Limitation Events" herein for a
description of such Events and the consequences of
the declaration of such an Event by the Company.
CERTAIN RISK FACTORS.................... The Warrants involve a high degree of risk,
including risks arising from fluctuations in the
prices of the Underlying Stocks (as hereinafter
defined), risks relating to the AMEX Hong Kong 30
Index and general risks applicable to the HKSE (the
exchange on which the Underlying Stocks are
traded), such as for example, market disruption
events, suspensions and trading halts. Prospective
purchasers of the Warrants should recognize that
their Warrants may expire worthless. Purchasers
should be prepared to sustain a total loss of the
purchase price of their Warrants. The Warrants are
appropriate investments only for investors with
options approved accounts who are able to
understand and bear the risk of a speculative
investment in the Warrants.
It is not possible to predict how the Warrants will
trade in the secondary market or whether such
market will be liquid or illiquid.
Application has been made to list the Warrants on
the AMEX. In the event that the Warrants are
delisted from, or permanently suspended from
trading on, the AMEX, and not accepted at the same
time for listing on another United States national
securities exchange, Warrants not previously
exercised will be deemed automatically exercised on
the last New York Business Day prior to the
effective date of such delisting or suspension, and
the Cash Settlement Value, if any, shall be
calculated and settled as provided below under
"Description of the Warrants -- Automatic
Exercise". See "Description of the
Warrants -- Delisting of Warrants" herein. In the
event of a delisting or suspension of trading on
the AMEX, the Company will use its best efforts to
list the Warrants on another United States national
securities exchange. To the extent Warrants are
exercised, the number of Warrants outstanding will
decrease, resulting in a decrease in the liquidity
of the Warrants.
The AMEX Hong Kong 30 Index has experienced
significant movements in the past, and it is
impossible to predict its future direction. See
"The AMEX Hong Kong 30 Index -- Historical Data on
the AMEX Hong Kong 30 Index" herein.
Potential investors should be aware that
PaineWebber, in its capacity as Determination
Agent, is under no obligation to
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take the interests of the Company or the
Warrantholders into consideration in the event it
determines, composes or calculates the Cash
Settlement Value. However, PaineWebber is an
affiliate of the Company, and certain conflicts of
interest may arise in connection with PaineWebber
performing its role as Determination Agent.
PaineWebber, as a registered broker-dealer, is
required to maintain policies and procedures
regarding the handling and use of confidential
proprietary information, and such policies and
procedures will be in effect throughout the term of
the Warrants to restrict the use of information
relating to the calculation of the Cash Settlement
Value prior to its dissemination. Moreover,
PaineWebber is obligated to carry out its duties
and functions as Determination Agent in good faith
and using its reasonable judgment. See "Description
of the Warrants -- Exercise and Settlement of
Warrants".
Except for cases of automatic exercise, a
Warrantholder must tender at least 500 Warrants at
any one time in order to exercise its Warrants.
Thus, except in such cases, Warrantholders with
fewer than 500 Warrants will need either to sell
their Warrants or to purchase additional Warrants,
incurring transaction costs in each case, in order
to realize upon their investment.
A Warrantholder will not be able to determine, at
the time of exercise of a Warrant, the Spot AMEX
Hong Kong 30 Index that will be used in calculating
the Cash Settlement Value of such Warrant (and will
thus be unable to determine such Cash Settlement
Value). In addition, the Valuation Date for
exercised Warrants may be postponed upon the
occurrence and continuation of an Extraordinary
Event or an Exercise Limitation Event (see
"Description of the Warrants -- Extraordinary
Events and Exercise Limitation Events" herein) or
as a result of the exercise of a number of Warrants
exceeding the limits on exercise described below
under "Description of the Warrants -- Maximum
Exercise Amount". Any downward movement in the
level of the AMEX Hong Kong 30 Index between the
time a Warrantholder submits an Exercise Notice and
the time the Spot AMEX Hong Kong 30 Index for such
exercise is determined (which period will, at a
minimum, represent an entire Hong Kong Business Day
(as hereinafter defined) and, in the case of a
Valuation Date that is postponed following an
Extraordinary Event or an Exercise Limitation Event
or in the case of a postponement resulting from the
exercise of a number of Warrants exceeding the
limits on exercise described below under
"Description of the Warrants -- Maximum Exercise
Amount", may be substantially longer) will result
in such Warrantholder receiving a Cash Settlement
Value or Alternative Settlement Amount (as
hereinafter defined) (including a zero Alternative
Settlement Amount) that is less than the Cash
Settlement Value anticipated by such Warrantholder
based on the level of the
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If the Company determines that on a Valuation Date
an Extraordinary Event or Exercise Limitation Event
has occurred and is continuing, then the Cash
Settlement Value may be calculated on the basis
that the Valuation Date shall be later than the
date otherwise provided herein. Circumstances
existed from October 20 through October 23, 1987
(prior to the inception of the AMEX Hong Kong 30
Index), on July 22, 1992 and on September 17, 1993,
that would have constituted an Extraordinary Event
and an Exercise Limitation Event. See "Description
of the Warrants -- Extraordinary Events and
Exercise Limitation Events" herein.
Investors are advised to consider carefully the
foregoing risk factors and the risks and other
matters discussed under "Risk Factors" in the
Prospectus and "Certain Important Information
Concerning the Warrants", "Description of the War-
rants" and "Certain United States Federal Income
Tax Considerations" herein prior to purchasing the
Warrants.
WHO SHOULD INVEST....................... The AMEX requires that the Warrants be sold only to
investors whose accounts have been approved for
options trading. In addition, the AMEX requires
that its members and member organizations and
registered employees thereof make certain
suitability determinations before recom-
mending transactions in Warrants.
Investment decisions relating to international
stock index warrants require an investor to predict
the direction of movements in the underlying index
as well as the amount and timing of those
movements. International stock index warrants may
change substantially in value, or lose all of their
value, with relatively small movements in the
underlying index. Moreover, an index warrant is a
"wasting asset" in that, in the absence of
countervailing factors, such as an offsetting
movement in the level of the index, the market
value of an index warrant will tend to decrease
over time and the warrant will have no market value
after the time for exercise has expired.
Accordingly, international stock index warrants
involve a high degree of risk and are not
appropriate for every investor. Investors who are
considering purchasing the Warrants must have an
options approved account, be able to understand and
bear the risk of a speculative investment in the
Warrants, be experienced with respect to options
and option transactions and understand the risks of
stock index transactions. Such investors should
reach an investment decision only after careful
consideration with their advisers of the
suitability of the Warrants in light of their
particular financial circumstances and the
information set forth in this Prospectus Supplement
and the Prospectus. See "Certain Important
Information Concerning the Warrants" herein. As
indicated above, investors should be prepared to
sustain a total loss of the purchase price of the
Warrants.
PROPOSED LISTING........................ American Stock Exchange
WARRANT TRADING SYMBOL.................. HCW.WS
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WARRANT AGENT........................... Citibank, N.A.
DETERMINATION AGENT..................... PaineWebber Incorporated
THE AMEX HONG KONG 30 INDEX QUOTATION
SYMBOL................................ HKX
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<PAGE> 9
CERTAIN IMPORTANT INFORMATION
CONCERNING THE WARRANTS
The registered or beneficial owner of a Warrant (a "Warrantholder")* will
receive a cash payment upon exercise (including automatic exercise) only if such
Warrant has a Cash Settlement Value (or, if applicable, upon the occurrence of
an Extraordinary Event or an Exercise Limitation Event as described under
"Description of the Warrants -- Extraordinary Events and Exercise Limitation
Events" herein, an Alternative Settlement Amount, as hereinafter defined)
greater than zero at such time. Prospective purchasers of the Warrants should
recognize that their Warrants may expire worthless and they should be prepared
to sustain a total loss of the purchase price of their Warrants. The Cash
Settlement Value of a Warrant will be an amount in U.S. dollars equal to the
quotient (rounded down to the nearest cent) of (A) the amount, if any, by which
the Spot AMEX Hong Kong 30 Index exceeds the Strike AMEX Hong Kong 30 Index for
the applicable Valuation Date, divided by (B) three, divided by (C) a fixed Hong
Kong dollar/U.S. dollar exchange rate of H.K.$ per U.S.$1.00. See
"Description of the Warrants -- Cash Settlement Value" herein.
The "Strike AMEX Hong Kong 30 Index" is , which was the closing level
of the AMEX Hong Kong 30 Index on January , 1994. The "Spot AMEX Hong Kong 30
Index" for any date means the closing level on such date of the AMEX Hong Kong
30 Index as compiled and published by the AMEX. See "The AMEX Hong Kong 30
Index" herein. In the event that the AMEX Hong Kong 30 Index is not published by
the AMEX but is published by another person not affiliated with, but acceptable
to, the Company (the "Third Party"), then the Spot AMEX Hong Kong 30 Index for
any date thereafter will be determined based on the closing level of the AMEX
Hong Kong 30 Index as published by such Third Party. If the AMEX or any Third
Party discontinues publication of the AMEX Hong Kong 30 Index and publishes a
successor or substitute index that the Company determines, in its sole
discretion, to be comparable to the AMEX Hong Kong 30 Index (any such index
being a "Successor Index"), then the Spot AMEX Hong Kong 30 Index for any date
thereafter will be determined by the Determination Agent on behalf of the
Company based on the closing level of the Successor Index on such date. If the
AMEX or any Third Party makes a material change in the formula for, or the
method of calculating, the AMEX Hong Kong 30 Index or any Successor Index, the
Determination Agent shall make such calculations as may be required to determine
the applicable Cash Settlement Value using the formula and method of calculating
the Index or any Successor Index as in effect prior to such change or
modification. If the AMEX and/or any Third Party discontinues publication of the
AMEX Hong Kong 30 Index and/or any Successor Index, the Company will cause the
Determination Agent to determine the applicable Cash Settlement Value based on
the formula and method used in calculating the AMEX Hong Kong 30 Index or any
Successor Index as in effect on the date the AMEX Hong Kong 30 Index or such
Successor Index was last published.
Except under the circumstances described in the next paragraph, the
Valuation Date for an exercised Warrant will be the first Index Calculation Day
after the related Exercise Date. The Exercise Date for an exercised Warrant,
subject to certain exceptions described under "-- Exercise and Settlement of the
Warrants", "-- Limit Option" and "-- Automatic Exercise" under "Description of
the Warrants" herein, will be the New York Business Day on which such Warrant
and an Exercise Notice (as hereinafter defined) in proper form are received by
the Warrant Agent (as hereinafter defined) if received at or prior to 3:00 P.M.,
New York City time, on such day; if such Warrant and Exercise Notice are
received after such time, the Exercise Date will be the next succeeding New York
Business Day. See "Description of the Warrants -- Exercise and Settlement of
Warrants" herein.
The Valuation Date for an exercised Warrant will occur after the Exercise
Date (see "Description of the Warrants -- Exercise and Settlement of Warrants"
herein). Therefore, a Warrantholder will not be able to determine, at the time
of exercise of a Warrant, the Spot AMEX Hong Kong 30 Index that will be used in
calculating the Cash Settlement Value of such Warrant (and will thus be unable
to determine such Cash Settlement Value). In addition, the Valuation Date for
exercised Warrants may be postponed upon the occurrence and continuation of an
Extraordinary Event or an Exercise Limitation Event (see "Description of
- ---------------
* Refer to "Index of Key Terms" attached hereto as Appendix B for a listing of
defined terms and pages on which they are defined in this Prospectus
Supplement.
S-9
<PAGE> 10
the Warrants -- Extraordinary Events and Exercise Limitation Events" herein) or
as a result of the exercise of a number of Warrants exceeding the limits on
exercise described below under "Description of the Warrants -- Maximum Exercise
Amount." Any downward movement in the level of the AMEX Hong Kong 30 Index
between the time a Warrantholder submits an Exercise Notice and the time the
Spot AMEX Hong Kong 30 Index for such exercise is determined (which period will,
at a minimum, represent an entire Hong Kong Business Day and, in the case of a
Valuation Date postponed following an Extraordinary Event or an Exercise
Limitation Event or as a result of there being exercised a number of Warrants
exceeding the maximum permissible amount, may be substantially longer) will,
subject to the Limit Option described below and under "Description of the
Warrants -- Limit Option" herein, result in such Warrantholder receiving a Cash
Settlement Value or Alternative Settlement Amount (including a zero Alternative
Settlement Amount) that is less than the Cash Settlement Value anticipated by
such Warrantholder based on the closing level of the AMEX Hong Kong 30 Index
most recently reported prior to exercise. The AMEX will calculate the AMEX Hong
Kong 30 Index once each Index Calculation Day based upon the most recent
official closing prices of each of the Underlying Stocks as reported by the
HKSE. Due to time differences, trading on the HKSE occurs when the AMEX is
closed for business.
The Warrants will originally be issued as certificates in registered form.
Accordingly, a beneficial owner of Warrants holding such Warrants indirectly
(for instance, through a broker that holds such Warrants in "street name") may
exercise such Warrants only through such owner's registered holder. In the case
of a beneficial owner holding Warrants through his broker in "street name" who
wishes to exercise his Warrants, such beneficial owner must direct his broker,
who may in turn need to direct another intermediary, to deliver an Exercise
Notice and the related Warrants to the Warrant Agent. To ensure that an Exercise
Notice and the related Warrants will be delivered to the Warrant Agent before
3:00 P.M., New York City time, on a particular New York Business Day, a
beneficial holder of Warrants may need to give exercise instructions to his
broker or other intermediary substantially earlier than 3:00 P.M., New York City
time, on such day. Different brokerage firms may have different cut-off times
and other exercise mechanics. See "-- Exercise and Settlement of Warrants" and
"-- Limit Option" under "Description of the Warrants" herein.
Forty-five calendar days after the closing of the offering (which closing
date is expected to be January , 1994), each Warrantholder will have the
option to convert the form in which such Warrantholder holds his Warrants from
certificated to book-entry form (the "Conversion Option"). Such conversion will
occur through the facilities of The Depository Trust Company, New York, New York
("DTC", which term, as used herein and in the Prospectus, includes any successor
depository selected by the Company). In addition, Warrant certificates held
through the facilities of CEDEL or Euroclear (as such terms are hereinafter
defined) will automatically be exchanged into book-entry form by CEDEL or
Euroclear, as the case may be, pursuant to the Conversion Option on the last day
of the Conversion Option Period (as hereinafter defined) without action of, or
consent by, the beneficial owner of the related Warrants. Accordingly,
Warrantholders holding their Warrants through CEDEL or Euroclear who do not wish
to convert the form in which they hold such Warrants to book-entry form must
arrange to transfer their Warrants out of the CEDEL or Euroclear systems, as the
case may be, prior to the last day of the Conversion Option Period. See
"Description of the Warrants -- Book-Entry Conversion" and "-- CEDEL and
Euroclear" herein and "Description of the Warrants -- Book-Entry Procedures and
Settlement" in the Prospectus. To exercise Warrants, a Warrantholder who has
utilized the Conversion Option must direct a broker, who may in turn need to
direct a Participant (as defined in the Prospectus under "Description of
Warrants -- Book-Entry Procedures and Settlement"), to transfer Warrants held by
DTC on behalf of such Warrantholder and to submit an Exercise Notice to the
Warrant Agent. A Warrantholder may desire that the New York Business Day on
which his Warrants and an Exercise Notice are delivered on his behalf to the
Warrant Agent will constitute the Exercise Date for the Warrants being exercised
(for example, to utilize the Limit Option most effectively). To achieve such
objective, the Warrantholder must cause such Warrants to be transferred free on
the records of DTC to, and such Exercise Notice to be received by, the Warrant
Agent at or prior to 3:00 P.M., New York City time, on such New York Business
Day; provided, however, that in the case of Warrants held through CEDEL or
Euroclear, the Warrants must be transferred to the Warrant Agent prior to 3:00
P.M., New York City time, on the relevant Valuation Date. To ensure that such
Warrants and Exercise Notice will be received by the Warrant Agent at or prior
to such time, such Warrantholder must give the appropriate directions to his
broker
S-10
<PAGE> 11
before such broker's (and, if such broker is not a Participant, the applicable
Participant's) cut-off time for accepting exercise instructions from customers
for that day. Different brokerage firms may have different cut-off times for
accepting and implementing exercise instructions from their customers.
Therefore, Warrantholders holding their Warrants in book-entry form should
consult with their brokers or other intermediaries, if applicable, as to
applicable cut-off times and other exercise mechanics. See "-- Exercise and
Settlement of Warrants" and "-- Limit Option" under "Description of the
Warrants" herein. FORMS OF EXERCISE NOTICE FOR WARRANTS HELD IN BOOK-ENTRY FORM
MAY BE OBTAINED AT THE WARRANT AGENT'S OFFICE (AS HEREINAFTER DEFINED), DURING
THE WARRANT AGENT'S NORMAL BUSINESS HOURS. SEE "DESCRIPTION OF THE
WARRANTS -- GENERAL" HEREIN.
If the Company determines that an Extraordinary Event or an Exercise
Limitation Event has occurred and is continuing on any day that would otherwise
be a Valuation Date for any exercised Warrant, then the Valuation Date for such
Warrant will be postponed to the next Index Calculation Day following the Hong
Kong Business Day on which there is no Extraordinary Event or Exercise
Limitation Event; provided that if the postponed Valuation Date has not occurred
on or prior to the Expiration Date or the Delisting Date, the Warrantholders
will receive the Alternative Settlement Amount (as described below) in lieu of
the Cash Settlement Value; provided, further, that, in the case of an
Extraordinary Event, if the Company determines that such Extraordinary Event is
expected to continue and the Company notifies the Warrant Agent that it is
cancelling the Warrants, then the date on which such notice is given (whether or
not such date is a New York Business Day) will become the Valuation Date for
such Warrant, in which case such Warrantholder will receive, in lieu of the Cash
Settlement Value of such Warrant, the Alternative Settlement Amount thereof,
which is equal to the greater of (a) the average of the last sale prices, if
available, of the Warrants on the AMEX (or any successor United States
securities exchange on which the Warrants are listed) on the 30 trading days
preceding the date on which such Extraordinary Event was declared and (b) an
amount equal to the sum of the Cash Settlement Value of the Warrants on such
Valuation Date and a ratable portion of the initial offering price of the
Warrants, in each case subject to certain exceptions and adjustments. The Cash
Settlement Value or the Alternative Settlement Amount of a Warrant determined as
of any such postponed Valuation Date may be substantially lower (including zero)
than the otherwise applicable Cash Settlement Value thereof. See "Description of
the Warrants -- Extraordinary Events and Exercise Limitation Events" herein,
which includes a description of events, circumstances or causes constituting
Extraordinary Events and Exercise Limitation Events.
The level of the AMEX Hong Kong 30 Index will determine whether the
Warrants have a Cash Settlement Value greater than zero on any given day. The
Warrants will be "at-the-money" (i.e., their Cash Settlement Value will be zero)
when initially offered and will be "in-the-money" (i.e., their Cash Settlement
Value will be greater than zero) on any given day only if the level of the AMEX
Hong Kong 30 Index increases so that the Spot AMEX Hong Kong 30 Index is above
the Strike AMEX Hong Kong 30 Index (i.e., if the level of the AMEX Hong Kong 30
Index is above ). An increase in the level of the AMEX Hong Kong 30 Index
will result in a greater Cash Settlement Value, and a decrease in the level of
the AMEX Hong Kong 30 Index will result in a lesser or zero Cash Settlement
Value. Potential profit or loss upon exercise (including automatic exercise) of
a Warrant will be a function of the Cash Settlement Value (or, if applicable,
the Alternative Settlement Amount) of such Warrant upon exercise, the purchase
price of such Warrant and any related transaction costs.
If a Warrant is not exercised prior to 3:00 P.M., New York City time, on
(i) the New York Business Day preceding the Expiration Date (as hereinafter
defined) or (ii) the Delisting Date and if the Strike AMEX Hong Kong 30 Index
equals or exceeds the Spot AMEX Hong Kong 30 Index on the appropriate Valuation
Date, such Warrant will expire worthless and the Warrantholder will have
sustained a total loss of the purchase price of such Warrant. See "Risk Factors"
in the Prospectus.
Investment decisions relating to international stock index warrants require
the investor to predict the direction of movements in the underlying index as
well as the amount and timing of those movements. International stock index
warrants may change substantially in value, or lose all of their value, with
relatively small movements in the underlying index. Moreover, an index warrant
is a "wasting asset" in that, in the absence of countervailing factors, such as
an offsetting movement in the level of the index, the market value of
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<PAGE> 12
an index warrant will tend to decrease over time and the warrant will have no
market value after the time for exercise has expired. Accordingly, international
stock index warrants involve a high degree of risk and are not appropriate for
every investor. Investors who are considering purchasing the Warrants must be
able to understand and bear the risk of a speculative investment in the Warrants
and be experienced with respect to options and option transactions and
understand the risks of stock index transactions. Such investors should reach an
investment decision only after careful consideration, with their advisers, of
the suitability of the Warrants in light of their particular financial
circumstances and the information set forth in this Prospectus Supplement and in
the Prospectus. The AMEX requires that the Warrants be sold only to investors
whose accounts have been approved for options trading. In addition, the AMEX
requires that its members and member organizations and registered employees
thereof make certain suitability determinations before recommending transactions
in Warrants. Before making any investment in the Warrants, it is important that
a prospective investor become informed about and understand the nature of the
Warrants in general, the specific terms of the Warrants and the nature of the
underlying international stock index. An investor should understand the
consequences of liquidating his investment in an index warrant by exercising it
as opposed to selling it. It is especially important for an investor to be
familiar with the procedures governing the exercise of international stock index
warrants, since a failure to properly exercise a warrant prior to its expiration
could result in the loss of his entire investment. This includes knowing when
warrants are exercisable and how to exercise them.
Except in the case of automatic exercise, a Warrantholder may be able to
limit to some extent the risk associated with any such downward movement in the
AMEX Hong Kong 30 Index between an Exercise Date and the applicable Valuation
Date if such Warrantholder, in connection with an exercise of Warrants, elects
the Limit Option. Pursuant to the Limit Option, Warrants tendered for exercise
will not be exercised if the Spot AMEX Hong Kong 30 Index as of the applicable
Valuation Date is 20 or more points lower than the closing level of the AMEX
Hong Kong 30 Index on the applicable Exercise Date or, if such date is not an
Index Calculation Day, on the immediately preceding Index Calculation Day. See
"Description of the Warrants -- Limit Option" herein. However, in the event of
the occurrence of an Extraordinary Event resulting in the payment to
Warrantholders of an Alternative Settlement Amount in lieu of the Cash
Settlement Value, the Limit Option will not preclude the exercise of Warrants as
described herein under "Description of the Warrants -- Extraordinary Events and
Exercise Limitation Events".
A Warrantholder may exercise no fewer than 500 Warrants at any time, except
in the case of automatic exercise. Accordingly, except in the case of automatic
exercise of the Warrants, Warrantholders with fewer than 500 Warrants will need
either to sell their Warrants or to purchase additional Warrants, thereby
incurring transaction costs, in order to realize upon their investment.
Potential investors should be aware that PaineWebber, in its capacity as
Determination Agent, is under no obligation to take the interests of the Company
or the Warrantholders into consideration in the event it determines, composes or
calculates the Cash Settlement Value. PaineWebber and its affiliates may from
time to time engage in transactions involving the Underlying Stocks for their
proprietary accounts and for other accounts under their management, which may
influence the value of such Underlying Stocks. PaineWebber and its affiliates
will also be the writers of the hedge of the Company's obligations under the
Warrants and will be obligated to pay to the Company upon exercise of the
Warrants an amount equal to the value of the Warrants. Accordingly, under
certain circumstances, conflicts of interest may arise between PaineWebber's
responsibilities as Determination Agent with respect to the Warrants and its
obligations under its hedge. In addition, because PaineWebber is an affiliate of
the Company, conflicts of interest may arise in connection with PaineWebber
performing its role as Determination Agent. PaineWebber, as a registered
broker-dealer, is required to maintain policies and procedures regarding the
handling and use of confidential proprietary information, and such policies and
procedures will be in effect throughout the term of the Warrants to restrict the
use of information relating to the calculation of the Cash Settlement Value
prior to its dissemination. PaineWebber is also obligated to carry out its
duties and functions as Determination Agent in good faith and using its
reasonable judgment.
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THE INITIAL OFFERING PRICE OF THE WARRANTS MAY BE IN EXCESS OF THE PRICE
THAT A COMMERCIAL USER OF OPTIONS ON THE AMEX HONG KONG 30 INDEX MIGHT PAY FOR A
COMPARABLE OPTION IN A PRIVATE, LESS LIQUID TRANSACTION.
Since the Cash Settlement Value of a Warrant will be determined using a
fixed Hong Kong dollar/U.S. dollar exchange rate, prospective purchasers
intending to utilize the Warrants to hedge a Hong Kong stock portfolio against
currency risk should recognize that the effect of changes in the Hong Kong
dollar/U.S. dollar exchange rate on the value of such portfolio may not be fully
hedged by holding the Warrants. On October 17, 1983, after a period of
instability in the exchange rate of the Hong Kong dollar, a revised exchange
rate system was introduced. Under this system, any bank in Hong Kong which is
authorized by law to issue Hong Kong dollar bank notes is required to hold, as
cover for such issuance, certificates of indebtedness issued by the Hong Kong
Government. Such certificates of indebtedness are issued and redeemed by the
Hong Kong Government against payments in U.S. dollars at a fixed exchange rate
of H.K.$7.80 to U.S.$1.00. There can be no assurance as to whether such fixed
exchange rate between the Hong Kong dollar and the U.S. dollar will remain in
effect or be changed. Since January 29, 1988, the market exchange rate between
the U.S. dollar and the Hong Kong dollar has varied within H.K.[$7.82 and
H.K.$7.72] per U.S.$1.00 (based on data from The Federal Reserve Bank of New
York). See also "Risk Factors -- Certain Considerations Regarding Hedging" in
the Prospectus.
On January , 1994, the closing level of the AMEX Hong Kong 30 Index was
.
References herein to "U.S. dollar", "U.S.$" or "$" are to the lawful
currency of the United States of America. References to "Hong Kong dollar" or
"H.K.$" are to the lawful currency of Hong Kong. As used herein, "New York
Business Day" means any day other than a Saturday or a Sunday or a day on which
either the AMEX or the New York Stock Exchange is not open for securities
trading or commercial banks in New York City are required or authorized by law
or executive order to remain closed, and "Hong Kong Business Day" means any day
other than a Saturday or a Sunday or a day on which commercial banks in Hong
Kong are not open for a full day of business. As used herein, "Index Calculation
Day" means any day on which the AMEX Hong Kong 30 Index or any Successor Index
is calculated and published.
CERTAIN IMPORTANT INFORMATION RELATING TO CHINA
Although the AMEX has represented that none of the companies whose stocks
comprise the AMEX Hong Kong 30 Index is or will be organized under the laws of
the People's Republic of China ("China"), the level of the AMEX Hong Kong 30
Index nonetheless can be affected by developments in China. China currently
indirectly influences political and economic developments in various parts of
Asia, including Hong Kong, and its influence is expected to continue to grow.
Political, economic or social developments in, and diplomatic and other
developments associated with, China could affect economic conditions in Hong
Kong and on the market prices and liquidity of securities traded on the HKSE,
including the Underlying Stocks. Moreover, many of the issuers of the Underlying
Stocks have substantial investments in China, which investments could be
affected by political, economic, market and other developments in or affecting
China. Accordingly, political or economic developments in China could affect the
level of the AMEX Hong Kong 30 Index and thus the value of the Warrants.
On December 19, 1984, the Government of the United Kingdom and the
Government of China signed a Joint Declaration under which sovereignty over Hong
Kong will be transferred from the United Kingdom to China on July 1, 1997.
Pursuant to the Joint Declaration, China promulgated on April 4, 1990 the Basic
Law (the "Basic Law") setting out the terms under which Hong Kong will operate
from 1997 as a Special Administrative Region of China.
It is not clear how future developments in Hong Kong and China may affect
the implementation of the Basic Law after the transfer of sovereignty in 1997.
As a result of this political and legal uncertainty, the economic prospects of
Hong Kong and the companies whose stocks comprise the AMEX Hong Kong 30 Index
are uncertain. Accordingly, the HKSE has been, and can be expected to remain,
volatile and sensitive to political developments with regard to Hong Kong's
future and perceptions of actual or potential political developments of that
kind. For this reason among others, the AMEX Hong Kong 30 Index and the value of
the Warrants can also be expected to be volatile.
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USE OF PROCEEDS
A substantial portion of the proceeds to be received by the Company from
the sale of the Warrants will be used by the Company or one or more of its
subsidiaries in connection with hedging the Company's obligations under the
Warrants. Such hedging activities are expected to include purchasing or
maintaining positions in a variety of financial instruments relating to the AMEX
Hong Kong 30 Index and the Underlying Stocks and the Hong Kong dollar/U.S.
dollar exchange rate (which may include certain types of instruments that entail
only potential payments upon closeout but not up-front acquisition costs). The
conduct of such hedging activities will not be limited to any particular
securities or futures exchange. Depending on future market conditions and the
actual number of Warrants outstanding from time to time, among other things, the
aggregate amount and the composition of such positions are likely to vary over
time. The remainder of the proceeds, if any, will be used for general corporate
purposes.
DESCRIPTION OF THE WARRANTS
GENERAL
The Warrants will be issued pursuant to a Warrant Agreement (the "Warrant
Agreement"), to be dated as of January , 1994, among the Company, Citibank,
N.A., as Warrant Agent (the "Warrant Agent"), and PaineWebber Incorporated as
Determination Agent. The following summaries of certain provisions of the
Warrants and the Warrant Agreement do not purport to be complete and are subject
to, and qualified in their entirety by reference to, all of the provisions of
the Warrant Agreement (including the form of Warrant certificate and form of
global Warrant certificate attached as exhibits thereto). The Warrant Agreement
will be available for inspection by any Warrantholder at the office of the
Warrant Agent (the "Warrant Agent's Office"), which is currently located at 111
Wall Street, 5th Floor, New York, New York 10043, during the Warrant Agent's
normal business hours. See "Description of Warrants" in the Prospectus.
The aggregate number of Warrants to be issued will be 2,000,000, subject to
the right of the Company to "reopen" the issue of Warrants and issue additional
Warrants with substantially identical terms at a later time. See "Underwriting".
A Warrant will not require or entitle a Warrantholder to sell or deliver
any shares of any component stock underlying the AMEX Hong Kong 30 Index or any
Successor Index (an "Underlying Stock") or any other securities to the Company.
Upon exercise of a Warrant, the Company will make only a U.S. dollar cash
payment in the amount of the Cash Settlement Value or Alternative Settlement
Amount, if any and as applicable, of such Warrant. The Company is under no
obligation to, nor will it, purchase or take delivery of any shares of any
Underlying Stock or any other securities from Warrantholders in connection with
the exercise of any Warrants. Warrantholders will not receive any interest on
any Cash Settlement Value or Alternative Settlement Amount, and the Warrants
will not entitle the Warrantholders to any of the rights of holders of any
Underlying Stock or any other securities.
The AMEX has advised the Company that the Warrants shall, for margin
purposes, be treated as if they were option contracts subject to AMEX Rule
462(d) relating to Minimum Margins.
CASH SETTLEMENT VALUE
Each Warrant will entitle the Warrantholder to receive, upon exercise
(including automatic exercise), the Cash Settlement Value of such Warrant,
except that, under the circumstances described under "-- Extraordinary Events
and Exercise Limitation Events" below, such Warrantholder may instead receive
the Alternative Settlement Amount for such Warrant. The Cash Settlement Value of
a Warrant will be an amount in U.S. dollars equal to the quotient (rounded down
to the nearest cent) of (A) the amount, if any, by which the Spot AMEX Hong Kong
30 Index exceeds the Strike AMEX Hong Kong 30 Index for the Valuation Date for
such Warrant, divided by (B) three, divided by (C) a fixed Hong Kong dollar/U.S.
dollar exchange rate of H.K.$ per U.S.$1.00, as indicated in the following
formula:
<TABLE>
<S> <C> <C> <C> <C> <C>
( Spot AMEX Hong Kong 30 Index - )
Cash Settlement Value = 3 / H.K.$
</TABLE>
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<PAGE> 15
HYPOTHETICAL WARRANT VALUES ON EXERCISE
Set forth below is a hypothetical example demonstrating the Cash Settlement
Values of a Warrant at the Strike AMEX Hong Kong 30 Index and at various levels
of the Spot AMEX Hong Kong 30 Index. The Cash Settlement Value numbers in the
table have been rounded to two decimal places.
<TABLE>
<CAPTION>
APPROXIMATE
HYPOTHETICAL CASH SETTLEMENT
SPOT VALUE (ALSO KNOWN
AMEX HONG KONG AS "INTRINSIC VALUE")
30 INDEX OF CALL WARRANT(1)
--------------- ----------------------
<S> <C> <C>
800 U.S.$8.63
750 6.47
700 4.32
650 2.16
Equal to or less than..................... 600(Strike) 0.00
</TABLE>
- ---------------
(1) Based on a fixed exchange rate of H.K.$7.725 per U.S.$1.00 and a
hypothetical strike index level of 600, exclusive of time value. The time
value of each Warrant will decline as the Expiration Date approaches,
reaching zero on the Expiration Date. Investors will receive only the cash
settlement value if the Warrants are exercised. If traded on the AMEX,
investors will receive the market value of the Warrants, which includes the
Cash Settlement Value plus any remaining time value. On the Expiration Date,
Warrants that are "in-the-money" will be automatically exercised.
WARRANT CERTIFICATES
The Warrants will be issued as certificates in registered form (each, a
"Warrant Certificate"). The Warrant Agent will from time to time register the
transfer of any outstanding Warrant Certificate upon surrender thereof at the
Warrant Agent's Office duly endorsed by, or accompanied by a written instrument
or instruments of transfer in form satisfactory to the Warrant Agent and the
Company, duly executed by the registered holder thereof, a duly appointed legal
representative or a duly authorized attorney. Such signature must be guaranteed
by a bank or trust company having a correspondent office in New York City or a
member of a national securities exchange. A new Warrant Certificate will be
issued to the transferee upon any such registration of transfer.
At the option of a Warrantholder, Warrant Certificates may be exchanged for
other Warrant Certificates representing a like number of Warrants upon surrender
to the Warrant Agent at the Warrant Agent's Office of the Warrant Certificates
to be exchanged. The Company will thereupon execute, and the Warrant Agent will
countersign and deliver, one or more new Warrant Certificates representing such
like number of Warrants.
In the event that, after any exercise of Warrants evidenced by a Warrant
Certificate, the number of Warrants exercised is fewer than the total number of
Warrants evidenced by such certificate, a new Warrant Certificate evidencing the
number of Warrants not exercised will be issued to the registered holder or his
assignee. See "-- Minimum Exercise Amount" below.
If any Warrant Certificate is mutilated, lost, stolen or destroyed, the
Company may in its discretion execute, and the Warrant Agent may countersign and
deliver, in exchange and substitution for such mutilated Warrant Certificate, or
in replacement for such lost, stolen or destroyed Warrant Certificate, a new
Warrant Certificate representing a like number of Warrants, but only (in the
case of loss, theft or destruction) upon receipt of evidence satisfactory to the
Company and the Warrant Agent of loss, theft or destruction of such Warrant
Certificate and security or indemnity, if requested, satisfactory to them.
Warrantholders requesting replacement Warrant Certificates must also comply with
such other reasonable regulations and pay such reasonable charges as the Company
or the Warrant Agent may prescribe. In case all of the Warrants represented by
any such mutilated, lost, stolen or destroyed Warrant Certificate have been or
are about to be exercised (including automatic exercise), the Company in its
discretion may, instead of issuing a new Warrant Certificate, direct the Warrant
Agent to treat such Warrant Certificate the same as if the Warrant Agent had
received an Exercise Notice in proper form in respect thereof or as being
subject to automatic exercise, as the case may be.
S-15
<PAGE> 16
No service charge will be made for any registration of transfer or exchange
of Warrant Certificates, but the Company may require the payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
relation thereto, other than exchanges not involving any transfer. In the case
of the replacement of mutilated, lost, stolen or destroyed Warrant Certificates,
the Company may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Warrant Agent) connected
therewith.
Warrant Certificates held through CEDEL will be held by Citibank, N.A.
("Citibank"), as custodian for CEDEL, and Warrant Certificates held through
Euroclear will be held by Morgan Guaranty Trust Company of New York ("Morgan"),
as custodian for Euroclear. After the last day of the Conversion Option Period,
Warrantholders may no longer hold certificated positions through CEDEL or
Euroclear. See "-- Book-Entry Conversion" herein.
BOOK-ENTRY CONVERSION
Forty-five calendar days after the closing of the offering (which closing
date is expected to be January , 1994), each Warrantholder will have the
option to convert the form in which such Warrantholder holds his Warrants from
definitive to book-entry form by utilizing the Conversion Option. The Conversion
Option will be available for 45 calendar days (the "Conversion Option Period")
and is expected to run from March , 1994 through April , 1994.
In order to be exchanged for a Warrant in book-entry form, a Warrant
Certificate must be delivered to DTC, in proper form for deposit, by a
Participant. Accordingly, a Warrantholder who is not a Participant (other than a
Warrantholder holding Warrants through CEDEL or Euroclear) must deliver his
Warrant Certificate, in proper form for deposit, to a Participant, either
directly or through an indirect participant (such as a bank, brokerage firm,
dealer or trust company that clears through, or maintains a custodial
relationship with, a Participant) or brokerage firm which maintains an account
with a Participant, in order to have its Warrant Certificate exchanged for a
Warrant in book-entry form. Such Warrantholders who desire to exchange their
Warrant Certificates for Warrants in book-entry form should contact their
brokers or other Participants or indirect participants to obtain information on
procedures for submitting their Warrant Certificates to DTC, including the
proper form for submission and (during the Conversion Option Period) the cut-off
times for same day and next day exchange. Warrant Certificates which are held by
the Warrantholder in nominee or "street" name may be automatically exchanged
into book-entry form by the broker or other entity in whose name such Warrant
Certificates are registered, without action of, or consent by, the beneficial
owner of the related Warrant. In addition, Warrant Certificates held through the
facilities of CEDEL or Euroclear will automatically be exchanged into book-entry
form by CEDEL or Euroclear, as the case may be, pursuant to the Conversion
Option on the last day of the Conversion Option Period without action of, or
consent by, the beneficial owner of the related Warrants. Accordingly,
Warrantholders holding their Warrants through CEDEL or Euroclear who do not wish
to convert the form in which they hold such Warrants to book-entry form must
arrange to transfer their Warrants out of the CEDEL or Euroclear systems, as the
case may be, prior to the last day of the Conversion Option Period. Thereafter,
Warrantholders may no longer hold certificated Warrants through the facilities
of CEDEL or Euroclear.
Warrant Certificates received by DTC for exchange during the Conversion
Option Period will be exchanged for Warrants in book-entry form by the close of
business on the New York Business Day that such Certificates are received by DTC
(if received by DTC at its then applicable cut-off time for same day credit) or
on the following New York Business Day (if received by DTC at its then
applicable cut-off time for next day credit). After the last day of the
Conversion Option Period, DTC will not be required to accept delivery of Warrant
Certificates in exchange for book-entry Warrants, but may permit Warrant
Certificates to be so exchanged on a case-by-case basis. However, there can be
no assurance that such Warrant Certificates will be accepted for exchange.
Warrants surrendered at any time for exchange for book-entry Warrants may not be
exercised or delivered for settlement or transfer until such exchange has been
effected. Accordingly, if an increase in the value of the AMEX Hong Kong 30
Index were to occur after a Warrant Certificate had been surrendered for
exchange into book-entry form, a Warrantholder would not be able to take
advantage of the increase by exercising his Warrant until such exchange had been
effected. Since Warrant Certificates are not
S-16
<PAGE> 17
required to be exchanged for Warrants in book-entry form, it is likely that not
all Warrant Certificates will be so exchanged. Accordingly, Warrantholders
purchasing Warrants in secondary market trading after commencement of the
Conversion Option Period may wish to make specific arrangements with brokers or
other Participants or indirect participants if they wish to purchase Warrants in
book-entry form only and not Warrant Certificates. The Company has been informed
by CEDEL and Euroclear that such clearing agencies will only clear Warrants in
book-entry form after the Conversion Option Period.
Once a Warrantholder has elected the Conversion Option, such Warrantholder
may hold his Warrants only in book-entry form and will not be able to change his
election or withdraw from the book-entry system during the Conversion Option
Period or thereafter. Accordingly, except in certain limited circumstances
described in the Prospectus under "Description of Warrants -- Book-Entry
Procedures and Settlement", ownership of the Warrants in certificated form will
no longer be available to investors who have elected the Conversion Option.
CEDEL AND EUROCLEAR
Warrantholders may hold their Warrants in either book-entry or certificated
form through CEDEL or Euroclear if they are participants of such systems, or
indirectly through organizations which are participants in such systems. The
common security registration number used by CEDEL and Euroclear for the Warrants
is . While Warrantholders may initially hold their Warrants in
certificated form through CEDEL or Euroclear, as described above under
"-- Book-Entry Conversion", it is anticipated that Warrant Certificates held
through such systems will be converted into book-entry form on the last day of
the Conversion Option Period and, accordingly, certificated ownership of
Warrants will no longer be available through such systems after such day.
CEDEL and Euroclear will hold omnibus certificated positions and omnibus
book-entry positions on behalf of their participants through customers'
securities accounts in CEDEL's and Euroclear's names on the books of their
respective depositaries which in turn will, in the case of certificated
positions only, hold such positions in customers' securities accounts in the
depositaries' names on the books of DTC. Citibank will act as depositary for
CEDEL and Morgan will act as depositary for Euroclear (in such capacities, the
"Depositaries"). All securities in CEDEL or Euroclear are held on a fungible
basis without attribution of specific certificates to specific securities
clearance accounts.
Exercises of certificated Warrants by persons holding through CEDEL or
Euroclear participants will be effected through Citibank or Morgan, as the case
may be; however, such transactions will require delivery of exercise
instructions to the relevant European international clearing system by the
participant in such system in accordance with its rules and procedures and
within its established deadlines (European time). The relevant European
international clearing system will, if the exercise meets its requirements,
deliver instructions to its Depositary to take action to effect the exercise of
the Warrants on its behalf by delivering Warrants to the Warrant Agent, and
receiving payment in accordance with its normal procedures for next-day funds
settlement. Payments with respect to the certificated Warrants held through
CEDEL or Euroclear will be credited to the cash accounts of CEDEL participants
or Euroclear participants in accordance with the relevant system's rules and
procedures, to the extent received by its Depositary. See "-- Exercise and
Settlement of the Warrants" herein.
Exercises of book-entry Warrants by persons holding through CEDEL or
Euroclear participants will be effected through DTC, in accordance with DTC
rules, on behalf of the relevant European international clearing system by its
Depositary; however, such transactions will require delivery of exercise
instructions to the relevant European international clearing system by the
participant in such system in accordance with its rules and procedures and
within its established deadlines (European time). The relevant European
international clearing system will, if the exercise meets its requirements,
deliver instructions to its Depositary to take action to effect its exercise of
the Warrants on its behalf by delivering Warrants through DTC and receiving
payment in accordance with its normal procedures for next-day funds settlement.
Payments with respect to the Warrants held through CEDEL or Euroclear will be
credited to the cash accounts of CEDEL participants or Euroclear participants in
accordance with the relevant system's rules and procedures, to the extent
received by its Depositary. See "-- Exercise and Settlement of the Warrants"
herein.
S-17
<PAGE> 18
Centrale de Livraison de Valeurs Mobilieres S.A. ("CEDEL") is incorporated
under the laws of Luxembourg as a professional depository. CEDEL holds
securities for its participating organizations and facilitates the clearance and
settlement of securities transactions between CEDEL participants through
electronic book-entry changes in accounts of CEDEL participants, thereby
eliminating the need for physical movement of certificates. Transactions may be
settled in CEDEL in any of 28 currencies, including U.S. dollars. CEDEL provides
to its participants, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. CEDEL interfaces with domestic markets in
several countries. As a professional depository, CEDEL is subject to regulation
by the Luxembourg Monetary Institute. CEDEL participants are recognized
financial institutions around the world, including underwriters, securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations and may include the Underwriters. Indirect access to CEDEL
is also available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a CEDEL
participant, either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for
participants in the Euroclear System and to clear and settle transactions
between Euroclear participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Transactions may now be settled in any of 27 currencies, including U.S.
dollars. The Euroclear System includes various other services, including
securities lending and borrowing and interfaces with domestic markets in several
countries generally similar to the arrangements for cross-market transfers with
DTC described above. The Euroclear System is operated by Morgan's Brussels,
Belgium office (the "Euroclear Operator" or "Euroclear"), under contract with
Euroclear Clearance System S.C., a Belgian cooperative corporation (the
"Cooperative"). Morgan is a member bank of the United States Federal Reserve
System. All operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for the Euroclear System on behalf of Euroclear participants. Euroclear
participants include banks (including central banks), securities brokers and
dealers and other professional financial intermediaries and may include the
Underwriters. Indirect access to the Euroclear System is also available to other
firms that clear through or maintain a custodial relationship with a Euroclear
participant, either directly or indirectly.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System, and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipt of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear participants, and has no record
of or relationship with persons holding through Euroclear participants.
All information herein on CEDEL and Euroclear is derived from CEDEL or
Euroclear, as the case may be, and reflects the policies of such organizations;
such policies are subject to change without notice.
EXERCISE AND SETTLEMENT OF WARRANTS
The Warrants will be immediately exercisable upon issuance, subject to
postponement upon the occurrence of an Extraordinary Event or an Exercise
Limitation Event as described under "-- Extraordinary Events and Exercise
Limitation Events" herein, and will expire on January 17, 1996 (the "Expiration
Date"). Warrants not exercised (including by reason of any such postponed
exercise) at or before 3:00 P.M., New York City time, on the earlier of (i) the
New York Business Day immediately preceding the Expiration Date and (ii) the
Delisting Date, will be automatically exercised as described under "-- Automatic
Exercise" below. See "-- Minimum Exercise Amount" and "-- Maximum Exercise
Amount" below.
S-18
<PAGE> 19
A Warrantholder may exercise certificated Warrants on any New York Business
Day during the period from the date of issuance of such Warrants until 3:00
P.M., New York City time, on the earlier of (i) the New York Business Day
immediately preceding the Expiration Date and (ii) the Delisting Date, by
delivering or causing to be delivered to the Warrant Agent the Warrant
Certificate representing such Warrants with the irrevocable notice of exercise
on the reverse thereof (or a notice of exercise in substantially identical form
delivered therewith) (such notice, an "Exercise Notice") duly completed and
executed. The Warrant Agent's telephone number and facsimile transmission number
for this purpose are (212) 657-7269 and (212) 825-3483, respectively.
In the case of Warrants held through the facilities of DTC, a Warrantholder
may exercise such Warrants on any New York Business Day during the period from
the date of issuance of such Warrants until 3:00 P.M., New York City time, on
the earlier of (i) the New York Business Day immediately preceding the
Expiration Date and (ii) the Delisting Date, by causing (x) such Warrants to be
transferred free to the Warrant Agent on the records of DTC and (y) a duly
completed and executed Exercise Notice to be delivered by a Participant on
behalf of the Warrantholder to the Warrant Agent. Forms of Exercise Notice for
Warrants held through the facilities of DTC may be obtained from the Warrant
Agent at the Warrant Agent's Office. The Warrant Agent's telephone number and
facsimile transmission number for this purpose are (201) 262-5444 and (201)
262-7521, respectively.
In the case of book-entry Warrants held through the facilities of CEDEL or
Euroclear, a Warrantholder may exercise such Warrants on any New York Business
Day during the period from the date of issuance of such Warrants until 3:00
P.M., New York City time, on the earlier of (i) the New York Business Day
immediately preceding the Expiration Date and (ii) the Delisting Date by causing
(x) such Warrants to be transferred to the Warrant Agent, by giving appropriate
instructions to the participant holding such Warrants in either the CEDEL or
Euroclear system, as the case may be, and (y) a duly completed and executed
Exercise Notice to be delivered on behalf of the Warrantholder by CEDEL, in the
case of Warrants held through CEDEL, or such participant, in the case of
Warrants held through Euroclear, to the Warrant Agent. Forms of Exercise Notice
for Warrants held through the facilities of either CEDEL or Euroclear may be
obtained from the Warrant Agent at the Warrant Agent's Office or from CEDEL or
Euroclear.
Except for Warrants subject to automatic exercise or held through the
facilities of CEDEL or Euroclear, and subject to the Limit Option, the "Exercise
Date" for a Warrant will be (i) the New York Business Day on which the Warrant
Agent receives the Warrant and Exercise Notice in proper form with respect to
such Warrant, if received at or prior to 3:00 P.M., New York City time, on such
day, or (ii) if the Warrant Agent receives such Warrant and Exercise Notice
after 3:00 P.M., New York City time, on a New York Business Day, then the New
York Business Day next succeeding such New York Business Day.
In the case of Warrants held through the facilities of CEDEL or Euroclear,
except for Warrants subject to automatic exercise, and subject to the Limit
Option, the "Exercise Date" for a Warrant will be (i) the New York Business Day
on which the Warrant Agent receives the Exercise Notice in proper form with
respect to such Warrant if such Exercise Notice is received at or prior to 3:00
P.M., New York City time, on such day, provided, that the Warrant is received by
the Warrant Agent by 3:00 P.M., New York City time, on the Valuation Date, or
(ii) if the Warrant Agent receives such Exercise Notice after 3:00 P.M., New
York City time, on a New York Business Day, then the New York Business Day
succeeding such New York Business Day, provided, that the Warrant is received by
3:00 P.M., New York City time, on the Valuation Date relating to exercises of
Warrants on such succeeding New York Business Day. In the event that the Warrant
is received after 3:00 P.M., New York City time, on the Valuation Date, then the
Exercise Date for such Warrants will be the day on which such Warrants are
received or, if such day is not a New York Business Day, the next succeeding New
York Business Day. In the case of Warrants held through the facilities of CEDEL
or Euroclear, in order to ensure proper exercise on a given New York Business
Day, participants in CEDEL or Euroclear must submit exercise instructions to
CEDEL or Euroclear, as the case may be, by 10:00 A.M., Luxembourg time, in the
case of CEDEL and by 10:00 A.M., Brussels time (by telex), or 11:00 A.M.,
Brussels time (by EUCLID), in the case of Euroclear. In addition, in the case of
book-entry exercises by means of the Euroclear System, (i) participants must
also transmit, by facsimile (facsimile number 201-262-7521), to the Warrant
Agent a copy of the Exercise Notice submitted to Euroclear by 3:00 P.M.,
S-19
<PAGE> 20
New York City time, on the desired Exercise Date and (ii) Euroclear must confirm
by telex to the Warrant Agent by 9:00 A.M., New York City time, on the Valuation
Date that the Warrants will be received by the Warrant Agent on such date;
provided, that if such telex communication is received after 9:00 A.M., New York
City time, on the Valuation Date, the Company will be entitled to direct the
Warrant Agent to reject the related Exercise Notice or waive the requirement for
timely delivery of such telex communication.
To ensure that an Exercise Notice and the related Warrants will be
delivered to the Warrant Agent before 3:00 P.M., New York City time, on a given
New York Business Day, a Warrantholder may need to give exercise instructions to
his broker or other intermediary substantially earlier than 3:00 P.M., New York
City time, on such day. Different brokerage firms may have different cut-off
times for accepting and implementing exercise instructions from their customers.
Therefore, Warrantholders should consult with their brokers and other
intermediaries, if applicable, as to applicable cut-off times and other exercise
mechanics. See "Certain Important Information Concerning the Warrants" above.
Except in the case of Warrants subject to automatic exercise and for
Warrants that upon exercise will entitle the holder thereof to receive an
Alternative Settlement Amount in lieu of the Cash Settlement Amount, if on any
Valuation Date the Cash Settlement Amount for any Warrants would be zero, then
the attempted exercise of any such Warrants will be void and of no effect and,
in the case of certificated Warrants, the Warrant Certificate evidencing such
Warrants will be returned to the registered holder by first class mail at the
Company's expense or, in the case of Warrants held through the facilities of
DTC, CEDEL or Euroclear, such Warrants will be transferred back to the
participant (including the Depositaries) that submitted them free on the records
of DTC, CEDEL or Euroclear, as the case may be, and, in any such case, such
Warrantholder will be permitted to re-exercise such Warrants prior to the
Expiration Date or the Delisting Date, as the case may be.
The "Valuation Date" for a Warrant will be the first Index Calculation Day
following the applicable Exercise Date, subject to postponement upon the
occurrence of an Extraordinary Event or an Exercise Limitation Event as
described below under "-- Extraordinary Events and Exercise Limitation Events"
or as a result of the exercise of a number of Warrants exceeding the limits on
exercise described below under "-- Maximum Exercise Amount". The AMEX will
calculate the AMEX Hong Kong 30 Index once on each Index Calculation Day based
upon the most recent official closing prices of each of the Underlying Stocks as
reported by the HKSE. Due to time differences, trading on the HKSE occurs when
the AMEX is closed for business. The following is an illustration of the timing
of an Exercise Date, the ensuing Valuation Date and the Limit Option Reference
Index (as hereinafter defined), assuming (i) that all relevant dates are New
York Business Days and Index Calculation Days, (ii) the absence of any
intervening Extraordinary Event or Exercise Limitation Event and (iii) the
number of exercised Warrants does not exceed the maximum permissible amount. If
the Warrant Agent receives a Warrantholder's Warrants and Exercise Notice in
proper form at or prior to 3:00 P.M., New York City time, on Wednesday, June 1,
1994, the Exercise Date for such Warrants will be June 1 and the Valuation Date
for such Warrants will be Thursday, June 2, 1994 (except that in the case of
Warrants held through the facilities of CEDEL or Euroclear, the Warrants must be
received by 3:00 P.M., New York City time, on the Valuation Date; if such
Warrants are received after such time, then the Exercise Date for such Warrants
will be the day on which such Warrants are received or, if such day is not a New
York Business Day, the next succeeding New York Business Day, and the Valuation
Date for such Warrants will be the first Index Calculation Day following such
Exercise Date and the Limit Option Reference Index will be determined by
reference to such Exercise Date and Valuation Date). The Spot AMEX Hong Kong 30
Index used to determine the Cash Settlement Value of such Warrants will be the
closing level of the AMEX Hong Kong 30 Index on June 2 (i.e., the level of the
AMEX Hong Kong 30 Index calculated using values for the Underlying Stocks as of
the close of the HKSE on June 2 (assuming such day is a Hong Kong Business Day),
which, because of time differences, will occur at 2:30 A.M., New York City time,
on June 2 (or 3:30 A.M., New York City time, during the months in which Eastern
Daylight Savings Time is in effect)). If the Warrantholder elected the Limit
Option in connection with the exercise of such Warrants, the Limit Option
Reference Index would be the closing level of the AMEX Hong Kong 30 Index on
June 1. If the Warrant Agent were to receive such Warrantholder's Warrants and
Exercise Notice after 3:00 P.M., New York City time, on June 1, 1994 (except
that in the case of Warrants held through the
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<PAGE> 21
facilities of CEDEL or Euroclear, the Warrants must be received by 3:00 P.M.,
New York City time, on June 2), then the Exercise Date for such Warrants would
instead be June 2, the Valuation Date would be June 3 and the applicable Limit
Option Reference Index would be the closing level of the AMEX Hong Kong 30 Index
on June 2 (which will not have occurred at the time such Warrantholder tendered
his Exercise Notice on June 1).
Following receipt of Warrants and the related Exercise Notice in proper
form, the Warrant Agent will, not later than 5:00 P.M., New York City time, on
the applicable Valuation Date (or, if such Valuation Date is not a New York
Business Day, on the next succeeding New York Business Day) (i) obtain the Spot
AMEX Hong Kong 30 Index (which will be the level of the AMEX Hong Kong 30 Index
on such Valuation Date), (ii) determine the Cash Settlement Value of such
Warrants and (iii) advise the Company of the aggregate Cash Settlement Value of
the exercised Warrants. Except in the case of Warrants held through the
facilities of DTC, CEDEL or Euroclear, if the Company has made adequate funds
available to the Warrant Agent in a timely manner as required by the Warrant
Agreement, the Warrant Agent will thereafter be responsible for making payment
available to each registered holder of a Warrant on the fifth New York Business
Day following the Valuation Date (or, if the Valuation Date is not a New York
Business Day, on the fifth New York Business Day following the New York Business
Day next succeeding the Valuation Date) in the form of a cashier's check or
official bank check or (in the case of payments of at least U.S.$100,000) by
wire transfer to a U.S. dollar bank account maintained by such holder in the
United States (at such holder's election as specified in the applicable Exercise
Notice), in an amount equal to the aggregate Cash Settlement Value of such
holder's exercised Warrants. In the case of Warrants held through the facilities
of DTC, CEDEL or Euroclear, the Company will be required to make available to
the Warrant Agent, no later than 3:00 P.M, New York City time, on the sixth New
York Business Day following the Valuation Date (or, if the Valuation Date is not
a New York Business Day, on the sixth New York Business Day following the New
York Business Day next succeeding the Valuation Date), funds in an amount
sufficient to pay such aggregate Cash Settlement Value. If the Company has made
such funds available by such time, the Warrant Agent will thereafter be
responsible for making funds available to each appropriate Participant
(including Citibank and Morgan, who, in turn, will disburse payments to CEDEL
and Euroclear, as the case may be, who will be responsible for disbursing such
payments to each of their respective participants, who, in turn, will be
responsible for disbursing payments to the Warrantholders it represents), and
such Participant will be responsible for disbursing such payments to the
Warrantholders it represents and to each brokerage firm for which it acts as
agent. Each such brokerage firm will be responsible for disbursing funds to the
Warrantholders it represents.
"Determination Agent" means PaineWebber or, in lieu thereof, another firm
selected by the Company to perform the functions of the Determination Agent in
connection with the Warrants. PaineWebber, in its capacity as Determination
Agent, will have no obligation to take the interests of the Company or the
Warrantholders into consideration in the event it determines, composes or
calculates the Cash Settlement Value. PaineWebber and its affiliates may from
time to time engage in transactions involving the Underlying Stocks for their
proprietary accounts and for other accounts under their management, which may
influence the value of such Underlying Stocks. PaineWebber and its affiliates
will also be the writers of the hedge of the Company's obligations under the
Warrants and will be obligated to pay to the Company upon exercise of the
Warrants an amount equal to the value of the Warrants. Accordingly, under
certain circumstances, conflicts of interest may arise between PaineWebber's
responsibilities as Determination Agent with respect to the Warrants and its
obligations under its hedge. In addition, because PaineWebber is an affiliate of
the Company, certain conflicts of interest may arise in connection with
PaineWebber performing its role as Determination Agent. PaineWebber, as a
registered broker-dealer, is required to maintain policies and procedures
regarding the handling and use of confidential proprietary information, and such
policies and procedures will be in effect throughout the term of the Warrants to
restrict the use of information relating to any calculation of the Cash
Settlement Value prior to its dissemination. PaineWebber is also obligated to
carry out its duties and functions as Determination Agent in good faith and
using its reasonable judgment.
S-21
<PAGE> 22
MINIMUM EXERCISE AMOUNT
No fewer than 500 Warrants may be exercised by a Warrantholder at any one
time, except in the case of automatic exercise or exercise upon cancellation of
the Warrants as described under "-- Extraordinary Events and Exercise Limitation
Events" below. Accordingly, except in the case of automatic exercise of the
Warrants or upon cancellation of the Warrants, Warrantholders with fewer than
500 Warrants will need either to sell their Warrants or to purchase additional
Warrants, thereby incurring transaction costs, in order to realize upon their
investment. Warrantholders must satisfy the minimum exercise amount requirement
described above separately with respect to both certificated and book-entry
Warrants, even if both kinds of Warrants are to be exercised at the same time.
Thus, a Warrantholder seeking to exercise both certificated and book-entry
Warrants at the same time must still exercise a minimum of 500 of each kind of
Warrant in order to satisfy such requirement. In addition, book-entry Warrants
held through one Participant (including participants in CEDEL or Euroclear) may
not be combined with book-entry Warrants held through another Participant in
order to satisfy the minimum exercise requirement.
MAXIMUM EXERCISE AMOUNT
All exercises of Warrants (other than on the Expiration Date or the
Delisting Date or upon cancellation of the Warrants as described under
"-- Extraordinary Events and Exercise Limitation Events" herein) are subject, at
the Company's option, to the limitation that not more than 1,000,000 Warrants in
total may be exercised on any Exercise Date and not more than 250,000 Warrants
may be exercised by or on behalf of any person or entity, either individually or
in concert with any other person or entity, on any Exercise Date. If any New
York Business Day would otherwise, under the terms of the Warrant Agreement, be
the Exercise Date in respect of more than 1,000,000 Warrants, then at the
Company's election 1,000,000 of such Warrants shall be deemed exercised on such
Exercise Date (selected by the Warrant Agent on a pro rata basis, but if, as a
result of such pro rata selection, any registered holders of Warrants would be
deemed to have exercised fewer than 500 Warrants, then the Warrant Agent shall
first select additional of such holders' Warrants so that no holder shall be
deemed to have exercised fewer than 500 Warrants), and the remainder of such
Warrants (the "Remaining Warrants") shall be deemed exercised on the following
New York Business Day (subject to successive applications of this provision);
provided, that any Remaining Warrant for which an Exercise Notice was delivered
on a given Exercise Date shall be deemed exercised before any other Warrants for
which an Exercise Notice was delivered on a later Exercise Date. If any
individual Warrantholder attempts to exercise more than 250,000 Warrants on any
New York Business Day, then at the Company's election 250,000 of such Warrants
shall be deemed exercised on such New York Business Day and the remainder shall
be deemed exercised on the following New York Business Day (subject to
successive applications of this provision). As a result of any such postponed
exercise, Warrantholders will receive a Cash Settlement Value determined as of a
date later than the otherwise applicable Valuation Date. In any such case, as a
result of any such postponement, the Cash Settlement Value actually received by
Warrantholders may be lower than the otherwise applicable Cash Settlement Value
if the Valuation Date of the Warrants had not been postponed.
LIMIT OPTION
Except for Warrants subject to automatic exercise and except as described
below with respect to payments of any Alternative Settlement Amount, each
Warrantholder, in connection with any exercise of Warrants (including a
postponed exercise following an Extraordinary Event or an Exercise Limitation
Event), will have the option (the "Limit Option") to specify that such Warrants
are not to be exercised if the Spot AMEX Hong Kong 30 Index that would otherwise
be used to determine the Cash Settlement Value of such Warrants is 20 or more
points lower than the closing level of the AMEX Hong Kong 30 Index for the day
specified below (such closing level, the "Limit Option Reference Index"). A
Warrantholder's election of the Limit Option must be specified in the applicable
Exercise Notice delivered to the Warrant Agent. The Limit Option Reference Index
will be the closing level of the AMEX Hong Kong 30 Index on the relevant
Exercise Date (or, if such date is not an Index Calculation Day, on the
immediately preceding Index Calculation Day). If an Exercise Notice and the
related Warrants are received after 3:00 P.M., New York City time, on a given
day, the applicable Limit Option Reference Index will be determined as of the
next day that is also a New
S-22
<PAGE> 23
York Business Day (or, if such day is not an Index Calculation Day, as of the
immediately preceding Index Calculation Day).
To ensure that the Limit Option will have its intended effect of limiting
the risk of any downward movement in the level of the AMEX Hong Kong 30 Index
between the date on which a Warrantholder submits an Exercise Notice and the
related Valuation Date, such Exercise Notice and the related Warrants generally
must be received by the Warrant Agent not later than 3:00 P.M., New York City
time, on the New York Business Day on which it is submitted and the Exercise
Date must also be an Index Calculation Day. See the illustration under
"-- Exercise and Settlement of Warrants" above and "Certain Important
Information Concerning the Warrants" herein.
Following receipt of an Exercise Notice and the related Warrants subject to
the Limit Option, the Warrant Agent will obtain the applicable Limit Option
Reference Index and will determine whether such Warrants will not be exercised
because of the Limit Option. Warrants that are not exercised will be treated as
not having been tendered for exercise, and either the Warrant Certificate
evidencing such Warrants will be returned to the registered holder by
first-class mail at the Company's expense or, in the case of Warrants held
through the facilities of DTC, CEDEL or Euroclear, such Warrants will be
transferred to the account at DTC, CEDEL or Euroclear, as the case may be, from
which they were transferred to the Warrant Agent. To exercise such Warrants, a
Warrantholder will be required to cause the Warrants and a related Exercise
Notice to be submitted again to the Warrant Agent.
Once elected by a Warrantholder in connection with an exercise of Warrants,
the Limit Option will continue to apply, on the basis of the Limit Option
Reference Index as initially determined for such Warrants, even if the Valuation
Date for such Warrants is postponed, except when such Valuation Date is
postponed until the Expiration Date, the Delisting Date or the Cancellation Date
(as hereinafter defined) as described under "-- Extraordinary Events and
Exercise Limitation Events" below. Pursuant to the Limit Option, such Warrants
will either (i) be exercised on a delayed basis if the applicable Spot AMEX Hong
Kong 30 Index on the postponed Valuation Date is not less than the Limit Option
Reference Index by 20 or more points or (ii) be excluded from being exercised
if, on any applicable postponed Valuation Date, the applicable Spot AMEX Hong
Kong 30 Index is less than the Limit Option Reference Index by 20 or more
points.
In connection with any exercise of 500 or more Warrants, a Warrantholder
may elect to subject the exercise of only a portion of such Warrants to the
Limit Option, provided that the number of Warrants subject to the Limit Option
and the number of Warrants not subject to the Limit Option shall in each case
not be less than 500. A Warrantholder may not combine certificated and
book-entry Warrants in order to meet the 500-Warrant minimum requirement. See
"-- Minimum Exercise Amount" herein.
AUTOMATIC EXERCISE
All Warrants for which the Warrant Agent has not received a valid Exercise
Notice at or prior to 3:00 P.M., New York City time, on (i) the New York
Business Day immediately preceding the Expiration Date or (ii) the Delisting
Date, as the case may be, or for which the Warrant Agent has received a valid
Exercise Notice but with respect to which timely delivery of the relevant
Warrants has not been made, together with any Warrants the Valuation Date for
which has at such time been postponed as described under "-- Extraordinary
Events and Exercise Limitation Events" below, will be automatically exercised on
such date. The Exercise Date for such Warrants will be the Expiration Date or
the Delisting Date, as the case may be, or, if such date is not a New York
Business Day, the next succeeding New York Business Day. The Warrant Agent will
obtain the Spot AMEX Hong Kong 30 Index (determined as of the first Index
Calculation Day following such date, which will be the Valuation Date for such
Warrants, except in the case of a postponed exercise following the occurrence of
an Extraordinary Event or an Exercise Limitation Event as described under
"-- Extraordinary Events and Exercise Limitation Events" below), and will
determine the Cash Settlement Value, if any, of such Warrants.
Except in the case of a postponed exercise following the occurrence of an
Extraordinary Event or an Exercise Limitation Event as described under
"-- Extraordinary Events and Exercise Limitation Events" below, or in the case
of Warrants held through the facilities of DTC, CEDEL or Euroclear, if the
Company
S-23
<PAGE> 24
has made adequate funds available to the Warrant Agent in a timely manner as
required by the Warrant Agreement, the Warrant Agent will thereafter be
responsible for making a payment available to each registered holder of a
Warrant in the form of a cashier's check or official bank check, or (in the case
of payments of at least $100,000) by wire transfer to a U.S. dollar account
maintained by such holder in the United States (at such holder's election) after
3:00 P.M., New York City time, on the fourth New York Business Day after such
Valuation Date (or, if such Valuation Date is not a New York Business Day, on
the fourth New York Business Day following the New York Business Day next
succeeding such Valuation Date) against receipt by the Warrant Agent at the
Warrant Agent's Office of such holder's Warrant Certificates. Such payment will
be in an amount equal to the aggregate Cash Settlement Value of the Warrants
evidenced by such Warrant Certificates.
In the case of Warrants held through the facilities of DTC, CEDEL or
Euroclear, and, except in the case of a postponed exercise following the
occurrence of an Extraordinary Event or an Exercise Limitation Event as
described under "Extraordinary Events and Exercise Limitation Events" below, the
Company will be required to make available to the Warrant Agent, no later than
3:00 P.M., New York City time, on the fourth New York Business Day after such
Valuation Date (or, if such Valuation Date is not a New York Business Day, on
the fourth New York Business Day following the New York Business Day next
succeeding such Valuation Date), funds in an amount sufficient to pay such
aggregate Cash Settlement Value. If the Company has made such funds available by
such time, the Warrant Agent will thereafter be responsible for making funds
available to DTC in an amount sufficient to pay the aggregate Cash Settlement
Value of the Warrants. DTC will be responsible for disbursing such funds to each
appropriate Participant (including Citibank and Morgan, who, in turn, will
disburse payments to CEDEL and Euroclear, as the case may be, who will be
responsible for disbursing such payments to each of their respective
participants, who, in turn, will be responsible for disbursing payments to the
Warrantholders it represents) and such Participant will be responsible for
disbursing such payments to the Warrantholders it represents and to each
brokerage firm for which it acts as agent. Each such brokerage firm will be
responsible for disbursing funds to the Warrantholders it represents.
EXTRAORDINARY EVENTS AND EXERCISE LIMITATION EVENTS
Extraordinary Events. The Warrant Agreement will provide that if the
Company determines that an Extraordinary Event has occurred and is continuing on
the Hong Kong Business Day with respect to which the Spot AMEX Hong Kong 30
Index on a Valuation Date is to be determined (the "Applicable Hong Kong
Business Day"), then the Cash Settlement Value in respect of an exercise shall
be calculated on the basis that the Valuation Date shall be the next Index
Calculation Day following an Applicable Hong Kong Business Day on which there is
no Extraordinary Event or Exercise Limitation Event; provided that if the
Valuation Date has not occurred on or prior to the Expiration Date or the
Delisting Date, the Warrantholders will receive the Alternative Settlement
Amount in lieu of the Cash Settlement Value which shall be calculated as if the
Warrants had been cancelled on the Expiration Date or the Delisting Date, as the
case may be. The Company shall promptly give notice to Warrantholders, by
publication in a United States newspaper with a national circulation (currently
expected to be The Wall Street Journal), if an Extraordinary Event shall have
occurred.
"Extraordinary Event" means any of the following events:
(i) a suspension or absence of trading on the HKSE of all the
Underlying Stocks which then comprise the AMEX Hong Kong 30 Index or a
Successor Index;
(ii) the enactment, publication, decree or other promulgation of any
statute, regulation, rule or order of any court or any other U.S. or
non-U.S. governmental authority which would make it unlawful for the
Company to perform any of its obligations under the Warrant Agreement or
the Warrants; or
(iii) any outbreak or escalation of hostilities or other national or
international calamity or crisis (including, without limitation, natural
calamities which in the opinion of the Company may materially and adversely
affect the economy of Hong Kong or the trading of securities generally on
the HKSE) which has or will have a material adverse effect on the ability
of the Company to perform its obligations under the Warrants or to modify
the hedge of its position with respect to the AMEX Hong Kong 30 Index.
S-24
<PAGE> 25
For the purpose of determining whether an Extraordinary Event has occurred:
(1) a limitation on the hours or number of days of trading will not constitute
an Extraordinary Event if it results from an announced change in the regular
business hours of the HKSE and (2) an "absence of trading" on the HKSE will not
include any time when the HKSE itself is closed for trading under ordinary
circumstances.
To the Company's knowledge no circumstances have arisen since the inception
of the AMEX Hong Kong 30 Index that could have constituted an Extraordinary
Event, except that on July 22, 1992 and on September 17, 1993 trading on the
HKSE and The Hong Kong Futures Exchange Ltd. (the "HK Futures Exchange") was
suspended due to typhoons (severe storms) in Hong Kong (the "Typhoon
Suspensions"). Prior to the inception of the AMEX Hong Kong 30 Index, and based
on the information published by the HKSE, trading on the HKSE was suspended
during the time of other world market breaks from October 20 through October 23,
1987. Trading in Hang Seng Index Futures on the HK Futures Exchange also was
suspended during the same four-day period (collectively, the "October 1987
Suspension"). The existence of such circumstances, however, is not necessarily
indicative of the likelihood of such circumstances arising or not arising in the
future. See "The AMEX Hong Kong 30 Index -- The HKSE" below.
If the Company determines that an Extraordinary Event has occurred and is
continuing, and if the Extraordinary Event is expected by the Company to
continue, the Company may immediately cancel the Warrants by notifying the
Warrant Agent of such cancellation (the date such notice is given being the
"Cancellation Date"), and each Warrantholder's rights under the Warrants and the
Warrant Agreement shall thereupon cease; provided that each Warrant shall be
exercised (even if such Warrant would not otherwise be exercisable on such date
because of the Limit Option) on the basis that the Valuation Date for such
Warrant shall be the Cancellation Date and the holder of each such Warrant will
receive, in lieu of the Cash Settlement Value of such Warrant, an amount (the
"Alternative Settlement Amount"), determined by the Determination Agent, which
is equal to the amount "X" calculated using the formula set forth below:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
T A
X = I + [ -- X - ]
2 B
</TABLE>
where
I = the Cash Settlement Value of the Warrants determined as described under
"-- Cash Settlement Value" above, but calculated with a Spot AMEX Hong Kong 30
Index determined by the Determination Agent which, subject to approval by the
Company (such approval not to be unreasonably withheld), in the reasonable
opinion of the Determination Agent, fairly reflects the value of the Underlying
Stocks on the Cancellation Date;
T = U.S.$ , the initial offering price per Warrant;
A = the total number of days from but excluding the Cancellation Date for
such Warrants to and including the Expiration Date; and
B = the total number of days from but excluding the date the Warrants were
initially sold to and including the Expiration Date.
For the purposes of determining "I" in the above formula, in the event that
the Determination Agent and the Company are required, but have not, after good
faith consultation with each other and within five days following the first day
upon which such Alternative Settlement Amount may be calculated in accordance
with the above formula, agreed upon a Spot AMEX Hong Kong 30 Index which fairly
reflects the value of the Underlying Stocks on the Cancellation Date, then the
Determination Agent shall promptly nominate a third party, subject to approval
by the Company (such approval not to be unreasonably withheld), to determine
such figure and calculate the Alternative Settlement Amount in accordance with
the above formula. Such party shall act as an independent expert and not as an
agent of the Company or the Determination Agent, and its calculation and
determination of the Alternative Settlement Amount shall, absent manifest error,
be final and binding on the Company, the Warrant Agent, the Determination Agent
and the Warrantholders. Any such calculations will be made available to a
Warrantholder for inspection at the Warrant Agent's Office.
S-25
<PAGE> 26
Neither the Company nor such third party shall have any responsibility for good
faith errors or omissions in calculating the Alternative Settlement Amount.
Exercise Limitation Events. The Warrant Agreement will provide that if the
Company determines that on an Applicable Hong Kong Business Day an Exercise
Limitation Event has occurred and is continuing, then the Cash Settlement Value
in respect of an exercise shall be calculated on the basis that the Valuation
Date shall be the next Index Calculation Day following an Applicable Hong Kong
Business Day on which there is no Exercise Limitation Event or Extraordinary
Event; provided that, if the Valuation Date has not occurred on or prior to the
Expiration Date or the Delisting Date, the Warrantholders will receive the
Alternative Settlement Amount in lieu of the Cash Settlement Value, which shall
be calculated as if the Warrants had been cancelled on the Expiration Date or
the Delisting Date, as the case may be. The Company shall promptly give notice
to Warrantholders, by publication in a United States newspaper with a national
circulation (currently expected to be The Wall Street Journal), if an Exercise
Limitation Event shall have occurred.
"Exercise Limitation Event" means either of the following events:
(i) a suspension or absence of trading on the HKSE of (a) 20% or more
of the Underlying Stocks which then comprise the AMEX Hong Kong 30 Index or
a Successor Index, and/or (b) the stocks of any three of the four most
highly capitalized companies included in the Underlying Stocks which then
comprise the AMEX Hong Kong 30 Index or a Successor Index; or
(ii) the suspension or material limitation on the HK Futures Exchange
or any other major futures or securities market (which as of the date of
this Prospectus Supplement includes only the HK Futures Exchange, but which
in the Company's judgment may change in the future) of trading in futures
or options contracts related to the Hang Seng Index (for a brief
description of the Hang Seng Index, see "The AMEX Hong Kong 30 Index -- The
HKSE" herein), the AMEX Hong Kong 30 Index or a Successor Index.
For purposes of determining whether an Exercise Limitation Event has
occurred: (1) a limitation on the hours or number of days of trading will not
constitute an Exercise Limitation Event if it results from an announced change
in the regular business hours of the relevant exchange, (2) a decision to
permanently discontinue trading in the relevant contract will not constitute an
Exercise Limitation Event, (3) a suspension in trading in a futures or options
contract on the Hang Seng Index, the AMEX Hong Kong 30 Index or a Successor
Index by the HK Futures Exchange or other major futures or securities market
(which as of the date of this Prospectus Supplement includes only the HK Futures
Exchange, but which in the Company's judgment may change in the future) by
reason of (x) a price change violating limits set by the HK Futures Exchange or
such futures or securities market, (y) an imbalance of orders relating to such
contracts or (z) a disparity in bid and ask quotes relating to such contracts
will constitute a suspension or material limitation of trading in futures or
options contracts related to the Hang Seng Index, the AMEX Hong Kong 30 Index or
such Successor Index, (4) an "absence of trading" on the HK Futures Exchange or
a major futures or securities market on which futures or options contracts
relating to the Hang Seng Index, the AMEX Hong Kong 30 Index or a Successor
Index are traded will not include any time when the HK Futures Exchange or such
futures or securities market, as the case may be, itself is closed for trading
under ordinary circumstances and (5) the occurrence of an Extraordinary Event
described in clause (i) of the definition of Extraordinary Event will not
constitute, and will supersede the occurrence of, an Exercise Limitation Event.
Based on information provided to the Company by HKSE and the HK Futures
Exchange, it is the Company's understanding that during the past six years there
have been no suspensions of trading on the HKSE and no suspensions of trading on
the HK Futures Exchange under circumstances that could have constituted an
Exercise Limitation Event, except for the Typhoon Suspensions and the October
1987 Suspension. The lack of such suspensions over the period indicated is not
necessarily indicative of the number or frequency of any future suspensions. See
"The AMEX Hong Kong 30 Index -- The HKSE" below.
In the case of a postponed Valuation Date resulting from an Extraordinary
Event or an Exercise Limitation Event, if the Company has made adequate funds
available to the Warrant Agent by 3:00 P.M., New York City time, on the third
New York Business Day following the date on which the Cash Settlement
S-26
<PAGE> 27
Value or Alternative Settlement Amount, as the case may be, has been calculated,
the Warrant Agent will thereafter be responsible for making payment available to
each registered holder who holds Warrants in certificated form in the form of a
cashier's check or official bank check, or (in the case of payments of at least
$100,000) by wire transfer to a U.S. dollar bank account maintained by such
holder in the United States (at such holder's election), in an amount equal to
the aggregate Cash Settlement Value or Alternative Settlement Amount, as
applicable, of such holder's exercised Warrants. In the case of Warrants held
through the facilities of DTC, CEDEL or Euroclear, if the Company has made such
funds available by such time as noted above, the Warrant Agent will thereafter
be responsible for making funds available to DTC in an amount sufficient to pay
the Cash Settlement Value or Alternative Settlement Amount of the Warrants. DTC
will be responsible for disbursing such funds to each appropriate Participant
(including Citibank and Morgan who in turn will disburse payments to CEDEL and
Euroclear, as the case may be, who will be responsible for disbursing such
payments to their respective participants who, in turn, will be responsible for
disbursing such payments to the Warrantholders it represents) and such
Participant will be responsible for disbursing such payments to the
Warrantholders it represents and to each brokerage firm for which it acts as
agent. Each such brokerage firm will be responsible for disbursing funds to the
Warrantholders it represents.
Certain of the Extraordinary Events and Exercise Limitation Events may be
events that would tend to decrease the level of the AMEX Hong Kong 30 Index and
accordingly decrease the Cash Settlement Value for the Warrants following the
occurrence of any such Extraordinary Event or Exercise Limitation Event.
However, as a result of any postponed exercise as described above,
Warrantholders would not receive such Cash Settlement Value, but would receive
instead a Cash Settlement Value (or, if applicable, an Alternative Settlement
Amount) determined as of a later date. In any such case, any immediate impact of
the related Extraordinary Event or Exercise Limitation Event on the AMEX Hong
Kong 30 Index may have been negated by interim market and other developments
and, as a result of any such postponement, the Cash Settlement Value (or
Alternative Settlement Amount) actually received by Warrantholders may be
substantially lower (including zero) than the otherwise applicable Cash
Settlement Value if the valuation of the Warrants had not been postponed.
LISTING
Application has been made to list the Warrants on the AMEX. The AMEX symbol
for the Warrants is HCW.WS. The AMEX expects to cease trading the Warrants on
such Exchange as of the close of business on the Expiration Date.
DELISTING OF WARRANTS
In the event that the Warrants are delisted from, or permanently suspended
from trading (within the meaning of the Securities Exchange Act of 1934 and the
rules and regulations thereunder) on, the AMEX, and not accepted at the same
time for listing on another United States national securities exchange, Warrants
not previously exercised will be deemed automatically exercised on the last New
York Business Day prior to the effective date of such delisting or trading
suspension (the "Delisting Date") and the Cash Settlement Value, if any, shall
be calculated and settled as provided above under "-- Automatic Exercise." The
Company will notify Warrantholders as soon as practicable of such delisting or
trading suspension. However, if the Company first receives notice of the
delisting or suspension on the same day on which the Warrants are delisted or
suspended, such day will nevertheless be deemed to be the Delisting Date. The
Company will covenant in the Warrant Agreement that it will not seek delisting
of the Warrants from, or suspension of their trading on, the AMEX unless the
Company has, at the same time, arranged for listing of the Warrants on another
United States national securities exchange.
THE AMEX HONG KONG 30 INDEX
Unless otherwise stated, all information herein on the AMEX Hong Kong 30
Index is derived from the AMEX or other publicly available sources. Such
information reflects the policies of the AMEX as stated in such sources and such
policies are subject to change by the AMEX.
S-27
<PAGE> 28
The AMEX Hong Kong 30 Index is a new capitalization-weighted stock index
designed, developed, maintained and operated by, and is a service mark of, the
AMEX that measures the market value performance (share price times the number of
shares outstanding) of selected HKSE listed stocks. The AMEX Hong Kong 30 Index
currently is based on the capitalization of 30 Underlying Stocks trading on the
HKSE and is designed to represent a substantial segment of the Hong Kong stock
market. The HKSE is the primary trading market for [25] of the 30 Underlying
Stocks. The primary trading market for all of the Underlying Stocks is either
Hong Kong or London. Business sector representation of the Underlying Stocks
comprising the AMEX Hong Kong 30 Index as of January , 1994 was as follows:
[(1) property development (25.22%); (2) utilities (22.64%); (3) conglomerates
(19.97%); (4) finance (19.05%); (5) hotel/leisure (4.67%); (6) property
investment (4.17%); (7) airlines (2.33%); (8) food retailing (1.65%); and (9)
luxury retailing (0.30 %). The AMEX Hong Kong 30 Index was established on June
25, 1993. (See Appendix A hereto for a list of the Underlying Stocks as of
January , 1994.) As of January , 1994, the five largest Underlying Stocks
accounted for approximately 42.86% of the market capitalization of the AMEX Hong
Kong 30 Index, with the largest being Hong Kong Telecommunications, Ltd.
(11.93%), followed by HSBC Holdings plc (10.03%), Hang Seng Bank Ltd. (7.60%),
Hutchison Whampoa Ltd. (6.74%) and Sun Hung Kai Properties Ltd. (6.57%). The
lowest weighted Underlying Stock, as of January , 1994, was Dickson Concepts
(International) Ltd. (0.30%).]
The AMEX Hong Kong 30 Index will be maintained by the AMEX and will contain
at least 30 Underlying Stocks at all times. In addition, the Underlying Stocks
must meet certain listing and maintenance standards as discussed below. The AMEX
may change the composition of the AMEX Hong Kong 30 Index at any time in order
to more accurately reflect the composition and track the movement of the Hong
Kong stock market. Any replacement Underlying Stock must also meet the
Underlying Stock listing and maintenance standards as discussed below. Further,
the AMEX may replace Underlying Stocks in the event of certain corporate events,
such as takeovers, or mergers, that change the nature of the security.
The AMEX will select Underlying Stocks on the basis of their market weight,
trading liquidity, and representation of the business industries reflected on
the HKSE. The AMEX will require that each Underlying Stock be one issued by an
entity with major business interests in Hong Kong, listed for trading on the
HKSE, and have its primary trading market located in a country that the AMEX has
an effective surveillance sharing agreement with. The AMEX will remove any
Underlying Stock failing to meet the above listing and maintenance criteria
within 30 days after such failure occurs. In order to ensure that the AMEX Hong
Kong 30 Index does not contain a large number of thinly-capitalized, low-priced
securities with small public floats and low trading volumes, the AMEX has also
established additional qualification criteria for the inclusion and maintenance
of Underlying Stocks, based on the following standards: (1) all Underlying
Stocks selected for inclusion in the AMEX Hong Kong 30 Index must have, and
thereafter maintain, an average daily capitalization, as calculated by the total
number of shares outstanding times the latest price per share (in Hong Kong
dollars), measured over the prior 6-month period, of at least H.K.$3,000,000,000
(approximately U.S.$ on the date hereof); (2) all Underlying Stocks
selected for inclusion in the AMEX Hong Kong 30 Index must have, and thereafter
maintain, an average daily closing price, measured over the prior 6-month
period, not lower than H.K.$2.50 (approximately U.S.$ on the date hereof);
(3) all Underlying Stocks selected for inclusion in the AMEX Hong Kong 30 Index
must have, and thereafter maintain, an average daily trading volume, measured
over the prior 6-month period, of more than 1,000,000 shares per day, although
up to, but no more than, three Underlying Stocks may have an average daily
trading volume, measured over the prior 6-month period, of less than 1,000,000
shares per day, but in no event less than 500,000 shares per day; and (4) all
Underlying Stocks selected for inclusion in the AMEX Hong Kong 30 Index must
have, and thereafter maintain, a minimum "free float" value (total freely
tradeable outstanding shares minus insider holdings), based on a monthly average
measured over the prior 3-month period, of U.S.$238,000,000, although up to, but
no more than, three Underlying Stocks may have a free float value of less than
U.S.$238,000,000 but in no event less than U.S.$150,000,000, measured over the
same period. The AMEX will review and apply the above qualification criteria
relating to the Underlying Stocks on a quarterly basis, conducted the last
business day in January, April, July, and October (beginning January 1994). Any
Underlying Stock failing to meet the above listing and maintenance criteria will
be reviewed on the second Friday of the second month following the quarterly
review to again determine compliance with the above
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<PAGE> 29
criteria. Any Underlying Stock failing this second review will be replaced by a
"qualified" Underlying Stock effective upon the close of business on the
following Friday provided, however, that if such Friday is not a New York
Business Day, the replacement will be effective at the close of business on the
first preceding New York Business Day. For example, if an Underlying Stock was
found to be below the maintenance criteria on Monday, January 31, 1994, it would
be reviewed again on March 11 and, if ineligible, would be replaced by a
qualified security at the close of business on March 18, 1994. If March 18
happened not to be a New York Business Day, the replacement would be effective
at the close of business on the preceding Thursday, March 17, 1994, assuming
that Thursday was a New York Business Day. The AMEX will notify its membership
immediately after it determines to replace an Underlying Stock.
The annual reports and prospectuses of the companies listed on the HKSE are
available for investors' inspection in the City Hall Library (a public library
in Hong Kong, Central). The HKSE library also has information for each listed
company but it is available only to members of the HKSE.
A company whose stock is included in the AMEX Hong Kong 30 Index is not
required to be incorporated under the laws of Hong Kong. As of the date of this
Prospectus Supplement eight of the thirty companies whose stocks comprise the
Underlying Stocks are not incorporated in Hong Kong. They are (country of
incorporation shown within parentheses): Dairy Farm International Holdings Ltd.
(Bermuda), Dickson Concepts (International) Ltd. (Bermuda), Great Eagle Holdings
Ltd. (Bermuda), Hong Kong Land Holdings Ltd. (Bermuda), HSBC Holdings plc
(England), Jardine Matheson Holdings Ltd. (Bermuda), Jardine Strategic Holdings
Ltd. (Bermuda) and Tai Cheung Holdings Ltd. (Bermuda).
The AMEX Hong Kong 30 Index is a capitalization-weighted index. A company's
market capitalization is calculated by multiplying the number of shares
outstanding by the company's current share price (in Hong Kong dollars). For
valuation purposes unrelated to the Warrants, one AMEX Hong Kong 30 Index unit
(1.0) is assigned a fixed value of one U.S. dollar. The AMEX Hong Kong 30 Index
measures the average changes in price of the Underlying Stocks, weighted
according to their respective market capitalizations, so that the effect of a
percentage price change in an Underlying Stock will be greater the larger the
Underlying Stock's market capitalization. The AMEX Hong Kong 30 Index was
established by the AMEX on June 25, 1993, on which date the AMEX Hong Kong 30
Index value was set at 350.00. The daily calculation and public dissemination by
the AMEX of the AMEX Hong Kong 30 Index value commenced on September 1, 1993.
The data relating to the AMEX Hong Kong 30 Index was back-calculated by the AMEX
from January 2, 1989 to August 31, 1993. The AMEX Hong Kong 30 Index is
calculated by (i) adding the market capitalization of each Underlying Stock and
(ii) dividing such sum by an adjusted base market capitalization or divisor. On
June 25, 1993, the market value of the Underlying Stocks was approximately
H.K.$1,152,829,149,500 (equivalent to approximately U.S.$148,656,241,000) and
the divisor used to calculate the AMEX Hong Kong 30 Index was 3,293,797,570. The
AMEX selected that particular divisor number in order, among other things, to
ensure that the AMEX Hong Kong 30 Index was set at a general price level
consistent with other well recognized stock markets. The divisor is subject to
periodic adjustments as set forth below. The AMEX Hong Kong 30 Index is
calculated once every Index Calculation Day by the AMEX based on the most recent
official closing prices of each of the Underlying Stocks reported by the HKSE.
Pricing of the AMEX Hong Kong 30 Index will be performed each day and be
disseminated before the opening of trading via the Consolidated Tape Authority
Network-B continuously during each New York Business Day. The dissemination
value, however, will remain the same throughout the trading day because the
trading hours of the HKSE do not overlap with AMEX trading hours. Accordingly,
updated price information will be unavailable. At the close of the market on
January , 1994, the AMEX Hong Kong 30 Index level was .
In order to maintain continuity in the level of the AMEX Hong Kong 30 Index
in the event of certain changes due to non-market factors affecting the
Underlying Stocks, such as the addition or deletion of stocks, substitution of
stocks, stock dividends, stock splits, distributions of assets to stockholders
or other capitalization events, the divisor used in calculating the AMEX Hong
Kong 30 Index is adjusted in a manner designed to prevent any instantaneous
change or discontinuity in the level of the AMEX Hong Kong 30 Index and in order
that the value of the AMEX Hong Kong 30 Index immediately after such change will
equal the level of the AMEX Hong Kong 30 Index immediately prior to the change.
Thereafter, the divisor remains at the new value until a further adjustment is
necessary as the result of another change. Nevertheless, changes in the
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<PAGE> 30
identities and characteristics of the Underlying Stocks may significantly affect
the behavior of the AMEX Hong Kong 30 Index over time.
The AMEX is under no obligation to continue the calculation and
dissemination of the AMEX Hong Kong 30 Index and the method by which the AMEX
Hong Kong 30 Index is calculated and the name "The AMEX Hong Kong 30 Index" may
be changed at the discretion of the AMEX. The Warrants are not sponsored,
endorsed, sold or promoted by the AMEX. No inference should be drawn from the
information contained in this Prospectus Supplement that the AMEX makes any
representation or warranty, implied or express, to the Company, the
Warrantholders or any member of the public regarding the advisability of
investing in securities generally or in the Warrants in particular or the
ability of the AMEX Hong Kong 30 Index to track general stock market
performance. The AMEX has no obligation to take the needs of the Company or the
Warrantholders into consideration in determining, composing or calculating the
AMEX Hong Kong 30 Index. The AMEX is not responsible for, and has not
participated in the determination of the timing of, prices for, or quantities
of, the Warrants to be issued or in the determination or calculation of the
equation by which the Warrants are to be settled in cash. The AMEX has no
obligation or liability in connection with the administration, marketing or
trading of the Warrants.
The use of and reference to the AMEX Hong Kong 30 Index in connection with
the Warrants have been consented to by the AMEX.
Except with respect to the responsibility of the Determination Agent to
make certain calculations under certain circumstances as described herein, none
of the Company, the Warrant Agent, the Determination Agent or the Underwriters
accepts any responsibility for the calculation, maintenance or publication of
the AMEX Hong Kong 30 Index or any Successor Index. The AMEX disclaims all
responsibility for any inaccuracies in the data on which the AMEX Hong Kong 30
Index is based, or any mistakes or errors or omissions in the calculation or
dissemination of the AMEX Hong Kong 30 Index or for the manner in which such
index is applied in determining any Cash Settlement Value or Alternative
Settlement Amount upon exercise of the Warrants.
HISTORICAL DATA ON THE AMEX HONG KONG 30 INDEX
The following table sets forth the closing level of the AMEX Hong Kong 30
Index at the end of each month in the period from January 1989 through January
7, 1994. All historical data presented in the following table relating to
periods before September 1, 1993 (the date the AMEX commenced the daily
calculation and public dissemination of the AMEX Hong Kong 30 Index) is
presented as if the AMEX Hong Kong 30 Index had existed during such periods,
based on the Underlying Stocks contained in the AMEX Hong Kong 30 Index as of
June 25, 1993, and such closing levels have been calculated hypothetically on
the same basis that the AMEX 30 Hong Kong Index is calculated, but without
making certain of the adjustments referred to above to take account of
non-market factors. All historical data presented in the following table
relating to periods after September 1, 1993 are based on actual data from the
AMEX Hong Kong 30 Index. Certain of the Underlying Stocks currently comprising
the AMEX Hong Kong 30 Index may not have met the AMEX's criteria for inclusion
in the AMEX Hong Kong 30 Index at all times during the period covered by the
table. In addition, there is no reason to believe that other stocks would not
have been included in the AMEX Hong Kong 30 Index had it been established at an
earlier date. Accordingly, the month-end closing levels set forth below are not
necessarily indicative of the levels that would have been in existence had the
AMEX calculated and disseminated the AMEX Hong Kong 30 Index beginning in
January 1989 applying the criteria set forth above to determine which Underlying
Stocks would be included in such index. These historical data on the AMEX Hong
Kong 30 Index are not necessarily indicative of the future performance of the
AMEX Hong Kong 30 Index or what the value of the Warrants may be. Any historical
upward or downward trend in the closing level of the AMEX Hong Kong 30 Index
during any period set forth below is not any indication that
S-30
<PAGE> 31
the level of the AMEX Hong Kong 30 Index is more or less likely to increase or
decrease at any time during the term of the Warrants.
<TABLE>
<CAPTION>
MONTH-END
CLOSING LEVEL
-------------
<S> <C>
1989:
January............................................................... 149.88
February.............................................................. 147.27
March................................................................. 146.46
April................................................................. 152.01
May................................................................... 133.76
June.................................................................. 110.46
July.................................................................. 125.78
August................................................................ 123.02
September............................................................. 135.71
October............................................................... 135.04
November.............................................................. 136.23
December.............................................................. 140.32
1990:
January............................................................... 136.29
February.............................................................. 146.44
March................................................................. 149.57
April................................................................. 146.77
May................................................................... 156.58
June.................................................................. 164.36
July.................................................................. 172.48
August................................................................ 154.24
September............................................................. 137.78
October............................................................... 149.74
November.............................................................. 148.38
December.............................................................. 151.46
1991:
January............................................................... 162.42
February.............................................................. 177.56
March................................................................. 187.39
April................................................................. 179.85
May................................................................... 186.43
June.................................................................. 184.68
July.................................................................. 201.91
August................................................................ 201.49
September............................................................. 200.42
October............................................................... 204.76
November.............................................................. 209.96
December.............................................................. 217.58
1992:
January............................................................... 233.06
February.............................................................. 250.01
March................................................................. 249.71
April................................................................. 271.89
May................................................................... 308.30
June.................................................................. 309.67
July.................................................................. 296.24
August................................................................ 282.96
September............................................................. 276.67
October............................................................... 311.14
November.............................................................. 291.86
December.............................................................. 276.73
</TABLE>
S-31
<PAGE> 32
<TABLE>
<CAPTION>
MONTH-END
CLOSING LEVEL
-------------
<S> <C>
1993:
January............................................................... 287.74
February.............................................................. 318.99
March................................................................. 319.68
April................................................................. 341.75
May................................................................... 369.20
June.................................................................. 354.06
July.................................................................. 348.06
August................................................................ 374.08
September............................................................. 382.05
October............................................................... 467.64
November.............................................................. 458.93
December.............................................................. 498.98
1994:
January (through January 7)........................................... 553.40
</TABLE>
The following graph sets forth the historical performance of the AMEX Hong
Kong 30 Index at the end of each month from January 1989 through January 7,
1994. Past movements of the AMEX Hong Kong 30 Index are not necessarily
indicative of the future AMEX Hong Kong 30 Index values. The January , 1994
closing level of the AMEX Hong Kong 30 Index was .
AMEX HONG KONG 30 INDEX--HISTORICAL PERFORMANCE
MONTH-END VALUES THROUGH JANUARY 7, 1994
Source: Prepared by the Company from data obtained from the AMEX.
S-32
<PAGE> 33
THE HKSE
As of September 30, 1993, the HKSE was the world's 9th largest stock
exchange based on U.S. dollar market capitalization. The HKSE market is a
continuous market where trading is order-based through a computer-assisted
system. Transactions are generally conducted by telephone. However,
broker-dealers continue to operate from the stock exchange floor, and trading is
therefore occasionally face-to-face. There are no market-makers in Hong Kong,
but exchange dealers may act as dual capacity broker-dealers. All of the
Underlying Stocks of the AMEX Hong Kong 30 Index are traded through the
computerized trading system. Trading is undertaken from 10:00 A.M. to 12:30 P.M.
and then from 2:30 P.M. to 3:30 P.M. (Hong Kong time) every Hong Kong day except
Saturdays, Sundays and other days on which the HKSE is closed. Hong Kong time is
12 hours ahead of Eastern Daylight Savings Time and 13 hours ahead of Eastern
Standard Time. Settlement of trades is required within 48 hours and requires
either delivery of share certificates or book-entry delivery through the Central
Clearing and Settlement System.
Due to the time differences between New York City and Hong Kong, on any
normal trading day, trading on the HKSE of the Underlying Stocks currently will
cease at 2:30 A.M. or 3:30 A.M., New York City time. Using the last reported
closing prices of the Underlying Stocks on the HKSE, the closing level of the
AMEX Hong Kong 30 Index on any such trading day generally will be calculated,
published and disseminated by the AMEX in the United States shortly prior to the
opening of trading on the AMEX in New York on the same calendar day.
The HKSE has adopted certain measures intended to prevent any extreme
short-term price fluctuations resulting from order imbalances or market
volatility. Where the HKSE considers it necessary for the protection of the
investor or the maintenance of an orderly market, it may at any time suspend
dealings in any securities or cancel the listing of any securities in such
circumstances and subject to such conditions as it thinks fit, whether requested
by the listed issuer or not. The HKSE may also do so where: (1) an issuer fails,
in a manner which the HKSE considers material, to comply with the HKSE Listing
Rules or its Listing Agreement; or (2) the HKSE considers there are insufficient
securities in the hands of the public; or (3) the HKSE considers that the listed
issuer does not have a sufficient level of operations or sufficient assets to
warrant the continued listing of the issuer's securities; or (4) the HKSE
considers that the issuer or its business is no longer suitable for listing.
Investors should also be aware that the HKSE may suspend the trading of
individual stocks in certain limited and extraordinary circumstances, until
certain price-sensitive information has been disclosed to the public. For
instance, dealing on a listed company's shares will normally be suspended when
information about an intention to make a private placing, or a very substantial
transaction compared to the net asset value of the company, has been leaked
through an improper channel. Trading will not be resumed until after a formal
announcement has been made. Trading of a company's shares may also be suspended
if there is unusual trading activity in that stock.
An issuer may apply for suspension on its own accord. A suspension request
will normally only be acceded to in the following circumstances: (1) where, for
a reason acceptable to the HKSE, price-sensitive information cannot at that time
be disclosed; (2) where the issuer is subject to an offer, but only where terms
have been agreed in principle and require discussion with, and agreement by, one
or more major shareholders (suspensions will only normally be appropriate where
no previous announcement has been made); (3) to maintain an orderly market; (4)
where there is an occurrence of certain levels of notifiable transactions, such
as substantial changes in the nature, control or structure of the issuer, where
publication of full details is necessary to permit a realistic valuation to be
made of the securities concerned, or the approval of shareholders is required;
(5) where the issuer is no longer suitable for listing, or becomes a "cash"
company; or (6) for issuers going into receivership or liquidation.
As a result of the foregoing, variations in the AMEX Hong Kong 30 Index may
be limited by suspension of trading of individual stocks which comprise the AMEX
Hong Kong 30 Index which may, in turn, adversely affect the value of the
Warrants. In addition, a suspension in trading of (a) 20% or more of the
Underlying Stocks and/or (b) stocks of any three of the four most highly
capitalized companies included in the Underlying Stocks would result in an
Exercise Limitation Event and a halt in trading of all of the Underlying Stocks
would result in an Extraordinary Event, if such Events were declared by the
Company. As a result, the
S-33
<PAGE> 34
Valuation Date of exercised Warrants would be postponed and the Cash Settlement
Value (or Alternative Settlement Amount) actually received by Warrantholders may
be substantially lower (including zero) than the otherwise applicable Cash
Settlement Value if the valuation of the Warrants had not been postponed. See
"Description of the Warrants -- Extraordinary Events and Exercise Limitation
Events" herein.
In 1977, the Hong Kong government authorized futures trading in
commodities. The HK Futures Exchange currently provides for trading in gold,
sugar and soybeans in addition to Hang Seng Index and Hong Kong Interbank
Offered Rate contracts.
The stock index futures contracts traded on the HK Futures Exchange are
based upon the Hang Seng Index ("HSI") and its four sub-indices: properties,
utilities, finance, and commerce and industry. The HSI is a value-weighted index
of 33 stocks and every stock in the HSI is represented in one of the four
sub-indices. The following Underlying Stocks of the AMEX Hong Kong 30 Index (as
of January , 1994) are not constituent securities of the HSI: [Amoy Properties
Ltd., Dickson Concepts (International) Ltd., Henderson Investment Ltd. and Tai
Cheung (Holdings) Ltd. The following constituent securities of the HSI (as of
October 26, 1993) are not Underlying Stocks of the AMEX Hong Kong 30 Index: Hong
Kong Aircraft Eng. Co. Ltd., Lai Sun Garment International Ltd., Mandarin
Oriental International Ltd., Mirmar Hotel and Inv. Co. Ltd., Shun Tak Holdings
Ltd., Television Broadcasts Ltd. and Winsor Industrial Corporation Ltd.] The
AMEX Hong Kong 30 Index also differs from the HSI in that, among other things,
the selection, maintenance and replacement criteria for the constituent
securities of the two indices are not the same and that they are operated and
governed by the rules of different entities.
Currently, the contracts listed on the HK Futures Exchange are HSI futures,
HSI sub-indices futures, HSI options, gold and Hong Kong Interbank Offered Rate
futures. There is a daily maximum fluctuation limit of 300 points imposed on the
HSI contracts (not applicable to spot mark contracts). Once the limit is
touched, orders cannot be transacted above (the upside limit) or below (the
downside limit) but orders within the range can continue to trade.
The foregoing discussion reflects the current rules governing the HKSE and
the HK Futures Exchange, which are subject to change.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
U.S. FEDERAL INCOME TAX CONSEQUENCES OF OWNERSHIP OF A WARRANT BY A U.S. HOLDER
The following is a summary of certain anticipated U.S. federal income tax
consequences of an investment in Warrants and represents the views of Sullivan &
Cromwell, special tax counsel to the Company. This summary deals only with "U.S.
Holders" (as defined below) that will hold Warrants as capital assets and as to
which the Underlying Stocks, if acquired by such holders, would be capital
assets, and does not deal with Warrantholders in special tax situations, such as
dealers in options, securities or currencies. A U.S. Holder means a
Warrantholder who or which is (i) a citizen or resident of the United States,
(ii) a domestic corporation, or (iii) a person otherwise subject to U.S. federal
income taxation on a net income basis in respect of the Warrant.
This summary does not address every U.S. federal income tax issue raised by
the ownership of Warrants. In particular, this summary does not consider either
(i) the U.S. federal income tax consequences of holding Warrants as a hedge
against, or hedged against, currency or security price risks, or (ii) the
possible application of the "straddle" rules of the Internal Revenue Code of
1986, as amended (the "Code"), to a Warrantholder as a result of holding other
"positions" (within the meaning of Section 1092 of the Code). Either of these
factors might substantially alter the tax consequences described below and may
require specific identification of positions in the Warrants before the close of
the date on which they are acquired. In particular, if the "straddle rules" were
to apply, a Warrantholder might be required to defer all or a portion of any
loss realized upon the sale, transfer, exercise, cancellation or lapse of a
Warrant. Accordingly, prospective purchasers of Warrants are urged to consult
their own tax advisors before any such acquisition concerning the U.S. federal,
state and local tax consequences, in light of their own particular
circumstances, of owning Warrants.
S-34
<PAGE> 35
A U.S. Holder will generally recognize capital gain or loss only upon the
sale, transfer, exercise, cancellation or lapse of a Warrant, which gain or loss
will be long-term capital gain or loss if the U.S. Holder has held the Warrant
for more than one year.
Notwithstanding the foregoing, assuming the Warrants remain traded on or
subject to the rules of a "qualified board or exchange" (as defined in Section
1256(g)(7) of the Code), they will become "nonequity options" subject to the
"mark-to-market" rules of Section 1256 of the Code at such time as either (i)
the Commodity Futures Trading Commission (the "CFTC") designates a contract
market for a contract based on the AMEX Hong Kong 30 Index or (ii) the Secretary
of the Treasury otherwise determines that the Warrants meet the requirements of
law for such a designation. No such designation or determination has yet
occurred. Nevertheless, an application is currently pending with the CFTC for a
designation of a contract market for a contract based on the Hang Seng Index
which is an index that is calculated on the basis of a substantially similar
weighting of a substantial number of identical securities as, and whose
performance is highly correlated to, the AMEX Hong Kong 30 Index. It is not
clear what effect such a designation would have on the classification of the
Warrants as "nonequity options". If the mark-to-market rules of Section 1256
were to apply to the Warrants, a U.S. Holder of an unexercised Warrant would
generally be required (a) to treat the Warrant as if it were sold for its fair
market value on the last day of each taxable year during which the U.S. Holder
owned the Warrant and (b) to recognize gain or loss as 60% long-term and 40%
short-term capital gain or loss. Thus, a U.S. Holder of a Warrant that is
subject to the mark-to-market rules of Section 1256 might incur federal income
tax liability on an annual basis in respect of an increase in the value of a
Warrant without a corresponding receipt of cash. Under the mark-to-market rules,
any gain or loss realized by a U.S. Holder upon the sale, transfer, exercise,
cancellation or lapse of a Warrant would also be treated as 60% long-term and
40% short-term capital gain or loss.
Regardless of whether the Warrants are treated as "nonequity options", no
portion of gain or loss in respect of a Warrant will be treated as foreign
currency gain or loss for U.S. federal income tax purposes.
U.S. FEDERAL INCOME TAX CONSEQUENCES OF OWNERSHIP OF A WARRANTY BY A NON-U.S.
HOLDER
In general, a Warrantholder who or which is (i) a nonresident alien
individual or (ii) a foreign corporation, partnership, estate or trust, in
either case not subject to U.S. federal income tax on a net income basis in
respect of a Warrant (a "non-U.S. Holder"), will not be subject to U.S. federal
withholding tax with respect to amounts received, if any, with respect to a
Warrant.
BACKUP WITHHOLDING
In general, the proceeds received from a sale, transfer, cancellation or
exercise of a Warrant by a U.S. Holder will be subject to information reporting,
and may be subject to a U.S. "backup" withholding at a rate of 31% if the U.S.
Holder thereof fails to supply an accurate taxpayer identification number or
otherwise comply with applicable U.S. information reporting or certification
requirements. Such payments made to a non-U.S. Holder will not be subject to
information reporting or back-up withholding if the non-U.S. Holder certifies
its status as a non-U.S. Holder under penalty of perjury, provided that the
payor does not have actual knowledge that the holder is a United States person.
Any amounts so withheld would be refundable or allowed as a credit against such
holder's U.S. federal income tax liability.
S-35
<PAGE> 36
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company has agreed to sell to each of the Underwriters named
below, and each of the Underwriters has severally agreed to purchase, the number
of Warrants set forth opposite its name.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS WARRANTS
-------------------------------------------------------------------------- ---------
<S> <C>
PaineWebber Incorporated..................................................
Oppenheimer & Co., Inc....................................................
Kemper Securities, Inc....................................................
---------
Total........................................................... 2,000,000
---------
---------
</TABLE>
The Underwriters have advised the Company that they propose to offer the
Warrants to the public initially at the offering price set forth on the cover
page of this Prospectus Supplement, and to certain dealers at such price less a
concession not in excess of $ per Warrant. The Underwriters may allow and
such dealers may reallow a concession not in excess of $ per Warrant to
certain other dealers. After the initial public offering, the public offering
price and such concessions may be changed.
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all of the Warrants if any are purchased.
The Company has agreed to indemnify the Underwriters against, and to
contribute to losses arising out of, certain liabilities, including liabilities
under the Securities Act of 1933, as amended.
PaineWebber Incorporated is a wholly owned subsidiary of the Company. The
participation of PaineWebber Incorporated in the offer and sale of the Warrants
complies with the requirements of Schedule E of the By-Laws of the National
Association of Securities Dealers, Inc. (the "NASD") regarding underwriting
securities of an affiliate. Under the provisions of Schedule E, when a NASD
member such as PaineWebber Incorporated distributes warrants of an affiliate,
the price of the warrants can be no higher than that recommended by a "qualified
independent underwriter", as such term is defined in Schedule E, meeting certain
standards. In accordance with such requirements, Oppenheimer & Co., Inc. has
agreed to serve as a "qualified independent underwriter" and has conducted due
diligence and has recommended a price for the Warrants in compliance with the
requirements of Schedule E.
Each Underwriter has represented that (i) it has complied and will comply
with all applicable provisions of the Financial Services Act of 1986 with
respect to anything done by it in relation to the Warrants in, from or otherwise
involving the United Kingdom and (ii) it has only issued or passed on, and will
only issue or pass on, in the United Kingdom any document received by it in
connection with the issue of the Warrants to a person who is of a kind described
in Article 9(3) of the Financial Services Act of 1986 (Investment
Advertisements) (Exemptions) Order 1988 or is a person to whom the document may
otherwise lawfully be issued or passed on.
No person (other than a person permitted to do so under the securities laws
of Hong Kong) may distribute this document or any other offering material
relating to the Warrants or issue any advertisement or invitation relating to
the Warrants in or from Hong Kong except with respect to Warrants intended to be
disposed of to persons outside Hong Kong or to be disposed of in Hong Kong only
to persons whose business involves the acquisition, disposal or holding of
securities, whether as principal or as agent.
VALIDITY OF THE WARRANTS
The validity of the Warrants will be passed upon for the Company by
Cravath, Swaine & Moore, New York, New York, and for the Underwriters by
Sullivan & Cromwell, New York, New York.
S-36
<PAGE> 37
APPENDIX A
AMEX HONG KONG 30 INDEX -- UNDERLYING STOCKS
The following is a list of the issuers of the 30 stocks constituting the
AMEX Hong Kong 30 Index as of January , 1994. Such information was obtained
from the AMEX. The AMEX may delete, add or substitute any stock underlying the
AMEX Hong Kong 30 Index. See "The AMEX Hong Kong 30 Index" in this Prospectus
Supplement.
STOCKS INCLUDED IN THE AMEX HONG KONG 30 INDEX AS OF JANUARY , 1994,
TOGETHER WITH THEIR PERCENTAGE WEIGHT (ROUNDED TO THE NEAREST .01%) IN THE AMEX
HONG KONG 30 INDEX AS OF JANUARY , 1994, ARE SET FORTH BELOW:
<TABLE>
<CAPTION>
PERCENTAGE
STOCK WEIGHT
- ---------------------------------------------------------------------------------- ----------
<S> <C>
[Amoy Properties Ltd.............................................................. 1.50%
The Bank of East Asia, Ltd........................................................ 1.42%
Cathay Pacific Airways Ltd........................................................ 2.33%
Cheung Kong (Holdings) Ltd........................................................ 5.12%
China Light & Power Co., Ltd...................................................... 5.55%
CITIC Pacific Ltd................................................................. 2.42%
Dairy Farm International Holdings Ltd............................................. 1.65%
Dickson Concepts (International) Ltd.............................................. 0.30%
Great Eagle Holdings Ltd.......................................................... 0.57%
Hang Lung Development Co. Ltd..................................................... 1.17%
Hang Seng Bank Ltd................................................................ 7.60%
Henderson Investment Ltd.......................................................... 0.87%
Henderson Land Development Co. Ltd................................................ 3.52%
The Hong Kong & China Gas Co. Ltd................................................. 1.93%
The Hong Kong and Shanghai Hotels, Ltd............................................ 0.71%
Hong Kong Electric Holdings Ltd................................................... 3.23%
Hong Kong Land Holdings Ltd....................................................... 2.60%
Hong Kong Telecommunications Ltd.................................................. 11.93%
Hopewell Holdings Ltd............................................................. 2.08%
HSBC Holdings plc................................................................. 10.03%
Hutchison Whampoa Ltd............................................................. 6.74%
Hysan Development Co. Ltd......................................................... 1.35%
Jardine Matheson Holdings Ltd..................................................... 3.46%
Jardine Strategic Holdings Ltd.................................................... 2.02%
New World Development Co., Ltd.................................................... 2.69%
Sun Hung Kai Properties Ltd....................................................... 6.57%
Swire Pacific Ltd. 'A'............................................................ 3.18%
Tai Cheung Holdings Ltd........................................................... 0.37%
The Wharf (Holdings) Ltd.......................................................... 3.96%
World International (Holdings) Ltd................................................ 2.15%]
----------
Total................................................................... 100.00%
----------
----------
</TABLE>
As of January , 1994, the total capitalization of the AMEX Hong Kong 30
Index was U.S. $
billion.
A-1
<PAGE> 38
APPENDIX B
INDEX OF KEY TERMS
<TABLE>
<CAPTION>
PAGE ON WHICH
TERM TERM IS DEFINED
- --------------------------------------------------------------------------- -----------------
<S> <C>
Alternative Settlement Amount.............................................. S-25
AMEX....................................................................... front cover, S-3
AMEX Hong Kong 30 Index.................................................... front cover, S-3
Applicable Hong Kong Business Day.......................................... S-24
Cancellation Date.......................................................... S-25
Cash Settlement Value...................................................... front cover, S-3
CEDEL...................................................................... S-18
CFTC....................................................................... S-35
China...................................................................... S-13
Citibank................................................................... S-16
Code....................................................................... S-34
Company.................................................................... front cover, S-3
Conversion Option.......................................................... S-10
Conversion Option Period................................................... S-16
Cooperative................................................................ S-18
Delisting Date............................................................. S-2, S-4, S-27
Depositaries............................................................... S-17
Determination Agent........................................................ S-21
DTC........................................................................ S-10
Euroclear.................................................................. S-18
Euroclear Operator......................................................... S-18
Exercise Date.............................................................. S-19
Exercise Notice............................................................ S-19
Expiration Date............................................................ S-4, S-18
Extraordinary Event........................................................ S-24
HK Futures Exchange........................................................ S-25
HKSE....................................................................... S-4
Hong Kong Business Day..................................................... S-13
Index Calculation Day...................................................... S-13
Limit Option............................................................... S-22
Limit Option Reference Index............................................... S-22
Morgan..................................................................... S-16
NASD....................................................................... S-36
New York Business Day...................................................... S-13
Non-U.S. Holder............................................................ S-35
PaineWebber................................................................ S-3
Spot AMEX Hong Kong 30 Index............................................... S-9
Strike AMEX Hong Kong 30 Index............................................. S-9
Successor Index............................................................ S-9
Terms and Conditions....................................................... S-18
Third Party................................................................ S-9
U.S. Holder................................................................ S-34
Underlying Stock........................................................... S-14
Valuation Date............................................................. S-20
Warrant Agent.............................................................. S-14
Warrant Agent's Office..................................................... S-14
Warrant Agreement.......................................................... S-14
Warrant Certificate........................................................ S-15
Warrantholder.............................................................. S-9
</TABLE>
B-1
<PAGE> 39
- ------------------------------------------------------
- ------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATES AS OF
WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH AN OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
PROSPECTUS SUPPLEMENT
Prospectus Summary.................... S-3
Certain Important Information
Concerning the Warrants............. S-9
Use of Proceeds....................... S-14
Description of the Warrants........... S-14
The AMEX Hong Kong 30 Index........... S-27
Certain United States Federal Income
Tax Considerations.................. S-34
Underwriting.......................... S-36
Validity of the Warrants.............. S-36
Appendix A: AMEX Hong Kong 30
Index -- Underlying Stocks.......... A-1
Appendix B: Index of Key Terms........ B-1
PROSPECTUS
Available Information................. 2
Documents Incorporated by Reference... 2
Risk Factors.......................... 3
Paine Webber Group Inc. .............. 9
Selected Consolidated Financial
Data................................ 10
Use of Proceeds....................... 10
Description of Warrants............... 11
Plan of Distribution.................. 14
ERISA Considerations.................. 15
Experts............................... 15
Legal Opinions........................ 16
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
TM
PAINEWEBBER
2,000,000 WARRANTS
PAINE WEBBER GROUP INC.
AMEX HONG KONG
30 STOCK INDEX*
CALL WARRANTS EXPIRING
JANUARY 17, 1996
--------------------------------
PROSPECTUS SUPPLEMENT
--------------------------------
PAINEWEBBER INCORPORATED
OPPENHEIMER & CO., INC.
KEMPER SECURITIES, INC.
------------------------
JANUARY , 1994
------------------------
* The use of and reference to the term "AMEX Hong Kong 30 Index" herein has been
consented to by the American Stock Exchange, Inc. The "AMEX Hong Kong 30
Index" is a service mark of the American Stock Exchange, Inc.
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 40
APPENDIX C
The following information is being furnished pursuant to Item 304 of
Regulation S-T promulgated by the Securities and Exchange Commission:
In the paper format version of this Prospectus Supplement there appears a
graph depicting the historical performance of the AMEX Hong Kong 30 Index at the
end of each month from January 1989 through January 7, 1994. The information
conveyed by such graphic information is described in tabular form in the
Prospectus Supplement on pages S-30, S-31 and S-32 under the heading "The AMEX
Hong Kong 30 Index -- Historical. Data on the AMEX Hong Kong 30 Index."
C-1
<PAGE> 1
EXHIBIT 7
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED OCTOBER 14, 1993)
2,000,000 WARRANTS
PAINE WEBBER GROUP INC.
AMEX HONG KONG 30 INDEX* PUT WARRANTS
EXPIRING JANUARY 17, 1996
------------------------
Each Warrant will entitle the holder thereof to receive from Paine Webber
Group Inc. (the "Company"), upon exercise (including automatic exercise), an
amount in U.S. dollars computed by reference to decreases in the American Stock
Exchange Hong Kong 30 Index (the "AMEX Hong Kong 30 Index"). Such amount (the
"Cash Settlement Value") will equal the quotient (rounded down to the nearest
cent) of (A) the amount, if any, by which the Strike AMEX Hong Kong 30 Index (as
defined herein) exceeds the Spot AMEX Hong Kong 30 Index (as defined herein) for
the applicable Valuation Date (as defined herein) following exercise, divided by
(B) three, divided by (C) a fixed Hong Kong dollar/U.S. dollar exchange rate of
H.K.$ per U.S.$1.00. If the Spot AMEX Hong Kong 30 Index for such Valuation
Date equals or exceeds the Strike AMEX Hong Kong 30 Index, the Cash Settlement
Value will be zero; in which case, the Warrantholder will be permitted, subject
to certain exceptions, to re-exercise such Warrant prior to the Expiration Date
or the Delisting Date (as defined herein). The Strike AMEX Hong Kong 30 Index is
, which was the closing level of the AMEX Hong Kong 30 Index on January
, 1994. As of January , 1994, the Spot AMEX Hong Kong 30 Index is and
the Cash Settlement Value of the Warrants is zero. The AMEX Hong Kong 30 Index
was established on June 25, 1993, on which date it was set at a value of 350.00.
The Warrants are unsecured contractual obligations of the Company and will
rank on a parity with the Company's other unsecured contractual obligations and
with the Company's unsecured and unsubordinated debt.
THE WARRANTS INVOLVE A HIGH DEGREE OF RISK, INCLUDING THE RISK OF EXPIRING
WORTHLESS IF THE LEVEL OF THE AMEX HONG KONG 30 INDEX DOES NOT DECLINE PRIOR TO
THE EXPIRATION DATE. PURCHASERS SHOULD BE PREPARED TO SUSTAIN A TOTAL LOSS OF
THE PURCHASE PRICE OF THEIR WARRANTS AND ARE ADVISED TO CONSIDER CAREFULLY THE
INFORMATION UNDER "CERTAIN IMPORTANT INFORMATION CONCERNING THE WARRANTS" HEREIN
AND "RISK FACTORS" IN THE PROSPECTUS, AS WELL AS THE OTHER INFORMATION HEREIN
AND IN THE PROSPECTUS.
Application has been made to list the Warrants on the American Stock
Exchange (the "AMEX"). The AMEX symbol for the Warrants is HPW.WS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Price to Underwriting Discounts Proceeds to
Public and Commissions(1) Company(2)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Warrant......................... $ $ $
- ---------------------------------------------------------------------------------------------------------
Total............................... $ $ $
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) See "Underwriting" herein.
(2) Before deducting expenses estimated at $ , which are payable by the
Company.
------------------------
The Warrants are offered by the Underwriters, subject to prior sale, when,
as and if delivered to and accepted by the Underwriters, and subject to their
right to reject any order in whole or in part. It is expected that delivery of
the Warrants will be made in New York City on or about January , 1994.
------------------------
PAINEWEBBER INCORPORATED
OPPENHEIMER & CO., INC.
KEMPER SECURITIES, INC.
------------------------
* The use of and reference to the term "AMEX Hong Kong 30 Index" herein has
been consented to by the American Stock Exchange, Inc. The "AMEX Hong Kong 30
Index" is a service mark of the American Stock Exchange, Inc.
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS JANUARY , 1994.
<PAGE> 2
The valuation of and payment for any exercised Warrant (including in the
case of automatic exercise) may be postponed as a result of an Exercise
Limitation Event or an Extraordinary Event or as a result of the exercise of a
number of Warrants exceeding the limits on exercise described herein under
"Description of the Warrants -- Maximum Exercise Amount", in which case the
Warrantholder will receive a Cash Settlement Value or, under certain
circumstances, the Alternative Settlement Amount (as defined herein) for such
Warrant, in either case determined as of a later date. See "Description of the
Warrants -- Extraordinary Events and Exercise Limitation Events" and "-- Maximum
Exercise Amount" herein.
The Warrants will be exercisable immediately upon issuance and may be
exercised until 3:00 P.M., New York City time, on the New York Business Day (as
defined herein) immediately preceding the Expiration Date for the Warrants,
which is January 17, 1996, or until their earlier expiration on the last New
York Business Day prior to the effective date of their delisting from, or
permanent suspension from trading on, the AMEX and failure to list on another
United States national securities exchange (the "Delisting Date"). Any Warrant
not exercised at or before 3:00 P.M., New York City time, on such New York
Business Day will be automatically exercised on such date. A Warrantholder may
exercise no fewer than 500 Warrants at any one time, except in the case of
automatic exercise. A Warrantholder tendering Warrants for exercise will have
the option of specifying that, unless an Alternative Settlement Amount is
payable in respect of such Warrants, such Warrants are not to be exercised if
the Spot AMEX Hong Kong 30 Index as of the applicable Valuation Date is 20 or
more points higher than the most recent closing level of the AMEX Hong Kong 30
Index prior to exercise. All exercises of Warrants (other than on the Expiration
Date, the Delisting Date or upon the occurrence of certain extraordinary
circumstances) are subject, at the Company's option, to the limitation that not
more than 1,000,000 Warrants in total may be exercised on any Exercise Date (as
defined herein) and not more than 250,000 Warrants may be exercised by or on
behalf of any person or entity, either individually or in concert with any other
person or entity, on any Exercise Date. See "Certain Important Information
Concerning the Warrants" and "Description of the Warrants" herein and
"Description of Warrants" in the Prospectus.
----------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE WARRANTS
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
------------------
FOR NORTH CAROLINA INVESTORS ONLY: THE COMMISSIONER OF INSURANCE OF THE
STATE OF NORTH CAROLINA HAS NOT APPROVED OR DISAPPROVED THIS OFFERING, NOR HAS
THE COMMISSIONER PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS.
------------------
S-2
<PAGE> 3
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in the Prospectus and this Prospectus Supplement
and in the documents incorporated therein and herein by reference. Appendix B
hereto (the "Index of Key Terms") contains a listing of defined terms and pages
on which they are defined in this Prospectus Supplement.
PAINE WEBBER GROUP INC.
Paine Webber Group Inc. (the "Company") is a holding company which,
together with its operating subsidiaries, forms one of the largest full-service
securities firms in the industry. Founded in 1879, the Company has offices
located throughout the United States and in many major foreign cities. The
Company's principal line of business is to serve the investment and capital
needs of individual, corporate, institutional and public agency clients through
its broker-dealer subsidiary, PaineWebber Incorporated ("PaineWebber"), and
other specialized subsidiaries. The Company is comprised of four interrelated
core business groups -- Retail Sales and Marketing, Asset Management,
Institutional Sales and Trading, and Investment Banking.
See "Selected Consolidated Financial Data" in the Prospectus for
information concerning the Company's earnings and financial condition.
THE OFFERING
<TABLE>
<S> <C>
SECURITIES OFFERED...................... AMEX Hong Kong 30 Index Put Warrants Expiring
January 17, 1996 (the "Warrants"). Each Warrant
will entitle the beneficial owner thereof to
receive from the Company, upon exercise (including
automatic exercise), an amount in U.S. dollars
computed by reference to decreases in the American
Stock Exchange Hong Kong 30 Index (the "AMEX Hong
Kong 30 Index"). Such amount (the "Cash Settlement
Value") will equal the quotient (rounded down to
the nearest cent) of (A) the amount, if any, by
which the Strike AMEX Hong Kong 30 Index (as
hereinafter defined) exceeds the Spot AMEX Hong
Kong 30 Index (as hereinafter defined) for the
applicable Valuation Date (as hereinafter defined)
following exercise, divided by (B) three, divided
by (C) a fixed Hong Kong dollar/U.S. dollar
exchange rate of H.K.$ per U.S.$1.00. If the
Spot AMEX Hong Kong 30 Index for a Valuation Date
equals or exceeds the Strike AMEX Hong Kong 30
Index, the corresponding Cash Settlement Value will
be zero; in which case, the Warrantholder will be
permitted, subject to certain exceptions, to
re-exercise such Warrant prior to the Expiration
Date or the Delisting Date (as hereinafter
defined). The Strike AMEX Hong Kong 30 Index is
, which was the closing level of the AMEX
Hong Kong 30 Index on January , 1994. As of
January , 1994, the Spot AMEX Hong Kong 30 Index
is and the Cash Settlement Value of the
Warrants is zero.
PRICE................................... U.S.$ per Warrant.
THE AMEX HONG KONG 30 INDEX............. The AMEX Hong Kong 30 Index is a new
capitalization-weighted stock index designed,
developed, maintained and operated by, and is a
service mark of, the American Stock Exchange (the
"AMEX"). The AMEX Hong Kong 30 Index is being used
by the Company with the permission of the
</TABLE>
S-3
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
AMEX. The AMEX Hong Kong 30 Index measures the
composite price performance of 30 selected stocks
trading on The Stock Exchange of Hong Kong Ltd.
(the "HKSE"), and is designed to represent a
substantial segment of the Hong Kong stock market.
Business sector representation in the AMEX Hong
Kong 30 Index consists primarily of finance,
property development, utilities and conglomerates
and also includes food retailing, hotel/leisure,
property investment, airlines and luxury retailing.
The AMEX Hong Kong 30 Index was established on June
25, 1993, on which date it was set at a value of
350.00.
Stocks that comprise the AMEX Hong Kong 30 Index
may be changed or substituted by the AMEX based on
certain criteria. The AMEX is under no obligation
to continue the calculation or the dissemination of
the AMEX Hong Kong 30 Index. See "The AMEX Hong
Kong 30 Index" herein. If the AMEX discontinues
publication of the AMEX Hong Kong 30 Index or any
Successor Index (as hereinafter defined), the
Determination Agent (as hereinafter defined) shall
determine the applicable Cash Settlement Value
based on the formula and method used in calculating
the AMEX Hong Kong 30 Index or any Successor Index
as in effect on the date the AMEX Hong Kong 30
Index or such Successor Index was last published.
See "Certain Important Information Concerning the
Warrants" herein.
EXERCISE OF WARRANTS.................... The Warrants will be immediately exercisable upon
issuance (subject to postponement as described
herein under "Description of the
Warrants -- Extraordinary Events and Exercise
Limitation Events") and may be exercised until 3:00
P.M., New York City time, on the earlier of (i) the
New York Business Day (as hereinafter defined)
immediately preceding the Expiration Date for the
Warrants, which is January 17, 1996 (the
"Expiration Date"), or (ii) the last New York
Business Day prior to the effective date of their
delisting from, or permanent suspension from
trading on (within the meaning of the Securities
Exchange Act of 1934 and the rules and regulations
thereunder), the AMEX and failure to list on
another United States national securities exchange
(the "Delisting Date"). See "Description of the
Warrants -- Exercise and Settlement of Warrants"
herein.
EXERCISE AMOUNT......................... A Warrantholder may exercise no fewer than 500
Warrants at any one time, except in the case of
automatic exercise. See "Description of the
Warrants -- Minimum Exercise Amount" herein. All
exercises of Warrants (other than on the Expiration
Date or the Delisting Date or upon the cancellation
of Warrants as described herein under "Description
of the Warrants -- Extraordinary Events and
Exercise Limitation Events") are subject, at the
Company's option, to the limitation that not more
than 1,000,000 Warrants in total may be exercised
on any Exercise Date and not more than 250,000
Warrants may be exercised by or on behalf of any
person or entity, either individually or in concert
with any
</TABLE>
S-4
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C>
other person or entity, on any Exercise Date. See
"Description of the Warrants -- Maximum Exercise
Amount" herein.
EXTRAORDINARY EVENTS AND EXERCISE
LIMITATION EVENTS..................... See "Description of the Warrants -- Extraordinary
Events and Exercise Limitation Events" herein for a
description of such Events and the consequences of
the declaration of such an Event by the Company.
CERTAIN RISK FACTORS.................... The Warrants involve a high degree of risk,
including risks arising from fluctuations in the
prices of the Underlying Stocks (as hereinafter
defined), risks relating to the AMEX Hong Kong 30
Index and general risks applicable to the HKSE (the
exchange on which the Underlying Stocks are
traded), such as for example, market disruption
events, suspensions and trading halts. Prospective
purchasers of the Warrants should recognize that
their Warrants may expire worthless. Purchasers
should be prepared to sustain a total loss of the
purchase price of their Warrants. The Warrants are
appropriate investments only for investors with
options approved accounts who are able to
understand and bear the risk of a speculative
investment in the Warrants.
It is not possible to predict how the Warrants will
trade in the secondary market or whether such
market will be liquid or illiquid.
Application has been made to list the Warrants on
the AMEX. In the event that the Warrants are
delisted from, or permanently suspended from
trading on, the AMEX, and not accepted at the same
time for listing on another United States national
securities exchange, Warrants not previously
exercised will be deemed automatically exercised on
the last New York Business Day prior to the
effective date of such delisting or suspension, and
the Cash Settlement Value, if any, shall be
calculated and settled as provided below under
"Description of the Warrants -- Automatic
Exercise". See "Description of the
Warrants -- Delisting of Warrants" herein. In the
event of a delisting or suspension of trading on
the AMEX, the Company will use its best efforts to
list the Warrants on another United States national
securities exchange. To the extent Warrants are
exercised, the number of Warrants outstanding will
decrease, resulting in a decrease in the liquidity
of the Warrants.
The AMEX Hong Kong 30 Index has experienced
significant movements in the past, and it is
impossible to predict its future direction. See
"The AMEX Hong Kong 30 Index -- Historical Data on
the AMEX Hong Kong 30 Index" herein.
Potential investors should be aware that
PaineWebber, in its capacity as Determination
Agent, is under no obligation to take the interests
of the Company or the Warrantholders into
consideration in the event it determines, composes
or calculates the Cash Settlement Value. However,
PaineWebber is an affiliate of the Company, and
certain conflicts of interest may arise in
connection with PaineWebber performing its
</TABLE>
S-5
<PAGE> 6
<TABLE>
<CAPTION>
<S> <C>
role as Determination Agent. PaineWebber, as a
registered broker-dealer, is required to maintain
policies and procedures regarding the handling and
use of confidential proprietary information, and
such policies and procedures will be in effect
throughout the term of the Warrants to restrict the
use of information relating to the calculation of
the Cash Settlement Value prior to its
dissemination. Moreover, PaineWebber is obligated
to carry out its duties and functions as
Determination Agent in good faith and using its
reasonable judgment. See "Description of the
Warrants -- Exercise and Settlement of Warrants".
Except for cases of automatic exercise, a
Warrantholder must tender at least 500 Warrants at
any one time in order to exercise its Warrants.
Thus, except in such cases, Warrantholders with
fewer than 500 Warrants will need either to sell
their Warrants or to purchase additional Warrants,
incurring transaction costs in each case, in order
to realize upon their investment.
A Warrantholder will not be able to determine, at
the time of exercise of a Warrant, the Spot AMEX
Hong Kong 30 Index that will be used in calculating
the Cash Settlement Value of such Warrant (and will
thus be unable to determine such Cash Settlement
Value). In addition, the Valuation Date for
exercised Warrants may be postponed upon the
occurrence and continuation of an Extraordinary
Event or an Exercise Limitation Event (see
"Description of the Warrants -- Extraordinary
Events and Exercise Limitation Events" herein) or
as a result of the exercise of a number of Warrants
exceeding the limits on exercise described below
under "Description of the Warrants -- Maximum
Exercise Amount". Any upward movement in the level
of the AMEX Hong Kong 30 Index between the time a
Warrantholder submits an Exercise Notice and the
time the Spot AMEX Hong Kong 30 Index for such
exercise is determined (which period will, at a
minimum, represent an entire Hong Kong Business Day
(as hereinafter defined) and, in the case of a
Valuation Date that is postponed following an
Extraordinary Event or an Exercise Limitation Event
or in the case of a postponement resulting from the
exercise of a number of Warrants exceeding the
limits on exercise described below under
"Description of the Warrants -- Maximum Exercise
Amount", may be substantially longer) will result
in such Warrantholder receiving a Cash Settlement
Value or Alternative Settlement Amount (as
hereinafter defined) (including a zero Alternative
Settlement Amount) that is less than the Cash
Settlement Value anticipated by such Warrantholder
based on the level of the AMEX Hong Kong 30 Index
most recently reported prior to exercise. The AMEX
will calculate the AMEX Hong Kong 30 Index once
each Index Calculation Day (as hereinafter defined)
based upon the most recent official closing prices
of each of the Underlying Stocks as reported by the
HKSE. Due to time differ-
</TABLE>
S-6
<PAGE> 7
<TABLE>
<CAPTION>
<S> <C>
ences, trading on the HKSE occurs when the AMEX is
closed for business.
If the Company determines that on a Valuation Date
an Extraordinary Event or Exercise Limitation Event
has occurred and is continuing, then the Cash
Settlement Value may be calculated on the basis
that the Valuation Date shall be later than the
date otherwise provided herein. Circumstances
existed from October 20 through October 23, 1987
(prior to the inception of the AMEX Hong Kong 30
Index), on July 22, 1992 and on September 17, 1993,
that would have constituted an Extraordinary Event
and an Exercise Limitation Event. See "Description
of the Warrants -- Extraordinary Events and
Exercise Limitation Events" herein.
Investors are advised to consider carefully the
foregoing risk factors and the risks and other
matters discussed under "Risk Factors" in the
Prospectus and "Certain Important Information
Concerning the Warrants", "Description of the War-
rants" and "Certain United States Federal Income
Tax Considerations" herein prior to purchasing the
Warrants.
WHO SHOULD INVEST....................... The AMEX requires that the Warrants be sold only to
investors whose accounts have been approved for
options trading. In addition, the AMEX requires
that its members and member organizations and
registered employees thereof make certain
suitability determinations before recommending
transactions in Warrants.
Investment decisions relating to international
stock index warrants require an investor to predict
the direction of movements in the underlying index
as well as the amount and timing of those
movements. International stock index warrants may
change substantially in value, or lose all of their
value, with relatively small movements in the
underlying index. Moreover, an index warrant is a
"wasting asset" in that, in the absence of
countervailing factors, such as an offsetting
movement in the level of the index, the market
value of an index warrant will tend to decrease
over time and the warrant will have no market value
after the time for exercise has expired.
Accordingly, international stock index warrants
involve a high degree of risk and are not
appropriate for every investor. Investors who are
considering purchasing the Warrants must have an
options approved account, be able to understand and
bear the risk of a speculative investment in the
Warrants, be experienced with respect to options
and option transactions and understand the risks of
stock index transactions. Such investors should
reach an investment decision only after careful
consideration with their advisers of the
suitability of the Warrants in light of their
particular financial circumstances and the
information set forth in this Prospectus Supplement
and the Prospectus. See "Certain Important
Information Concerning the Warrants" herein. As
indicated above, investors should be prepared to
sustain a total loss of the purchase price of the
Warrants.
</TABLE>
S-7
<PAGE> 8
<TABLE>
<CAPTION>
<S> <C>
PROPOSED LISTING........................ American Stock Exchange
WARRANT TRADING SYMBOL.................. HPW.WS
WARRANT AGENT........................... Citibank, N.A.
DETERMINATION AGENT..................... PaineWebber Incorporated
THE AMEX HONG KONG 30 INDEX QUOTATION
SYMBOL................................ HKX
</TABLE>
S-8
<PAGE> 9
CERTAIN IMPORTANT INFORMATION
CONCERNING THE WARRANTS
The registered or beneficial owner of a Warrant (a "Warrantholder") will
receive a cash payment upon exercise (including automatic exercise) only if such
Warrant has a Cash Settlement Value (or, if applicable, upon the occurrence of
an Extraordinary Event or an Exercise Limitation Event as described under
"Description of the Warrants -- Extraordinary Events and Exercise Limitation
Events" herein, an Alternative Settlement Amount, as hereinafter defined)
greater than zero at such time. Prospective purchasers of the Warrants should
recognize that their Warrants may expire worthless and they should be prepared
to sustain a total loss of the purchase price of their Warrants. The Cash
Settlement Value of a Warrant will be an amount in U.S. dollars equal to the
quotient (rounded down to the nearest cent) of (A) the amount, if any, by which
the Strike AMEX Hong Kong 30 Index exceeds the Spot AMEX Hong Kong 30 Index for
the applicable Valuation Date, divided by (B) three, divided by (C) a fixed Hong
Kong dollar/U.S. dollar exchange rate of H.K.$ per U.S.$1.00. See
"Description of the Warrants -- Cash Settlement Value" herein.
The "Strike AMEX Hong Kong 30 Index" is , which was the closing level
of the AMEX Hong Kong 30 Index on January , 1994. The "Spot AMEX Hong Kong 30
Index" for any date means the closing level on such date of the AMEX Hong Kong
30 Index as compiled and published by the AMEX. See "The AMEX Hong Kong 30
Index" herein. In the event that the AMEX Hong Kong 30 Index is not published by
the AMEX but is published by another person not affiliated with, but acceptable
to, the Company (the "Third Party"), then the Spot AMEX Hong Kong 30 Index for
any date thereafter will be determined based on the closing level of the AMEX
Hong Kong 30 Index as published by such Third Party. If the AMEX or any Third
Party discontinues publication of the AMEX Hong Kong 30 Index and publishes a
successor or substitute index that the Company determines, in its sole
discretion, to be comparable to the AMEX Hong Kong 30 Index (any such index
being a "Successor Index"), then the Spot AMEX Hong Kong 30 Index for any date
thereafter will be determined by the Determination Agent on behalf of the
Company based on the closing level of the Successor Index on such date. If the
AMEX or any Third Party makes a material change in the formula for, or the
method of calculating, the AMEX Hong Kong 30 Index or any Successor Index, the
Determination Agent shall make such calculations as may be required to determine
the applicable Cash Settlement Value using the formula and method of calculating
the Index or any Successor Index as in effect prior to such change or
modification. If the AMEX and/or any Third Party discontinues publication of the
AMEX Hong Kong 30 Index and/or any Successor Index, the Company will cause the
Determination Agent to determine the applicable Cash Settlement Value based on
the formula and method used in calculating the AMEX Hong Kong 30 Index or any
Successor Index as in effect on the date the AMEX Hong Kong 30 Index or such
Successor Index was last published.
Except under the circumstances described in the next paragraph, the
Valuation Date for an exercised Warrant will be the first Index Calculation Day
after the related Exercise Date. The Exercise Date for an exercised Warrant,
subject to certain exceptions described under "-- Exercise and Settlement of the
Warrants", "-- Limit Option" and "-- Automatic Exercise" under "Description of
the Warrants" herein, will be the New York Business Day on which such Warrant
and an Exercise Notice (as hereinafter defined) in proper form are received by
the Warrant Agent (as hereinafter defined) if received at or prior to 3:00 P.M.,
New York City time, on such day; if such Warrant and Exercise Notice are
received after such time, the Exercise Date will be the next succeeding New York
Business Day. See "Description of the Warrants -- Exercise and Settlement of
Warrants" herein.
The Valuation Date for an exercised Warrant will occur after the Exercise
Date (see "Description of the Warrants -- Exercise and Settlement of Warrants"
herein). Therefore, a Warrantholder will not be able to determine, at the time
of exercise of a Warrant, the Spot AMEX Hong Kong 30 Index that will be used in
calculating the Cash Settlement Value of such Warrant (and will thus be unable
to determine such Cash Settlement Value). In addition, the Valuation Date for
exercised Warrants may be postponed upon the occurrence and continuation of an
Extraordinary Event or an Exercise Limitation Event (see "Description of
- ---------------
* Refer to "Index of Key Terms" attached hereto as Appendix B for a listing of
defined terms and pages on which they are defined in this Prospectus
Supplement.
S-9
<PAGE> 10
the Warrants -- Extraordinary Events and Exercise Limitation Events" herein) or
as a result of the exercise of a number of Warrants exceeding the limits on
exercise described below under "Description of the Warrants -- Maximum Exercise
Amount." Any upward movement in the level of the AMEX Hong Kong 30 Index between
the time a Warrantholder submits an Exercise Notice and the time the Spot AMEX
Hong Kong 30 Index for such exercise is determined (which period will, at a
minimum, represent an entire Hong Kong Business Day and, in the case of a
Valuation Date postponed following an Extraordinary Event or an Exercise
Limitation Event or as a result of there being exercised a number of Warrants
exceeding the maximum permissible amount, may be substantially longer) will,
subject to the Limit Option described below and under "Description of the
Warrants -- Limit Option" herein, result in such Warrantholder receiving a Cash
Settlement Value or Alternative Settlement Amount (including a zero Alternative
Settlement Amount) that is less than the Cash Settlement Value anticipated by
such Warrantholder based on the closing level of the AMEX Hong Kong 30 Index
most recently reported prior to exercise. The AMEX will calculate the AMEX Hong
Kong 30 Index once each Index Calculation Day based upon the most recent
official closing prices of each of the Underlying Stocks as reported by the
HKSE. Due to time differences, trading on the HKSE occurs when the AMEX is
closed for business.
The Warrants will originally be issued as certificates in registered form.
Accordingly, a beneficial owner of Warrants holding such Warrants indirectly
(for instance, through a broker that holds such Warrants in "street name") may
exercise such Warrants only through such owner's registered holder. In the case
of a beneficial owner holding Warrants through his broker in "street name" who
wishes to exercise his Warrants, such beneficial owner must direct his broker,
who may in turn need to direct another intermediary, to deliver an Exercise
Notice and the related Warrants to the Warrant Agent. To ensure that an Exercise
Notice and the related Warrants will be delivered to the Warrant Agent before
3:00 P.M., New York City time, on a particular New York Business Day, a
beneficial holder of Warrants may need to give exercise instructions to his
broker or other intermediary substantially earlier than 3:00 P.M., New York City
time, on such day. Different brokerage firms may have different cut-off times
and other exercise mechanics. See "-- Exercise and Settlement of Warrants" and
"-- Limit Option" under "Description of the Warrants" herein.
Forty-five calendar days after the closing of the offering (which closing
date is expected to be January , 1994), each Warrantholder will have the
option to convert the form in which such Warrantholder holds his Warrants from
certificated to book-entry form (the "Conversion Option"). Such conversion will
occur through the facilities of The Depository Trust Company, New York, New York
("DTC", which term, as used herein and in the Prospectus, includes any successor
depository selected by the Company). In addition, Warrant certificates held
through the facilities of CEDEL or Euroclear (as such terms are hereinafter
defined) will automatically be exchanged into book-entry form by CEDEL or
Euroclear, as the case may be, pursuant to the Conversion Option on the last day
of the Conversion Option Period (as hereinafter defined) without action of, or
consent by, the beneficial owner of the related Warrants. Accordingly,
Warrantholders holding their Warrants through CEDEL or Euroclear who do not wish
to convert the form in which they hold such Warrants to book-entry form must
arrange to transfer their Warrants out of the CEDEL or Euroclear systems, as the
case may be, prior to the last day of the Conversion Option Period. See
"Description of the Warrants -- Book-Entry Conversion" and "-- CEDEL and
Euroclear" herein and "Description of the Warrants -- Book-Entry Procedures and
Settlement" in the Prospectus. To exercise Warrants, a Warrantholder who has
utilized the Conversion Option must direct a broker, who may in turn need to
direct a Participant (as defined in the Prospectus under "Description of
Warrants -- Book-Entry Procedures and Settlement"), to transfer Warrants held by
DTC on behalf of such Warrantholder and to submit an Exercise Notice to the
Warrant Agent. A Warrantholder may desire that the New York Business Day on
which his Warrants and an Exercise Notice are delivered on his behalf to the
Warrant Agent will constitute the Exercise Date for the Warrants being exercised
(for example, to utilize the Limit Option most effectively). To achieve such
objective, the Warrantholder must cause such Warrants to be transferred free on
the records of DTC to, and such Exercise Notice to be received by, the Warrant
Agent at or prior to 3:00 P.M., New York City time, on such New York Business
Day; provided, however, that in the case of Warrants held through CEDEL or
Euroclear, the Warrants must be transferred to the Warrant Agent prior to 3:00
P.M., New York City time, on the relevant Valuation Date. To ensure that such
Warrants and Exercise Notice will be received by the Warrant Agent at or prior
to such time, such Warrantholder must give the appropriate directions to his
broker
S-10
<PAGE> 11
before such broker's (and, if such broker is not a Participant, the applicable
Participant's) cut-off time for accepting exercise instructions from customers
for that day. Different brokerage firms may have different cut-off times for
accepting and implementing exercise instructions from their customers.
Therefore, Warrantholders holding their Warrants in book-entry form should
consult with their brokers or other intermediaries, if applicable, as to
applicable cut-off times and other exercise mechanics. See "-- Exercise and
Settlement of Warrants" and "-- Limit Option" under "Description of the
Warrants" herein. FORMS OF EXERCISE NOTICE FOR WARRANTS HELD IN BOOK-ENTRY FORM
MAY BE OBTAINED AT THE WARRANT AGENT'S OFFICE (AS HEREINAFTER DEFINED), DURING
THE WARRANT AGENT'S NORMAL BUSINESS HOURS. SEE "DESCRIPTION OF THE WARRANTS
- -- GENERAL" HEREIN.
If the Company determines that an Extraordinary Event or an Exercise
Limitation Event has occurred and is continuing on any day that would otherwise
be a Valuation Date for any exercised Warrant, then the Valuation Date for such
Warrant will be postponed to the next Index Calculation Day following the Hong
Kong Business Day on which there is no Extraordinary Event or Exercise
Limitation Event; provided that if the postponed Valuation Date has not occurred
on or prior to the Expiration Date or the Delisting Date, the Warrantholders
will receive the Alternative Settlement Amount (as described below) in lieu of
the Cash Settlement Value; provided, further, that, in the case of an
Extraordinary Event, if the Company determines that such Extraordinary Event is
expected to continue and the Company notifies the Warrant Agent that it is
cancelling the Warrants, then the date on which such notice is given (whether or
not such date is a New York Business Day) will become the Valuation Date for
such Warrant, in which case such Warrantholder will receive, in lieu of the Cash
Settlement Value of such Warrant, the Alternative Settlement Amount thereof,
which is equal to the greater of (a) the average of the last sale prices, if
available, of the Warrants on the AMEX (or any successor United States
securities exchange on which the Warrants are listed) on the 30 trading days
preceding the date on which such Extraordinary Event was declared and (b) an
amount equal to the sum of the Cash Settlement Value of the Warrants on such
Valuation Date and a ratable portion of the initial offering price of the
Warrants, in each case subject to certain exceptions and adjustments. The Cash
Settlement Value or the Alternative Settlement Amount of a Warrant determined as
of any such postponed Valuation Date may be substantially lower (including zero)
than the otherwise applicable Cash Settlement Value thereof. See "Description of
the Warrants -- Extraordinary Events and Exercise Limitation Events" herein,
which includes a description of events, circumstances or causes constituting
Extraordinary Events and Exercise Limitation Events.
The level of the AMEX Hong Kong 30 Index will determine whether the
Warrants have a Cash Settlement Value greater than zero on any given day. The
Warrants will be "at-the-money" (i.e., their Cash Settlement Value will be zero)
when initially offered and will be "in-the-money" (i.e., their Cash Settlement
Value will be greater than zero) on any given day only if the level of the AMEX
Hong Kong 30 Index decreases so that the Spot AMEX Hong Kong 30 Index is below
the Strike AMEX Hong Kong 30 Index (i.e., if the level of the AMEX Hong Kong 30
Index is below ). A decrease in the level of the AMEX Hong Kong 30 Index
will result in a greater Cash Settlement Value, and an increase in the level of
the AMEX Hong Kong 30 Index will result in a lesser or zero Cash Settlement
Value. Potential profit or loss upon exercise (including automatic exercise) of
a Warrant will be a function of the Cash Settlement Value (or, if applicable,
the Alternative Settlement Amount) of such Warrant upon exercise, the purchase
price of such Warrant and any related transaction costs.
If a Warrant is not exercised prior to 3:00 P.M., New York City time, on
(i) the New York Business Day preceding the Expiration Date (as hereinafter
defined) or (ii) the Delisting Date and if the Spot AMEX Hong Kong 30 Index
equals or exceeds the Strike AMEX Hong Kong 30 Index on the appropriate
Valuation Date, such Warrant will expire worthless and the Warrantholder will
have sustained a total loss of the purchase price of such Warrant. See "Risk
Factors" in the Prospectus.
Investment decisions relating to international stock index warrants require
the investor to predict the direction of movements in the underlying index as
well as the amount and timing of those movements. International stock index
warrants may change substantially in value, or lose all of their value, with
relatively small movements in the underlying index. Moreover, an index warrant
is a "wasting asset" in that, in the absence of countervailing factors, such as
an offsetting movement in the level of the index, the market value of
S-11
<PAGE> 12
an index warrant will tend to decrease over time and the warrant will have no
market value after the time for exercise has expired. Accordingly, international
stock index warrants involve a high degree of risk and are not appropriate for
every investor. Investors who are considering purchasing the Warrants must be
able to understand and bear the risk of a speculative investment in the Warrants
and be experienced with respect to options and option transactions and
understand the risks of stock index transactions. Such investors should reach an
investment decision only after careful consideration, with their advisers, of
the suitability of the Warrants in light of their particular financial
circumstances and the information set forth in this Prospectus Supplement and in
the Prospectus. The AMEX requires that the Warrants be sold only to investors
whose accounts have been approved for options trading. In addition, the AMEX
requires that its members and member organizations and registered employees
thereof make certain suitability determinations before recommending transactions
in Warrants. Before making any investment in the Warrants, it is important that
a prospective investor become informed about and understand the nature of the
Warrants in general, the specific terms of the Warrants and the nature of the
underlying international stock index. An investor should understand the
consequences of liquidating his investment in an index warrant by exercising it
as opposed to selling it. It is especially important for an investor to be
familiar with the procedures governing the exercise of international stock index
warrants, since a failure to properly exercise a warrant prior to its expiration
could result in the loss of his entire investment. This includes knowing when
warrants are exercisable and how to exercise them.
Except in the case of automatic exercise, a Warrantholder may be able to
limit to some extent the risk associated with any such upward movement in the
AMEX Hong Kong 30 Index between an Exercise Date and the applicable Valuation
Date if such Warrantholder, in connection with an exercise of Warrants, elects
the Limit Option. Pursuant to the Limit Option, Warrants tendered for exercise
will not be exercised if the Spot AMEX Hong Kong 30 Index as of the applicable
Valuation Date is 20 or more points higher than the closing level of the AMEX
Hong Kong 30 Index on the applicable Exercise Date or, if such date is not an
Index Calculation Day, on the immediately preceding Index Calculation Day. See
"Description of the Warrants -- Limit Option" herein. However, in the event of
the occurrence of an Extraordinary Event resulting in the payment to
Warrantholders of an Alternative Settlement Amount in lieu of the Cash
Settlement Value, the Limit Option will not preclude the exercise of Warrants as
described herein under "Description of the Warrants -- Extraordinary Events and
Exercise Limitation Events".
A Warrantholder may exercise no fewer than 500 Warrants at any time, except
in the case of automatic exercise. Accordingly, except in the case of automatic
exercise of the Warrants, Warrantholders with fewer than 500 Warrants will need
either to sell their Warrants or to purchase additional Warrants, thereby
incurring transaction costs, in order to realize upon their investment.
Potential investors should be aware that PaineWebber, in its capacity as
Determination Agent, is under no obligation to take the interests of the Company
or the Warrantholders into consideration in the event it determines, composes or
calculates the Cash Settlement Value. PaineWebber and its affiliates may from
time to time engage in transactions involving the Underlying Stocks for their
proprietary accounts and for other accounts under their management, which may
influence the value of such Underlying Stocks. PaineWebber and its affiliates
will also be the writers of the hedge of the Company's obligations under the
Warrants and will be obligated to pay to the Company upon exercise of the
Warrants an amount equal to the value of the Warrants. Accordingly, under
certain circumstances, conflicts of interest may arise between PaineWebber's
responsibilities as Determination Agent with respect to the Warrants and its
obligations under its hedge. In addition, because PaineWebber is an affiliate of
the Company, certain conflicts of interest may arise in connection with
PaineWebber performing its role as Determination Agent. PaineWebber, as a
registered broker-dealer, is required to maintain policies and procedures
regarding the handling and use of confidential proprietary information, and such
policies and procedures will be in effect throughout the term of the Warrants to
restrict the use of information relating to the calculation of the Cash
Settlement Value prior to its dissemination. PaineWebber is also obligated to
carry out its duties and functions as Determination Agent in good faith and
using its reasonable judgment.
S-12
<PAGE> 13
THE INITIAL OFFERING PRICE OF THE WARRANTS MAY BE IN EXCESS OF THE PRICE
THAT A COMMERCIAL USER OF OPTIONS ON THE AMEX HONG KONG 30 INDEX MIGHT PAY FOR A
COMPARABLE OPTION IN A PRIVATE, LESS LIQUID TRANSACTION.
Since the Cash Settlement Value of a Warrant will be determined using a
fixed Hong Kong dollar/U.S. dollar exchange rate, prospective purchasers
intending to utilize the Warrants to hedge a Hong Kong stock portfolio against
currency risk should recognize that the effect of changes in the Hong Kong
dollar/U.S. dollar exchange rate on the value of such portfolio may not be fully
hedged by holding the Warrants. On October 17, 1983, after a period of
instability in the exchange rate of the Hong Kong dollar, a revised exchange
rate system was introduced. Under this system, any bank in Hong Kong which is
authorized by law to issue Hong Kong dollar bank notes is required to hold, as
cover for such issuance, certificates of indebtedness issued by the Hong Kong
Government. Such certificates of indebtedness are issued and redeemed by the
Hong Kong Government against payments in U.S. dollars at a fixed exchange rate
of H.K.$7.80 to U.S.$1.00. There can be no assurance as to whether such fixed
exchange rate between the Hong Kong dollar and the U.S. dollar will remain in
effect or be changed. Since January 29, 1988, the market exchange rate between
the U.S. dollar and the Hong Kong dollar has varied within H.K.[$7.82 and
H.K.$7.72] per U.S.$1.00 (based on data from The Federal Reserve Bank of New
York). See also "Risk Factors -- Certain Considerations Regarding Hedging" in
the Prospectus.
On January , 1994, the closing level of the AMEX Hong Kong 30 Index was
.
References herein to "U.S. dollar", "U.S.$" or "$" are to the lawful
currency of the United States of America. References to "Hong Kong dollar" or
"H.K.$" are to the lawful currency of Hong Kong. As used herein, "New York
Business Day" means any day other than a Saturday or a Sunday or a day on which
either the AMEX or the New York Stock Exchange is not open for securities
trading or commercial banks in New York City are required or authorized by law
or executive order to remain closed, and "Hong Kong Business Day" means any day
other than a Saturday or a Sunday or a day on which commercial banks in Hong
Kong are not open for a full day of business. As used herein, "Index Calculation
Day" means any day on which the AMEX Hong Kong 30 Index or any Successor Index
is calculated and published.
CERTAIN IMPORTANT INFORMATION RELATING TO CHINA
Although the AMEX has represented that none of the companies whose stocks
comprise the AMEX Hong Kong 30 Index is or will be organized under the laws of
the People's Republic of China ("China"), the level of the AMEX Hong Kong 30
Index nonetheless can be affected by developments in China. China currently
indirectly influences political and economic developments in various parts of
Asia, including Hong Kong, and its influence is expected to continue to grow.
Political, economic or social developments in, and diplomatic and other
developments associated with, China could affect economic conditions in Hong
Kong and on the market prices and liquidity of securities traded on the HKSE,
including the Underlying Stocks. Moreover, many of the issuers of the Underlying
Stocks have substantial investments in China, which investments could be
affected by political, economic, market and other developments in or affecting
China. Accordingly, political or economic developments in China could affect the
level of the AMEX Hong Kong 30 Index and thus the value of the Warrants.
On December 19, 1984, the Government of the United Kingdom and the
Government of China signed a Joint Declaration under which sovereignty over Hong
Kong will be transferred from the United Kingdom to China on July 1, 1997.
Pursuant to the Joint Declaration, China promulgated on April 4, 1990 the Basic
Law (the "Basic Law") setting out the terms under which Hong Kong will operate
from 1997 as a Special Administrative Region of China.
It is not clear how future developments in Hong Kong and China may affect
the implementation of the Basic Law after the transfer of sovereignty in 1997.
As a result of this political and legal uncertainty, the economic prospects of
Hong Kong and the companies whose stocks comprise the AMEX Hong Kong 30 Index
are uncertain. Accordingly, the HKSE has been, and can be expected to remain,
volatile and sensitive to political developments with regard to Hong Kong's
future and perceptions of actual or potential political developments of that
kind. For this reason, among others, the AMEX Hong Kong 30 Index and the value
of the Warrants can also be expected to be volatile.
S-13
<PAGE> 14
USE OF PROCEEDS
A substantial portion of the proceeds to be received by the Company from
the sale of the Warrants will be used by the Company or one or more of its
subsidiaries in connection with hedging the Company's obligations under the
Warrants. Such hedging activities are expected to include purchasing or
maintaining positions in a variety of financial instruments relating to the AMEX
Hong Kong 30 Index and the Underlying Stocks and the Hong Kong dollar/U.S.
dollar exchange rate (which may include certain types of instruments that entail
only potential payments upon closeout but not up-front acquisition costs). The
conduct of such hedging activities will not be limited to any particular
securities or futures exchange. Depending on future market conditions and the
actual number of Warrants outstanding from time to time, among other things, the
aggregate amount and the composition of such positions are likely to vary over
time. The remainder of the proceeds, if any, will be used for general corporate
purposes.
DESCRIPTION OF THE WARRANTS
GENERAL
The Warrants will be issued pursuant to a Warrant Agreement (the "Warrant
Agreement"), to be dated as of January , 1994 among the Company, Citibank,
N.A., as Warrant Agent (the "Warrant Agent"), and PaineWebber Incorporated as
Determination Agent. The following summaries of certain provisions of the
Warrants and the Warrant Agreement do not purport to be complete and are subject
to, and qualified in their entirety by reference to, all of the provisions of
the Warrant Agreement (including the form of Warrant certificate and form of
global Warrant certificate attached as exhibits thereto). The Warrant Agreement
will be available for inspection by any Warrantholder at the office of the
Warrant Agent (the "Warrant Agent's Office"), which is currently located at 111
Wall Street, 5th Floor, New York, New York 10043, during the Warrant Agent's
normal business hours. See "Description of Warrants" in the Prospectus.
The aggregate number of Warrants to be issued will be 2,000,000, subject to
the right of the Company to "reopen" the issue of Warrants and issue additional
Warrants with substantially identical terms at a later time. See "Underwriting".
A Warrant will not require or entitle a Warrantholder to sell or deliver
any shares of any component stock underlying the AMEX Hong Kong 30 Index or any
Successor Index (an "Underlying Stock") or any other securities to the Company.
Upon exercise of a Warrant, the Company will make only a U.S. dollar cash
payment in the amount of the Cash Settlement Value or Alternative Settlement
Amount, if any and as applicable, of such Warrant. The Company is under no
obligation to, nor will it, purchase or take delivery of any shares of any
Underlying Stock or any other securities from Warrantholders in connection with
the exercise of any Warrants. Warrantholders will not receive any interest on
any Cash Settlement Value or Alternative Settlement Amount, and the Warrants
will not entitle the Warrantholders to any of the rights of holders of any
Underlying Stock or any other securities.
The AMEX has advised the Company that the Warrants shall, for margin
purposes, be treated as if they were option contracts subject to AMEX Rule
462(d) relating to Minimum Margins.
CASH SETTLEMENT VALUE
Each Warrant will entitle the Warrantholder to receive, upon exercise
(including automatic exercise), the Cash Settlement Value of such Warrant,
except that, under the circumstances described under "-- Extraordinary Events
and Exercise Limitation Events" below, such Warrantholder may instead receive
the Alternative Settlement Amount for such Warrant. The Cash Settlement Value of
a Warrant will be an amount in U.S. dollars equal to the quotient (rounded down
to the nearest cent) of (A) the amount, if any, by which the Strike AMEX Hong
Kong 30 Index exceeds the Spot AMEX Hong Kong 30 Index for the
S-14
<PAGE> 15
Valuation Date for such Warrant, divided by (B) three, divided by (C) a fixed
Hong Kong dollar/U.S. dollar exchange rate of H.K.$ per U.S.$1.00, as
indicated in the following formula:
<TABLE>
<S> <C> <C> <C> <C> <C>
Cash Settlement Value = ( - Spot AMEX Hong Kong 30 Index ) / H.K. $
3
</TABLE>
HYPOTHETICAL WARRANT VALUES ON EXERCISE
Set forth below is a hypothetical example demonstrating the Cash Settlement
Values of a Warrant at the Strike AMEX Hong Kong 30 Index and at various levels
of the Spot AMEX Hong Kong 30 Index. The Cash Settlement Value numbers in the
table have been rounded to two decimal places.
<TABLE>
<CAPTION>
HYPOTHETICAL APPROXIMATE
SPOT CASH SETTLEMENT VALUE
AMEX HONG KONG (ALSO KNOWN AS "INTRINSIC
30 INDEX VALUE") OF PUT WARRANTS(1)
--------------- ----------------------------
<S> <C> <C>
Equal to or greater than 600(Strike) U.S.$0.00
550 2.16
500 4.32
450 6.47
400 8.63
</TABLE>
- ---------------
(1) Based on a fixed exchange rate of H.K.$7.725 per U.S.$1.00 and a
hypothetical strike index level of 600, exclusive of time value. The time
value of each Warrant will decline as the Expiration Date approaches,
reaching zero on the Expiration Date. Investors will receive only the cash
settlement value if the Warrants are exercised. If traded on the AMEX,
investors will receive the market value of the Warrants, which includes the
Cash Settlement Value plus any remaining time value. On the Expiration Date,
Warrants that are "in-the-money" will be automatically exercised.
WARRANT CERTIFICATES
The Warrants will be issued as certificates in registered form (each, a
"Warrant Certificate"). The Warrant Agent will from time to time register the
transfer of any outstanding Warrant Certificate upon surrender thereof at the
Warrant Agent's Office duly endorsed by, or accompanied by a written instrument
or instruments of transfer in form satisfactory to the Warrant Agent and the
Company duly executed by the registered holder thereof, a duly appointed legal
representative or a duly authorized attorney. Such signature must be guaranteed
by a bank or trust company having a correspondent office in New York City or a
member of a national securities exchange. A new Warrant Certificate will be
issued to the transferee upon any such registration of transfer.
At the option of a Warrantholder, Warrant Certificates may be exchanged for
other Warrant Certificates representing a like number of Warrants upon surrender
to the Warrant Agent at the Warrant Agent's Office of the Warrant Certificates
to be exchanged. The Company will thereupon execute, and the Warrant Agent will
countersign and deliver, one or more new Warrant Certificates representing such
like number of Warrants.
In the event that, after any exercise of Warrants evidenced by a Warrant
Certificate, the number of Warrants exercised is fewer than the total number of
Warrants evidenced by such certificate, a new Warrant Certificate evidencing the
number of Warrants not exercised will be issued to the registered holder or his
assignee. See "-- Minimum Exercise Amount" below.
If any Warrant Certificate is mutilated, lost, stolen or destroyed, the
Company may in its discretion execute, and the Warrant Agent may countersign and
deliver, in exchange and substitution for such mutilated Warrant Certificate, or
in replacement for such lost, stolen or destroyed Warrant Certificate, a new
Warrant Certificate representing a like number of Warrants, but only (in the
case of loss, theft or destruction) upon receipt of evidence satisfactory to the
Company and the Warrant Agent of loss, theft or destruction of such Warrant
Certificate and security or indemnity, if requested, satisfactory to them.
Warrantholders requesting replacement Warrant Certificates must also comply with
such other reasonable regulations and pay such
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reasonable charges as the Company or the Warrant Agent may prescribe. In case
all of the Warrants represented by any such mutilated, lost, stolen or destroyed
Warrant Certificate have been or are about to be exercised (including automatic
exercise), the Company in its discretion may, instead of issuing a new Warrant
Certificate, direct the Warrant Agent to treat such Warrant Certificate the same
as if the Warrant Agent had received an Exercise Notice in proper form in
respect thereof or as being subject to automatic exercise, as the case may be.
No service charge will be made for any registration of transfer or exchange
of Warrant Certificates, but the Company may require the payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
relation thereto, other than exchanges not involving any transfer. In the case
of the replacement of mutilated, lost, stolen or destroyed Warrant Certificates,
the Company may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Warrant Agent) connected
therewith.
Warrant Certificates held through CEDEL will be held by Citibank, N.A.
("Citibank"), as custodian for CEDEL, and Warrant Certificates held through
Euroclear will be held by Morgan Guaranty Trust Company of New York ("Morgan"),
as custodian for Euroclear. After the last day of the Conversion Option Period,
Warrantholders may no longer hold certificated positions through CEDEL or
Euroclear. See "-- Book-Entry Conversion" herein.
BOOK-ENTRY CONVERSION
Forty-five calendar days after the closing of the offering (which closing
date is expected to be January , 1994), each Warrantholder will have the
option to convert the form in which such Warrantholder holds his Warrants from
definitive to book-entry form by utilizing the Conversion Option. The Conversion
Option will be available for 45 calendar days (the "Conversion Option Period")
and is expected to run from March , 1994 through April , 1994.
In order to be exchanged for a Warrant in book-entry form, a Warrant
Certificate must be delivered to DTC, in proper form for deposit, by a
Participant. Accordingly, a Warrantholder who is not a Participant (other than a
Warrantholder holding Warrants through CEDEL or Euroclear) must deliver his
Warrant Certificate, in proper form for deposit, to a Participant, either
directly or through an indirect participant (such as a bank, brokerage firm,
dealer or trust company that clears through, or maintains a custodial
relationship with, a Participant) or brokerage firm which maintains an account
with a Participant, in order to have its Warrant Certificate exchanged for a
Warrant in book-entry form. Such Warrantholders who desire to exchange their
Warrant Certificates for Warrants in book-entry form should contact their
brokers or other Participants or indirect participants to obtain information on
procedures for submitting their Warrant Certificates to DTC, including the
proper form for submission and (during the Conversion Option Period) the cut-off
times for same day and next day exchange. Warrant Certificates which are held by
the Warrantholder in nominee or "street" name may be automatically exchanged
into book-entry form by the broker or other entity in whose name such Warrant
Certificates are registered, without action of, or consent by, the beneficial
owner of the related Warrant. In addition, Warrant Certificates held through the
facilities of CEDEL or Euroclear will automatically be exchanged into book-entry
form by CEDEL or Euroclear, as the case may be, pursuant to the Conversion
Option on the last day of the Conversion Option Period without action of, or
consent by, the beneficial owner of the related Warrants. Accordingly,
Warrantholders holding their Warrants through CEDEL or Euroclear who do not wish
to convert the form in which they hold such Warrants to book-entry form must
arrange to transfer their Warrants out of the CEDEL or Euroclear systems, as the
case may be, prior to the last day of the Conversion Option Period. Thereafter,
Warrantholders may no longer hold certificated Warrants through the facilities
of CEDEL or Euroclear.
Warrant Certificates received by DTC for exchange during the Conversion
Option Period will be exchanged for Warrants in book-entry form by the close of
business on the New York Business Day that such Certificates are received by DTC
(if received by DTC at its then applicable cut-off time for same day credit) or
on the following New York Business Day (if received by DTC at its then
applicable cut-off time for next day credit). After the last day of the
Conversion Option Period, DTC will not be required to accept delivery of Warrant
Certificates in exchange for book-entry Warrants, but may permit Warrant
Certificates to be so
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exchanged on a case-by-case basis. However, there can be no assurance that such
Warrant Certificates will be accepted for exchange. Warrants surrendered at any
time for exchange for book-entry Warrants may not be exercised or delivered for
settlement or transfer until such exchange has been effected. Accordingly, if a
decrease in the value of the AMEX Hong Kong 30 Index were to occur after a
Warrant Certificate had been surrendered for exchange into book-entry form, a
Warrantholder would not be able to take advantage of the decrease by exercising
his Warrant until such exchange had been effected. Since Warrant Certificates
are not required to be exchanged for Warrants in book-entry form, it is likely
that not all Warrant Certificates will be so exchanged. Accordingly,
Warrantholders purchasing Warrants in secondary market trading after
commencement of the Conversion Option Period may wish to make specific
arrangements with brokers or other Participants or indirect participants if they
wish to purchase Warrants in book-entry form only and not Warrant Certificates.
The Company has been informed by CEDEL and Euroclear that such clearing agencies
will only clear Warrants in book-entry form after the Conversion Option Period.
Once a Warrantholder has elected the Conversion Option, such Warrantholder
may hold his Warrants only in book-entry form and will not be able to change his
election or withdraw from the book-entry system during the Conversion Option
Period or thereafter. Accordingly, except in certain limited circumstances
described in the Prospectus under "Description of Warrants -- Book-Entry
Procedures and Settlement", ownership of the Warrants in certificated form will
no longer be available to investors who have elected the Conversion Option.
CEDEL AND EUROCLEAR
Warrantholders may hold their Warrants in either book-entry or certificated
form through CEDEL or Euroclear if they are participants of such systems, or
indirectly through organizations which are participants in such systems. The
common security registration number used by CEDEL and Euroclear for the Warrants
is . While Warrantholders may initially hold their Warrants in
certificated form through CEDEL or Euroclear, as described above under
"-- Book-Entry Conversion", it is anticipated that Warrant Certificates held
through such systems will be converted into book-entry form on the last day of
the Conversion Option Period and, accordingly, certificated ownership of
Warrants will no longer be available through such systems after such day.
CEDEL and Euroclear will hold omnibus certificated positions and omnibus
book-entry positions on behalf of their participants through customers'
securities accounts in CEDEL's and Euroclear's names on the books of their
respective depositaries which in turn will, in the case of certificated
positions only, hold such positions in customers' securities accounts in the
depositaries' names on the books of DTC. Citibank will act as depositary for
CEDEL and Morgan will act as depositary for Euroclear (in such capacities, the
"Depositaries"). All securities in CEDEL or Euroclear are held on a fungible
basis without attribution of specific certificates to specific securities
clearance accounts.
Exercises of certificated Warrants by persons holding through CEDEL or
Euroclear participants will be effected through Citibank or Morgan, as the case
may be; however, such transactions will require delivery of exercise
instructions to the relevant European international clearing system by the
participant in such system in accordance with its rules and procedures and
within its established deadlines (European time). The relevant European
international clearing system will, if the exercise meets its requirements,
deliver instructions to its Depositary to take action to effect the exercise of
the Warrants on its behalf by delivering Warrants to the Warrant Agent, and
receiving payment in accordance with its normal procedures for next-day funds
settlement. Payments with respect to the certificated Warrants held through
CEDEL or Euroclear will be credited to the cash accounts of CEDEL participants
or Euroclear participants in accordance with the relevant system's rules and
procedures, to the extent received by its Depositary. See "-- Exercise and
Settlement of the Warrants" herein.
Exercises of book-entry Warrants by persons holding through CEDEL or
Euroclear participants will be effected through DTC, in accordance with DTC
rules, on behalf of the relevant European international clearing system by its
Depositary; however, such transactions will require delivery of exercise
instructions to the relevant European international clearing system by the
participant in such system in accordance with its
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rules and procedures and within its established deadlines (European time). The
relevant European international clearing system will, if the exercise meets its
requirements, deliver instructions to its Depositary to take action to effect
its exercise of the Warrants on its behalf by delivering Warrants through DTC
and receiving payment in accordance with its normal procedures for next-day
funds settlement. Payments with respect to the Warrants held through CEDEL or
Euroclear will be credited to the cash accounts of CEDEL participants or
Euroclear participants in accordance with the relevant system's rules and
procedures, to the extent received by its Depositary. See "-- Exercise and
Settlement of the Warrants" herein.
Centrale de Livraison de Valeurs Mobilieres S.A. ("CEDEL") is incorporated
under the laws of Luxembourg as a professional depository. CEDEL holds
securities for its participating organizations and facilitates the clearance and
settlement of securities transactions between CEDEL participants through
electronic book-entry changes in accounts of CEDEL participants, thereby
eliminating the need for physical movement of certificates. Transactions may be
settled in CEDEL in any of 28 currencies, including U.S. dollars. CEDEL provides
to its participants, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. CEDEL interfaces with domestic markets in
several countries. As a professional depository, CEDEL is subject to regulation
by the Luxembourg Monetary Institute. CEDEL participants are recognized
financial institutions around the world, including underwriters, securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations and may include the Underwriters. Indirect access to CEDEL
is also available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a CEDEL
participant, either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for
participants in the Euroclear System and to clear and settle transactions
between Euroclear participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Transactions may now be settled in any of 27 currencies, including U.S.
dollars. The Euroclear System includes various other services, including
securities lending and borrowing and interfaces with domestic markets in several
countries generally similar to the arrangements for cross-market transfers with
DTC described above. The Euroclear System is operated by Morgan's Brussels,
Belgium office (the "Euroclear Operator" or "Euroclear"), under contract with
Euroclear Clearance System S.C., a Belgian cooperative corporation (the
"Cooperative"). Morgan is a member bank of the United States Federal Reserve
System. All operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for the Euroclear System on behalf of Euroclear participants. Euroclear
participants include banks (including central banks), securities brokers and
dealers and other professional financial intermediaries and may include the
Underwriters. Indirect access to the Euroclear System is also available to other
firms that clear through or maintain a custodial relationship with a Euroclear
participant, either directly or indirectly.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System, and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipt of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear participants, and has no record
of or relationship with persons holding through Euroclear participants.
All information herein on CEDEL and Euroclear is derived from CEDEL or
Euroclear, as the case may be, and reflects the policies of such organizations;
such policies are subject to change without notice.
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EXERCISE AND SETTLEMENT OF WARRANTS
The Warrants will be immediately exercisable upon issuance, subject to
postponement upon the occurrence of an Extraordinary Event or an Exercise
Limitation Event as described under "-- Extraordinary Events and Exercise
Limitation Events" herein, and will expire on January 17, 1996 (the "Expiration
Date"). Warrants not exercised (including by reason of any such postponed
exercise) at or before 3:00 P.M., New York City time, on the earlier of (i) the
New York Business Day immediately preceding the Expiration Date and (ii) the
Delisting Date, will be automatically exercised as described under "-- Automatic
Exercise" below. See "-- Minimum Exercise Amount" and "-- Maximum Exercise
Amount" below.
A Warrantholder may exercise certificated Warrants on any New York Business
Day during the period from the date of issuance of such Warrants until 3:00
P.M., New York City time, on the earlier of (i) the New York Business Day
immediately preceding the Expiration Date and (ii) the Delisting Date, by
delivering or causing to be delivered to the Warrant Agent the Warrant
Certificate representing such Warrants with the irrevocable notice of exercise
on the reverse thereof (or a notice of exercise in substantially identical form
delivered therewith) (such notice, an "Exercise Notice") duly completed and
executed. The Warrant Agent's telephone number and facsimile transmission number
for this purpose are (212) 657-7269 and (212) 825-3483, respectively.
In the case of Warrants held through the facilities of DTC, a Warrantholder
may exercise such Warrants on any New York Business Day during the period from
the date of issuance of such Warrants until 3:00 P.M., New York City time, on
the earlier of (i) the New York Business Day immediately preceding the
Expiration Date and (ii) the Delisting Date, by causing (x) such Warrants to be
transferred free to the Warrant Agent on the records of DTC and (y) a duly
completed and executed Exercise Notice to be delivered by a Participant on
behalf of the Warrantholder to the Warrant Agent. Forms of Exercise Notice for
Warrants held through the facilities of DTC may be obtained from the Warrant
Agent at the Warrant Agent's Office. The Warrant Agent's telephone number and
facsimile transmission number for this purpose are (201) 262-5444 and (201)
262-7521, respectively.
In the case of book-entry Warrants held through the facilities of CEDEL or
Euroclear, a Warrantholder may exercise such Warrants on any New York Business
Day during the period from the date of issuance of such Warrants until 3:00
P.M., New York City time, on the earlier of (i) the New York Business Day
immediately preceding the Expiration Date and (ii) the Delisting Date by causing
(x) such Warrants to be transferred to the Warrant Agent, by giving appropriate
instructions to the participant holding such Warrants in either the CEDEL or
Euroclear system, as the case may be, and (y) a duly completed and executed
Exercise Notice to be delivered on behalf of the Warrantholder by CEDEL, in the
case of Warrants held through CEDEL, or such participant, in the case of
Warrants held through Euroclear, to the Warrant Agent. Forms of Exercise Notice
for Warrants held through the facilities of either CEDEL or Euroclear may be
obtained from the Warrant Agent at the Warrant Agent's Office or from CEDEL or
Euroclear.
Except for Warrants subject to automatic exercise or held through the
facilities of CEDEL or Euroclear, and subject to the Limit Option, the "Exercise
Date" for a Warrant will be (i) the New York Business Day on which the Warrant
Agent receives the Warrant and Exercise Notice in proper form with respect to
such Warrant, if received at or prior to 3:00 P.M., New York City time, on such
day, or (ii) if the Warrant Agent receives such Warrant and Exercise Notice
after 3:00 P.M., New York City time, on a New York Business Day, then the New
York Business Day next succeeding such New York Business Day.
In the case of Warrants held through the facilities of CEDEL or Euroclear,
except for Warrants subject to automatic exercise, and subject to the Limit
Option, the "Exercise Date" for a Warrant will be (i) the New York Business Day
on which the Warrant Agent receives the Exercise Notice in proper form with
respect to such Warrant if such Exercise Notice is received at or prior to 3:00
P.M., New York City time, on such day, provided that the Warrant is received by
the Warrant Agent by 3:00 P.M., New York City time, on the Valuation Date, or
(ii) if the Warrant Agent receives such Exercise Notice after 3:00 P.M., New
York City time, on a New York Business Day, then the New York Business Day
succeeding such New York Business Day, provided that the Warrant is received by
3:00 P.M., New York City time, on the Valuation Date relating to exercises of
Warrants on such succeeding New York Business Day. In the event that the Warrant
is
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received after 3:00 P.M., New York City time, on the Valuation Date, then the
Exercise Date for such Warrants will be the day on which such Warrants are
received or, if such day is not a New York Business Day, the next succeeding New
York Business Day. In the case of Warrants held through the facilities of CEDEL
or Euroclear, in order to ensure proper exercise on a given New York Business
Day, participants in CEDEL or Euroclear must submit exercise instructions to
CEDEL or Euroclear, as the case may be, by 10:00 A.M., Luxembourg time, in the
case of CEDEL and by 10:00 A.M., Brussels time (by telex), or 11:00 A.M.,
Brussels time (by EUCLID), in the case of Euroclear. In addition, in the case of
book-entry exercises by means of the Euroclear System, (i) participants must
also transmit, by facsimile (facsimile number 201-262-7521), to the Warrant
Agent a copy of the Exercise Notice submitted to Euroclear by 3:00 P.M., New
York City time, on the desired Exercise Date and (ii) Euroclear must confirm by
telex to the Warrant Agent by 9:00 A.M., New York City time, on the Valuation
Date that the Warrants will be received by the Warrant Agent on such date;
provided, that if such telex communication is received after 9:00 A.M., New York
City time, on the Valuation Date, the Company will be entitled to direct the
Warrant Agent to reject the related Exercise Notice or waive the requirement for
timely delivery of such telex communication.
To ensure that an Exercise Notice and the related Warrants will be
delivered to the Warrant Agent before 3:00 P.M., New York City time, on a given
New York Business Day, a Warrantholder may need to give exercise instructions to
his broker or other intermediary substantially earlier than 3:00 P.M., New York
City time, on such day. Different brokerage firms may have different cut-off
times for accepting and implementing exercise instructions from their customers.
Therefore, Warrantholders should consult with their brokers and other
intermediaries, if applicable, as to applicable cut-off times and other exercise
mechanics. See "Certain Important Information Concerning the Warrants" above.
Except in the case of Warrants subject to automatic exercise and for
Warrants that upon exercise will entitle the holder thereof to receive an
Alternative Settlement Amount in lieu of the Cash Settlement Amount, if on any
Valuation Date the Cash Settlement Amount for any Warrants would be zero, then
the attempted exercise of any such Warrants will be void and of no effect and,
in the case of certificated Warrants, the Warrant Certificate evidencing such
Warrants will be returned to the registered holder by first class mail at the
Company's expense or, in the case of Warrants held through the facilities of
DTC, CEDEL or Euroclear, such Warrants will be transferred back to the
participant (including the Depositaries) that submitted them free on the records
of DTC, CEDEL or Euroclear, as the case may be, and, in any such case, such
Warrantholder will be permitted to re-exercise such Warrants prior to the
Expiration Date or the Delisting Date, as the case may be.
The "Valuation Date" for a Warrant will be the first Index Calculation Day
following the applicable Exercise Date, subject to postponement upon the
occurrence of an Extraordinary Event or an Exercise Limitation Event as
described below under "-- Extraordinary Events and Exercise Limitation Events"
or as a result of the exercise of a number of Warrants exceeding the limits on
exercise described below under "-- Maximum Exercise Amount". The AMEX will
calculate the AMEX Hong Kong 30 Index once on each Index Calculation Day based
upon the most recent official closing prices of each of the Underlying Stocks as
reported by the HKSE. Due to time differences, trading on the HKSE occurs when
the AMEX is closed for business. The following is an illustration of the timing
of an Exercise Date, the ensuing Valuation Date and the Limit Option Reference
Index (as hereinafter defined), assuming (i) that all relevant dates are New
York Business Days and Index Calculation Days, (ii) the absence of any
intervening Extraordinary Event or Exercise Limitation Event and (iii) the
number of exercised Warrants does not exceed the maximum permissible amount. If
the Warrant Agent receives a Warrantholder's Warrants and Exercise Notice in
proper form at or prior to 3:00 P.M., New York City time, on Wednesday, June 1,
1994, the Exercise Date for such Warrants will be June 1 and the Valuation Date
for such Warrants will be Thursday, June 2, 1994 (except that in the case of
Warrants held through the facilities of CEDEL or Euroclear, the Warrants must be
received by 3:00 P.M., New York City time, on the Valuation Date; if such
Warrants are received after such time, then the Exercise Date for such Warrants
will be the day on which such Warrants are received or, if such day is not a New
York Business Day, the next succeeding New York Business Day, and the Valuation
Date for such Warrants will be the first Index Calculation Day following such
Exercise Date and the Limit Option Reference Index will be determined by
reference to such Exercise Date and Valuation Date). The Spot
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AMEX Hong Kong 30 Index used to determine the Cash Settlement Value of such
Warrants will be the closing level of the AMEX Hong Kong 30 Index on June 2
(i.e., the level of the AMEX Hong Kong 30 Index calculated using values for the
Underlying Stocks as of the close of the HKSE on June 2 (assuming such day is a
Hong Kong Business Day), which, because of time differences, will occur at 2:30
A.M., New York City time, on June 2 (or 3:30 A.M., New York City time, during
the months in which Eastern Daylight Savings Time is in effect)). If the
Warrantholder elected the Limit Option in connection with the exercise of such
Warrants, the Limit Option Reference Index would be the closing level of the
AMEX Hong Kong 30 Index on June 1. If the Warrant Agent were to receive such
Warrantholder's Warrants and Exercise Notice after 3:00 P.M., New York City
time, on June 1, 1994 (except that in the case of Warrants held through the
facilities of CEDEL or Euroclear, the Warrants must be received by 3:00 P.M.,
New York City time, on December 2), then the Exercise Date for such Warrants
would instead be June 2, the Valuation Date would be June 3 and the applicable
Limit Option Reference Index would be the closing level of the AMEX Hong Kong 30
Index on June 2 (which will not have occurred at the time such Warrantholder
tendered his Exercise Notice on June 1).
Following receipt of Warrants and the related Exercise Notice in proper
form, the Warrant Agent will, not later than 5:00 P.M., New York City time, on
the applicable Valuation Date (or, if such Valuation Date is not a New York
Business Day, on the next succeeding New York Business Day) (i) obtain the Spot
AMEX Hong Kong 30 Index (which will be the level of the AMEX Hong Kong 30 Index
on such Valuation Date), (ii) determine the Cash Settlement Value of such
Warrants and (iii) advise the Company of the aggregate Cash Settlement Value of
the exercised Warrants. Except in the case of Warrants held through the
facilities of DTC, CEDEL or Euroclear, if the Company has made adequate funds
available to the Warrant Agent in a timely manner as required by the Warrant
Agreement, the Warrant Agent will thereafter be responsible for making payment
available to each registered holder of a Warrant on the fifth New York Business
Day following the Valuation Date (or, if the Valuation Date is not a New York
Business Day, on the fifth New York Business Day following the New York Business
Day next succeeding the Valuation Date) in the form of a cashier's check or
official bank check or (in the case of payments of at least U.S.$100,000) by
wire transfer to a U.S. dollar bank account maintained by such holder in the
United States (at such holder's election as specified in the applicable Exercise
Notice), in an amount equal to the aggregate Cash Settlement Value of such
holder's exercised Warrants. In the case of Warrants held through the facilities
of DTC, CEDEL or Euroclear, the Company will be required to make available to
the Warrant Agent, no later than 3:00 P.M, New York City time, on the sixth New
York Business Day following the Valuation Date (or, if the Valuation Date is not
a New York Business Day, on the sixth New York Business Day following the New
York Business Day next succeeding the Valuation Date), funds in an amount
sufficient to pay such aggregate Cash Settlement Value. If the Company has made
such funds available by such time, the Warrant Agent will thereafter be
responsible for making funds available to each appropriate Participant
(including Citibank and Morgan, who, in turn, will disburse payments to CEDEL
and Euroclear, as the case may be, who will be responsible for disbursing such
payments to each of their respective participants, who, in turn, will be
responsible for disbursing payments to the Warrantholders it represents), and
such Participant will be responsible for disbursing such payments to the
Warrantholders it represents and to each brokerage firm for which it acts as
agent. Each such brokerage firm will be responsible for disbursing funds to the
Warrantholders it represents.
"Determination Agent" means PaineWebber or, in lieu thereof, another firm
selected by the Company to perform the functions of the Determination Agent in
connection with the Warrants. PaineWebber, in its capacity as Determination
Agent, will have no obligation to take the interests of the Company or the
Warrantholders into consideration in the event it determines, composes or
calculates the Cash Settlement Value. PaineWebber and its affiliates may from
time to time engage in transactions involving the Underlying Stocks for their
proprietary accounts and for other accounts under their management, which may
influence the value of such Underlying Stocks. PaineWebber and its affiliates
will also be the writers of the hedge of the Company's obligations under the
Warrants and will be obligated to pay to the Company upon exercise of the
Warrants an amount equal to the value of the Warrants. Accordingly, under
certain circumstances, conflicts of interest may arise between PaineWebber's
responsibilities as Determination Agent with respect to the Warrants and its
obligations under its hedge. In addition, because PaineWebber is an affiliate of
the Company,
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certain conflicts of interest may arise in connection with PaineWebber
performing its role as Determination Agent. PaineWebber, as a registered
broker-dealer, is required to maintain policies and procedures regarding the
handling and use of confidential proprietary information, and such policies and
procedures will be in effect throughout the term of the Warrants to restrict the
use of information relating to any calculation of the Cash Settlement Value
prior to its dissemination. PaineWebber is also obligated to carry out its
duties and functions as Determination Agent in good faith and using its
reasonable judgment.
MINIMUM EXERCISE AMOUNT
No fewer than 500 Warrants may be exercised by a Warrantholder at any one
time, except in the case of automatic exercise or exercise upon cancellation of
the Warrants as described under "--Extraordinary Events and Exercise Limitation
Events" below. Accordingly, except in the case of automatic exercise of the
Warrants or upon cancellation of the Warrants, Warrantholders with fewer than
500 Warrants will need either to sell their Warrants or to purchase additional
Warrants, thereby incurring transaction costs, in order to realize upon their
investment. Warrantholders must satisfy the minimum exercise amount requirement
described above separately with respect to both certificated and book-entry
Warrants, even if both kinds of Warrants are to be exercised at the same time.
Thus, a Warrantholder seeking to exercise both certificated and book-entry
Warrants at the same time must still exercise a minimum of 500 of each kind of
Warrant in order to satisfy such requirement. In addition, book-entry Warrants
held through one Participant (including participants in CEDEL or Euroclear) may
not be combined with book-entry Warrants held through another Participant in
order to satisfy the minimum exercise requirement.
MAXIMUM EXERCISE AMOUNT
All exercises of Warrants (other than on the Expiration Date or the
Delisting Date or upon cancellation of the Warrants as described under
"--Extraordinary Events and Exercise Limitation Events" herein) are subject, at
the Company's option, to the limitation that not more than 1,000,000 Warrants in
total may be exercised on any Exercise Date and not more than 250,000 Warrants
may be exercised by or on behalf of any person or entity, either individually or
in concert with any other person or entity, on any Exercise Date. If any New
York Business Day would otherwise, under the terms of the Warrant Agreement, be
the Exercise Date in respect of more than 1,000,000 Warrants, then at the
Company's election 1,000,000 of such Warrants shall be deemed exercised on such
Exercise Date (selected by the Warrant Agent on a pro rata basis, but if, as a
result of such pro rata selection, any registered holders of Warrants would be
deemed to have exercised fewer than 500 Warrants, then the Warrant Agent shall
first select additional of such holders' Warrants so that no holder shall be
deemed to have exercised fewer than 500 Warrants), and the remainder of such
Warrants (the "Remaining Warrants") shall be deemed exercised on the following
New York Business Day (subject to successive applications of this provision);
provided, that any Remaining Warrant for which an Exercise Notice was delivered
on a given Exercise Date shall be deemed exercised before any other Warrants for
which an Exercise Notice was delivered on a later Exercise Date. If any
individual Warrantholder attempts to exercise more than 250,000 Warrants on any
New York Business Day, then at the Company's election 250,000 of such Warrants
shall be deemed exercised on such New York Business Day and the remainder shall
be deemed exercised on the following New York Business Day (subject to
successive applications of this provision). As a result of any such postponed
exercise, Warrantholders will receive a Cash Settlement Value determined as of a
date later than the otherwise applicable Valuation Date. In any such case, as a
result of any such postponement, the Cash Settlement Value actually received by
Warrantholders may be lower than the otherwise applicable Cash Settlement Value
if the Valuation Date of the Warrants had not been postponed.
LIMIT OPTION
Except for Warrants subject to automatic exercise and except as described
below with respect to payments of any Alternative Settlement Amount, each
Warrantholder, in connection with any exercise of Warrants (including a
postponed exercise following an Extraordinary Event or an Exercise Limitation
Event), will have the option (the "Limit Option") to specify that such Warrants
are not to be exercised if the Spot AMEX Hong Kong 30 Index that would otherwise
be used to determine the Cash Settlement Value of such
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<PAGE> 23
Warrants is 20 or more points higher than the closing level of the AMEX Hong
Kong 30 Index for the day specified below (such closing level, the "Limit Option
Reference Index"). A Warrantholder's election of the Limit Option must be
specified in the applicable Exercise Notice delivered to the Warrant Agent. The
Limit Option Reference Index will be the closing level of the AMEX Hong Kong 30
Index on the relevant Exercise Date (or, if such date is not an Index
Calculation Day, on the immediately preceding Index Calculation Day). If an
Exercise Notice and the related Warrants are received after 3:00 P.M., New York
City time, on a given day, the applicable Limit Option Reference Index will be
determined as of the next day that is also a New York Business Day (or, if such
day is not an Index Calculation Day, as of the immediately preceding Index
Calculation Day).
To ensure that the Limit Option will have its intended effect of limiting
the risk of any upward movement in the level of the AMEX Hong Kong 30 Index
between the date on which a Warrantholder submits an Exercise Notice and the
related Valuation Date, such Exercise Notice and the related Warrants generally
must be received by the Warrant Agent not later than 3:00 P.M., New York City
time, on the New York Business Day on which it is submitted and the Exercise
Date must also be an Index Calculation Day. See the illustration under
"-- Exercise and Settlement of Warrants" above and "Certain Important
Information Concerning the Warrants" herein.
Following receipt of an Exercise Notice and the related Warrants subject to
the Limit Option, the Warrant Agent will obtain the applicable Limit Option
Reference Index and will determine whether such Warrants will not be exercised
because of the Limit Option. Warrants that are not exercised will be treated as
not having been tendered for exercise, and either the Warrant Certificate
evidencing such Warrants will be returned to the registered holder by
first-class mail at the Company's expense or, in the case of Warrants held
through the facilities of DTC, CEDEL or Euroclear, such Warrants will be
transferred to the account at DTC, CEDEL or Euroclear, as the case may be, from
which they were transferred to the Warrant Agent. To exercise such Warrants, a
Warrantholder will be required to cause the Warrants and a related Exercise
Notice to be submitted again to the Warrant Agent.
Once elected by a Warrantholder in connection with an exercise of Warrants,
the Limit Option will continue to apply, on the basis of the Limit Option
Reference Index as initially determined for such Warrants, even if the Valuation
Date for such Warrants is postponed, except when such Valuation Date is
postponed until the Expiration Date, the Delisting Date or the Cancellation Date
(as hereinafter defined) as described under "-- Extraordinary Events and
Exercise Limitation Events" below. Pursuant to the Limit Option, such Warrants
will either (i) be exercised on a delayed basis if the applicable Spot AMEX Hong
Kong 30 Index on the postponed Valuation Date does not exceed the Limit Option
Reference Index by 20 or more points or (ii) be excluded from being exercised
if, on any applicable postponed Valuation Date, the applicable Spot AMEX Hong
Kong 30 Index exceeds the Limit Option Reference Index by 20 or more points.
In connection with any exercise of 500 or more Warrants, a Warrantholder
may elect to subject the exercise of only a portion of such Warrants to the
Limit Option, provided that the number of Warrants subject to the Limit Option
and the number of Warrants not subject to the Limit Option shall in each case
not be less than 500. A Warrantholder may not combine certificated and
book-entry Warrants in order to meet the 500-Warrant minimum requirement. See
"-- Minimum Exercise Amount" herein.
AUTOMATIC EXERCISE
All Warrants for which the Warrant Agent has not received a valid Exercise
Notice at or prior to 3:00 P.M., New York City time, on (i) the New York
Business Day immediately preceding the Expiration Date or (ii) the Delisting
Date, as the case may be, or for which the Warrant Agent has received a valid
Exercise Notice but with respect to which timely delivery of the relevant
Warrants has not been made, together with any Warrants the Valuation Date for
which has at such time been postponed as described under "-- Extraordinary
Events and Exercise Limitation Events" below, will be automatically exercised on
such date. The Exercise Date for such Warrants will be the Expiration Date or
the Delisting Date, as the case may be, or, if such date is not a New York
Business Day, the next succeeding New York Business Day. The Warrant Agent will
obtain the Spot AMEX Hong Kong 30 Index (determined as of the first Index
Calculation Day following
S-23
<PAGE> 24
such date, which will be the Valuation Date for such Warrants, except in the
case of a postponed exercise following the occurrence of an Extraordinary Event
or an Exercise Limitation Event as described under "-- Extraordinary Events and
Exercise Limitation Events" below), and will determine the Cash Settlement
Value, if any, of such Warrants.
Except in the case of a postponed exercise following the occurrence of an
Extraordinary Event or an Exercise Limitation Event as described under
"-- Extraordinary Events and Exercise Limitation Events" below, or in the case
of Warrants held through the facilities of DTC, CEDEL or Euroclear, if the
Company has made adequate funds available to the Warrant Agent in a timely
manner as required by the Warrant Agreement, the Warrant Agent will thereafter
be responsible for making a payment available to each registered holder of a
Warrant in the form of a cashier's check or official bank check, or (in the case
of payments of at least $100,000) by wire transfer to a U.S. dollar account
maintained by such holder in the United States (at such holder's election) after
3:00 P.M., New York City time, on the fourth New York Business Day after such
Valuation Date (or, if such Valuation Date is not a New York Business Day, on
the fourth New York Business Day following the New York Business Day next
succeeding such Valuation Date) against receipt by the Warrant Agent at the
Warrant Agent's Office of such holder's Warrant Certificates. Such payment will
be in an amount equal to the aggregate Cash Settlement Value of the Warrants
evidenced by such Warrant Certificates.
In the case of Warrants held through the facilities of DTC, CEDEL or
Euroclear, and, except in the case of a postponed exercise following the
occurrence of an Extraordinary Event or an Exercise Limitation Event as
described under "Extraordinary Events and Exercise Limitation Events" below, the
Company will be required to make available to the Warrant Agent, no later than
3:00 P.M., New York City time, on the fourth New York Business Day after such
Valuation Date (or, if such Valuation Date is not a New York Business Day, on
the fourth New York Business Day following the New York Business Day next
succeeding such Valuation Date), funds in an amount sufficient to pay such
aggregate Cash Settlement Value. If the Company has made such funds available by
such time, the Warrant Agent will thereafter be responsible for making funds
available to DTC in an amount sufficient to pay the aggregate Cash Settlement
Value of the Warrants. DTC will be responsible for disbursing such funds to each
appropriate Participant (including Citibank and Morgan, who, in turn, will
disburse payments to CEDEL and Euroclear, as the case may be, who will be
responsible for disbursing such payments to each of their respective
participants, who, in turn, will be responsible for disbursing payments to the
Warrantholders it represents) and such Participant will be responsible for
disbursing such payments to the Warrantholders it represents and to each
brokerage firm for which it acts as agent. Each such brokerage firm will be
responsible for disbursing funds to the Warrantholders it represents.
EXTRAORDINARY EVENTS AND EXERCISE LIMITATION EVENTS
Extraordinary Events. The Warrant Agreement will provide that if the
Company determines that an Extraordinary Event has occurred and is continuing on
the Hong Kong Business Day with respect to which the Spot AMEX Hong Kong 30
Index on a Valuation Date is to be determined (the "Applicable Hong Kong
Business Day"), then the Cash Settlement Value in respect of an exercise shall
be calculated on the basis that the Valuation Date shall be the next Index
Calculation Day following an Applicable Hong Kong Business Day on which there is
no Extraordinary Event or Exercise Limitation Event; provided that if the
Valuation Date has not occurred on or prior to the Expiration Date or the
Delisting Date, the Warrantholders will receive the Alternative Settlement
Amount in lieu of the Cash Settlement Value which shall be calculated as if the
Warrants had been cancelled on the Expiration Date or the Delisting Date, as the
case may be. The Company shall promptly give notice to Warrantholders, by
publication in a United States newspaper with a national circulation (currently
expected to be The Wall Street Journal), if an Extraordinary Event shall have
occurred.
S-24
<PAGE> 25
"Extraordinary Event" means any of the following events:
(i) a suspension or absence of trading on the HKSE of all the
Underlying Stocks which then comprise the AMEX Hong Kong 30 Index or a
Successor Index;
(ii) the enactment, publication, decree or other promulgation of any
statute, regulation, rule or order of any court or any other U.S. or
non-U.S. governmental authority which would make it unlawful for the
Company to perform any of its obligations under the Warrant Agreement or
the Warrants; or
(iii) any outbreak or escalation of hostilities or other national or
international calamity or crisis (including, without limitation, natural
calamities which in the opinion of the Company may materially and adversely
affect the economy of Hong Kong or the trading of securities generally on
the HKSE) which has or will have a material adverse effect on the ability
of the Company to perform its obligations under the Warrants or to modify
the hedge of its position with respect to the AMEX Hong Kong 30 Index.
For the purposes of determining whether an Extraordinary Event has
occurred: (1) a limitation on the hours or number of days of trading will not
constitute an Extraordinary Event if it results from an announced change in the
regular business hours of the HKSE and (2) an "absence of trading" on the HKSE
will not include any time when the HKSE itself is closed for trading under
ordinary circumstances.
To the Company's knowledge, no circumstances have arisen since the
inception of the AMEX Hong Kong 30 Index that could have constituted an
Extraordinary Event, except that on July 22, 1992 and on September 17, 1993
trading on the HKSE and The Hong Kong Futures Exchange Ltd. (the "HK Futures
Exchange") was suspended due to typhoons (severe storms) in Hong Kong (the
"Typhoon Suspensions"). Prior to the inception of the AMEX Hong Kong 30 Index,
and based on the information published by the HKSE, trading on the HKSE was
suspended during the time of other world market breaks from October 20 through
October 23, 1987. Trading in Hang Seng Index Futures on the HK Futures Exchange
also was suspended during the same four-day period (collectively, the "October
1987 Suspension"). The existence of such circumstances, however, is not
necessarily indicative of the likelihood of such circumstances arising or not
arising in the future. See "The AMEX Hong Kong 30 Index -- The HKSE" below.
If the Company determines that an Extraordinary Event has occurred and is
continuing, and if the Extraordinary Event is expected by the Company to
continue, the Company may immediately cancel the Warrants by notifying the
Warrant Agent of such cancellation (the date such notice is given being the
"Cancellation Date"), and each Warrantholder's rights under the Warrants and the
Warrant Agreement shall thereupon cease; provided that each Warrant shall be
exercised (even if such Warrant would not otherwise be exercisable on such date
because of the Limit Option) on the basis that the Valuation Date for such
Warrant shall be the Cancellation Date and the holder of each such Warrant will
receive, in lieu of the Cash Settlement Value of such Warrant, an amount (the
"Alternative Settlement Amount"), determined by the Determination Agent, which
is the greater of (i) the average of the last sale prices, as available, of the
Warrants on the AMEX (or any successor securities exchange on which the Warrants
are listed) on the 30 trading days preceding the date on which such
Extraordinary Event was declared; provided that, if the Warrants were not traded
on the AMEX (or such successor securities exchange) on at least 20 of such
trading days, no effect will be given to this clause (i) for the purpose of
determining the Alternative Settlement Amount, and (ii) the amount "X"
calculated using the formula set forth below:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
T A
X = I + [ -- X ]
---
2 B
</TABLE>
where
I = the Cash Settlement Value of the Warrants determined as described under
"-- Cash Settlement Value" above, but subject to the following modifications:
(1) if the Cancellation Date for such Warrants is a date on which the
AMEX Hong Kong 30 Index or a Successor Index is calculated and published,
for the purpose of determining such Cash Settlement Value, the Spot AMEX
Hong Kong 30 Index will be determined as of such Cancellation Date except
S-25
<PAGE> 26
that, if the Spot AMEX Hong Kong 30 Index as of such day is less than 90%
of the Spot AMEX Hong Kong 30 Index as of the immediately preceding Index
Calculation Day, then the Spot AMEX Hong Kong 30 Index will be deemed to be
90% of the Spot AMEX Hong Kong 30 Index on such preceding Index Calculation
Day; or
(2) if the Cancellation Date for such Warrants is a date on which the
AMEX Hong Kong 30 Index or a Successor Index is not calculated or
published, for the purpose of determining such Cash Settlement Value, the
Spot AMEX Hong Kong 30 Index will be deemed to be the lesser of (i) the
Spot AMEX Hong Kong 30 Index as of the first Index Calculation Day
immediately preceding the Cancellation Date except that, if the Spot AMEX
Hong Kong 30 Index as of such day is less than 90% of the Spot AMEX Hong
Kong 30 Index as of the second Index Calculation Day immediately preceding
such Cancellation Date, 90% of the Spot AMEX Hong Kong 30 Index as of such
second Index Calculation Day and (ii) the arithmetic average of four
amounts, being (a) the Spot AMEX Hong Kong 30 Index at each of the three
successive Index Calculation Days immediately preceding the Cancellation
Date and (b) the Spot AMEX Hong Kong 30 Index at the next Index Calculation
Day; provided that if an Extraordinary Event described in clause (i) of the
definition of Extraordinary Event continues for 30 consecutive days
immediately following such Cancellation Date, then the Determination Agent
shall calculate an amount which, in its reasonable opinion, fairly reflects
the value of the Underlying Stocks on the Index Calculation Day immediately
following such Cancellation Date which, subject to approval by the Company
(such approval not to be unreasonably withheld), shall for purposes of
calculating the amount under this clause (2)(ii) be treated as the figure
arrived at under clause (2)(ii)(b);
T = U.S.$ , the initial offering price per Warrant;
A = the total number of days from but excluding the Cancellation Date for
such Warrants to and including the Expiration Date; and
B = the total number of days from but excluding the date the Warrants were
initially sold to and including the Expiration Date.
For the purposes of determining "I" in the above formula, in the event that
the Determination Agent and the Company are required, but have not, after good
faith consultation with each other and within five days following the first day
upon which such Alternative Settlement Amount may be calculated in accordance
with the above formula, agreed upon a figure under clause (2)(ii)(b) which
fairly reflects the value of the Underlying Stocks on the Cancellation Date,
then the Determination Agent shall promptly nominate a third party, subject to
approval by the Company (such approval not to be unreasonably withheld), to
determine such figure and calculate the Alternative Settlement Amount in
accordance with the above formula. Such party shall act as an independent expert
and not as an agent of the Company or the Determination Agent, and its
calculation and determination of the Alternative Settlement Amount shall, absent
manifest error, be final and binding on the Company, the Warrant Agent, the
Determination Agent and the Warrantholders. Any such calculations will be made
available to a Warrantholder for inspection at the Warrant Agent's Office.
Neither the Company nor such third party shall have any responsibility for good
faith errors or omissions in calculating the Alternative Settlement Amount.
Exercise Limitation Events. The Warrant Agreement will provide that if the
Company determines that on an Applicable Hong Kong Business Day an Exercise
Limitation Event has occurred and is continuing, then the Cash Settlement Value
in respect of an exercise shall be calculated on the basis that the Valuation
Date shall be the next Index Calculation Day following an Applicable Hong Kong
Business Day on which there is no Exercise Limitation Event or Extraordinary
Event; provided that, if the Valuation Date has not occurred on or prior to the
Expiration Date or the Delisting Date, the Warrantholders will receive the
Alternative Settlement Amount in lieu of the Cash Settlement Value which shall
be calculated as if the Warrants had been cancelled on the Expiration Date or
the Delisting Date, as the case may be. The Company shall promptly give notice
to Warrantholders, by publication in a United States newspaper with a national
circulation (currently expected to be The Wall Street Journal), if an Exercise
Limitation Event shall have occurred.
S-26
<PAGE> 27
"Exercise Limitation Event" means either of the following events:
(i) a suspension or absence of trading on the HKSE of (a) 20% or more
of the Underlying Stocks which then comprise the AMEX Hong Kong 30 Index or
a Successor Index, and/or (b) the stocks of any three of the four most
highly capitalized companies included in the Underlying Stocks which then
comprise the AMEX Hong Kong 30 Index or a Successor Index; or
(ii) the suspension or material limitation on the HK Futures Exchange
or any other major futures or securities market (which as of the date of
this Prospectus Supplement includes only the HK Futures Exchange, but which
in the Company's judgment may change in the future) of trading in futures
or options contracts related to the Hang Seng Index (for a brief
description of the Hang Seng Index, see "The AMEX Hong Kong 30 Index -- The
HKSE" herein), the AMEX Hong Kong 30 Index or a Successor Index.
For purposes of determining whether an Exercise Limitation Event has
occurred: (1) a limitation on the hours or number of days of trading will not
constitute an Exercise Limitation Event if it results from an announced change
in the regular business hours of the relevant exchange, (2) a decision to
permanently discontinue trading in the relevant contract will not constitute an
Exercise Limitation Event, (3) a suspension in trading in a futures or options
contract on the Hang Seng Index, the AMEX Hong Kong 30 Index or a Successor
Index by the HK Futures Exchange or other major futures or securities market
(which as of the date of this Prospectus Supplement includes only the HK Futures
Exchange, but which in the Company's judgment may change in the future) by
reason of (x) a price change violating limits set by the HK Futures Exchange or
such futures or securities market, (y) an imbalance of orders relating to such
contracts or (z) a disparity in bid and ask quotes relating to such contracts
will constitute a suspension or material limitation of trading in futures or
options contracts related to the Hang Seng Index, the AMEX Hong Kong 30 Index or
such Successor Index, (4) an "absence of trading" on the HK Futures Exchange or
a major futures or securities market on which futures or options contracts
relating to the Hang Seng Index, the AMEX Hong Kong 30 Index or a Successor
Index are traded will not include any time when the HK Futures Exchange or such
futures or securities market, as the case may be, itself is closed for trading
under ordinary circumstances and (5) the occurrence of an Extraordinary Event
described in clause (i) of the definition of Extraordinary Event will not
constitute, and will supersede the occurrence of, an Exercise Limitation Event.
Based on information provided to the Company by HKSE and the HK Futures
Exchange, it is the Company's understanding that during the past six years there
have been no suspensions of trading on the HKSE and no suspensions of trading on
the HK Futures Exchange under circumstances that could have constituted an
Exercise Limitation Event, except for the Typhoon Suspensions and the October
1987 Suspension. The lack of such suspensions over the period indicated is not
necessarily indicative of the number or frequency of any future suspensions. See
"The AMEX Hong Kong 30 Index -- The HKSE" below.
In the case of a postponed Valuation Date resulting from an Extraordinary
Event or an Exercise Limitation Event, if the Company has made adequate funds
available to the Warrant Agent by 3:00 P.M., New York City time, on the third
New York Business Day following the date on which the Cash Settlement Value or
Alternative Settlement Amount, as the case may be, has been calculated, the
Warrant Agent will thereafter be responsible for making payment available to
each registered holder who holds Warrants in certificated form in the form of a
cashier's check or official bank check, or (in the case of payments of at least
$100,000) by wire transfer to a U.S. dollar bank account maintained by such
holder in the United States (at such holder's election), in an amount equal to
the aggregate Cash Settlement Value or Alternative Settlement Amount, as
applicable, of such holder's exercised Warrants. In the case of Warrants held
through the facilities of DTC, CEDEL or Euroclear, if the Company has made such
funds available by such time as noted above, the Warrant Agent will thereafter
be responsible for making funds available to DTC in an amount sufficient to pay
the Cash Settlement Value or Alternative Settlement Amount of the Warrants. DTC
will be responsible for disbursing such funds to each appropriate Participant
(including Citibank and Morgan who in turn will disburse payments to CEDEL and
Euroclear, as the case may be, who will be responsible for disbursing such
payments to their respective participants who, in turn, will be responsible for
disbursing such payments to the Warrantholders it represents) and such
Participant will be responsible for disbursing such payments to the
S-27
<PAGE> 28
Warrantholders it represents and to each brokerage firm for which it acts as
agent. Each such brokerage firm will be responsible for disbursing funds to the
Warrantholders it represents.
Certain of the Extraordinary Events and Exercise Limitation Events may be
events that would tend to decrease the level of the AMEX Hong Kong 30 Index and
accordingly increase the Cash Settlement Value for the Warrants following the
occurrence of any such Extraordinary Event or Exercise Limitation Event.
However, as a result of any postponed exercise as described above,
Warrantholders would not receive such Cash Settlement Value, but would receive
instead a Cash Settlement Value (or, if applicable, an Alternative Settlement
Amount) determined as of a later date. In any such case, any immediate impact of
the related Extraordinary Event or Exercise Limitation Event on the AMEX Hong
Kong 30 Index may have been negated by interim market and other developments
and, as a result of any such postponement, the Cash Settlement Value (or
Alternative Settlement Amount) actually received by Warrantholders may be
substantially lower (including zero) than the otherwise applicable Cash
Settlement Value if the valuation of the Warrants had not been postponed.
LISTING
Application has been made to list the Warrants on the AMEX. The AMEX symbol
for the Warrants is HPW.WS. The AMEX expects to cease trading the Warrants on
such Exchange as of the close of business on the Expiration Date.
DELISTING OF WARRANTS
In the event that the Warrants are delisted from, or permanently suspended
from trading (within the meaning of the Securities Exchange Act of 1934 and the
rules and regulations thereunder) on the AMEX, and not accepted at the same time
for listing on another United States national securities exchange, Warrants not
previously exercised will be deemed automatically exercised on the last New York
Business Day prior to the effective date of such delisting or trading suspension
(the "Delisting Date") and the Cash Settlement Value, if any, shall be
calculated and settled as provided above under "-- Automatic Exercise." The
Company will notify Warrantholders as soon as practicable of such delisting or
trading suspension. However, if the Company first receives notice of the
delisting or suspension on the same day on which the Warrants are delisted or
suspended, such day will nevertheless be deemed to be the Delisting Date. The
Company will covenant in the Warrant Agreement that it will not seek delisting
of the Warrants from, or suspension of their trading on, the AMEX unless the
Company has, at the same time, arranged for listing of the Warrants on another
United States national securities exchange.
THE AMEX HONG KONG 30 INDEX
Unless otherwise stated, all information herein on the AMEX Hong Kong 30
Index is derived from the AMEX or other publicly available sources. Such
information reflects the policies of the AMEX as stated in such sources and such
policies are subject to change by the AMEX.
The AMEX Hong Kong 30 Index is a new capitalization-weighted stock index
designed, developed, maintained and operated by, and is a service mark of, the
AMEX that measures the market value performance (share price times the number of
shares outstanding) of selected HKSE listed stocks. The AMEX Hong Kong 30 Index
currently is based on the capitalization of 30 Underlying Stocks trading on the
HKSE and is designed to represent a substantial segment of the Hong Kong stock
market. The HKSE is the primary trading market for 25 of the 30 Underlying
Stocks. The primary trading market for all of the Underlying Stocks is either
Hong Kong or London. Business sector representation of the Underlying Stocks
comprising the AMEX Hong Kong 30 Index as of January , 1994 was as follows:
[(1) property development (25.22%); (2) utilities (22.64%); (3) conglomerates
(19.97%); (4) finance (19.05%); (5) hotel/leisure (4.67%); (6) property
investment (4.17%); (7) airlines (2.33%); (8) food retailing (1.65%); and (9)
luxury retailing (0.30%)]. The AMEX Hong Kong 30 Index was established on June
25, 1993. (See Appendix A hereto for a list of the Underlying Stocks as of
January , 1994.) As of January , 1994, the five largest Underlying Stocks
accounted for approximately [42.86%] of the market capitalization of the AMEX
Hong
S-28
<PAGE> 29
Kong 30 Index, with the largest being [Hong Kong Telecommunications, Ltd.
(11.93%), followed by HSBC Holdings plc (10.03%), Hang Seng Bank Ltd. (7.60%),
Hutchison Whampoa Ltd. (6.74%) and Sun Hung Kai Properties Ltd. (6.57%). The
lowest weighted Underlying Stock, as of January , 1994, was Dickson Concepts
(International) Ltd. (0.30%)].
The AMEX Hong Kong 30 Index will be maintained by the AMEX and will contain
at least 30 Underlying Stocks at all times. In addition, the Underlying Stocks
must meet certain listing and maintenance standards as discussed below. The AMEX
may change the composition of the AMEX Hong Kong 30 Index at any time in order
to more accurately reflect the composition and track the movement of the Hong
Kong stock market. Any replacement Underlying Stock must also meet the
Underlying Stock listing and maintenance standards as discussed below. Further,
the AMEX may replace Underlying Stocks in the event of certain corporate events,
such as takeovers, or mergers, that change the nature of the security.
The AMEX will select Underlying Stocks on the basis of their market weight,
trading liquidity, and representation of the business industries reflected on
the HKSE. The AMEX will require that each Underlying Stock be one issued by an
entity with major business interests in Hong Kong, listed for trading on the
HKSE, and have its primary trading market located in a country that the AMEX has
an effective surveillance sharing agreement with. The AMEX will remove any
Underlying Stock failing to meet the above listing and maintenance criteria
within 30 days after such failure occurs. In order to ensure that the AMEX Hong
Kong 30 Index does not contain a large number of thinly-capitalized, low-priced
securities with small public floats and low trading volumes, the AMEX has also
established additional qualification criteria for the inclusion and maintenance
of Underlying Stocks, based on the following standards: (1) all Underlying
Stocks selected for inclusion in the AMEX Hong Kong 30 Index must have, and
thereafter maintain, an average daily capitalization, as calculated by the total
number of shares outstanding times the latest price per share (in Hong Kong
dollars), measured over the prior 6-month period, of at least H.K.$3,000,000,000
(approximately U.S.$ on the date hereof); (2) all Underlying
Stocks selected for inclusion in the AMEX Hong Kong 30 Index must have, and
thereafter maintain, an average daily closing price, measured over the prior
6-month period, not lower than H.K.$2.50 (approximately U.S.$ on the date
hereof); (3) all Underlying Stocks selected for inclusion in the AMEX Hong Kong
30 Index must have, and thereafter maintain, an average daily trading volume,
measured over the prior 6-month period, of more than 1,000,000 shares per day,
although up to, but no more than, three Underlying Stocks may have an average
daily trading volume, measured over the prior 6-month period, of less than
1,000,000 shares per day, but in no event less than 500,000 shares per day; and
(4) all Underlying Stocks selected for inclusion in the AMEX Hong Kong 30 Index
must have, and thereafter maintain, a minimum "free float" value (total freely
tradeable outstanding shares minus insider holdings), based on a monthly average
measured over the prior 3-month period, of U.S.$238,000,000, although up to, but
no more than, three Underlying Stocks may have a free float value of less than
U.S.$238,000,000 but in no event less than U.S.$150,000,000, measured over the
same period. The AMEX will review and apply the above qualification criteria
relating to the Underlying Stocks on a quarterly basis, conducted the last
business day in January, April, July, and October (beginning January 1994). Any
Underlying Stock failing to meet the above listing and maintenance criteria will
be reviewed on the second Friday of the second month following the quarterly
review to again determine compliance with the above criteria. Any Underlying
Stock failing this second review will be replaced by a "qualified" Underlying
Stock effective upon the close of business on the following Friday provided,
however, that if such Friday is not a New York Business Day, the replacement
will be effective at the close of business on the first preceding New York
Business Day. For example, if an Underlying Stock was found to be below the
maintenance criteria on Monday, January 31, 1994, it would be reviewed again on
March 11 and, if ineligible, would be replaced by a qualified security at the
close of business on March 18, 1994. If March 18 happened not to be a New York
Business Day, the replacement would be effective at the close of business on the
preceding Thursday, March 17, 1994, assuming that Thursday was a New York
Business Day. The AMEX will notify its membership immediately after it
determines to replace an Underlying Stock.
The annual reports and prospectuses of the companies listed on the HKSE are
available for investors' inspection in the City Hall Library (a public library
in Hong Kong, Central). The HKSE library also has information for each listed
company but it is available only to members of the HKSE.
S-29
<PAGE> 30
A company whose stock is included in the AMEX Hong Kong 30 Index is not
required to be incorporated under the laws of Hong Kong. As of the date of this
Prospectus Supplement eight of the thirty companies whose stocks comprise the
Underlying Stocks are not incorporated in Hong Kong. They are (country of
incorporation shown within parentheses): Dairy Farm International Holdings Ltd.
(Bermuda), Dickson Concepts (International) Ltd. (Bermuda), Great Eagle Holdings
Ltd. (Bermuda), Hong Kong Land Holdings Ltd. (Bermuda), HSBC Holdings plc
(England), Jardine Matheson Holdings Ltd. (Bermuda), Jardine Strategic Holdings
Ltd. (Bermuda) and Tai Cheung Holdings Ltd. (Bermuda).
The AMEX Hong Kong 30 Index is a capitalization-weighted index. A company's
market capitalization is calculated by multiplying the number of shares
outstanding by the company's current share price (in Hong Kong dollars). For
valuation purposes unrelated to the Warrants, one AMEX Hong Kong 30 Index unit
(1.0) is assigned a fixed value of one U.S. dollar. The AMEX Hong Kong 30 Index
measures the average changes in price of the Underlying Stocks, weighted
according to their respective market capitalizations, so that the effect of a
percentage price change in an Underlying Stock will be greater the larger the
Underlying Stock's market capitalization. The AMEX Hong Kong 30 Index was
established by the AMEX on June 25, 1993, on which date the AMEX Hong Kong 30
Index value was set at 350.00. The daily calculation and public dissemination by
the AMEX of the AMEX Hong Kong 30 Index value commenced on September 1, 1993.
The data relating to the AMEX Hong Kong 30 Index was back-calculated by the AMEX
from January 2, 1989 to August 31, 1993. The AMEX Hong Kong 30 Index is
calculated by (i) adding the market capitalization of each Underlying Stock and
(ii) dividing such sum by an adjusted base market capitalization or divisor. On
June 25, 1993, the market value of the Underlying Stocks was approximately
H.K.$1,152,829,149,500 (equivalent to approximately U.S.$148,656,241,000) and
the divisor used to calculate the AMEX Hong Kong 30 Index was 3,293,797,570. The
AMEX selected that particular divisor number in order, among other things, to
ensure that the AMEX Hong Kong 30 Index was set at a general price level
consistent with other well recognized stock markets. The divisor is subject to
periodic adjustments as set forth below. The AMEX Hong Kong 30 Index is
calculated once every Index Calculation Day by the AMEX based on the most recent
official closing prices of each of the Underlying Stocks reported by the HKSE.
Pricing of the AMEX Hong Kong 30 Index will be performed each day and be
disseminated before the opening of trading via the Consolidated Tape Authority
Network-B continuously during each New York Business Day. The dissemination
value, however, will remain the same throughout the trading day because the
trading hours of the HKSE do not overlap with AMEX trading hours. Accordingly,
updated price information will be unavailable. At the close of the market on
January , 1994, the AMEX Hong Kong 30 Index level was .
In order to maintain continuity in the level of the AMEX Hong Kong 30 Index
in the event of certain changes due to non-market factors affecting the
Underlying Stocks, such as the addition or deletion of stocks, substitution of
stocks, stock dividends, stock splits, distributions of assets to stockholders
or other capitalization events, the divisor used in calculating the AMEX Hong
Kong 30 Index is adjusted in a manner designed to prevent any instantaneous
change or discontinuity in the level of the AMEX Hong Kong 30 Index and in order
that the value of the AMEX Hong Kong 30 Index immediately after such change will
equal the level of the AMEX Hong Kong 30 Index immediately prior to the change.
Thereafter, the divisor remains at the new value until a further adjustment is
necessary as the result of another change. Nevertheless, changes in the
identities and characteristics of the Underlying Stocks may significantly affect
the behavior of the AMEX Hong Kong 30 Index over time.
The AMEX is under no obligation to continue the calculation and
dissemination of the AMEX Hong Kong 30 Index and the method by which the AMEX
Hong Kong 30 Index is calculated and the name "The AMEX Hong Kong 30 Index" may
be changed at the discretion of the AMEX. The Warrants are not sponsored,
endorsed, sold or promoted by the AMEX. No inference should be drawn from the
information contained in this Prospectus Supplement that the AMEX makes any
representation or warranty, implied or express, to the Company, the
Warrantholders or any member of the public regarding the advisability of
investing in securities generally or in the Warrants in particular or the
ability of the AMEX Hong Kong 30 Index to track general stock market
performance. The AMEX has no obligation to take the needs of the Company or the
Warrantholders into consideration in determining, composing or calculating the
AMEX Hong Kong 30 Index. The AMEX is not responsible for, and has not
participated in the determination of the
S-30
<PAGE> 31
timing of, prices for, or quantities of, the Warrants to be issued or in the
determination or calculation of the equation by which the Warrants are to be
settled in cash. The AMEX has no obligation or liability in connection with the
administration, marketing or trading of the Warrants.
The use of and reference to the AMEX Hong Kong 30 Index in connection with
the Warrants have been consented to by the AMEX.
Except with respect to the responsibility of the Determination Agent to
make certain calculations under certain circumstances as described herein, none
of the Company, the Warrant Agent, the Determination Agent or the Underwriters
accepts any responsibility for the calculation, maintenance or publication of
the AMEX Hong Kong 30 Index or any Successor Index. The AMEX disclaims all
responsibility for any inaccuracies in the data on which the AMEX Hong Kong 30
Index is based, or any mistakes or errors or omissions in the calculation or
dissemination of the AMEX Hong Kong 30 Index or for the manner in which such
index is applied in determining any Cash Settlement Value or Alternative
Settlement Amount upon exercise of the Warrants.
HISTORICAL DATA ON THE AMEX HONG KONG 30 INDEX
The following table sets forth the closing level of the AMEX Hong Kong 30
Index at the end of each month in the period from January 1989 through January
7, 1994. All historical data presented in the following table relating to
periods before September 1, 1993 (the date the AMEX commenced the daily
calculation and public dissemination of the AMEX Hong Kong 30 Index) is
presented as if the AMEX Hong Kong 30 Index had existed during such periods,
based on the Underlying Stocks contained in the AMEX Hong Kong 30 Index as of
June 25, 1993, and such closing levels have been calculated hypothetically on
the same basis that the AMEX 30 Hong Kong Index is calculated, but without
making certain of the adjustments referred to above to take account of
non-market factors. All historical data presented in the following table
relating to periods after September 1, 1993 are based on actual data from the
AMEX Hong Kong 30 Index. Certain of the Underlying Stocks currently comprising
the AMEX Hong Kong 30 Index may not have met the AMEX's criteria for inclusion
in the AMEX Hong Kong 30 Index at all times during the period covered by the
table. In addition, there is no reason to believe that other stocks would not
have been included in the AMEX Hong Kong 30 Index had it been established at an
earlier date. Accordingly, the monthly closing levels set forth below are not
necessarily indicative of the levels that would have been in existence had the
AMEX calculated and disseminated the AMEX Hong Kong 30 Index beginning in
January 1989 applying the criteria set forth above to determine which Underlying
Stocks would be included in such index. These historical data on the AMEX Hong
Kong 30 Index are not necessarily indicative of the future performance of the
AMEX Hong Kong 30 Index or what the value of the Warrants may be. Any historical
upward or downward trend in the closing level of the AMEX Hong Kong 30 Index
during any period set forth below is not any indication that the level of the
AMEX Hong Kong 30 Index is more or less likely to increase or decrease at any
time during the term of the Warrants.
<TABLE>
<CAPTION>
MONTH-END
CLOSING LEVEL
-------------
<S> <C>
1989:
January............................................................... 149.88
February.............................................................. 147.27
March................................................................. 146.46
April................................................................. 152.01
May................................................................... 133.76
June.................................................................. 110.46
July.................................................................. 125.78
August................................................................ 123.02
September............................................................. 135.71
October............................................................... 135.04
November.............................................................. 136.23
December.............................................................. 140.32
</TABLE>
S-31
<PAGE> 32
<TABLE>
<CAPTION>
MONTH-END
CLOSING LEVEL
-------------
<S> <C>
1990:
January............................................................... 136.29
February.............................................................. 146.44
March................................................................. 149.57
April................................................................. 146.77
May................................................................... 156.58
June.................................................................. 164.36
July.................................................................. 172.48
August................................................................ 154.24
September............................................................. 137.78
October............................................................... 149.74
November.............................................................. 148.38
December.............................................................. 151.46
1991:
January............................................................... 162.42
February.............................................................. 177.56
March................................................................. 187.39
April................................................................. 179.85
May................................................................... 186.43
June.................................................................. 184.68
July.................................................................. 201.91
August................................................................ 201.49
September............................................................. 200.42
October............................................................... 204.76
November.............................................................. 209.96
December.............................................................. 217.58
1992:
January............................................................... 233.06
February.............................................................. 250.01
March................................................................. 249.71
April................................................................. 271.89
May................................................................... 308.30
June.................................................................. 309.67
July.................................................................. 296.24
August................................................................ 282.96
September............................................................. 276.67
October............................................................... 311.14
November.............................................................. 291.86
December.............................................................. 276.73
1993:
January............................................................... 287.74
February.............................................................. 318.99
March................................................................. 319.68
April................................................................. 341.75
May................................................................... 369.20
June.................................................................. 354.06
</TABLE>
S-32
<PAGE> 33
<TABLE>
<CAPTION>
MONTH-END
CLOSING LEVEL
-------------
<S> <C>
July.................................................................. 348.06
August................................................................ 374.08
September............................................................. 382.05
October............................................................... 467.64
November.............................................................. 458.93
December.............................................................. 498.98
1994:
January (through January 7)........................................... 553.40
</TABLE>
The following graph sets forth the historical performance of the AMEX Hong
Kong 30 Index at the end of each month from January 1989 through January 7,
1994. Past movements of the AMEX Hong Kong 30 Index are not necessarily
indicative of the future AMEX Hong Kong 30 Index values. The January , 1994
closing level of the AMEX Hong Kong 30 Index was .
AMEX HONG KONG 30 INDEX--HISTORICAL PERFORMANCE
MONTH-END VALUES THROUGH JANUARY 7, 1994
Source: Prepared by the Company from data obtained from the AMEX.
S-33
<PAGE> 34
THE HKSE
As of September 30, 1993, the HKSE was the world's 9th largest stock
exchange based on U.S. dollar market capitalization. The HKSE market is a
continuous market where trading is order-based through a computer-assisted
system. Transactions are generally conducted by telephone. However,
broker-dealers continue to operate from the stock exchange floor, and trading is
therefore occasionally face-to-face. There are no market-makers in Hong Kong,
but exchange dealers may act as dual capacity broker-dealers. All of the
Underlying Stocks of the AMEX Hong Kong 30 Index are traded through the
computerized trading system. Trading is undertaken from 10:00 A.M. to 12:30 P.M.
and then from 2:30 P.M. to 3:30 P.M. (Hong Kong time) every Hong Kong day except
Saturdays, Sundays and other days on which the HKSE is closed. Hong Kong time is
12 hours ahead of Eastern Daylight Savings Time and 13 hours ahead of Eastern
Standard Time. Settlement of trades is required within 48 hours and requires
either delivery of share certificates or book-entry delivery through the Central
Clearing and Settlement System.
Due to the time differences between New York City and Hong Kong, on any
normal trading day, trading on the HKSE of the Underlying Stocks currently will
cease at 2:30 A.M. or 3:30 A.M., New York City time. Using the last reported
closing prices of the Underlying Stocks on the HKSE, the closing level of the
AMEX Hong Kong 30 Index on any such trading day generally will be calculated,
published and disseminated by the AMEX in the United States shortly prior to the
opening of trading on the AMEX in New York on the same calendar day.
The HKSE has adopted certain measures intended to prevent any extreme
short-term price fluctuations resulting from order imbalances or market
volatility. Where the HKSE considers it necessary for the protection of the
investor or the maintenance of an orderly market, it may at any time suspend
dealings in any securities or cancel the listing of any securities in such
circumstances and subject to such conditions as it thinks fit, whether requested
by the listed issuer or not. The HKSE may also do so where: (1) an issuer fails,
in a manner which the HKSE considers material, to comply with the HKSE Listing
Rules or its Listing Agreement; or (2) the HKSE considers there are insufficient
securities in the hands of the public; or (3) the HKSE considers that the listed
issuer does not have a sufficient level of operations or sufficient assets to
warrant the continued listing of the issuer's securities; or (4) the HKSE
considers that the issuer or its business is no longer suitable for listing.
Investors should also be aware that the HKSE may suspend the trading of
individual stocks in certain limited and extraordinary circumstances, until
certain price-sensitive information has been disclosed to the public. For
instance, dealing on a listed company's shares will normally be suspended when
information about an intention to make a private placing, or a very substantial
transaction compared to the net asset value of the company, has been leaked
through an improper channel. Trading will not be resumed until after a formal
announcement has been made. Trading of a company's shares may also be suspended
if there is unusual trading activity in that stock.
An issuer may apply for suspension on its own accord. A suspension request
will normally only be acceded to in the following circumstances: (1) where, for
a reason acceptable to the HKSE, price-sensitive information cannot at that time
be disclosed; (2) where the issuer is subject to an offer, but only where terms
have been agreed in principle and require discussion with, and agreement by, one
or more major shareholders (suspensions will only normally be appropriate where
no previous announcement has been made); (3) to maintain an orderly market; (4)
where there is an occurrence of certain levels of notifiable transactions, such
as substantial changes in the nature, control or structure of the issuer, where
publication of full details is necessary to permit a realistic valuation to be
made of the securities concerned, or the approval of shareholders is required;
(5) where the issuer is no longer suitable for listing, or becomes a "cash"
company; or (6) for issuers going into receivership or liquidation.
As a result of the foregoing, variations in the AMEX Hong Kong 30 Index may
be limited by suspension of trading of individual stocks which comprise the AMEX
Hong Kong 30 Index which may, in turn, adversely affect the value of the
Warrants. In addition, a suspension in trading of (a) 20% or more of the
Underlying Stocks and/or (b) stocks of any three of the four most highly
capitalized companies included in the Underlying Stocks would result in an
Exercise Limitation Event and a halt in trading of all of the Underlying Stocks
would result in an Extraordinary Event, if such Events were declared by the
Company. As a result, the
S-34
<PAGE> 35
Valuation Date of exercised Warrants would be postponed and the Cash Settlement
Value (or Alternative Settlement Amount) actually received by Warrantholders may
be substantially lower (including zero) than the otherwise applicable Cash
Settlement Value if the valuation of the Warrants had not been postponed. See
"Description of the Warrants -- Extraordinary Events and Exercise Limitation
Events" herein.
In 1977, the Hong Kong government authorized futures trading in
commodities. The HK Futures Exchange currently provides for trading in gold,
sugar and soybeans in addition to Hang Seng Index and Hong Kong Interbank
Offered Rate contracts.
The stock index futures contracts traded on the HK Futures Exchange are
based upon the Hang Seng Index ("HSI") and its four sub-indices: properties,
utilities, finance, and commerce and industry. The HSI is a value-weighted index
of 33 stocks and every stock in the HSI is represented in one of the four
sub-indices. The following Underlying Stocks of the AMEX Hong Kong 30 Index (as
of , 1994) are not constituent securities of the HSI: [Amoy
Properties Ltd., Dickson Concepts (International) Ltd., Henderson Investment
Ltd. and Tai Cheung (Holdings) Ltd. The following constituent securities of the
HSI (as of October 26, 1993) are not Underlying Stocks of the AMEX Hong Kong 30
Index: Hong Kong Aircraft Eng. Co. Ltd., Lai Sun Garment International Ltd.,
Mandarin Oriental International Ltd., Mirmar Hotel and Inv. Co. Ltd., Shun Tak
Holdings Ltd., Television Broadcasts Ltd. and Winsor Industrial Corporation
Ltd.] The AMEX Hong Kong 30 Index also differs from the HSI in that, among other
things, the selection, maintenance and replacement criteria for the constituent
securities of the two indices are not the same and that they are operated and
governed by the rules of different entities.
Currently, the contracts listed on the HK Futures Exchange are HSI futures,
HSI sub-indices futures, HSI options, gold and Hong Kong Interbank Offered Rate
futures. There is a daily maximum fluctuation limit of 300 points imposed on the
HSI contracts (not applicable to spot mark contracts). Once the limit is
touched, orders cannot be transacted above (the upside limit) or below (the
downside limit) but orders within the range can continue to trade.
The foregoing discussion reflects the current rules governing the HKSE and
the HK Futures Exchange, which are subject to change.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
U.S. FEDERAL INCOME TAX CONSEQUENCES OF OWNERSHIP OF A WARRANT BY A U.S. HOLDER
The following is a summary of certain anticipated U.S. federal income tax
consequences of an investment in Warrants and represents the views of Sullivan &
Cromwell, special tax counsel to the Company. This summary deals only with "U.S.
Holders" (as defined below) that will hold Warrants as capital assets and as to
which the Underlying Stocks, if acquired by such holders, would be capital
assets, and does not deal with Warrantholders in special tax situations, such as
dealers in options, securities or currencies. A U.S. Holder means a
Warrantholder who or which is (i) a citizen or resident of the United States,
(ii) a domestic corporation, or (iii) a person otherwise subject to U.S. federal
income taxation on a net income basis in respect of the Warrant.
This summary does not address every U.S. federal income tax issue raised by
the ownership of Warrants. In particular, this summary does not consider either
(i) the U.S. federal income tax consequences of holding Warrants as a hedge
against, or hedged against, currency or security price risks, or (ii) the
possible application of the "straddle" rules of the Internal Revenue Code of
1986, as amended (the "Code"), to a Warrantholder as a result of holding other
"positions" (within the meaning of Section 1092 of the Code). Either of these
factors might substantially alter the tax consequences described below and may
require specific identification of positions in the Warrants before the close of
the date on which they are acquired. In particular, if the "straddle rules" were
to apply, a Warrantholder might be required to defer all or a portion of any
loss realized upon the sale, transfer, exercise, cancellation or lapse of a
Warrant. Accordingly, prospective purchasers of Warrants are urged to consult
their own tax advisors before any such acquisition concerning the U.S. federal,
state and local tax consequences, in light of their own particular
circumstances, of owning Warrants.
S-35
<PAGE> 36
A U.S. Holder will generally recognize capital gain or loss only upon the
sale, transfer, exercise, cancellation or lapse of a Warrant, which gain or loss
will be long-term capital gain or loss if the U.S. Holder has held the Warrant
for more than one year.
Notwithstanding the foregoing, assuming the Warrants remain traded on or
subject to the rules of a "qualified board or exchange" (as defined in Section
1256(g)(7) of the Code), they will become "nonequity options" subject to the
"mark-to-market" rules of Section 1256 of the Code at such time as either (i)
the Commodity Futures Trading Commission (the "CFTC") designates a contract
market for a contract based on the AMEX Hong Kong 30 Index or (ii) the Secretary
of the Treasury otherwise determines that the Warrants meet the requirements of
law for such a designation. No such designation or determination has yet
occurred. Nevertheless, an application is currently pending with the CFTC for a
designation of a contract market for a contract based on the Hang Seng Index
which is an index that is calculated on the basis of a substantially similar
weighting of a substantial number of identical securities as, and whose
performance is highly correlated to, the AMEX Hong Kong 30 Index. It is not
clear what effect such a designation would have on the classification of the
Warrants as "nonequity options". If the mark-to-market rules of Section 1256
were to apply to the Warrants, a U.S. Holder of an unexercised Warrant would
generally be required (a) to treat the Warrant as if it were sold for its fair
market value on the last day of each taxable year during which the U.S. Holder
owned the Warrant and (b) to recognize gain or loss as 60% long-term and 40%
short-term capital gain or loss. Thus, a U.S. Holder of a Warrant that is
subject to the mark-to-market rules of Section 1256 might incur federal income
tax liability on an annual basis in respect of an increase in the value of a
Warrant without a corresponding receipt of cash. Under the mark-to-market rules,
any gain or loss realized by a U.S. Holder upon the sale, transfer, exercise,
cancellation or lapse of a Warrant would also be treated as 60% long-term and
40% short-term capital gain or loss.
Regardless of whether the Warrants are treated as "nonequity options", no
portion of gain or loss in respect of a Warrant will be treated as foreign
currency gain or loss for U.S. federal income tax purposes.
U.S. FEDERAL INCOME TAX CONSEQUENCES OF OWNERSHIP OF A WARRANTY BY A NON-U.S.
HOLDER
In general, a Warrantholder who or which is (i) a nonresident alien
individual or (ii) a foreign corporation, partnership, estate or trust, in
either case not subject to U.S. federal income tax on a net income basis in
respect of a Warrant (a "non-U.S. Holder"), will not be subject to U.S. federal
withholding tax with respect to amounts received, if any, with respect to a
Warrant.
BACKUP WITHHOLDING
In general, the proceeds received from a sale, transfer, cancellation or
exercise of a Warrant by a U.S. Holder will be subject to information reporting,
and may be subject to a U.S. "backup" withholding at a rate of 31% if the U.S.
Holder thereof fails to supply an accurate taxpayer identification number or
otherwise comply with applicable U.S. information reporting or certification
requirements. Such payments made to a non-U.S. Holder will not be subject to
information reporting or back-up withholding if the non-U.S. Holder certifies
its status as a non-U.S. Holder under penalty of perjury, provided that the
payor does not have actual knowledge that the holder is a United States person.
Any amounts so withheld would be refundable or allowed as a credit against such
holder's U.S. federal income tax liability.
S-36
<PAGE> 37
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company has agreed to sell to each of the Underwriters named
below, and each of the Underwriters has severally agreed to purchase, the number
of Warrants set forth opposite its name.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS WARRANTS
-------------------------------------------------------------------------- ---------
<S> <C>
PaineWebber Incorporated..................................................
Oppenheimer & Co., Inc....................................................
Kemper Securities, Inc....................................................
---------
Total........................................................... 2,000,000
---------
---------
</TABLE>
The Underwriters have advised the Company that they propose to offer the
Warrants to the public initially at the offering price set forth on the cover
page of this Prospectus Supplement, and to certain dealers at such price less a
concession not in excess of $ per Warrant. The Underwriters may allow and
such dealers may reallow a concession not in excess of $ per Warrant to
certain other dealers. After the initial public offering, the public offering
price and such concessions may be changed.
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all of the Warrants if any are purchased.
The Company has agreed to indemnify the Underwriters against, and to
contribute to losses arising out of, certain liabilities, including liabilities
under the Securities Act of 1933, as amended.
PaineWebber Incorporated is a wholly owned subsidiary of the Company. The
participation of PaineWebber Incorporated in the offer and sale of the Warrants
complies with the requirements of Schedule E of the By-Laws of the National
Association of Securities Dealers, Inc. (the "NASD") regarding underwriting
securities of an affiliate. Under the provisions of Schedule E, when a NASD
member such as PaineWebber Incorporated distributes warrants of an affiliate,
the price of the warrants can be no higher than that recommended by a "qualified
independent underwriter", as such term is defined in Schedule E, meeting certain
standards. In accordance with such requirements, Oppenheimer & Co., Inc. has
agreed to serve as a "qualified independent underwriter" and has conducted due
diligence and has recommended a price for the Warrants in compliance with the
requirements of Schedule E.
Each Underwriter has represented that (i) it has complied and will comply
with all applicable provisions of the Financial Services Act of 1986 with
respect to anything done by it in relation to the Warrants in, from or otherwise
involving the United Kingdom and (ii) it has only issued or passed on, and will
only issue or pass on, in the United Kingdom any document received by it in
connection with the issue of the Warrants to a person who is of a kind described
in Article 9(3) of the Financial Services Act of 1986 (Investment
Advertisements) (Exemptions) Order 1988 or is a person to whom the document may
otherwise lawfully be issued or passed on.
No person (other than a person permitted to do so under the securities laws
of Hong Kong) may distribute this document or any other offering material
relating to the Warrants or issue any advertisement or invitation relating to
the Warrants in or from Hong Kong except with respect to Warrants intended to be
disposed of to persons outside Hong Kong or to be disposed of in Hong Kong only
to persons whose business involves the acquisition, disposal or holding of
securities, whether as principal or as agent.
VALIDITY OF THE WARRANTS
The validity of the Warrants will be passed upon for the Company by
Cravath, Swaine & Moore, New York, New York, and for the Underwriters by
Sullivan & Cromwell, New York, New York.
S-37
<PAGE> 38
APPENDIX A
AMEX HONG KONG 30 INDEX--UNDERLYING STOCKS
The following is a list of the issuers of the 30 stocks constituting the
AMEX Hong Kong 30 Index as of January , 1994. Such information was obtained
from the AMEX. The AMEX may delete, add or substitute any stock underlying the
AMEX Hong Kong 30 Index. See "The AMEX Hong Kong 30 Index" in this Prospectus
Supplement.
STOCKS INCLUDED IN THE AMEX HONG KONG 30 INDEX AS OF JANUARY , 1994,
TOGETHER WITH THEIR PERCENTAGE WEIGHT (ROUNDED TO THE NEAREST .01%) IN THE AMEX
HONG KONG 30 INDEX AS OF JANUARY , 1994, ARE SET FORTH BELOW:
[update]
<TABLE>
<CAPTION>
STOCK PERCENTAGE WEIGHT
- --------------------------------------------------------------------------- -----------------
<S> <C>
[Amoy Properties Ltd....................................................... 1.50%
The Bank of East Asia, Ltd................................................. 1.42%
Cathay Pacific Airways Ltd................................................. 2.33%
Cheung Kong (Holdings) Ltd................................................. 5.12%
China Light & Power Co., Ltd............................................... 5.55%
CITIC Pacific Ltd.......................................................... 2.42%
Dairy Farm International Holdings Ltd...................................... 1.65%
Dickson Concepts (International) Ltd....................................... 0.30%
Great Eagle Holdings Ltd................................................... 0.57%
Hang Lung Development Co. Ltd.............................................. 1.17%
Hang Seng Bank Ltd......................................................... 7.60%
Henderson Investment Ltd................................................... 0.87%
Henderson Land Development Co. Ltd......................................... 3.52%
The Hong Kong & China Gas Co. Ltd.......................................... 1.93%
The Hong Kong and Shanghai Hotels, Ltd..................................... 0.71%
Hong Kong Electric Holdings Ltd............................................ 3.23%
Hong Kong Land Holdings Ltd................................................ 3.60%
Hong Kong Telecommunications Ltd........................................... 11.93%
Hopewell Holdings Ltd...................................................... 2.08%
HSBC Holdings plc.......................................................... 10.03%
Hutchison Whampoa Ltd...................................................... 6.74%
Hysan Development Co. Ltd.................................................. 1.35%
Jardine Matheson Holdings Ltd.............................................. 3.46%
Jardine Strategic Holdings Ltd............................................. 2.02%
New World Development Co., Ltd............................................. 2.69%
Sun Hung Kai Properties Ltd................................................ 6.57%
Swire Pacific Ltd. 'A'..................................................... 3.18%
Tai Cheung Holdings Ltd.................................................... 0.37%
The Wharf (Holdings) Ltd................................................... 3.96%
World International (Holdings) Ltd......................................... 2.15%]
-------
Total................................................................. 100.00%
-------
-------
</TABLE>
As of January , 1994, the total capitalization of the AMEX Hong Kong 30
Index was U.S.$
billion.
A-1
<PAGE> 39
APPENDIX B
INDEX OF KEY TERMS
<TABLE>
<CAPTION>
PAGE ON WHICH
TERM TERM IS DEFINED
- --------------------------------------------------------------------------- -----------------
<S> <C>
Alternative Settlement Amount.............................................. S-25
AMEX....................................................................... front cover, S-3
AMEX Hong Kong 30 Index.................................................... front cover, S-3
Applicable Hong Kong Business Day.......................................... S-24
Cancellation Date.......................................................... S-25
Cash Settlement Value...................................................... front cover, S-3
CEDEL...................................................................... S-18
CFTC....................................................................... S-35
China...................................................................... S-13
Citibank................................................................... S-16
Code....................................................................... S-35
Company.................................................................... front cover, S-3
Conversion Option.......................................................... S-10
Conversion Option Period................................................... S-16
Cooperative................................................................ S-18
Delisting Date............................................................. S-2, S-4, S-28
Depositaries............................................................... S-17
Determination Agent........................................................ S-21
DTC........................................................................ S-10
Euroclear.................................................................. S-18
Euroclear Operator......................................................... S-18
Exercise Date.............................................................. S-19
Exercise Notice............................................................ S-19
Expiration Date............................................................ S-4, S-19
Extraordinary Event........................................................ S-24
HK Futures Exchange........................................................ S-25
HKSE....................................................................... S-4
Hong Kong Business Day..................................................... S-13
Index Calculation Day...................................................... S-13
Limit Option............................................................... S-22
Limit Option Reference Index............................................... S-23
Morgan..................................................................... S-16
NASD....................................................................... S-37
New York Business Day...................................................... S-13
Non-U.S. Holder............................................................ S-36
PaineWebber................................................................ S-3
Spot AMEX Hong Kong 30 Index............................................... S-9
Strike AMEX Hong Kong 30 Index............................................. S-9
Successor Index............................................................ S-9
Terms and Conditions....................................................... S-18
Third Party................................................................ S-9
U.S. Holder................................................................ S-35
Underlying Stock........................................................... S-14
Valuation Date............................................................. S-20
Warrants................................................................... S-3
Warrant Agent.............................................................. S-14
Warrant Agent's Office..................................................... S-14
Warrant Agreement.......................................................... S-14
Warrant Certificate........................................................ S-15
Warrantholder.............................................................. S-9
</TABLE>
B-1
<PAGE> 40
- ------------------------------------------------------
- ------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATES AS OF
WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH AN OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
PROSPECTUS SUPPLEMENT
Prospectus Summary.................... S-3
Certain Important Information
Concerning the Warrants............. S-9
Use of Proceeds....................... S-14
Description of the Warrants........... S-14
The AMEX Hong Kong 30 Index........... S-33
Certain United States Federal Income
Tax Considerations.................. S-35
Underwriting.......................... S-37
Validity of the Warrants.............. S-37
Appendix A: AMEX Hong Kong 30
Index -- Underlying Stocks.......... A-1
Appendix B: Index of Key Terms........ B-1
PROSPECTUS
Available Information................. 2
Documents Incorporated by Reference... 2
Risk Factors.......................... 3
Paine Webber Group Inc. .............. 9
Selected Consolidated Financial
Data................................ 10
Use of Proceeds....................... 10
Description of Warrants............... 11
Plan of Distribution.................. 14
ERISA Considerations.................. 15
Experts............................... 15
Legal Opinions........................ 16
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
TM
PAINEWEBBER
2,000,000 WARRANTS
PAINE WEBBER GROUP INC.
AMEX HONG KONG
30 STOCK INDEX*
PUT WARRANTS EXPIRING
JANUARY 17, 1994
---------------------------------
PROSPECTUS SUPPLEMENT
---------------------------------
PAINEWEBBER INCORPORATED
OPPENHEIMER & CO., INC.
KEMPER SECURITIES, INC.
------------------------
JANUARY , 1994
------------------------
* The use of and reference to the term "AMEX Hong Kong 30 Index" herein has been
consented to by the American Stock Exchange, Inc. The "AMEX Hong Kong 30
Index" is a service mark of the American Stock Exchange, Inc.
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 41
APPENDIX C
The following information is being furnished pursuant to Item 304 of
Regulation S-T promulgated by the Securities and Exchange Commission:
In the paper format version of this Prospectus Supplement there appears a
graph depicting the historical performance of the AMEX Hong Kong 30 Index at the
end of each month from January 1989 through January 7, 1994. The information
conveyed by such graphic information is described in tabular form in the
Prospectus Supplement on pages S-31, S-32 and S-33 under the heading "The AMEX
Hong Kong 30 Index -- Historical. Data on the AMEX Hong Kong 30 Index."
C-1
