<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 29, 1997
SECURITIES ACT FILE NO. 333-22289
INVESTMENT COMPANY ACT FILE NO. 811-08069
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM N-2
<TABLE>
<S> <C> <C>
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. 3 [X]
POST-EFFECTIVE AMENDMENT NO. [ ]
AND/OR
REGISTRATION STATEMENT UNDER THE [X]
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 3 [X]
</TABLE>
---------------------
AUTOMATIC COMMON EXCHANGE SECURITY TRUST II
(Exact Name of Registrant as Specified in its Charter)
C/O GOLDMAN, SACHS & CO.
85 BROAD STREET
NEW YORK, NEW YORK 10004
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (212) 902-1000
KENNETH L. JOSSELYN, ESQ.
85 BROAD STREET
NEW YORK, NEW YORK 10004
(Name and Address of Agent for Service)
COPIES TO:
<TABLE>
<C> <C> <C>
ROBERT E. BUCKHOLZ, JR., ESQ. PHYLLIS G. KORFF, ESQ. JOHN E. RILEY, ESQ.
SULLIVAN & CROMWELL SKADDEN, ARPS, SLATE, MEAGHER & SIMPSON THACHER & BARTLETT
125 BROAD STREET FLOM LLP 425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10004 919 THIRD AVENUE NEW YORK, NEW YORK 10017
NEW YORK, NEW YORK 10022
</TABLE>
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after
the effective date of this Registration Statement.
If any securities being registered on this form will be offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act of
1933, other than securities offered in connection with a dividend reinvestment
plan, check the following box. [ ]
[ ] This form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act and the Securities Act
registration statement number of the earlier effective registration statement
for the same offering is 333- .
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
AUTOMATIC COMMON EXCHANGE SECURITY TRUST II
CROSS-REFERENCE SHEET
(PURSUANT TO RULE 404(C) UNDER THE SECURITIES ACT OF 1933)
PARTS A & B OF PROSPECTUS*
<TABLE>
<CAPTION>
ITEM
NUMBER CAPTION LOCATION IN PROSPECTUS
- ------ ------- ----------------------
<C> <S> <C>
1. Outside Front Cover.................................. Front Cover Page
2. Inside Front and Outside Back Cover Page............. Front Cover Page; Inside Front Cover Page;
Outside Back Cover Page
3. Fee Table and Synopsis............................... Prospectus Summary; Fee Table
4. Financial Highlights................................. Not Applicable
5. Plan of Distribution................................. Front Cover Page; Prospectus Summary;
Underwriting
6. Selling Shareholders................................. Not Applicable
7. Use of Proceeds...................................... Use of Proceeds; Investment Objective and Policies
8. General Description of the Registrant................ Front Cover Page; Prospectus Summary;
The Trust; Investment Objective and Policies;
Risk Factors
9. Management........................................... Management and Administration of the Trust
10. Capital Stock, Long-Term Debt and Other Securities... Investment Objective and Policies; Description of
the Securities; Certain Federal Income Tax
Considerations
11. Defaults and Arrears on Senior Securities............ Not Applicable
12. Legal Proceedings.................................... Not Applicable
13. Table of Contents of the Statement
of Additional Information.......................... Not Applicable
14. Cover Page........................................... Not Applicable
15. Table of Contents.................................... Not Applicable
16. General Information and History...................... The Trust
17. Investment Objective and Policies.................... Investment Objective and Policies
18. Management........................................... Management and Administration of the Trust
19. Control Persons and Principal Holders of
Securities......................................... Management and Administration of the Trust
20. Investment Advisory and Other Services............... Management and Administration of the Trust
21. Brokerage Allocation and Other Practices............. Investment Objective and Policies
22. Tax Status........................................... Certain Federal Income Tax Considerations
23. Financial Statements................................. Statement of Assets and Liabilities
</TABLE>
- ---------------
* Pursuant to the General Instructions to Form N-2, all information required to
be set forth in Part B: Statement of Additional Information has been included
in Part A: The Prospectus. Information required to be included in Part C is
set forth under the appropriate item so numbered in Part C of this
Registration Statement.
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAW OF
ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY 29, 1997
8,700,000 SHARES
AUTOMATIC COMMON EXCHANGE SECURITY TRUST II
(EXCHANGEABLE INTO COMMON STOCK OF
REPUBLIC INDUSTRIES, INC.)
$ TRUST AUTOMATIC COMMON EXCHANGE SECURITIES (TRACES(TM)/(SM))
---------------------
Each of the $ . Trust Automatic Common Exchange Securities (the
"Securities") of Automatic Common Exchange Security Trust II (the "Trust")
represents the right to receive an annual distribution of $ . , and will
be exchanged for between 0. shares and one share of common stock, par value
$0.01 per share (the "Common Stock"), of Republic Industries, Inc., a Delaware
corporation (the "Company"), on , 2000 (the "Exchange Date").
The Trust is a newly organized, finite-term Trust established to acquire and
hold a portfolio of stripped U.S. Treasury securities maturing on a quarterly
basis through the Exchange Date, and forward purchase contracts (the
"Contracts") with one or more existing shareholders of the Company (the
"Sellers") relating to the Common Stock. The Trust's investment objective is to
provide each holder of Securities with a quarterly distribution of $ . per
Security and, on the Exchange Date, a number of shares of Common Stock per
Security equal to the Exchange Rate. The Exchange Rate is equal to (i) if the
Current Market Price (as defined herein) on the Exchange Date is less than
$ . (the "Appreciation Threshold Price") but equal to or greater than
$ . (the "Initial Price"), a number (or fractional number) of shares of
Common Stock per Security having a value (determined at such Current Market
Price) equal to the Initial Price, (ii) if such Current Market Price is equal to
or greater than the Appreciation Threshold Price, 0. shares of Common Stock
per Security and (iii) if such Current Market Price is less than the Initial
Price, one share of Common Stock per Security, subject in each case to
adjustment in certain events. In lieu of delivering Common Stock, each Contract
entitles the Seller thereunder to elect to pay cash upon settlement of such
Contract in an amount equal to the then Current Market Price of the number of
shares of Common Stock determined pursuant to the above formula (the "Cash
Settlement Alternative"). To the extent the Sellers elect the Cash Settlement
Alternative, holders of Securities will receive cash instead of Common Stock
upon settlement of the Contracts. Holders otherwise entitled to receive
fractional shares in respect of their aggregate holdings of Securities will
receive cash in lieu thereof.
Holders of Securities will receive quarterly distributions. The Company
currently does not pay dividends on the Common Stock. There is no assurance,
however, that the yield on the Securities will be higher than the dividend yield
on the Common Stock over the term of the Trust. In addition, the opportunity for
equity appreciation afforded by an investment in the Securities is less than
that afforded by an investment in the Common Stock because holders of Securities
will realize no equity appreciation if, on the Exchange Date, the Current Market
Price of the Common Stock is below the Appreciation Threshold Price, and less
than all of the appreciation if at that time the Current Market Price is above
the Appreciation Threshold Price. Holders of Securities will realize the entire
decline in equity value if the Current Market Price is less than the price to
public per Security shown below.
The Company is not affiliated with the Trust.
The Securities have been approved for listing, subject to notice of
issuance, on the New York Stock Exchange under the symbol "RTR". Prior to this
offering there has been no public market for the Securities. The Common Stock is
traded on The Nasdaq Market -- National Market ("Nasdaq") under the symbol
"RWIN". The last reported sale price of the Common Stock on Nasdaq on May 28,
1997, was $24.25 per share.
(continued on next page)
SEE "RISK FACTORS" ON PAGE 17 OF THIS PROSPECTUS FOR A DISCUSSION OF
CERTAIN FACTORS RELEVANT TO AN INVESTMENT IN THE SECURITIES.
---------------------
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.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
<TABLE>
<CAPTION>
PRICE TO PUBLIC SALES LOAD(1) PROCEEDS TO THE TRUST(2)
------------------- ------------------- ----------------------------
<S> <C> <C> <C>
Per Security................................. $ $ (4) $
Total(3)..................................... $ $ (4) $
</TABLE>
- ---------------
(1) The Company and the Sellers have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933. See "Underwriting".
(2) Before deducting estimated expenses of $ , payable by Goldman, Sachs
& Co. and the Sellers.
(3) The Trust has granted to the Underwriters an option for 30 days to purchase
up to an additional 1,234,235 Securities at the price to the public per
Security, solely to cover over-allotments, if any. If the option is
exercised in full, the total Price to Public, Sales Load and Proceeds to the
Trust will be $ , $ and $ , respectively. See
"Underwriting".
(4) In light of the fact that the proceeds of the sale of the Securities will be
used in part by the Trust to purchase the Contracts from the Sellers, the
Underwriting Agreement provides that the Sellers will pay to the
Underwriters as compensation ("Underwriters' Compensation") $ . per
Security. See "Underwriting".
---------------------
The Securities offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that certificates
for the Securities will be ready for delivery in book entry form only through
the facilities of DTC, on or about , 1997, against payment therefor
in immediately available funds.
GOLDMAN, SACHS & CO.
---------------------
The date of this Prospectus is , 1997.
<PAGE> 4
The Trust has adopted a policy that the Contracts may not be disposed of
during the term of the Trust. The Trust will continue to hold the Contracts
despite any significant decline in the market price of the Common Stock or
adverse changes in the financial condition of the Company.
This Prospectus sets forth concisely information about the Trust that a
prospective investor ought to know before investing. Potential investors are
advised to read this Prospectus and to retain it for future reference.
The Securities may be a suitable investment for those investors who are
able to understand the unique nature of the Trust and the economic
characteristics of the Contracts and the U.S. Treasury securities held by the
Trust.
The Trust will be a grantor trust for federal income tax purposes and each
holder of Securities will be treated as the owner of its pro rata portions of
the stripped U.S. Treasury securities and the Contracts. For a discussion of the
principal United States federal income tax consequences of ownership of
Securities, see "Certain Federal Income Tax Considerations".
THE TRUST IS A NEWLY ORGANIZED CLOSED-END INVESTMENT COMPANY WITH NO
PREVIOUS HISTORY OF PUBLIC TRADING. TYPICAL CLOSED-END FUND SHARES FREQUENTLY
TRADE AT A DISCOUNT FROM NET ASSET VALUE. THIS CHARACTERISTIC OF INVESTMENTS IN
A CLOSED-END INVESTMENT COMPANY IS A RISK SEPARATE AND DISTINCT FROM THE RISK
THAT THE TRUST'S NET ASSET VALUE WILL DECREASE. THE TRUST CANNOT PREDICT WHETHER
ITS SHARES WILL TRADE AT, BELOW OR ABOVE NET ASSET VALUE. THE RISK OF PURCHASING
INVESTMENTS IN A CLOSED-END COMPANY THAT MIGHT TRADE AT A DISCOUNT MAY BE
GREATER FOR INVESTORS WHO WISH TO SELL THEIR INVESTMENTS SOON AFTER COMPLETION
OF AN INITIAL PUBLIC OFFERING.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES OR THE
COMMON STOCK, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING
TRANSACTIONS IN SUCH SECURITIES OR THE COMMON STOCK, AND THE IMPOSITION OF A
PENALTY BID, DURING AND AFTER THE OFFERING. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING".
2
<PAGE> 5
PROSPECTUS SUMMARY
This summary of the provisions relating to the Securities does not purport
to be complete and is qualified in its entirety by the detailed information
appearing elsewhere in this Prospectus. Certain terms used in this summary are
defined elsewhere in this Prospectus.
THE TRUST
GENERAL. The Trust is a newly organized, finite-term trust. The Trust will
be registered as a non-diversified closed-end management investment company
under the Investment Company Act of 1940 (the "Investment Company Act"). Under
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
applicable to grantor trusts, the Trustees will not have the power to vary the
investments held by the Trust.
INVESTMENT OBJECTIVE AND POLICIES. The Trust will acquire and hold a
portfolio of stripped U.S. Treasury securities maturing on a quarterly basis
through the Exchange Date, and the Contracts with the Sellers obligating each
Seller, on the Exchange Date, to deliver to the Trust a number of shares of
Common Stock equal to the product of the Exchange Rate times the initial number
of shares subject to such Seller's Contract (or an amount of cash equal to the
Current Market Price thereof). The Trust's investment objective is to provide
the holders of Securities ("Holders") with a quarterly distribution of $ per
Security (which amount equals the pro rata portion of the fixed quarterly cash
distributions from the proceeds of the maturing U.S. Treasury securities held by
the Trust) and, on the Exchange Date, a number of shares of Common Stock per
Security equal to the Exchange Rate (or to the extent the Sellers select the
Cash Settlement Alternative, an amount in cash equal to the Current Market Price
thereof). The Exchange Rate is equal to (i) if the Current Market Price on the
Exchange Date is less than the Appreciation Threshold Price but equal to or
greater than the Initial Price, a number (or fractional number) of shares of
Common Stock per Security having a value (determined at such Current Market
Price) equal to the Initial Price, (ii) if such Current Market Price is equal to
or greater than the Appreciation Threshold Price, 0. shares of Common Stock
per Security and (iii) if such Current Market Price is less than the Initial
Price, one share of Common Stock per Security, subject in each case to
adjustment in certain events. This provides the Trust with the potential for a
portion of any capital appreciation above the Appreciation Threshold Price on
the Common Stock, but no protection from depreciation of the Common Stock.
Holders otherwise entitled to receive fractional shares in respect of their
aggregate holdings of Securities will receive cash in lieu thereof. See
"Investment Objective and Policies -- Trust Termination".
STRUCTURE. The purchase price under the Contracts is equal to $
per share of Common Stock initially subject thereto and $ ( shares
of Common Stock) in the aggregate (exclusive of the over-allotment option) and
is payable to the Sellers by the Trust at the closing of the offering of the
Securities. The obligations of the Sellers under the Contracts will be secured
by a pledge of the Common Stock (or at the election of the Sellers, by
substitute collateral consisting of short-term, direct obligations of the U.S.
Government). See "Investment Objective and Policies -- The
Contracts -- Collateral Arrangements; Acceleration".
THE OFFERING
The Trust is offering 8,700,000 Securities to the public at a purchase
price of $ per Security (which is equal to the last reported sale price
of the Common Stock on the date of the offering) through Goldman, Sachs & Co.
("Goldman Sachs" or the "Underwriters"). In addition, the Underwriters have been
granted options to purchase up to 1,234,235 additional Securities solely for the
purpose of covering over-allotments. See "Underwriting".
THE SECURITIES
GENERAL. The Securities are designed to provide investors with an annual
distribution of $ per Security. The Company does not currently pay
dividends on the Common Stock. Future declarations
3
<PAGE> 6
of dividends on the Common Stock by the Company and the amount of such dividends
are discretionary with its Board of Directors and subject to legal and other
factors. Such further declarations will necessarily depend on the Company's
future earnings, financial condition, capital requirements and other factors.
Quarterly distributions on the Securities will consist solely of the cash
received from the U.S. Treasury securities. The Trust will not be entitled to
any dividends that may be declared on the Common Stock.
Holders will receive quarterly distributions. The Company currently does
not pay dividends on the Common Stock. There is no assurance, however, that the
yield on the Securities will be higher than the dividend yield on the Common
Stock over the term of the Trust. In addition, the opportunity for equity
appreciation afforded by an investment in the Securities is less than that
afforded by an investment in the Common Stock because Holders will realize no
equity appreciation if, on the Exchange Date, the Current Market Price of the
Common Stock is below the Appreciation Threshold Price (which represents an
appreciation of % of the Initial Price). Moreover, because a Holder will
only receive 0. shares of Common Stock per Security (or the Current Market
Price thereof) if the Current Market Price exceeds the Appreciation Threshold
Price, Holders will only be entitled to receive upon exchange % of any
appreciation of the value of the Common Stock in excess of the Appreciation
Threshold Price. Holders of Securities will realize the entire decline in equity
value if the Current Market Price on the Exchange Date is less than the price to
public per Security shown on the cover page hereof.
DISTRIBUTIONS. Holders are entitled to receive distributions at the rate
per Security of $ per annum or $ per quarter, payable
quarterly on each , , and or, if any such date is not a
business day, on the next succeeding business day, to Holders of record as of
each , , and , respectively. The first distribution
will be payable on , 1997 to Holders of record as of ,
1997. See "Investment Objective and Policies -- General".
MANDATORY EXCHANGE. On the Exchange Date, each outstanding Security will
be exchanged automatically for between 0. shares and one share of Common
Stock, subject to adjustment in the event of certain dividends or distributions,
subdivisions, splits, combinations, issuances of certain rights or warrants or
distributions of certain assets with respect to the Common Stock. In lieu of
delivering Common Stock, each Contract entitles the Seller thereunder to elect
to pay cash upon settlement of such Contract in an amount equal to the then
Current Market Price of the number of shares of Common Stock determined pursuant
to the above formula (the "Cash Settlement Alternative"). To the extent the
Sellers elect the Cash Settlement Alternative, holders of Securities will
receive cash instead of Common Stock on the Exchange Date. The Trustees will
notify the Holders of any election of the Cash Settlement Alternative by the
Sellers not less than 30 days nor more than 60 days prior to the Exchange Date.
The "Current Market Price" on any date means the average Closing Price per share
of Common Stock for the 20 Trading Days immediately prior to, but not including,
such date.
In addition, in the event of a merger of the Company into another entity,
or the liquidation of the Company, or certain related events, Holders would
receive consideration in the form of cash or Marketable Securities (as defined
below under the caption "Investment Objective and Policies -- The
Contracts -- Dilution Adjustments") rather than shares of Common Stock. Further,
the occurrence of certain defaults by the Sellers under the Contracts or the
collateral arrangements would cause the acceleration of the Contracts and the
exchange of each Security for an amount of shares of Common Stock (or Marketable
Securities), cash, or a combination thereof, in respect of the shares of Common
Stock and the U.S. Treasury Securities. See "Investment Objective and
Policies -- The Contracts -- Collateral Arrangements; Acceleration"; "-- The
U.S. Treasury Securities" and "-- Trust Termination".
VOTING RIGHTS. Holders will have the right to vote on matters affecting
the Trust, as described below under the caption "Description of the Securities",
but will have no voting rights with respect to the Common Stock prior to receipt
of shares of Common Stock by the Holders as a result of the exchange of the
Securities for the Common Stock on the Exchange Date. See "Investment Objective
and Policies -- The Company" and "Description of the Securities".
4
<PAGE> 7
THE COMPANY
The Company is a diversified holding company with subsidiaries operating in
the solid waste services, electronic security services, automotive rental and
automotive retailing industries. The Company is aggressively building its
existing lines of business through internal growth and acquisitions. The Company
is actively negotiating to acquire additional companies in its existing and
complementary lines of business.
Reference is made to the accompanying prospectus of the Company (pages A-1
through A-13 hereto) and the prospectus supplement thereto (pages S-1 to S-2
hereto) which describe the Company and the shares of Common Stock of the Company
deliverable to the Holders upon mandatory exchange of the Securities on the
Exchange Date. The Company is not affiliated with the Trust and will not receive
any of the proceeds from the sale of the Securities. The Company prospectus, as
supplemented, relates to an aggregate of up to 8,700,000 shares of Common Stock
(plus up to an additional 1,234,235 shares that may be delivered upon exercise
of the Underwriters' over-allotment option).
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The Trust will be treated as a grantor trust for federal income tax
purposes. Accordingly, each Holder will be treated for federal income tax
purposes as the owner of its pro rata portion of the U.S. Treasury securities
and the Contracts, and income received (including original issue discount
treated as received) by the Trust will generally be treated as income of the
Holders. The U.S. Treasury securities will be treated for federal income tax
purposes as having "original issue discount" that will accrue over the term of
such U.S. Treasury securities. Actual receipts of cash in respect of U.S.
Treasury securities will not be included in income, however, but rather will
reduce the aggregate tax basis of the Securities. A holder will have taxable
gain or loss upon receipt of cash in lieu of Common Stock distributed upon
termination of the Trust. Holders should also be aware that there are
alternative characterizations of the assets of the Trust and the Securities
which could require Holders to include more interest in income than they would
include in income under the analysis set out above. See "Certain Federal Income
Tax Considerations".
MANAGEMENT AND ADMINISTRATION OF THE TRUST
The Trust will be internally managed and will not have an investment
adviser. The administration of the Trust will be overseen by three Trustees. The
day-to-day administration of the Trust will be carried out by The Bank of New
York (or its successor) as trust administrator (the "Administrator"). The Bank
of New York (or its successor) will also act as custodian (the "Custodian") for
the Trust's assets and as paying agent (the "Paying Agent"), registrar and
transfer agent with respect to the Securities. Except as aforesaid, The Bank of
New York has no other affiliation with, and is not engaged in any other
transaction with, the Trust. See "Management and Administration of the Trust".
LIFE OF THE TRUST
The Trust will terminate automatically on or shortly after the Exchange
Date. Promptly after the Exchange Date the shares of Common Stock or cash, as
the case may be, to be exchanged for the Securities and other remaining Trust
assets, if any, will be distributed pro rata to Holders. See "Investment
Objective and Policies -- Trust Termination".
RISK FACTORS
The Trust will not be managed in the traditional sense. The Trust has
adopted a policy that the Contracts may not be disposed of during the term of
the Trust and that the U.S. Treasury securities held by the Trust may not be
disposed of prior to the earlier of their respective maturities and the
termination of the Trust. The Trust will continue to hold the Contracts despite
any significant decline in the market price of the Common Stock or adverse
changes in the financial condition of the Company. See "Risk Factors -- Internal
Management; No Portfolio Management" and "Management and Administration of the
Trust -- Trustees".
5
<PAGE> 8
Holders will receive quarterly distributions. The Company currently does
not pay dividends on the Common Stock. There is no assurance, however, that the
yield on the Securities will be higher than the dividend yield on the Common
Stock over the term of the Trust. In addition, the opportunity for equity
appreciation afforded by an investment in the Securities is less than that
afforded by an investment in the Common Stock because Holders will realize no
equity appreciation if, on the Exchange Date, the Current Market Price of the
Common Stock is below the Appreciation Threshold Price (which represents an
appreciation of % of the Initial Price). Moreover, because a Holder will
only receive 0. shares of Common Stock per Security (or the Current Market
Price thereof) if the Current Market Price exceeds the Appreciation Threshold
Price, Holders will only be entitled to receive upon exchange % of any
appreciation of the value of the Common Stock in excess of the Appreciation
Threshold Price. Holders of Securities will realize the entire decline in equity
value if the Current Market Price on the Exchange Date is less than the price to
public per Security shown on the cover page hereof.
The Trust is classified as a "non-diversified" investment company under the
Investment Company Act. Consequently, the Trust is not limited by the Investment
Company Act in the proportion of its assets that may be invested in the
securities of a single issuer. Since the only assets held by the Trust will be
the U.S. Treasury securities and the Contracts, the Trust will be subject to
greater risk than would be the case for an investment company with diversified
investments. See "Investment Objective and Policies" and "Risk
Factors -- Non-Diversified Status".
The trading prices of the Securities in the secondary market will be
directly affected by the trading prices of the Common Stock in the secondary
market. Trading prices of Common Stock will be influenced by the Company's
operating results and prospects and by economic, financial and other factors and
market conditions.
Holders of the Securities will not be entitled to any rights with respect
to the Common Stock (including, without limitation, voting rights and rights to
receive any dividends or other distributions in respect thereof) unless and
until such time, if any, as the Sellers shall have delivered shares of Common
Stock pursuant to the Contracts.
A bankruptcy of a Seller could adversely affect the timing of exchange or,
as a result, the amount received by the Holders in respect of the Securities.
See "Risk Factors -- Risk Relating to Bankruptcy of the Sellers".
LISTING
The Securities have been approved for listing, subject to notice of
issuance, on the New York Stock Exchange (the "NYSE") under the symbol "RTR".
FEES AND EXPENSES
In light of the fact that the proceeds of the sale of the Securities will
be used in part by the Trust to purchase the Contracts from the Sellers, the
Underwriting Agreement provides that the Sellers will pay Underwriters'
Compensation to the Underwriters of $ per Security. See "Underwriting".
Estimated organization costs of the Trust in the amount of $10,000 and estimated
costs of the Trust in connection with the initial registration and public
offering of the Securities in the amount of $164,301 will be paid by Goldman
Sachs. Other estimated costs of the Trust in connection with the public offering
of the Securities in the amount of $275,699 will be paid by the Sellers. Each of
the Administrator, the Custodian and the Paying Agent, and each Trustee will be
paid by Goldman Sachs at the closing of the offering of the Securities a
one-time, up-front amount in respect of its ongoing fees and, in the case of the
Administrator, anticipated expenses of the Trust (estimated to be $300,000 in
the aggregate), over the term of the Trust. Goldman Sachs has agreed to pay any
ongoing expenses of the Trust in excess of these estimated amounts and to
reimburse the Trust for any amounts it may be required to pay as indemnification
to any Trustee, the Administrator, the Custodian or the Paying Agent. See
"Management and Administration of the Trust -- Estimated Expenses".
6
<PAGE> 9
Regulations of the Securities and Exchange Commission ("SEC") applicable to
closed-end investment companies designed to assist investors in understanding
the costs and expenses that an investor will bear directly or indirectly require
the presentation of Trust expenses in the following format. Because the Trust
will not bear any fees or expenses, investors will not bear any direct expenses.
The only expenses that an investor might be considered to be bearing indirectly
are (i) the Underwriters' Compensation payable by the Sellers with respect to
such investor's Securities and (ii) the ongoing expenses of the Trust (including
fees of the Administrator, Custodian, Paying Agent and Trustees), estimated at
$100,000 per year, payable by Goldman Sachs at the closing of the offering. See
"Investment Objective and Policies -- General".
INVESTOR TRANSACTION EXPENSES
<TABLE>
<S> <C>
Sales Load (as a percentage of offering price).............. %
Dividend Reinvestment and Cash Purchase Plan Fees........... N/A
</TABLE>
ANNUAL EXPENSES
<TABLE>
<S> <C>
Management Fees............................................. 0%
Other Expenses (after reimbursement by Goldman Sachs)*...... %
---
Total Annual Expenses (after reimbursement by
Goldman Sachs)*.................................. %
===
</TABLE>
- ---------------
* Absent the reimbursement, the Trust's "total annual expenses" would be equal
to approximately % of the Trust's average net assets. Goldman Sachs is
paying expenses on behalf of the Trust out of its normal underwriting
compensation.
SEC regulations also require that closed-end investment companies present
an illustration of cumulative expenses (both direct and indirect) that an
investor would bear. The example is required to factor in the applicable Sales
Load and to assume, in addition to a 5% annual return, the reinvestment of all
distributions at net asset value. INVESTORS SHOULD NOTE THAT THE ASSUMPTION OF A
5% ANNUAL RETURN DOES NOT ACCURATELY REFLECT THE FINANCIAL TERMS OF THE TRUST.
SEE "INVESTMENT OBJECTIVE AND POLICIES -- GENERAL". ADDITIONALLY, THE TRUST DOES
NOT PERMIT THE REINVESTMENT OF DISTRIBUTIONS.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
EXAMPLE
You would bear the following expenses (i.e., the
applicable sales load and allocable portion of ongoing
expenses paid by Goldman Sachs and the Sellers) on a
$1,000 investment, assuming a 5% annual return......... $ $
</TABLE>
7
<PAGE> 10
THE TRUST
The Trust is a newly organized New York trust and is registered as a
closed-end investment company under the Investment Company Act. The Trust was
formed on February 21, 1997 pursuant to a trust agreement dated as of such date
and amended and restated as of May , 1997 (the "Amended and Restated Trust
Agreement"). The address of the Trust is 85 Broad Street, New York, New York
10004 (telephone no. (212) 902-1000).
USE OF PROCEEDS
The net proceeds of this offering will be used immediately upon the closing
of this offering to purchase a fixed portfolio comprised of stripped U.S.
Treasury securities with face amounts and maturities corresponding to the
quarterly distributions payable with respect to the Securities and the payment
dates thereof, and to pay the purchase price under the Contracts to the Sellers.
INVESTMENT OBJECTIVE AND POLICIES
GENERAL
The Trust will acquire and hold a portfolio of stripped U.S. Treasury
securities maturing on a quarterly basis through the Exchange Date and the
Contracts relating to the Common Stock of the Company. The Trust's investment
objective is to provide each Holder with a quarterly cash distribution of
$ per Security (which amount equals the pro rata portion of the fixed
quarterly distributions from the proceeds of the maturing U.S. Treasury
securities held by the Trust) and, on the Exchange Date, a number of shares of
Common Stock per Security equal to the Exchange Rate (or to the extent the
Sellers select the Cash Settlement Alternative, an amount in cash equal to the
Current Market Price thereof). The Exchange Rate is equal to (i) if the Current
Market Price on the Exchange Date is less than the Appreciation Threshold Price
but equal to or greater than the Initial Price, a number (or fractional number)
of shares of Common Stock per Security equal to the Initial Price divided by
such Current Market Price (i.e., the value of such shares of Common Stock
(determined at such Current Market Price) shall equal the Initial Price), (ii)
if such Current Market Price is equal to or greater than the Appreciation
Threshold Price, 0. shares of Common Stock per Security and (iii) if such
Current Market Price is less than the Initial Price, one share of Common Stock
per Security, subject in each case to adjustment in certain events. See "-- The
Contracts -- Dilution Adjustments". For purposes of the preceding clause (i) the
Exchange Rate will be rounded upward or downward to the nearest 1/10,000 (or if
there is not a nearest 1/10,000, to the next lower 1/10,000). Holders otherwise
entitled to receive fractional shares in respect of their aggregate holdings of
Securities will receive cash in lieu thereof. See "-- Trust Termination". The
Current Market Price per share of Common Stock on any date means the average
Closing Price (as defined below) of a share of Common Stock on the 20 Trading
Days (as defined below) immediately prior to but not including such date. The
Closing Price of the Common Stock on any date of determination means the daily
closing sale price (or, if no closing sale price is reported, the last reported
sale price) of the Common Stock as reported by The Nasdaq National Market on
such date of determination or, if the Common Stock is not traded on The Nasdaq
National Market on any such date, as reported in the composite transactions for
the principal United States securities exchange on which the Common Stock is so
listed, or if the Common Stock is not so listed on a United States national or
regional securities exchange, the last quoted bid price for the Common Stock in
the over-the-counter market as reported by the National Quotation Bureau or
similar organization, provided that if any event that results in an adjustment
to the number of shares of Common Stock deliverable under the Contracts as
described under "-- The Contracts -- Dilution Adjustments" occurs prior to the
Exchange Date, the Closing Price as determined pursuant to the foregoing will be
appropriately adjusted to reflect the occurrence of such event. A "Trading Day"
means a day on which the Common Stock (A) is not suspended from trading on any
national or regional securities exchange or association or over-the-counter
market at the close of
8
<PAGE> 11
business and (B) has traded at least once on the national or regional securities
exchange or association or over-the-counter market that is the primary market
for the trading of such security.
A fundamental policy of the Trust is to invest at least % of its total
assets in the Contracts. The Trust has also adopted a fundamental policy that
the Contracts may not be disposed of during the term of the Trust and that the
U.S. Treasury securities held by the Trust may not be disposed of prior to the
earlier of their respective maturities and the termination of the Trust. The
foregoing investment objective and policies are fundamental policies of the
Trust that may not be changed without the approval of a majority of the Trust's
outstanding Securities. A "majority of the Trust's outstanding Securities" means
the lesser of (i) 67% of the Securities represented at a meeting at which more
than 50% of the outstanding Securities are represented, and (ii) more than 50%
of the outstanding Securities.
The value of the Common Stock (or cash or Marketable Securities received in
lieu thereof) that will be received by Holders in respect of the Securities on
the Exchange Date may be more or less than the amount paid for the Securities
offered hereby.
For illustrative purposes only, the following chart shows the number of
shares of Common Stock that a Holder would receive for each Security at various
Current Market Prices. The chart assumes that there would be no adjustments to
the number of shares of Common Stock deliverable under the Contracts by reason
of the occurrence of any of the events described under "-- The
Contracts -- Dilution Adjustments". There can be no assurance that the Current
Market Price on the Exchange Date will be within the range set forth below.
Given the Initial Price of $ per Security and the Appreciation
Threshold Price of $ , a Holder would receive in connection with the
exchange of Securities on the Exchange Date the following number of shares of
Common Stock:
<TABLE>
<CAPTION>
CURRENT MARKET PRICE NUMBER OF SHARES
OF COMMON STOCK OF COMMON STOCK
- -------------------- ----------------
<C> <C>
</TABLE>
The following table sets forth information regarding the distributions to
be received on the U.S. Treasuries to be acquired by the Trust with a portion of
the proceeds of the Offering (assuming no exercise of the Underwriters'
over-allotment option), the portion of each year's distributions that will
constitute a return of capital for U.S. federal income tax purposes and the
amount of original issue discount accruing (assuming a yield-to-maturity accrual
election in respect of any short-term U.S. Treasury securities) on such U.S.
Treasuries with respect to a Holder who acquires its Securities at the issue
price from an Underwriter pursuant to the original offering. See "Certain
Federal Income Tax Considerations -- Recognition of Interest on the U.S.
Treasury Securities".
<TABLE>
<CAPTION>
ANNUAL GROSS
ANNUAL GROSS DISTRIBUTIONS FROM ANNUAL RETURN OF ANNUAL INCLUSION OF
DISTRIBUTIONS FROM U.S. TREASURIES CAPITAL PER ORIGINAL ISSUE DISCOUNT
YEAR U.S. TREASURIES PER SECURITY SECURITY IN INCOME PER SECURITY
- ---- ------------------ ------------------ ---------------- -----------------------
<S> <C> <C> <C> <C>
1997...................... $ $ $ $
1998......................
1999......................
2000......................
</TABLE>
The annual distribution of $ per Security is payable quarterly on each
, , and , commencing , 1997. Quarterly
distributions on the Securities will consist solely of the cash received from
the U.S. Treasury securities. The Trust will not be entitled to any dividends
that may be declared on the Common Stock. See "Management and Administration of
the Trust -- Distributions".
9
<PAGE> 12
CURRENT YIELD; LESS EQUITY APPRECIATION THAN COMMON STOCK; NO DEPRECIATION
PROTECTION
Holders will receive quarterly distributions, while the Company currently
does not pay dividends on the Common Stock. However, there is no assurance that
the yield on the Securities will be higher than the dividend yield on the Common
Stock over the term of the Trust. In addition, the opportunity for equity
appreciation afforded by an investment in the Securities is less than that
afforded by an investment in the Common Stock because Holders will realize no
equity appreciation if, on the Exchange Date, the Current Market Price of the
Common Stock is below the Appreciation Threshold Price (which represents an
appreciation of % of the Initial Price). Moreover, because Holders will
only receive 0. shares of Common Stock per Security (or the Current Market
Price thereof) if the Current Market Price exceeds the Appreciation Threshold
Price, Holders will only be entitled to receive upon exchange % (the
percentage equal to the Initial Price divided by the Appreciation Threshold
Price) of any appreciation of the value of the Common Stock in excess of the
Appreciation Threshold Price. Holders of Securities will realize the entire
decline in value if the Current Market Price on the Exchange Date is less than
the price to public per Security shown on the cover page hereof.
THE COMPANY
The Company is a diversified holding company with subsidiaries operating in
the automotive retailing, automotive rental, automotive financial services,
solid waste services, and electronic security services industries. The Company
owns the nation's largest chain of new vehicle dealerships and is building a
chain of used vehicle megastores which it operates under the AutoNation USA
brand name. The Company also owns National Car Rental System, Inc., Alamo
Rent-A-Car, Inc., and Spirit Rent-A-Car, Inc., as well as some of the country's
leading solid waste services and electronic security services companies, which
operate under their regionally known business names. The Company is aggressively
building its existing lines of business through internal growth and
acquisitions. The Company is actively negotiating to acquire additional
companies in its existing and complementary lines of business.
The shares of Common Stock are traded on Nasdaq under the symbol "RWIN".
The following table sets forth, for the calendar quarters indicated, the
reported high and low sales prices of the shares of Common Stock on Nasdaq. In
May 1996, the Company declared a two-for-one stock split in the form of a 100%
stock dividend, which was distributed in June 1996 (the "Stock Split"). All
prices presented herein have been adjusted to reflect the Stock Split. Since
December 1989, the Company has not declared or paid any cash dividends on Common
Stock. As of May 21, 1997, there were 4,822 record holders of the Common Stock,
including The Depository Trust Company, which holds shares of Common Stock on
behalf of an indeterminate number of beneficial owners.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C> <C> <C>
1995
1st Quarter............................................... $ 2 1/8 $ 1 9/16
2nd Quarter............................................... 7 3/16 1 1/2
3rd Quarter............................................... 13 3/8 6 7/16
4th Quarter............................................... 18 1/16 9 15/16
1996
1st Quarter............................................... 17 15/16 13 3/16
2nd Quarter............................................... 34 1/8 15
3rd Quarter............................................... 31 19 1/4
4th Quarter............................................... 34 5/8 27 3/8
1997
1st Quarter............................................... 42 3/4 29 15/16
2nd Quarter (through May 28, 1997)........................ 31 11/16 23 3/8
</TABLE>
Holders will not be entitled to rights with respect to the Common Stock
(including, without limitation, voting rights and rights to receive dividends or
other distributions in respect thereof) until receipt of
10
<PAGE> 13
shares of Common Stock by the Holders as a result of the exchange of the
Securities for the Common Stock on the Exchange Date.
Reference is made to the accompanying prospectus of the Company, dated
March 20, 1997 (pages A-1 through A-13 hereto), and the prospectus supplement
thereto, dated May 22, 1997 (pages S-1 to S-2 hereto), which describe the
Company and the shares of Common Stock deliverable to the Holders upon mandatory
exchange of the Securities on the Exchange Date. The Company is not affiliated
with the Trust and will not receive any of the proceeds from the sale of the
Securities. The Company prospectus, as supplemented, relates to an aggregate of
up to 8,700,000 shares of Common Stock (plus up to an additional 1,234,235
shares that may be delivered upon exercise of the Underwriters' over-allotment
option).
THE CONTRACTS
GENERAL. The Trust will enter into a Contract with each Seller obligating
that Seller to deliver to the Trust on the Exchange Date a number of shares of
Common Stock equal to the product of the Exchange Rate times the initial number
of shares of Common Stock subject to such Contract. The aggregate initial number
of shares of Common Stock under the Contracts will equal the aggregate number of
Securities offered hereby (subject to increase in the event the Underwriters
exercise their over-allotment option). Each Contract also provides that the
Seller thereunder may deliver to the Trust upon settlement of such Contract, at
such Seller's option, an amount of cash equal to the value of the Common Stock
deliverable pursuant to such Contract (the "Cash Settlement Alternative"). If a
Seller elects to deliver cash in lieu of shares of Common Stock, such Seller
would be required to deliver cash in respect of all shares deliverable pursuant
to such Seller's Contract. The Trustees will notify the Holders of any election
of the Cash Settlement Alternative by the Sellers not less than 30 days nor more
than 60 days prior to the Exchange Date.
The purchase price of the Contracts was arrived at by arm's-length
negotiation between the Trust and the Sellers taking into consideration factors
including the price, expected dividend level and volatility of the Common Stock,
current interest rates, the term of the Contracts, current market volatility
generally, the collateral security pledged by the Sellers, the value of other
similar instruments and the costs and anticipated proceeds of the offering of
the Securities. All matters relating to the administration of the Contracts will
be the responsibility of either the Administrator or the Custodian.
DILUTION ADJUSTMENTS. The Exchange Rate is subject to adjustment if the
Company shall (i) pay a stock dividend or make a distribution with respect to
the Common Stock in shares of such stock, (ii) subdivide or split its
outstanding shares of Common Stock, (iii) combine its outstanding shares of
Common Stock into a smaller number of shares, or (iv) issue by reclassification
of its shares of Common Stock any shares of other common stock of the Company.
In any such event, the Exchange Rate shall be multiplied by a dilution
adjustment equal to the number of shares of Common Stock (or, in the case of a
reclassification referred to in clause (iv) above, the number of shares of other
common stock of the Company issued pursuant thereto), or fraction thereof, that
a shareholder who held one share of Common Stock immediately prior to such event
would be entitled solely by reason of such event to hold immediately after such
event.
In addition, if the Company shall issue rights or warrants to all holders
of Common Stock entitling them to subscribe for or purchase shares of Common
Stock at a price per share less than the Then-Current Market Price of the Common
Stock (as defined below) (other than rights to purchase Common Stock pursuant to
a plan for the reinvestment of dividends or interest) then the Exchange Rate
shall be multiplied by a dilution adjustment equal to a fraction, of which the
numerator shall be the number of shares of Common Stock outstanding immediately
prior to the time (determined as described below) the adjustment is calculated
by reason of the issuance of such rights or warrants plus the number of
additional shares offered for subscription or purchase pursuant to such rights
or warrants, and of which the denominator shall be the number of shares of
Common Stock outstanding immediately prior to the time such adjustment is
calculated plus the number of additional shares that the aggregate offering
price
11
<PAGE> 14
of the shares so offered for subscription or purchase would purchase at the
Then-Current Market Price. To the extent that, after expiration of such rights
or warrants, the shares offered thereby shall not have been delivered, the
Exchange Rate shall be further adjusted to equal the Exchange Rate that would
have been in effect had the foregoing adjustment been made upon the basis of
delivery of only the number of shares of Common Stock actually delivered. The
"Then-Current Market Price" of the Common Stock means the average Closing Price
per share of Common Stock for a Calculation Period of five Trading Days
immediately prior to the time such adjustment is calculated (or, in the case of
an adjustment calculated at the opening of business on the business day
following a record date, as described below, immediately prior to the earlier of
the time such adjustment is calculated and the related "ex-date" on which the
shares of Common Stock first trade regular way on their principal market without
the right to receive the relevant dividend, distribution or issuance); provided
that if no Closing Price for the Common Stock is determined for one or more (but
not all) of such Trading Days, such Trading Day shall be disregarded in the
calculation of the Then-Current Market Price (but no additional Trading Days
shall be added to the Calculation Period). If no Closing Price for the Common
Stock is determined for any of such Trading Days, the most recently available
Closing Price for the Common Stock prior to such five Trading Days shall be the
Then-Current Market Price.
Further, if the Company shall pay a dividend or make a distribution to all
holders of Common Stock, in either case, of evidences of its indebtedness or
other non-cash assets (excluding any stock dividends or distributions in shares
of Common Stock) or issue to all holders of Common Stock rights or warrants to
subscribe for or purchase any of its securities (other than rights or warrants
referred to in the previous paragraph), then the Exchange Rate shall be
multiplied by a dilution adjustment equal to a fraction, of which the numerator
shall be the Then-Current Market Price per share of Common Stock, and the
denominator shall be such price less the fair market value (as determined by a
nationally recognized independent investment banking firm retained for this
purpose by the Administrator) as of the time the adjustment is calculated of the
portion of such evidences of indebtedness, non-cash assets or rights or warrants
payable in respect of one share of Common Stock.
Further, if the Company distributes cash (other than any Permitted Dividend
(as defined below), any cash distributed in consideration of fractional shares
of Common Stock and any cash distributed in a Reorganization Event (as defined
below) ("Excluded Distributions")), by dividend or otherwise, to all holders of
Common Stock or makes an Excess Purchase Payment (as defined below) then the
Exchange Rate shall be multiplied by a dilution adjustment equal to a fraction,
of which the numerator shall be the Then-Current Market Price on the record date
in respect of such distribution and of which the denominator shall be such price
less the amount of such distribution applicable to one share of Common Stock
that would not be a Permitted Dividend (or in the case of an Excess Purchase
Payment, less the aggregate amount of such Excess Purchase Payment divided by
the number of outstanding shares of Common Stock on such record date). For
purposes of these adjustments, (a) the term "Permitted Dividend" means any
quarterly cash dividend in respect of the Common Stock, other than a quarterly
cash dividend that exceeds the immediately preceding quarterly cash dividend,
and then only to the extent that the per share amount of such dividend results
in an annualized dividend yield on the Common Stock in excess of % and (b)
the term "Excess Purchase Payment" means the excess, if any, of (i) the cash and
the value (as determined by a nationally recognized independent investment
banking firm retained for this purpose by the Administrator, whose determination
shall be conclusive) of all other consideration paid by the Company with respect
to one share of Common Stock acquired in a tender offer or exchange offer by the
Company over (ii) the Then-Current Market Price per share of Common Stock.
If any adjustment in the Exchange Rate is required to be calculated as
described above, corresponding adjustments to the Initial Price and the
Appreciation Threshold Price shall be calculated.
Dilution adjustments shall be effected: (i) in the case of any dividend,
distribution or issuance described above, at the opening of business on the
business day following the record date for determination of holders of Common
Stock entitled to receive such dividend, distribution or issuance or, if the
announcement of any such dividend, distribution or issuance is after such record
date, at the time such dividend, distribution or issuance shall be announced by
the Company; (ii) in the case of any
12
<PAGE> 15
subdivision, split, combination or reclassification described above, on the
effective date of such transaction; (iii) in the case of any Excess Purchase
Payment for which the Company shall announce, at or prior to the time it
commences the relevant share repurchase, the repurchase price for such shares to
be repurchased, on the date of such announcement; and (iv) in the case of any
other Excess Purchase Payment, on the date that the holders of Common Stock
become entitled to payment with respect thereto. There will be no adjustment
under the Contracts in respect of any dividends, distributions, issuances or
repurchases that may be declared or announced after the Exchange Date. If any
announcement or declaration of a record date in respect of a dividend,
distribution, issuance or repurchase shall subsequently be cancelled by the
Company, or such dividend, distribution, issuance or repurchase shall fail to
receive requisite approvals or shall fail to occur for any other reason, then
the Exchange Rate shall be further adjusted to equal the Exchange Rate that
would have been in effect had the adjustment for such dividend, distribution,
issuance or repurchase not been made. All adjustments described herein shall be
rounded upward or downward to the nearest 1/10,000 (or if there is not a nearest
1/10,000, to the next lower 1/10,000). No adjustment in the Exchange Rate shall
be required unless such adjustment would require an increase or decrease of at
least one percent therein; provided, however, that any adjustments which by
reason of the foregoing are not required to be made shall be carried forward and
taken into account in any subsequent adjustment.
In the event of (A) any consolidation or merger of the Company, or any
surviving entity or subsequent surviving entity of the Company (a "Company
Successor"), with or into another entity (other than a merger or consolidation
in which the Company is the continuing corporation and in which the Common Stock
outstanding immediately prior to the merger or consolidation is not exchanged
for cash, securities or other property of the Company or another corporation),
(B) any sale, transfer, lease or conveyance to another corporation of the
property of the Company or any Company Successor as an entirety or substantially
as an entirety, (C) any statutory exchange of securities of the Company or any
Company Successor with another corporation (other than in connection with a
merger or acquisition) or (D) any liquidation, dissolution or winding up of the
Company or any Company Successor (any such event described in clause (A), (B),
(C) or (D), a "Reorganization Event"), the Exchange Rate will be adjusted such
that, on the Exchange Date, each Holder will receive for each Security cash in
an amount equal to (i) if the Transaction Value (as defined below) is less than
the Appreciation Threshold Price but equal to or greater than the Initial Price,
the Initial Price, (ii) if the Transaction Value is greater than or equal to the
Appreciation Threshold Price, 0. multiplied by the Transaction Value and (iii)
if the Transaction Value is less than the Initial Price, the Transaction Value.
Notwithstanding the foregoing, to the extent that any Marketable Securities (as
defined below) are received by holders of Common Stock in such Reorganization
Event, then in lieu of delivering cash as provided above, the Sellers may at
their option deliver a proportional amount of such Marketable Securities on the
Exchange Date. If the Sellers elect to deliver Marketable Securities, Holders
will be responsible for the payment of any and all brokerage and other
transaction costs upon the sale of such securities.
"Transaction Value" means (i) for any cash received in any such
Reorganization Event, the amount of cash received per share of Common Stock,
(ii) for any property other than cash or Marketable Securities received in any
such Reorganization Event, an amount equal to the market value on the date the
Reorganization Event is consummated of such property received per share of
Common Stock as determined by a nationally recognized independent investment
banking firm retained for this purpose by the Administrator and (iii) for any
Marketable Securities received in any such Reorganization Event, an amount equal
to the average Closing Price per share of such securities on the 20 Trading Days
immediately prior to the Exchange Date multiplied by the number of such
securities received for each share of Common Stock; provided that if no Closing
Price for such Marketable Securities is determined for one or more (but not all)
of such Trading Days, such Trading Days shall be disregarded in the calculation
of such average Closing Price (but no additional Trading Days shall be added to
the Calculation Period). If no Closing Price for the Marketable Securities is
determined for all such Trading Days, the calculation in the preceding clause
(iii) shall be based on the most recently available Closing Price for the
Marketable Securities prior to such 20 Trading Days. The number of shares of
Marketable Securities included in the calculation of Transaction Value for
purposes of the preceding clause (iii) shall be subject to adjustment
13
<PAGE> 16
if a dilution event of the type described above shall occur with respect to the
issuer of the Marketable Securities between the time of the Reorganization Event
and the Exchange Date.
"Marketable Securities" means any common equity securities listed on a U.S.
national securities exchange or reported by The Nasdaq National Market.
No dilution adjustments will be made for events, other than those described
above, such as offerings of Common Stock (other than through the issuance of
rights or warrants described above) for cash or in connection with acquisitions.
COLLATERAL ARRANGEMENTS; ACCELERATION. Each Seller's obligations under the
Contract between such Seller and the Trust initially will be secured by a
security interest in the maximum number of shares of Common Stock subject to
such Contract (subject to adjustment in accordance with the dilution adjustment
provisions of such Contract, described above), pursuant to a Collateral
Agreement between such Seller and The Bank of New York, as collateral agent (the
"Collateral Agent"). Unless a Seller is in default in its obligations under its
Collateral Agreement, such Seller will be permitted to substitute for the
pledged shares of Common Stock collateral consisting of short-term, direct
obligations of the U.S. Government. Any U.S. Government obligations pledged as
substitute collateral will be required to have an aggregate market value at the
time of substitution and at daily mark-to-market valuations thereafter of not
less than 150% (or, from and after any Insufficiency Determination that shall
not be cured by the close of business on the next business day thereafter, as
described below, 200%) of the product of the market price of the Common Stock at
the time of each valuation times the number of shares of Common Stock for which
such obligations are being substituted. The Collateral Agreements will provide
that, in the event of a Reorganization Event, each Seller will pledge as
alternative collateral any Marketable Securities received by it in respect of
the maximum number of shares of Common Stock subject to its Contract at the time
of the Reorganization Event, plus cash in an amount equal to 100% of such
Seller's Cash Delivery Obligations (or U.S. Government obligations having an
aggregate market value when pledged and at daily mark-to-market valuations
thereafter of not less than 105% thereof). The Collateral Agent will be
required, under the Collateral Agreements, to invest any such cash in U.S.
Treasury securities maturing on or before , 2000. A Seller's "Cash
Delivery Obligations" shall be the Transaction Value of any consideration other
than Marketable Securities received by such Seller in respect of the maximum
number of shares subject to its Contract at the time of the Reorganization
Event. The number of shares of Marketable Securities required to be pledged
shall be subject to adjustment if any event requiring a dilution adjustment
under the Contracts shall occur. The Sellers will be permitted to substitute
U.S. Government obligations for Marketable Securities pledged at the time of or
after any Reorganization Event. Any U.S. Government obligations so substituted
will be required to have an aggregate market value at the time of substitution
and at daily mark-to-market valuations thereafter of not less than 150% (or,
from and after any Insufficiency Determination that shall not be cured by the
close of business on the next business day thereafter, as described below, 200%)
of the product of the market price per share of Marketable Securities at the
time of each valuation times the number of shares of Marketable Securities for
which such obligations are being substituted. The Collateral Agent will promptly
pay over to each Seller any dividends, interest, principal or other payments
received by the Collateral Agent in respect of any collateral pledged by such
Seller, including any substitute collateral, unless such Seller is in default of
its obligations under its Collateral Agreement, or unless the payment of such
amount to such Seller would cause the collateral to become insufficient under
its Collateral Agreement. Each Seller shall have the right to vote any pledged
shares of Marketable Securities for so long as such shares are owned by it and
pledged under its Collateral Agreement, including after an event of default
under such Seller's Contract or Collateral Agreement.
If the Collateral Agent shall determine (an "Insufficiency Determination")
that U.S. Government obligations pledged by any Seller as substitute collateral
shall fail to meet the foregoing requirements at any valuation, or that such
Seller has failed to pledge additional collateral required as a result of a
dilution adjustment increasing the maximum number of shares of Common Stock or
shares of Marketable Securities subject to such Contract, and such failure shall
not be cured by the close of business on the next business day after such
determination, then, unless a Collateral Event of Default (as defined below)
14
<PAGE> 17
under such Collateral Agreement shall have occurred and be continuing, the
Collateral Agent shall commence (i) sales of the collateral consisting of U.S.
Government obligations and (ii) purchases, using the proceeds of such sales, of
shares of Common Stock or shares of Marketable Securities, in an amount
sufficient to cause the collateral to meet the requirements under such
Collateral Agreement. The Collateral Agent shall discontinue such sales and
purchases if at any time a Collateral Event of Default under such Collateral
Agreement shall have occurred and be continuing. A "Collateral Event of Default"
under such Seller's Collateral Agreement shall mean, at any time, (A) if no U.S.
Government obligations shall be pledged as substitute collateral at such time,
failure of the collateral to consist of at least the maximum number of shares of
Common Stock subject to such Seller's Contract at such time (or, if a
Reorganization Event shall have occurred at or prior to such time, failure of
the collateral to include the maximum number of shares of any Marketable
Securities required to be pledged as described above); (B) if any U.S.
Government obligations shall be pledged as substitute collateral for shares of
Common Stock (or shares of Marketable Securities) at such time, failure of such
U.S. Government obligations to have a market value at such time of at least 105%
of the market price per share of Common Stock (or the then-current market price
per share of Marketable Securities, as the case may be) times the difference
between (x) the maximum number of shares of Common Stock (or shares of
Marketable Securities) subject to such Contract at such time and (y) the number
of shares of Common Stock (or shares of Marketable Securities) pledged as
collateral at such time; and (C) at any time after a Reorganization Event in
which consideration other than Marketable Securities shall have been delivered,
failure of any U.S. Government obligations pledged in respect of Cash Delivery
Obligations to have a market value at such time of at least 105% of such Cash
Delivery Obligations, if such failure shall not be cured within one business day
after notice thereof is delivered to such Seller.
The occurrence of a Collateral Event of Default under a Collateral
Agreement, or the bankruptcy or insolvency of a Seller, will cause an automatic
acceleration of such Seller's obligations under its Contract. In any such event,
such Seller will become obligated to deliver the initial number of shares of
Common Stock (or, after a Reorganization Event, the Marketable Securities or
cash or a combination thereof deliverable in respect thereof) subject to such
Seller's Contract, or any U.S. Government obligations then pledged in respect
thereof.
Upon any acceleration under a Collateral Agreement, (i) the Collateral
Agent will distribute to the Trust, for distribution pro rata to the Holders,
the shares of Common Stock then pledged by the defaulting Seller, or cash
generated from the liquidation of U.S. Government obligations then pledged by
the defaulting Seller, or a combination thereof (or, after a Reorganization
Event, the Marketable Securities then pledged by the defaulting Seller, cash
generated from the liquidation of U.S. Government obligations then pledged by
the defaulting Seller, or a combination thereof) and (ii) the Custodian will
liquidate a proportionate amount of the U.S. Treasury securities acquired by the
Trust at closing. Following any distributions upon acceleration and liquidation
in accordance with the foregoing sentence, the number of shares of Common Stock
or Marketable Securities, as applicable, deliverable to Holders on the Exchange
Date will be proportionately reduced. In addition, in the event that by the
Exchange Date any substitute collateral has not been replaced by Common Stock
(or, after a Reorganization Event, cash or Marketable Securities) sufficient to
meet the obligations under any Contract, the Collateral Agent will distribute to
the Trust for distribution pro rata to the Holders the market value of the
Common Stock required to be delivered thereunder, in the form of any shares of
Common Stock then pledged by the Sellers plus cash generated from the
liquidation of U.S. Government obligations then pledged by the Sellers (or,
after a Reorganization Event, the market value of the alternative consideration
required to be delivered thereunder, in the form of any Marketable Securities
then pledged, plus any cash then pledged, plus cash generated from the
liquidation of U.S. Government obligations then pledged). See "-- Trust
Termination."
DESCRIPTION OF THE SELLERS. The Sellers are (1) Brion Properties, (2)
National Car Rental, Inc., (3) Cline Tucker and Patricia Mack-Tucker, (4) Dale
Ritter, (5) Larry A. and Mary Jane Ritter, (6) National Car Rental of Oklahoma
City, Inc., (7) Elizabeth Catherine Frame Trust, (8) Elizabeth Peake Graham
Trust, (9) Margaret Nicholson Lobeck Trust, (10) William E. Lobeck, Jr., (11)
William E.
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<PAGE> 18
Lobeck, Jr. IRA Contributing, (12) Sleepy Lagoon, Ltd., (13) Alvin E. Swanner
and (14) Kathryn L. Taylor. Reference is made to the caption "Selling
Stockholders" in the Company's prospectus, as supplemented, for information
about the Sellers.
THE U.S. TREASURY SECURITIES
The Trust will purchase and hold a series of zero-coupon ("stripped") U.S.
Treasury securities with face amounts and maturities corresponding to the
distributions payable with respect to the Securities and the payment dates
thereof. Up to % of the Trust's total assets may be invested in these U.S.
Treasury Securities. In the event that any Contract is accelerated, then a
proportionate amount of such U.S. Treasury securities then held in the Trust
shall be liquidated by the Administrator and the proceeds thereof distributed
pro rata to the Holders, together with the amounts distributed upon
acceleration. See "-- Collateral Arrangements; Acceleration" and "-- Trust
Termination."
TEMPORARY INVESTMENTS
For cash management purposes, the Trust may invest the proceeds of the U.S.
Treasury securities and any other cash held by the Trust in short-term
obligations of the U.S. Government maturing no later than the business day
preceding the next following distribution date. Not more than 5% of the Trust's
total assets will be invested in such short-term obligations or held in cash at
any one time.
INVESTMENT RESTRICTIONS
As a matter of fundamental policy, the Trust may not purchase any
securities or instruments other than the U.S. Treasury securities, the Contracts
and the Common Stock or other assets received pursuant to the Contracts and, for
cash management purposes, short-term obligations of the U.S. Government; issue
any securities or instruments except for the Securities; make short sales or
purchase securities on margin; write put or call options; borrow money;
underwrite securities; purchase or sell real estate, commodities or commodities
contracts including futures contracts; or make loans (other than the purchase of
stripped U.S. Treasury securities as described in this Prospectus). The Trust
also has adopted a fundamental policy that the Contracts may not be disposed of
during the term of the Trust and that the U.S. Treasury securities held by the
Trust may not be disposed of prior to the earlier of their respective maturities
and the termination of the Trust.
Because of the foregoing limitations, the Trust's investments will be
concentrated in the automotive rental industry, which, as of the date hereof, is
one of the industries in which the Company operates. The Trust is not permitted
to purchase restricted securities.
TRUST TERMINATION
The Trust will terminate automatically on or shortly after the Exchange
Date. Alternatively, in the event that all Contracts are accelerated, then any
U.S. Treasury securities then held in the Trust shall be liquidated by the
Administrator and the proceeds distributed pro rata to the Holders, together
with the amounts distributed upon acceleration, and the Trust shall be
terminated. See "-- Collateral Arrangements; Acceleration" and "-- The U.S.
Treasury Securities".
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<PAGE> 19
RISK FACTORS
INTERNAL MANAGEMENT; NO PORTFOLIO MANAGEMENT
The Trust will be internally managed by its Trustees and will not have any
separate investment adviser. It is a fundamental policy of the Trust that the
Contracts may not be disposed of during the term of the Trust and that the U.S.
Treasury securities held by the Trust may not be disposed of prior to the
earlier of their respective maturities and the termination of the Trust. As a
result, the Trust will continue to hold the Contracts despite significant
declines in the market price of the Common Stock or adverse changes in the
financial condition of the Company (or, after a Reorganization Event, comparable
developments affecting any Marketable Securities or the issuer thereof). The
Trust will not be managed like a typical closed-end investment company.
LIMITED APPRECIATION POTENTIAL; COMMON STOCK DEPRECIATION RISK
The Trust anticipates that on the Exchange Date, it will receive the Common
Stock deliverable pursuant to the Contracts, which it will then distribute to
Holders. Although the Trust will make quarterly distributions on the Securities
and the Company currently does not pay dividends on the Common Stock, there is
no assurance that the yield on the Securities will be higher than the dividend
yield on the Common Stock over the term of the Trust. In addition, because the
Contracts call for the Sellers to deliver less than the full number of shares of
Common Stock subject to the Contracts where the Current Market Price exceeds the
Initial Price (and therefore less than one full share of Common Stock for each
outstanding Security), the Securities have more limited appreciation potential
than the Common Stock. Therefore, the Securities may trade below the value of
the Common Stock if the Common Stock appreciates in value. The value of the
Common Stock to be received by Holders on the Exchange Date (and any cash
received in lieu thereof) may be less than the amount paid for the Securities.
Holders of Securities will realize the entire decline in value if the Current
Market Price is less than the price to public per Security shown on the cover
page hereof.
DILUTION ADJUSTMENTS; SHAREHOLDER RIGHTS
The number of shares of Common Stock that Holders are entitled to receive
at the termination of the Trust is subject to adjustment for certain events
arising from stock splits and combinations, stock dividends and certain other
actions of the Company that modify its capital structure. See "Investment
Objective and Policies -- The Contracts -- Dilution Adjustments". The number of
shares to be received by Holders may not be adjusted for other events, such as
offerings of Common Stock for cash or in connection with acquisitions, that may
adversely affect the price of the Common Stock and, because of the relationship
of the amount to be received pursuant to the Contracts to the price of the
Common Stock, such other events may adversely affect the trading price of the
Securities. There can be no assurance that the Company will not take any of the
foregoing actions, or that it will not make offerings of, or that major
shareholders will not sell any, Common Stock in the future, or as to the amount
of any such offerings or sales. In addition, until the receipt of the Common
Stock by Holders as a result of the exchange of the Securities for the Common
Stock, Holders will not be entitled to any rights with respect to the Common
Stock (including without limitation voting rights and the rights to receive any
dividends or other distributions in respect thereof).
TRADING VALUE; LISTING
The Trust is a newly organized closed-end investment company with no
previous operating history and the Securities are innovative securities. It is
not possible to predict how the Securities will trade in the secondary market.
The trading price of the Securities may vary considerably prior to the Exchange
Date due to, among other things, fluctuations in the price of the Common Stock
(which may occur due to changes in the Company's financial condition, results of
operations or prospects, or because of complex and interrelated political,
economic, financial and other factors that can affect the capital markets
generally, the stock exchanges or quotation systems on which the Common Stock is
traded and the
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<PAGE> 20
market segment of which the Company is a part) and fluctuations in interest
rates and other factors that are difficult to predict and beyond the Trust's
control. The Trust believes, however, that because of the yield on the
Securities and the formula for determining the number of shares of Common Stock
to be delivered on the Exchange Date, the Securities will tend to trade at a
premium to the market value of the Common Stock to the extent the Common Stock
price falls and at a discount to the market value of the Common Stock to the
extent the Common Stock price rises.
Shares of closed-end investment companies frequently trade at a discount
from net asset value. This characteristic of investments in a closed-end
investment company is a risk separate and distinct from the risk that the
Trust's net asset value will decrease. The Trust cannot predict whether its
shares will trade at, below or above net asset value. The risk of purchasing
investments in a closed-end investment company that might trade at a discount
may be greater for investors who wish to sell their investments soon after
completion of an initial public offering because for those investors,
realization of a gain or loss on their investments is likely to be more
dependent upon the existence of a premium or discount than upon portfolio
performance.
Goldman Sachs currently intends, but is not obligated, to make a market in
the Securities. There can be no assurance that a secondary market will develop
or, if a secondary market does develop, that it will provide the Holders with
liquidity of investment or that it will continue for the life of the Securities.
Goldman Sachs may cease to make a market in the Securities at any time without
notice. The Securities have been approved for listing, subject to notice of
issuance, on the NYSE, but there can be no assurance that the Securities will
not later be delisted or that trading in the Securities on the NYSE will not be
suspended. In the event of a delisting or suspension of trading on such
exchange, the Trust will apply for listing of the Securities on another national
securities exchange or for quotation on another trading market. If the
Securities are not listed or traded on any securities exchange or trading
market, or if trading of the Securities is suspended, pricing information for
the Securities may be more difficult to obtain, and the price and liquidity of
the Securities may be adversely affected.
NON-DIVERSIFIED STATUS
The Trust is considered non-diversified under the Investment Company Act,
which means that the Trust is not limited in the proportion of its assets that
may be invested in the obligations of a single issuer. Since the only assets
held or received by the Trust will be U.S. Treasury securities and the Contracts
or other assets consistent with the terms of the Contracts, the Trust will be
subject to greater risk than would be the case for an investment company with
diversified investments.
RISKS RELATING TO THE COMPANY AND THE COMPANY'S INDUSTRY
The Company is a diversified holding company with subsidiaries operating in
the automotive retailing, automotive rental, automotive financial services,
solid waste services, and electronic security services industries. Because the
trading price of the Securities may vary considerably due to, among other
things, fluctuations in the price of the Common Stock, prospective investors
should consider carefully the following factors which may adversely affect the
business, financial condition, results of operations and future prospects of the
Company and the prevailing market price and performance of the Common Stock.
Such factors include, among other things: (a) the Company's limited operations
and operating losses in the automotive retailing business; (b) the Company's
need for substantial additional capital; (c) uncertainties in integrating the
Company's operations and achieving cost savings; (d) dependence on vehicle
manufacturers; (e) the cost of vehicle rental fleet; (f) dependence on vehicle
manufacturer's credit; (g) dependence on principal rental fleet; (h) interest
rates and restrictive covenants in the Company's debt instruments; (i)
regulation of collision damage waivers; (j) environmental regulations; (k) risks
of legal proceedings; (l) seasonality and dependence on the travel industry and
fuel supply; (m) the competitive environment for the Company's businesses; (n)
the Company's aggressive acquisition strategy; (o) the possible depressing
effect of future sales of Common Stock; and (p) dependence on certain key
personnel of the Company.
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<PAGE> 21
Reference is made to the accompanying prospectus of the Company, dated
March 20, 1997 ("Risk Factors" set forth on pages A-4 through A-7 hereto), which
describes certain factors that may adversely affect the business, financial
condition, results of operations and future prospects of the Company and the
prevailing market price and performance of the Common Stock.
RISK RELATING TO BANKRUPTCY OF THE SELLERS
The Trust believes that the Contracts constitute "securities contracts" for
purposes of the Bankruptcy Code, performance of which would not be subject to
the automatic stay provisions of the Bankruptcy Code in the event of bankruptcy
of the Sellers. It is, however, possible that the Contracts will be determined
not to qualify as "securities contracts" for this purpose, in which case a
Seller's bankruptcy may cause a delay in settlement of such Seller's Contract,
or otherwise subject such Contract to the bankruptcy proceedings, which could
adversely affect the timing of exchange or, as a result, the amount received by
the Holders in respect of the Securities.
DESCRIPTION OF THE SECURITIES
Each Security represents an equal proportional interest in the Trust, and a
total of 8,700,000 Securities (excluding the over-allotment option) will be
issued. Upon liquidation of the Trust, Holders are entitled to share pro rata in
the net assets of the Trust available for distribution. The Securities have no
preemptive, redemption or conversion rights. Securities are fully paid and
nonassessable by the Trust. The only securities that the Trust is authorized to
issue are the Securities offered hereby and those sold to the initial Holder
referred to below. See "Underwriting".
Holders are entitled to a full vote for each Security held on all matters
to be voted on by Holders and are not able to cumulate their votes in the
election of Trustees. The Trustees of the Trust have been selected initially by
Goldman Sachs, as the initial Holder of Securities of the Trust. The Trust
intends to hold annual meetings as required by the rules of the NYSE. The
Trustees may call special meetings of Holders for action by Holder vote as may
be required by either the Investment Company Act or the Amended and Restated
Trust Agreement. The Holders have the right, upon the declaration in writing or
vote of more than two-thirds of the outstanding Securities, to remove a Trustee.
The Trustees will call a meeting of Holders to vote on the removal of a Trustee
upon the written request of the Holders of record of 10% of the Securities or to
vote on other matters upon the written request of the Holders of record of 51%
of the Securities (unless substantially the same matter was voted on during the
preceding 12 months). The Trustees shall establish, and notify the Holders in
writing of, the record date for each such meeting, which shall be not less than
10 nor more than 50 days before the meeting date. Holders at the close of
business on the record date will be entitled to vote at the meeting. The Trust
will also assist in communications with other Holders as required by the
Investment Company Act.
In calculating the net asset value of the Trust as required by the
Investment Company Act, the Amended and Restated Trust Agreement provides that
(i) the Treasury Securities will be valued at the mean between the last current
bid and asked prices or, if quotations are not available, as determined in good
faith by the Trustees, (ii) short-term investments having a maturity of 60 days
or less will be valued at cost with accrued interest or discount earned included
in interest receivable and (iii) the Contracts will be valued on the basis of
the bid price received by the Trust in respect of the Contracts, or any portion
thereof covering not less than 1,000 shares, from an independent broker-dealer
firm unaffiliated with the Trust to be named by the Trustees who is in the
business of making bids on financial instruments similar to the Contracts and
with terms comparable thereto.
BOOK-ENTRY-ONLY ISSUANCE
The Depository Trust Company ("DTC") will act as securities depository for
the Securities. The information in this section concerning DTC and DTC's
book-entry system is based upon information obtained from DTC. The Securities
offered hereby will be issued only as fully-registered securities registered in
the name of Cede & Co. (as nominee for DTC). One or more fully-registered global
Security certificates will be issued, representing in the aggregate the total
number of Securities, and will be deposited with DTC.
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<PAGE> 22
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilities the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). Access to
the DTC system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly ("Indirect
Participants").
Purchases of Securities within the DTC system must be made by or through
Direct Participants, which will receive a credit for the Securities on DTC's
records. The ownership interest of each actual purchaser of a Security
("Beneficial Owner") is in turn to be recorded on the Direct or Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchases, but Beneficial Owners are expected to receive
written confirmations providing details of the transactions, as well as periodic
statements of their holdings, from the Direct or Indirect Participants through
which the Beneficial Owners purchased Securities. Transfers of ownership
interests in Securities are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in Securities,
except upon a resignation of DTC.
DTC has no knowledge of the actual Beneficial Owners of the Securities;
DTC's records reflect only the identity of the Direct Participants to whose
accounts such Securities are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Payments on the Securities will be made to DTC. DTC's practice is to credit
Direct Participants' accounts on the relevant payment date in accordance with
their respective holdings shown on DTC's records unless DTC has reason to
believe that it will not receive payments on such payment date. Payments by
Participants to Beneficial Owners will be governed by standing instructions and
customary practices and will be the responsibility of such Participant and not
of DTC or the Trust, subject to any statutory or regulatory requirements as may
be in effect from time to time. Payment of dividends to DTC is the
responsibility of the Trust, disbursement of such payments to Direct
Participants is the responsibility of DTC, and disbursement of such payments to
the Beneficial Owners is the responsibility of Direct and Indirect Participants.
Except as provided herein, a Beneficial Owner of an interest evidenced by a
global Security will not be entitled to receive physical delivery of Securities.
Accordingly, each Beneficial Owner must rely on the procedures of DTC to
exercise any rights under the Securities.
DTC may discontinue providing its services as securities depository with
respect to the Securities at any time by giving reasonable notice to the Trust.
Under such circumstances, in the event that a successor securities depository is
not obtained, certificates representing the Securities will be printed and
delivered.
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<PAGE> 23
MANAGEMENT AND ADMINISTRATION OF THE TRUST
TRUSTEES
The Trust will be internally managed by three Trustees, none of whom is an
"interested person" of the Trust as defined in the Investment Company Act. Under
the provisions of the Code applicable to grantor trusts, the Trustees will not
have the power to vary the investments held by the Trust. It is a fundamental
policy of the Trust that the Contracts may not be disposed of during the term of
the Trust and that the U.S. Treasury Securities held by the Trust may not be
disposed of prior to the earlier of their respective maturities and termination
of the Trust.
The names of the persons who have been elected by Goldman Sachs, the
initial Holder of the Trust, and who will serve as the Trustees are set forth
below. The positions and the principal occupations of the individual Trustees
during the past five years are also set forth below.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME, AGE AND ADDRESS TITLE DURING PAST FIVE YEARS
- --------------------- ----- ----------------------
<S> <C> <C>
Donald J. Puglisi, 50................. Managing Trustee Professor of Finance
Department of Finance University of Delaware
University of Delaware
Newark, DE 19716
William R. Latham III, 51............. Trustee Professor of Economics
Department of Economics University of Delaware
University of Delaware
Newark, DE 19716
James B. O'Neill, 57.................. Trustee Professor of Economics
Center for Education & University of Delaware
Entrepreneurship
University of Delaware
Newark, DE 19716
</TABLE>
Each Trustee who is not a director, officer or employee of any Underwriter
or the Administrator, or of any affiliate thereof, will be paid by the Sellers,
on behalf of the Trust, in respect of its annual fee and anticipated
out-of-pocket expenses, a one-time, up-front fee of $10,800. The Trust's
Managing Trustee will also receive an additional up-front fee of $3,600 for
serving in that capacity. The Trustees will not receive, either directly or
indirectly, any compensation, including any pension or retirement benefits, from
the Trust. None of the Trustees receives any compensation for serving as a
trustee or director of any other affiliated investment company.
ADMINISTRATOR
The day-to-day affairs of the Trust will be managed by The Bank of New York
as Trust Administrator pursuant to an Administration Agreement. Under the
Administration Agreement, the Trustees have delegated most of their operational
duties to the Administrator, including without limitation, the duties to: (i)
receive invoices for expenses incurred by the Trust; (ii) with the approval of
the Trustees, engage legal and other professional advisors (other than the
independent public accountants for the Trust); (iii) instruct the Paying Agent
to pay distributions on Securities as described herein; (iv) prepare and mail,
file or publish all notices, proxies, reports, tax returns and other
communications and documents, and keep all books and records, for the Trust; (v)
at the direction of the Trustees, institute and prosecute legal and other
appropriate proceedings to enforce the rights and remedies of the Trust; and
(vi) make all necessary arrangements with respect to meetings of Trustees and
any meetings of Holders. The Administrator, however, will not select the
independent public accountants for the Trust or sell or otherwise dispose of the
Trust assets (except in connection with an acceleration of a Contract or the
settlement of the Contracts and upon termination of the Trust).
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<PAGE> 24
The Administration Agreement may be terminated by either the Trust or the
Administrator upon 60 days' prior written notice, except that no termination
shall become effective until a successor Administrator has been chosen and has
accepted the duties of the Administrator.
Except for its roles as Administrator, Custodian, Paying Agent, registrar
and transfer agent for the Trust, The Bank of New York has no other affiliation
with, and is not engaged in any other transactions with, the Trust.
The address of the Administrator is 101 Barclay Street, New York, New York
10286.
CUSTODIAN
The Trust's custodian (the "Custodian") is The Bank of New York pursuant to
a custodian agreement (the "Custodian Agreement"). In the event of any
termination of the Custodian Agreement by the Trust or the resignation of the
Custodian, the Trust must engage a new Custodian to carry out the duties of the
Custodian as set forth in the Custodian Agreement. Pursuant to the Custodian
Agreement, all net cash received by the Trust will be invested by the Custodian
in short-term U.S. Treasury securities maturing on or shortly before the next
quarterly distribution date. The Custodian will also act as collateral agent
under the Collateral Agreements and will hold a perfected security interest in
the Common Stock and U.S. Government obligations or other assets consistent with
the terms of the Contracts.
PAYING AGENT
The transfer agent, registrar and paying agent (the "Paying Agent") for the
Securities is The Bank of New York pursuant to a paying agent agreement (the
"Paying Agent Agreement"). In the event of any termination of the Paying Agent
Agreement by the Trust or the resignation of the Paying Agent, the Trust will
use its best efforts to engage a new Paying Agent to carry out the duties of the
Paying Agent.
INDEMNIFICATION
The Trust will indemnify each Trustee, the Paying Agent, the Administrator
and the Custodian, with respect to any claim, liability, loss or expense
(including the costs and expenses of the defense against any claim or liability)
that it may incur in acting as Trustee, Paying Agent, Administrator or
Custodian, as the case may be, except in the case of willful misfeasance, bad
faith, gross negligence or reckless disregard of their respective duties or
where applicable law prohibits such indemnification. Goldman Sachs has agreed to
reimburse the Trust for any amounts it may be required to pay as indemnification
to any Trustee, the Administrator, the Custodian or the Paying Agent.
DISTRIBUTIONS
The Trust intends to distribute to Holders on a quarterly basis an amount
equal to $ per Security (which amount equals the pro rata portion of
the fixed quarterly cash distributions from the proceeds of the maturing U.S.
Treasury securities held by the Trust). The first distribution, reflecting the
Trust's operations from the date of this offering, will be made on ,
1997 to Holders of record as of , 1997. Thereafter, distributions
will be made on , , and of each year to
Holders of record as of each , , and ,
respectively. A portion of each such distribution should be treated as a
tax-free return of the Holder's investment. See "Investment Objective and
Policies -- General" and "Certain Federal Income Tax
Considerations -- Recognition of Interest on the U.S. Treasury Securities".
Upon termination of the Trust, as described under the caption "Investment
Objective and Policies -- Trust Termination", each Holder will receive any
remaining net assets of the Trust.
The Trust does not permit the reinvestment of distributions.
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<PAGE> 25
ESTIMATED EXPENSES
At the closing of this offering Goldman Sachs will pay to each of the
Administrator, the Custodian and the Paying Agent, and to each Trustee, a
one-time, up-front amount in respect of its fee and, in the case of the
Administrator, anticipated expenses of the Trust over the term of the Trust. The
anticipated Trust expenses to be borne by the Administrator include, among other
things, expenses for legal and independent accountants' services, costs of
printing proxies, Securities certificates and Holder reports, expenses of the
Trustees, fidelity bond coverage, stock exchange listing fees and expenses of
qualifying the Securities for sale in the various states. Organization costs of
the Trust in the amount of $10,000 and estimated costs of the Trust in
connection with the initial registration and public offering of the Securities
in the amount of $164,301 will be paid by Goldman Sachs. Other estimated costs
of the Trust in connection with the public offering of the Securities in the
amount of $275,699 will be paid by the Sellers.
The amount payable to the Administrator in respect of ongoing expenses of
the Trust was determined based on estimates made in good faith on the basis of
information currently available to the Trust, including estimates furnished by
the Trust's agents. There cannot, however, be any assurance that actual
operating expenses of the Trust will not be substantially more than this amount.
Any excess expenses will be paid by Goldman Sachs or, in the event their failure
to pay such amounts, the Trust.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary of the principal United States federal income tax
consequences of ownership of Securities is based upon the opinion of Sullivan &
Cromwell, special tax counsel to the Trust. It deals only with Securities held
as capital assets by a Holder who acquires its Securities at the issue price
from an Underwriter pursuant to the original offering, and not with special
classes of Holders, such as dealers in securities or currencies, banks, life
insurance companies, persons who are not United States Holders (as defined
below), persons that hold Securities that are part of a hedging transaction,
straddle or conversion transaction, or persons whose functional currency is not
the U.S. dollar. The summary is based on the Internal Revenue Code of 1986, as
amended (the "Code"), its legislative history, existing and proposed regulations
thereunder, published rulings and court decisions, all as currently in effect
and all subject to change at any time, perhaps with retroactive effect. It
should be noted that the Trust has not sought a ruling from the Internal Revenue
Service with respect to the federal income tax consequences of ownership of
Securities, and the opinion of counsel of Sullivan & Cromwell is not binding on
the Internal Revenue Service.
Prospective purchasers of Securities should consult their own tax advisors
concerning the consequences, in their particular circumstances, under the Code
and the laws of any other taxing jurisdiction, of ownership of Securities.
A United States Holder is a beneficial owner who or that is (i) a citizen
or resident of the United States, (ii) a domestic corporation or (iii) otherwise
subject to United States federal income taxation on a net income basis in
respect of Securities.
Holders should also be aware that there are alternative characterizations
of the assets of the Trust which could result in different federal income tax
consequences. See "Alternative Characterizations" below. While Sullivan &
Cromwell does not believe these alternative characterizations should apply for
federal income tax purposes, there can be no assurance in this regard, and
Holders should consult their tax advisors concerning the risks associated with
alternative characterizations. The following discussion assumes that no such
alternative characterizations will apply.
TAX STATUS OF THE TRUST. The Trust will be treated as a grantor trust for
federal income tax purposes, and each Holder will be considered the owner of its
pro rata portions of the stripped U.S. Treasury securities and the Contracts in
the Trust under the grantor trust rules of the Code. Income received by the
Trust will be treated as income of the Holders in the manner set forth below.
23
<PAGE> 26
RECOGNITION OF ORIGINAL ISSUE DISCOUNT ON THE U.S. TREASURY
SECURITIES. The U.S. Treasury securities in the Trust will consist of stripped
U.S. Treasury securities. A Holder will be required to treat its pro rata
portion of each U.S. Treasury security in the Trust as a bond that was
originally issued on the date the Trust acquired the relevant U.S. Treasury
securities and will include original issue discount in income over the life of
the U.S. Treasury securities in an amount equal to the Holder's pro rata portion
of the excess of the amounts payable on such U.S. Treasury securities over the
value of the U.S. Treasury securities at the time the Trust acquires them. The
amount of such excess will constitute only a portion of the total amounts
payable in respect of U.S. Treasury securities held by the Trust, however.
Consequently, a substantial portion of each quarterly cash distribution to the
Holders will be treated as a tax-free return of the Holders' investment in the
U.S. Treasury securities and will not be considered current income for federal
income tax purposes. See "Investment Objective and Policies -- General".
A Holder (whether on the cash or accrual method of tax accounting) will be
required to include original issue discount (other than original issue discount
on short-term U.S. Treasury securities as defined below) in income for federal
income tax purposes as it accrues on a constant yield basis. The Trust expects
that more than 20% of the Holders will be accrual basis taxpayers, in which case
original issue discount on any short-term U.S. Treasury security (i.e., any U.S.
Treasury security with a maturity of one year or less from the date it is
purchased) held by the Trust also will be required to be included in income by
the Holders as it is accrued. Unless a Holder elects to accrue the original
issue discount on a short-term U.S. Treasury security according to a constant
yield method based on daily compounding, such original issue discount will be
accrued on a straight-line basis.
TAX BASIS OF THE U.S. TREASURY SECURITIES AND THE CONTRACTS. A Holder's
initial tax basis in the Contracts and the U.S. Treasury securities,
respectively, will equal its pro rata portion of the amounts paid for them by
the Trust. It is currently anticipated that % and % of the net
proceeds of the offering will be used by the Trust to purchase the U.S. Treasury
securities and as payments for the Contracts, respectively. A Holder's tax basis
in the U.S. Treasury securities will be increased by the amounts of original
issue discount included in income in respect of U.S. Treasury securities and
decreased by each amount of cash received in respect of U.S. Treasury
securities.
TREATMENT OF THE CONTRACTS. Each Holder will be treated as having entered
into a pro rata portion of the Contracts and, at the Exchange Date, as having
received a pro rata portion of the Common Stock or cash, Marketable Securities
or a combination thereof delivered to the Trust.
DISTRIBUTION OF THE COMMON STOCK. The delivery of Common Stock pursuant to
the Contracts will not be taxable to the Holders. Each Holder's basis in its
Common Stock will be equal to its basis in its pro rata portion of the Contracts
less the portion of such basis allocable to any fractional shares of Common
Stock for which cash is received. A Holder will recognize short-term capital
gain or loss upon receipt of cash in lieu of fractional shares of Common Stock
distributed upon termination of the Trust equal to the difference between the
amount of cash received and the basis of such fractional share. The holding
period for the Common Stock will begin on the day after it is acquired by the
Trust.
DISTRIBUTION OF CASH. If the Trust receives cash upon settlement of the
Contracts, a Holder will recognize capital gain or loss equal to the difference
between the amount of cash received and the basis of the Contracts settled
therefor. Any gain or loss will be capital gain or loss and, if the Holder has
held the Securities for more than one year, such gain or loss will be long-term
capital gain or loss.
SALE OF SECURITIES. A Holder who sells Securities will be treated as
having sold its pro rata portions of the U.S. Treasury securities and the
Contracts underlying the Securities. The Holder will therefore recognize gain or
loss equal to the difference between the amount realized and the Holder's
aggregate tax bases in its pro rata portions of the U.S. Treasury securities and
the Contracts. Any gain or loss will be long-term capital gain or loss if the
Trust has held the relevant property for more than one year.
ALTERNATIVE CHARACTERIZATIONS. Sullivan & Cromwell believes the Contracts
should be treated for federal income tax purposes as prepaid forward contracts
for the purchase of a variable number of shares of Common Stock.
24
<PAGE> 27
The Internal Revenue Service could conceivably take the view that the
Contracts should be treated as loans to the Sellers in exchange for contingent
debt obligations of the Sellers. If the Internal Revenue Service were to prevail
in making such an assertion, a Holder might be required to include original
issue discount in income over the life of the Securities at a market rate of
interest for the Seller, taking account of all the relevant facts and
circumstances. In addition, a Holder would be required to include interest
(rather than capital gain) in income on the Exchange Date in an amount equal to
the excess, if any, of the value of the Common Stock received on the Exchange
Date (or the proceeds from cash settlement of the Contracts) over the aggregate
of the basis of the Contracts and any interest on the Contracts previously
included in income (or might be entitled to an ordinary deduction to the extent
of interest previously included in income and not ultimately received). The
Internal Revenue Service could also conceivably take the view that a Holder
should simply include in income the amount of cash actually received each year
in respect of the Securities.
BACKUP WITHHOLDING AND INFORMATION REPORTING. The payments of principal
and interest (including original issue discount) on, and the proceeds received
from the sale of, Securities may be subject to U.S. backup withholding tax at
the rate of 31% if the Holder thereof fails to supply an accurate taxpayer
identification number or otherwise to comply with applicable U.S. information
reporting or certification requirements. Any amounts so withheld will be allowed
as a credit against such Holder's U.S. federal income tax liability and may
entitle such Holder to a refund, provided that the required information is
furnished to the Internal Revenue Service.
After the end of each calendar year, the Trust will furnish to each record
Holder of Securities an annual statement containing information relating to the
payments on the U.S. Treasury securities received by the Trust. The Trust will
also furnish annual information returns to each record Holder of the Securities
and to the Internal Revenue Service.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Trust has agreed to sell to each of the Underwriters named below, and each of
such Underwriters, for whom Goldman, Sachs & Co. are acting as representatives,
has severally agreed to purchase from the Trust, the respective number of
Securities set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SECURITIES
----------- ----------
<S> <C>
Goldman, Sachs & Co. .......................................
---------
Total................................................ 8,700,000
=========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Securities offered
hereby, if any are taken.
The Underwriters propose to offer the Securities in part directly to the
public at the price to the public set forth on the cover page of this Prospectus
and in part to certain securities dealers at such price less a concession of
$ per Security. The Underwriters may allow, and such dealers may
re-allow, a concession not in excess of $ per Security to certain
brokers and dealers. After the Securities are released for sale to the public,
the offering price and other selling terms may from time to time be varied by
the Underwriters. The sales load of $ per Security is equal to %
of the initial public offering price. Investors must pay for any Securities
purchased in the initial public offering on or before , 1997.
25
<PAGE> 28
In connection with the offering, the Underwriters may purchase and sell the
Securities and the Common Stock in the open market. These transactions may
include over-allotment and stabilizing transactions, "passive" market making and
purchases to cover syndicate short positions created in connection with the
offering. Stabilizing transactions consist of certain bids or purchases for the
purpose of preventing or retarding a decline in the market price of the
Securities or the Common Stock; and short positions created by the Underwriters
involve the sale by the Underwriters of a greater number of Securities than they
are required to purchase from the Trust in the offering. The Underwriters also
may impose a penalty bid, whereby selling concessions allowed to syndicate
members or other broker-dealers in respect of the Securities sold in the
offering may be reclaimed by the syndicate if such Securities are repurchased by
the syndicate in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the Securities which
may be higher than the price that might otherwise prevail in the open market;
and these activities, if commenced, may be discontinued at any time. These
transactions may be effected on the NYSE, Nasdaq in the over-the-counter market
or otherwise.
As permitted by Rule 103 under the Exchange Act, certain Underwriters (and
selling group members, if any) that are market makers ("passive market makers")
in the Common Stock may make bids for or purchases of the Common Stock in the
Nasdaq National Market until such time, if any, when a stabilizing bid for such
securities has been made. Rule 103 generally provides that (1) a passive market
maker's net daily purchases of the Common Stock may not exceed 30% of its
average daily trading volume in such securities for the two full consecutive
calendar months (or any 60 consecutive days ending within the 10 days)
immediately preceding the filing date of the registration statement of which
this Prospectus forms a part, (2) a passive market maker may not effect
transactions or display bids for the Common Stock at a price that exceeds the
highest independent bid for the Common Stock by persons who are not passive
market makers and (3) bids made by passive market makers must be identified as
such.
In light of the fact that proceeds from the sale of the Securities will be
used by the Trust to purchase the Contracts from the Sellers, the Underwriting
Agreement provides that the Sellers will pay to the Underwriters the
Underwriters' Compensation of $ per Security.
The Trust has granted the Underwriters an option exercisable for 30
calendar days after the date of this Prospectus to purchase up to an aggregate
of 1,234,235 additional Securities solely to cover over-allotments, if any. If
the Underwriters exercise their over-allotment option, they will receive the
Underwriters' Compensation referred to above for each Security so purchased.
The Sellers have agreed that, during the period beginning from the date of
this Prospectus and continuing to and including the date 90 days after the date
of this Prospectus, they will not offer, sell, contract to sell or otherwise
dispose of any Common Stock or other securities of the Company (other than
pursuant to employee stock option plans existing, or on the conversion or
exchange of convertible or exchangeable securities outstanding, on the date of
this Prospectus) which are substantially similar to the Common Stock or which
are convertible or exchangeable into Common Stock or other securities which are
substantially similar to the Common Stock, without the prior written consent of
Goldman Sachs.
The Securities will be a new issue of securities with no established
trading market. The Securities have been approved for listing, subject to notice
of issuance, on the NYSE. Goldman Sachs have advised the Company that they
intend to make a market in the Securities, but they are not obligated to do so
and may discontinue market making at any time without notice. No assurance can
be given as to the liquidity of the trading market for the Securities.
Goldman Sachs has informed the Trust that they will not confirm sales to
any accounts over which they exercise discretionary authority without specific
written approval of such transactions by the customer.
26
<PAGE> 29
The Company and the Sellers have agreed to indemnify the Underwriters
against certain liabilities, including certain liabilities under the Securities
Act of 1933. The Underwriters have agreed to pay certain expenses of the Trust.
One Security has been subscribed for by Goldman Sachs at an aggregate
purchase price of $100.00. No Securities will be sold to the public until the
Securities subscribed for have been purchased and the purchase price thereof
paid in full to the Trust. Prior to completion of this offering, Goldman Sachs
will control the Trust, but after completion of this offering, Goldman Sachs
will no longer control the Trust.
VALIDITY OF SECURITIES
The validity of the Securities offered hereby will be passed upon for the
Trust by Sullivan & Cromwell, 125 Broad Street, New York, New York 10004, and
certain legal matters will be passed upon for the Underwriters by Skadden, Arps,
Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York 10022.
EXPERTS
The financial statement included in this Prospectus has been audited by
Coopers & Lybrand L.L.P., independent accountants, as stated in their opinion
appearing herein, and has been so included in reliance upon such opinion given
upon the authority of that firm as experts in accounting and auditing.
FURTHER INFORMATION
The Trust has filed with the Securities and Exchange Commission,
Washington, D.C. 20549, a Registration Statement under the Securities Act of
1933, as amended, with respect to the Securities offered hereby. Further
information concerning the Securities and the Trust may be found in the
Registration Statement of which this Prospectus constitutes a part. The
Registration Statement may be inspected without charge at the Commission's
office in Washington, D.C., and copies of all or any part thereof may be
obtained from such office after payment of the fees prescribed by the
Commission. Such Registration Statement is also available on the Commission's
website (http://www.sec.gov).
27
<PAGE> 30
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Securityholders of
Automatic Common Exchange Security Trust II:
We have audited the accompanying statement of assets and liabilities of
Automatic Common Exchange Security Trust II as of May 27, 1997. This financial
statement is the responsibility of the Trust's management. Our responsibility is
to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of assets and liabilities is
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement. An
audit also includes assessing the accounting principles used and significant
estimates made by the Trust's management, as well as evaluating the overall
financial statement presentation. We believe that our audit of the financial
statement provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the financial position of Automatic Common Exchange
Security Trust II, as of May 27, 1997 in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
New York, New York
May 28, 1997
28
<PAGE> 31
AUTOMATIC COMMON EXCHANGE SECURITY TRUST II
STATEMENT OF ASSETS AND LIABILITIES
MAY 27, 1997
<TABLE>
<S> <C>
ASSETS
Cash........................................................ $100
----
Total assets................................................ $100
====
LIABILITIES
............................................................ $ 0
----
NET ASSETS
Balance applicable to 1 Security outstanding................ $100
----
Net asset value per Security................................ $100
====
</TABLE>
- ---------------
(1) Automatic Common Exchange Security Trust II (the "Trust") was established on
February 21, 1997 and has had no operations to date other than matters
relating to its organization and registration as a non-diversified,
closed-end management investment company under the Investment Company Act of
1940. Costs incurred in connection with the organization of the Trust will
be paid by Goldman, Sachs & Co.
(2) The Trust proposes to sell Trust Automatic Common Exchange Securities (the
"Securities") to the public pursuant to a Registration Statement on Form N-2
under the Securities Act of 1933, as amended, and the Investment Company Act
of 1940, as amended.
The Trust is a newly organized, finite-term trust established to purchase
and hold a portfolio of stripped U.S. treasury securities and a forward
purchase contract with existing shareholders of Republic Industries, Inc.
("Republic Industries") relating to the common stock of Republic Industries.
The Trust will be internally managed and will not have an investment
adviser. The administration of the Trust, which will be overseen by the
trustees, will be carried out by The Bank of New York as trust
administrator. The Bank of New York will also serve as custodian, paying
agent, registrar and transfer agent with respect to the Securities. Ongoing
fees and anticipated expenses for the term of the trust will be paid for by
Goldman, Sachs & Co.
(3) The Trust issued one Security on May 27, 1997 to Goldman, Sachs & Co. in
consideration for the aggregate purchase price of $100.
The Amended and Restated Trust Agreement provides that prior to the
offering, the Trust will split the outstanding Security to be effected on
the date that the price and underwriting discount of the Securities being
offered to the public is determined, but prior to the sale of the Securities
to Goldman, Sachs & Co. The initial Security will be split into the smallest
whole number of Securities that would result in the per Security amount
recorded as shareholders' equity after effecting the split not exceeding the
Public Offering price per Security.
29
<PAGE> 32
=========================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary...................... 3
The Trust............................... 8
Use of Proceeds......................... 8
Investment Objective and Policies....... 8
Risk Factors............................ 17
Description of the Securities........... 19
Management and Administration of the
Trust................................. 21
Certain Federal Income Tax
Considerations........................ 23
Underwriting............................ 25
Validity of Securities.................. 27
Experts................................. 27
Further Information..................... 27
Report of Independent Accountants....... 28
Statement of Assets and Liabilities..... 29
</TABLE>
------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL
DEALERS EFFECTING TRANSACTIONS IN THE SECURITIES, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
=========================================================
=========================================================
8,700,000 SHARES
AUTOMATIC
COMMON EXCHANGE
SECURITY TRUST II
$ TRUST AUTOMATIC
COMMON EXCHANGE
SECURITIES (TRACES(TM)/(SM))
------------------
PROSPECTUS
------------------
GOLDMAN, SACHS & CO.
=========================================================
<PAGE> 33
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<S> <C> <C> <C>
(a) Financial Statements
Part A -- Report of Independent Accountants.
Statement of Assets and Liabilities.
Part B -- None.
(b) Exhibits
2.a.(i) -- Trust Agreement*
2.a.(ii) -- Form of Amended and Restated Trust Agreement
2.d -- Form of Specimen Certificate of Trust Automatic Common
Exchange Security (included in Exhibit 2.a.(ii))
2.h -- Form of Underwriting Agreement
2.j -- Form of Custodian Agreement
2.k.(i) -- Form of Administration Agreement
2.k.(ii) -- Form of Paying Agent Agreement
2.k.(iii) -- Form of Purchase Contract
2.k.(iv) -- Form of Collateral Agreement
2.k.(v) -- Form of Fund Expense Agreement
2.k.(vi) -- Form of Fund Indemnity Agreement
2.l -- Opinion and Consent of Counsel to the Trust
2.n.(i) -- Tax Opinion of Counsel to the Trust (Consent contained in
Exhibit 2.n.(i))
2.n.(iii) -- Consent of Independent Public Accountants
2.n.(iv) -- Consents to Being Named as Trustee
2.p -- Form of Subscription Agreement
2.s -- Power of Attorney
27 -- Financial Data Schedule
</TABLE>
- ---------------
* Previously Filed.
ITEM 25. MARKETING ARRANGEMENTS
See the Form of Underwriting Agreement to be filed as Exhibit 2.h to this
Registration Statement.
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses to be incurred in
connection with the offering described in this Registration Statement:
<TABLE>
<S> <C>
Registration fees........................................... $ 90,311
New York Stock Exchange listing fee......................... 73,085
Printing (other than certificates).......................... 80,000
Fees and expenses of qualification under state securities
laws (excluding fees of counsel).......................... 2,000
Accounting fees and expenses................................ 10,000
Legal fees and expenses..................................... 150,000
NASD fees................................................... 30,303
Miscellaneous............................................... 4,301
--------
Total............................................. $440,000
========
</TABLE>
C-1
<PAGE> 34
ITEM 27. PERSON CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Prior to February 21, 1997 the Trust had no existence. As of the effective
date, the Trust will have entered into a Subscription Agreement for one Security
with Goldman, Sachs & Co. and an Underwriting Agreement with respect to
8,700,000 Securities with Goldman, Sachs & Co.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
NUMBER OF
TITLE OF CLASS RECORD HOLDERS
- -------------- --------------
<S> <C>
Trust Automatic Common Exchange Securities.................. 1
</TABLE>
ITEM 29. INDEMNIFICATION
The Underwriting Agreement, to be filed as Exhibit 2.h to this Registration
Statement, provides for indemnification to the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended
(the "Securities Act").
The Amended and Restated Trust Agreement filed as Exhibit 2.a.(ii) to this
Registration Statement provides for indemnification to each Trustee against any
claim or liability incurred in acting as Trustee of the Trust, except in the
case of willful misfeasance, bad faith, gross negligence or reckless disregard
of the Trustee's duties. The Custodian Agreement, Administration Agreement and
Paying Agent Agreement filed as Exhibits 2.j, 2.k.(i) and 2.k.(iii) to this
Registration Statement provide for indemnification to the Custodian,
Administrator and Paying Agent against any loss or expense incurred in the
performance of their obligations under the respective agreements, unless such
loss or expense is due to willful misfeasance, bad faith, gross negligence or
reckless disregard of their obligations. The Fund Indemnity Agreement filed as
Exhibit 2.k.(vi) to this Registration Statement provides that Goldman Sachs will
indemnify the Trust for certain indemnification expenses incurred under the
Amended and Restated Trust Agreement, the Custodian Agreement, the
Administration Agreement and the Paying Agent Agreement.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to trustees, officers and controlling persons of the
Registrant, pursuant to the foregoing provisions or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Not Applicable.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
The Trust's accounts, books and other documents are currently located at
the offices of the Registrant, c/o Goldman, Sachs & Co., 85 Broad Street, New
York, New York 10004 and at the offices of The Bank of New York, the
Registrant's Administrator, Custodian, paying agent, transfer agent and
registrar.
ITEM 32. MANAGEMENT SERVICES
Not applicable.
C-2
<PAGE> 35
ITEM 33. UNDERTAKINGS
(a) The Registrant hereby undertakes to suspend offering of its units until
it amends its prospectus if (1) subsequent to the effective date of its
Registration Statement, the net asset value declines more than 10 percent from
its net asset value as of the effective date of the Registration Statement or
(2) the net asset value increases to an amount greater than its net proceeds as
stated in the prospectus.
(b) The Registrant hereby undertakes that (i) for the purpose of
determining any liability under the Securities Act, the information omitted from
the form of prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the Registrant
under Rule 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective; (ii) for the
purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of the securities at that time shall be deemed to be the initial
bona fide offering thereof.
C-3
<PAGE> 36
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment
No. 3 to the Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of New York, State of New
York, on the 28th day of May, 1997.
AUTOMATIC COMMON EXCHANGE
SECURITY TRUST II
By: /s/ ERIC S. SCHWARTZ
------------------------------------
Eric S. Schwartz
Trustee
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the Registration Statement has been signed below by the following
person, in the capacities and on the date indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ ERIC S. SCHWARTZ Principal Executive Officer, May 28, 1997
- ----------------------------------------------------- Principal Financial Officer,
Eric S. Schwartz Principal Accounting Officer
and Trustee
</TABLE>
C-4
<PAGE> 37
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- --------- ----------- ----------
<S> <C> <C> <C>
2.a.(i) -- Trust Agreement*
2.a.(ii) -- Form of Amended and Restated Trust Agreement
2.d -- Form of Specimen Certificate of Trust Automatic Common
Exchange Security (included in Exhibit 2.a.(ii))
2.h -- Form of Underwriting Agreement
2.j -- Form of Custodian Agreement
2.k.(i) -- Form of Administration Agreement
2.k.(ii) -- Form of Paying Agent Agreement
2.k.(iii) -- Form of Purchase Contract
2.k.(iv) -- Form of Collateral Agreement
2.k.(v) -- Form of Fund Expense Agreement
2.k.(vi) -- Form of Fund Indemnity Agreement
2.l -- Opinion and Consent of Counsel to the Trust
2.n.(i) -- Tax Opinion of Counsel to the Trust (Consent contained in
Exhibit 2.n.(i))
2.n.(iii) -- Consent of Independent Public Accountants
2.n.(iv) -- Consents to Being Named as Trustee
2.p -- Form of Subscription Agreement
2.s -- Power of Attorney
27 -- Financial Data Schedule (for SEC use only)
</TABLE>
- ---------------
* Previously Filed.
<PAGE> 1
EXHIBIT 2.A.(ii)
AMENDED AND RESTATED
TRUST AGREEMENT
CONSTITUTING
AUTOMATIC COMMON EXCHANGE SECURITY TRUST II
Dated as of May __, 1997
<PAGE> 2
Table of Contents
<TABLE>
Page
ARTICLE I
DEFINITIONS
ARTICLE II
TRUST DECLARATION; PURPOSES, POWERS
AND DUTIES OF THE TRUSTEES; ADMINISTRATION
<CAPTION>
<S> <C> <C>
SECTION 2.1 Declaration of Trust; Purposes of the
Trust............................................................................ 6
SECTION 2.2 General Powers and Duties of the
Trustees......................................................................... 6
SECTION 2.3 Portfolio Acquisition............................................................ 8
SECTION 2.4 Portfolio Administration......................................................... 8
SECTION 2.5 Manner of Sales.................................................................. 11
SECTION 2.6 Limitations on Trustees' Powers.................................................. 11
ARTICLE III
ACCOUNTS AND PAYMENTS
SECTION 3.1 The Trust Account................................................................ 12
SECTION 3.2 Payment of Fees and Expenses..................................................... 12
SECTION 3.3 Distributions to Holders......................................................... 12
SECTION 3.4 Segregation...................................................................... 13
SECTION 3.5 Temporary Investments............................................................ 13
ARTICLE IV
REDEMPTION
SECTION 4.1 Redemption....................................................................... 14
ARTICLE V
ISSUANCE OF CERTIFICATES;
REGISTRY; TRANSFER OF SECURITIES
SECTION 5.1 Form of Certificate.............................................................. 14
SECTION 5.2 Transfer of Securities; Issuance,
Transfer and Interchange of
Certificates..................................................................... 15
SECTION 5.3 Replacement of Certificates...................................................... 16
</TABLE>
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Table of Contents
<TABLE>
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Page
ARTICLE VI
ISSUANCE OF THE CONTRACTS
<S> <C> <C>
SECTION 6.1 Execution of the Contracts....................................................... 17
ARTICLE VII
TRUSTEES
SECTION 7.1 Trustees......................................................................... 17
SECTION 7.2 Vacancies........................................................................ 17
SECTION 7.3 Powers........................................................................... 18
SECTION 7.4 Meetings......................................................................... 18
SECTION 7.5 Resignation and Removal.......................................................... 19
SECTION 7.6 Liability........................................................................ 19
SECTION 7.7 Compensation..................................................................... 19
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Meetings of Holders.............................................................. 20
SECTION 8.2 Books and Records; Reports....................................................... 21
SECTION 8.3 Termination...................................................................... 22
SECTION 8.4 Amendment and Waiver............................................................. 22
SECTION 8.5 Accountants...................................................................... 24
SECTION 8.6 Nature of Holder's Interest...................................................... 25
SECTION 8.7 New York Law to Govern........................................................... 25
SECTION 8.8 Notices.......................................................................... 25
SECTION 8.9 Severability..................................................................... 26
SECTION 8.10 Counterparts..................................................................... 26
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AMENDED AND RESTATED TRUST AGREEMENT
This Amended and Restated Trust Agreement, dated as of May __,
1997 (the "Trust Agreement"), by and between Goldman Sachs & Co., as sponsor
(the "Sponsor"), and William R. Latham III, James B. O'Neill and Donald J.
Puglisi as trustees (the "Trustees"), constituting Automatic Common Exchange
Security Trust II (the "Trust").
WITNESSETH:
WHEREAS, the Sponsor and Eric S. Schwartz, as trustee, have
previously entered into a Declaration of Trust dated as of February 21, 1997
(the "Original Agreement"), creating Second Automatic Common Exchange Security
Trust;
WHEREAS, the parties hereto desire to amend and
restate the Original Agreement in certain respects; and
WHEREAS, the Trust has previously issued to the Sponsor one
Security in consideration of the aggregate purchase price therefor of $100.00;
NOW, THEREFORE, the parties hereto agree to amend and restate
the Original Agreement as provided herein. Upon the execution and delivery of
copies hereof by the parties hereto, the Original Agreement will be
automatically amended and restated in its entirety to read as provided herein.
ARTICLE I
DEFINITIONS
Whenever used in this Trust Agreement, the following words and
phrases shall have the meanings listed below. Any reference to any agreement
shall be a reference to such agreement as supplemented or amended from time to
time.
"Additional Purchase Price" - The Additional Purchase Price as
defined in the Contracts.
"Administration Agreement" - The Administration Agreement,
dated as of the date hereof, between the Administrator and the Trustees, and any
substitute agreement therefor entered into pursuant to Section 2.2(a) hereof.
"Administrator" - The Bank of New York or its successor as
permitted under Section 6.1 of the
<PAGE> 5
Administration Agreement or appointed pursuant to Section 2.2(a) hereof.
"Business Day" - A day on which the New York Stock Exchange,
Inc. is open for trading that is not a day on which banks in The City of New
York are authorized or obligated by law to close.
"Cash Settlement Alternative" - The Cash Settlement
Alternative as defined in the Contracts.
"Certificate" - Any certificate evidencing the ownership of
Securities substantially in the form of Exhibit A hereto.
"Code" - The Internal Revenue Code of 1986, as amended from
time to time; each reference herein to any section of the Code or any regulation
thereunder shall constitute a reference to any successor provision thereto.
"Collateral Agent" - The Bank of New York, or its successor as
permitted under the Collateral Agreements.
"Collateral Agreements" - The Collateral Agreements between
the Collateral Agent and each of the Sellers, securing the Sellers' obligations
under the Contracts, substantially in the form of Exhibit B hereto.
"Commencement Date" - The day on which the Underwriting
Agreement is executed.
"Commission" - The United States Securities and Exchange
Commission.
"Common Stock" - Common Stock, par value $0.01 per share, of
the Company.
"Company" - Republic Industries, Inc., a Delaware
corporation.
"Contracts" - The forward purchase contracts entered into by
the Trustees with one or more existing shareholders of the Company,
substantially in the form of Exhibit C hereto.
"Current Market Price" - Current Market Price as
defined in the Contracts.
"Custodian" - The Bank of New York, or its successor as
permitted under paragraph 11 of the Custodian Agreement or appointed pursuant to
Section 2.2(a) hereof.
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<PAGE> 6
"Custodian Agreement" - The Custodian Agreement, dated as of
the date hereof, between the Custodian and the Trustees, and any substitute
agreement therefor entered into pursuant to Section 2.2(a) hereof.
"Depositary" - The Depository Trust Company, or
any successor thereto.
"Distribution Date" - Each ___________, ___________,
____________ and __________ of each year commencing _____________, to and
including ___________ or if any such date is not a Business Day, then the first
Business Day thereafter.
"Excess Purchase Payment" - Excess Purchase Payment as defined
under the Contracts.
"Event of Default" - An Event of Default as defined in the
Contracts.
"Exchange" - The delivery by the Trustees to the Holders of
Shares, subject to the adjustments and exceptions set forth in the Contracts
(or, to the extent one or more Sellers elect the Cash Settlement Alternative
under the Contracts, the amount in cash specified in such Contracts as payable
in respect thereof), in mandatory exchange for the Securities on the Exchange
Date.
"Exchange Date" - The Exchange Date as defined in the
Contracts.
"Exchange Rate" - The Exchange Rate as defined in the
Contracts.
"Firm Purchase Price" - The Firm Purchase Price as defined in
the Contracts.
"First Time of Delivery" - The First Time of Delivery as
defined in the Underwriting Agreement.
"Holder" - The registered owner of any Security as recorded on
the books of the Paying Agent.
"Indemnity Agreement" - The Fund Indemnity Agree ment dated as
of the date hereof between the Trustees and the Sponsor substantially in the
form of Exhibit D hereto.
"Investment Company" - Investment Company as defined in
Section 3 of the Investment Company Act.
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<PAGE> 7
"Investment Company Act" - The Investment Company Act of 1940,
as amended from time to time; each reference herein to any section of such Act
or any rule or regulation thereunder shall constitute a reference to any
successor provision thereto.
"Managing Trustee" - The Trustee designated the Managing
Trustee by resolution of the Trustees.
"Marketable Securities" - Marketable Securities as defined in
the Contracts.
"Original Agreement" - The meaning specified in the recitals
hereof.
"Participant" - A Person having a book-entry only system
account with the Depositary.
"Paying Agent" - The Bank of New York, or its successor as
permitted under Section 6.6 of the Paying Agent Agreement or appointed pursuant
to Section 2.2(a) hereof.
"Paying Agent Agreement" - The Paying Agent Agree ment, dated
as of the date hereof, between the Paying Agent and the Trustees, and any
substitute agreement therefor entered into pursuant to Section 2.2(a) hereof.
"Person" - An individual, a partnership, a corporation, a
trust, an unincorporated association, a joint venture or other entity or a
government or any agency or political subdivision thereof.
"Prospectus" - The prospectus relating to the Trust
constituting a part of the Registration Statement, as first filed with the
Commission pursuant to Rule 497(b) or (h) under the Securities Act, and as
subsequently amended or supplemented by the Trust.
"Quarterly Distribution" - $_______ per Security paid to each
Holder on each Distribution Date.
"Record Date" - Each _________, ___________,
__________, and _________ of each year commencing __________.
"Registration Statement" - Registration Statement on Form N-2
(Registration No. 333-22289) of the Trust, as amended.
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"Reorganization Event" - A Reorganization Event as defined in
the Contracts.
"Second Time of Delivery" - The Second Time of Delivery as
defined in the Underwriting Agreement.
"Securities Act" - The Securities Act of 1933, as amended from
time to time.
"Security" - $____ Trust Automatic Common Exchange Security of
the Trust evidencing a Holder's undivided interest in the Trust and right to
receive a pro rata distribution upon liquidation of the Trust Estate.
"Sellers" - The persons named as Sellers in the Contracts.
"Shares" - Shares of Common Stock to be exchanged by the
Trustees for the Securities on the Exchange Date.
"Temporary Investments" - Direct short-term U.S. government
obligations, as specified from time to time by the Trustees or through standing
instructions from the Trustees to the Administrator or the Paying Agent.
"Transfer Agent and Registrar" - Harris Trust and Savings
Bank, as Transfer Agent and Registrar for the Common Stock.
"Treasury Securities" - The meaning specified in Section
2.3(b) hereof.
"Trust Account" - The account created pursuant to Section 3.1
hereof.
"Trust Estate" - The Contracts and the Treasury Securities
held at any time by the Trust, together with any Temporary Investments held at
any time pursuant to Section 3.5 hereof, and any proceeds thereof or therefrom
and any other moneys held at any time in the Trust Account.
"Underwriters" - The Underwriters named in the Underwriting
Agreement.
"Underwriting Agreement" - The Underwriting Agreement as
described in the Prospectus.
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<PAGE> 9
ARTICLE II
TRUST DECLARATION; PURPOSES, POWERS
AND DUTIES OF THE TRUSTEES; ADMINISTRATION
SECTION 2.1 Declaration of Trust; Purposes of the Trust. The
Sponsor hereby creates the Trust in order that it may acquire the Treasury
Securities, enter into the Contracts, issue and sell to the Sponsor and the
Under writers the Securities, hold the Trust Estate in trust for the use and
benefit of all present and future Holders and otherwise carry out the terms and
conditions of this Trust Agreement, all for the purpose of achieving the
investment objectives set forth in the Prospectus. The Trustees hereby declare
that they will accept and hold the Trust Estate in trust for the use and benefit
of all present and future Holders. The Sponsor has heretofore deposited with the
Trustees the sum of $10 to accept and hold in trust hereunder until the issuance
and sale of the Securities to the Underwriters, whereupon such sum shall be
donated to an organization satisfying the requirements of Section 170(c)(2) of
the Code selected by unanimous consent of the Trustees.
SECTION 2.2 General Powers and Duties of the Trustees. In
furtherance of the provisions of Section 2.1 hereof, the Sponsor authorizes and
directs the Trustees:
(a) to enter into and perform (and, in accordance with Section
8.4(a) hereof, amend), the Contracts, the Collateral Agreements, the
Underwriting Agreement, the Indemnity Agreement, the Custodian
Agreement, the Administration Agreement and the Paying Agent Agreement
and to perform all obligations of the Trustees (including the
obligation to provide indemnity hereunder and thereunder) and enforce
all rights and remedies of the Trust under each of such agreements; and
if any of the Custodian Agreement, the Administration Agreement, the
Collateral Agreements and the Paying Agent Agreement terminates, or the
agent of the Trust thereunder resigns or is discharged, to appoint a
substitute agent and enter into a new agreement with such substitute
agent containing provisions substantially similar to those contained in
the agreement being terminated; provided that in any such new agreement
(i) the Custodian and the Paying Agent shall each be a commercial bank
or trust company organized and existing under the laws of the United
States of America or any state therein, shall have full
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<PAGE> 10
trust powers and shall have minimum capital, surplus and retained
earnings of not less than $100,000,000; and (ii) the Administrator and
the Collateral Agent shall each be a reputable financial institution
qualified in all respects to carry out its obligations under the
Administration Agreement or the Collateral Agreements, as the case may
be;
(b) to hold the Trust Estate in trust, to create and
administer the Trust Account, to direct payments received by the Trust
to the Trust Account and to make payments out of the Trust Account as
set forth in Article III hereof;
(c) to issue and sell to the Underwriters an aggregate of up
to _________ Securities (including those Securities subject to the
over-allotment option of the Underwriters provided for in the
Underwriting Agreement) pursuant to the Underwriting Agreement and as
contemplated by the Prospectus; provided, however, that subsequent to
the determination of the public offering price per Security and related
underwriting discount for the Securities to be sold to the Underwriters
but prior to the sale of the Securities to the Underwriters, the
Securities originally issued to the Sponsor shall be split into a
greater number of Securities so that immediately following such split
the value of each Security held by the Sponsor will equal the aforesaid
public offering price;
(d) to select independent public accountants and, subject to
the provisions of Section 8.5 hereof, to engage such independent public
accountants;
(e) to engage legal counsel and, to the extent required by
Section 2.4 hereof, to engage professional advisors and pay reasonable
compensation thereto;
(f) to defend any action commenced against the Trustees or the
Trust and to prosecute any action which the Trustees deem necessary to
protect the Trust and the rights and interests of Holders, and to pay
the costs thereof;
(g) to arrange for the bonding of officers and employees of
the Trust as required by Section 17(g) of the Investment Company Act
and the rules and regulations thereunder;
(h) to delegate any and all of its powers and
duties hereunder as contemplated by the Custodian
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<PAGE> 11
Agreement, the Paying Agent Agreement and the Administration Agreement,
to the extent permitted by applicable law; and
(i) to adopt and amend bylaws, and take any and all such other
actions as necessary or advisable to carry out the purposes of the
Trust, subject to the provisions hereof and applicable law, including,
without limitation, the Investment Company Act.
SECTION 2.3 Portfolio Acquisition. In furtherance of the
provisions of Section 2.1 hereof, the Sponsor further specifically authorizes
and directs the Trustees:
(a) to enter into the Contracts with respect to the Shares
subject thereto with the Sellers on the Commencement Date for
settlement on the date or dates provided thereunder and, subject to
satisfaction of the conditions set forth in the Contracts, to pay the
Firm Purchase Price and the Additional Purchase Price, if any,
thereunder with the proceeds of the sale of the Securities, net of
underwriting commissions and other expenses payable in connection with
the public offering of the Securities as described in Section 3.2
hereof and net of the purchase price paid for the Treasury Securities
as provided in paragraph (b) below; and, subject to the adjustments and
exceptions set forth in the Contracts, the Contracts shall entitle the
Trust to receive from each of the Sellers on the Exchange Date the
Shares subject thereto (or, if one or more Sellers elect the Cash
Settlement Alternative under the Contracts, the amount in cash
specified in such Contracts in respect thereof) so that the Trust may
execute the Exchange with the Holders; and
(b) to purchase for settlement at the First Time of Delivery,
and at the Second Time of Delivery, as appropriate, with the proceeds
of the sale the Securities, net of underwriting commissions and other
expenses payable in connection with the public offering of the
Securities, U.S. Treasury securities from such brokers or dealers as
the Trustees shall designate in writing to the Administrator having the
terms set forth on Schedule I hereto ("Treasury Securities").
SECTION 2.4 Portfolio Administration. In furtherance of the
provisions of Section 2.1 hereof, the Sponsor further specifically authorizes
and directs the Trustees:
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<PAGE> 12
(a) Determination of Dilution, Merger or Acceleration
Adjustments. Upon receipt of any notice pursuant to Section 5.4(b) of
the Contracts of an event requiring an adjustment to the Exchange Rate,
or upon otherwise acquiring knowledge of such an event, to calculate
the required adjustment and furnish notice thereof to the Collateral
Agent and the Sellers, or to request from the Sellers such further
information as may be necessary to calculate or effect the required
adjustment;
(b) Selection of Independent Investment Bank. Upon receipt of
notice of (i) the occurrence of a Reorganization Event in which
property other than cash or Marketable Securities is to be received in
respect of the Common Stock as described in Section 6.2 of the
Contracts or (ii) an Excess Purchase Payment in which the Company has
paid or will pay consideration other than cash as described in Section
6.1(d) of the Contracts, to select and retain a nationally recognized
investment banking firm to determine the market value of such property
as provided in the Contracts, and to deliver to the Sellers notice
pursuant to Section 8.1 of the Contracts identifying the firm proposed
to be selected and retained, and to consult with the Sellers on such
selection and retention as provided in such Section 8.1;
(c) Acceleration. In the event an Acceleration Date shall
occur due to an Event of Default as provided in Article VII of the
Contracts, to liquidate a proportionate amount of Treasury Securities
and distribute the proceeds thereof pro rata to each of the Holders of
Securities, together with any shares of Common Stock or other amounts
to be distributed to the Holders of Securities, in each case in
accordance with the Contracts and the Collateral Agreements;
(d) Determination of Exchange Date Amounts. To calculate, on
the Exchange Date, the number of Shares (or, if one or more Sellers
elect the Cash Settlement Alternative under the Contracts, the amount
in cash) required to be delivered by each of the Sellers under Section
1.1 of the Contracts or, if a Reorganization Event shall have occurred,
the amount of cash required to be delivered by the Sellers, and the
number of Marketable Securities permitted to be delivered by the
Sellers in lieu of all or a portion of such cash, all as provided in
Section 6.2 of the Contracts, and to furnish notice of the amounts so
determined to the Collateral Agent and the Sellers;
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(e) Distribution of Exchange Consideration. Unless a
Reorganization Event shall have occurred (in which event distribution
of proceeds shall be governed by Section 8.3 below) or one or more
Sellers elect the Cash Settlement Alternative under the Contracts (in
which event the cash received in respect thereof shall be distributed
pro rata to the Holders of Securities):
(i) Determination of Fractional Shares. To
determine, on the Exchange Date: (A) for each Holder of
Securities, such Holder's pro rata share of the total number
of Shares delivered to the Trustees under the Contracts on the
Exchange Date; and (B) the number of fractional Shares
allocable to each Holder (including, in the case of the
Depositary, fractional shares allocable to beneficial owners
of Securities who own through Participants) and in the
aggregate;
(ii) Cash for Fractional Shares. To sell, in
the principal market therefor, on the Exchange Date, a number
of Shares equal to the aggregate number of fractional Shares
determined pursuant to clause (i) (B) above, rounded down to
the nearest integral number; and to determine the difference
between (A) the aggregate proceeds of such sale (net of any
brokerage or related expenses) and (B) the product of the
number of Shares so sold and the Current Market Price; and, in
accordance with the Indemnity Agreement, to pay such
difference, if positive, to Goldman, Sachs & Co., or to
request payment of such difference, if negative, from Goldman,
Sachs & Co.;
(iii) Delivery of Shares. To deliver the
remaining Shares to the Transfer Agent and Registrar on the
Exchange Date, with instructions that such Shares be
re-registered and re-issued as follows: (A) for and in the
name of each Holder (other than the Depositary) who holds
Securities in definitive form, the Transfer Agent and
Registrar shall be instructed to issue definitive certificates
representing a number of Shares equal to such Holder's pro
rata share of the total delivered to the Trustees under the
Contracts, rounded down to the nearest integral number; (B)
the Transfer Agent and Registrar shall be instructed to
transfer all remaining Shares to the account of the Custodian
held through the Depositary, who shall then be instructed to
transfer and credit such Shares to each
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<PAGE> 14
Participant who holds Securities, with each Participant
receiving its pro rata share of the total Shares delivered to
the Trust on the Exchange Date, reduced by the aggregate
fractional shares allocable to such Participant; and
(iv) Distribution of Cash in Respect of
Fractional Shares. To distribute to each Holder of Securities
cash in the amount of: (A) the fraction of a Share, if any,
allocable to such Holder as determined pursuant to clause (i)
(B) above; times (B) the Current Market Price.
(v) Record Date. The distributions described
in this paragraph (e) shall be made to Holders of record as of
the close of business on the Business Day preceding the
Exchange Date.
SECTION 2.5 Manner of Sales. Any sale of Trust property
permitted under Section 8.3(c) hereof shall be made through such executing
brokers or to such dealers as the Trustees, seeking best price and execution for
the Trust, shall designate in writing to the Paying Agent, taking into account
such factors as price, commission, size of order, difficulty of execution and
brokerage skill required.
SECTION 2.6 Limitations on Trustees' Powers. The Trustees are
not permitted:
(a) to purchase or hold any securities or instruments except
for the Shares, the Contracts, the Treasury Securities, the Temporary
Investments contem plated by Section 3.5 hereof and, in the event of a
Reorganization Event, Marketable Securities;
(b) to dispose of the Contracts prior to the
Exchange Date;
(c) to issue any securities or instruments except for the
Securities, or to issue any Securities other than the Securities sold
to the Sponsor and the Securi ties to be sold pursuant to the
Underwriting Agreement and until such Securities have been so purchased
and paid for in full;
(d) to make short sales or purchases on margin;
(e) to write put or call options;
(f) to borrow money;
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<PAGE> 15
(g) to underwrite securities;
(h) to purchase or sell real estate, commodities
or commodities contracts;
(i) to purchase restricted securities;
(j) to make loans; or
(k) to take any action, or direct or permit the
Administrator, the Paying Agent or the Custodian to take any
action, that would vary the investment of the Holders within the
meaning of Treasury Regulation Section 301.7701-4(c), or otherwise
take any action or direct or permit any action to be taken that would
or could cause the Trust not to be a "grantor trust" under the Code.
ARTICLE III
ACCOUNTS AND PAYMENTS
SECTION 3.1 The Trust Account. The Trustees shall, upon
issuance of the Securities, establish with the Paying Agent an account to be
called the "Trust Account". All moneys received by the Trustees in respect of
the Con tracts, the Treasury Securities and any Temporary Investments held
pursuant to Section 3.5 hereof, all moneys received from the sale of the
Securities to the Sponsor, and any proceeds from the sale to the Underwriters of
the Securities after the purchase of the Contracts and the Treasury Securities
and the payment of the Trust's expenses described in Section 3.2 hereof shall be
credited to the Trust Account.
SECTION 3.2 Payment of Fees and Expenses. The Administrator is
authorized to pay from the Trust Account out of the net proceeds of the sale of
the Securities, the fees and expenses of the Trust incurred in connection with
the offering of the Securities and the costs and expenses incurred in the
organization of the Trust.
SECTION 3.3 Distributions to Holders. On or shortly after each
Distribution Date the Trustees shall distribute to each Holder of record at the
close of business on the preceding Record Date, at the post office address of
the Holder appearing on the books of the Trust or Paying Agent or by any other
means mutually agreed upon by the Holder and the Trustees, an amount equal to
such Holder's
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<PAGE> 16
pro rata share of the Quarterly Distribution computed as of the close of
business on such Distribution Date.
SECTION 3.4 Segregation. All moneys and other assets deposited
or received by the Trustees hereunder shall be held by them in trust as part of
the Trust Estate until required to be disbursed or otherwise disposed of in
accordance with the provisions of this Trust Agreement, and the Trustees shall
handle such moneys and other assets in such manner as shall constitute the
segregation and holding in trust within the meaning of the Investment Company
Act.
SECTION 3.5 Temporary Investments. To the extent necessary to
enable the Paying Agent to make the next succeeding Quarterly Distribution, any
moneys deposited with or received by the Trustees in the Trust Account shall be
invested as soon as possible by the Paying Agent in Temporary Investments
maturing no later than the Business Day preceding the next following
Distribution Date. Except as otherwise specifically provided herein or in the
Paying Agent Agreement, the Paying Agent shall not have the power to sell,
transfer or otherwise dispose of any Temporary Investment prior to the maturity
thereof, or to acquire additional Temporary Investments. The Paying Agent shall
hold any Temporary Investments to its maturity and shall apply the proceeds
thereof upon maturity to the payment of the next succeeding Quarterly
Distribution. All such Temporary Investments shall be selected from time to time
by the Trustees or pursuant to standing instructions from the Trustees to the
Administrator, and the Administrator and/or Paying Agent shall have no liability
to the Trust or any Holder or any other Person with respect to any such Tempo
rary Investment. Any interest or other income received on any moneys in the
Trust Account shall, upon receipt thereof, be deposited into the Trust Account.
Notwithstanding the foregoing, not more than 5% of the assets of the Trust may
be held at any time in the form of cash and Temporary Investments, and the
Trustees shall distribute cash, or liquidate Temporary Investments and
distribute the proceeds thereof, if, when and to the extent needed to maintain
compliance with the foregoing restriction.
ARTICLE IV
REDEMPTION
SECTION 4.1 Redemption. The Trustees shall have no right or
obligation to redeem Securities.
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ARTICLE V
ISSUANCE OF CERTIFICATES; REGISTRY; TRANSFER OF SECURITIES
SECTION 5.1 Form of Certificate. Each Certificate evidencing
Securities shall be countersigned manually or in facsimile by the Managing
Trustee and executed manually by the Paying Agent in substantially the form of
Exhibit A hereto with the blanks appropriately filled in, shall be dated the
date of execution and delivery by the Paying Agent and shall represent a
fractional undivided interest in the Trust, the numerator of which fraction
shall be the number of Securities set forth on the face of such Certificate and
the denominator of which shall be the total number of Securities outstanding at
that time. All Securities shall be issued in registered form and shall be
numbered serially.
The Certificates delivered to the Underwriters at the First
Time of Delivery and the Second Time of Delivery (if any) will be issued in the
form of a global Certificate or Certificates representing the Securities issued
to the Underwriters, to be delivered to The Depository Trust Company, as
depositary ("DTC"), by or on behalf of the Trust. Such Certificate or
Certificates shall initially be registered on the books and records of the Trust
in the name of Cede & Co., the nominee of DTC, and no beneficial owner of such
Securities will receive a definitive Certificate representing such beneficial
owner's interest in such Securities, except as provided in the next paragraph.
Unless and until definitive, fully registered Certificates have been issued
pursuant to the next paragraph, the Trust shall be entitled to deal with DTC for
all purposes of this Agreement as the Holder and the sole holder of the Certifi
cates and shall have no obligation to the beneficial owners thereof, and none of
the Trust, the Trustees, or any agent of the Trust or the Trustees shall have
any liability with respect to or responsibility for the records of DTC.
If DTC elects to discontinue its services as securities
depository, then definitive Certificates shall be prepared by the Trust. Upon
surrender of the global Certificate or Certificates accompanied by registration
instructions, the Trustees shall cause definitive Certificates to be delivered
to the beneficial owners in accordance with the instructions of the DTC. Neither
the Trustees nor the Trust shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying on,
such instructions.
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<PAGE> 18
Pending the preparation of definitive Certifi cates, the
Trustees may execute and the Paying Agent shall authenticate and deliver
temporary Certificates (printed, lithographed, typewritten or otherwise
reproduced, in each case in form satisfactory to the Paying Agent). Temporary
Certificates shall be issuable as registered Certificates substantially in the
form of the definitive Certificates but with such omissions, insertions and
variations as may be appropriate for temporary Certificates, all as may be
determined by the Trustees with the concurrence of the Paying Agent. Every
temporary Certificate shall be executed by the Managing Trustee and be
authenticated by the Paying Agent upon the same conditions and in substantially
the same manner, and with like effect, as the definitive Certifi cates. Without
unreasonable delay the Managing Trustee shall execute and shall furnish
definitive Certificates and thereupon temporary Certificates may be surrendered
in exchange therefor without charge at each office or agency of the Paying Agent
and the Paying Agent shall authenticate and deliver in exchange for such
temporary Certificates definitive Certificates for a like aggregate number of
Securities. Until so exchanged, the temporary Certificates shall be entitled to
the same benefits hereunder as definitive Certificates.
SECTION 5.2 Transfer of Securities; Issuance, Transfer and
Interchange of Certificates. Securities may be transferred by the Holder thereof
by presentation and surrender of properly endorsed Certificates at the office of
the Paying Agent, accompanied by such documents executed by the Holder or his
authorized attorney as the Paying Agent deems necessary to evidence the
authority of the person making the transfer. Certificates issued pursuant to
this Trust Agreement are interchangeable for one or more other Certificates in
an equal aggregate number of Securities and all Certificates issued as may be
requested by the Holder and deemed appropriate by the Paying Agent shall be
issued in denominations of one Security or any multiple thereof. The Paying
Agent may deem and treat the person in whose name any Security shall be
registered upon the books of the Paying Agent as the owner of such Security for
all purposes hereunder and the Paying Agent shall not be affected by any notice
to the contrary. The transfer books maintained by the Paying Agent for the
purposes of this Section 5.2 hereof shall include the name and address of the
record owners of the Securities and shall be closed in connection with the
termination of the Trust pursuant to Section 8.3 hereof.
A sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such transfer shall be paid to the
Paying Agent by the
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<PAGE> 19
Holder. A Holder may be required to pay a fee for each new Certificate to be
issued pursuant to the preceding paragraph in such amount as may be specified
by the Paying Agent and approved by the Trustees.
All Certificates cancelled pursuant to this Trust Agreement
may be voided by the Paying Agent in accordance with the usual practice of the
Paying Agent or in accordance with the instructions of the Trustees; provided,
however, that the Paying Agent shall not be required to destroy cancelled
Certificates.
The Paying Agent may adopt other reasonable rules and
regulations for the registration, transfer and tender of Securities as it may,
in its discretion, deem necessary.
SECTION 5.3 Replacement of Certificates. In case any
Certificate shall become mutilated or be destroyed, stolen or lost, the Paying
Agent shall execute and deliver a new Certificate in exchange and substitution
therefor upon the Holder's furnishing the Paying Agent with proper
identification and satisfactory indemnity, complying with such other reasonable
regulations and conditions as the Paying Agent may prescribe and paying such
expenses and charges, including any bonding fee, as the Paying Agent may incur
or reasonably impose; provided that if the Trust has terminated or is in the
process of terminating, the Paying Agent, in lieu of issuing such new
Certificate, may, upon the terms and conditions set forth herein, make the
distributions set forth in Section 8.3(c) hereof. Any mutilated Certificate
shall be duly surrendered and cancelled before any duplicate Certificate shall
be issued in exchange and substitution therefor. Upon issuance of any duplicate
Certificate pur suant to this Section 5.3 hereof, the original Certificate
claimed to have been lost, stolen or destroyed shall become null and void and
of no effect, and any bona fide purchaser thereof shall have only such rights
as are afforded under Article 8 of the Uniform Commercial Code to a Holder
presenting a Certificate for transfer in the case of an overissue.
ARTICLE VI
ISSUANCE OF THE CONTRACTS
SECTION 6.1 Execution of the Contracts. The Contracts shall be
countersigned manually or in facsimile by the Managing Trustee and executed
manually by each of the
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<PAGE> 20
Sellers and shall be dated the date of execution and delivery by each of the
Sellers.
ARTICLE VII
TRUSTEES
SECTION 7.1 Trustees. The Trust shall have three Trustees who
shall initially be elected by the Sponsor. One Trustee shall be the Managing
Trustee and, as such, is authorized to execute documents and instruments on
behalf of the Trust. The Managing Trustee will be appointed by resolution of the
Trustees. Each Trustee shall serve until the next regular annual or special
meeting of Holders called for the purpose of electing Trustees and, then, until
such Trustee's successor is duly elected and qualified. Holders may not cumulate
their votes in the election of Trustees. Each Trustee shall not be considered to
have qualified for the office unless such Trustee shall agree to be bound by the
terms of this Trust Agreement and shall evidence his consent by executing this
Trust Agreement or a supplement hereto.
SECTION 7.2 Vacancies. Any vacancy in the office of a Trustee
may be filled in compliance with Sections 10 and 16 of the Investment Company
Act by the vote, within thirty days, of the remaining Trustees; provided that if
required by Section 16 of the Investment Company Act, the Trustees shall
forthwith cause to be held as promptly as possible and in any event within sixty
days (unless the Commission by order shall extend such period) a meeting of
Holders for the purpose of electing Trustees in compliance with Sections 10 and
16 of the Investment Company Act. Until a vacancy in the office of any Trustee
is filled as provided above, the remaining Trustees in office, regardless of
their number, shall have the powers granted to the Trustees and shall discharge
all the duties imposed upon the Trustees by this Trust Agreement. Election shall
be by the affirmative vote of Holders of a majority of the Securities entitled
to vote present in person or by proxy at a special meeting of Holders called for
the purpose of electing any Trustee. Each individual Trustee shall be at least
21 years of age and shall not be under any legal disability. No Trustee who is
an "interested person", as defined in the Investment Company Act, may assume
office if it would cause the composition of the Trustees of the Trust not to be
in compliance with the percentage limitations on interested persons in Section
10 of the Investment Company Act. Trustees need not be Holders. Notice of the
appointment or
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<PAGE> 21
election of a successor Trustee shall be mailed promptly after acceptance of
such appointment by the successor Trustee to each Holder.
SECTION 7.3 Powers. The Trust will be managed solely by the
Trustees, who will, subject to the provisions of Article II hereof, have
complete and exclusive control over the management, conduct and operation of the
Trust's business, and shall have the rights, powers and authority of a board of
directors of a corporation organized under New York law. The Trustees shall have
fiduciary responsibility for the safekeeping and use of all funds and assets of
the Trust and shall not employ, or permit another to employ, such funds or
assets in any manner except for the exclusive benefit of the Trust and except in
accordance with the terms of this Trust Agreement. Subject to the continuing
supervision of the Trustees and as permitted by applicable law, the functions of
the Trust shall be performed by the Custodian, the Paying Agent, the
Administrator and such other entities engaged to perform such functions as the
Trustees may determine, including, without limitation, any or all administrative
functions.
SECTION 7.4 Meetings. Meetings of the Trustees shall be held
from time to time upon the call of any Trustee on not less than 48 hours' notice
(which may be waived by any or all of the Trustees in writing either before or
after such meeting or by attendance at the meeting unless the Trustee attends
the meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting has not been lawfully called or
convened). The Trustees shall act either by majority vote of the Trustees
present at a meeting at which at least a majority of the Trustees then in office
are present or by a unanimous written consent of the Trustees without a meeting.
Except as otherwise required under the Investment Company Act, all or any of the
Trustees may participate in a meeting of the Trustees by means of a conference
telephone call or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to such communications equipment shall constitute presence in person at
such meeting.
SECTION 7.5 Resignation and Removal. Any Trustee may resign
and be discharged of the trust created by the Trust Agreement by executing an
instrument in writing resigning as Trustee, filing the same with the
Administrator and sending notice thereof to the remaining Trustees, and such
resignation shall become effective immediately unless otherwise specified
therein. Any Trustee may be removed in
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<PAGE> 22
the event of incapacity by vote of the remaining Trustees and for any reason by
written declaration or vote of the Holders of more than 66 2/3% of the
outstanding Securities, notice of which vote shall be given to the remaining
Trustees and the Administrator. The resignation, removal or failure to reelect
any Trustee shall not cause the termination of the Trust.
SECTION 7.6 Liability. The Trustees shall not be liable to the
Trust or any Holder for any action taken or for refraining from taking any
action except in the case of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties of their office. Specifically, without
limitation, the Trustees shall not be responsible for or in respect of the
recitals herein or the validity or sufficiency of this Trust Agreement or for
the due execution hereof by any other Person, or for or in respect of the
validity or sufficiency of Securities or certificates representing Securities
and shall in no event assume or incur any liability, duty or obligation to any
Holder or to any other Person, other than as expressly provided for herein. The
Trustees may employ agents, attorneys, administrators, accountants and auditors,
and shall not be answerable for the default or misconduct of any such Persons if
such Persons shall have been selected with reasonable care. Action in good faith
may include action taken in good faith in accordance with an opinion of counsel.
In no event shall any Trustee be personally liable for any expenses with respect
to the Trust. Each Trustee shall be indemnified from the Trust Account with
respect to any claim, liability, loss or expense incurred in acting as Trustee
of the Trust, including the costs and expenses of the defense against any such
claim or liability, except in the case of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties of his office.
SECTION 7.7 Compensation. Each Trustee, other than a Trustee
who is a director, officer or employee of the Sponsor, any Underwriter, or the
Administrator or any affiliate thereof, shall receive a one-time, up-front fee
of $_________, in respect of its annual fee and anticipated out-of-pocket
expenses. In addition, the Managing Trustee shall receive an additional
one-time, up-front fee of $________ for serving in such capacity. The Trustees
will not receive any pension or retirement benefits. In the event of the
resignation or removal of a Trustee, such Trustee shall remit to the Trust the
portion of its fee ratable for the period from the day of such resignation or
removal through the Exchange Date.
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<PAGE> 23
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Meetings of Holders. The Trustees shall not hold
annual or regular meetings of Holders except as set forth herein. A special
meeting may be called at any time by the Trustees or upon petition of Holders of
not less than 51% of the Securities outstanding (unless substantially the same
matter was voted on during the preceding 12 months), and shall be called as
provided in Section 7.2 hereof (or as otherwise required by the Investment
Company Act and the rules and regulations thereunder, including, without
limitation, when requested by the Holders of not less than 10% of the Securities
outstanding for the purposes of voting upon the question of the removal of any
Trustee or Trustees). The Trustees shall establish, and notify the Holders in
writing of, the record date for each such meeting which shall be not less than
10 nor more than 50 days before the meeting date. Holders at the close of
business on the record date will be entitled to vote at the meeting. The
Administrator shall, as soon as possible after any such record date (or prior to
such record date if appropriate), mail by first class mail to each Holder a
notice of meeting and a proxy statement and form of proxy in the form approved
by the Trustees and complying with the Investment Company Act and the rules and
regulations thereunder. Except as otherwise specified herein or in any provision
of the Investment Company Act and the rules and regulations thereunder, any
action may be taken by vote of Holders of a majority of the Securities
outstanding present in person or by proxy if Holders of a majority of Securities
outstanding on the record date are so represented. Each Security shall have one
vote and may be voted in person or by duly executed proxy. Any proxy may be
revoked by notice in writing, by a subsequently dated proxy or by voting in
person at the meeting, and no proxy shall be valid after eleven months following
the date of its execution. Any Investment Company owning Securities in excess of
the limits imposed by Sections 12(d)(1)(A)(i) and 12(d)(1)(C) of the Investment
Company Act will be required to vote its Securities in proportion to the votes
of all other Holders.
SECTION 8.2 Books and Records; Reports. (a) The Trustees shall
keep a certified copy or duplicate original of this Trust Agreement on file at
the office of the Trust and the office of the Administrator available for
inspection at all reasonable times during its usual business hours by any
Holder. The Trustees shall keep proper books of record and account for all the
transactions under this Trust
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<PAGE> 24
Agreement at the office of the Trust and the office of the Administrator, and
such books and records shall be open to inspection by any Holder at all
reasonable times during usual business hours. The Trustees shall retain all
books and records in compliance with Section 31 of the Investment Company Act
and the rules and regulations thereunder.
(b) With each payment to Holders the Paying Agent shall set
forth, either in the instruments by means of which payment is made or in a
separate statement, the amount being paid from the Trust Account expressed as a
dollar amount per Security and the other information required under Section 19
of the Investment Company Act and the rules and regulations thereunder. The
Trustees shall prepare and file or dis tribute reports as required by Section 30
of the Investment Company Act and the rules and regulations thereunder. The
Trustees shall prepare and file such reports as may from time to time be
required to be filed or distributed to Holders under any applicable state or
Federal statute or rule or regulation thereunder, and shall file such tax
returns as may from time to time be required under any applicable state or
Federal statute or rule or regulation thereunder. One of the Trustees shall be
designated by resolution of the Trustees to make the filings and give the
notices required by Rule 17g-1 under the Investment Company Act.
(c) In calculating the net asset value of the Trust as
required by the Investment Company Act, (i) the Treasury Securities will be
valued at the mean between the last current bid and asked prices or, if
quotations are not available, as determined in good faith by the Trustees, (ii)
short-term investments having a maturity of 60 days or less will be valued at
cost with accrued interest or dis count earned included in interest receivable
and (iii) the Contracts will be valued on the basis of the bid price received by
the Trust in respect of the Contracts, or any portion thereof covering not less
than 1000 shares, from an independent broker-dealer firm unaffiliated with the
Trust to be named by the Trustees who is in the business of making bids on
financial instruments similar to the Contracts and with terms comparable
thereto.
SECTION 8.3 Termination. (a) This Trust Agree ment and the
Trust created hereby shall terminate upon the earliest of (i) the date 90 days
after the execution of this Trust Agreement if (x) the Securities have not
theretofore been issued or (y) the net worth of the Trust is not at least
$100.00 at such time, (ii) the date of the repayment, sale or other disposition,
as the case may be, of all of the Contracts, the Treasury Securities and any
other securities
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<PAGE> 25
held hereunder, (iii) the date 10 Business Days after the Exchange Date (or, if
the Contracts shall be accelerated pursuant to Article VIII thereof, 10 Business
Days after the date on which the Trust shall receive the Shares then required to
be delivered by each of the Sellers, or the proceeds of any sale of collateral
pursuant to Section 8(c) of the Collateral Agreements), and (iv) the date which
is 21 years less 91 days after the death of the last survivor of all of the
descendants of Joseph P. Kennedy living on the date hereof. The Trust is
irrevocable, the Sponsor has no right to withdraw any assets constituting a
portion of the Trust Estate, and the dissolution of the Sponsor shall not
operate to terminate the Trust. The death or incapacity of any Holder shall not
operate to terminate this Trust Agreement, nor entitle his legal representatives
or heirs to claim an accounting or to take any action or proceeding in any court
for a partition or winding up of the Trust, and shall not otherwise affect the
rights, obligations and liabilities of the parties hereto.
(b) Written notice of any termination shall be sent to Holders
specifying the record date for any distribu tion to Holders and the time of
termination as determined by the Trustees, upon which the books maintained by
the Paying Agent pursuant to Section 5.2 hereof shall be closed.
(c) For purposes of termination under Sections 8.3(a)(ii),
(iii) and (iv) hereof, within five Business Days after such termination, the
Trustees shall, subject to any applicable provisions of law, effect the sale of
any remaining property of the Trust, and the Paying Agent shall distribute pro
rata as soon as practicable thereafter to each Holder, upon surrender for
cancellation of its Certificates, its interest in the Trust Estate. Together
with the distribution to the Holders, the Trustees shall furnish the Holders
with a final statement as of the date of the distribution of the amount
distributable with respect to each Security.
SECTION 8.4 Amendment and Waiver. (a) This Trust Agreement,
and any of the agreements referred to in Section 2.2(a) hereof, may be amended
from time to time by the Trustees for any purpose prior to the issuance and sale
to the Underwriters of the Securities and thereafter without the consent of any
of the Holders (i) to cure any ambiguity or to correct or supplement any
provision contained herein or therein which may be defective or inconsistent
with any other provision contained herein or therein; (ii) to change any
provision hereof or thereof as may be required by applicable law or the
Commission or any successor governmental agency exercising similar authority;
or (iii) to make
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<PAGE> 26
such other provisions in regard to matters or questions arising hereunder or
thereunder as shall not materially adversely affect the interests of the Holders
(as determined in good faith by the Trustees, who may rely on an opinion of
counsel).
(b) This Trust Agreement may also be amended from time to time
by the Trustees (or the performance of any of the provisions of the Trust
Agreement may be waived) with the consent by the required vote of the Holders in
accordance with Section 8.1 hereof; provided that this Trust Agreement may not
be amended (i) without the consent by vote of the Holders of all Securities then
outstanding, so as to increase the number of Securities issuable hereunder above
the number of Securities specified in Section 2.2(c) hereof or such lesser
number as may be outstanding at any time during the term of this Trust
Agreement, (ii) to reduce the interest in the Trust represented by Securities
without the consent of the Holders of such Securities, (iii) if such amendment
is prohibited by the Investment Company Act or other applicable law, (iv)
without the consent by vote of the Holders of all Securities then outstanding,
if such amendment would effect a change in the voting requirements set forth in
Section 8.1 hereof or this Section 8.4, or (v) without the consent by vote of
the Holders of the lesser of (x) 67% or more of the Securities represented at a
special meeting of Holders, if more than 50% of the Securities outstanding are
represented at such meeting, and (y) more than 50% of the Securities
outstanding, if such amendment would effect a change in Section 2.1 or 2.6
hereof.
(c) Promptly after the execution of any amendment, the
Trustees shall furnish written notification of the substance of such amendment
to each Holder.
(d) Notwithstanding subsections (a) and (b) of this Section
8.4 no amendment hereof shall permit the Trust, the Trustees, the Administrator,
the Paying Agent or the Custodian to take any action or direct or permit any
Person to take any action that (i) would vary the investment of Holders within
the meaning of Treasury Regulation Section 301.7701-4(c), or (ii) would or could
cause the Trust, or direct or permit any action to be taken that would or could
cause the Trust, not to be a "grantor trust" under the Code.
SECTION 8.5 Accountants.
(a) The Trustees shall, in accordance with Section 30 of the
Investment Company Act, file annually with the Commission such information,
documents and reports as investment companies having securities registered on a
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national securities exchange are required to file annually pursuant to Section
13(a) of the Securities Exchange Act of 1934, as amended, and the rules and
regulations issued thereunder. The Trustees shall transmit to the Holders, at
least semi-annually, the reports required by Section 30(d) of the Investment
Company Act and the rules and regulations thereunder, including, without
limitation, a balance sheet accompanied by a statement of the aggregate value of
invest ments on the date of such balance sheet, a list showing the amounts and
values of such investments owned on the date of such balance sheet, and a
statement of income for the period covered by the report. Financial statements
contained in such annual reports shall be accompanied by a certificate of
independent public accounts based upon an audit not less in scope or procedures
than that which independent public accountants would ordinarily make for the
purpose of presenting comprehensive and dependable financial statements and
shall contain such information as the Commission may prescribe. Each such report
shall state that such indepen dent public accountants have verified investments
owned, either by actual examination or by receipt of a certificate from the
Custodian.
(b) The independent public accountants referred to in
subsection (a) above shall be selected at a meeting held within thirty days
before or after the beginning of the fiscal year by the vote, cast in person, of
a majority of the Trustees who are not "interested persons" as defined in the
Investment Company Act and such selection shall be sub mitted for ratification
at the first meeting of Holders to be held as set forth in Section 8.1 hereof,
and thereafter as required by the Investment Company Act and the rules and
regulations thereunder. The employment of any independent public accountant for
the Trust shall be conditioned upon the right of the Holders by a vote of the
lesser of (i) 67% or more of the Securities present at a special meeting of
Holders, if Holders of more than 50% of Securities outstanding are present or
represented by proxy at such meeting or (ii) more than 50% of the Securities
outstanding to terminate such employment at any time without penalty.
(c) The foregoing provisions of this Section 8.5 are in
addition to any applicable requirements of the Investment Company Act and the
rules and regulations thereunder.
SECTION 8.6 Nature of Holder's Interest. Each Holder holds at
any given time a beneficial interest in the Trust Estate, but does not have any
right to take title or possession of any portion of the Trust Estate. Each
Holder expressly waives any right he may have under any rule of
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<PAGE> 28
law, or the provisions of any statute, or otherwise, to require the Trustees at
any time to account, in any manner other than as expressly provided in this
Trust Agreement, for the Shares, the Contracts, the Treasury Securities or other
assets or monies from time to time received, held and applied by the Trustees
hereunder. No Holder shall have any right except as provided herein to control
or determine the operation and management of the Trust or the obligations of the
parties hereto. Nothing set forth herein or in the certificates representing
Securities shall be construed to constitute the Holders from time to time as
partners or members of an association.
SECTION 8.7 New York Law to Govern. This Trust Agreement is
executed and delivered in the State of New York, and all laws or rules of
construction of the State of New York shall govern the rights of the parties
hereto and the Holders and the construction, validity and effect of the
provisions hereof.
SECTION 8.8 Notices. Any notice, demand, direction or
instruction to be given to the Sponsor hereunder shall be in writing and shall
be duly given if mailed or delivered to Goldman, Sachs & Co., 85 Broad Street,
New York, New York 10004, Attention: Registration Department, or at such other
address as shall be specified by the Sponsor to the other parties hereto in
writing. Any notice, demand, direction or instruction to be given to the Trust
and the Trustees hereunder shall be in writing and shall be duly given if mailed
or delivered to the Trust at 101 Barclay Street, New York, New York 10286 and to
each Trustee at such Trustee's address set forth beneath its signature below, or
such other address as shall be specified to the other parties hereto by such
party in writing. Any notice to be given to a Holder shall be duly given if
mailed, first class postage prepaid, or by such other substantially equivalent
means as the Trustees may deem appropriate, or delivered to such Holder at the
address of such Holder appearing on the registry of the Paying Agent.
SECTION 8.9 Severability. If any one or more of the covenants,
agreements, provisions or terms of this Trust Agreement shall be for any reason
whatsoever held invalid, then such covenants, agreements, provisions or terms
shall be deemed severable from the remaining covenants, agree ments, provisions
and terms of this Trust Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Trust Agreement or of the
Certificates, or the rights of the Holders thereof.
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<PAGE> 29
SECTION 8.10 Counterparts. This Trust Agreement may be
executed in counterparts, and as so executed will constitute one agreement,
binding on all of the parties hereto.
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<PAGE> 30
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed.
GOLDMAN, SACHS & CO.
By:
-------------------------------
TRUSTEES:
----------------------------------
Name: William R. Latham III
Address: Department of Economics
University of Delaware
Newark, Delaware 19716
---------------------------------
Name: James B. O'Neill
Address: Center for Economic
Education and
Entrepreneurship
University of Delaware
Newark, Delaware 19716
---------------------------------
Name: Donald J. Puglisi
Address: Department of Finance
University of Delaware
Newark, Delaware 19716
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<PAGE> 31
Schedule I
TREASURY SECURITIES
All terms specified are for stripped principal or interest
components of U.S. Treasury debt obligations.
<PAGE> 32
Exhibit A
Unless this certificate is presented by an authorized representative of
The Depository Trust Company, a New York Corporation ("DTC"), to
Automatic Common Exchange Security Trust II or its agent for
registration of transfer, exchange, or payment, and any certificate
issued is registered in the name of Cede & Co. (or in such other name
as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an
interest herein. This certificate may be exchanged by an authorized
representative of DTC in whole or in part for securities in definitive
form, registered in the names of such holders as such representative of
DTC shall specify, in which case, a new certificate will be issued in
the name of Cede & Co. (or in such other name as is requested by such
authorized representative of DTC) representing the securities not
issued in definitive form.
THIS CERTIFICATE IS ISSUED UNDER AND IS SUBJECT TO THE TERMS, PROVISIONS AND
CONDITIONS OF THE TRUST AGREEMENT REFERRED TO BELOW TO WHICH THE HOLDER OF THIS
CERTIFICATE BY VIRTUE OF THE ACCEPTANCE HEREOF ASSENTS AND IS BOUND.
$____ TRUST AUTOMATIC COMMON EXCHANGE SECURITIES
AUTOMATIC COMMON EXCHANGE SECURITY TRUST II
CUSIP NO. ___________
NO. 1 ____________ SHARES
-------
THIS CERTIFIES THAT CEDE & CO. IS THE RECORD OWNER OF ____________ $____ TRUST
AUTOMATIC COMMON EXCHANGE SECURITIES OF AUTOMATIC COMMON EXCHANGE SECURITY TRUST
II CONSTITUTING FRACTIONAL UNDIVIDED INTERESTS IN AUTOMATIC COMMON EXCHANGE
SECURITY TRUST II, A TRUST CREATED UNDER THE LAWS OF THE STATE OF NEW YORK
PURSUANT TO A TRUST AGREEMENT BETWEEN GOLDMAN, SACHS & CO. AND THE TRUSTEES
NAMED THEREIN. THIS CERTIFICATE IS ISSUED UNDER AND IS SUBJECT TO THE TERMS,
PROVISIONS AND CONDITIONS OF THE TRUST AGREEMENT TO WHICH THE HOLDER OF THIS
CERTIFICATE BY VIRTUE OF THE ACCEPTANCE HEREOF ASSENTS AND IS BOUND, A COPY OF
WHICH TRUST AGREEMENT IS AVAILABLE AT THE OFFICE OF THE TRUST'S ADMINISTRATOR
AND PAYING AGENT, 101 BARCLAY STREET, NEW YORK, NEW YORK 10286. THIS CERTIFICATE
IS TRANSFERABLE AND INTERCHANGEABLE BY THE REGISTERED OWNER IN PERSON OR BY HIS
DULY AUTHORIZED ATTORNEY AT THE OFFICE OF THE PAYING AGENT UPON SURRENDER OF
THIS CERTIFICATE PROPERLY ENDORSED OR ACCOMPANIED BY A WRITTEN INSTRUMENT OF
TRANSFER AND ANY
<PAGE> 33
OTHER DOCUMENTS THAT THE PAYING AGENT MAY REQUIRE FOR TRANSFER, IN FORM
SATISFACTORY TO THE PAYING AGENT AND PAYMENT OF THE FEES AND EXPENSES PROVIDED
IN THE TRUST AGREEMENT.
THIS CERTIFICATE IS NOT VALID UNLESS MANUALLY COUNTERSIGNED BY
THE PAYING AGENT.
WITNESS THE FACSIMILE SIGNATURE OF THE MANAGING TRUSTEE.
Automatic Common Exchange
Security Trust II
DATED: May __, 1997
By
-------------------------
Managing Trustee
COUNTERSIGNED:
The Bank of New York,
as Paying Agent
By
---------------------------
Authorized Signature
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<PAGE> 1
EXHIBIT 2.h
AUTOMATIC COMMON EXCHANGE SECURITY TRUST II
(subject to exchange into shares of common stock of Republic Industries, Inc.)
$______ TRUST AUTOMATIC COMMON EXCHANGE SECURITIES
Underwriting Agreement
May , 1997
Goldman, Sachs & Co.,
As representatives of the several Underwriters
named in Schedule I hereto,
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
Automatic Common Exchange Security Trust II, a trust duly created under
the laws of the State of New York (such trust and the trustees thereof acting in
their capacities as such being referred to herein as the "Trust"), proposes,
subject to the terms and conditions stated herein, to issue and sell to the
Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of
8,700,000 shares of the $___.__ Automatic Common Exchange Securities of the
Trust specified above (the "Firm Securities") and, at the election of the
Underwriters, up to an aggregate of 1,234,235 additional shares of the
$___.__ Automatic Common Exchange Securities (the "Optional Securities")
(the Firm Securities and the Optional Securities which the Underwriters elect
to purchase pursuant to Section 2 hereof are herein collectively called the
"Securities").
The $___.__ Automatic Common Exchange Securities of the Trust to be
outstanding after giving effect to the sales contemplated hereby are hereinafter
called the "Automatic Common Exchange Securities". Each Automatic Common
Exchange Security will be exchanged for one or fewer shares of Common Stock, par
value $0.01 per share ("Stock"), of Republic Industries, Inc., a Delaware
corporation (the "Company"), or for cash pursuant to the Cash Settlement
Alternative (as such term is defined in the Trust Prospectus) (as defined in
Section 1(c)(i) hereof) on _________, 2000 (the "Exchange Date") to be delivered
pursuant to forward purchase contracts (the "Contracts"), dated June __, 1997,
among the Trust and one or more existing stockholders of the Company (the
"Sellers"). The Trust has entered into a Contract with each Seller obligating
that Seller to deliver to the Trust on the Exchange Date a number of shares of
Stock equal to the product of the Exchange Rate (as such term is defined in the
Trust Prospectus) times the initial number of shares of Stock subject to such
Contract. The Sellers' obligations under the Contracts will be secured by
pledges of collateral pursuant to the terms of
<PAGE> 2
collateral agreements, dated June __, 1997, among each of the Sellers, The Bank
of New York ("BONY"), as collateral agent (in such capacity, the "Collateral
Agent"), and the Trust (the "Collateral Agreements").
1. (a) The Company represents and warrants to, and agrees with, each of
the Underwriters, the Trust and the Sellers that:
(i) A registration statement on Form S-3 (File No.
333-23415) (the "Initial Company Registration Statement") in respect of
the shares of Stock deliverable pursuant to the Contracts has been
filed with the Securities and Exchange Commission (the "Commission");
the Initial Company Registration Statement and any post-effective
amendment thereto, each in the form heretofore delivered to you, and,
excluding exhibits thereto but including all documents incorporated by
reference in the prospectus contained therein, to you for each of the
other Underwriters, have been declared effective by, or have been filed
with, as the case may be, the Commission in such form; no other
document with respect to the Initial Company Registration Statement has
heretofore been filed with the Commission; and no stop order suspending
the effectiveness of the Initial Company Registration Statement or any
post-effective amendment thereto has been issued and no notice has been
received from the Commission by the Company that any proceeding for
that purpose has been initiated (any preliminary prospectus included in
the Initial Company Registration Statement or filed with the Commission
pursuant to Rule 424(a) of the rules and regulations of the Commission
under the Act is hereinafter called a "Company Preliminary Prospectus";
the various parts of the Initial Company Registration Statement,
including all exhibits thereto and including (A) the information
contained in the form of final prospectus filed with the Commission
pursuant to Rule 424(b) under the Securities Act of 1933, as amended
(the "Act"), in accordance with Section 5(a) hereof and deemed by
virtue of Rule 430A under the Act to be part of the Initial Company
Registration Statement at the time it was declared effective and (B)
the documents incorporated by reference in the prospectus contained in
the Initial Company Registration Statement at the time such part of the
Initial Company Registration Statement became effective as amended at
the time such part of the Initial Company Registration Statement became
effective, are hereinafter collectively called the "Company
Registration Statement"; such final prospectus, in the form first filed
pursuant to Rule 424(b) under the Act, is hereinafter called the
"Company Prospectus"; the Trust Registration Statement (as defined in
Section 1(c)(i) hereof) and the Company Registration Statement are
hereinafter collectively called the "Registration Statements" and the
Trust Prospectus and the Company Prospectus are hereinafter
collectively called the "Prospectuses"; any reference herein to any
Company Preliminary Prospectus or the Company Prospectus shall be
deemed to refer to and include the documents incorporated by reference
therein pursuant to Item 12 of Form S-3 under the Act, as of the date
of such Company Preliminary Prospectus or Company Prospectus, as the
case may be; any reference to any amendment or supplement to any
Company Preliminary Prospectus or the Company Prospectus shall be
deemed to refer to and include any documents filed after the date of
such Company Preliminary Prospectus or Company Prospectus, as the case
may be, under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and
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<PAGE> 3
incorporated by reference in such Company Preliminary Prospectus or
Company Prospectus, as the case may be; and any reference to any
amendment to the Company Registration Statement shall be deemed to
refer to and include any annual report of the Company filed pursuant to
Section 13(a) or 15(d) of the Exchange Act after the effective date of
the Initial Company Registration Statement that is incorporated by
reference in the Company Registration Statement);
(ii) No order preventing or suspending the use of
any Company Preliminary Prospectus has been issued by the Commission,
and each Company Preliminary Prospectus, at the time of filing thereof,
conformed in all material respects to the requirements of the Act and
the rules and regulations of the Commission thereunder, and did not
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that this representation
and warranty shall not apply to any statements or omissions made in
reliance upon and in conformity with information furnished in writing
to the Company by the Underwriters or the Sellers expressly for use
therein;
(iii) The documents incorporated by reference in the
Company Prospectus, when they became effective or were filed with the
Commission, as the case may be, conformed in all material respects to
the requirements of the Act or the Exchange Act, as applicable, and the
rules and regulations of the Commission thereunder, and none of such
documents contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; and any further documents
so filed and incorporated by reference in the Company Prospectus or any
further amendment or supplement thereto, when such documents become
effective or are filed with the Commission, as the case may be, will
conform in all material respects to the requirements of the Act or the
Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by the
Underwriters or the Sellers expressly for use therein;
(iv) The Company Registration Statement conforms,
and the Company Prospectus and any further amendments or supplements to
the Company Registration Statement or the Company Prospectus, when they
become effective or are filed with the Commission, will conform, in all
material respects to the requirements of the Act and the rules and
regulations of the Commission thereunder and do not and will not, as of
the applicable effective date as to the Company Registration Statement
and any amendment thereto, and as of the applicable filing date as to
the Company Prospectus and any amendment or supplement thereto, contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that this representation and
warranty shall not apply to any state-
3
<PAGE> 4
ments or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by the Underwriters or
the Sellers expressly for use therein;
(v) Except as disclosed in the Company Prospectus
or any document incorporated by reference therein, the Company
and its subsidiaries, taken as a whole, has not sustained since the
date of the latest audited financial statements included or
incorporated by reference in the Company Prospectus any material loss
or interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree; and, since
the latest dates as of which information is given in the Company
Registration Statement and the Company Prospectus or any document
incorporated by reference therein, there has not been any change in the
outstanding capital stock in excess of 100,000,000 shares or long-term
debt (net of current maturities) and long-term revenue earning vehicle
debt (net of current maturities) in excess of $300,000,000 of the
Company on a consolidated basis, any material adverse change, or any
development involving a prospective material adverse change, in or
affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, taken as a whole, otherwise than as set forth or
contemplated in the Company Prospectus;
(vi) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
Delaware, with power and authority to own its properties and conduct
its business as described in the Company Prospectus, and has been duly
qualified as a foreign corporation for the transaction of business and
is in good standing under the laws of each other jurisdiction in which
it owns or leases properties or conducts any business so as to require
such qualification, or is subject to no material liability or
disability by reason of the failure to be so qualified in any such
jurisdiction; and substantially all of the subsidiaries of the Company
(the "significant subsidiaries") have been duly incorporated and are
validly existing as corporations in good standing under the laws of
their respective jurisdictions of incorporation;
(vii) The Company had, at the time of filing, an
authorized capitalization as set forth in the Company Prospectus, and
all of the issued shares of capital stock of the Company, including the
Stock, have been duly and validly authorized and issued, are fully paid
and non-assessable and conform to the description of the Stock
contained in the Company Prospectus; and all of the issued shares of
capital stock of each significant subsidiary of the Company have been
duly and validly authorized and issued, are fully paid and
non-assessable and (except for directors' qualifying shares) are owned
directly or indirectly by the Company, free and clear of all material
liens, encumbrances, equities or claims;
(viii) The compliance by the Company with all of the
provisions of this Agreement and the consummation of the transactions
herein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any material indenture, mortgage, deed of trust,
4
<PAGE> 5
loan agreement or other material agreement or instrument to which the
Company or any of its significant subsidiaries is a party or by which
the Company or any of its significant subsidiaries is bound or to
which the material property or assets of the Company and its
significant subsidiaries, taken as a whole, is subject, nor will such
action result in any violation of the provisions of the Third Amended
and Restated Certificate of Incorporation or By-laws of the Company or
any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or
any of its significant subsidiaries or any of their material
properties, taken as a whole; and no consent, approval, authorization,
order, registration or qualification of or with any such court or
governmental agency or body is required for the performance by the
Company of its obligations under this Agreement, except such as may be
required by the National Association of Securities Dealers, Inc. (the
"NASD") or the registration under the Act of the Securities and such
consents, approvals, authorizations, registrations or qualifications
as may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the shares of
Securities pursuant to the Contracts;
(ix) Neither the Company nor any of its significant
subsidiaries is in violation of its certificate of incorporation or
by-laws or in material default in the performance or observance of any
material obligation, agreement, covenant or condition contained in any
material indenture, mortgage, deed of trust, loan agreement, lease or
other material agreement or instrument to which it is a party or by
which it may be bound which default would individually or in the
aggregate have a material adverse effect on the current or future
consolidated financial position, stockholders' equity or results of
operations of the Company and its subsidiaries;
(x) The statements set forth in the Company
Prospectus under the caption "Description of Capital Stock", as
modified by the Company's Form 8-K dated May 14, 1997, insofar as they
purport to constitute a summary of the terms of the Stock, are
accurate, complete and fair in all material respects;
(xi) Other than as set forth in the Company
Prospectus, there are no legal or governmental proceedings
pending to which the Company or any of its subsidiaries is a party or
of which any property of the Company or any of its subsidiaries is the
subject which, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a material
adverse effect on the current or future consolidated financial
position, stockholders' equity or results of operations of the
Company and its subsidiaries; and, to the best of the Company's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(xii) The Company is not an "investment company" or
an entity "controlled" by an "investment company", as such terms are
defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act" and, together with the Act, the "Acts");
(xiii) The Stock is listed on The Nasdaq Stock
Market -- National Market ("Nasdaq");
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<PAGE> 6
(xiv) Neither the Company nor any of its affiliates
does business with the government of Cuba or with any person or
affiliate located in Cuba within the meaning of Section 517.075,
Florida Statutes; and
(xv) Arthur Andersen LLP, who have certified certain
financial statements of the Company and its subsidiaries, are
independent public accountants as required by the Act and the rules and
regulations of the Commission thereunder.
(b) Each Seller represents and warrants to, and agrees with,
each of the Underwriters, the Company and the Trust that:
(i) The compliance by such Seller with all of the
provisions of this Agreement, the Contract to which such Seller is a
party and the Collateral Agreement to which such Seller is a party and
the consummation of the transactions herein and therein contemplated
will not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which such Seller is a party or by which such Seller is
bound or to which any of the property or assets of such Seller is
subject, nor will such action result in any violation of the provisions
of any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over such Seller or any
of the property of such Seller; and no consent, approval,
authorization, order, registration or qualification of or with any such
court or governmental agency or body is required for the compliance by
such Seller with or the consummation by such Seller of the transactions
contemplated by this Agreement, the Contract to which such Seller is a
party or the Collateral Agreement to which such Seller is a party,
except such as may be required by the NASD or the registration under
the Act of the Securities and such consents, approvals, authorizations,
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of the Stock by the Trust pursuant to the Contracts;
(ii) This Agreement has been duly authorized (in
the case of each Non-Individual Seller (as defined in Section 7(j)
hereof)), executed and delivered by such Seller; the Contract to which
such Seller is a party and the Collateral Agreement to which such
Seller is a party have been duly authorized (in the case of each
Non-Individual Seller), executed and delivered by such Seller and,
assuming due authorization, execution and delivery by the other parties
thereto, constitute valid and legally binding agreements of such
Seller, enforceable in accordance with their respective terms, subject,
as to enforcement, to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors'
rights and to general equity principles;
(iii) Such Seller has, and immediately prior to each
Time of Delivery (as defined in Section 4(a) hereof) such Seller will
have, good and valid title to the shares of Stock to be pledged and
assigned by it under the Collateral Agreement to which such Seller is a
party, free and clear of all liens, encumbrances, equities or claims
other than those created pursuant to such Collateral Agreement; all
consents, approvals, authorizations and orders necessary for such
Seller to pledge and
6
<PAGE> 7
assign the shares of Stock to be pledged and assigned by such Seller
pursuant to such Collateral Agreement have been obtained; such Seller
has full right, power and authority to pledge and assign the shares of
Stock to be pledged and assigned by such Seller pursuant to such
Collateral Agreement to which such Seller is a party; and upon delivery
of such shares of Stock and payment therefor pursuant to the Contracts
to which such Seller is a party, good and valid title to such shares of
Stock, free and clear of all liens, encumbrances, equities or claims,
will pass to the Trust;
(iv) The representations and warranties of such
Seller set forth in Section 3 of such Collateral Agreement are true and
correct on and as of the date hereof with the same effect as though
such representations and warranties had been set forth in full in this
Agreement;
(v) During the period beginning from the date
hereof and continuing to and including the date 90 days after the date
of the Trust Prospectus, such Seller will not offer, sell, contract to
sell or otherwise dispose of, except as provided hereunder, any Stock
or any securities of the Company that are substantially similar to the
Stock, including but not limited to any securities that are convertible
into or exchangeable for, or that represent the right to receive, Stock
or any such substantially similar securities without your prior written
consent, provided, however, that if the Underwriters have not exercised
their right to purchase all the Optional Securities pursuant to
subsection 2(b) hereof as of the 30th calendar day after the date of
the Trust Prospectus, the agreement of the Sellers in this paragraph
(v) of subsection 1(b) shall not apply to those Optional Securities the
Underwriters have not purchased by such date;
(vi) Such Seller has not taken, nor will such
Seller take, directly or indirectly, any action which is designed to or
which has constituted or which might reasonably be expected to cause or
result in stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Securities; and
(vii) To the extent that any statements or omissions
made in the Registration Statements, any Preliminary Prospectus, the
Prospectuses or any amendment or supplement thereto are made in
reliance upon and in conformity with written information furnished to
the Company by such Seller expressly for use therein, such Preliminary
Prospectus and the Registration Statements did, and the Prospectuses
and any further amendments or supplements to the Registration
Statements and the Prospectuses, when they become effective or are
filed with the Commission, as the case may be, will conform in all
material respects to the requirements of the Acts and the rules and
regulations of the Commission thereunder and will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading.
(c) The Trust represents and warrants to, and agrees
with, each of the Underwriters, the Sellers and the Company that:
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<PAGE> 8
(i) A notification on Form N-8A (the
"Notification") of registration of the Trust as an investment company
has been filed with the Commission; a registration statement on Form
N-2 (File No. 333-22289 and File No. 811-08069) (the "Initial Trust
Registration Statement") in respect of the Securities has been filed
with the Commission; the Initial Trust Registration Statement and any
post-effective amendment thereto, each in the form heretofore delivered
to you, and, excluding exhibits thereto, to you for each of the other
Underwriters, have been declared effective by the Commission in such
form; no other document with respect to the Initial Trust Registration
Statement has heretofore been filed with the Commission; and no stop
order suspending the effectiveness of the Initial Trust Registration
Statement, or any post-effective amendment thereto has been issued and
no proceeding for that purpose has been initiated or threatened by the
Commission (any preliminary prospectus included in the Initial Trust
Registration Statement or filed with the Commission pursuant to Rule
424(a) of the rules and regulations of the Commission under the Act, is
hereinafter called a "Trust Preliminary Prospectus"; the various parts
of the Initial Trust Registration Statement including all exhibits
thereto and including the information contained in the form of final
prospectus filed with the Commission pursuant to Rule 424(b) under the
Act in accordance with Section 5(a) hereof and deemed by virtue of Rule
430A under the Act to be part of the Initial Trust Registration
Statement at the time it was declared effective, as amended at the time
such part of the registration statement became effective, are
hereinafter collectively called the "Trust Registration Statement"; and
such final prospectus, in the form first filed pursuant to Rule 424(b)
under the Act, is hereinafter called the "Trust Prospectus");
(ii) No order preventing or suspending the use of
any Trust Preliminary Prospectus has been issued by the Commission, and
each Trust Preliminary Prospectus, at the time of filing thereof,
conformed in all material respects to the requirements of the Acts, and
the rules and regulations of the Commission thereunder, and did not
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that this representation
and warranty shall not apply to any statements or omissions made in
reliance upon and in conformity with information furnished in writing
to the Trust by the Underwriters or the Sellers expressly for use
therein;
(iii) The Notification and the Trust Registration
Statement conform, and the Trust Prospectus and any further amendments
or supplements to the Notification, the Trust Registration Statement or
the Trust Prospectus will conform, in all material respects to the
requirements of the Acts and the rules and regulations of the
Commission thereunder and do not and will not, as of the applicable
effective date as to the Trust Registration Statement and any amendment
thereto and as of the applicable filing date as to the Trust Prospectus
and any amendment or supplement thereto, contain an untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in
8
<PAGE> 9
conformity with information furnished in writing to the Trust by the
Underwriters or the Sellers expressly for use therein;
(iv) Since the respective dates as of which
information is given in the Trust Registration Statement and the Trust
Prospectus, there has not been any material adverse change, or any
development involving a prospective material adverse change, in or
affecting the general affairs, management, financial position, results
of operations, prospects, investment objectives, investment policies,
liabilities of the Trust, otherwise than as set forth or contemplated
in the Trust Prospectus and there have been no transactions entered
into by the Trust which are material to the Trust other than those in
the ordinary course of its business or as described in the Trust
Prospectus;
(v) The Trust has been duly created, is validly
existing as a trust under the laws of the State of New York, with power
and authority to own its properties and conduct its business as
described in the Trust Prospectus and to enter into and perform its
obligations under this Agreement and the Fundamental Agreements (as
defined in Section 1(c)(vii) hereof); the Trust has all necessary
consents, approvals, authorizations, orders, registrations or
qualifications, of and from, and has made all declarations and filings
with, all courts and governmental agencies and bodies, to own and use
its assets and to conduct its business in the manner described in the
Trust Prospectus, except to the extent that the failure to obtain or
file the foregoing would not have a material adverse effect on the
Trust and except such as may be required by the NASD or the
registration under the Act of the Securities and such consents,
approvals, authorizations, registrations or qualifications as may be
required under state securities or Blue Sky laws in connection with the
purchase and distribution of the Securities by the Underwriters; the
Trust has no subsidiaries;
(vi) The Trust is registered with the Commission as
a non-diversified, closed-end management investment company under the
Investment Company Act and no order of suspension or revocation of such
registration has been issued or proceedings therefor initiated or, to
the knowledge of the Trust, threatened by the Commission; no person is
serving or acting as an officer or trustee of the Trust except in
accordance with the provisions of the Investment Company Act;
(vii) Each of the Contracts, the Collateral
Agreements, the Administration Agreement between BONY and the Trust
(the "Administration Agreement"), the Custodian Agreement between BONY
and the Trust (the "Custodian Agreement"), the Paying Agent Agreement
between BONY and the Trust (the "Paying Agent Agreement"), the Fund
Expense Agreement between Goldman, Sachs & Co. and BONY (the "Fund
Expense Agreement") and the Fund Indemnity Agreement between Goldman,
Sachs & Co. and the Trust (the "Fund Indemnity Agreement") (the
Contracts, the Collateral Agreements, the Administration Agreement, the
Custodian Agreement, the Paying Agent Agreement, the Fund Expense
Agreement and the Fund Indemnity Agreement are herein collectively
called the "Fundamental Agreements") has been duly authorized, executed
and delivered by the Trust and, assuming due authorization, execution
and delivery by the other parties thereto,
9
<PAGE> 10
constitutes a valid and legally binding agreement of the Trust,
enforceable in accordance with its terms, subject, as to enforcement,
to bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general
equity principles;
(viii) The Trust Agreement and the Fundamental
Agreements comply with all applicable provisions of the Acts, and all
approvals of such agreements required under the Investment Company Act
by the holders of the Automatic Common Exchange Securities and the
trustees have been obtained and are in full force and effect;
(ix) All of the outstanding Automatic Common
Exchange Securities have been duly and validly authorized and issued
and are fully paid and non-assessable, and the form of certificates
used to evidence the Automatic Common Exchange Securities is in due and
proper form and complies with all provisions of applicable law; the
Trust Agreement and the Fundamental Agreements conform to the
description thereof contained in the Trust Prospectus;
(x) The Securities have been duly authorized and,
when issued and delivered pursuant to this Agreement, will be validly
issued, fully paid and non-assessable; the Securities will conform to
the description thereof in the Trust Prospectus; no person has rights
to registration of any securities because of the filing of the Trust
Registration Statement;
(xi) The issue and sale of the Securities and the
compliance by the Trust with all of the provisions of the Securities,
this Agreement and each Fundamental Agreement and the consummation of
the transactions herein and therein contemplated will not conflict with
or result in a breach or violation of any of the terms or provisions
of, or constitute a default under, the Trust Agreement or any
indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which the Trust is a party or by which the Trust is
bound or to which any of the property or assets of the Trust is
subject, nor will such action result in any violation of any statute or
any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Trust or any of its properties; and
no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body
is required for the issue and sale of the Securities or the
consummation by the Trust of the transactions contemplated by this
Agreement or the Fundamental Agreements, except such as may be required
by the NASD or the registration under the Act of the Securities and
such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky
laws in connection with the purchase and distribution of the Securities
by the Underwriters;
(xii) The Fundamental Agreements are in full force
and effect and the Trust is not in default in the performance or
observance of any obligation, covenant or condition thereunder and, to
the knowledge of the Trust, no event has occurred which with the
passage of time or the giving of notice or both would constitute a
default thereunder; the Trust is not in default in the performance or
observance of
10
<PAGE> 11
any obligation, covenant or condition contained in any other agreement
or instrument to which it is a party or by which it or any of its
properties may be bound;
(xiii) The statements set forth in the Trust
Prospectus under the caption "Description of the Securities", insofar
as they purport to constitute a summary of the terms of the Securities,
under the caption "Certain Federal Income Tax Considerations", and
under the caption "Underwriting", insofar as they purport to describe
the provisions of the laws and agreements referred to therein, are
accurate, complete and fair;
(xiv) Other than as set forth in the Trust
Prospectus, there are no legal or governmental proceedings pending to
which the Trust is a party or of which any property of the Trust is the
subject which, if determined adversely to the Trust, would individually
or in the aggregate have a material adverse effect on the current or
future financial position, or results of operations of the Trust; and,
to the best of the Trust's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened by
others;
(xv) There are no material restrictions,
limitations or regulations with respect to the ability of the Trust to
invest its assets as described in the Trust Prospectus, other than as
described therein;
(xvi) The Securities and any Automatic Common
Exchange Securities outstanding prior to the issuance of the Securities
have been approved for listing on the New York Stock Exchange subject
to notice of issuance; the Trust's Registration Statement on Form 8-A
under the Exchange Act is effective;
(xvii) The Trust does not do business with the
government of Cuba or with any person or affiliate located in Cuba
within the meaning of Section 517.075, Florida Statutes; and
(xviii) Coopers & Lybrand L.L.P., who have certified
certain financial statements and supporting schedules included in the
Trust Registration Statement, are independent public accountants as
required by the Act and the rules and regulations of the Commission
thereunder.
2. Subject to the terms and conditions herein set forth, (a) the Trust
agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Trust, at a
purchase price of $___.___ per Security, the number of Firm Securities set forth
opposite the name of such Underwriter in Schedule I hereto and (b) in the event
and to the extent that the Underwriters shall exercise the election to purchase
Optional Securities as provided below, the Trust agrees to issue and sell to
each of the Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Trust, at the same purchase price set forth in
clause (a) of this Section 2, that portion of the aggregate number of Optional
Securities as to which such election shall have been exercised (to be adjusted
by you so as to eliminate fractional securities) determined by multiplying such
number of Optional Securities by a fraction, the numerator of which is the
maximum aggregate number of Optional Securities which such
11
<PAGE> 12
Underwriter is entitled to purchase as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is the maximum
aggregate number of Optional Securities that all of the Underwriters are
entitled to purchase hereunder. The agreements in this Section made by the Trust
are for the benefit of and enforceable by the Underwriters and the Sellers. The
agreements in this Section made by the Underwriters are for the benefit of and
are enforceable by the Sellers and the Trust.
The Trust hereby grants to the Underwriters the right to purchase at
their election up to 1,234,235 Optional Securities, at the purchase price set
forth in clause (a) of the first paragraph of this Section 2, for the sole
purpose of covering overallotments in the sale of the Firm Securities. Any such
election to purchase Optional Securities may be exercised only by written notice
from you to the Trust (with copies to Kathryn L. Taylor, Crowe & Dunlevy, 500
Kennedy Building, 321 South Boston, Tulsa, Oklahoma 74103), given within a
period of 30 calendar days after the date of this Agreement, setting forth the
aggregate principal amount of Optional Securities to be purchased and the date
on which such Optional Securities are to be delivered, as determined by you but
in no event earlier than the First Time of Delivery (as defined in Section 4(a)
hereof) or, unless you and the Trust otherwise agree in writing, earlier than
two or later than ten business days after the date of such notice.
As compensation to the Underwriters for their commitments hereunder,
and in view of the fact that the proceeds of the sale of the Securities will be
used by the Trust as specified in the Contracts, the Sellers at each Time of
Delivery will pay to Goldman, Sachs & Co., for the accounts of the several
Underwriters, an amount equal to $___.___ per Security for the Securities to be
delivered at such Time of Delivery; provided that the aggregate amount payable
to Goldman, Sachs & Co. by the Sellers shall be paid by the Sellers on a pro
rata basis according to the number of shares of Stock pledged by each Seller
pursuant to the Collateral Agreement to which such Seller is a party.
Alternatively, as a matter of convenience, Goldman, Sachs & Co. may deduct such
amount from the purchase price of the Securities, and in such event the Sellers
shall be deemed to have paid the same.
3. Upon the authorization by you of the release of the Firm Securities,
the several Underwriters propose to offer the Firm Securities for sale upon the
terms and conditions set forth in the Trust Prospectus.
4. (a) The Securities to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior
notice to the Trust, shall be delivered by or on behalf of the Trust to Goldman,
Sachs & Co., for the account of such Underwriter, against payment by or on
behalf of such Underwriter of the purchase price therefor by wire transfer or
certified or official bank check or checks, payable to the order of the Trust
in Federal (same day) funds. The Trust will cause the certificates representing
the Securities to be made available for checking and packaging at least
twenty-four hours prior to the Time of Delivery (as defined below) at the
office of Goldman, Sachs & Co., 85 Broad Street, New York, NY 10004 (the
"Designated Office"). The time and date of such delivery and payment shall be,
with respect to the Firm Securities, 9:30 a.m., New York City time, on June __,
1997 or such other time and date as Goldman, Sachs & Co.
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<PAGE> 13
and the Trust may agree upon in writing, and, with respect to the Optional
Securities, 9:30 a.m., New York City time, on the date specified by Goldman,
Sachs & Co. in the written notice given by Goldman, Sachs & Co. of the
Underwriters' election to purchase such Optional Securities, or such other time
and date as Goldman, Sachs & Co. and the Trust may agree upon in writing. Such
time and date for delivery of the Firm Securities is herein called the "First
Time of Delivery", such time and date for delivery of the Optional Securities,
if not the First Time of Delivery, is herein called the "Second Time of
Delivery", and each such time and date for delivery is herein called a "Time of
Delivery".
(b) The documents to be delivered at each Time of Delivery by
or on behalf of the parties hereto pursuant to Section 7 hereof, including the
cross-receipt for the Securities and any additional documents requested by the
Underwriters pursuant to Section 7(p) hereof, will be delivered at the offices
of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New
York 10022 (the "Closing Location"), and the Securities will be delivered at the
Designated Office, all at such Time of Delivery. A meeting will be held at the
Closing Location at _____ p.m., New York City time, on the New York Business Day
next preceding such Time of Delivery, at which meeting the final drafts of the
documents to be delivered pursuant to the preceding sentence will be available
for review by the parties hereto. For the purposes of this Section 4, "New York
Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York City are generally
authorized or obligated by law or executive order to close.
5. (a) The Trust agrees with each of the Underwriters:
(i) To prepare the Trust Prospectus in a form
approved by you and to file such Trust Prospectus pursuant to Rule
497(h) under the Act not later than the Commission's close of business
on the second business day following the execution and delivery of this
Agreement, or, if applicable, such earlier time as may be required by
Rule 430A(a)(3) under the Act; to make no further amendment or any
supplement to the Trust Registration Statement or Trust Prospectus
prior to the last Time of Delivery which shall be disapproved by you
promptly after reasonable notice thereof; to advise you, promptly after
it receives notice thereof, of the time when any amendment to the Trust
Registration Statement has been filed or becomes effective or any
supplement to the Trust Prospectus or any amended prospectus has been
filed and to furnish you with copies thereof; to file promptly all
reports and any definitive proxy or information statements required to
be filed by the Trust with the Commission pursuant to the Acts and the
Exchange Act subsequent to the date of the Trust Prospectus and for so
long as the delivery of a prospectus is required in connection with the
offering or sale of the Securities; to advise you, promptly after it
receives notice thereof, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any Trust
Preliminary Prospectus or prospectus or any order pursuant to Section
8(e) of the Investment Company Act, of the suspension of the
qualification of the Securities for offering or sale in any
jurisdiction, of the initiation or threatening of any proceeding for
any such purpose, or of any request by the Commission for the amending
or supplementing of the Trust Registration Statement or Trust
Prospectus or for additional information; and, in the event of the
issuance of any stop order or
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<PAGE> 14
of any order preventing or suspending the use of any Trust Preliminary
Prospectus or prospectus or suspending any such qualification or order
pursuant to Section 8(e) of the Investment Company Act, promptly to use
its best efforts to obtain the withdrawal of such order;
(ii) Promptly from time to time to take such action
as you may reasonably request to qualify the Securities for offering
and sale under the securities laws of such jurisdictions as you may
request and to comply with such laws so as to permit the continuance of
sales and dealings therein in such jurisdictions for as long as may be
necessary to complete the distribution of the Securities, provided that
in connection therewith the Trust shall not be required to qualify as a
foreign trust or association or to file a general consent to service of
process in any jurisdiction;
(iii) Prior to 10:00 a.m., New York City time, on the
New York Business Day next succeeding the date of this Agreement and
from time to time, at the expense of the Sellers, to furnish the
Underwriters with copies of the Trust Prospectus in New York City in
such quantities as you may reasonably request, and, if the delivery of
a prospectus is required at any time prior to the expiration of nine
months after the time of issue of the Trust Prospectus in connection
with the offering or sale of the Securities and if at such time any
event shall have occurred as a result of which the Trust Prospectus as
then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made when such Trust Prospectus is delivered, not
misleading, or, if for any other reason it shall be necessary during
such period to amend or supplement the Trust Prospectus in order to
comply with the Act, to notify you and upon your request to prepare and
furnish without charge to each Underwriter and to any dealer in
securities as many copies as you may from time to time reasonably
request of an amended Trust Prospectus or a supplement to the Trust
Prospectus which will correct such statement or omission or effect such
compliance; and in case any Underwriter is required to deliver a
prospectus in connection with sales of any of the Securities at any
time nine months or more after the time of issue of the Trust
Prospectus, upon your request but at the expense of such Underwriter,
to prepare and deliver to such Underwriter as many copies as you may
request of an amended or supplemented Trust Prospectus complying with
Section 10(a)(3) of the Act;
(iv) To make generally available to the Trust's
securityholders as soon as practicable, but in any event not later than
eighteen months after the effective date of the Trust Registration
Statement (as defined in Rule 158(c) under the Act), an earnings
statement of the Trust (which need not be audited) complying with
Section 11(a) of the Act and the rules and regulations of the
Commission thereunder (including, at the option of the Trust, Rule
158);
(v) To use the net proceeds received by it from the
sale of the Securities pursuant to this Agreement in the manner
specified in the Trust Prospectus under the caption "Use of Proceeds";
and
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<PAGE> 15
(vi) To use its best efforts to list, subject to
notice of issuance, the Securities on the New York Stock Exchange.
(b) The Company agrees with each of the Underwriters:
(i) To prepare the Company Prospectus in a form
approved by you and to file such Company Prospectus pursuant to Rule
424(b) under the Act not later than the Commission's close of business
on the second business day following the execution and delivery of this
Agreement, or, if applicable, such earlier time as may be required by
Rule 430A(a)(3) under the Act; to make no further amendment or any
supplement to the Company Registration Statement or Company Prospectus
prior to the last Time of Delivery which shall be disapproved by you
promptly after reasonable notice thereof; to advise you, promptly after
it receives notice thereof, of the time when any amendment to the
Company Registration Statement has been filed or becomes effective or
any supplement to the Company Prospectus or any amended Company
Prospectus has been filed and to furnish you with copies thereof; to
file promptly all reports and any definitive proxy or information
statements required to be filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of the Company Prospectus and for so long as the
delivery of a prospectus is required in connection with the offering or
sale of the Securities; to advise you, promptly after it receives
notice thereof, of the issuance by the Commission of any stop order or
of any order preventing or suspending the use of any Company
Preliminary Prospectus or prospectus, of the suspension of the
qualification of the shares of Stock to be delivered pursuant to the
Contracts for offering or sale in any jurisdiction, of the initiation
or threatening of any proceeding for any such purpose, or of any
request by the Commission for the amending or supplementing of the
Company Registration Statement or Company Prospectus or for additional
information; and, in the event of the issuance of any stop order or any
order preventing or suspending the use of any Company Preliminary
Prospectus or prospectus or suspending any such qualification, to
promptly use its best efforts to obtain the withdrawal of such order;
(ii) Prior to 10:00 a.m. New York City time, on the
New York Business Day next succeeding the date of this Agreement and
from time to time, at the expense of the Sellers, to furnish the
Underwriters with copies of the Company Prospectus in New York City in
such quantities as you may reasonably request, and, if the delivery of
a prospectus is required at any time prior to the expiration of nine
months after the time of issue of the Company Prospectus in connection
with the offering or sale of the Securities and if at such time any
events shall have occurred as a result of which the Company Prospectus
as then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in light of the circumstances under which
they were made when such Company Prospectus is delivered, not
misleading, or, if for any other reason it shall be necessary during
such same period to amend or supplement the Company Prospectus or to
file under the Exchange Act any document incorporated by reference in
the Company Prospectus in order to comply with the Act or the Exchange
Act, to notify you and
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<PAGE> 16
upon your request to file such document and to prepare and, at the
expense of the Sellers, furnish, without charge to each Underwriter and
to any dealer in securities as many copies as you may from time to time
reasonably request of an amended Company Prospectus or a supplement to
the Company Prospectus which will correct such statement or omission or
effect such compliance; and in case any Underwriter is required to
deliver a prospectus in connection with sales of any of the Securities
at any time nine months or more after the time of issue of the Company
Prospectus, upon your request but at the expense of such Underwriter,
to prepare and deliver to such Underwriter as many copies as you may
request of an amended or supplemented Company Prospectus complying with
Section 10(a)(3) of the Act;
6. Except as otherwise disclosed in the Prospectuses, the Trust, the
Company and the Sellers covenant and agree with the several Underwriters that
(a) the Sellers will pay or cause to be paid (i) the fees, disbursements and
expenses of the Company's counsel and the Sellers' counsel and the Company's
accountants in connection with the registration of the Securities under the Act
and all other expenses in connection with the preparation, printing and filing
of the Notification, Trust Registration Statement, any Trust Preliminary
Prospectus and the Trust Prospectus and amendments and supplements thereto and
the Supplement dated May 22, 1997 to the Company Prospectus and the mailing and
delivering of copies thereof to the Underwriters and dealers; (ii) the cost of
printing or producing any Agreement among Underwriters, this Agreement and Blue
Sky Memorandum, closing documents (including any compilations thereof) and any
other documents in connection with the offering, purchase, sale and delivery of
the Securities; (iii) all expenses in connection with the qualification of the
Securities for offering and sale under state securities laws as provided
in Section 5(b)(ii) hereof, including the fees and disbursements of counsel for
the Underwriters in connection with such qualification and in connection with
the Blue Sky survey up to a maximum of $2,500; (iv) the filing fees incident
to, and the fees and disbursements of counsel for the Underwriters in
connection with, securing any required review by the NASD of the terms of the
sale of the Securities; (v) all fees and expenses in connection with the
preparation and filing of a registration statement under the Exchange Act
relating to the Securities and all costs and expenses incident to the listing
of the Securities on the New York Stock Exchange or other national or regional
exchange; (vi) the cost of preparing certificates representing the Securities;
(vii) the cost and charges of any transfer agent or registrar for the
Securities; (viii) all expenses and taxes incident to the sale and delivery of
the shares of Stock to be sold or pledged by the Sellers; (ix) all fees,
expenses and costs in connection with the marketing of the Securities; and (x)
all other costs and expenses incident to the performance by the Trust, the
Company and the Sellers of their respective obligations hereunder which are not
otherwise specifically provided for in this Section; (b) the Company will pay
or cause to be paid (i) the cost of preparing Stock certificates; and (ii) the
cost and charges of any transfer agent or registrar for the Stock; and (c)
Goldman, Sachs & Co. will pay or cause to be paid all fees, disbursements and
expenses of the Trust's counsel and the Trust's accountants in connection with
the registration of the Securities under the Acts. It is understood, however,
that, except as provided in this Section, and Sections 8 and 11 hereof, the
Underwriters will pay all of their own costs and expenses, including the fees
of their counsel, transfer taxes on resale of any of the Securities by them,
and any advertising expenses connected with any offers they may make.
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<PAGE> 17
7. The obligations of the Underwriters hereunder, as to the Securities
to be delivered at each Time of Delivery, shall be subject, in their discretion,
to the condition that all representations and warranties and other statements of
the Trust, the Company and the Sellers herein are, at and as of such Time of
Delivery, true and correct, the condition that the Trust, the Company and the
Sellers shall have performed all of their respective obligations hereunder
theretofore to be performed, and the following additional conditions:
(a) The Prospectuses shall have been filed with the Commission
pursuant to Rule 424(b) or Rule 497(h), as applicable, within the applicable
time period prescribed for such filing by the rules and regulations under the
Act and in accordance with Sections 5(a)(i) and 5(b)(i) hereof; no stop order
suspending the effectiveness of the Registration Statements or any part thereof,
and no order pursuant to Section 8(e) of the Investment Company Act, shall have
been issued and no proceeding for that purpose shall have been initiated or
threatened by the Commission; and all requests for additional information on the
part of the Commission shall have been complied with to your reasonable
satisfaction;
(b) Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the
Underwriters, shall have furnished to you such opinion or opinions, dated such
Time of Delivery, with respect to paragraphs (i), (ii), (iii), (v), (vi) and
(viii) of subsection (c) below and paragraphs (i), (ii), (vi) and (xi) of
subsection (e) below, as well as such other related matters as you may
reasonably request, and such counsel shall have received such papers and
information as they may reasonably request to enable them to pass upon such
matters;
(c) Sullivan & Cromwell, counsel for the Trust, shall have
furnished to you their written opinion or opinions, dated such Time of Delivery,
in form and substance satisfactory to you, to the effect that:
(i) The Trust (x) has been duly formed and is
validly existing as a trust under the laws of the State of New York and
(y) is registered with the Commission under the Investment Company Act
as a non-diversified, closed-end management investment company;
(ii) The Securities have been duly authorized and
validly issued and are fully paid and non-assessable and are entitled
to the benefits provided by the Trust Agreement;
(iii) The Securities will be exchanged for shares of
Stock in accordance with the terms of the Trust Agreement and the
Contracts (unless a Reorganization Event (as such term is defined in
the Contracts) occurs or a Seller elects the Cash Settlement
Alternative), subject to bankruptcy, insolvency, reorganization and
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<PAGE> 18
similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles;
(iv) All regulatory consents, authorizations,
approvals and filings required to be obtained or made by the Trust
under the Federal laws of the United States and the laws of the State
of New York for the issuance, sale and delivery of the Securities by
the Trust to you have been obtained or made;
(v) This Agreement has been duly authorized,
executed and delivered by the Trust;
(vi) Each Fundamental Agreement has been duly
authorized, executed and delivered by the Trust and, assuming due
authorization, execution and delivery by the other parties thereto,
constitutes a valid and legally binding agreement of the Trust,
enforceable in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles;
(vii) The statements in the Trust Prospectus under
the caption "Certain Federal Income Tax Considerations", to the extent
that such statements constitute summaries of the legal matters referred
to therein, fairly represent their opinion as to such matters;
(viii) On the basis of information which was reviewed
in the course of the performance of the services referred to in their
opinion considered in the light of their understanding of the
applicable law (including the requirements of Form N-2 and the
character of the Prospectus contemplated thereby) and the experience
they have gained through their practice under the Acts, such counsel
are of the opinion that the Trust Registration Statement, as of its
effective date, and the Trust Prospectus, as of the date of the Trust
Prospectus, appeared on their face to be appropriately responsive in
all material respects to the requirements of the Acts and the
applicable rules and regulations of the Commission thereunder; and that
nothing that came to their attention in the course of such review has
caused them to believe that the Trust Registration Statement, as of its
effective date, contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or
necessary to make the statements therein not misleading or that the
Trust Prospectus, as of the date of the Trust Prospectus, contained any
untrue statement of a material fact or omitted to state any material
fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; also,
nothing that has come to such counsel's attention in the course of
certain procedures (as described in such opinion) has caused such
counsel to believe that the Trust Prospectus, as of the date and time
of delivery of such opinion, contained any untrue statement of a
material fact or omitted to state any material fact necessary in order
to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that such
opinion may state that the limitations inherent in the independent
verification of factual matters and the character of determinations
involved in the registration process are such, however, that such
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<PAGE> 19
counsel do not assume any responsibility for the accuracy, completeness
or fairness of the statements contained in the Trust Registration
Statement or the Trust Prospectus except for those made under the
captions "Underwriting", "Investment Objective and Policies", and
"Descriptions of the Securities" in the Trust Prospectus insofar as
they relate to provisions of documents therein described, and that such
counsel need not express any opinion or belief as to the financial
statements or other financial data, or as to information under the
captions "Prospectus Summary--The Company", "Investment Objectives and
Policies--The Company" and "Risk Factors--Risks Relating to the Company
and the Company's Industry", contained in the Trust Registration
Statement or the Trust Prospectus.
(d) Sullivan & Cromwell, counsel for the Trust, shall have
furnished to the Sellers their written opinion, dated such Time of Delivery,
with respect to paragraphs (i)(y), (iv) and (vii) of subsection (c) above and,
in addition, to the effect that the statements in the Trust Prospectus under the
captions "Underwriting", "Investment Objective and Policies" and "Description of
Securities", insofar as such statements summarize provisions of documents
referred to therein, are accurate in all material respects and fairly summarize
the matters referred to therein.
(e) Akerman, Senterfitt & Eidson, P.A., counsel for the
Company, shall have furnished to you their written opinion or opinions, dated
such Time of Delivery, in form and substance reasonably satisfactory to you, to
the effect that:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
Delaware, with power and authority to own its properties and conduct
its business as described in the Company Prospectus;
(ii) The Company has an authorized capitalization as
set forth in the Company Prospectus, as modified by the Company's
Form 8-K dated May 14, 1997; the shares of Stock listed in
the Selling Stockholders Table in the Supplement dated May 22, 1997 to
the Company Prospectus have been duly authorized by all necessary
corporate action on the part of the Company and are validly issued,
fully paid and non-assessable; and the shares of Stock conform in all
material respects to the description of the Stock contained in the
Company Prospectus under the caption "Description of Capital Stock"
(such counsel being entitled to rely in respect of the opinion in this
clause upon the opinion of in-house counsel to the Company, provided
that such counsel shall state that they believe that both you and the
Company's counsel are justified in relying upon such opinion);
(iii) The Company has been duly qualified as a
foreign corporation for the transaction of business and is in good
standing under the laws of each other jurisdiction in which it owns or
leases properties or conducts any business so as to require such
qualification, or is subject to no material liability or disability by
reason of failure to be so qualified in any such jurisdiction (such
counsel being entitled to rely in respect of the opinion in this clause
upon opinions of local counsel or in-house counsel to the Company and
in respect of matters of fact upon certificates of
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<PAGE> 20
officers of the Company, provided that such counsel shall state that
they believe that both you and the Company's counsel are justified in
relying upon such opinions and certificates);
(iv) Each of Alamo Rent-a-Car, Inc. and National
Car Rental Systems, Inc. (referred to as the "Car Rental Subsidiaries")
has been duly incorporated and is validly existing as a corporation in
good standing under the laws of its jurisdiction of incorporation; and
all of the issued shares of capital stock of each such subsidiary have
been duly and validly authorized and issued, are fully paid and
non-assessable, and are owned directly or indirectly by the Company,
free and clear of all liens, encumbrances, equities or claims (such
counsel being entitled to rely in respect of the opinion in this clause
upon opinions of local counsel or counsel to the Company and in respect
of matters of fact upon certificates of officers of the Company or its
subsidiaries, provided that such counsel shall state that they believe
that both you and the Company's counsel are justified in relying upon
such opinions and certificates);
(v) To the best of such counsel's knowledge and
other than as set forth or incorporated by reference in the Company
Prospectus, there are no legal or governmental proceedings pending to
which the Company or any of its subsidiaries is a party or of which any
property of the Company or any of its subsidiaries is the subject
which, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a material
adverse effect on the current or future consolidated financial
position, stockholders' equity or results of operations of the Company
and its subsidiaries; and, to the best of such counsel's knowledge, no
such proceedings are threatened or contemplated by governmental
authorities or threatened by others;
(vi) This Agreement has been duly authorized,
executed and delivered by the Company;
(vii) The compliance by the Company with all of the
provisions of this Agreement and the consummation of the transactions
herein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any material indenture, mortgage, deed of trust, loan agreement
or other material agreement or instrument known to such counsel to
which the Company or any of the Car Rental Subsidiaries is a party or
by which the Company or any of the Car Rental Subsidiaries is bound or
to which the material property or assets of the Company or any of the
Car Rental Subsidiaries is subject, nor will such action result in any
violation of the provisions of the Third Amended and Restated
Certificate of Incorporation or By-laws of the Company or any statute
or any order, rule or regulation known to such counsel of any court or
governmental agency or body having jurisdiction over the Company or any
of the Car Rental Subsidiaries or any of their material properties;
(viii) To the best knowledge of such counsel, neither
the Company nor any of its Car Rental Subsidiaries is in violation of
its certificate of incorporation or by-laws or in material default in
the performance or observance of any material
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<PAGE> 21
obligation, agreement, covenant or condition contained in any
material indenture, mortgage, deed of trust, loan agreement, lease or
material agreement or other instrument to which it is a party or by
which it may be bound which default would individually or in the
aggregate have a material adverse effect on the current or future
consolidated financial position, stockholders' equity or results of
operations of the Company and its subsidiaries;
(ix) The statements set forth in the Company
Prospectus as modified by the Company's Form 8-K dated May 14,
1997 under the caption "Description of Capital Stock", to the extent
that such statements purport to constitute a summary of the terms of
the Stock, are accurate, complete and fair in all material respects;
(x) The Company is not an "investment company" or an
entity "controlled" by an "investment company", as such terms are
defined in the Investment Company Act; and
(xi) On the basis of information which was reviewed
in the course of the performance of the services referred to in their
opinion considered in the light of their understanding of the
applicable law and the experience they have gained through their
practice under the Act, such counsel are of the opinion that the
Company Registration Statement, the Company Prospectus and the
documents incorporated by reference in the Company Prospectus or any
further amendment or supplement thereto made by the Company prior to
such Time of Delivery (other than the financial statements and related
schedules therein, as to which such counsel need express no opinion),
when they became effective or were filed with the Commission, as the
case may be, appeared on their face to be appropriately responsive in
all material respects to the requirements of the Act or the Exchange
Act, as applicable, and the rules and regulations of the Commission
thereunder; and that nothing that came to their attention in the course
of such review has caused them to believe that any of such documents,
when such documents became effective or were so filed, as the case may
be, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading.
(f) Simpson Thacher & Bartlett, counsel for (x) William E.
Lobeck, Jr.; William E. Lobeck, Jr., IRA Contributing; Dale E. Ritter; Larry A.
Ritter and Mary Jane Ritter, joint tenants with right of survivorship; Alvin E.
Swanner; Kathryn L. Taylor; and Cline Tucker and Patricia Mack-Tucker, joint
tenants with right of survivorship (collectively, the "Individual Sellers") and
(y) Brion Properties, a limited partnership organized under the laws of the
State of Louisiana; Elizabeth Catherine Frame Trust, a trust organized under the
laws of the State of Oklahoma; Elizabeth Peake Graham Trust, a trust organized
under the laws of the State of Oklahoma; Margaret Nicholson Lobeck Trust, a
trust organized under the laws of the State of Oklahoma; National Car Rental,
Inc., an Arizona corporation; National Car Rental of Oklahoma City, Inc., an
Oklahoma corporation; and Sleepy Lagoon, Ltd., a Texas limited partnership
(collectively, the "Non-Individual Sellers"), shall have furnished to you their
written opinion, dated such Time of Delivery, in form and substance satisfactory
to you, to the effect that:
(i) This Agreement has been duly executed and
delivered by or on behalf of each of the Individual Sellers; each of
the Contracts and the Collateral Agreements to which an Individual
Seller is a party has been duly executed and
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<PAGE> 22
delivered by or on behalf of such Seller and, assuming due
authorization, execution and delivery by the other parties thereto,
constitutes a valid and legally binding agreement of such Individual
Seller, enforceable against such Individual Seller in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and an implied
covenant of good faith and fair dealing); and the compliance by each
Individual Seller with all of the provisions of this Agreement, the
Contract to which such Individual Seller is a party and the Collateral
Agreement to which such Individual Seller is a party and the
consummation of the transactions herein and therein contemplated will
not breach or result in a default under any indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument identified on
an annexed schedule furnished by such Individual Seller and which such
Individual Seller has represented lists all material agreements and
instruments to which such Individual Seller is a party or by which such
Individual Seller is bound or to which any of the property or assets of
such Individual Seller is subject, nor will such action violate any
Federal or New York statute or any rule or regulation issued pursuant
to any Federal or New York statute or any order known to such counsel
issued pursuant to any Federal or New York statute by any court or
governmental agency or body having jurisdiction over any Individual
Seller or any of its properties;
(ii) No consent, approval, authorization or order of
any Federal or New York governmental agency or body or, to such
counsel's knowledge, any Federal or New York court is required for the
compliance by each Seller with all of the provisions of this Agreement,
the Contract to which such Seller is a party and the Collateral
Agreement to which such Seller is a party, except for the registration
of the Securities and the Stock, under the Acts and such consents,
approvals, authorizations, registrations or qualifications as may be
required under state securities or Blue Sky laws in connection with the
purchase and distribution of the Securities and the Stock;
(iii) Assuming due authorization, execution and
delivery thereof by the Trust and the Collateral Agent, each Collateral
Agreement, together with the delivery of (x) the certificates in
registered form representing the Stock pledged thereunder by the Seller
party thereto and (y) undated stock powers with respect thereto duly
endorsed in blank, to the Collateral Agent for the benefit of the Trust
in the State of New York creates in favor of the Collateral Agent for
the benefit of the Trust a perfected security interest in such Stock
under the Uniform Commercial Code as in effect in the State of New York
(the "New York UCC"); upon such delivery, at the First Time of
Delivery, assuming that (A) the Collateral Agent and the Trust will
acquire the security interest in such shares in good faith and without
notice of any adverse claim (within the meaning of the New York UCC)
and (B) such Seller has rights in the shares of Stock subject to such
Collateral Agreement, the Collateral Agent will acquire such security
interest in such shares of Stock for the benefit of the Trust free of
any adverse claims (within the meaning of the New York UCC); and
22
<PAGE> 23
(iv) Upon payment for and delivery of the shares of
Stock in accordance with the Purchase Agreement and Collateral
Agreement to which each Seller is a party, assuming due authorization,
execution and delivery thereof by the Trust and, in the case of each
Collateral Agreement, the Collateral Agent, and assuming that (A) each
Seller continues to be the sole registered owner of the shares of Stock
to be sold by it, (B) the certificates representing such shares do not
contain any notation of liens or restrictions and (C) the purchasers of
Securities will acquire such shares in good faith and without notice of
any adverse claims (within the meaning of the New York UCC), the
purchasers will acquire all of the rights of such Seller in such shares
and will also acquire their interest in such shares free of any adverse
claims (within the meaning of the New York UCC).
(g) (i) William W. Edelman, as Louisiana counsel
for Brion Properties, shall have furnished to you his written opinion,
dated such Time of Delivery, with respect to paragraph (i) of
subsection (f) above;
(ii) Hartzog, Conger & Cason, as Oklahoma counsel
for Elizabeth Catherine Frame Trust, Elizabeth Peake Graham
Trust, Margaret Nicholson Lobeck Trust and National Car Rental of
Oklahoma City, Inc., shall have furnished to you their written
opinion, dated such Time of Delivery, with respect to paragraph (i) of
subsection (f) above;
(iii) Hill & Savoy, as Arizona counsel for National
Car Rental, Inc., shall have furnished to you their written opinion,
dated such Time of Delivery, with respect to paragraph (i) of
subsection (f) above; and
(iv) Fulbright & Jaworski, as Texas counsel for
Sleepy Lagoon, Ltd., shall have furnished to you their written opinion,
dated such Time of Delivery, with respect to paragraph (i) of
subsection (f) above.
(h) On the date of the Trust Prospectus at a time prior to the
execution of this Agreement, at 9:30 a.m., New York City time, on the effective
date of any post-effective amendment to the Trust Registration Statement filed
subsequent to the date of this Agreement and also at each Time of Delivery,
Coopers & Lybrand L.L.P. shall have furnished to you a letter or letters, dated
the respective dates of delivery thereof, in form and substance satisfactory to
you;
(i) On the date of the Company Prospectus at a time prior to
the execution of this Agreement, at 9:30 a.m., New York City time, on the
effective date of any post-effective amendment to the Company Registration
Statement filed subsequent to the date of this Agreement and also at each Time
of Delivery, the accounting firm listed in Section 1(a)(xv) hereof shall have
furnished to you a letter or letters, dated the respective dates of delivery
thereof, in form and substance satisfactory to you, to the effect set forth in
Annex I hereto;
(j) (i) Since the respective dates as of which information is
given in the Trust Registration Statement and the Trust Prospectus, there shall
not have been any change, or any development involving a prospective change, in
or affecting the general
23
<PAGE> 24
affairs, management, financial position, results of operations, prospects,
investment objectives, investment policies or liabilities of the Trust,
otherwise than as set forth or contemplated in the Trust Prospectus, (ii) the
Company and its subsidiaries, taken as a whole, shall not have sustained since
the date of the latest audited financial statements included or incorporated by
reference in the Company Prospectus any loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order or
decree, otherwise than as set forth or contemplated in the Company Prospectus,
and (iii) since the latest date as of which information is given in the Company
Prospectus or any document incorporated by reference therein, there shall not
have been any change in the outstanding capital stock in excess of 100,000,000
shares or long-term debt (net of current maturities) and long-term revenue
earning vehicle debt (net of current maturities) of the Company in excess of
$300,000,000 on a consolidated basis or any change, or any development
involving a prospective change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of operations
of the Company and its subsidiaries, taken as a whole, otherwise than as set
forth or contemplated in the Company Prospectus, the effect of which, in any
such case described in clause (i), (ii) or (iii), is in the judgment of the
Underwriters so material and adverse as to make it impracticable or inadvisable
to proceed with the public offering or the delivery of the Securities being
issued at such Time of Delivery on the terms and in the manner contemplated in
the Trust Prospectus;
(k) On or after the date hereof (i) no downgrading shall have
occurred in the rating accorded the Company's debt securities or preferred stock
by any "nationally recognized statistical rating organization", as that term is
defined by the Commission for purposes of Rule 436(g)(2) under the Act, and (ii)
no such organization shall have publicly announced that it has under
surveillance or review, with possible negative implications, its rating of any
of the Company's debt securities or preferred stock;
(l) On or after the date hereof there shall not have occurred
any of the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange, the American Stock Exchange
or Nasdaq; (ii) a suspension or material limitation in trading in the securities
of the Company or the Trust on Nasdaq or the New York Stock Exchange; (iii) a
general moratorium on commercial banking activities declared by either Federal
or New York State authorities; or (iv) the outbreak or escalation of hostilities
involving the United States or the declaration by the United States of a
national emergency or war, if the effect of any such event specified in this
clause (iv) in the judgment of the Underwriters makes it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Securities being issued at such Time of Delivery on the terms and in the manner
contemplated in the Trust Prospectus;
(m) The Securities shall have been duly listed, subject to
notice of issuance, on the New York Stock Exchange;
(n) Each Fundamental Agreement shall have been executed and
delivered by all parties thereto and each Seller shall have delivered to the
Collateral Agent the number of shares of Stock required by the Collateral
Agreement to which such Seller is a party to be initially pledged thereunder in
accordance with the requirements of such Collateral Agreement;
24
<PAGE> 25
(o) The Trust and the Company shall have complied with the
provisions of Section 5(a)(iii) and 5(b)(ii) hereof with respect to the
furnishing of prospectuses on the New York Business Day next succeeding the date
of this Agreement; and
(p) The Trust, the Company and the Sellers shall have
furnished or caused to be furnished to you at such Time of Delivery certificates
of officers of the Trust, the Company and the Sellers satisfactory to you as to
the accuracy of the representations and warranties of the Trust, the Company and
the Sellers, respectively, herein and in the Contracts and Collateral Agreements
at and as of such Time of Delivery, as to the satisfaction and performance by
the Trust, the Company and the Sellers of all of their respective obligations
hereunder and thereunder to be performed at or prior to such Time of Delivery,
as to the matters set forth in subsections (a) and (i) of this Section (except
in the case of the Sellers) and as to such other matters as you may reasonably
request.
8. (a) The Company will indemnify and hold harmless the Trust, each
Seller and each Underwriter against any losses, claims, damages or liabilities,
joint or several, to which the Trust, such Seller or such Underwriter may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Company Preliminary Prospectus, the Company Registration Statement or the
Company Prospectus, or any amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Trust, each Seller and each Underwriter for
any legal or other expenses reasonably incurred by the Trust, such Seller or
such Underwriter in connection with investigating or defending any such action
or claim as such expenses are incurred; provided, however, that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any Company
Preliminary Prospectus, the Company Registration Statement or the Company
Prospectus, or any such amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through Goldman, Sachs & Co. expressly for use therein; provided, further, that
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission relating
only to the Sellers made in any Company Preliminary Prospectus, the Company
Registration Statement or the Company Prospectus, or any amendment or supplement
thereto, in reliance upon and in conformity with information furnished to the
Company by the Sellers expressly for use therein.
(b) Each Seller will indemnify and hold harmless the Trust,
the Company and each Underwriter against any losses, claims, damages or
liabilities to which the Trust, the Company or such Underwriter may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Trust Preliminary Prospectus, the Trust Registration Statement or the Trust
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or
25
<PAGE> 26
necessary to make the statements therein not misleading, and will reimburse the
Trust, the Company and each Underwriter for any legal or other expenses
reasonably incurred by the Trust, the Company or such Underwriter in connection
with investigating or defending any such action or claim; provided, however,
that no Seller shall be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any Trust Preliminary Prospectus, the Trust Registration Statement or the Trust
Prospectus, or any such amendment or supplement thereto, in reliance upon and in
conformity with written information furnished by any Underwriter through
Goldman, Sachs & Co. expressly for use therein; provided, further, that no
Seller shall be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission relating only to the
Company made in any Trust Preliminary Prospectus, the Trust Registration
Statement or the Trust Prospectus, or any amendment or supplement thereto, in
reliance upon and in conformity with information furnished by the Company
expressly for use therein; provided, further, that in no event shall any
Seller's liability under this Section 8 exceed such Seller's gross proceeds from
the transactions contemplated by this Agreement and the Fundamental Agreements;
provided still further that each Seller shall have the obligation to reimburse
the Trust, the Company and each Underwriter for any legal or other expenses
provided for above (i) on a periodic basis as such expenses are incurred if such
action or claim is based upon or relates solely to the Trust; and (ii) at the
conclusion of such action or claim if such action or claim is based upon or
relates to both the Company and the Trust.
(c) Each Underwriter will indemnify and hold harmless the
Company, the Trust and the Sellers against any losses, claims, damages or
liabilities to which the Company, the Trust or the Sellers may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Company Preliminary Prospectus or Trust Preliminary Prospectus, either of the
Registration Statements or either of the Prospectuses, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in any Company Preliminary
Prospectus or Trust Preliminary Prospectus, either of the Registration
Statements or either of the Prospectuses, or any amendment or supplement
thereto, in reliance upon and in conformity with written information furnished
to the Trust or the Company by such Underwriter through Goldman, Sachs & Co.
expressly for use therein; and will reimburse the Company, the Trust and the
Sellers for any legal or other expenses reasonably incurred by the Company, the
Trust or the Sellers in connection with investigating or defending any such
action or claim as such expenses are incurred.
(d) Each Seller will indemnify and hold harmless the Company,
the Trust and the Underwriters against any losses, claims, damages or
liabilities to which the Company, the Trust or the Underwriters may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in
26
<PAGE> 27
any Company Preliminary Prospectus, the Company Registration Statement or the
Company Prospectus, or any amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in any Company Preliminary Prospectus, the Company Registration Statement or the
Company Prospectus, or any amendment or supplement thereto, in reliance upon and
in conformity with written information furnished to the Company by the Sellers
expressly for use therein; and will reimburse the Company, the Trust and the
Underwriters for any legal or other expenses reasonably incurred by the Company,
the Trust or the Underwriters in connection with investigating or defending any
such action or claim as such expenses are incurred.
(e) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by or
on behalf of any indemnified party.
(f) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company, the Trust and the Sellers on the one
hand and the Underwriters on the other from the offering of the Securities. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law or if the indemnified party failed to give the
notice required under subsection (e) above, then each indemnifying
27
<PAGE> 28
party shall contribute to such amount paid or payable by such indemnified party
in such proportion as is appropriate to reflect not only such relative benefits
but also the relative fault of the Company, the Trust and the Sellers on the one
hand and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company, the Trust and the
Sellers on the one hand and the Underwriters on the other shall be deemed to be
in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company, the Trust and the Sellers bear to
the total underwriting discounts and commissions received by the Underwriters,
in each case as set forth in the table on the cover page of the Trust
Prospectus. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company, the Trust or the Sellers on the one hand or the
Underwriters on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, the Trust, the Sellers and the Underwriters agree that it would not
be just and equitable if contribution pursuant to this subsection (f) were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this
subsection (f). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (f) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (f), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Securities underwritten by it and distributed to the public were offered to
the public exceeds the amount of any damages which such Underwriter has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (f) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(g) The obligations of the Company, the Trust and the Sellers
under this Section 8 shall be in addition to any liability which the Company,
the Trust and the Sellers may otherwise have and shall extend, upon the same
terms and conditions, to each person, if any, who controls any Underwriter
within the meaning of the Act; and the obligations of the Underwriters under
this Section 8 shall be in addition to any liability which the respective
Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company or the Sellers (if any),
to each trustee of the Trust and to each person, if any, who controls the
Company, the Trust or the Sellers within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase
the Securities which it has agreed to purchase hereunder, you may in your
discretion arrange for you or another party or other parties to purchase such
Securities on the terms contained herein at
28
<PAGE> 29
a Time of Delivery. If within thirty-six hours after such default by any
Underwriter you do not arrange for the purchase of such Securities, then the
Company, the Trust and the Sellers shall be entitled to a further period of
thirty-six hours within which to procure another party or other parties
satisfactory to you to purchase such Securities on such terms. In the event
that, within the respective prescribed periods, you notify the Company, the
Trust and the Sellers that you have so arranged for the purchase of such
Securities, or the Company, the Trust and the Sellers notify you that it has so
arranged for the purchase of such Securities, you or the Company, the Trust and
the Sellers shall have the right to postpone such Time of Delivery for a period
of not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Registration Statements or the Prospectuses, or in any
other documents or arrangements, and the Company, the Trust and the Sellers
agree to file promptly any amendments to the Registration Statements or the
Prospectuses which in your opinion may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any person substituted
under this Section with like effect as if such person had originally been a
party to this Agreement with respect to such Securities.
(b) If, after giving effect to any arrangements for the
purchase of the Securities of a defaulting Underwriter or Underwriters by you
and the Company, the Trust and the Sellers as provided in subsection (a) above,
the aggregate principal amount of such Securities which remains unpurchased does
not exceed one-eleventh of the aggregate principal amount of all the Securities
to be purchased at such Time of Delivery, then the Company, the Trust and the
Sellers shall have the right to require each non-defaulting Underwriter to
purchase the principal amount of Securities which such Underwriter agreed to
purchase hereunder at such Time of Delivery and, in addition, to require each
non-defaulting Underwriter to purchase its pro rata share (based on the
principal amount of Securities which such Underwriter agreed to purchase
hereunder) of the Securities of such defaulting Underwriter or Underwriters for
which such arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the
purchase of the Securities of a defaulting Underwriter or Underwriters by you
and the Company, the Trust and the Sellers as provided in subsection (a) above,
the aggregate principal amount of such Securities which remains unpurchased
exceeds one-eleventh of the aggregate principal amount of all the Securities to
be purchased at such Time of Delivery, or if the Company, the Trust and the
Sellers shall not exercise the right described in subsection (b) above to
require non-defaulting Underwriters to purchase Securities of a defaulting
Underwriter or Underwriters, then this Agreement (or, with respect to the Second
Time of Delivery, the obligations of the Underwriters to purchase and of the
Trust to sell the Optional Securities) shall thereupon terminate, without
liability on the part of any non-defaulting Underwriter or the Company, the
Trust and the Sellers, except for the expenses to be borne by the Company, the
Trust, the Sellers and the Underwriters as provided in Section 6 hereof and the
indemnity and contribution agreements in Section 8 hereof; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the Trust, the Sellers and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this
29
<PAGE> 30
Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or the Company,
the Trust or the Sellers or any officer or director or controlling person of the
Company, the Trust or the Sellers and shall survive delivery of and payment for
the Securities.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company, the Trust nor the Sellers shall then be under any liability
to any Underwriter except as provided in Sections 6 and 8 hereof; but, if for
any other reason, any Securities are not delivered by or on behalf of the Trust
as provided herein, the Sellers will reimburse the Underwriters through you for
all out-of-pocket expenses approved in writing by you, including fees and
disbursements of counsel, reasonably incurred by the Underwriters in making
preparations for the purchase, sale and delivery of the Securities not so
delivered, but the Company, the Trust and the Sellers shall then be under no
further liability to any Underwriter in respect of the Securities not so
delivered except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives at 85 Broad Street, New
York, New York 10004, Attention: Registration Department; if to the Trust shall
be delivered or sent by mail, telex or facsimile transmission in care of Donald
J. Puglisi, Puglisi & Associates, 850 Library Avenue, Suite 204, Newark,
Delaware 19711; if to the Company shall be delivered or sent by mail to the
address of the Company set forth in the Registration Statement, Attention:
Secretary (with a copy to Akerman, Senterfitt & Eidson, P.A., One S.E. Third
Avenue, Suite 2800, Miami, Florida 33131, Attention: Jonathan L. Awner, Esq.);
and if to the Sellers shall be delivered or sent by mail, telex or facsimile
transmission to each Seller in care of Kathryn L. Taylor, Crowe & Dunlevy, 500
Kennedy Building, 321 South Boston, Tulsa, Oklahoma 74103; provided, however,
that any notice to an Underwriter pursuant to Section 8(c) hereof shall be
delivered or sent by mail, telex or facsimile transmission to such Underwriter
at its address set forth in its Underwriters' Questionnaire, or telex
constituting such Questionnaire, which address will be supplied to the Company
by you upon request. Any such statements, requests, notices or agreements shall
take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company, the Trust, the Sellers and, to the
extent provided in Sections 8 and 10 hereof, the officers and directors of the
Company, the Trust, the Sellers and each person who controls the Company or any
Underwriter, and their respective heirs, executors, administrators, successors
and assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement. No purchaser of any of the Securities from any
Underwriter shall be deemed a successor or assign by reason merely of such
purchase.
30
<PAGE> 31
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
If the foregoing is in accordance with your understanding,
please sign and return to us ten counterparts hereof, and upon the acceptance
hereof by you, on behalf of each of the Underwriters, this letter and such
acceptance hereof shall constitute a binding agreement between each of the
Underwriters, the Trust, the Company and the Sellers. It is understood that your
acceptance of this letter on behalf of each of the Underwriters is pursuant to
the authority set forth in a form of Agreement among Underwriters, the form of
which shall be submitted to the Company for examination upon request, but
without warranty on your part as to the authority of the signers thereof.
Very truly yours,
REPUBLIC INDUSTRIES, INC.
By:
-------------------------------------
Name:
Title:
AUTOMATIC COMMON EXCHANGE SECURITY
TRUST II
By:
-------------------------------------
Name: Donald J. Puglisi
By:
-------------------------------------
Name: William R. Latham III
By:
-------------------------------------
Name: James B. O'Neill
each a trustee of Automatic Common
Exchange Security Trust II
31
<PAGE> 32
BRION PROPERTIES
By: Swanner 1995 Trust, as General Partner
By:
----------------------------------------
Alvin E. Swanner, as Trustee
ELIZABETH CATHERINE FRAME TRUST
By:
----------------------------------------
Kathryn L. Taylor, as Trustee
ELIZABETH PEAKE GRAHAM TRUST
By:
----------------------------------------
William E. Lobeck, Jr., as Trustee
MARGARET NICHOLSON LOBECK TRUST
By:
----------------------------------------
William E. Lobeck, as Trustee
WILLIAM E. LOBECK, JR.
------------------------------------
WILLIAM E. LOBECK, JR., IRA CONTRIBUTING
By:
----------------------------------------
William E. Lobeck, Jr.
32
<PAGE> 33
NATIONAL CAR RENTAL, INC.
By:
----------------------------------
Name:
Title:
NATIONAL CAR RENTAL OF OKLAHOMA CITY,
INC.
By:
------------------------------------
Name:
Title:
DALE E. RITTER
----------------------------------------
LARRY A. RITTER and MARY JANE RITTER,
joint tenants with right of survivorship
----------------------------------------
----------------------------------------
SLEEPY LAGOON, LTD.
By:
-------------------------------------
Archer McWhorter, as General Partner
ALVIN E. SWANNER
----------------------------------------
33
<PAGE> 34
KATHRYN L. TAYLOR
----------------------------------------
CLINE TUCKER and PATRICIA MACK-TUCKER,
joint tenants with right of survivorship
----------------------------------------
34
<PAGE> 35
Accepted as of the date hereof:
GOLDMAN, SACHS & CO.
- ----------------------------------
<PAGE> 36
SCHEDULE I
<TABLE>
<CAPTION>
Number of Optional
Shares to be
Total Number of Purchased if
Firm Shares Maximum Option
Underwriter to be Purchased Exercised
----------- --------------- ---------
<S> <C> <C> <C>
Goldman, Sachs & Co.
Total
</TABLE>
<PAGE> 37
ANNEX I
Pursuant to Section 7(i) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public
accountants with respect to the Company and its subsidiaries within the
meaning of the Act and the applicable published rules and regulations
thereunder;
(ii) In their opinion, the financial statements and
any supplementary financial information and schedules (and, if
applicable, financial forecasts and/or pro forma financial information)
examined by them and included or incorporated by reference in the
Registration Statement or the Prospectus comply as to form in all
material respects with the applicable accounting requirements of the
Act or the Exchange Act, as applicable, and the related published rules
and regulations thereunder; and, if applicable, they have made a review
in accordance with standards established by the American Institute of
Certified Public Accountants of the consolidated interim financial
statements, selected financial data, pro forma financial information,
financial forecasts and/or condensed financial statements derived from
audited financial statements of the Company for the periods specified
in such letter, as indicated in their reports thereon, copies of which
have been furnished to the representatives of the Underwriters (the
"Representatives") and are attached hereto;
(iii) They have made a review in accordance with
standards established by the American Institute of Certified Public
Accountants of the unaudited condensed consolidated statements of
income, consolidated balance sheets and consolidated statements of cash
flows included in the Prospectus and/or included in the Company's
quarterly report on Form 10-Q incorporated by reference into the
Prospectus as indicated in their reports thereon copies of which are
attached hereto; and on the basis of specified procedures including
inquiries of officials of the Company who have responsibility for
financial and accounting matters regarding whether the unaudited
condensed consolidated financial statements referred to in paragraph
(vi)(A)(i) below comply as to form in all material respects with the
applicable accounting requirements of the Act and the Exchange Act and
the related published rules and regulations, nothing came to their
attention that caused them to believe that the unaudited condensed
consolidated financial statements do not comply as to form in all
material respects with the applicable accounting requirements of the
Act and the Exchange Act and the related published rules and
regulations;
(iv) The unaudited selected financial information
with respect to the consolidated results of operations and financial
position of the Company for the five most recent fiscal years included
in the Prospectus and included or incorporated by reference in Item 6
of the Company's Annual Report on Form 10-K for the most recent fiscal
year agrees with the corresponding amounts (after restatement where
applicable) in the audited consolidated financial statements for such
five fiscal years which were included or incorporated by reference in
the Company's Annual Reports on Form 10-K for such fiscal years;
(v) They have compared the information in the
Prospectus under selected captions with the disclosure requirements of
Regulation S-K and on the basis of limited procedures specified in such
letter nothing came to their attention as a result of the foregoing
procedures that caused them to believe that this information does not
conform in
I
<PAGE> 38
all material respects with the disclosure requirements of Items 301,
302, 402 and 503(d), respectively, of Regulation S-K;
(vi) On the basis of limited procedures, not
constituting an examination in accordance with generally accepted
auditing standards, consisting of a reading of the unaudited financial
statements and other information referred to below, a reading of the
latest available interim financial statements of the Company and its
subsidiaries, inspection of the minute books of the Company and its
subsidiaries since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus, inquiries of
officials of the Company and its subsidiaries responsible for financial
and accounting matters and such other inquiries and procedures as may
be specified in such letter, nothing came to their attention that
caused them to believe that:
(A) (i) the unaudited condensed consolidated
statements of income, consolidated balance sheets and
consolidated statements of cash flows included in the
Prospectus and/or included or incorporated by reference in the
Company's Quarterly Reports on Form 10-Q incorporated by
reference in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements
of the Exchange Act as it applies to Form 10-Q and the related
published rules and regulations, or (ii) any material
modifications should be made to the unaudited condensed
consolidated statements of income, consolidated balance sheets
and consolidated statements of cash flows included in the
Prospectus or included in the Company's Quarterly Reports on
Form 10-Q incorporated by reference in the Prospectus, for
them to be in conformity with generally accepted accounting
principles;
(B) any other unaudited income statement data and
balance sheet items included in the Prospectus do not agree
with the corresponding items in the unaudited consolidated
financial statements from which such data and items were
derived, and any such unaudited data and items were not
determined on a basis substantially consistent with the basis
for the corresponding amounts in the audited consolidated
financial statements included or incorporated by reference in
the Company's Annual Report on Form 10-K for the most recent
fiscal year;
(C) the unaudited financial statements which were not
included in the Prospectus but from which were derived the
unaudited condensed financial statements referred to in
Clause (A) and any unaudited income statement data and
balance sheet items included in the Prospectus and referred
to in Clause (B) were not determined on a basis substantially
consistent with the basis for the audited financial
statements included or incorporated by reference in the
Company's Annual Report on Form 10-K for the most recent
fiscal year;
(D) any unaudited pro forma consolidated condensed
financial statements included or incorporated by reference in
the Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of the
Act and the published rules and regulations thereunder or the
pro forma adjustments have not been properly applied to the
historical amounts in the compilation of those statements;
II
<PAGE> 39
(E) as of a specified date not more than five days
prior to the date of such letter, there have been any changes
in the consolidated capital stock (other than issuances of
capital stock upon exercise of options and stock appreciation
rights, upon earn-outs of performance shares and upon
conversions of convertible securities, in each case which
were outstanding on the date of the latest balance sheet
included or incorporated by reference in the Prospectus) or
any increase in the consolidated long-term debt of the
Company and its subsidiaries, or any decreases in
consolidated net current assets or stockholders' equity or
other items specified by the Representatives, or any
increases in any items specified by the Representatives, in
each case as compared with amounts shown in the latest
balance sheet included or incorporated by reference in the
Prospectus, except in each case for changes, increases or
decreases which the Prospectus discloses have occurred or may
occur or which are described in such letter; and
(F) for the period from the date of the latest
financial statements included or incorporated by reference in
the Prospectus to the specified date referred to in Clause
(E) there were any decreases in consolidated net revenues or
operating profit or the total or per share amounts of
consolidated net income or other items specified by the
Representatives, or any increases in any items specified by
the Representatives, in each case as compared with the
comparable period of the preceding year and with any other
period of corresponding length specified by the
Representatives, except in each case for increases or
decreases which the Prospectus discloses have occurred or may
occur or which are described in such letter; and
(vii) In addition to the examination referred to in
their report(s) included or incorporated by reference in the Prospectus
and the limited procedures, inspection of minute books, inquiries and
other procedures referred to in paragraphs (iii) and (vi) above, they
have carried out certain specified procedures, not constituting an
examination in accordance with generally accepted auditing standards,
with respect to certain amounts, percentages and financial information
specified by the Representatives which are derived from the general
accounting records of the Company and its subsidiaries, which appear in
the Prospectus (excluding documents incorporated by reference) or in
Part II of, or in exhibits and schedules to, the Registration Statement
specified by the Representatives or in documents incorporated by
reference in the Prospectus specified by the Representatives, and have
compared certain of such amounts, percentages and financial information
with the accounting records of the Company and its subsidiaries and
have found them to be in agreement.
III
<PAGE> 1
EXHIBIT 2.J
CUSTODIAN AGREEMENT
This CUSTODIAN AGREEMENT dated as of this __ day of May 1997
by and between The Bank of New York, a New York banking corporation (the
"Custodian"), and William R. Latham III, James B. O'Neill and Donald J. Puglisi
(collectively, the "Trustees"), not in their individual capacities but solely
as Trustees of Automatic Common Exchange Security Trust II (the "Trust"), a
trust organized under the laws of the State of New York, under and by virtue of
an Amended and Restated Trust Agreement, dated as of May __, 1997 (the "Trust
Agreement").
W I T N E S S E T H
WHEREAS, the Trust is a non-diversified, closed-end
management investment company, as defined in the Investment Company Act of 1940
(the "Investment Company Act"), formed to purchase and hold certain U.S.
treasury securities (the "Treasury Securities"), to enter into and hold forward
purchase contracts (the "Contracts") with one or more existing shareholders of
Republic Industries, Inc. (the "Company"), and to issue Trust Automatic Common
Exchange Securities (the "Securities") in accordance with the terms and
conditions of the Trust Agreement;
WHEREAS, the Trustees desire to engage the services of the
Custodian to perform certain custodial duties for the Trust; and
WHEREAS, the Custodian is qualified and willing to assume
such duties, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties agree as follows:
1. Definitions. Capitalized terms not otherwise defined
herein shall have the respective meanings specified in the Trust Agreement.
2. Appointment of Custodian; Transfer of Assets. The Trustees
hereby constitute and appoint the Custodian, and the Custodian accepts such
appointment, as custodian of all of the property, including but not limited to,
the Contracts, the Treasury Securities, the Temporary Investments, any cash and
any other property at any time owned or held by the Trust (collectively, the
"Assets"). The
<PAGE> 2
Trustees hereby deposit the Assets with the Custodian and the Custodian hereby
accepts such into its custody and the Trustees shall deliver to the Custodian
all of the Assets, including all monies, securities and other property received
by the Trust at any time during the period of this Agreement, subject to the
following terms and conditions. The Custodian hereby agrees that it shall hold
the Assets in a segregated custody account, separate and distinct from all
other accounts, in accordance with Section 17(f) of, and in such manner as
shall constitute the segregation and holding in trust within the meaning of,
the Investment Company Act and the rules and regulations thereunder. The
Trustees authorize the Custodian, for any Assets held hereunder, to use the
services of any United States securities depository permitted to perform such
services for registered investment companies and their custodians under Rule
17f-4 under the Investment Company Act and which have been approved by the
Trustees, including but not limited to, the Depository Trust Company and the
Federal Reserve Book Entry System. The Custodian shall invest monies on deposit
in such custody account in the Temporary Investments in accordance with Section
3.5 of the Trust Agreement. Except as otherwise specifically provided in the
Trust Agreement, the Custodian shall not have the power to sell, transfer or
otherwise dispose of any Temporary Investments prior to the maturity thereof,
or to acquire additional Temporary Investments. The Custodian shall hold any
Temporary Investments to maturity and shall apply (or cause to be applied) the
proceeds thereof paid upon maturity to the payment of the next succeeding
Quarterly Distribution. All such Temporary Investments shall be selected by the
Trustee from time to time or pursuant to standing instructions from the
Trustees, and the Custodian shall have no liability to the Trust or any Holder
or any other Person with respect to any such Temporary Investments.
3. Asset Disposition; Examinations. The Custodian shall have
no power or authority to assign, hypothecate, pledge or otherwise dispose of
the Assets, except pursuant to a written direction in accordance with paragraph
4 below and then only for the account of the Trust. The Assets shall be subject
to no lien or charge of any kind in favor of the Custodian for itself or for
any other Person claiming through the Custodian. The Custodian shall permit
actual examination of the Assets by the Trust's independent public accountant
at the end of each annual and semi-annual fiscal period of the Trust and at
least one other time during the fiscal year of the Trust chosen by such
independent public accountant and shall permit the inspection of the Assets by
the Commission through its employees or agents during the
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<PAGE> 3
normal business hours of the Custodian upon reasonable request.
4. Authorized Actions. The Custodian shall take such actions
with respect to the Assets as directed in writing by the Trustees or by any
officer of the Administrator as may be received by the Custodian from time to
time.
5. Custodian's Actions Taken In Good Faith. In connection
with the performance of its duties under this Agreement, the Custodian shall be
under no liability to the Trust or any Holder for any action taken in good
faith in reliance on any paper, order, certification, list, demand, request,
consent, affidavit, notice, opinion, direction, endorsement, assignment,
resolution, draft or other document, prima facie properly executed, or for the
disposition of the Assets pursuant to the Trust Agreement or in respect of any
action taken or suffered under the Trust Agreement in good faith, in accordance
with an opinion of counsel or at the direction of the Trustees pursuant hereto;
provided that this provision shall not protect the Custodian against any
liability to which it would otherwise be subject by reason of its reckless
disregard of its obligations and duties hereunder. Notwithstanding any other
provision of this Agreement, the Custodian shall under no circumstances be
liable for any indirect or consequential damages.
6. Trust Agreement Validity. The Custodian shall not be
responsible for the validity or sufficiency of the Trust Agreement or the due
execution thereof, or for the form, character, genuineness, sufficiency, value
or validity of any of the Assets and the Custodian shall in no event assume or
incur any liability, duty or obligation to any Holder or to the Trustees, other
than as expressly provided for herein. The Custodian shall not be responsible
for or in respect of the validity of any signature by or on behalf of the
Trustees.
7. Litigation Obligations, Costs and Indemnity. The Custodian
shall not be under any obligation to appear in, prosecute or defend any action
which in its opinion may involve it in expense or liability, unless it shall be
furnished with such reasonable security and indemnity against such expense or
liability as it may require, and any pecuniary costs of the Custodian from such
actions shall be expenses which are reimbursable pursuant to paragraph 13
hereof.
8. Taxes; Trust Expenses. In no event shall the Custodian be
personally liable for any taxes or other
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<PAGE> 4
governmental charges imposed upon or in respect of the Assets or upon the
monies, securities or other properties included therein. The Custodian shall be
reimbursed and indemnified by the Trustees for all such taxes and charges, for
any tax or charge imposed against the Trust and for any expenses, including
counsel fees, interest, penalties and additions to tax which the Custodian may
sustain or incur with respect to such taxes or charges.
9. Custodian Resignation, Succession. (a) The Custodian may
resign by executing an instrument in writing resigning as Custodian and
delivering the same to the Trustees, not less than 60 days before the date
specified in such instrument when, subject to clause (b) of this paragraph 9,
such resignation is to take effect. Upon receiving such notice of resignation,
the Trustees shall use their reasonable efforts promptly to appoint a successor
Custodian in the manner and meeting the qualifications provided in the Trust
Agreement, by written instrument or instruments delivered to the resigning
Custodian and the successor Custodian.
(b) In case no successor Custodian shall have been appointed
within 30 days after notice of resignation has been received by the Trustees,
the resigning Custodian may forthwith apply to a court of competent
jurisdiction for the appointment of a successor Custodian. Such court may
thereupon, after such notice, if any, as it may deem proper and prescribed,
appoint a successor Custodian.
10. Custodian Removal. The Trustees may remove the Custodian
upon 60 days' prior written notice to the Custodian and appoint a successor
Custodian. In case at any time the Custodian shall not meet the requirements
set forth in the Trust Agreement or shall become incapable of acting or if a
court having jurisdiction shall enter a decree or order for relief in respect
of the Custodian in an involuntary case, or the Custodian shall commence a
voluntary case, under any applicable bankruptcy, insolvency, or other similar
law now or hereafter in effect, or any receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) for the Custodian or for
any substantial part of its property shall be appointed, or the Custodian shall
make any general assignment for the benefit of creditors, or shall generally
fail to pay its debts as they become due, the Trustees may remove the Custodian
immediately and appoint a successor Custodian. The termination of the
Administration Agreement or the Paying Agent Agreement shall cause the removal
of the Custodian simultaneously therewith.
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<PAGE> 5
11. Transfers to Successor Custodian. Upon the request of any
successor Custodian, the Custodian hereunder shall, upon payment of all amounts
due it, execute and deliver an instrument acknowledged by it transferring to
such successor Custodian all the rights and powers of the resigning Custodian;
and the resigning Custodian shall transfer, deliver and pay over to the
successor Custodian the Assets at the time held by it hereunder, if any,
together with all necessary instruments of transfer and assignment or other
documents properly executed necessary to effect such transfer and such of the
records or copies thereof maintained by the resigning Custodian in the
administration hereof as may be requested by the successor Custodian, and shall
thereupon be discharged from all duties and responsibilities hereunder. Any
resignation or removal of the Custodian shall become effective upon such
acceptance of appointment by the successor Custodian. The indemnification of
the resigning Custodian provided for hereunder shall survive any resignation,
discharge or removal of the Custodian hereunder.
12. Custodian Merger, Consolidation. Any corporation into
which the Custodian may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Custodian shall be a party, shall be the successor
Custodian hereunder and under the Trust Agreement without the execution or
filing of any paper, instrument or further act to be done on the part of the
parties hereto, provided that such corporation meets the requirements set forth
in the Trust Agreement and provided further that the Trust has given its prior
written consent to the Custodian with respect to any such merger, conversion or
consolidation.
13. Compensation; Expenses. The Custodian shall receive
compensation for performing the usual, ordinary, normal and recurring services
under this Custodian Agreement and, with the prior written approval of the
Trustees, reimbursement for any and all expenses and disbursements incurred
hereunder, as provided in Section 3.1 of the Administration Agreement.
14. Section 17(f) Qualification. The Custodian hereby
represents that it is qualified to act as a custodian under Section 17(f) of
the Investment Company Act.
15. Custodian's Limited Liability. The Trustees shall
indemnify and hold the Custodian harmless from and against any loss, damages,
cost or expense (including the costs of investigation, preparation for and
defense of legal
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<PAGE> 6
and/or administrative proceedings related to a claim against it and reasonable
attorneys' fees and disbursements), liability or claim incurred by reason of
any inaccuracy in information furnished to the Custodian by the Trustees, or
any act or omission in the course of, connected with or arising out of any
services to be rendered hereunder, provided that the Custodian shall not be
indemnified and held harmless from and against any such loss, damages, cost,
expense, liability or claim arising from its willful misfeasance, bad faith or
gross negligence in the performance of its duties, or its reckless disregard of
its duties and obligations hereunder. Neither the Federal Reserve Book Entry
System nor the Depository Trust Company shall be deemed to be agents of the
Custodian.
16. Rights of Set-Off; Banker's Lien. The Custodian hereby
waives all rights of set-off or banker's lien it may have with respect to the
Assets held by it as Custodian hereunder.
17. Termination. This Agreement shall terminate upon the
earlier of the termination of the Trust or the appointment of a successor
Custodian.
18. Choice of Law. This Agreement is executed and delivered
in the State of New York, and all laws or rules of construction of the State of
New York shall govern the right of the parties hereto and the interpretation of
the provisions hereof.
19. Notices. Any notice to be given to the Trust hereunder
shall be in writing and shall be duly given if mailed or delivered to Republic
Industries Automatic Common Exchange Security Trust, c/o Donald J. Puglisi,
Managing Trustee, Puglisi & Associates, 850 Library Avenue, Suite 204, Newark,
Delaware 19711, and to the Custodian if mailed or delivered to The Bank of New
York, 101 Barclay Street, New York, New York 10286, Attention: Sandra Whalen or
at such other address as shall be specified by the addressee to the other party
hereto in writing.
20. No Third Party Beneficiaries. Nothing herein, express or
implied, shall give to any Person, other than the Trustees, the Custodian and
their respective successors and assigns, any benefit of any legal or equitable
right, remedy or claim hereunder.
21. Amendments; Trust Agreement Changes; Waiver. This
Agreement shall not be deemed or construed to be modified, amended, rescinded,
cancelled or waived, in whole or in part, except by a written instrument signed
by a duly
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<PAGE> 7
authorized representative of the party to be charged. The Trustees shall notify
the Custodian of any change in the Trust Agreement prior to the effective date
of any such change. Failure of either party hereto to exercise any right or
remedy hereunder in the event of a breach hereof by the other party shall not
constitute a waiver of any such right or remedy with respect to any subsequent
breach.
22. Counterparts. This Agreement may be signed in
counterparts with all counterparts constituting one and the same instrument.
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<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this
Custodian Agreement to be duly executed as of the day and year first above
written.
TRUSTEES
-------------------------
William R. Latham III,
as Trustee
-------------------------
James B. O'Neill,
as Trustee
-------------------------
Donald J. Puglisi,
as Trustee
THE BANK OF NEW YORK
By
------------------------
Name:
Title:
-8-
<PAGE> 1
EXHIBIT 2.K.(i)
ADMINISTRATION AGREEMENT
This ADMINISTRATION AGREEMENT, dated as of this ___ day of
May, 1997, by and between The Bank of New York, a New York banking corporation
(the "Administrator"), and William R. Latham III, James B. O'Neill and Donald
J. Puglisi (collectively, the "Trustees"), not in their individual capacities
but solely as Trustees of Automatic Common Exchange Security Trust II (the
"Trust"), a trust organized under the laws of the State of New York under and
by virtue of an Amended and Restated Trust Agreement, dated as of May __, 1997
(the "Trust Agreement").
W I T N E S S E T H
WHEREAS, the Trust is a non-diversified, closed-end
management investment company, as defined in the Investment Company Act of 1940
(the "Investment Company Act"), formed to purchase and hold certain U.S.
treasury securities (the "Treasury Securities"), to enter into and hold forward
purchase contracts (the "Contracts") with one or more existing shareholders of
Republic Industries, Inc. (the "Company") and to issue Trust Automatic Common
Exchange Securities (the "Securities") in accordance with the terms and
conditions of the Trust Agreement;
WHEREAS, the Trustees desire to engage the services of the
Administrator to assume certain duties and responsibilities of the Trustees
under the Trust Agreement and the Investment Company Act and to undertake
certain services on behalf of and subject to the supervision of the Trustees as
provided herein; and
WHEREAS, the Administrator is qualified and willing to assume
such duties and responsibilities and to undertake to render such services,
subject to the supervision of the Trustees, on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties agree as follows:
<PAGE> 2
ARTICLE I
DEFINITIONS
1.1 Definitions. Capitalized terms not otherwise
defined herein shall have the respective meanings specified
in the Trust Agreement.
ARTICLE II
ENGAGEMENT OF ADMINISTRATOR
2.1 Engagement. The Trustees hereby engage the
Administrator, and the Administrator hereby agrees to be so
engaged, to provide the services hereinafter enumerated.
2.2 Services of Administrator. Subject to the supervision of
the Trustees, the Administrator shall effect the matters set forth further in
Sections 2.3, 2.4 and 2.5 of the Trust Agreement, to the extent such
responsibilities can lawfully be delegated to the Administrator; provided,
however, that the Administrator shall not (i) render investment advisory
services to the Trust as defined in the Investment Company Act or the
Investment Advisers Act of 1940; (ii) have the power of the Trustees to sell
the Contract or the Treasury Securities except as provided in Sections 2.5 of
the Trust Agreement; or (iii) have the power to select the independent public
accountants for the Trust. Additionally, the Administrator shall be responsible
for rendering the following services:
(a) instruct the Paying Agent to pay out of the Net Proceeds
of the sale of the Securities the fees and expenses of the Trust
incurred in connection with the offering of the Securities as
specified in Schedule I to the Fund Expense Agreement;
(b) instruct the Paying Agent to pay out of the Net Proceeds
of the sale of the Securities the fees and expenses of the Trust
incurred in connection with the organization of the Trust as specified
in Schedule I to the Fund Expense Agreement;
(c) instruct the Paying Agent to effect the transactions set
forth in Sections 2.3, 2.4 and 2.5 of the Trust Agreement and to
otherwise perform the duties of the Paying Agent referred to in the
Trust Agreement;
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<PAGE> 3
(d) with the approval of the Trustees, engage legal and other
professional advisors, subject to clause 2.2 (iii) above;
(e) receive all demands, bills and invoices for expenses
incurred by or on behalf of the Trust, and pay the same, or cause the
Paying Agent to pay the same, out of moneys paid to the Administrator
pursuant to the Fund Expense Agreement dated the date hereof between
Goldman, Sachs & Co., and The Bank of New York (the "Fund Expense
Agreement") but in no event out of any assets of the Trust except, as
provided in paragraphs (a) and (b) hereof, and give notice to Goldman,
Sachs & Co. pursuant to the Fund Indemnity Agreement dated the date
hereof between Goldman, Sachs & Co. and the Trustees (the "Fund
Indemnity Agreement") of any claim for Indemnification Expenses (as
defined in the Fund Indemnity Agreement) or any threatened claim for
Indemnification Expenses;
(f) (i) prepare and mail, file or publish, or, as
appropriate, direct the Paying Agent to prepare and mail, file or
publish, any notices, proxies, reports and other communications
required to be mailed or published pursuant to the Trust Agreement and
the Investment Company Act, (ii) keep all the books and records of the
Trust (other than those to be kept by the Paying Agent), and (iii)
prepare (or cause to be prepared) and, as necessary, file (or cause to
be filed) any and all reports, returns and other documents as required
under the Investment Company Act, the Securities Exchange Act of 1934,
or the Code, or, as reasonably requested by the Trustees, under any
other applicable laws, rules or regulations or otherwise; provided,
however, that responsibility for the adequacy and accuracy of any such
reports, returns, etc. shall be that of the Trustees and provided,
further, that the Administrator shall have no liability for the
adequacy or accuracy of such reports, returns, etc.;
(g) at the request of the Trustees and upon being furnished
with such reasonable security and indemnity against any related
expense or liability as the Administrator may require, institute and
prosecute, in accordance with the instructions of the Trustees, legal
or other appropriate proceedings to enforce any and all rights and
remedies of the Trust;
(h) receive and review on behalf of the Trust all notices,
reports, certificates and other documents regarding the Contract and
the Treasury Securities;
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<PAGE> 4
(i) make all necessary arrangements with respect to meetings
of Trustees and meetings of Holders, including, without limitation,
the preparation of notices, proxies and minutes, subject to the
approval of Trustees; and
(j) in conjunction with the Trustees, determine and publish,
in such manner as the Trustees shall direct in writing, the Trust's
net asset value in accordance with the Trust's policy as set forth in
the Prospectus.
2.3 Certain Rights of the Administrator. In connection with
the performance of its duties under this Agreement, the Administrator shall not
be liable to the Trust, the Trustees or any Holder (i) for any action taken or
for refraining from taking any action hereunder except in the case of its
willful misfeasance, bad faith, gross negligence or the reckless disregard of
its duties hereunder, (ii) with respect to any action taken or omitted to be
taken by it in good faith in accordance with the directions of the Trustees or
of any Trustee or (iii) in connection with the performance of its duties under
Section 2.2(j) hereof, for good faith reliance upon information furnished by
third parties selected by the Administrator with due care. The Administrator
shall under no circumstances be liable for any indirect or consequential
damages. The Administrator may consult with counsel and the written advice of
such counsel shall be full and complete authorization and protection in respect
of any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon. The Administrator may perform its duties and exercise its
rights hereunder either directly or by or through agents or attorneys appointed
with due care by it but shall be liable for the acts and omissions of such
persons to the same extent as if the functions had been performed by the
Administrator itself.
ARTICLE III
COMPENSATION OF ADMINISTRATOR
3.1 Compensation. For services to be rendered by the
Administrator pursuant to this Agreement, and for the payment of Trust expenses
pursuant to Section 2.2(e) hereof, the Administrator shall receive only such
fees and expenses as shall be paid to it pursuant to the terms of the Fund
Expense Agreement and shall have no recourse to the assets of the Trust for the
payment of any such amounts. No provision of this Administration Agreement
shall require the
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<PAGE> 5
Administrator to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the exercise
of any of its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it.
3.2 Additional Services. If and to the extent that the
Trustees shall request the Administrator to render services for the Trust,
other than those to be rendered by the Administrator hereunder, and if the
Administrator agrees to render such services, such additional services shall be
compensated separately on terms to be agreed upon between the Administrator and
the Trustees from time to time.
ARTICLE IV
TERMINATION
4.1 Termination.
(a) This Agreement shall terminate immediately upon written
notice of termination from the Trustees to the Administrator if any of the
following events shall occur:
(i) If the Administrator shall violate any provision
of this Agreement, the Trust Agreement, or the Investment Company Act,
and after notice of such violation, shall not cure such default within
30 days; or
(ii) If the Administrator shall be adjudged bankrupt or
insolvent by a court of competent juris diction, or an order shall be
made by a court of competent jurisdiction for the appointment of a
receiver, liquidator, or trustee of the Administrator, or of all or
substantially all of its property by reason of the foregoing, or
approving any petition filed against the Administrator for its
reorganization, and such adjudication or order shall remain in force
or unstayed for a period of 30 days; or
(iii) If the Administrator shall institute proceedings for
voluntary bankruptcy, or shall file a petition seeking reorganization
under the Federal bankruptcy laws, or for relief under any law for the
relief of debtors, or shall consent to the appointment of a receiver
of the Administrator or of all or
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<PAGE> 6
substantially all of its property, or shall make a general assignment
for the benefit of its creditors, or shall admit in writing its
inability to pay its debts generally as they become due; or
(iv) Upon the voluntary or involuntary dissolution of the
Administrator, or unless the Trust shall have given its prior written
consent thereto, the merger or consolidation of the Administrator with
any other entity.
If any of the events specified in clauses (ii), (iii) or (iv)
of this Section 4.1(a) shall occur, the Administrator shall give immediate
written notice thereof to the Trustees.
(b) Notwithstanding anything to the contrary contained
herein, this Agreement shall terminate immediately (i) upon termination of the
Trust Agreement, (ii) upon termination of the Paying Agent Agreement, (iii)
upon termination of the Collateral Agreement, (iv) upon termination of the
Custodian Agreement or (v) upon the resignation or removal of the Custodian.
(c) This Agreement may be terminated by either party hereto
without penalty upon 60 days' prior written notice to the other party hereto;
provided that neither party hereto may terminate this Agreement pursuant to
this Section 4.1(c) unless a successor Administrator shall have been appointed
and shall have accepted the duties of the Administrator. If, within 30 days
after notice by the Administrator to the Trustees of termination of this
Agreement, no successor Administrator shall have been selected and accepted the
duties of the Administrator, the Administrator may apply to a court of
competent jurisdiction for the appointment of a successor Administrator.
4.2 Effect of Termination. The Administrator shall forthwith
upon termination of this Agreement deliver to the Trustees any records or other
property of the Trust then in the possession or custody of the Administrator.
Any obligation to indemnify the Administrator pursuant to Section 6.6 shall
survive the termination of this Agreement.
ARTICLE V
RECORDS AND REPORTS
5.1 Books and Records; Inspection and Copying.
The Administrator shall keep appropriate, and reasonably
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<PAGE> 7
detailed and accurate, books and records of all its activities pursuant to this
Agreement. The Trustees shall have the right to inspect such books and records
during the Administrator's normal business hours upon reasonable request, and
to make copies of the same at the expense of the Trust.
5.2 Access to Information. The Administrator shall make
available to each of the Trustees all information it receives and compiles with
respect to the Contracts and the Treasury Securities, the monies available to
the Trust, the financial condition of the Trust and all other relevant matters
concerning the Trust.
ARTICLE VI
MISCELLANEOUS
6.1 Binding Effect. Any corporation into which the
Administrator may be merged or converted or with which it may be consolidated,
or any corporation resulting from any merger, conversion or consolidation to
which the Administrator shall be a party, shall be the successor Administrator
hereunder and under the Trust Agreement without the execution or filing of any
paper, instrument or further act to be done on the part of the parties hereto,
provided that such corporation meets the requirements set forth in the Trust
Agreement and provided further that the Trustees have given their prior written
consent to the Administrator with respect to any such merger, conversion or
consolidation. This Agreement shall be binding on and inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
6.2 Entire Agreement. This Agreement contains the entire
agreement between the parties with respect to the matters contained herein and
supersedes all prior agreements or understandings, whether oral or written.
This Agreement shall not be amended, changed, modified, or discharged, in whole
or in part, except by an instrument in writing signed by both parties hereto,
or their respective successors or permitted assigns.
6.3 Notices. Any notice, report or other communication
required or permitted to be given hereunder shall be in writing, and shall,
unless some other method of giving such notice, report or other communication
is accepted by the party to whom it is to be given or is required by the Trust
Agreement or the Investment Company Act, be given by being mailed by U.S. first
class mail,
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<PAGE> 8
certified or registered, return receipt requested, postage prepaid, to the
following addresses of the parties hereto:
The Trust: Automatic Common Exchange Security
Trust II
c/o Donald J. Puglisi, Managing
Trustee
Puglisi & Associates
850 Library Avenue, Suite 204
Newark, Delaware 19711
Telephone: (302) 738-6680
Telecopier: (302) 738-7210
The Administrator: The Bank of New York
101 Barclay Street
New York, New York 10286
Attn: Sandra Whalen
Telephone: (212) 815-5095
Telecopier: (212) 815-5999
Any party may at any time give written notice to the other
party that it wishes to change its address for the purposes of this Section
6.3.
6.4 Applicable Law. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect except to the extent such law is preempted by federal
law.
6.5 Non-assignability. This Agreement and the rights and
obligations of the parties hereunder may not be assigned or delegated by either
party without the prior written consent of the other party.
6.6 Indemnification. The Trustees shall indemnify and hold
the Administrator harmless from and against any loss, damages, cost or expense
(including the costs of investigation, preparation for and defense of legal
and/or administrative proceedings related to a claim against it and reasonable
attorneys' fees and disbursements), liability or claim incurred by reason of
any inaccuracy in information furnished to the Administrator by the Trustees,
or any act or omission in the course of, connected with or arising out of any
services to be rendered hereunder, provided that the Administrator shall not be
indemnified and held harmless from and against any such loss, damages, cost,
expense, liability or claim incurred by reason of its willful misfeasance, bad
faith, or gross negligence in the
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<PAGE> 9
performance of its duties, or its reckless disregard of its duties and
obligations hereunder.
6.7. Provisions of Law to Control. This Agreement shall be
subject to the applicable provisions of the Investment Company Act and the
rules and regulations of the Commission thereunder. To the extent that any
provisions herein contained conflict with any applicable provisions of the
Investment Company Act or such rules and regulations, the latter shall control.
6.8. Counterparts. This Agreement may be signed
in counterparts with all counterparts constituting one and
the same instrument.
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<PAGE> 10
IN WITNESS WHEREOF the parties have hereunto executed this
Administration Agreement as of the day and year first above written.
TRUSTEES
------------------------------
William R. Latham III,
as Trustee
------------------------------
James B. O'Neill,
as Trustee
------------------------------
Donald J. Puglisi,
as Trustee
THE BANK OF NEW YORK
By
---------------------------
Name:
Title:
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<PAGE> 1
EXHIBIT 2.K.(ii)
PAYING AGENT AGREEMENT
This PAYING AGENT AGREEMENT, dated as of this ___ day of May,
1997, by and between The Bank of New York, a New York banking corporation (the
"Paying Agent"), and William R. Latham III, James B. O'Neill and Donald J.
Puglisi (collectively, the "Trustees"), not in their individual capacities but
solely as Trustees of Automatic Common Exchange Security Trust II (the
"Trust"), a trust organized under the laws of the State of New York under and
by virtue of an Amended and Restated Trust Agreement, dated as of May __, 1997
(the "Trust Agreement").
W I T N E S S E T H
WHEREAS, the Trust is a non-diversified, closed-end
management investment company, as defined in the Investment Company Act of 1940
(the "Investment Company Act"), formed to purchase and hold the U.S. treasury
securities (the "Treasury Securities"), to enter into and hold forward purchase
contracts (the "Contracts") with one or more existing shareholders of Republic
Industries, Inc. (the "Company") and to issue Trust Automatic Common Exchange
Securities (the "Securities") to the public in accordance with the terms and
conditions of the Trust Agreement;
WHEREAS, the Trustees desire to engage the services of the
Paying Agent to assume certain responsibilities and to perform certain duties
as the transfer agent, registrar and paying agent with respect to the
Securities upon the terms and conditions of this Agreement; and
WHEREAS, the Paying Agent is qualified and willing to assume
such responsibilities and to perform such duties, subject to the supervision of
the Trustees, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties agree as follows:
<PAGE> 2
ARTICLE I
DEFINITIONS
1.1 Definitions. Capitalized terms not otherwise defined
herein shall have the respective meanings specified in the Trust Agreement.
ARTICLE II
PAYING AGENT
2.1 Appointment of Paying Agent and Acceptance. The Trust
Agreement provides that The Bank of New York shall act as the initial Paying
Agent. The Bank of New York accepts such appointment and agrees to act in
accordance with its standard procedures and the provisions of the Trust
Agreement and the provisions set forth in this Article 2 as Paying Agent with
respect to the Securities. Without limiting the generality of the foregoing,
The Bank of New York, as Paying Agent, agrees that it shall establish and
maintain the Trust Account, subject to the provisions of Section 2.3 hereof.
2.2 Certificates and Notices. The Trustees shall deliver to
the Paying Agent the certificates and notices required to be delivered to the
Paying Agent pursuant to the Trust Agreement, and the Paying Agent shall mail
or publish such certificates or notices as required by the Trust Agreement, but
the Paying Agent shall have no responsibility to confirm or verify the accuracy
of certificates or notices of the Trustees so delivered.
2.3 Payments and Investments. The Paying Agent shall make
payments out of the Trust Account as provided for in Section 3.2 of the Trust
Agreement. The Paying Agent shall effect the transactions set forth in Sections
2.3, 2.4, 2.5 and 8.3 of the Trust Agreement upon instructions to do so from
the Administrator (except that with respect to its obligations under Section
8.3 of the Trust Agreement, the Paying Agent shall act without instructions
from the Administrator) and shall invest monies on deposit in the Trust Account
in Temporary Investments in accordance with Section 3.5 of the Trust Agreement.
Except as otherwise specifically provided herein or in the Trust Agreement, the
Paying Agent shall not have the power to sell, transfer or otherwise dispose of
any Temporary Investment prior to the maturity thereof, or to acquire
additional Temporary Investments. The Paying Agent shall hold any Temporary
Investment to its maturity and shall apply the proceeds
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<PAGE> 3
thereof paid upon maturity to the payment of the next succeeding Quarterly
Distribution. All such Temporary Investments shall be selected by the Trustees
from time to time or pursuant to standing instructions from the Trustees, and
the Paying Agent shall have no liability to the Trust or any Holder or any
other Person with respect to any such Temporary Investment.
2.4 Instructions from Administrator. The Paying Agent shall
receive and execute all instructions from the Administrator, except to the
extent they conflict with or are contrary to the terms of the Trust Agreement
or this Agreement.
ARTICLE III
TRANSFER AGENT AND REGISTRAR
3.1 Original Issue of Certificates. On the date Securities
sold pursuant to the Underwriting Agreement are originally issued, certificates
for the Securities shall be issued by the Trust, and, at the request of the
Trustees, registered in such names and such denominations as the underwriters
shall have previously requested of the Trustees, executed manually or in
facsimile by the Managing Trustee and countersigned by the Paying Agent. At no
time shall the aggregate number of Securities represented by such countersigned
certificates exceed the number of then outstanding Securities.
3.2 Registry of Holders. The Paying Agent shall
maintain a registry of the Holders of the Securities.
3.3 Registration of Transfer of the Securities. The
Securities shall be registered for transfer or exchange, and new certificates
shall be issued, in the name of the designated transferee or transferees, upon
surrender of the old certificates in form deemed by the Paying Agent properly
endorsed for transfer with (a) all necessary endorsers' signatures guaranteed
in such manner and form as the Paying Agent may require by a guarantor
reasonably believed by the Paying Agent to be responsible, (b) such assurances
as the Paying Agent shall deem necessary or appropriate to evidence the
genuineness and effectiveness of each necessary endorsement and (c)
satisfactory evidence of compliance with all applicable laws relating to the
collection of taxes or funds necessary for the payment of such taxes.
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<PAGE> 4
3.4 Lost Certificates. The Paying Agent shall issue and
register replacement certificates for certificates represented to have been
lost, stolen or destroyed, upon the fulfillment of such requirements as shall
be deemed appropriate by the Trustees and the Paying Agent, subject at all
times to provisions of law, the Trust Agreement and resolutions adopted by the
Trustees with respect to lost securities. The Paying Agent may issue new
certificates in exchange for and upon the cancellation of mutilated
certificates. Any request by the Trustees to the Paying Agent to issue a
replacement or new certificate pursuant to this Section 3.4 shall be deemed to
be a representation and warranty by the Trustees to the Paying Agent that such
issuance will comply with such provisions of law and the Trust Agreement and
resolutions of the Trustees.
3.5 Transfer Books. The Paying Agent shall maintain the
transfer books listing the Holders of the Securities. In case of any written
request or demand for the inspection of the transfer books of the Trust or any
other books in the possession of the Paying Agent, the Paying Agent will notify
the Trustees and secure instructions as to permitting or refusing such
inspection. The Paying Agent reserves the right, however, to exhibit the
transfer books or other books to any person in case it is advised by its
counsel that its failure to do so would be unlawful.
3.6 Disposition of Cancelled Certificates; Records. The
Paying Agent shall retain certificates which have been cancelled in transfer or
in exchange and accompanying documentation in accordance with applicable rules
and regulations of the Commission for six calendar years from the date of such
cancellation, and shall make such records available during this period at any
time, or from time to time, for reasonable periodic, special, or other
examinations by representatives of the Commission and the Board of Governors of
the Federal Reserve System. Thereafter such records shall not be destroyed by
the Paying Agent but will be safely stored for possible future reference. In
case of any request or demand for the inspection of the register of the Trust
or any other books in the possession of the Paying Agent, the Paying Agent will
notify the Trustees and seek to secure instructions as to permitting or
refusing such inspection. The Paying Agent reserves the right, however, to
exhibit the register or other records to any person in case it is advised by
its counsel that its failure to do so would (i) be unlawful, or (ii) expose it
to liability, unless the Trustees shall have offered indemnification
satisfactory to the Paying Agent.
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<PAGE> 5
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE TRUSTEES
The Trustees represent and warrant to the Paying Agent that:
(a) the Trust is a validly existing trust under the laws of
the State of New York and the Trustees have full power under the Trust
Agreement to execute and deliver this Agreement and to authorize,
create and issue the Securities;
(b) this Agreement has been duly and validly authorized,
executed and delivered by the Trustees and constitutes the valid and
binding agreement of the Trustees, enforceable against the Trustees in
accordance with its terms, subject as to such enforceability to
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to
general equitable principles;
(c) the form of the certificate evidencing the Securities
complies with all applicable laws of the State of New York;
(d) the Securities have been duly and validly authorized,
executed and delivered by the Trustees and are validly issued;
(e) the offer and sale of the Securities has been registered
under the Securities Act of 1933 and the Trust has been registered
under the Investment Company Act and no further action by or before
any governmental body or authority of the United States or of any
state thereof is required in connection with the execution and
delivery of this Agreement or the issuance of the Securities;
(f) the execution and delivery of this Agreement and the
issuance and delivery of the Securities do not and will not conflict
with, violate, or result in a breach of, the terms, conditions or
provisions of, or constitute a default under, the Trust Agreement, any
law or regulation, any order or decree of any court or public
authority having jurisdiction over the Trust, or any mortgage,
indenture, contract, agreement or undertaking to which the Trustees
are a party or by which any of them are bound; and
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<PAGE> 6
(g) no taxes are payable upon or in respect of the execution
of this Agreement or the issuance of the Securities.
ARTICLE V
DUTIES AND RIGHTS
5.1 Duties. (a) The Paying Agent is acting solely as agent
for the Trustees hereunder and owes no fiduciary duties to any other Person by
reason of this Agreement.
(b) In the absence of bad faith, gross negligence or willful
misfeasance on its part in the performance of its duties hereunder or its
reckless disregard of its duties and obligations hereunder, the Paying Agent
shall not be liable for any action taken, suffered, or omitted in the
performance of its duties under this Agreement. The Paying Agent shall under no
circumstances be liable for any indirect or consequential damages hereunder.
5.2 Rights. (a) The Paying Agent may rely and shall be
protected in acting or refraining from acting upon any communication authorized
hereby and upon any written instruction, notice, request, direction, consent,
report, certificate, share certificate or other instrument, paper or document
reasonably believed by it to be genuine. The Paying Agent shall not be liable
for acting upon any telephone communication authorized hereby which the Paying
Agent believes in good faith to have been given by the Trustees.
(b) The Paying Agent may consult with legal counsel and the
advice of such counsel shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) The Paying Agent shall not be required to advance, expend
or risk its own funds or otherwise incur or become exposed to financial
liability in the performance of its duties hereunder.
(d) The Paying Agent may perform its duties and exercise its
rights hereunder either directly or by or through agents or attorneys appointed
with due care by it hereunder.
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<PAGE> 7
5.3 Disclaimer. The Paying Agent makes no representation as
to (a) the first two recitals of this Agreement or (b) the validity or adequacy
of the Securities.
5.4 Compensation, Expenses and Indemnification. (a) The
Paying Agent shall receive for all services rendered by it under this Agreement
and, upon the prior written approval of the Trustees, for all expenses,
disbursements and advances incurred or made by the Paying Agent in accordance
with any provision of this Agreement (including the reasonable compensation and
the expenses and disbursements of its agents and counsel), the compensation set
forth in Section 3.1 of the Administration Agreement.
(b) The Trustees shall indemnify the Paying Agent for and
hold it harmless against any loss, liability, claim or expense (including the
costs of investigation, prepara tion for and defense of legal and/or
administrative proceedings relating to a claim against it and reasonable
attorneys' fees and disbursements) arising out of or in connection with the
performance of its obligations under this Agreement, provided such loss,
liability or expense is not the result of gross negligence, willful misfeasance
or bad faith on its part in the performance of its duties hereunder or its
reckless disregard of its duties or obligations hereunder, including the costs
and expenses of defending itself against any claim or liability in connection
with its exercise or performance of any of its duties or obligations hereunder
and thereunder. The indemnification provided by this Section 5.4(b) shall
survive the termination of this Agreement.
ARTICLE VI
MISCELLANEOUS
6.1 Term of Agreement. (a) The term of this Agreement is
unlimited unless terminated as provided in this Section 6.1 or unless the Trust
is terminated, in which case this Agreement shall terminate ten days after the
date of termination of the Trust. This Agreement may be terminated by either
party hereto without penalty upon 60 days' prior written notice to the other
party hereto; provided that neither party hereto may terminate this Agreement
pursuant to this Section 6.1(a) unless a successor Paying Agent shall have been
appointed and shall have accepted the duties of the Paying Agent. The
termination of the Trust Agreement, the Collateral Agreement, the
Administration Agreement or the Custodian Agreement or the resignation or
removal of the Custodian shall cause the termination of this Agreement
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<PAGE> 8
simultaneously therewith. If, within 30 days after notice by the Paying Agent
of termination of this Agreement, no successor Paying Agent shall have been
selected and accepted the duties of the Paying Agent, the Paying Agent may
apply to a court of competent jurisdiction for the appointment of a successor
Paying Agent.
(b) Except as otherwise provided in this para graph (b), the
respective rights and duties of the Trustees and the Paying Agent under this
Agreement shall cease upon termination of this Agreement. The Trustees'
representa tions, warranties, covenants and obligations to the Paying Agent
under Article IV and Section 5.4 hereof shall survive the termination hereof.
Upon termination of this Agreement, the Paying Agent shall, at the Trustees'
request, promptly deliver to the Trustees or to any successor Paying Agent as
requested by the Trustees (i) copies of all books and records maintained by it
and (ii) any funds deposited with the Paying Agent by the Trustees.
6.2 Communications. Except for communications authorized to
be made by telephone pursuant to this Agreement, all notices, requests and
other communications to any party hereunder shall be in writing (including
telecopy or similar writing) and given to such person at its address or
telecopy number set forth below:
If to the Trust,
addressed: Automatic Common Exchange Security
Trust II
c/o Donald J. Puglisi, Managing
Trustee
Puglisi & Associates
850 Library Avenue, Suite 204
Newark, Delaware 19711
Telephone: (302) 738-6680
Telecopier: (302) 738-7210
with a copy to the Administrator if the duties of the Administrator are being
performed by a Person other than the Person performing the obligations of the
Paying Agent.
If to the Paying Agent,
addressed: The Bank of New York
101 Barclay Street
New York, New York 10286
Attn: Sandra Whalen
Telephone: (212) 815-5095
Telecopier: (212) 571-5999
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<PAGE> 9
or such other address or telecopy number as such party may hereafter specify
for such purpose by notice to the other party. Each such notice, request or
communication shall be effective when delivered at the address specified
herein. Communications shall be given on behalf of the Trust by the Trustees
(or by the Administrator, provided that the Trustees shall not have delivered
to the Paying Agent an instrument in writing revoking the authorization of the
Administrator to act for it pursuant hereto) and on behalf of the Paying Agent
by a Senior Vice President or Vice President of the Paying Agent assigned to
its Corporate Trust Department.
6.3 Entire Agreement. This Agreement contains the entire
agreement between the parties relating to the subject matter hereof, and there
are no other representations, endorsements, promises, agreements or
understandings, oral, written or inferred, between the parties relating to the
subject matter hereof.
6.4 No Third Party Beneficiaries. Nothing herein, express or
implied, shall give to any Person, other than the Trustees, the Paying Agent
and their respective successors and assigns, any benefit of any legal or
equitable right, remedy or claim hereunder.
6.5 Amendment; Waiver. (a) This Agreement shall not be deemed
or construed to be modified, amended, rescinded, cancelled or waived, in whole
or in part, except by a written instrument signed by a duly authorized
representative of the party to be charged. The Trustees shall notify the Paying
Agent of any change in the Trust Agreement prior to the effective date of any
such change.
(b) Failure of either party hereto to exercise any right or
remedy hereunder in the event of a breach hereof by the other party shall not
constitute a waiver of any such right or remedy with respect to any subsequent
breach.
6.6 Successors and Assigns. Any corporation into which the
Paying Agent may be merged or converted or with which it may be consolidated,
or any corporation resulting from any merger, conversion or consolidation to
which the Paying Agent shall be a party, shall be the successor Paying Agent
hereunder and under the Trust Agreement without the execution or filing of any
paper, instrument or further act to be done on the part of the parties hereto,
provided that such corporation meets the requirements set forth in the Trust
Agreement, provided further that the Trustees have given their prior written
consent to the Paying Agent with
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<PAGE> 10
respect to any such merger, conversion or consolidation. This Agreement shall
be binding upon, inure to the benefit of, and be enforceable by, the respective
successors of each of the Trust and the Paying Agent. This Agreement shall not
be assignable by either the Trustees or the Paying Agent, without the prior
written consent of the other party.
6.7 Severability. If any clause, provision or section hereof
shall be ruled invalid or unenforceable by any court of competent jurisdiction,
the invalidity or unenforceability of such clause, provision or section shall
not affect any of the remaining clauses, provisions or sections hereof.
6.8 Execution in Counterparts. This Agreement may be executed
in several counterparts, each of which shall be an original and all of which
shall constitute but one and the same instrument.
6.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to principles of conflicts of law.
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<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have caused this
Paying Agent Agreement to be duly executed and delivered as of the date first
above written.
TRUSTEES
------------------------------
` William R. Latham III,
as Trustee
------------------------------
James B. O'Neill,
as Trustee
------------------------------
Donald J. Puglisi,
as Trustee
THE BANK OF NEW YORK
By:
----------------------------
Name:
Title:
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<PAGE> 1
EXHIBIT 2.K.(iii)
PURCHASE AGREEMENT
THIS AGREEMENT is made as of this ___ day of May, 1997
between [Selling Shareholder] ("Seller") and Automatic Common Exchange Security
Trust II, a trust organized under the laws of the State of New York under and
by virture of an Amended and Restated Trust Agreement, dated as of May __, 1997
(the "Trust Agreement") (such trust and the trustees thereof acting in their
capacity as such being referred to herein as "Purchaser").
WHEREAS, Seller owns shares of common stock, par value $0.01
per share (the "Common Stock"), of Republic Industries, Inc., a Delaware
corporation (the "Company");
WHEREAS, Purchaser has filed with the Securities and Exchange
Commission a registration statement contemplating the offering of up to
9,934,235 Trust Automatic Common Exchange Securities (the "Securities"), the
terms of which contemplate delivery by Purchaser to the holders thereof of a
number of shares of Common Stock (or, at the option of Sellers, cash in lieu
thereof) on the Exchange Date referred to herein;
WHEREAS, Seller has agreed, pursuant to the Collateral
Agreement (the "Collateral Agreement") dated as of May __, 1997, among
Purchaser, Seller and The Bank of New York, as collateral agent (the
"Collateral Agent"), to grant Purchaser a security interest in the Common Stock
and in certain other circumstances certain other collateral to secure the
obligations of Seller hereunder;
WHEREAS, Purchaser has agreed, pursuant to an underwriting
agreement, dated May __, 1997 (the "Underwriting Agreement"), among Purchaser,
Sellers, the Company and Goldman Sachs & Co. as representatives of the several
underwriters named therein (the "Underwriters"), to issue and sell to the
Underwriters an aggregate of 8,700,000 Securities (the "Firm Securities") and,
at the Underwriters' option, up to 1,234,235 additional Securities (the
"Optional Securities") to cover overallotments;
NOW, THEREFORE, in consideration of their mutual covenants
herein contained, the parties hereto, intending to be legally bound, hereby
mutually covenant and agree as follows:
<PAGE> 2
DEFINITIONS
As used herein, the following words and phrases shall have
the following meanings:
"Additional Purchase Price" has the meaning provided in
Section 1.2(b).
"Additional Share Base Amount" means a number equal to the
number of Optional Securities that the Underwriters elect to purchase under the
Underwriting Agreement multiplied by a fraction, the numerator of which is the
Firm Share Base Amount and the denominator of which is the number of Firm
Securities purchased by the Underwriters under the Underwriting Agreement.
"Additional Shares" has the meaning provided in
Section 1.1(b).
"Additional STRIPS" means the U.S. Treasury obligations
purchased by Purchaser for settlement at the Second Time of
Delivery.
"Administrator" means The Bank of New York, administrator for
Purchaser under the Administration Agreement dated as of May __, 1997, or any
successor thereto.
"Appreciation Threshold Price" has the meaning provided
in Section 1.1(c).
"Business Day" means any day on which commercial banks are
open for business in New York City and the New York Stock Exchange is not
closed.
"Calculation Period" means any period of Trading Days for
which an average security price must be determined pursuant to this Agreement.
"Cash Settlement Alternative" has the meaning provided
in Section 1.3(d).
"Closing Price" of the Common Stock on any date of
determination means the daily closing sale price (or, if no closing sale price
is reported, the last reported sale price) of the Common Stock as reported on
the Nasdaq Stock Market--National Market ("Nasdaq") on such date of
determination or, if the Common Stock is traded on Nasdaq on any such date, as
reported in the composite transactions for the principal United States
securities exchange on which the Common Stock is so listed, or if the Common
Stock is not so listed on a United States national or regional securities
exchange, the last quoted bid price for the Common Stock in the
over-the-counter market as reported by the National
<PAGE> 3
Quotation Bureau or similar organization, provided that if any event that
results in an adjustment to the number of shares of Common Stock deliverable
hereunder pursuant to Section 6.1(e), occurs prior to the Exchange Date, the
Closing Price as determined pursuant to the foregoing will be appropriately
adjusted to reflect the occurrence of such event.
"Contract Shares" has the meaning provided in Section 1.1(b).
"Current Market Price" per share of Common Stock means the
average Closing Price of a share of Common Stock on the 20 Trading Days
immediately prior to but not including the Exchange Date.
"Custodian" means The Bank of New York, custodian for
Purchaser under the Custodian Agreement dated as of May __, 1997, or any
successor thereto.
"Dilution Adjustment" means any fraction or number by which
the Exchange Rate shall be multiplied pursuant to Section 6.1(a), (b), (c) or
(d).
"Event of Default" has the meaning provided in Article VII.
"Excess Purchase Payment" has the meaning provided in Section
6.1(d).
"Exchange Date" means __________, 2000.
"Exchange Rate" has the meaning provided in Section 1.1(c).
"Firm Purchase Price" has the meaning provided in Section
1.2(a).
"Firm Share Base Amount" has the meaning provided in Section
1.1(a).
"Firm Shares" has the meaning provided in Section 1.1(a).
"First Time of Delivery" has the meaning provided in Section
1.3(a).
"Initial Price" has the meaning provided in Section 1.1(c).
"Marketable Securities" has the meaning provided in Section
6.2.
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<PAGE> 4
"Permitted Dividend" has the meaning provided in Section
6.1(d).
"Reorganization Event" has the meaning provided in Section
6.2.
"Second Time of Delivery" has the meaning provided in Section
1.1(b).
"Then-Current Market Price" of the Common Stock, for the
purpose of applying any adjustment pursuant to Section 6.1, means the average
Closing Price per share of the Common Stock for the Calculation Period of 5
Trading Days immediately prior to the time such adjustment is effected (or, in
the case of an adjustment effected at the opening of business on the Business
Day next following a record date as described in Section 6.1(f)(i), immediately
prior to the earlier of the time such adjustment is effected and the related
ex-date); provided that if no Closing Price for the Common Stock is determined
for one or more (but not all) of such Trading Days, such Trading Day shall be
disregarded in the calculation of the Then-Current Market Price (but no
additional trading days shall be added to the Calculation Period). If no
Closing Price for the Common Stock may be determined for any of such Trading
Days, the Then-Current Market Price shall be the Closing Price for the Common
Stock for the most recent Trading Day prior to such 5 Trading Days for which a
Closing Price for the Common Stock may be determined pursuant to the "Closing
Price" definition. The "ex-date" with respect to any dividend, distribution or
issuance shall mean the first date on which the shares of Common Stock trade
regular way on their principal market without the right to receive such
dividend, distribution or issuance.
"Trading Day" means a day on which the Common Stock (A) is
not suspended from trading on any national or regional securities exchange or
association or over-the-counter market at the close of business and (B) has
traded at least once on the national or regional securities exchange or
association or over-the-counter market that is the primary market for the
trading of such security.
"Transaction Value" has the meaning provided in Section 6.2.
"Trust Agreement" means the Amended and Restated Trust
Agreement constituting Automatic Common Exchange Security Trust II, dated as of
May __, 1997.
"U.S. Government Securities" has the meaning provided in the
Collateral Agreement.
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I.
SALE AND PURCHASE
1.1 Sale and Purchase. (a) Firm Shares. Upon the terms and
subject to the conditions of this Agreement, Seller agrees to sell to
Purchaser, and Purchaser agrees to purchase and acquire from Seller, the number
of shares of Common Stock (the "Firm Shares") equal to the product of ________
(the "Firm Share Base Amount") and the Exchange Rate.
(b) Additional Shares. Upon the terms and subject to the
conditions of this Agreement, Seller agrees to sell to Purchaser, and Purchaser
shall have a right to purchase, a number of additional shares of Common Stock
(the "Additional Shares") equal to the product of the Exchange Rate and the
Additional Share Base Amount. If the Underwriters exercise their option to
purchase Optional Securities pursuant to the Underwriting Agreement, Purchaser
shall notify Seller in writing that Purchaser will purchase the Additional
Shares, which notice shall specify the Additional Share Base Amount and the
date on which Purchaser shall deliver the purchase price for the Additional
Shares, which shall be the Second Time of Delivery specified pursuant to
Section 2 of the Underwriting Agreement (the "Second Time of Delivery"). The
Firm Shares and the Additional Shares (if any) are collectively referred to
herein as the "Contract Shares".
(c) Exchange Rate. The "Exchange Rate" shall be determined in
accordance with the following formula, subject to adjustment as a result of
certain events as provided in Article VI: (i) if the Current Market Price is
less than $______ (the "Appreciation Threshold Price") but equal to or greater
than $_____ (the "Initial Price"), a fraction (rounded upward or downward to
the nearest 1/10,000th or, if there is not a nearest 1/10,000th, to the next
lower 1/10,000th) equal to the Initial Price divided by the Current Market
Price; (ii) if the Current Market Price is equal to or greater than the
Appreciation Threshold Price, _________ and (iii) if the Current Market Price
is less than the Initial Price, 1.
1.2 Purchase Price. (a) Firm Purchase Price. The purchase
price for the Firm Shares (the "Firm Purchase Price") shall be $__________ in
cash.
(b) Additional Purchase Price. The purchase price for the
Additional Shares (the "Additional Purchase Price") shall be an amount equal to
(i) the difference between (1) the aggregate proceeds to Purchaser from the
sale of the Optional Securities and (2) the aggregate cost to Purchaser, as
notified by Purchaser to Seller at the Second Time of Delivery, of the
Additional
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<PAGE> 6
STRIPS, multiplied by (ii) a fraction, the numerator of which is the Firm Share
Base Amount and the denominator of which is the number of Firm Securities
purchased by the Underwriters under the Underwriting Agreement.
1.3 Payment for and Delivery of Contract Shares. (a) First
Time of Delivery. Upon the terms and subject to the conditions of this
Agreement, Purchaser shall deliver to Seller the Firm Purchase Price on
_________, 1997 (the "First Time of Delivery") at the offices of Sullivan &
Cromwell, 125 Broad Street, New York, New York 10004, or at such other place as
shall be agreed upon by Purchaser and Seller, paid by wire transfer to an
account designated by Seller, in Federal (immediately available) funds.
(b) Second Time of Delivery. Upon the terms and subject to
the conditions of this Agreement, Purchaser shall deliver to Seller the
Additional Purchase Price at the Second Time of Delivery at the offices of
Sullivan & Cromwell, 125 Broad Street, New York, New York 10004, or at such
other place as shall be agreed upon by Purchaser and Seller, paid by wire
transfer to an account designated by Seller, in Federal (immediately available)
funds.
(c) Delivery of Contract Shares. On the Exchange Date, Seller
agrees to deliver the Contract Shares to Purchaser. Delivery shall be effected
by delivery by the Collateral Agent to the Custodian, for the account of
Purchaser, of shares of Common Stock then held by the Collateral Agent as
collateral under the Collateral Agreement, in an amount equal to the number of
Contract Shares, rounded down to the nearest whole number. Instead of any
fractional shares of Common Stock that would otherwise be deliverable to
Purchaser at the Exchange Date, Seller agrees to make a cash payment in respect
of such fractional shares of Common Stock in an amount equal to the value
thereof at the Current Market Price. Notwithstanding the foregoing, if a
Reorganization Event shall have occurred prior to the Exchange Date then, in
lieu of the foregoing, delivery shall be effected as follows: (i) in the case
of any cash required to be delivered on the Exchange Date as provided in
Section 6.2, by wire transfer of immediately available funds to an account
designated by Purchaser; or (ii) in the case of any Marketable Securities
elected by Seller to be delivered in lieu of cash as provided in Section 6.2,
at Seller's election, by instruction to the Collateral Agent to deliver to the
Custodian, for the account of Purchaser, a specified number of Marketable
Securities then held as collateral under the Collateral Agreement, as provided
in Section 6(g) of the Collateral Agreement.
(d) Cash Settlement Alternative. At its option, Seller may
deliver to Purchaser on the Exchange Date, in lieu of
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<PAGE> 7
the Contract Shares, an amount in cash equal to the Current Market Price of the
Contract Shares (the "Cash Settlement Alternative"), paid by wire transfer to
an account designated by Custodian, in Federal (immediately available) funds.
Seller may request the Cash Settlement Alternative in respect of all, but not
less than all, Contract Shares and may do so by notice to Purchaser, the
Collateral Agent and the Custodian not less than 35 days prior to the Exchange
Date. In the event Seller elects the Cash Settlement Alternative and so
notifies Purchaser, Purchaser shall provide notice of such election to the
holders of the Securities, together with a news release delivered to the Dow
Jones News Service announcing Seller's election of the Cash Settlement
Alternative, not less than thirty (30) nor more than sixty (60) days prior to
the Exchange Date.
II.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser that each
representation and warranty made by Seller pursuant to Section 1(b) of the
Underwriting Agreement is true and correct on the date hereof.
III.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller that each
representation and warranty made by Purchaser pursuant to Section 1(a) of the
Underwriting Agreement is true and correct on the date hereof.
IV.
CONDITIONS TO PURCHASER'S OBLIGATIONS
(a) The obligation of Purchaser to deliver the Firm Purchase
Price at the First Time of Delivery is subject to the condition that the
purchase by the Underwriters of the Firm Securities pursuant to the
Underwriting Agreement shall have been consummated as contemplated under the
Underwriting Agreement.
(b) The obligation of Purchaser to deliver the Additional
Purchase Price at the Second Time of Delivery is subject to the condition that
the purchase by the Underwriters of the Optional Securities shall have been
consummated as contemplated under the Underwriting Agreement.
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<PAGE> 8
V.
COVENANTS
5.1 Taxes. Seller shall pay any and all documentary, stamp,
transfer or similar taxes and charges that may be payable in respect of the
entry into this Agreement and the transfer and delivery of the Contract Shares
pursuant hereto.
5.2 Forward Contract. Seller hereby agrees that: (i) he will
not treat this Agreement, any portion of this Agreement, or any obligation
hereunder as giving rise to any interest income or other inclusions of ordinary
income; (ii) he will not treat the delivery of any portion of the Contract
Shares, cash or Marketable Securities to be delivered pursuant to this
Agreement as the payment of interest or ordinary income; (iii) he will treat
this Agreement in its entirety as a forward contract for the delivery of such
Contract Shares, cash or Marketable Securities; and (iv) he will not take any
action (including filing any tax return or form or taking any position in any
tax proceeding) that is inconsistent with the obligations contained in clause
(i) through (iii). Notwithstanding the preceding sentence, Seller may take any
action or position required by law, provided that Seller delivers to Purchaser
an unqualified opinion of counsel, nationally recognized as expert in Federal
tax matters, to the effect that such action or position is required by a
statutory change, Treasury regulation, or applicable court decision published
after the date of this Agreement.
5.3 Limitations on Trading During Certain Days. Seller hereby
agrees that he will not buy shares of Common Stock for his own account during
the 60 days prior to the Exchange Date.
5.4 Notices. Seller will cause to be delivered to Purchaser:
(a) Immediately upon the occurrence of any Event of Default
hereunder or under the Collateral Agreement, or upon Seller's obtaining
knowledge that any of the conditions or events described in paragraph (a) or
(b) of Article VII shall have occurred with respect to the Company, notice of
such occurrence; and
(b) In case at any time prior to the Exchange Date Seller
receives notice, or otherwise obtains knowledge, that any event requiring that
an adjustment be effected pursuant to Article VI hereof shall have occurred or
be pending, then Seller shall promptly cause to be delivered to Purchaser a
notice
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<PAGE> 9
identifying such event and stating, if known to Seller, the date on which such
event is to occur and, if applicable, the record date relating to such event.
Seller shall cause further notices to be delivered to Purchaser if Seller shall
subsequently receive notice, or otherwise obtain knowledge, of any further or
revised information regarding the terms or timing of such event or any record
date relating thereto.
5.5 Further Assurances. From time to time on and after the
date hereof through the Exchange Date, each of the parties hereto shall use its
or his reasonable best efforts to take, or cause to be taken, all action and to
do, or cause to be done, all things necessary, proper and advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement in accordance with the terms and conditions
hereof, including (i) using reasonable best efforts to remove any legal
impediment to the consummation of such transactions and (ii) the execution and
delivery of all such deeds, agreements, assignments and further instruments of
transfer and conveyance necessary, proper or advisable to consummate and make
effective the transactions contemplated by the Agreement in accordance with the
terms and conditions hereof.
VI.
ADJUSTMENT OF EXCHANGE RATE, APPRECIATION THRESHOLD PRICE,
INITIAL PRICE AND CLOSING PRICE
6.1 Dilution Adjustments. The Exchange Rate,
Appreciation Threshold Price and Initial Price shall be subject
to adjustment from time to time as follows:
(a) Stock Dividends, Splits, Reclassifications, Etc. If the
Company shall, after the date hereof,
(i) pay a stock dividend or make a distribution with respect
to Common Stock in shares of such stock;
(ii) subdivide or split the outstanding shares of Common
Stock into a greater number of shares of Common Stock;
(iii) combine the outstanding shares of Common Stock into a
smaller number of shares; or
(iv) issue by reclassification of shares of its Common Stock
any shares of other common stock of the Company;
then, in each such case, the Exchange Rate shall be multiplied by a Dilution
Adjustment equal to the number of shares of Common
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<PAGE> 10
Stock (or in the case of a reclassification referred to in clause (iv) above,
the number of shares of other common stock of the Company issued pursuant
thereto), or the fraction thereof, that a holder who held one share of Common
Stock immediately prior to such event would be entitled solely by reason of
such event to hold immediately after such event. The Appreciation Threshold
Price and Initial Price shall also be adjusted in the manner described in
paragraph (e).
(b) Right or Warrant Issuances. If the Company shall, after
the date hereof, issue, or declare a record date in respect of an issuance of,
rights or warrants to all holders of Common Stock entitling them to subscribe
for or purchase shares of Common Stock at a price per share less than the
Then-Current Market Price of the Common Stock (other than rights to purchase
Common Stock pursuant to a plan for the reinvestment of dividends or interest),
then, in each such case, the Exchange Rate shall be multiplied by a Dilution
Adjustment equal to a fraction of which the numerator shall be the number of
shares of Common Stock outstanding immediately prior to the time the adjustment
is effected by reason of the issuance of such rights or warrants, plus the
number of additional shares of Common Stock offered for subscription or
purchase pursuant to such rights or warrants, and of which the denominator
shall be the number of shares of Common Stock outstanding immediately prior to
the time the adjustment is effected, plus the number of additional shares of
Common Stock which the aggregate offering price of the total number of shares
of Common Stock so offered for subscription or purchase pursuant to such rights
or warrants would purchase at the Then-Current Market Price of the Common
Stock, which shall be determined by multiplying the total number of shares so
offered for subscription or purchase by the exercise price of such rights or
warrants and dividing the product so obtained by such Then- Current Market
Price. To the extent that, after the expiration of such rights or warrants, the
shares of Common Stock offered thereby shall not have been delivered, the
Exchange Rate shall be further adjusted to equal the Exchange Rate which would
have been in effect had such adjustment for the issuance of such rights or
warrants been made upon the basis of delivery of only the number of shares of
Common Stock actually delivered. The Appreciation Threshold Price and Initial
Price shall also be adjusted in the manner described in paragraph (e).
(c) Distributions of Other Assets. If the Company shall,
after the date hereof, declare or pay a dividend or make a distribution to all
holders of Common Stock, in either case, of evidences of its indebtedness or
other non-cash assets (excluding any dividends or distributions referred to in
paragraph (a) above) or shall issue to all holders of Common Stock rights or
warrants to subscribe for or purchase any of its securities (other than rights
or warrants referred to in paragraph (b)
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<PAGE> 11
above), then, in each such case, the Exchange Rate shall be multiplied by a
Dilution Adjustment equal to a fraction, of which the numerator shall be the
Then-Current Market Price per share of the Common Stock, and of which the
denominator shall be such Then-Current Market Price per share less the fair
market value (as determined by a nationally recognized independent investment
banking firm retained for this purpose by the Administrator) as of the time the
adjustment is effected of the portion of the assets or evidences of
indebtedness so distributed or of such subscription rights or warrants
applicable to one share of Common Stock. The Appreciation Threshold Price and
Initial Price shall also be adjusted in the manner described in subparagraph
(e).
(d) Cash Dividends; Excess Purchase Payments. If, after the
date hereof, the Company declares a record date in respect of a distribution of
cash (other than any Permitted Dividend, any cash distributed in consideration
of fractional shares of Common Stock and any cash distributed in a
Reorganization Event), by dividend or otherwise, to all holders of Common
Stock, or makes an Excess Purchase Payment, then the Exchange Rate will be
multiplied by a Dilution Adjustment equal to a fraction, of which the numerator
shall be the Then-Current Market Price of the Common Stock on such record date,
and of which the denominator shall be such Then-Current Market Price less the
amount of such distribution applicable to one share of Common Stock which would
not be a Permitted Dividend (or in the case of an Excess Purchase Payment, less
the aggregate amount of such Excess Purchase Payment for which adjustment is
being made at such time divided by the number of shares of Common Stock
outstanding on such record date). For purposes of these adjustments, (A)
"Permitted Dividend" means any quarterly cash dividend in respect of the Common
Stock, other than a quarterly cash dividend that exceeds the immediately
preceding quarterly cash dividend, and then only to the extent that the per
share amount of such dividend results in an annualized dividend yield on the
Common Stock in excess of ____% and (B) "Excess Purchase Payment" means the
excess, if any, of (x) the cash and the value (as determined by a nationally
recognized independent investment banking firm retained for this purpose by the
Administrator, whose determination shall be final) of all other consideration
paid by the Company with respect to one share of Common Stock acquired in a
tender offer or exchange offer by the Company, over (y) the Then-Current Market
Price of the Common Stock. The Appreciation Threshold Price and Initial Price
shall also be adjusted in the manner described in subparagraph (e).
(e) Corresponding Adjustments to Initial Price, Appreciation
Threshold Price and Closing Price; Change in Principal Market. (i) If any
adjustment is made to the Exchange Rate pursuant to paragraph (a), (b), (c) or
(d) of this Section 6.1, an adjustment shall also be made to the Appreciation
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<PAGE> 12
Threshold Price and the Initial Price. The required adjustment shall be made by
dividing each of the Appreciation Threshold Price and the Initial Price by the
relevant Dilution Adjustment.
(ii) If, during any Calculation Period used in calculating
the Current Market Price, the Then-Current Market Price or the Transaction
Value, there shall occur any event requiring an adjustment to be effected
pursuant to this Section 6.1, then the Closing Price for each Trading Day in
the Calculation Period occurring prior to the day on which such adjustment is
effected shall be adjusted by being divided by the relevant Dilution
Adjustment.
(f) Timing of Dilution Adjustments. Each Dilution Adjustment
shall be effected:
(i) in the case of any dividend, distribution or issuance,
at the opening of business on the Business Day next following the
record date for determination of holders of Common Stock entitled
to receive such dividend, distribution or issuance or, if the
announcement of any such dividend, distribution or issuance is after
such record date, at the time such dividend, distribution or issuance
shall be announced by the Company;
(ii) in the case of any subdivision, split, combination or
reclassification, on the effective date of such transaction;
(iii) in the case of any Excess Purchase Payment for which
the Company shall announce, at or prior to the time it commences the
relevant share repurchase, the repurchase price per share for shares
proposed to be repurchased, on the date of such announcement; and
(iv) in the case of any other Excess Purchase Payment, on the
date that the holders of the repurchased shares become entitled to
payment in respect thereof.
(g) General; Failure of Dilution Event to Occur. All Dilution
Adjustments shall be rounded upward or downward to the nearest 1/10,000th (or
if there is not a nearest 1/10,000th to the next lower 1/10,000th). No
adjustment in the Exchange Rate shall be required unless such adjustment would
require an increase or decrease of at least one percent therein; provided,
however, that any adjustments which by reason of this sentence are not required
to be made shall be carried forward and taken into account in any subsequent
adjustment. If any announcement or declaration of a record date in respect of a
dividend, distribution, issuance or repurchase requiring an adjustment pursuant
to this Section 6.1 shall subsequently be cancelled by
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<PAGE> 13
the Company, or such dividend, distribution, issuance or repurchase shall fail
to receive requisite approvals or shall fail to occur for any other reason,
then, upon such cancellation, failure of approval or failure to occur, the
Exchange Rate shall be further adjusted to the Exchange Rate which would then
have been in effect had adjustment for such event not been made. If a
Reorganization Event shall occur after the occurrence of one or more events
requiring an adjustment pursuant to this Section 6.1, the Dilution Adjustments
previously applied to the Exchange Rate in respect of such events shall not be
rescinded but shall be applied to the new Exchange Rate provided for under
Section 6.2.
6.2 Adjustment for Consolidation, Merger or Other
Reorganization Event. In the event of (i) any consolidation or merger of the
Company, or any surviving entity or subsequent surviving entity of the Company
(a "Company Successor"), with or into another entity (other than a merger or
consolidation in which the Company is the continuing corporation and in which
the Common Stock outstanding immediately prior to the merger or consolidation
is not exchanged for cash, securities or other property of the Company or
another corporation), (ii) any sale, transfer, lease or conveyance to another
corporation of the property of the Company or any Company Successor as an
entirety or substantially as an entirety, (iii) any statutory exchange of
securities of the Company or any Company Successor with another corporation
(other than in connection with a merger or acquisition) or (iv) any
liquidation, dissolution or winding up of the Company or any Company Successor
(any such event described in clause (i), (ii), (iii) or (iv), a "Reorganization
Event"), the Exchange Rate shall be adjusted so that on the Exchange Date
Purchaser shall receive, in lieu of the Contract Shares, cash in an amount
equal to the product of (x) the Firm Share Base Amount plus the Additional
Share Base Amount (if any) and (y)(i) if the Transaction Value is less than the
Appreciation Threshold Price but equal to or greater than the Initial Price,
the Initial Price, (ii) if the Transaction Value is equal to or greater than
the Appreciation Threshold Price, _________ multiplied by the Transaction
Value, and (iii) if the Transaction Value is less than the Initial Price, the
Transaction Value. Notwithstanding the foregoing, if any Marketable Securities
are received by holders of Common Stock in such Reorganization Event, Seller
may, at its option, in lieu of delivering cash as described above, deliver an
equivalent amount (based on the value determined in accordance with clause (z)
of the following paragraph) of Marketable Securities, but not exceeding, as a
percentage of the total consideration required to be delivered, the percentage
of the total Transaction Value attributable to such Marketable Securities.
"Transaction Value" means the sum of: (x) for any cash
received in any such Reorganization Event, the amount of cash
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<PAGE> 14
received per share of Common Stock; (y) for any property other than cash or
Marketable Securities received in any such Reorganization Event, an amount
equal to the market value on the date the Reorganization Event is consummated
of such property received per share of Common Stock, as determined by a
nationally recognized independent investment banking firm retained for this
purpose by the Administrator; and (z) for any Marketable Securities received in
any such Reorganization Event, an amount equal to the average Closing Price per
share of such Marketable Securities for the Calculation Period of 20 Trading
Days immediately prior to the Exchange Date multiplied by the number of such
Marketable Securities received for each share of Common Stock; provided that if
no Closing Price for such Marketable Securities may be determined for one or
more (but not all) of such Trading Days such Trading Day shall be disregarded
in the calculation of such average Closing Price (but no additional trading
days shall be added to the Calculation Period). If no Closing Price for the
Marketable Securities may be determined for all such Trading Days, the
calculation in the preceding clause (z) shall be based on the most recently
available Closing Price for the Marketable Securities prior to such 20 Trading
Days.
"Marketable Securities" means any common equity securities
listed on a U.S. national securities exchange or reported by The Nasdaq
National Market. The number of shares of any Marketable Securities included in
the calculation of Transaction Value pursuant to the preceding clause (z) shall
be subject to adjustment if any event that would, had it occurred with respect
to the Common Stock or the Company, have required an adjustment pursuant to
Section 6.1, shall occur with respect to such Marketable Securities or the
issuer thereof subsequent to the date the Reorganization Event is consummated.
Adjustment for such subsequent events shall be as nearly equivalent as
practicable to the adjustments provided for in Section 6.1.
VII.
ACCELERATION
If one or more of the following events (each an "Event of
Default") shall occur:
(a) Seller shall commence a voluntary case or other
proceeding seeking a liquidation, reorganization or other relief with respect
to himself or his debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of him or any substantial part
of his property, or shall consent to any such relief or to the appointment of
or taking possession by any such official in
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<PAGE> 15
an involuntary case or other proceeding commenced against him, or shall take
any action to authorize any of the foregoing;
(b) an involuntary case or other proceeding shall be
commenced against the Seller seeking liquidation, reorganization or other
relief with respect to him or his debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of him or
any substantial part of his property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of 60 days; or an
order for relief shall be entered against the Seller under the federal
bankruptcy laws as now or hereafter in effect; or
(c) a Collateral Event of Default within the meaning of the
Collateral Agreement;
then, upon the occurrence of any such event, Seller shall become obligated to
deliver the Contract Shares (or, after a Reorganization Event, the Marketable
Securities or cash or a combination thereof deliverable in respect thereof), or
any U.S. Government Securities then pledged under the Collateral Agreement in
respect thereof. Purchaser and Seller agree that such amount is a reasonable
pre-estimate of loss and not a penalty. Such amount is payable for the loss of
bargain and Purchaser will not be entitled to recover additional damage as a
consequence of loss resulting from an Event of Default.
VIII.
MISCELLANEOUS
8.1 Adjustments of Exchange Rate; Selection of Independent
Investment Banking Firm. Purchaser shall be responsible for the effectuation
and calculation of any adjustment pursuant to Article VI hereof and shall
furnish Seller notice of any such adjustment and shall provide Seller
reasonable opportunity to review the calculations pertaining to any such
adjustment. If, pursuant to the terms and conditions hereof, the Administrator
shall be required to retain a nationally recognized independent investment
banking firm for any purpose provided herein, such nationally recognized
independent investment banking firm shall be selected and retained by the
Administrator only after consultation with Seller.
8.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard forms of telecommunication. Notices to Purchaser
shall be directed to it
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<PAGE> 16
in care of the Administrator for Purchaser, The Bank of New York, at 101
Barclay Street, New York, New York 10286, Telecopy No: (212) 815-5999,
attention Sandra Whalen; notices to Seller shall be directed to [him] [her] at
____________________________, Attention: _________ with a copy to Kathy Taylor,
Crowe & Dunlevy, 500 Kennedy Building, 321 South Boston, Tulsa, Oklahoma 74103,
Telecopy No.(918) 592-9801.
8.3 Governing Law; Severability. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York.
To the extent permitted by law, the unenforceability or invalidity of any
provision or provisions of this Agreement shall not render any other provision
or provisions herein contained unenforceable or invalid.
8.4 Entire Agreement. Except as expressly set forth herein,
this Agreement constitutes the entire agreement among the parties with respect
to the subject matter hereof and supersedes all prior agreements,
understandings and negotiations, both written and oral, among the parties with
respect to the subject matter of this Agreement.
8.5 Amendments; Waivers. Any provision of this Agreement may
be amended or waived if, and only if, such amendment or waiver is in writing
and signed, in the case of an amendment, by Purchaser and Seller or, in the
case of a waiver, by the party against whom the waiver is to be effective. No
failure or delay by either party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by
law.
8.6 No Third Party Rights; Successors and Assigns. This
Agreement is not intended and shall not be construed to create any rights in
any person other than Seller and Purchaser and their respective successors and
assigns and no person shall assert any rights as third party beneficiary
hereunder. Whenever any of the parties hereto is referred to, such reference
shall be deemed to include the successors and assigns of such party. All the
covenants and agreements herein contained by or on behalf of the Seller and
Purchaser shall bind, and inure to the benefit of, their respective successors
and assigns whether so expressed or not, and shall be enforceable by and inure
to the benefit of Purchaser and its successors and assigns.
8.7 Counterparts. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with
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<PAGE> 17
the same effect as if the signatures thereto and hereto were upon the same
instrument.
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<PAGE> 18
IN WITNESS WHEREOF, the parties have signed this Agreement as
of the date and year first above written.
SELLER:
-----------------------------------
-----------------------------------
-----------------------------------
---------------
------------------------------------
PURCHASER:
, as trustee,
-----------------------
William R. Latham III
, as trustee,
----------------------
James B. O'Neill
, as trustee,
----------------------
Donald J. Puglisi
each as trustee of Automatic Common
Exchange Security Trust II
<PAGE> 1
EXHIBIT 2.K.(iv)
COLLATERAL AGREEMENT
Among
[Selling Shareholder],
As Pledgor,
The Bank of New York, As Collateral Agent
and
AUTOMATIC COMMON EXCHANGE SECURITY TRUST II
Dated as of
May __, 1997
<PAGE> 2
The following Table of Contents has been inserted for
convenience of reference only and does not constitute a part of the Collateral
Agreement.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C> <C>
1. The Security Interests........................................................................ 1
2. Definitions................................................................................... 2
3. Representations and Warranties of the Pledgor................................................. 6
4. Representations and Warranties of the Collateral
Agent......................................................................................... 7
5. Certain Covenants of the Pledgor.............................................................. 7
6. Administration of the Collateral and Valuation of
the Securities................................................................................ 8
7. Income and Voting Rights on Collateral........................................................ 14
8. Remedies upon Events of Default............................................................... 15
9. The Collateral Agent.......................................................................... 18
10. Miscellaneous................................................................................. 21
11. Termination of Collateral Agreement........................................................... 22
12. No Personal Liability of Trustees............................................................. 22
</TABLE>
Exhibit A - Certificate for Substituted Collateral
Exhibit B - Certificate for Additional Collateral
<PAGE> 3
COLLATERAL AGREEMENT
THIS COLLATERAL AGREEMENT (the "Agreement"), dated as of May
__, 1997, among [Selling Shareholder] (the "Pledgor"), The Bank of New York, a
New York banking corporation, as collateral agent (the "Collateral Agent")
hereunder for the benefit of Automatic Common Exchange Security Trust II, a
trust duly created under the laws of the State of New York (such trust and the
trustees thereof acting in their capacity as such being referred to herein as
the "Trust" or "Purchaser");
WITNESSETH:
WHEREAS, pursuant to the Purchase Agreement (the "Purchase
Agreement"), dated as of May __, 1997, between the Pledgor and Purchaser, the
Pledgor has agreed to sell and Purchaser has agreed to purchase Common Stock,
par value $0.01 per share (the "Common Stock"), of Republic Industries, Inc., a
Delaware corporation (the "Company"), subject to the terms and conditions of the
Purchase Agreement; and
NOW, THEREFORE, to secure the performance by the Pledgor of
its obligations under the Purchase Agreement and to secure the observance and
performance of the covenants and agreements contained herein and in the Purchase
Agreement, the parties hereto agree as follows:
1. The Security Interests.
In order to secure the observance and performance of the
covenants and agreements contained herein and in the Purchase Agreement:
(a) Security Interests. Effective upon and subject to the
receipt by Pledgor of the Firm Purchase Price at the First Time of Delivery, the
Pledgor hereby grants, sells, conveys, assigns, transfers and pledges unto the
Collateral Agent, as agent of and for the benefit of the Trust, a security
interest in and to, and a lien upon and right of set-off against, all of his
right, title and interest in and to (i) the Pledged Items described in
paragraphs (b) and (c); (ii) all additions to and substitutions for such Pledged
Items; (iii) all income, proceeds and collections received or to be received, or
derived or to be derived, now or any time hereafter from or in connection with
the Pledged Items; and (iv) all powers and rights now owned or hereafter
acquired under or with respect to the Pledged Items (such Pledged Items,
additions,
<PAGE> 4
substitutions, proceeds, collections, powers and rights being herein
collectively called the "Collateral"). The Collateral Agent shall have all of
the rights, remedies and recourses with respect to the Collateral afforded a
secured party by the New York Uniform Commercial Code, in addition to, and not
in limitation of, the other rights, remedies and recourses afforded to the
Collateral Agent by this Agreement.
(b) First Time of Delivery. At the First Time of Delivery, the
Pledgor shall deliver to the Collateral Agent in pledge hereunder one or more
certificates in registered form representing in the aggregate ___________ shares
of the Common Stock, together with undated stock powers with respect thereto
duly endorsed in blank.
(c) Second Time of Delivery. Effective upon and subject to the
receipt by the Pledgor of the Additional Purchase Price, at the Second Time of
Delivery, the Pledgor shall deliver to the Collateral Agent in pledge hereunder
one or more certificates in registered form representing in the aggregate Common
Stock representing the Additional Share Base Amount of Common Stock, together
with undated stock powers with respect thereto duly endorsed in blank.
2. Definitions.
Capitalized terms used and not otherwise defined herein shall
have the meanings ascribed to them in the Purchase Agreement. Capitalized terms
used herein shall have the meanings as follows:
"Authorized Representative" of the Pledgor means any trustee
or other representative as to whom Pledgor shall have delivered notice to the
Collateral Agent that such trustee or other representative is authorized to act
hereunder on behalf of Pledgor.
"Business Day" means any day except a Saturday, Sunday or
other day on which banking institutions in New York City are authorized or
obligated by law or regulation to close or a day on which the New York Stock
Exchange, Inc. is closed.
"Cash Delivery Obligations" means, at any time (A) if no
Reorganization Event shall have occurred prior to such time, zero, and (B) from
and after any Reorganization Event, the Dilution Adjustment that shall have been
applied to the Exchange Rate pursuant to Section 6.1 of the Purchase Agreement
at or prior to the Reorganization Event, times the product of: (i) the Firm
Share Base Amount plus the Additional Share Base Amount (if any); and (ii) the
Transaction Value of any property other than Marketable
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<PAGE> 5
Securities received by the Pledgor in such Reorganization Event.
"Collateral" has the meaning specified in Section 1(a).
"Collateral Agent" means the financial institution identified
as such in the preliminary paragraph hereof, or any successor appointed in
accordance with Section 9.
"Collateral Agreement" means this Collateral Agreement and any
exhibits hereto.
"Collateral Event of Default" has the meaning specified in
Section 6(e).
"Collateral Requirement" means, as of any date and with
respect to: (i) any Common Stock, 100%; (ii) any Marketable Securities, 100%;
(iii) any U.S. Government Securities pledged in respect of Cash Delivery
Obligations, 105%; and (iv) any other U.S. Government Securities, 150%, provided
that upon and after any failure to cure an Insufficiency Determination by 4:00
p.m. New York City time on the tenth Business Day following telephonic notice of
such Insufficiency Determination as described in Section 6(e), which
insufficiency shall be continuing on such tenth business day, the Collateral
Requirement relating to any U.S. Government Securities shall be 200%. The
portion of any pledged U.S. Government Securities that shall be deemed at any
time to be in respect of Cash Delivery Obligations shall be as provided in
Section 6(e).
"Distribution Date" has the meaning specified in the Trust
Agreement.
"Eligible Collateral" means (i) Common Stock, (ii) U.S.
Government Securities, and (iii) from and after any Reorganization Event,
Marketable Securities, provided, in each case, that the Pledgor has good and
marketable title thereto, free of all Liens (other than the Liens created by
this Collateral Agreement) and Transfer Restrictions and that the Collateral
Agent has a valid, first priority perfected security interest therein and first
lien thereon, and provided further that to the extent the number of shares of
Marketable Securities pledged hereunder exceeds at any time the Maximum
Deliverable Number thereof, such excess shares shall not be Eligible Collateral.
"Event of Default" means the occurrence of: (i) an event
described in clause (a) or (b) of Article VII of the Purchase Agreement, (ii) a
Collateral Event of Default, (iii) a failure by Pledgor to have caused the
Collateral to meet the requirements described in Section 5(d) on the
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<PAGE> 6
Exchange Date or (iv) if a Reorganization Event shall have occurred prior to the
Exchange Date, failure by Pledgor to cause to be delivered to Purchaser on the
Exchange Date the consideration then required to be delivered pursuant to
Section 6.2 of the Purchase Agreement.
"Ineligible Collateral" means Collateral that does not
constitute "Eligible Collateral".
"Lien" means any lien, mortgage, security interest, pledge,
charge or encumbrance of any kind.
"Market Value" means, as of any date: (a) with respect to any
Common Stock (except as otherwise provided in Section 6(e)(2)), the Closing
Price on such date; (b) with respect to any U.S. Government Security, the
product of (x)(i) the average unit bid price for such security as published on
the Trading Day prior to such date in the New York edition of The Wall Street
Journal or The New York Times or, if not so published, (ii) the lower bid price
quoted (which quotation shall be evidenced in writing) on the Trading Day prior
to such date by either of two nationally recognized dealers making a market in
such security which are members of the National Association of Securities
Dealers, Inc. and (y) the number of such units comprised in the outstanding
principal amount of such security; and (c) with respect to any share of
Marketable Securities, the Closing Price thereof on the Trading Day prior to
such date; provided that the "Market Value" of any Ineligible Collateral shall
be zero.
"Maximum Deliverable Number" means, on any date, with respect
to the Common Stock, the product of the Firm Share Base Amount plus the
Additional Share Base Amount (if any), multiplied successively by each number by
which the Exchange Rate shall have been multiplied on or prior to such date
pursuant to the adjustments provided for under Section 6.1 of the Purchase
Agreement. The Maximum Deliverable Number of Marketable Securities means, on any
date, the product of (i) the Firm Share Base Amount plus the Additional Share
Base Amount (if any) and (ii) the number of Marketable Securities received by
the Pledgor in the Reorganization Event for each share of Common Stock,
multiplied successively by each number by which the Exchange Rate shall have
been multiplied on or prior to such date and after the date of such
Reorganization Event pursuant to the adjustments provided for under Article VI
of the Purchase Agreement.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
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<PAGE> 7
"Pledge Value" means, as of any date and with respect to any
particular type of Collateral, an amount equal to the aggregate Market Value of
such Collateral divided by the Collateral Requirement for such Collateral.
"Pledge Value Requirement" means, as of any date, (a) the
aggregate Market Value on such date of the Maximum Deliverable Number of shares
of Common Stock on such date or, from and after a Reorganization Event,
Marketable Securities, plus (b) from and after a Reorganization Event, the Cash
Delivery Obligations.
"Pledged Items" means, as of any date, any and all securities
and instruments delivered by the Pledgor to be held by the Collateral Agent
under this Collateral Agreement as Collateral, whether Eligible Collateral or
Ineligible Collateral.
"Prior Collateral" has the meaning specified in Section
6(b)(1).
"Responsible Officer" means, when used with respect to the
Collateral Agent, any vice president, assistant vice president, assistant
treasurer or assistant secretary located in the division or department of the
Collateral Agent responsible for performing the obligations of the Collateral
Agent under this Collateral Agreement, or in any other division or department of
the Collateral Agent performing operations substantially equivalent to those
performed by such division or department pursuant hereto, or any other officer
of the Collateral Agent or any successor Collateral Agent customarily performing
functions similar to those performed by any of the aforesaid officers, and also
means, with respect to any matter relating to this Collateral Agreement or the
Collateral, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Transfer Restriction" means, with respect to any item of
Collateral, any condition to or restriction on the ability of the holder thereof
to sell, assign or otherwise transfer such item of Collateral or to enforce the
provisions thereof or of any document related thereto whether set forth in such
item of Collateral itself or in any document related thereto, including, without
limitation, (i) any requirement that any sale, assignment or other transfer or
enforcement of such item of Collateral be consented to or approved by any
Person, including, without limitation, the issuer thereof or any other obligor
thereon, (ii) any limitations on the type or status, financial or otherwise, of
any purchaser, pledgee, assignee or transferee of such item of Collateral, (iii)
any requirement of the delivery of any certificate, consent, agreement, opinion
of
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<PAGE> 8
counsel, notice or any other document of any Person to the issuer of, any other
obligor on or any registrar or transfer agent for, such item of Collateral,
prior to the sale, pledge, assignment or other transfer or enforcement of such
item of Collateral and (iv) any registration or qualification requirement for
such item of Collateral pursuant to any federal or state securities law;
provided that the required delivery of any assignment from the seller, pledgor,
assignor or transferor of such item of Collateral, together with any evidence of
the corporate or other authority of such Person, shall not constitute a
"Transfer Restriction."
"Trustee" or "Trustees" means any trustee or trustees of the
Trust identified on the signature pages hereto, or any successor as such trustee
or trustees.
"UCC" means the Uniform Commercial Code as in effect in the
State of New York.
"U.S. Government Securities" means direct obligations of the
United States of America that mature on a date that is one year or less from the
date such obligations are pledged hereunder, but in any event prior to the
Exchange Date.
3. Representations and Warranties of the Pledgor.
The Pledgor hereby represents and warrants to the Collateral
Agent and the Trust that:
(a) No Transfer Restrictions. No Transfer Restrictions exist
with respect to or otherwise apply to the assignment of, or transfer by the
Pledgor of possession of, any items of Collateral to the Collateral Agent
hereunder, or the subsequent sale or transfer of such items of Collateral by the
Collateral Agent pursuant to the terms hereof.
(b) Title to Collateral; Perfected Security Interest. The
Pledgor has good and marketable title to the Pledged Items, free of all Liens
(other than the Lien created by this Collateral Agreement) and Transfer
Restrictions. Upon delivery of the Pledged Items described in paragraphs (b) and
(c) of Section 1 to the Collateral Agent hereunder, the Collateral Agent will
obtain a valid, first priority perfected security interest in, and a first lien
upon, such Pledged Items subject to no other Lien. None of the Collateral is or
shall be pledged by the Pledgor as collateral for any other purpose.
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<PAGE> 9
4. Representations and Warranties of the Collateral Agent.
The Collateral Agent represents and warrants to the Pledgor
and the Trust that:
(a) Corporate Existence and Power. The Collateral Agent is a
banking corporation, duly incorporated, validly existing and in good standing
under the laws of the jurisdiction of its incorporation, and has all corporate
powers and all material governmental licenses, authorizations, consents and
approvals required to enter into, and perform its obligations under, this
Collateral Agreement.
(b) Authorization and Non-Contravention. The execution,
delivery and performance by the Collateral Agent of this Collateral Agreement
have been duly authorized by all necessary corporate action on the part of the
Collateral Agent (no action by the shareholders of the Collateral Agent being
required) and do not and will not violate, contravene or constitute a default
under any provision of applicable law or regulation or of the charter or by-laws
of the Collateral Agent or of any material agreement, judgment, injunction,
order, decree or other instrument binding upon the Collateral Agent.
(c) Binding Effect. This Collateral Agreement constitutes a
valid and binding agreement of the Collateral Agent enforceable against the
Collateral Agent in accordance with its terms.
5. Certain Covenants of the Pledgor.
The Pledgor agrees that, so long as any of its obligations
under the Purchase Agreement remain outstanding:
(a) Title to Collateral. The Pledgor shall at all times
hereafter have good and marketable title to the Collateral pledged by him, free
of all Liens (other than the Liens created by this Collateral Agreement) and
Transfer Restrictions, and, subject to the terms of this Collateral Agreement,
will at all times hereafter have good, right and lawful authority to assign,
transfer and pledge such Collateral and all such additions thereto and
substitutions therefor under this Collateral Agreement.
(b) Pledge Value Requirement. The Pledgor shall cause the
aggregate Pledge Value of the Collateral to be equal to or greater than the
Pledge Value Requirement at all times, and shall pledge additional Collateral in
the manner described in Section 6(d) as necessary to cause such requirement to
be met.
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<PAGE> 10
(c) Pledge upon Reorganization Event. Upon the occurrence of a
Reorganization Event, the Pledgor shall immediately cause to be delivered to the
Collateral Agent, in the manner provided in Section 6(d): (i) U.S. Government
Securities having an aggregate Market Value at least equal to 105% of the Cash
Delivery Obligations; and (ii) Marketable Securities in an amount at least equal
to the Maximum Deliverable Number thereof, or, at Pledgor's election, U.S.
Government Securities having an aggregate Market Value at least equal to 150% of
such Maximum Deliverable Number of Marketable Securities; in each case to be
held as substitute Collateral hereunder.
(d) Pledge of Purchase Agreement Consideration.
Notwithstanding the Pledgor's right to substitute Collateral pursuant to Section
6(b), the Pledgor shall cause the Collateral to include, on the Exchange Date,
unless a Reorganization Event shall have occurred, a number of shares of Common
Stock at least equal to the number of shares of Common Stock required to be
delivered under the Purchase Agreement on the Exchange Date.
(e) Further Assurances. The Pledgor shall, at his expense and
in such manner and form as the Trust or the Collateral Agent may require, give,
execute, deliver, file and record any financing statement, notice, instrument,
document, agreement or other papers that may be necessary or desirable in order
to create, preserve, perfect, substantiate or validate any security interest
granted pursuant hereto or to enable the Collateral Agent to exercise and
enforce its rights and the rights of the Trust hereunder with respect to such
security interest. To the extent permitted by applicable law, the Pledgor hereby
authorizes the Collateral Agent to execute and file, in the name of the Pledgor
or otherwise, Uniform Commercial Code financing or continuation statements
(which may be carbon, photographic, photostatic or other reproductions of this
Agreement or of a financing statement relating to this Agreement) which the
Collateral Agent in its sole discretion may deem necessary or appropriate to
further perfect, or maintain the perfection of the security interests granted
hereby.
6. Administration of the Collateral and Valuation of the
Securities.
(a) Valuation of Collateral. The Collateral Agent shall
determine on each Business Day whether the Pledge Value is at least equal to the
Pledge Value Requirement and whether an Insufficiency Determination or
Collateral Event of Default shall have occurred and, from and after any
substitution of U.S. Government Securities for pledged Common Stock or
Marketable Securities pursuant to
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<PAGE> 11
paragraph (b) of this Section 6, shall determine the Pledge Value on each
Business Day and shall provide written notice of the Pledge Value to the
Pledgor.
(b) Substitution of Collateral. The Pledgor may substitute
Collateral in accordance with the following provisions:
(1) Unless an Event of Default or a failure by the Pledgor to
meet any of its obligations under Section 5(b) or (c) hereof has
occurred and is continuing, the Pledgor shall have the right at any
time and from time to time to deposit Eligible Collateral with the
Collateral Agent in substitution for Pledged Items previously deposited
hereunder ("Prior Collateral") and to obtain the release from the Lien
hereof of such Prior Collateral.
(2) If a Pledgor wishes to deposit Eligible Collateral with
the Collateral Agent in substitution for Prior Collateral, he shall (i)
give written notice to the Collateral Agent identifying the Prior
Collateral to be released from the Lien hereof, (ii) deliver to the
Collateral Agent concurrently with such Eligible Collateral a
certificate of the Pledgor substantially in the form of Exhibit A
hereto and dated the date of such delivery, (A) identifying the items
of Eligible Collateral being substituted for the Prior Collateral and
the Prior Collateral that is to be transferred to the Pledgor and (B)
certifying that the representations and warranties contained in such
Exhibit A hereto are true and correct on and as of the date thereof and
(iii) deliver to the Collateral Agent concurrently with such Eligible
Collateral an opinion (dated the date of such delivery) of counsel
addressed to the Collateral Agent confirming the representations
contained in the second sentence of paragraph 3(b) of Exhibit A hereto.
The Pledgor hereby covenants and agrees to take all actions required
under Section 6(d) and any other actions necessary to create for the
benefit of the Collateral Agent a valid, first priority perfected
security interest in, and a first lien upon, such Eligible Collateral
deposited with the Collateral Agent in substitution for Prior
Collateral.
(3) No such substitution shall be made unless and until the
Collateral Agent shall have determined that the aggregate Pledge Value
of all of the Collateral at the time of such proposed substitution,
after giving
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<PAGE> 12
effect to the proposed substitution, shall at least equal the Pledge
Value Requirement.
(c) Additional Collateral. The Pledgor may pledge additional
Collateral hereunder at any time. Concurrently with the delivery of any
additional Eligible Collateral, the Pledgor shall deliver (i) a certificate of
the Pledgor substantially in the form of Exhibit B hereto and dated the date of
such delivery, (A) identifying the additional items of Eligible Collateral being
pledged and (B) certifying that with respect to such items of additional
Eligible Collateral the representations and warranties contained in such Exhibit
B hereto are true and correct on and as of the date thereof and (ii) an opinion,
dated the date of such delivery, of counsel addressed to the Collateral Agent
confirming the representations contained in the second sentence of paragraph
2(b) of Exhibit B hereto. The Pledgor hereby covenants and agrees to take all
actions required under Section 6(d) and any other actions necessary to create
for the benefit of the Collateral Agent a valid, first priority perfected
security interest in, and a first lien upon, such additional Eligible
Collateral.
(d) Delivery of Collateral. The Pledgor shall deliver the
Collateral to the Collateral Agent in accordance with the following provisions:
(1) Pledged Common Stock. In the case of Collateral consisting
of Common Stock, by delivery to the Collateral Agent of Common Stock,
registered in the name of the Collateral Agent or its nominee;
(2) Pledged U.S. Government Securities. In the
case of Collateral consisting of U.S. Government Securities, by
transfer thereof through the Book Entry System of the Federal Reserve
System to the account of the Collateral Agent or to an account (other
than an account of the Pledgor) designated by the Collateral Agent; and
(3) Pledged Marketable Securities. In the case of Collateral
consisting of Marketable Securities, by delivery of certificates
evidencing such Marketable Securities, registered in the name of the
Collateral Agent or its nominee or, if such Marketable Securities are
not issuable in certificated form but are held in book entry form by
The Depository Trust Company, by transfer to an account of the
Collateral Agent or to an account (other than an account of the
Pledgor) designated by the Collateral Agent with The Depository Trust
Company. Each such delivery of Marketable Securities shall be
accompanied by an opinion of
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<PAGE> 13
counsel satisfactory to the Collateral Agent that the Collateral Agent
has obtained a valid, first priority perfected security interest in,
and a first lien upon, such Marketable Securities.
Upon delivery of any Pledged Item under this Collateral Agreement, the
Collateral Agent shall examine such Pledged Item and any opinions and
certificates delivered pursuant to Sections 6(b) or (c) or otherwise pursuant to
the terms hereof in connection therewith to determine that they comply as to
form with the requirements for Eligible Collateral. The Pledgor hereby
designates the Collateral Agent as the person in whose name any Collateral held
in book entry form in the Federal Reserve System shall be registered.
(e) Insufficiency Determination.
(1) If on any Business Day the Collateral Agent determines
that the aggregate Pledge Value of the Collateral is less than the Pledge Value
Requirement (any such determination, an "Insufficiency Determination"), the
Collateral Agent shall promptly notify the Pledgor of such determination by
telephone call to an Authorized Representative of the Pledgor followed by a
written confirmation of such call.
(2) If, by 4:00 p.m., New York City time on the tenth
Business Day following the day on which telephonic notice shall have been given
pursuant to the preceding paragraph (e)(1), the Pledgor shall have failed to
deliver, in the manner set forth in paragraphs (c) and (d) of this Section 6,
sufficient additional Eligible Collateral so that, after giving effect to such
delivery, the aggregate Pledge Value of the Collateral, as of such tenth
business day, is at least equal to the Pledge Value Requirement, then (x) the
Collateral Requirement with respect to any U.S. Government Securities pledged
hereunder (other than in respect of Cash Delivery Obligations) shall be
increased from 150% to 200%, and (y) unless a Collateral Event of Default shall
have occurred and be continuing, the Collateral Agent shall:
(i) commence sales, in the manner described in paragraph (3)
below, of such portion of the Collateral consisting of U.S. Government
Securities as may be required to be sold in order to generate proceeds
sufficient to purchase Common Stock or, after a Reorganization Event,
Marketable Securities, as described in the following clause (ii); and
(ii) commence purchases, in the manner described in paragraph
(3) below, of Common Stock or, after a Reorganization Event,
Marketable Securities, in an
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<PAGE> 14
amount sufficient to cause the aggregate Pledge Value of the Collateral
to be at least equal to the Pledge Value Requirement.
Notwithstanding the foregoing, the Collateral Agent shall discontinue sales and
purchases pursuant to the preceding clauses (i) and (ii), respectively, if at
any time a Collateral Event of Default shall have occurred and be continuing.
The Collateral Agent shall determine the Market Value and the Pledge Value of
the Collateral after each purchase of Common Stock or Marketable Securities
pursuant to the preceding clause (ii) in order to determine whether the Pledge
Value Requirement is met and whether a Collateral Event of Default has occurred.
Solely for purposes of such calculation, the Market Value of the Common Stock or
Marketable Securities shall be: (A) the most recent sales price as reported in
the composite transactions for the principal securities exchange on which the
Common Stock or Marketable Securities, as the case may be, are then listed or,
if such securities are not so listed, the last quoted ask price for such
securities in the over-the-counter market as reported by The NASDAQ National
Market or, if not so reported, by the National Quotation Bureau or a similar
organization; or (B) if higher, in the case of Common Stock, the most recent
available Closing Price.
A "Collateral Event of Default" shall mean, at any time, the
occurrence of any of the following: (A) failure of the aggregate Market Value of
the Collateral to equal or exceed the Pledge Value Requirement; (B) failure of
the Market Value of any U.S. Government Securities pledged at such time (not
including any U.S. Government Securities pledged in respect of Cash Delivery
Obligations at such time) to have an aggregate Market Value of at least 105% of
the Market Value of a number of shares of Common Stock (or, from and after any
Reorganization Event, Marketable Securities) equal to (x) the Maximum
Deliverable Number thereof minus (y) the number thereof pledged as Collateral
hereunder at such time; or (C) from and after any Reorganization Event, failure
of the U.S. Government Securities pledged in respect of Cash Delivery
Obligations to have an aggregate Market Value at least equal to 105% of the Cash
Delivery Obligations at such time, if, in the case of a failure described in
this clause (C), such failure shall continue to be in effect at 4:00 p.m., New
York City time, on the tenth Business Day following the day on which telephonic
notice in respect thereof shall have been given pursuant to paragraph (e)(1)
above. For purposes of this Agreement, the portion of any pledged U.S.
Government Securities that shall be deemed to be in respect of Cash Delivery
Obligations at any time shall be a portion having a Market Value equal to 105%
of the Cash Delivery Obligations
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<PAGE> 15
at such time (or, if less, the aggregate Market Value of all U.S. Government
Securities pledged at such time).
(3) Collateral sold and Common Stock or shares of Marketable
Securities purchased by the Collateral Agent pursuant to the preceding
paragraphs (e)(i) and (ii) may be sold and purchased on any securities exchange
or in any over-the-counter market or in any private purchase transaction, and at
such price or prices, in each case as the Collateral Agent may deem
satisfactory. The Pledgor covenants and agrees that it will execute and deliver
such documents and take such other action as the Collateral Agent deems
necessary or advisable in order that any such sales and purchases may be made in
compliance with law.
(f) Release of Excess Collateral. If on any Business Day the
Collateral Agent determines that the aggregate Pledge Value of the Pledgor's
Eligible Collateral exceeds the Pledge Value Requirement and no Event of Default
or failure by the Pledgor to meet any of its obligations under Sections 5 or 6
hereof has occurred and is continuing, the Pledgor may obtain the release from
the Lien hereof of any Collateral having an aggregate Pledge Value on such
Business Day less than or equal to such excess, upon delivery to the Collateral
Agent of a written notice from an Authorized Representative of the Pledgor
indicating the items of Collateral to be released. Such Collateral shall be
released only after the Collateral Agent shall have determined that the
aggregate Pledge Value of all of the Collateral remaining after such release as
determined on such Business Day is at least equal to the Pledge Value
Requirement.
(g) Delivery of Purchase Agreement Consideration. On the
Exchange Date, unless a Reorganization Event shall have occurred prior thereto,
the Collateral Agent shall deliver to the Trust Common Stock then held by it
hereunder representing the number of shares of Common Stock then required to be
delivered under the Purchase Agreement. If a Reorganization Event shall have
occurred prior to the Exchange Date, then, if so instructed by the Pledgor by
the close of business on the Business Day preceding the Exchange Date, the
Collateral Agent shall deliver to the Trust, to the extent permitted to be
delivered in lieu of cash required to be delivered on such date under Section
6.2 of the Purchase Agreement, the Marketable Securities then held by the
Collateral Agent hereunder. Upon such delivery, the Trust shall hold such Common
Stock or Marketable Securities, as the case may be, absolutely and free from any
claim or right whatsoever.
(h) Investment of Cash Collateral. The Collateral Agent shall
invest any cash received by it
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<PAGE> 16
pursuant to Section 6.2 of the Purchase Agreement in U.S. Treasury Securities
maturing on or before _________, 2000.
7. Income and Voting Rights on Collateral.
(a) Unless an Event of Default or failure by the Pledgor to
meet any of his obligations under Section 5(b) or (c) hereof has occurred and is
continuing, the Pledgor shall be entitled to receive for his own account all
dividends, interest and, if any, principal and premium relating to all of the
Collateral, unless the payment thereof to the Pledgor would reduce the aggregate
Pledge Value of the Collateral below the Pledge Value Requirement. The
Collateral Agent agrees to remit to the Pledgor on the Business Day received or
the first Business Day thereafter all such payments received by it. If an Event
of Default or failure by the Pledgor to meet any of its obligations under
Section 5(b) or (c) hereof has occurred and is continuing, all such payments
made or accrued after and during the continuance of such default or failure
shall be retained by the Collateral Agent, and any such payments which are
received by the Pledgor shall be received in trust for the benefit of the Trust,
shall be segregated from other funds of the Pledgor and shall forthwith be paid
over to the Collateral Agent. Any such payments so retained by, or paid over to,
the Collateral Agent shall be held by the Collateral Agent as Collateral
hereunder.
(b) Unless an Event of Default has occurred and is continuing,
the Pledgor shall have the right, from time to time, to vote and to give
consents, ratifications and waivers with respect to the Collateral, and the
Collateral Agent shall, upon receiving a written request from the Pledgor,
deliver to the Pledgor or as specified in such request such proxies, powers of
attorney, consents, ratifications and waivers in respect of any of the
Collateral which is registered in the name of the Collateral Agent or its
nominee as shall be specified in such request and be in form and substance
satisfactory to the Collateral Agent.
If an Event of Default shall have occurred and be continuing,
the Collateral Agent shall have the right to the extent permitted by law, and
the Pledgor shall take all such action as may be necessary or appropriate to
give effect to such right, to vote and to give consents, ratifications and
waivers, and take any other action with respect to any or all of the Collateral
with the same force and effect as if the Collateral Agent were the absolute and
sole owner thereof.
8. Remedies upon Events of Default.
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<PAGE> 17
(a) If any Event of Default shall have occurred and be
continuing, the Collateral Agent may exercise on behalf of the Trust all the
rights of a secured party under the Uniform Commercial Code (whether or not in
effect in the jurisdiction where such rights are exercised) and, in addition,
without being required to give any notice, except as herein provided or as may
be required by mandatory provisions of law, shall: (i) deliver all Collateral
consisting of Common Stock or Marketable Securities (but not, in either case, in
excess of the number of shares thereof deliverable under the Purchase Agreement
at such time) to the Trust on the date of the Acceleration Notice relating to
such Event of Default (or, in the case of an Event of Default described in
clause (iii) or (iv) of the definition thereof, on the Exchange Date) (in either
case, the "Delivery Date"), whereupon the Trust shall hold such Common Stock or
Marketable Securities absolutely free from any claim or right of whatsoever
kind, including any equity or right of redemption of the Pledgor which may be
waived, and the Pledgor, to the extent permitted by law, hereby specifically
waives all rights of redemption, stay or appraisal which he has or may have
under any law now existing or hereafter adopted; and (ii) if such delivery shall
be insufficient to satisfy in full all of the obligations of Pledgor under the
Purchase Agreement, sell all of the remaining Collateral, or such lesser portion
thereof as may be necessary to generate proceeds sufficient to satisfy in full
all of the obligations of Pledgor under the Purchase Agreement, at public or
private sale or at any broker's board or on any securities exchange, for cash,
upon credit or for future delivery, and at such price or prices as the
Collateral Agent may deem satisfactory. The Pledgor covenants and agrees that he
will execute and deliver such documents and take such other action as the
Collateral Agent deems necessary or advisable in order that any such sale may be
made in compliance with law. Upon any such sale the Collateral Agent shall have
the right to deliver, assign and transfer to the purchaser thereof the
Collateral so sold. Each purchaser at any such sale shall hold the Collateral so
sold absolutely and free from any claim or right of whatsoever kind, including
any equity or right of redemption of the Pledgor which may be waived, and the
Pledgor, to the extent permitted by law, hereby specifically waives all rights
of redemption, stay or appraisal which he has or may have under any law now
existing or hereafter adopted. The notice (if any) of such sale required by
Article 9 of the UCC shall (1) in case of a public sale, state the time and
place fixed for such sale, (2) in case of sale at a broker's board or on a
securities exchange, state the board or exchange at which such sale is to be
made and the day on which the Collateral, or the portion thereof so being sold,
will first be offered for sale at such board or exchange, and (3) in the case of
a private sale, state the day after
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<PAGE> 18
which such sale may be consummated. Any such public sale shall be held at such
time or times within ordinary business hours and at such place or places as the
Collateral Agent may fix in the notice of such sale. At any such sale the
Collateral may be sold in one lot as an entirety or in separate parcels, as the
Collateral Agent may determine. The Collateral Agent shall not be obligated to
make any such sale pursuant to any such notice. The Collateral Agent may,
without notice or publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the time and place
fixed for the sale, and such sale may be made at any time or place to which the
same may be so adjourned. In case of any sale of all or any part of the
Collateral on credit or for future delivery, the Collateral so sold may be
retained by the Collateral Agent until the selling price is paid by the
purchaser thereof, but the Collateral Agent shall not incur any liability in
case of the failure of such purchaser to take up and pay for the Collateral so
sold and, in case of any such failure, such Collateral may again be sold upon
like notice. The Collateral Agent, instead of exercising the power of sale
herein conferred upon it, may proceed by a suit or suits at law or in equity to
foreclose the security interests and sell the Collateral, or any portion
thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
(b) Power of Attorney. Upon any delivery or sale of all or any
part of any Collateral made either under the power of delivery or sale given
hereunder or under judgment or decree in any judicial proceedings for
foreclosure or otherwise for the enforcement of this Collateral Agreement, the
Collateral Agent is hereby irrevocably appointed the true and lawful attorney of
the Pledgor, in the name and stead of the Pledgor, to make all necessary deeds,
bills of sale and instruments of assignment, transfer or conveyance of the
property thus delivered or sold. For that purpose the Collateral Agent may
execute all such documents and instruments. This power of attorney shall be
deemed coupled with an interest, and the Pledgor hereby ratifies and confirms
all that his attorneys acting under such power, or such attorneys' successors or
agents, shall lawfully do by virtue of this Collateral Agreement. If so
requested by the Collateral Agent, by the Trustees or by any purchaser of the
Collateral or a portion thereof, the Pledgor shall further ratify and confirm
any such delivery or sale by executing and delivering to the Collateral Agent,
to the Trustees or to such purchaser or purchasers at the expense of the Pledgor
all proper deeds, bills of sale, instruments of assignment, conveyance of
transfer and releases as may be designated in any such request.
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<PAGE> 19
(c) Application of Collateral and Proceeds. In the case of an
Event of Default, the Collateral Agent may proceed to realize upon the security
interest in the Collateral against any one or more of the types of Collateral,
at any one time, as the Collateral Agent shall determine in its sole discretion
subject to the foregoing provisions of this Section 8. The proceeds of any sale
of, or other realization upon, or other receipt from, any of the remaining
Collateral shall be applied by the Collateral Agent in the following order of
priorities:
first, to the payment to the Trust of an amount equal to: (A)
the aggregate Market Value of a number of shares of Common Stock equal
to (1) the number of shares of Common Stock required to be delivered
under the Purchase Agreement on the Delivery Date minus (2) the number
of shares of Common Stock delivered by the Collateral Agent to the
Trust on the Delivery Date as described above; or (B) from and after a
Reorganization Event, the sum of (1) the Cash Delivery Obligations on
the Delivery Date and (2) the aggregate Market Value on the Delivery
Date of a number of Marketable Securities equal to (x) the number
thereof permitted to be delivered on the Delivery Date under Section
6(b) of the Purchase Agreement minus (y) the number thereof delivered
by the Collateral Agent to the Trust on the Delivery Date as described
above;
second, to the payment to the Collateral Agent of the expenses
of such sale or other realization, including reasonable compensation to
the Collateral Agent and its agents and counsel, and all expenses,
liabilities and advances incurred or made by the Collateral Agent in
connection therewith, including brokerage fees in connection with the
sale by the Collateral Agent of any Pledged Item; and
finally, if all of the obligations of the Pledgor hereunder
and under the Purchase Agreement have been fully discharged or
sufficient funds have been set aside by the Collateral Agent at the
request of the Pledgor for the discharge thereof, any remaining
proceeds shall be released to the Pledgor.
9. The Collateral Agent.
The Collateral Agent accepts its duties and responsibilities
hereunder as agent for the Trust, on and subject to the following terms and
conditions:
(a) Performance of Duties. The Collateral Agent undertakes to
perform such duties and only such duties as are expressly set forth herein and,
beyond the exercise of
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reasonable care in the performance of such duties, no implied covenants or
obligations shall be read into this Collateral Agreement against the Collateral
Agent. No provision hereof shall be construed to relieve the Collateral Agent
from liability for its own grossly negligent action, grossly negligent failure
to act or its own wilful misconduct, subject to the following:
(1) The Collateral Agent may consult with counsel, and the
advice or opinion of such counsel shall be full and complete
authorization and protection in respect of an action taken or suffered
hereunder in good faith and in accordance with such advice or opinion
of counsel.
(2) The Collateral Agent shall not be liable with respect to
any action taken, suffered or omitted by it in good faith (i)
reasonably believed by it to be authorized or within the discretion or
rights or powers conferred on it by this Collateral Agreement or (ii)
in accordance with any direction or request of the Trustees.
(3) The Collateral Agent shall not be liable for any error of
judgment made in good faith by any of its officers, unless the
Collateral Agent was grossly negligent in ascertaining the pertinent
facts.
(4) In the absence of bad faith on its part, the Collateral
Agent may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any note, notice,
resolution, consent, certificate, affidavit, letter, telegram, teletype
message, statement, order or other document believed by it to be
genuine and correct and to have been signed or sent by the proper
Person or Persons.
(5) No provision of this Collateral Agreement shall require
the Collateral Agent to expend or risk its own funds or otherwise incur
any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it
shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(6) The Collateral Agent may perform any duties hereunder
either directly or by or through agents or attorneys, and the
Collateral Agent shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care
by it hereunder. In furtherance thereof, any
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<PAGE> 21
subsidiary owned or controlled by the Collateral Agent, or its
successors, as agent for the Collateral Agent, may perform any or all
of the duties of the Collateral Agent relating to the valuation of
securities and other instruments constituting Collateral hereunder.
(7) In no event shall the Collateral Agent be personally
liable for any taxes or other governmental charges imposed upon or in
respect of (i) the collateral or (ii) the income or other distributions
thereon.
(8) Unless and until the Collateral Agent shall have received
notice from the Pledgor, or unless and until a Responsible Officer of
the Collateral Agent shall have actual knowledge to the contrary, the
Collateral Agent shall be entitled to deem and treat all Collateral
delivered to it hereunder as Eligible Collateral hereunder, provided
that the Collateral Agent has carried out the duties specified in
Section 6 with respect to such Collateral at the time of delivery
thereof.
The Collateral Agent shall not be responsible for the correctness of the
recitals and statements herein which are made by the Pledgor or for any
statement or certificate delivered by the Pledgor pursuant hereto. Except as
specifically provided herein, the Collateral Agent shall not be responsible for
the validity, sufficiency, collectibility or marketability of any Collateral
given to or held by it hereunder or for the validity or sufficiency of the
Purchase Agreement or the Lien on the Collateral purported to be created hereby.
(b) Knowledge. The Collateral Agent shall not be deemed to
have knowledge of any Event of Default (except a Collateral Event of Default),
unless and until a Responsible Officer of the Collateral Agent shall have actual
knowledge thereof or shall have received written notice thereof.
(c) Merger. Any corporation or association into which the
Collateral Agent may be converted or merged, or with which it may be
consolidated, or to which it may sell or transfer its agency business and assets
as a whole or substantially as a whole, or any corporation or association
resulting from any such conversion, sale, merger, consolidation or transfer to
which it is a party, shall, subject to the prior written consent of the Trust,
be and become a successor Collateral Agent hereunder and vested with all of the
title to the Collateral and all of the powers, discretions, immunities,
privileges and other matters as was its predecessor without, except as provided
above, the execution or filing of any instrument or any
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<PAGE> 22
further act, deed or conveyance on the part of any of the parties hereto,
anything herein to the contrary notwithstanding.
(d) Resignation. The Collateral Agent and any successor
Collateral Agent may at any time resign by giving thirty days' written notice by
registered or certified mail to the Pledgor and notice to the Trust in
accordance with the provisions of Section 10(d) hereof. Such resignation shall
take effect upon the appointment of a successor Collateral Agent by the Trust.
(e) Removal. The Collateral Agent may be removed at any time
by an instrument or concurrent instruments in writing delivered to the
Collateral Agent and to the Pledgor and signed by the Trust.
(f) Appointment of Successor. (1) If the Collateral Agent
hereunder shall resign or be removed, or be dissolved or shall be in the course
of dissolution or liquidation or otherwise become incapable of action hereunder,
or if it shall be taken under the control of any public officer or officers or
of a receiver appointed by a court, a successor may be appointed by the Trust by
an instrument or concurrent instruments in writing signed by the Trust or by its
attorneys in fact fully authorized. A copy of such instrument or concurrent
instruments shall be sent by registered mail to the Pledgor.
(2) Every such temporary or permanent successor Collateral
Agent appointed pursuant to the provisions hereof shall be a trust company or
bank in good standing, having a reported capital and surplus of not less than
$100,000,000 and capable of holding the Collateral in the State of New York, if
there be such an institution willing, qualified and able to accept the duties of
the Collateral Agent hereunder upon customary terms.
(g) Acceptance by Successor. Every temporary or permanent
successor Collateral Agent appointed hereunder shall execute, acknowledge and
deliver to its predecessor and also to the Pledgor an instrument in writing
accepting such appointment hereunder, whereupon such successor, without any
further act, deed or conveyance, shall become fully vested with all the estates,
properties, rights, powers, duties and obligations of its predecessors. Such
predecessor shall, nevertheless, on the written request of its successor or the
Pledgor, execute and deliver an instrument transferring to such successor all
the estates, properties, rights and powers of such predecessor hereunder. Every
predecessor Collateral Agent shall deliver all Collateral held by it as the
Collateral Agent hereunder to its successor. Should any instrument in writing
from the
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<PAGE> 23
Pledgor be required by a successor Collateral Agent for more fully and certainly
vesting in such successor the estates, properties, rights, powers, duties and
obligations hereby vested or intended to be vested in the predecessor, any and
all such instruments in writing shall, at the request of the temporary or
permanent successor Collateral Agent, be forthwith executed, acknowledged and
delivered by the Pledgor.
10. Miscellaneous.
(a) Benefit of Agreement; Successors and Assigns. Whenever any
of the parties hereto is referred to, such reference shall be deemed to include
the successors and assigns of such party. All the covenants and agreements
herein contained by or on behalf of the Pledgor and the Collateral Agent shall
bind, and inure to the benefit of, their respective successors and assigns
whether so expressed or not, and shall be enforceable by and inure to the
benefit of the Trust and its successors and assigns.
(b) Separability. To the extent permitted by law, the
unenforceability or invalidity of any provision or provisions of this Collateral
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
(c) Amendments and Waivers. Any term, covenant, agreement or
condition of this Collateral Agreement may be amended or compliance therewith
may be waived (either generally or in a particular instance and either
retrospectively or prospectively) but only by a writing signed by the Collateral
Agent, the Pledgor and the Trust.
(d) Notices. (1) Any notice provided for herein, unless
otherwise specified, shall be in writing (including transmittals by telex or
telecopier) and shall be given to a party at the address set forth opposite such
party's name on the signature pages hereto or at such other address as may be
designated by notice duly given in accordance with this Section 10(d) to each
other party hereto.
(2) Each such notice given pursuant to paragraph (1) shall be
effective (i) if sent by certified mail (return receipt requested), 72 hours
after being deposited in the United States mail, postage prepaid; (ii) if given
by telex or telecopier, when such telex or telecopied notice is transmitted; or
(iii) if given by any other means, when delivered at the address specified in
this Section 10(d).
(e) Governing Law. This Collateral Agreement shall in all
respects be construed in accordance with and governed by the laws of the State
of New York; provided that
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<PAGE> 24
as to Pledged Items located in any jurisdiction other than the State of New
York, the Collateral Agent on behalf of the Trust shall have all of the rights
to which a secured party is entitled under the laws of such other jurisdiction.
(f) Counterparts. This Collateral Agreement may be executed,
acknowledged and delivered in any number of counterparts and such counterparts
taken together shall constitute one and the same instrument.
11. Termination of Collateral Agreement.
This Collateral Agreement and the rights hereby granted by the
Pledgor in the Collateral shall cease, terminate and be void upon fulfillment of
all of the obligations of the Pledgor under the Purchase Agreement, and the
Pledgor shall have no further liability hereunder upon such termination. Any
Collateral remaining at the time of such termination shall be fully released and
discharged from the Lien hereof and delivered to the Pledgor by the Collateral
Agent, all at the expense of the Pledgor.
12. No Personal Liability of Trustees.
By executing this Collateral Agreement none of the Trustees
assumes any personal liability hereunder.
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<PAGE> 25
IN WITNESS WHEREOF, the Pledgor has caused this Collateral
Agreement to be duly executed on its behalf, and the Collateral Agent has caused
this Collateral Agreement to be duly executed on its behalf, as of the date
hereof.
PLEDGOR:
-------------------------------------
By
----------------------------------
Name:
Title:
Address for Notices:
-------------------------------------
Attention:
---------------------------
COLLATERAL AGENT:
The Bank of New York,
as Collateral Agent
By
-----------------------------------
Name:
Title:
Address for Notices:
101 Barclay Street
New York, New York 10286
Attention: Sandra Whalen
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<PAGE> 26
THE TRUST:
AUTOMATIC COMMON EXCHANGE
SECURITY TRUST II
---------------------------------
William R. Latham III,
as Trustee
---------------------------------
James B. O'Neill,
as Trustee
---------------------------------
Donald J. Puglisi,
as Trustee
Address for Notices:
Donald J. Puglisi
Puglisi & Associates
850 Library Avenue, Suite 204
Newark, Delaware 19711
Attention: Donald J. Puglisi
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<PAGE> 27
Exhibit A
to
Collateral Agreement
CERTIFICATE FOR SUBSTITUTED COLLATERAL
The undersigned, _____________ (the "Pledgor"), hereby
certifies, pursuant to Section 6(b) of the Collateral Agreement dated as of May
__, 1997 among the Pledgor, The Bank of New York, as Collateral Agent, and
AUTOMATIC COMMON EXCHANGE SECURITY TRUST II (the "Collateral Agreement"; terms
defined in the Collateral Agreement being used herein as defined therein), that:
1. The Pledgor is delivering the following securities to the
Collateral Agent to be held by the Collateral Agent as substituted Collateral
(the "Substituted Collateral"):
2. The Pledgor requests that the Collateral Agent transfer to
the Pledgor the following Prior Collateral, pursuant to Section 6(b) of the
Collateral Agreement:
3. The Pledgor hereby represents and warrants to the
Collateral Agent and the Trust that:
(a) Consents to Transfer. No Transfer Restrictions exist with
respect to or otherwise apply to the assignment of, or transfer by the Pledgor
of possession of, any items of Substituted Collateral to the Collateral Agent
under the Collateral Agreement, or the subsequent sale or transfer of such items
of Substituted Collateral by the Collateral Agent pursuant to the terms of the
Collateral Agreement.
(b) Title to Collateral; Perfected Security Interest. The
Pledgor has good and marketable title to the Substituted Collateral, free of all
Liens (other than the Lien created by the Collateral Agreement) and Transfer
Restrictions. Upon delivery of the Collateral to the Collateral Agent, the
Collateral Agent will obtain a valid, first priority perfected security interest
in, and a first lien upon, such Substituted Collateral subject to no other Lien.
None of such Substituted Collateral is or shall be pledged by the Pledgor as
collateral for any other purpose.
This Certificate may be relied upon by the Trust as fully and
to the same extent as if this Certificate had been specifically addressed to the
Trust.
<PAGE> 28
IN WITNESS WHEREOF, the undersigned has executed this
Certificate this _____ day of ____________, 199__.
----------------------------------
Name:
Title:
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<PAGE> 29
Exhibit B
to
Collateral Agreement
CERTIFICATE FOR ADDITIONAL COLLATERAL
The undersigned, __________________ (the "Pledgor"), hereby
certifies, pursuant to Section 6(c) of the Collateral Agreement, dated as of May
__, 1997, among the Pledgor, The Bank of New York, as Collateral Agent and
AUTOMATIC COMMON EXCHANGE SECURITY TRUST (the "Collateral Agreement"; terms
defined in the Collateral Agreement being used herein as defined therein), that:
1. The Pledgor is delivering the following securities to the
Collateral Agent to be held by the Collateral Agent as additional Collateral
(the "Additional Collateral"):
2. The Pledgor hereby represents and warrants to the
Collateral Agent that:
(a) Consents to Transfer. No Transfer Restrictions exist with
respect to or otherwise apply to the assignment of, or transfer by the Pledgor
of possession of, any items of Additional Collateral to the Collateral Agent
under the Collateral Agreement, or the subsequent sale or transfer of such items
of Additional Collateral by the Collateral Agent pursuant to the terms of the
Collateral Agreement.
(b) Title to Collateral; Perfected Security Interest. The
Pledgor has good and marketable title to the Additional Collateral, free of all
Liens (other than the Lien created by the Collateral Agreement) and Transfer
Restrictions. Upon delivery of the Collateral to the Collateral Agent, the
Collateral Agent will obtain a valid, first priority perfected security interest
in, and a first lien upon, such additional Collateral subject to no other Lien.
None of such Additional Collateral is or shall be pledged by the Pledgor as
collateral for any other purpose.
This Certificate may be relied upon by the Trust as fully and
to the same extent as if this Certificate had been specifically addressed to the
Trust.
<PAGE> 30
IN WITNESS WHEREOF, the undersigned has executed this
Certificate this _____ day of ____________, 199__.
------------------------------------
Name:
Title:
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<PAGE> 1
EXHIBIT 2.K.(v)
FUND EXPENSE AGREEMENT
FUND EXPENSE AGREEMENT, dated as of May __, 1997, between
Goldman, Sachs & Co. ("Goldman Sachs") and The Bank of New York (the "Service
Provider"), in its capacities as custodian, paying agent and collateral agent
for Automatic Common Exchange Security Trust II (the "Trust").
WHEREAS the Trust is a trust formed under the laws of the
State of New York pursuant to a Trust Agreement, as amended and restated as of
May __, 1997 (the "Trust Agreement"); and
WHEREAS, Goldman Sachs, as sponsor under the Trust Agreement,
desires to make provisions for the payment of certain initial and on-going
expenses of the Trust;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained in this Agreement, the parties agree as follows:
1. Definitions. (a) Capitalized terms used
herein and not defined herein shall have the meanings
ascribed thereto in the Trust Agreement.
(b) The following terms shall have the following
meanings:
"Additional Expense" means the Ordinary Expense the incurring
of which will require the Service Provider to provide the Additional Expense
Notice pursuant to Section 3(a) hereof and any Ordinary Expense incurred
thereafter.
"Additional Expense Notice" means the notice required to be
given by the Service Provider to Goldman Sachs pursuant to Section 3(a)(i)
hereof.
"First Time of Delivery" shall have the meaning ascribed
thereto in the Underwriting Agreement.
"Ordinary Expense" of the Trust means any expense of the Trust
other than any expense of the Trust arising under Section 6.6 of the
Administration Agreement, Section 15 of the Custodian Agreement, Section 5.4(b)
of the Paying Agent Agreement, or Section 7.6 of the Trust Agreement.
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<PAGE> 2
"Up-front Fee Amount" means the amount set forth as such on
Schedule I hereto payable as a one-time payment to the Service Provider in
respect of its collective services as Administrator, Custodian, Paying Agent and
Collateral Agent for the entire term of the Trust.
"Up-front Expense Amount" means the amount set forth as such
on Schedule I hereto payable as a one-time payment to the Service Provider in
respect of Ordinary Expenses anticipated to be incurred by the Administrator on
behalf of the Trust, pursuant to the Administration Agreement, during the term
of the Trust.
2. Agreement to Pay Up-front Fees and Expenses.
Goldman Sachs agrees to pay to the Service Provider in
Federal (same day) funds at the First Time of Delivery the
Up-front Fee Amount and the Up-front Expense Amount.
3. Agreement to Pay Additional Expenses. (a) Prior to
incurring any Ordinary Expense on behalf of the Trust that, together with all
prior Ordinary Expenses incurred by the Administrator on behalf of the Trust,
would cause the aggregate amount of Ordinary Expenses of the Trust to exceed the
Up-front Expense Amount, the Administrator shall provide to Goldman Sachs (i)
prompt written notice to the effect that the aggregate amount of Ordinary
Expenses of the Trust will exceed the Up-front Expense Amount, and (ii) an
accounting, in such detail as shall be reasonably acceptable to Goldman Sachs,
of all Ordinary Expenses incurred on behalf of the Trust through the date of the
Additional Expense Notice.
(b) From and after the date of the Additional Expense Notice,
the Service Provider agrees that it will not, without the prior written consent
of Goldman Sachs, incur on behalf of the Trust (i) any single expense in excess
of $________ or (ii) in any calendar period, expenses aggregating in excess of
$________. Subject to the foregoing, the Service Provider shall give notice to
Goldman Sachs in writing promptly following the incurring of any Additional
Expense. Such notice shall be accompanied by any demand, bill, invoice or other
similar document in respect of such Additional Expense.
(c) Subject to the first sentence of paragraph (b) of this
Section 3, Goldman Sachs agrees to pay to the Service Provider from time to time
the amount of any Additional Expense. Payment by Goldman Sachs of any Additional
Expense shall be made in New York Clearing House funds by the later of (i) five
Business Days after the receipt by Goldman Sachs from the Service Provider of
notice
-2-
<PAGE> 3
of the incurring thereof or (ii) the due date for the payment of such
Additional Expense.
(d) Goldman Sachs may contest in good faith the reasonableness
of any Additional Expense and the parties shall attempt to resolve amicably the
disagreement; provided that if the parties cannot resolve the dispute by the due
date hereunder with respect to such Additional Expense, subject to the first
sentence of paragraph (b) of this Section 3, Goldman Sachs shall pay the amount
of such Additional Expense subject to later adjustment and credit if such
dispute is resolved in favor of Goldman Sachs.
4. Condition to Payment. Goldman Sachs' obligations under
paragraphs 2 and 3 hereof shall be subject to the condition that the Trust's
Automatic Common Exchange Securities shall have been issued and paid for at the
First Time of Delivery.
5. Trust Termination; Refund of Unused Expense Funds. If at
the termination of the Trust in accordance with Section 8.3 of the Trust
Agreement the aggregate amount of Ordinary Expenses incurred by the Service
Provider on behalf of the Trust through the date of termination shall be less
than the Up-front Expenses Amount, the Service Provider shall, promptly
following the date of such termination, pay to Goldman Sachs in New York
Clearing House funds the amount of such excess.
6. Termination of Administration Agreement. In the event of
the termination of the Administration Agreement in accordance with Section 4.1
thereof, the Service Provider shall promptly pay to Goldman Sachs the portion of
its Up- front Fee Amount ratable for the period from the date of the termination
of the Administration Agreement to the Exchange Date together with any
unexpended portion of the Up-front Expense Amount.
7. Statements and Reports. The Service Provider shall collect
and safekeep all demands, bills, invoices or other written communications
received from third parties in connection with any Ordinary Expenses and
Additional Expenses and shall prepare and maintain adequate books and records
showing all receipts and disbursements of funds in connection therewith. Goldman
Sachs shall have the right to inspect and to copy, at its expense, all such
documents, books and records at all reasonable times and from time to time
during the term of this Agreement.
8. Term of Contract. This Agreement shall continue in effect
until the termination of the Trust in accordance with Section 8.3 of the Trust
Agreement.
-3-
<PAGE> 4
9. No Assignment. No party to this Agreement may assign its
rights or delegate its duties hereunder without the prior written consent of the
other party.
10. Amendments. The Service Provider agrees that it will not
consent to any amendment of the Administration Agreement, the Custodian
Agreement, the Paying Agent Agreement or the Collateral Agreement without the
prior written consent of Goldman Sachs.
11. Entire Agreement. This Agreement contains the entire
agreement among the parties with respect to the matters contained herein and
supersedes all prior agreements or understandings. No amendment or modification
of this Agreement shall be valid unless the amendment or modification is in
writing and is signed by all the parties to this Agreement.
12. Notices. All notices, demands, reports, statements,
approvals or consents given by any party under this Agreement shall be in
writing and shall be delivered in person or by telecopy or other facsimile
communication or sent by first-class U.S. mail, registered or certified, postage
prepaid, to the appropriate party at its address on the signature pages hereof
or at such other address subsequently notified to the other parties hereto. Any
party may change its address for purposes hereof by delivering a written notice
of the change to the other parties. All notices given under this Agreement shall
be deemed received (a) in the case of hand delivery, on the day of delivery, (b)
in the case of telecopy or other facsimile communication, on the day of
transmission, and (c) in the case of mailing, on the third day after such notice
was deposited in the mail.
13. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
14. Governing Law. This Agreement shall be governed by and be
construed in accordance with the laws of the State of New York.
15. Counterparts. This Agreement may be signed in counterparts
with all of such counterparts constituting one and the same instrument.
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties have caused this Fund Expense
Agreement to be executed by their authorized representatives the date first
above written.
GOLDMAN, SACHS & CO.
By
---------------------------
Address:
85 Broad Street
New York, New York 10004
THE BANK OF NEW YORK
By
---------------------------
Address:
101 Barclay Street
New York, New York 10286
-5-
<PAGE> 6
SCHEDULE I
Directors & Officers Insurance $
-------
Fidelity Bond $
-------
Trustees Fees $
-------
Bank of New York
Acceptance Fee $
-------
Annual Administrative Fee $
-------
External Counsel Fees $
-------
Accounting Fees $
-------
Total $
-------
-6-
<PAGE> 1
EXHIBIT 2.K.(vi)
FUND INDEMNITY AGREEMENT
FUND INDEMNITY AGREEMENT, dated as of May __, 1997, between
Goldman, Sachs & Co. ("Goldman Sachs") and William R. Latham III, James B.
O'Neill and Donald J. Puglisi (collectively, the "Trustees"), not in their
individual capacities but solely as trustees of Automatic Common Exchange
Security Trust II (the "Trust").
WHEREAS the Trust is a trust formed under the laws of the
State of New York pursuant to a Trust Agreement, as amended and restated as of
May __, 1997 (the "Trust Agreement"); and
WHEREAS, Goldman Sachs, as sponsor under the Trust Agreement,
desires to make provision for the payment of certain indemnification expenses of
the Trust;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained in this Agreement, the parties agree as follows:
1. Definitions. Capitalized terms used herein and not defined
herein shall have the meanings ascribed thereto in the Trust Agreement.
2. Agreement to Pay Expenses. Goldman Sachs agrees to pay to
the Trust, and hold the Trust harmless from, any expenses of the Trust arising
under Sections 2.2(f) and 6.6 of the Administration Agreement, Section 15 of the
Custodian Agreement, Section 5.4(b) of the Paying Agent Agreement and Section
7.6 of the Trust Agreement (collectively, "Indemnification Expenses"). Subject
to paragraph 4 hereof, payment hereunder by Goldman Sachs shall be made in New
York Clearing House funds no later than five Business Days after the receipt by
Goldman Sachs, pursuant to paragraph 3 hereof, of written notice of any claim
for Indemnification Expenses.
3. Notice of Receipt of Claim. The Trustees shall give notice
to, or cause notice to be given to, Goldman Sachs in writing of any claim for
Indemnification Expenses or any threatened claim for Indemnification Expenses
immediately upon their acquiring knowledge thereof. Such written notice shall be
accompanied by any demand, bill, invoice or other communication received from
any third party claimant (a "Claimant") in respect of such Indemnification
Expense.
<PAGE> 2
4. Right to Contest. The Trustees agree that Goldman Sachs
may, and Goldman Sachs is authorized on behalf of the Trustees and the Trust to,
contest in good faith with any Claimant any amount contained in any claim for
Indemnification Expense, provided, that if, within such time period as Goldman
Sachs shall determine to be reasonable, Goldman Sachs and such Claimant are
unable to resolve amicably any disagreement regarding such claim for
Indemnification Expense, Goldman Sachs shall retain counsel reasonably
satisfactory to the Trustees to represent the Trustees in any resulting
proceeding and shall pay the fees and disbursements of such counsel related to
such proceeding. It is understood that Goldman Sachs shall not, in respect of
the legal expenses of any indemnified party in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the fees and
expenses of more than one separate firm (in addition to any local counsel).
Goldman Sachs shall not be liable for any settlement of any proceeding effected
without its written consent, but if settled with such consent or if there be a
final judgment for the Claimant, Goldman Sachs agrees to indemnify the Trustees
and the Trust from and against any loss or liability by reason of such
settlement or judgment.
5. Statements and Reports. The Trustees shall collect and
safekeep all demands, bills, invoices or other written communications received
from third parties in connection with any claim for Indemnification Expenses and
shall prepare and maintain adequate books and records showing all receipts and
disbursements of funds in connection therewith. Goldman Sachs shall have the
right to inspect and to copy, at its expense, all such documents, books and
records at all reasonable times and from time to time during the term of this
Agreement.
6. Term of Contract. This Agreement shall continue in effect
until the termination of the Trust in accordance with Section 8.3 of the Trust
Agreement.
7. No Assignment. No party to this Agreement may assign its
rights or delegate its duties hereunder without the prior written consent of the
other parties, except that the Trust may delegate any and all duties hereunder
to the Administrator to the extent permitted by law.
8. Entire Agreement. This Agreement contains the entire
agreement among the parties with respect to the matters contained herein and
supersedes all prior agreements or understandings. No amendment or modification
of this Agreement shall be valid unless the amendment or
-2-
<PAGE> 3
modification is in writing and is signed by all the parties to this Agreement.
9. Notices. All notices, demands, reports, statements,
approvals or consents given by any party under this Agreement shall be in
writing and shall be delivered in person or by telecopy or other facsimile
communication or sent by first-class U.S. mail, registered or certified, postage
prepaid, to the appropriate party at its address on the signature pages hereof
or at such other address subsequently notified to the other parties hereto. A
copy of any communication to Goldman Sachs shall be furnished to Goldman, Sachs
& Co., 85 Broad Street, New York, New York 10004, attention: Registration
Department, provided that the failure to furnish such copy shall not affect the
effectiveness of any such communication. Any party may change its address for
purposes hereof by delivering a written notice of the change to the other
parties. All notices, given under this Agreement shall be deemed received (a) in
the case of hand delivery, on the day of delivery, (b) in the case of telecopy
or other facsimile communication, on the day of transmission, and (c) in the
case of mailing, on the third day after such notice was deposited in the mail.
10. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
11. Governing Law. This Agreement shall be governed by and be
construed in accordance with the laws of the State of New York.
12. Counterparts. This Agreement may be signed in counterparts
with all of such counterparts constituting one and the same instrument.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties have caused this Fund
Indemnity Agreement to be executed by their authorized representatives the date
first above written.
GOLDMAN, SACHS & CO.
By
-----------------------
Address:
85 Broad Street
New York, NY 10004
TRUSTEES
-------------------------
William R. Latham III
Address:
-------------------------
James B. O'Neill
Address:
-------------------------
Donald J. Puglisi
Address:
-4-
<PAGE> 1
EXHIBIT 2.1
SULLIVAN & CROMWELL 125 Broad Street
New York, NY 10004
Telephone: (212) 558-4000
Facsimile: (212) 558-3588
May 28, 1997
Automatic Common Exchange Security Trust II,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Dear Sirs:
In connection with the registration under the Securities Act
of 1933 (the "Act") and the Investment Company Act of 1940 (the "Investment
Company Act") of the Trust Automatic Common Exchange Securities (the
"Securities") of Automatic Common Exchange Security Trust II, a New York trust
(the "Trust"), we, as your counsel, have examined such records, certificates
and other documents, and such questions of law, as we have considered necessary
or appropriate for the purposes of this opinion. Upon the basis of such
examination, we advise you that, in our opinion, when the registration
statement relating to the Securities (the "Registration Statement") has become
effective under the Act, the Trust's Amended and Restated Trust Agreement has
been duly executed and delivered by the parties thereto, and the Securities
have been duly issued and sold as contemplated by the Registration Statement,
the
<PAGE> 2
Automatic Common Exchange Security Trust II -2-
Securities will be validly issued, fully paid and nonassessable.
The foregoing opinion is limited to the Federal laws of the
United States and the laws of the State of New York, and we are expressing no
opinion as to the effect of the laws of any other jurisdiction.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the reference to us under the heading
"Validity of Securities" in the Prospectus. In giving such consent, we do not
thereby admit that we are in the category of persons whose consent is required
under Section 7 of the Act.
Very truly yours,
SULLIVAN & CROMWELL
<PAGE> 1
EXHIBIT 2.N.(i)
SULLIVAN & CROMWELL 125 Broad Street
New York, NY 10004
Telephone: (212) 558-4000
Facsimile: (212) 558-3588
May 28, 1997
Automatic Common Exchange Security Trust II,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Dear Sirs:
We have acted as special tax counsel to Automatic Common
Exchange Security Trust II (the "Trust") in connection with the Registration
Statement on Form N-2 of the Trust filed with the Securities and Exchange
Commission on May 28, 1997 (the "Registration Statement") and hereby confirm to
you our opinion as set forth under the heading "Certain Federal Income Tax
Considerations" in the Prospectus included in the Registration Statement.
We hereby consent to the filing with the Securities and
Exchange Commission of this letter as an exhibit to the Registration Statement
and the reference to us under the heading "Certain Federal Income Tax
Considerations". In giving such consent, we do not thereby
<PAGE> 2
Automatic Common Exchange Security Trust II -2-
admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933.
Very truly yours,
SULLIVAN & CROMWELL
<PAGE> 1
EXHIBIT 2.N.(iii)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form N-2
(Securities Act File No. 333-22289 and Investment Company Act File No.
811-08069) of our report dated May 28, 1997, on our audit of the statement of
assets and liabilities of Automatic Common Exchange Security Trust II. We also
consent to the reference to our firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
New York, New York
May 28, 1997
<PAGE> 1
EXHIBIT 2.N.(iv)
CONSENT TO BEING NAMED AS TRUSTEE
The undersigned hereby consents to being named in the Registration Statement on
Form N-2 of Automatic Common Exchange Security Trust II (the "Trust") and any
amendments thereto, as a person about to become a Trustee of the Trust.
Dated: May 28, 1997
/s/ James B. O'Neill
------------------------
James B. O'Neill
<PAGE> 2
CONSENT TO BEING NAMED AS TRUSTEE
The undersigned hereby consents to being named in the Registration Statement on
Form N-2 of Automatic Common Exchange Security Trust II (the "Trust") and any
amendments thereto, as a person about to become a Trustee of the Trust.
Dated: May 28, 1997
/s/ William R. Latham, III
--------------------------
William R. Latham, III
<PAGE> 3
CONSENT TO BEING NAMED AS TRUSTEE
The undersigned hereby consents to being named in the Registration Statement on
Form N-2 of Automatic Common Exchange Security Trust II (the "Trust") and any
amendments thereto, as a person about to become a Trustee of the Trust.
Dated: May 28, 1997
/s/ Donald J. Puglisi
-------------------------
Donald J. Puglisi
<PAGE> 1
EXHIBIT 2.P
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT is entered into as of the ___ day
of May 1997, between Eric S. Schwartz (the "Trustee"), not in his individual
capacity, but solely as trustee of Automatic Common Exchange Security Trust II,
a trust organized and existing under the laws of New York (the "Trust"), and
Goldman, Sachs & Co. or one of its affiliates (the "Purchaser").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF THE SECURITIES
1.1 SALE AND ISSUANCE OF UNITS. Subject to the terms and
conditions of this Agreement, the Trustee agrees to sell to the Purchaser, and
the Purchaser agrees to purchase from the Trustee, one Trust Automatic Common
Exchange Security, representing an undivided beneficial interest in the Trust
(the "Security") at an aggregate purchase price of $100.00.
1.2 CLOSING. The purchase and sale of the Security shall take
place at the offices of Sullivan & Cromwell, 125 Broad Street, New York, New
York at 10:00 a.m., on May ___, 1997, or at such other time (the "Closing
Date") and place as the Trustee and the Purchaser mutually agree upon. At or
after the Closing, the Trustee shall deliver to the Purchaser a certificate
representing the Security, registered in the name of the Purchaser or its
nominee. Payment for the Security shall be made on the Closing Date by the
Purchaser by bank wire transfers or by delivery of certified or official bank
checks, in either case in immediately available funds, of an amount equal to
the purchase price of the Security purchased by the Purchaser.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
PURCHASER. The Purchaser hereby represents and warrants to, and covenants for
the benefit of, the Trust that:
2.1 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made
by the Trustee with the Purchaser in reliance upon the Purchaser's
representation to the Trustee, which by the Purchaser's execution of this
Agreement the Purchaser hereby confirms, that the Securities are being acquired
for investment for the Purchaser's own account, and not as a nominee or agent
and not with a view to the resale or distribution by the Purchaser of any the
Security, and that the Purchaser has no present intention of selling, granting
any participation in, or otherwise distributing the Security, in either case in
violation of any securities registration requirement under applicable law, but
subject nevertheless, to any requirement of law that the disposition of its
property shall at all times be within its control. By executing this Agreement,
the Purchaser further represents that the Purchaser does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or
grant participation to such person or to any third person, with respect to any
of the Security.
<PAGE> 2
2.2 INVESTMENT EXPERIENCE. The Purchaser acknowledges that it
can bear the economic risk of the investment for an indefinite period of time
and has such knowledge and experience in financial and business matters (and
particularly in the business in which the Trust operates) as to be capable of
evaluating the merits and risks of the investment in the Security. The
Purchaser is an "accredited investor" as defined in Rule 501(a) of Regulation D
under the Securities Act of 1933, as amended (the "Act").
2.3 RESTRICTED SECURITIES. The Purchaser understands that the
Securities are characterized as "restricted securities" under the United States
securities laws inasmuch as they are being acquired from the Trustee in a
transaction not involving a public offering and that under such laws and
applicable regulations such Security may be resold without registration under
the Act only in certain circumstances. In this connection, the Purchaser
represents that it understands the resale limitations imposed by the Act and is
generally familiar with the existing resale limitations imposed by Rule 144.
2.4 FURTHER LIMITATIONS ON DISPOSITION. The Purchaser further
agrees not to make any disposition directly or indirectly of all or any portion
of the Security unless and until:
(a) There is then in effect a registration statement under
the Act covering such proposed disposition and such disposition is made in
accordance with such registration statement;
(b) The Purchaser shall have furnished the Trustee with an
opinion of counsel, reasonably satisfactory to the Trustee, that such
disposition will not require registration of such Securities under the Act; or
(c) Notwithstanding the provisions of subsections (a) and (b)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by the Purchaser to any affiliate of the Purchaser, if the
transferee agrees in writing to be subject to the terms hereof to the same
extent as if it were the original Purchaser hereunder.
2.5 LEGENDS. It is understood that the certificate evidencing
the Security may bear either or both of the following legends:
(a) "These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration statement in
effect with respect to the securities under such Act or an opinion of
counsel reasonably satisfactory to the Trustees of Automatic Common
Exchange Security Trust II that such registration is not required."
(b) Any legend required by the laws of any other applicable
jurisdiction.
The Purchaser and the Trustee agree that the legend contained
in the paragraph (a) above shall be removed at a holder's request when they are
no longer necessary to ensure compliance with federal securities laws.
-2-
<PAGE> 3
2.6 AMENDMENT TO TRUST AGREEMENT; SPLIT OF THE SECURITY. The
Purchaser consents to (a) the execution and delivery by the Trustee and
Goldman, Sachs & Co., as sponsor of the Trust, of an Amended and Restated Trust
Agreement in the form attached hereto and (b) the split of the Purchaser's
Security. Subsequent to the determination of the public offering price per
Security and related underwriting discount for the Securities to be sold to the
Underwriters (as defined in the aforementioned Amended and Restated Trust
Agreement) but prior to the sale of the Securities to the Underwriters, the
Security purchased hereby shall be split into a greater number of Securities so
that immediately following such split the value of each Security held by the
Purchaser will equal the aforesaid public offering price less the related
underwriting discount.
2.7 COUNTERPARTS. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
TRUSTEE
-------------------------------
Eric S. Schwartz
as Trustee
GOLDMAN, SACHS & CO.
By:
----------------------------
-4-
<PAGE> 1
EXHIBIT 2.S
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that Eric S. Schwartz, as Trustee of
Automatic Common Exchange Security Trust II (the "Trust") does hereby make,
constitute and appoint Paul S. Efron, Lynn M. Swanson, Tuan Lam and Tara E.
Connolly of 85 Broad Street, New York, New York his true and lawful attorneys,
to execute and deliver in his name as Trustee of the Trust and on behalf of the
Trust, the Registration Statement on Form N-2 and the New York Stock Exchange
Listing Application for the Trust Automatic Common Exchange Securities (the
"Securities") of the Trust and any other documents pertaining to the
registration of the Securities and such listing application, giving and
granting unto said attorneys-in-fact full power and authority to act in the
premises as fully and to all intents and purposes as Eric S. Schwartz might or
could do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact shall fully do or cause to be done by virtue hereof.
I hereby acknowledge and declare that the said Paul S. Efron, Lynn M. Swanson,
Tuan Lam and Tara E. Connolly attorneys-in-fact for Eric S. Schwartz,
constituted by these present, are hereby directed and authorized to sign such
documents and any other instruments or paper necessary or proper in connection
with the exercise of the powers conferred on them by these presents with the
signature of said attorneys-in-fact, in the form and chirography as follows:
Paul Efron /s/ Paul Efron
------------------------------
Lynn M. Swanson /s/ Lynn M. Swanson
------------------------------
Tuan Lam /s/ Tuan Lam
------------------------------
Tara E. Connolly /s/ Tara E. Connolly
------------------------------
IN WITNESS WHEREOF, the undersigned has duly subscribed these presents this
27th day of May, 1997.
/s/ Eric S. Schwartz
- --------------------------
Eric S. Schwartz
As Trustee of Automatic Common Exchange Security Trust II
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AUTOMATIC
COMMON EXCHANGE TRUST II STATEMENT OF ASSETS AND LIABILITIES AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> Other
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> MAY-27-1997
<PERIOD-END> MAY-27-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 100
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 100
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 100
<SHARES-COMMON-STOCK> 1
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 100
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 100
<PER-SHARE-NAV-BEGIN> 100
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 100
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
