<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 2, 1997
SECURITIES ACT FILE NO. 333-22289
INVESTMENT COMPANY ACT FILE NO. 811-08069
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. 1 [X]
POST-EFFECTIVE AMENDMENT NO. [ ]
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 1 [X]
------------------
SECOND AUTOMATIC
COMMON EXCHANGE SECURITY TRUST
(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
85 BROAD STREET
NEW YORK, NEW YORK 10004
(Name and Address of Agent for Service)
COPIES TO:
Robert E. Buckholz, Jr., Esq.
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
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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- .
------------------
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Title of Securities Proposed Maximum Amount of
Being Registered Aggregate Offering Price(1) Registration Fee
------------------- --------------------------- ----------------
<S> <C> <C>
Trust Automatic Common
Exchange Securities $10,000,000 $3,030.31(2)
- --------------------------------------------------------------------------------
</TABLE>
- ----------
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
SECOND AUTOMATIC COMMON EXCHANGE SECURITY TRUST
CROSS-REFERENCE SHEET
(PURSUANT TO RULE 404(c) UNDER THE SECURITIES ACT OF 1933)
PART A & B OF PROSPECTUS*
<TABLE>
<CAPTION>
ITEM
NUMBER CAPTION LOCATION IN PROSPECTUS
- ------ ------- ----------------------
<S> <C> <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
SUBJECT TO COMPLETION, DATED MAY 2, 1997
_______ SHARES
SECOND AUTOMATIC
COMMON EXCHANGE SECURITY TRUST
$ . TRUST AUTOMATIC COMMON EXCHANGE SECURITIES (TRACES (TM)/(SM))
(SUBJECT TO EXCHANGE INTO SHARES OF COMMON STOCK OF ________________)
---------------------------
Each of the $ . Trust Automatic Common Exchange Securities (the
"Securities") of Second Automatic Common Exchange Security Trust (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, no par value (the
"Common Stock"), of ______________ (the "Company") on the Exchange Date, subject
to earlier partial settlement as set forth herein. The annual distribution of
$ . per Security is payable quarterly on each ___________, _______,
_________, and ____________, commencing ____________, 1997.
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.
The "Exchange Date" will be the date, not earlier than _______, 2000
and not later than __________, 2001, designated as such by the Sellers on not
less than 30 days' notice, provided that if some but not all of the
then-remaining Sellers so designate a date, the designating Sellers' Contracts
will be settled on that date (as if it were the Exchange Date), the Trust will
promptly distribute the shares of Common Stock (or cash) received upon
settlement, the Securities will remain outstanding and the Exchange Rate will
thereafter be proportionately reduced. If the Exchange Date or any such early
settlement occurs prior to ________, 2001, holders of Securities will receive a
cash premium, in the amount set forth herein, in addition to the shares of
Common Stock distributed on such date.
Holders of Securities will receive distributions at a higher annual
rate than the current annual dividends paid 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, when the Contracts are
settled, 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.
Application will be made to list the Securities on the [American] Stock
Exchange under the symbol ____. Prior to this offering there has been no public
market for the Securities. The last reported sale price of the Common Stock on
the [New York] Stock Exchange on May __, 1997, was $_____ per share.
(continued on next page)
SEE "RISK FACTORS" ON PAGE ___ 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) Expenses of the offering, which are payable by the Sellers, are estimated to
be $_______.
(3) The Trust has granted to the Underwriters an option for 30 days to purchase
up to an additional _______ Securities at the price to the public per
Security, solely to cover over-allotments. If the option is exercised in
full, the total Price to Public, Sales Load and Proceeds to the Trust will
be $ , $ , $ , 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 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 through the facilities of The Depository
Trust Company, on or about ______ , 1997.
GOLDMAN, SACHS & CO.
---------------------------
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.
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,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
SECURITIES, AND THE IMPOSITION OF A PENALTY BID, DURING AND AFTER THE OFFERING.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
-3-
<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 (or upon earlier settlement), 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
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), together with a cash premium if the Exchange Date falls prior to
____________, 2001. 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 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 (a) the Common Stock (or at
the election of the Sellers, by substitute collateral consisting of short-term,
direct obligations of the U.S. Government) and (b) stripped U.S. Treasury
securities, the payments on which will be sufficient to fund the premium payable
if the Exchange Date falls on ________, 2000. See "Investment Objective and
Policies -- The Contracts -- Collateral Arrangements; Acceleration". The Trust
will purchase, with a portion of the proceeds of this Offering, stripped U.S.
Treasury securities the payments on which will be sufficient to make quarterly
distributions of $.___ per Security through _______________, 2000.
The Exchange Date will be the date, not earlier than ________, 2000 and not
later than ________, 2001, designated as such by the Sellers on not less than 30
days' notice, provided that if some but not all of the then remaining Sellers so
designate a date, the designating Sellers' Contracts will be settled on that
date (as if it were the Exchange Date), the Trust will promptly distribute the
shares of Common Stock (or cash) received upon settlement, the Securities will
remain outstanding and the Exchange Rate will thereafter be proportionately
reduced. In addition, if by ________, 2000 any Seller has not pledged in favor
of the Trust U.S. Treasury securities sufficient to fund such Seller's
proportion of the quarterly distributions on the Securities for the four
quarters ending _______, 2001, then
-4-
<PAGE> 6
such Seller will be deemed to have designated ___________, 2000 as the Exchange
Date, and such Seller's Contract will settle on that date. If the Exchange Date
or any such early settlement occurs prior to ________, 2001, holders of
Securities will receive a cash premium, in the amount set forth herein, in
addition to the shares of Common Stock distributed on such date.
THE OFFERING
The Trust is offering _________ 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 _______ additional Securities solely for the
purpose of covering over-allotments. See "Underwriting".
THE SECURITIES
GENERAL. The Securities are designed to provide investors with a higher
distribution per Security than the dividend currently paid per share on the
Common Stock. The annual distribution per Security is $ . Based on the
current annual dividend rate of $.__ per share of Common Stock, the annual per
share distribution per Security is $ greater than the current annual per
share dividend rate on the Common Stock. Future declarations 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 distributions at a higher annual rate than the
current annual dividends paid 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, when the Contracts are settled, 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 when the Contracts
are settled 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 (i) certain dividends or
distributions, subdivisions, splits, combinations, issuances of certain rights
or warrants or distributions of certain assets with respect to the Common Stock
or (ii) early settlement of one or more Contracts. In addition, if the Exchange
Date or any such early settlement occurs prior to ____________, 2001, Holders of
Securities will be entitled to receive a cash premium in the following amount
per Security (subject to pro ration if less than all Contracts are settled on
such date):
-5-
<PAGE> 7
<TABLE>
<CAPTION>
IF THE EXCHANGE IS PRIOR TO: PREMIUM
<S> <C>
_____________, 2000................................ $_________
_____________, 2000................................ _________
_____________, 2000................................ _________
_____________, 2001................................ _________
</TABLE>
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.
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 or upon earlier settlement.
See "Investment Objective and Policies -- The Company" and "Description of the
Securities".
THE COMPANY
[TO COME]
Reference is made to the accompanying prospectus of the Company (pages
A-1 through A-_ hereto) which describes 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 or upon earlier settlement. The Company is not
affiliated with the Trust. The Company prospectus relates to an aggregate of
_________ shares of Common Stock (plus an additional _______ 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
-6-
<PAGE> 8
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. See "Certain Federal Income Tax Considerations".
ALTERNATIVE FEDERAL INCOME TAX CHARACTERIZATIONS
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 _________ (or its
successor) as trust administrator (the "Administrator"). ____________ (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, _____________ 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".
Holders will receive distributions at a higher annual rate than the
current annual dividends paid 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, when the Contracts are settled, 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 when the Contracts are settled 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".
-7-
<PAGE> 9
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
Application will be made to list the Securities on the [American] Stock
Exchange (the "Amex") under the symbol ___.
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 $_______ will be paid by the
Sellers. Each of the Administrator, the Custodian and the Paying Agent, and each
Trustee will be paid by the Sellers 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 $_______ in the aggregate), over the term of the Trust. The Sellers have
agreed to pay any on-going expenses of the Trust in excess of these estimated
amounts and to reimburse the Trust for any amounts it may be required to pay as
indemnification to any Trustee, the Administrator, the Custodian or the Paying
Agent. See "Management and Administration of the Trust -- Estimated Expenses".
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 $_______ per year, payable by the Sellers at the closing
of the offering. See "Investment Objective and Policies -- General".
<TABLE>
<S> <C>
INVESTOR TRANSACTION EXPENSES
Sales Load (as a percentage of offering price)...................... %
Dividend Reinvestment and Cash Purchase Plan Fees................... N/A
ANNUAL EXPENSES
Management Fees..................................................... 0%
Other Expenses...................................................... %
--
Total Annual Expenses.......................................... %
==
</TABLE>
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
-8-
<PAGE> 10
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>
EXAMPLE 1 YEAR 3 YEARS
------- ------ -------
<S> <C> <C>
You would bear the following expenses (i.e., the applicable sales load $ $
and allocable portion of ongoing expenses paid by the Sellers) on a
$1,000 investment, assuming a 5% annual return..............................
</TABLE>
-9-
<PAGE> 11
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 ______ , 1997. 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 at or prior to 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 through
__________, 2000 and the payment dates thereof, and to pay the purchase price
under the Contracts to the Sellers.
At the closing of this Offering, pursuant to the Contracts, the Sellers
will purchase and pledge in favor of the Trust stripped U.S. Treasury securities
with face amounts and maturities corresponding to the premium that would be
payable with respect to the Securities if the Exchange Date falls on __________,
2000. The proceeds from such pledged U.S. Treasury securities will be applied to
pay any premium that may become payable in respect of the Securities on the
Exchange Date or upon earlier settlement. In addition, the Sellers may
subsequently pledge in favor of the Trust U.S. Treasury securities in amounts
sufficient to fund quarterly distributions on the Securities for the four
quarters ending __________, 2001. If any Seller does not make such a pledge,
such Seller's Contract will be settled on ___________, 2000.
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 (or upon earlier settlement), 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), together with a cash premium if the Exchange
Date falls prior to __________, 2001. 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 on the [NYSE
Consolidated Tape] on such date of determination or, if the Common Stock is not
listed for trading on the [NYSE] on any such date, as reported in the composite
transactions for the principal United States securities exchange on which the
Common Stock is so listed, or if the Common Stock is not so listed on a United
States national or regional securities exchange, as reported by The Nasdaq
National Market or, if the Common Stock is not so reported, the last quoted bid
price for the Common Stock in the over-the-counter market as reported
-10-
<PAGE> 12
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 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 (or upon earlier settlement) 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 (or upon earlier settlement) 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 (or upon earlier settlement) the following
number of shares of Common Stock:
CURRENT MARKET PRICE NUMBER OF SHARES
OF COMMON STOCK OF COMMON STOCK
---------------------- ------------------
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, 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. [Distributions
after _____________, 2001 should be treated as a tax-free return of the Holders'
investment in the Contracts.] 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
U.S. TREASURIES PER SECURITY SECURITY IN INCOME PER SECURITY
YEAR ----------------- ------------------ ---------------- -----------------------
- ----
<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
-11-
<PAGE> 13
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".
ENHANCED YIELD; LESS EQUITY APPRECIATION THAN COMMON STOCK; NO DEPRECIATION
PROTECTION
Holders will receive distributions at a higher annual rate than the
current annual dividends paid 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, when the Contracts are settled, 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 when the
Contracts are settled is less than the price to public per Security shown on the
cover page hereof.
THE COMPANY
[TO COME]
The shares of Common Stock are traded on the [New York] Stock Exchange.
The following table sets forth, for the calendar quarters indicated, the
reported high and low sales prices of the shares of Common Stock on the [New
York Stock Exchange Composite Tape] and the cash dividends per share of Common
Stock. As of , 1997, there were 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>
DIVIDEND
HIGH LOW PER SHARE
------ ----- -----------
<S> <C> <C> <C>
1995
1st Quarter.....................................
2nd Quarter.....................................
3rd Quarter.....................................
4th Quarter.....................................
1996
1st Quarter.....................................
2nd Quarter.....................................
3rd Quarter.....................................
4th Quarter.....................................
1997
1st Quarter.....................................
2nd Quarter (through , 1997)...........
</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 shares of Common Stock
by the Holders as a result of the exchange of the Securities for the Common
Stock on the Exchange Date or upon earlier settlement.
Reference is made to the accompanying prospectus of the Company, dated
_________ , 1997 (pages A-1 through A-_ hereto) which describes the Company and
the shares of Common Stock deliverable to the Holders upon mandatory exchange of
the Securities on the Exchange Date or upon earlier settlement. The Company is
not affiliated
-12-
<PAGE> 14
with the Trust and will not receive any of the proceeds from the
sale of the Securities. The Company prospectus relates to an aggregate of
_________ shares of Common Stock (plus an additional _______ 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) 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, and (b) if
the Exchange Date is prior to the dates specified below, a cash premium in the
following amount per Security (subject to pro ration if less than all Contracts
are settled on such date):
<TABLE>
<CAPTION>
DATE PREMIUM
<S> <C>
_____________, 2000................................ $_________
_____________, 2000................................ _________
_____________, 2001................................ _________
_____________, 2001................................ _________
</TABLE>
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 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.
EXCHANGE DATE; EARLIER SETTLEMENT. The Exchange Date will be the date,
not earlier than ________, 2000 and not later than ________, 2001, designated as
such by the Sellers on not less than 30 days' notice, provided that if some but
not all of the then remaining Sellers so designate a date, the designating
Sellers' Contracts will be settled on that date (as if it were the Exchange
Date), the Trust will promptly distribute the shares of Common Stock (or cash)
received upon settlement, the Securities will remain outstanding and the
Exchange Rate will thereafter be proportionately reduced. In addition, if by
________, 2000 any Seller has not pledged in favor of the Trust U.S. Treasury
securities sufficient to fund such Seller's proportion of the quarterly
distributions on the Securities for the four quarters ending _______, 2001, then
such Seller will be deemed to have designated __________, 2000 as the Exchange
Date, and such Seller's Contract will settle on that date. Ownership of these
pledged Treasury securities will be transferred at the beginning of each quarter
to the Trust in amounts sufficient to fund the quarterly distributions on the
Securities. If the Exchange Date or any such earlier settlement occurs prior to
________, 2001, holders of Securities will receive a cash premium, in the amount
per Security set forth above, in addition to the shares of Common Stock (or
cash) distributed on such date.
The proportionate reduction in the Exchange Rate following a partial
settlement will be computed by multiplying the Exchange Rate by a fraction, the
numerator of which is the initial number of shares of Common Stock subject to
the Contracts remaining outstanding after such settlement, and the denominator
of which is the initial number of shares
-13-
<PAGE> 15
of Common Stock subject to the Contracts outstanding immediately prior to such
settlement (which reduction may be applied successively if there is more than
one early settlement).
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 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
-14-
<PAGE> 16
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 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 (or upon earlier settlement), 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. 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.
-15-
<PAGE> 17
"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 (or earlier settlement 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 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 (or earlier settlement 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 (a) 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) and (b) stripped U.S. Treasury
securities, the payments on which will be sufficient to fund the premium payable
if the Exchange Date falls on __________, 2000, pursuant to a Collateral
Agreement between such Sellers and __________, as collateral agent (the
"Collateral Agent"). In addition, the Sellers may subsequently pledge in favor
of the Trust U.S. Treasury securities in amounts sufficient to fund quarterly
distributions on the Securities for the four quarters ending _____________,
2001. 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 (or after such date, maturing on or
before the next quarterly distribution date). 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
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<PAGE> 18
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) 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, (i) the Collateral Agent will distribute to the
Trust, for distribution pro rata to the Holders, the shares of Common Stock then
pledged, or cash generated from the liquidation of U.S. Government obligations
then pledged, or a combination thereof (or, after a Reorganization Event, the
Marketable Securities then pledged, cash generated from the liquidation of U.S.
Government obligations then pledged, or a combination thereof) and (ii) the
Custodian will liquidate any U.S. Treasury securities then held by the Trust and
distribute the proceeds pro rata to the Holders. In addition, in the event that
by the Exchange Date (or upon earlier settlement) 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
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<PAGE> 19
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 _________________.
Reference is made to the caption "Selling Shareholders" in the Company's
prospectus 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 through __________, 2000. In addition, the Sellers may subsequently
pledge in favor of the Trust U.S. Treasury securities in amounts sufficient to
fund quarterly distributions on the Securities for the four quarters ending
_____________, 2001. If by ____________, 2000, any Seller has not pledged in
favor of the Trust U.S. Treasury securities sufficient to fund such Seller's
proportion of the quarterly distributions on the Securities through
_____________, 2001, then such Seller will be deemed to have designated
_____________, 2000 as the Exchange Date.
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 or disposed
of as described under the caption "Management and Administration of the Trust --
Trustees", then any 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 or any
consideration received by the Trust upon disposition of such Contract. 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. 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 ____________________ industry, which is the industry 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
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<PAGE> 20
acceleration, and the Trust shall be terminated. See "-- Collateral
Arrangements; Acceleration" and "-- The U.S. Treasury Securities".
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 (or upon earlier
settlement), it will receive the Common Stock deliverable pursuant to the
Contracts, which it will then distribute to Holders. Although the yield on the
Securities is higher than the current dividend yield 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) or upon earlier settlement 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 or upon earlier settlement 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,
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<PAGE> 21
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 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 (or upon earlier settlement),
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 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 intend, but are 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. Application will be made to list the Securities on the
[Amex]. Assuming the acceptance of such application, there can be no assurance
that the Securities will not later be delisted or that trading in the Securities
on the [Amex] 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'S INDUSTRY]
[TO COME]
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, amount
received by the Holders in respect of the Securities.
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<PAGE> 22
DESCRIPTION OF THE SECURITIES
Each Security represents an equal proportional interest in the Trust,
and a total of _______ Securities 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 [Amex]. 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 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.
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.
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.
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<PAGE> 23
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 in 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.
MANAGEMENT AND ADMINISTRATION OF THE TRUST
TRUSTEES
The Trust will be internally managed by three Trustees. 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.
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<PAGE> 24
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME, AGE AND ADDRESS TITLE DURING PAST FIVE YEARS
- --------------------- ----- ----------------------
<S> <C> <C>
MANAGING TRUSTEE
TRUSTEE
TRUSTEE
</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 $________. The
Trust's Managing Trustee will also receive an additional up-front fee of
$_________ 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 __________ 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 pursuant to the Sellers' right to direct an assignment or
in connection with an acceleration of a Contract or the settlement of the
Contracts and upon termination of the Trust).
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, ___________ has no other affiliation
with, and is not engaged in any other transactions with, the Trust.
The address of the Administrator is _______________.
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<PAGE> 25
CUSTODIAN
The Trust's custodian (the "Custodian") is ______________ 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 _____________ 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. Goldman
Sachs will in turn be reimbursed by the Sellers for all such reimbursements paid
by it.
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 prior to ____________, 2000,
and all of each such distribution thereafter, 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.
ESTIMATED EXPENSES
At the closing of this offering the Sellers 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
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<PAGE> 26
the amount of $__________ and estimated costs of the Trust in connection with
the initial registration and public offering of the Securities in the amount of
$_______ 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 the Sellers or, in the event of failure by
the Sellers to pay such amounts, the Trust.
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<PAGE> 27
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.
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.
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 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 security 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, or in the case of U.S. Treasury securities acquired by the Trust from
the Sellers, the fair market value of such U.S.
-26-
<PAGE> 28
Treasury securities on the date they are acquired 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. If the Exchange Date is later than ________, a
Holder's tax basis in the Contracts will be decreased by (a) the fair market
value of any U.S. Treasury securities acquired by the Trust from the Sellers
on the date they are acquired and (b) the amount of any cash premium received.
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. Likewise, each
Holder will be treated as having received a pro-rata portion of any U.S.
Treasury securities acquired by the Trust from the Sellers.
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.
Sullivan & Cromwell also believes that any receipt by the Trust of cash premium
or U.S. Treasury securities from the Sellers should be treated as a partial
return of the purchase price of the Contracts, in an amount equal to such cash
or the fair market value of such U.S. Treasury securities on the date they are
acquired by the Trust.
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 as interest the amount of cash actually
received each year in respect of the Securities. The Internal Revenue Service
could also conceivably take the view that a Holder should include a pro rata
share of the fair market value of any U.S. Treasury securities, or cash premium,
acquired by the Trust from Sellers in income at that time the Trust receives
them.
-27-
<PAGE> 29
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 Goldman Sachs, as Underwriters, and the Underwriters
have agreed to purchase from the Trust, _________ Securities.
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.
During and after the offering, the Underwriters may purchase and sell
the Securities in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases to cover syndicate short positions
created in connection with 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 for their
account 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.
These transactions may be effected on the [American Stock Exchange], in the
over-the-counter market or otherwise, and these activities, if commenced, may be
discontinued at any time.
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 _______ 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 and the Company have agreed that, during the period
beginning from the date of this Prospectus and continuing to and including the
date 180 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.
-28-
<PAGE> 30
The Securities will be a new issue of securities with no established
trading market. Application has been made to list the Securities on the
[American] Stock Exchange. 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.
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.
VALIDITY OF SECURITIES
The validity of the Securities will be passed upon for the Trust and
the Underwriters by their counsel, Sullivan & Cromwell, 125 Broad Street, New
York, New York 10004.
EXPERTS
The financial statement included in this Prospectus has been audited by
_______________, 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).
-29-
<PAGE> 31
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Securityholders of
Second Automatic Common Exchange Security Trust:
We have audited the accompanying statement of assets and liabilities of
Second Automatic Common Exchange Security Trust as of ________, 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 Second Automatic
Common Exchange Security Trust, as of ________, 1997 in conformity with
generally accepted accounting principles.
New York, New York
________, 1997
-30-
<PAGE> 32
SECOND AUTOMATIC COMMON EXCHANGE SECURITY TRUST
STATEMENT OF ASSETS AND LIABILITIES
________, 1997
ASSETS
<TABLE>
<S> <C>
Cash.............................................................. $ 100
----------
Total assets...................................................... $ 100
==========
LIABILITIES
.................................................................. $ 0
------------
NET ASSETS
Balance applicable to 1 Security outstanding...................... $ 100
-----------
Net asset value per Security...................................... $ 100
===========
</TABLE>
- ------------------------------------------------------
(1) Second Automatic Common Exchange Security Trust (the "Trust") was
established on ________, 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 ____________________.
(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 ______
relating to the common stock of _____________________. 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 ____________ as trust administrator.
____________ 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
____________________.
(3) The Trust issued one Security on ________, 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.
-31-
<PAGE> 33
================================================================================
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 SECURITY IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL.
------------------------------------------------------
TABLE OF CONTENTS
PAGE
Prospectus Summary.......................................................... 3
The Trust................................................................... 9
Use of Proceeds............................................................. 9
Investment Objective and Policies........................................... 9
Risk Factors................................................................ 18
Description of the Securities............................................... 19
Management and Administration of the Trust.................................. 21
Certain Federal Income Tax Considerations................................... 25
Underwriting................................................................ 27
Validity of Securities...................................................... 28
Experts..................................................................... 28
Further Information......................................................... 28
Report of Independent Accountants........................................... 29
Statement of Assets and Liabilities......................................... 30
------------------------------------------------------
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.
================================================================================
================================================================================
_________ SHARES
SECOND AUTOMATIC
COMMON EXCHANGE
SECURITY TRUST
$ . TRUST AUTOMATIC COMMON
EXCHANGE SECURITIES
(TRACES(TM)/(SM))
------------------------------------------------------
PROSPECTUS
------------------------------------------------------
GOLDMAN, SACHS & CO.
================================================================================
<PAGE> 34
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(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.r Financial Data Schedule**
- ------------------------------------------------------
* Previously Filed.
** To be Filed by Amendment.
ITEM 25. MARKETING ARRANGEMENTS
See the Form of Underwriting Agreement to be filed as Exhibit 2.h to
this Registration Statement.
C-1
<PAGE> 35
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............................................................$
[American] Stock Exchange listing fee........................................
Printing (other than certificates)...........................................
Fees and expenses of qualification under state securities laws
(excluding fees of counsel)................................................
Accounting fees and expenses.................................................
Legal fees and expenses......................................................
NASD fees....................................................................
Miscellaneous................................................................
Total........................................................................$
=======
</TABLE>
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 _________ 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
C-2
<PAGE> 36
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 Registrant's
Administrator, Custodian, paying agent, transfer agent and registrar.
ITEM 32. MANAGEMENT SERVICES
Not applicable.
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> 37
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. 1 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 2nd day of May, 1997.
SECOND AUTOMATIC COMMON
EXCHANGE SECURITY TRUST
By: /s/ Eric S. Schwartz
------------------------------
Eric S. Schwartz
Trustee
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 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
<S> <C> <C>
Principal Executive Officer,
/s/ Eric S. Schwartz Principal Financial Officer,
- --------------------------- Principal Accounting Officer May 2, 1997
Eric S. Schwartz and Trustee
</TABLE>
<PAGE> 38
EXHIBIT INDEX
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------ ----------- -------
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.r Financial Data Schedule**
- ------------------------------------------------------
* Previously Filed.
** To be Filed by Amendment.
<PAGE> 1
Exhibit 2.a.(ii)
AMENDED AND RESTATED
TRUST AGREEMENT
CONSTITUTING
SECOND AUTOMATIC
COMMON EXCHANGE SECURITY TRUST
Dated as of __________, 1997
<PAGE> 2
Table of Contents
Page
----
ARTICLE I
DEFINITIONS
ARTICLE II
TRUST DECLARATION; PURPOSES, POWERS
AND DUTIES OF THE TRUSTEES; ADMINISTRATION
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
<PAGE> 3
Table of Contents
Page
----
ARTICLE VI
ISSUANCE OF THE CONTRACTS
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
<PAGE> 4
AMENDED AND RESTATED TRUST AGREEMENT
This Amended and Restated Trust Agreement, dated as of
________, 1997 (the "Trust Agreement"), by and between Goldman Sachs & Co., as
sponsor (the "Sponsor"), and _______________, _______________ and
_______________ as trustees (the "Trustees"), constituting Second Automatic
Common Exchange Security Trust (the "Trust").
W I T N E S S E T H:
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 in
satisfaction of the requirements of Section 14(a)(1) under the Investment
Company Act (as defined hereinafter);
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.
"Acceleration Amount Notice" - An Acceleration Amount Notice
as defined in the Contracts.
"Acceleration Value" - The Acceleration Value as defined in
the Contracts.
"Additional Purchase Price" - The Additional Purchase Price as
defined in the Contracts.
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"Aggregate Acceleration Value" - The Aggregate Acceleration
Value 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" - [_______________] or its successor as
permitted under Section 6.1 of the 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.
"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" - [_______________], 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, of
_______________.
"Company" - ______________, a __________ 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.
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"Current Market Price" - Current Market Price as defined in
the Contracts.
"Custodian" - [_______________], or its successor as permitted
under paragraph 11 of the Custodian Agreement or appointed pursuant to Section
2.2(a) hereof.
"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 (or, to the extent the Trustees agree with a Seller that such Seller may
satisfy its obligations under its contract by paying cash on the Exchange Date,
such cash) 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.
"Independent Dealers" - Independent Dealers as defined in the
Contracts.
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"Indemnity Agreement" - The Fund Indemnity Agreement 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.
"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" - [_______________], 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 Agreement, 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 __________.
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"Registration Statement" - Registration Statement on Form N-2
(Registration No. 333-________) of the Trust, as amended.
"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" - $____ 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" - _______________, 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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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; 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:
(a) Determination of Dilution or Merger 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
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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. Upon receipt of any notice pursuant to
Section 5.4(a) of the Contracts or pursuant to Section 6(a) of the
Collateral Agreements that a Collateral Event of Default has occurred,
or upon otherwise acquiring notice that an Event of Default has
occurred, to request quotations from Independent Dealers, compute
Acceleration Value and Aggregate Acceleration Value and deliver an
Acceleration Amount Notice, in each case with respect to the Contracts,
all as described in Article VII of the Contracts;
(d) Determination of Exchange Date Amounts. To calculate, on
the Exchange Date, the number of Shares 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; provided that the Trustees are authorized, in their sole
discretion, to permit any one or more Sellers to satisfy all or any
portion of its or their respective obligations under the Contracts by
making a cash payment (in immediately available funds) to the Trust
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on or before the Exchange Date; provided further that any such cash
payment is in an amount at least equal to the Current Market Price of
the Shares in lieu of delivery of which it is made;
(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 the Trustees in
their sole discretion accept a cash payment in lieu of delivery of
shares pursuant to any Contract (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,
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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 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;
(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; and
(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 contemplated 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 Securities to be sold pursuant to the
Underwriting Agreement and until such Securities have been so purchased
and paid for in full;
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<PAGE> 15
(d) to make short sales or purchases on margin;
(e) to write put or call options;
(f) to borrow money;
(g) to underwrite securities;
(h) to purchase or sell real estate, commodities or
commodities contracts;
(i) to purchase restricted securities;
(j) to make loans; or
(k) to take any action, or direct or permit the Administrator,
the Paying Agent or the Custodian to take any action, that would vary
the investment of the Holders within the meaning of Treasury Regulation
Section 301.7701-4(c), or otherwise take any action or direct or permit
any action to be taken that would or could cause the Trust not to be a
"grantor trust" 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 Contracts, 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.
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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 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
Temporary Investment. Any interest or other income received on any moneys in
the Trust Account shall, upon receipt thereof, be deposited into the Trust
Account. 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.
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ARTICLE IV
REDEMPTION
SECTION 4.1 Redemption. The Trustees shall have no right or
obligation to redeem Securities.
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
Certificates and shall have no obligation to the beneficial owners thereof, and
none of the Trust, the Trustees, or any agent of the Trust or the Trustees shall
have any liability with respect to or responsibility for the records of 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
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<PAGE> 18
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.
Pending the preparation of definitive Certificates, the
Trustees may execute and the Paying Agent shall authenticate and deliver
temporary Certificates (printed, lithographed, typewritten or otherwise
reproduced, in each case in form satisfactory to the Paying Agent). Temporary
Certificates shall be issuable as registered Certificates substantially in the
form of the definitive Certificates but with such omissions, insertions and
variations as may be appropriate for temporary Certificates, all as may be
determined by the Trustees with the concurrence of the Paying Agent. Every
temporary Certificate shall be executed by the Managing Trustee and be
authenticated by the Paying Agent upon the same conditions and in substantially
the same manner, and with like effect, as the definitive Certificates. Without
unreasonable delay the Managing Trustee shall execute and shall furnish
definitive Certificates and thereupon temporary Certificates may be surrendered
in exchange therefor without charge at each office or agency of the Paying Agent
and the Paying Agent shall authenticate and deliver in exchange for such
temporary Certificates definitive Certificates for a like aggregate number of
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
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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 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 pursuant to this Section 5.3 hereof, the original Certificate
claimed to have been lost, stolen or destroyed shall become null and void and of
no effect, and any bona fide purchaser thereof shall have only such rights as
are afforded under Article 8 of the Uniform Commercial Code to a Holder
presenting a Certificate for transfer in the case of an overissue.
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ARTICLE VI
ISSUANCE OF THE CONTRACTS
SECTION 6.1 Execution of the Contracts. The Contracts shall be
countersigned manually or in facsimile by the Managing Trustee and executed
manually by each of the Sellers and shall be dated the date of execution and
delivery by each of the Sellers.
ARTICLE VII
TRUSTEES
SECTION 7.1 Trustees. The Trust shall have three Trustees who
shall initially be elected by the 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
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of age and shall not be under any legal disability. No Trustee who is an
"interested person", as defined in the Investment Company Act, may assume office
if it would cause the composition of the Trustees of the Trust not to be in
compliance with the percentage limitations on interested persons in Section 10
of the Investment Company Act. Trustees need not be Holders. Notice of the
appointment or election of a successor Trustee shall be mailed promptly after
acceptance of such appointment by the successor Trustee to each Holder.
SECTION 7.3 Powers. The Trust will be managed solely by the
Trustees, who will, subject to the provisions of Article II hereof, have
complete and exclusive control over the management, conduct and operation of the
Trust's business, and shall have the rights, powers and authority of a board of
directors of a corporation organized under 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.
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SECTION 7.5 Resignation and Removal. Any Trustee may resign
and be discharged of the trust created by the Trust Agreement by executing an
instrument in writing resigning as Trustee, filing the same with the
Administrator and sending notice thereof to the remaining Trustees, and such
resignation shall become effective immediately unless otherwise specified
therein. Any Trustee may be removed in the event of incapacity by vote of the
remaining Trustees and for any reason by written declaration or vote of the
Holders of more than 66 2/3% of the outstanding 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
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not receive any pension or retirement benefits. In the event of the resignation
or removal of a Trustee, such Trustee shall remit to the Trust the portion of
its fee ratable for the period from the day of such resignation or removal
through the Exchange Date.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Meetings of Holders. The Trustees shall not hold
annual or regular meetings of Holders except as set forth herein. A special
meeting may be called at any time by the Trustees or upon petition of Holders of
not less than 51% of the 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 shall vote its Securities in proportion to the votes of all other
Holders.
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SECTION 8.2 Books and Records; Reports. (a) The Trustees shall
keep a certified copy or duplicate original of this Trust Agreement on file at
the office of the Trust and the office of the Administrator available for
inspection at all reasonable times during its usual business hours by any
Holder. The Trustees shall keep proper books of record and account for all the
transactions under this Trust Agreement at the office of the Trust and the
office of the Administrator, and such books and records shall be open to
inspection by any Holder at all reasonable times during usual business hours.
The Trustees shall retain all books and records in compliance with Section 31 of
the Investment Company Act and the rules and regulations thereunder.
(b) With each payment to Holders the Paying Agent shall set
forth, either in the instruments by means of which payment is made or in a
separate statement, the amount being paid from the Trust Account expressed as a
dollar amount per 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 distribute reports as required by Section 30
of the Investment Company Act and the rules and regulations thereunder. The
Trustees shall prepare and file such reports as may from time to time be
required to be filed or distributed to Holders under any applicable state or
Federal statute or rule or regulation thereunder, and shall file such tax
returns as may from time to time be required under any applicable state or
Federal statute or rule or regulation thereunder. One of the Trustees shall be
designated by resolution of the Trustees to make the filings and give the
notices required by Rule 17g-1 under the Investment Company Act.
(c) In calculating the net asset value of the Trust as
required by the Investment Company Act, (i) the Treasury Securities 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.
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SECTION 8.3 Termination. (a) This Trust Agreement 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 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 distribution 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
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<PAGE> 26
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
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
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direct or permit any action to be taken that would or could cause the Trust, not
to be a "grantor trust" under the Code.
SECTION 8.5 Accountants.
(a) The Trustees shall, in accordance with Section 30 of the
Investment Company Act, file annually with the Commission such information,
documents and reports as investment companies having securities registered on a
national securities exchange are required to file annually pursuant to Section
13(a) of the Securities Exchange Act of 1934, as amended, and the rules and
regulations issued thereunder. The Trustees shall transmit to the Holders, at
least semi-annually, the reports required by Section 30(d) of the Investment
Company Act and the rules and regulations thereunder, including, without
limitation, a balance sheet accompanied by a statement of the aggregate value of
investments on the date of such balance sheet, a list showing the amounts and
values of such investments owned on the date of such balance sheet, and a
statement of income for the period covered by the report. Financial statements
contained in such annual reports shall be accompanied by a certificate of
independent public accounts based upon an audit not less in scope or procedures
than that which independent public accountants would ordinarily make for the
purpose of presenting comprehensive and dependable financial statements and
shall contain such information as the Commission may prescribe. Each such report
shall state that such independent public accountants have verified investments
owned, either by actual examination or by receipt of a certificate from the
Custodian.
(b) The independent public accountants referred to in
subsection (a) above shall be selected at a meeting held within thirty days
before or after the beginning of the fiscal year by the vote, cast in person, of
a majority of the Trustees who are not "interested persons" as defined in the
Investment Company Act and such selection shall be submitted for ratification
at the first meeting of Holders to be held as set forth in Section 8.1 hereof,
and thereafter as required by the Investment Company Act and the rules and
regulations thereunder. The employment of any independent public accountant for
the Trust shall be conditioned upon the right of the Holders by a vote of the
lesser of (i) 67% or more of the 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.
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(c) The foregoing provisions of this Section 8.5 are in
addition to any applicable requirements of the Investment Company Act and the
rules and regulations thereunder.
SECTION 8.6 Nature of Holder's Interest. Each Holder holds at
any given time a beneficial interest in the Trust Estate, but does not have any
right to take title or possession of any portion of the Trust Estate. Each
Holder expressly waives any right he may have under any rule of law, or the
provisions of any statute, or otherwise, to require the Trustees at any time to
account, in any manner other than as expressly provided in this Trust Agreement,
for the Shares, the Contracts, the Treasury Securities or other assets or moneys
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 [_________________________________________________
_______________________________________________] 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.
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SECTION 8.9 Severability. If any one or more of the covenants,
agreements, provisions or terms of this Trust Agreement shall be for any reason
whatsoever held invalid, then such covenants, agreements, provisions or terms
shall be deemed severable from the remaining covenants, agreements, provisions
and terms of this Trust Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Trust Agreement or of the
Certificates, or the rights of the Holders thereof.
SECTION 8.10 Counterparts. This Trust Agreement may be
executed in 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:
Address:
__________________________________
Name:
Address:
__________________________________
Name:
Address:
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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 Second
Automatic Common Exchange Security Trust 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.
$____ AUTOMATIC COMMON EXCHANGE SECURITIES
SECOND AUTOMATIC COMMON EXCHANGE
SECURITY TRUST
CUSIP NO. ___________
NO. 1 ____________ SHARES
THIS CERTIFIES THAT CEDE & CO. IS THE RECORD OWNER OF ____________ $_________
AUTOMATIC COMMON EXCHANGE SECURITIES OF SECOND AUTOMATIC COMMON EXCHANGE
SECURITY TRUST CONSTITUTING FRACTIONAL UNDIVIDED INTERESTS IN SECOND AUTOMATIC
COMMON EXCHANGE SECURITY TRUST, 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, ____________________, _______________________ ______________.
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
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<PAGE> 33
ACCOMPANIED BY A WRITTEN INSTRUMENT OF TRANSFER AND ANY OTHER DOCUMENTS THAT THE
PAYING AGENT MAY REQUIRE FOR TRANSFER, IN FORM SATISFACTORY TO THE PAYING AGENT
AND PAYMENT OF THE FEES AND EXPENSES PROVIDED IN THE TRUST AGREEMENT.
THIS CERTIFICATE IS NOT VALID UNLESS MANUALLY COUNTERSIGNED BY
THE PAYING AGENT.
WITNESS THE FACSIMILE SIGNATURE OF THE MANAGING TRUSTEE.
Second Automatic Common
Exchange Security Trust
DATED: ___________, 1997
By _____________________________________
Managing Trustee
COUNTERSIGNED:
____________________,
as Paying Agent
By _______________________________
Authorized Signature
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<PAGE> 1
Exhibit 2.j
CUSTODIAN AGREEMENT
This CUSTODIAN AGREEMENT dated as of this ___ day of _________
1997 by and between [_______________, a ____________________] (the "Custodian"),
and [_______________, _______________ and _______________] (collectively, the
"Trustees"), not in their individual capacities but solely as Trustees of Second
Automatic Common Exchange Security Trust (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 __________, 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
[_______________] (the "Company"), and to issue 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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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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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 Second
Automatic Common Exchange Security Trust, _____________________________________
_______________________________________________________________________________
and to the Custodian if mailed or delivered to [_______________________________
____________________________ Attention: _____________] 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
____________________________
as Trustee
____________________________
as Trustee
____________________________
as Trustee
[__________________]
By _________________________
Name:
Title:
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<PAGE> 1
Exhibit 2.k.(i)
ADMINISTRATION AGREEMENT
This ADMINISTRATION AGREEMENT, dated as of this ___ day of
________, 1997, by and between [_______________, a ____________________] (the
"Administrator"), and [______________, _______________ and _______________]
(collectively, the "Trustees"), not in their individual capacities but solely as
Trustees of Second Automatic Common Exchange Security Trust (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 ___________, 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
[_______________] (the "Company") and to issue 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 "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 jurisdiction, or an order shall be
made by a court of competent jurisdiction for the appointment of a
receiver, liquidator, or trustee of the Administrator, or of all or
substantially all of its property by reason of the foregoing, or
approving any petition filed 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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certified or registered, return receipt requested, postage prepaid, to the
following addresses of the parties hereto:
The Trust: Second Automatic Common
Exchange Security Trust
Telephone: (___) ___-____
Telecopier: (___) ___-____
The Administrator: [_______________
Telephone: (___) ___-____
Telecopier: (___) ___-____]
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.
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<PAGE> 9
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 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
------------------------------
as Trustee
------------------------------
as Trustee
------------------------------
as Trustee
[ ]
----------------
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
__________, 1997, by and between [_______________, a _________________________]
(the "Paying Agent"), and [_______________, _______________ and _______________]
(collectively, the "Trustees"), not in their individual capacities but solely as
Trustees of Second Automatic Common Exchange Security Trust (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 __________, 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 with each of _____________ (the "Company") and one or more existing
shareholders of the Company (the "Contracts") and to issue 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 [_______________] shall act as the initial Paying Agent.
[_______________] 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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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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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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(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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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, preparation 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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simultaneously therewith. If, within 30 days after notice by the Paying Agent of
termination of this Agreement, no successor Paying Agent shall have been
selected and accepted the duties of the Paying Agent, the Paying Agent may apply
to a court of competent jurisdiction for the appointment of a successor Paying
Agent.
(b) Except as otherwise provided in this paragraph (b), the
respective rights and duties of the Trustees and the Paying Agent under this
Agreement shall cease upon termination of this Agreement. The Trustees'
representations, 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: Second Automatic Common
Exchange Security Trust
Telephone: (___) ___-____
Telecopier: (___) ___-____
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:
Attn:
Telephone: (___) ___-____
Telecopier: (___) ___-____
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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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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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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
------------------------------
as Trustee
------------------------------
as Trustee
------------------------------
as Trustee
------------------------------
By:
---------------------------
Name:
Title:
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Exhibit 2.k.(iii)
PURCHASE AGREEMENT
THIS AGREEMENT is made as of this ___ day of ______, 1997 between
[Selling Shareholder] ("Seller") and Second Automatic Common Exchange Security
Trust (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, no par value (the "Common
Stock"), of ________________________, a ______ corporation (the "Company");
WHEREAS, Purchaser has filed with the Securities and Exchange
commission a registration statement contemplating the offering of up to
_________ Second 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 on the Exchange Date referred to herein;
WHEREAS, Seller has agreed, pursuant to the Collateral Agreement (the
"Collateral Agreement") dated as of ________, 1997, among Purchaser, Seller and
[____________________], 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 ________, 1997 (the "Underwriting Agreement"), among Purchaser, Seller,
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 _________ Securities (the "Firm Securities") and,
at the Underwriters' option, up to _______ 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:
"Acceleration Amount" has the meaning provided in Article VII.
"Acceleration Amount Notice" has the meaning provided in Article VII.
"Acceleration Value" has the meaning provided in Article VII.
"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.
"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 [____________________], administrator for
Purchaser under the Administration Agreement dated as of ________, 1997, or any
successor thereto.
"Aggregate Acceleration Value" has the meaning provided in Article VII.
"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.
"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 NYSE Consolidated
Tape on such date of determination or, if the Common Stock is not listed
<PAGE> 3
for trading on the NYSE 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, as reported by The Nasdaq
National Market or, if the Common Stock is not so reported, 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 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 [____________________], custodian for Purchaser under
the Custodian Agreement dated as of ________, 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; provided, that at the
option of the Seller, the Exchange Rate may be extended to _________, 2001, upon
(i) not less than 30 days' notice of such extension to the Purchaser and to the
Holders of the Securities in the manner contemplated in the Trust Agreement and
(ii) delivery to the Purchaser of the Extension Strips.
"Exchange Rate" has the meaning provided in Section 1.1(c).
"Extension Strips" means the U.S. Treasury obligations pledged by the
Seller at the First Time of Delivery, and at the Second Time of Delivery, as
appropriate, having the terms set forth on Schedule I hereto.
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"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).
"Independent Dealers" has the meaning provided in Article VII.
"Initial Price" has the meaning provided in Section 1.1(c).
"Marketable Securities" has the meaning provided in Section 6.2.
"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
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<PAGE> 5
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 Second Automatic Common Exchange Security Trust dated as of
________, 1997.
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 relating to the Common
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<PAGE> 6
Stock 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 the difference between: (i)
the aggregate proceeds to Purchaser from the sale of the Optional Securities;
and (ii) the aggregate cost to Purchaser, as notified by Purchaser to Seller at
the Second Time of Delivery, of the Additional STRIPS.
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
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<PAGE> 7
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.
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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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, an Acceleration Date shall occur,
and Seller shall become obligated to deliver, immediately upon receipt of the
Acceleration Amount Notice (as defined below), the Acceleration Amount of Common
Stock. The "Acceleration Amount" means the quotient obtained by dividing: (i)
the Aggregate Acceleration Value, as defined below, by (ii) the Current Market
Price on the Acceleration Date. If a Reorganization Event shall have occurred on
or before the Acceleration Date, then in lieu of the Acceleration Amount of
Common Stock, Seller shall deliver cash, Marketable Securities or a combination
thereof having an aggregate value, based on the Closing Price per share of the
Marketable Securities on the Acceleration Date, equal to the Aggregate
Acceleration Value; provided that the percentage of such aggregate value that
may be delivered in the form of Marketable Securities shall not exceed the
percentage of the Transaction Value that would be attributable to Marketable
Securities if the Exchange Date were the Acceleration Date.
The "Aggregate Acceleration Value" means the product obtained by
multiplying: (i) the quotient obtained by dividing (A) the Acceleration Value by
(B) 1,000 by (ii) the sum of the Firm Share Base Amount and the Additional Share
Base Amount (if any); except that, if no quotations for the determination of the
Acceleration Value are obtained as described below, the Aggregate Acceleration
Value shall be (A) the Current Market Price on the Acceleration Date times the
number of shares of Common Stock that would be required to be delivered by
Seller on such date under this Agreement if the Exchange Date were the
Acceleration Date or (B) after a Reorganization Event, the value of the
alternative consideration that would be required to be delivered by Seller on
such date under this Agreement if the Exchange Date were the Acceleration Date.
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<PAGE> 16
The "Acceleration Value" means an amount determined on the basis of
quotations from Independent Dealers, determined as follows. Each quotation will
be for the amount that would be paid to the relevant Independent Dealer in
consideration of an agreement between Purchaser and such Independent Dealer that
would have the effect of preserving Purchaser's right to receive the payments
and deliveries that Purchaser would, but for the occurrence of the Acceleration
Date, have been entitled to receive after the Acceleration Date under Article I
hereof (taking into account any adjustments to the Exchange Rate that may have
been effected on or prior to the Acceleration Date), provided that, for purposes
of determining the payments and deliveries to which Purchaser is entitled under
Article I hereof, the Additional Share Base Amount shall be redefined to be zero
and the Firm Share Base Amount shall be redefined to be 1,000. On or as soon as
reasonably practicable following the Acceleration Date, Purchaser will request
each Independent Dealer to provide its quotation as soon as reasonably
practicable, but in any event within two Business Days. Purchaser shall compute
the Acceleration Value upon receipt of each Independent Dealer's quotation,
provided that if, at the close of business on the fourth Business Day following
the Acceleration Date, Purchaser shall have received quotations from fewer than
four of the Independent Dealers, Purchaser shall compute the Acceleration Value
using the quotations, if any, it shall have received at or prior to such time.
If four quotations are provided, the Acceleration Value will be the arithmetic
mean of the two quotations remaining after disregarding the highest and lowest
quotations. (For this purpose, if more than one quotation has the same highest
or lowest value, then one of such quotations shall be disregarded.) If two or
three quotations are provided, the Acceleration Value will be the arithmetic
mean of such quotations. If one quotation is provided, the Acceleration Value
will be equal to such quotation. If no quotations are provided, the Acceleration
Value will not be determined and the Aggregate Acceleration Value will be
determined as provided above.
"Independent Dealers" means four nationally recognized independent
investment banking firms selected by the Administrator.
As promptly as reasonably practicable after receipt of the quotations
on which the Acceleration Value is based (or, as the case may be, after failure
to receive any such quotations within the time period prescribed above)
Purchaser shall deliver to Seller a notice (the "Acceleration Amount Notice")
specifying the Acceleration Amount of Common Stock (or, after a Reorganization
Event, the amount of cash and marketable Securities) required to be delivered by
Seller. Purchaser and Seller agree that the Aggregate Acceleration Value is a
reasonable pre-estimate of loss and not a penalty. Such amount
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<PAGE> 17
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 in care of the Administrator for Purchaser,
__________________________, _____________________________________ __________,
Telecopy No: (_____) _____-________, attention __________________]; notices to
Seller shall be directed to him at ___________________________________,
Attention: ___________.
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
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<PAGE> 18
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 the same effect as if the
signatures thereto and hereto were upon the same instrument.
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<PAGE> 19
IN WITNESS WHEREOF, the parties have signed this Agreement as of the
date and year first above written.
SELLER:
_________________________________________
_________________________________________
_________________________________________
____________________
_________________________________________
PURCHASER:
[_________________________________, as
trustee,
__________________________________, as
trustee, and
__________________________________, as
trustee,
each as trustee of Second Automatic
Common Exchange Security Trust
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<PAGE> 20
SCHEDULE I
EXTENSION STRIPS
All terms specified are for stripped principal or interest components
of U.S. Treasury debt obligations.
First Time of Delivery
Second Time of Delivery
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<PAGE> 1
Exhibit 2.k.(iv)
COLLATERAL AGREEMENT
Among
[Selling Shareholder],
As Pledgor,
[ ,] As Collateral Agent
and
SECOND AUTOMATIC COMMON EXCHANGE
SECURITY TRUST
Dated as of
___________, 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
SECTION PAGE
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
Exhibit A - Certificate for Substituted Collateral
Exhibit B - Certificate for Additional Collateral
<PAGE> 3
COLLATERAL AGREEMENT
THIS COLLATERAL AGREEMENT (the "Agreement"), dated as of __________,
1997, among [Selling Shareholder] (the "Pledgor"), [_______________, a
_______________,] as collateral agent (the "Collateral Agent") hereunder for the
benefit of Second Automatic Common Exchange Security Trust, 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 ___________, 1997, between the Pledgor and Purchaser, the Pledgor
has agreed to sell and Purchaser has agreed to purchase Common Stock, without
par value (the "Common Stock"), of ____________, a _________ 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) 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 paragraph (b); (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, substitutions, proceeds, collections,
powers and rights being herein collectively called the
<PAGE> 4
"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) At the First Time of Delivery, the Pledgor shall deliver to the
Collateral Agent in pledge hereunder (i) ___________ shares of the Common Stock
and (ii) Extension Strips having the terms set forth in Schedule I to the
Purchase Agreement, in each case registered in the name of the Collateral Agent
or its nominee.
(c) 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 (i) Common Stock
representing the Additional Share Base Amount of Common Stock and (ii) Extension
Strips having the terms set forth in Schedule I to the Purchase Agreement, in
each case registered in the name of the Collateral Agent or its nominee.
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).
"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 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
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<PAGE> 6
consideration then required to be delivered pursuant to Section 6.2 of the
Purchase Agreement.
"Extension Strips" means the U.S. Treasury obligations pledged by the
Seller pursuant to Section 1(b) at the First Time of Delivery, and Section 1(c)
at the Second Time of Delivery, as appropriate, having the terms set forth on
Schedule I to the Purchase Agreement. The Extension Strips (i) shall not secure
the Pledgor's obligations under the Purchase Agreement and (ii) shall not be
applied towards satisfaction of the Collateral Requirement.
"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
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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.
"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,
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(i) any requirement that any sale, assignment or other transfer or enforcement
of such item of Collateral be consented to or approved by any Person, including,
without limitation, the issuer thereof or any other obligor thereon, (ii) any
limitations on the type or status, financial or otherwise, of any purchaser,
pledgee, assignee or transferee of such item of Collateral, (iii) any
requirement of the delivery of any certificate, consent, agreement, opinion of
counsel, notice or any other document of any Person to the issuer of, any other
obligor on or any registrar or transfer agent for, such item of Collateral,
prior to the sale, pledge, assignment or other transfer or enforcement of such
item of Collateral and (iv) any registration or qualification requirement for
such item of Collateral pursuant to any federal or state securities law;
provided that the required delivery of any assignment from the seller, pledgor,
assignor or transferor of such item of Collateral, together with any evidence of
the corporate or other authority of such Person, shall not constitute a
"Transfer Restriction."
"Trustee" or "Trustees" means any trustee or trustees of the Trust
identified on the signature pages hereto, or any successor as such trustee or
trustees.
"UCC" means the Uniform Commercial Code as in effect in the State of
New York.
"U.S. Government Securities" means direct obligations of the United
States of America that mature on a date that is one year or less from the date
such obligations are pledged hereunder, but in any event prior to the Exchange
Date.
3. Representations and Warranties of the Pledgor.
The Pledgor hereby represents and warrants to the Collateral Agent and
the Trust that:
(a) 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 Collateral to the
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Collateral Agent hereunder, the Collateral Agent will obtain a valid, first
priority perfected security interest in, and a first lien upon, such Collateral
subject to no other Lien; none of such Collateral is or shall be pledged by the
Pledgor as collateral for any other purpose.
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.
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(b) Pledge Value Requirement. The Pledgor shall cause the aggregate
Pledge Value of the Collateral to be equal to or greater than the Pledge Value
Requirement at all times, and shall pledge additional Collateral in the manner
described in Section 6(d) as necessary to cause such requirement to be met.
(c) Pledge upon 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 any 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.
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(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 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 an Authorized
Officer 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 (who may be an employee of the
Pledgor) 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
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<PAGE> 12
first lien upon, such Eligible Collateral deposited with the Collateral
Agent in substitution for Prior Collateral.
(3) No such substitution shall be made unless and until the Collateral
Agent shall have determined that the aggregate Pledge Value of all of the
Collateral at the time of such proposed substitution, after giving effect to
the proposed substitution, shall at least equal the Pledge Value
Requirement.
(c) Additional Collateral. The Pledgor may pledge additional Collateral
hereunder at any time. Concurrently with the delivery of any additional Eligible
Collateral, the Pledgor shall deliver (i) a certificate of an Authorized Officer
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
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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 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
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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 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
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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 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
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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) Release of Extension Strips. Upon notice of extension of the
Exchange Date as provided for in the Purchase Agreement, the Collateral Agent
shall release the Extension Strips to the Custodian for the benefit of the
Trust.
[(i) Investment of Cash Collateral. The Collateral Agent shall invest
any cash received by it pursuant to Section 6.2 of the Purchase Agreement in
[Qualified Deposits] [U.S. Treasury Securities maturing on or before the
Exchange Date].]
7. Income and Voting Rights on Collateral.
(a) Unless an Event of Default or failure by the Pledgor to meet any of
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 or 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
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<PAGE> 17
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.
(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.
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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 Section 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 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
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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.
(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
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<PAGE> 20
fully discharged or sufficient funds have been set aside by the
Collateral Agent at the request of the Pledgor for the discharge thereof,
any remaining proceeds shall be released to the Pledgor.
9. The Collateral Agent.
The Collateral Agent accepts its duties and responsibilities hereunder
as agent for the Trust, on and subject to the following terms and conditions:
(a) Performance of Duties. The Collateral Agent undertakes to perform
such duties and only such duties as are expressly set forth herein and, beyond
the exercise of reasonable care in the performance of such duties, no implied
covenants or obligations shall be read into this Collateral Agreement against
the Collateral Agent. No provision hereof shall be construed to relieve the
Collateral Agent from liability for its own grossly negligent action, 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
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<PAGE> 21
its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it.
(6) The Collateral Agent may perform any duties hereunder either
directly or by or through agents or attorneys, and the Collateral Agent
shall not be responsible for any misconduct or negligence on the part of any
agent or attorney appointed with due care by it hereunder. In furtherance
thereof, any subsidiary owned or controlled by the Collateral Agent, or its
successors, as agent for the Collateral Agent, may perform any or all of the
duties of the Collateral Agent relating to the valuation of securities and
other instruments constituting Collateral hereunder.
(7) In no event shall the Collateral Agent be personally liable for any
taxes or other governmental charges imposed upon or in respect of (i) the
collateral or (ii) the income or other distributions thereon.
(8) Unless and until the Collateral Agent shall have received notice
from the Pledgor, or unless and until a Responsible Officer of the
Collateral Agent shall have actual knowledge to the contrary, the Collateral
Agent shall be entitled to deem and treat all Collateral delivered to it
hereunder as Eligible Collateral hereunder, provided that the Collateral
Agent has carried out the duties specified in Section 6 with respect to such
Collateral at the time of delivery thereof.
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.
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<PAGE> 22
(c) Merger. Any corporation or association into which the Collateral
Agent may be converted or merged, or with which it may be consolidated, or to
which it may sell or transfer its agency business and assets as a whole or
substantially as a whole, or any corporation or association resulting from any
such conversion, sale, merger, consolidation or transfer to which it is a party,
shall, subject to the prior written consent of the Trust, be and become a
successor Collateral Agent hereunder and vested with all of the title to the
Collateral and all of the powers, discretions, immunities, privileges and other
matters as was its predecessor without, except as provided above, the execution
or filing of any instrument or any further act, deed or conveyance on the part
of any of the parties hereto, anything herein to the contrary notwithstanding.
(d) Resignation. The Collateral Agent and any successor Collateral
Agent may at any time resign by giving thirty days' written notice by registered
or certified mail to the Pledgor and notice to the Trust in accordance with the
provisions of Section 10(d) hereof. Such resignation shall take effect upon the
appointment of a successor Collateral Agent by the Trust.
(e) Removal. The Collateral Agent may be removed at any time by an
instrument or concurrent instruments in writing delivered to the Collateral
Agent and to the Pledgor and signed by the Trust.
(f) Appointment of Successor. (1) If the Collateral Agent hereunder
shall resign or be removed, or be dissolved or shall be in the course of
dissolution or liquidation or otherwise become incapable of action hereunder, or
if it shall be taken under the control of any public officer or officers or of a
receiver appointed by a court, a successor may be appointed by the Trust by an
instrument or concurrent instruments in writing signed by the Trust or by its
attorneys in fact fully authorized. A copy of such instrument or concurrent
instruments shall be sent by registered mail to the Pledgor.
(2) Every such temporary or permanent successor Collateral Agent
appointed pursuant to the provisions hereof shall be a trust company or bank in
good standing, having a reported capital and surplus of not less than
$100,000,000 and capable of holding the Collateral in the State of New York, if
there be such an institution willing, qualified and able to accept the duties of
the Collateral Agent hereunder upon customary terms.
(g) Acceptance by Successor. Every temporary or permanent successor
Collateral Agent appointed hereunder
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<PAGE> 23
shall execute, acknowledge and deliver to its predecessor and also to the
Pledgor an instrument in writing accepting such appointment hereunder, whereupon
such successor, without any further act, deed or conveyance, shall become fully
vested with all the estates, properties, rights, powers, duties and obligations
of its predecessors. Such predecessor shall, nevertheless, on the written
request of its successor or the Pledgor, execute and deliver an instrument
transferring to such successor all the estates, properties, rights and powers of
such predecessor hereunder. Every predecessor Collateral Agent shall deliver all
Collateral held by it as the Collateral Agent hereunder to its successor. Should
any instrument in writing from the Pledgor be required by a successor Collateral
Agent for more fully and certainly vesting in such successor the estates,
properties, rights, powers, duties and obligations hereby vested or intended to
be vested in the predecessor, any and all such instruments in writing shall, at
the request of the temporary or permanent successor Collateral Agent, be
forthwith executed, acknowledged and delivered by the Pledgor.
10. Miscellaneous.
(a) Benefit of Agreement; Successors and Assigns. Whenever any of the
parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party. All the covenants and agreements herein
contained by or on behalf of the Pledgor and the Collateral Agent shall bind,
and inure to the benefit of, their respective successors and assigns whether so
expressed or not, and shall be enforceable by and inure to the benefit of the
Trust and its successors and assigns.
(b) Separability. To the extent permitted by law, the unenforceability
or invalidity of any provision or provisions of this Collateral Agreement shall
not render any other provision or provisions herein contained unenforceable or
invalid.
(c) Amendments and Waivers. Any term, covenant, agreement or condition
of this Collateral Agreement may be amended or compliance therewith may be
waived (either generally or in a particular instance and either retrospectively
or prospectively) but only by a writing signed by the Collateral Agent, the
Pledgor and the Trust.
(d) Notices. (1) Any notice provided for herein, unless otherwise
specified, shall be in writing (including transmittals by telex or telecopier)
and shall be given to a party at the address set forth opposite such party's
name on the signature pages hereto or at such other address as may
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<PAGE> 24
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 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:
--------------------,
as Collateral Agent
By
----------------------------
Name:
Title:
Address for Notices:
---------------------
Attention:
--------------------
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<PAGE> 26
THE TRUST:
SECOND AUTOMATIC COMMON EXCHANGE
SECURITY TRUST
---------------------------------
---------------,
as Trustee
---------------------------------
---------------,
as Trustee
---------------------------------
---------------,
as Trustee
Address for Notices:
---------------------
Attention:
--------------------
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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 __________,
1997 among the Pledgor, [_______________,] as Collateral Agent, and SECOND
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 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 ____________,
1997, among the Pledgor, [_____________________], as Collateral Agent and SECOND
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 ________, 1997, between
Goldman, Sachs & Co. ("Goldman Sachs") and [____________________] (the "Service
Provider"), in its capacities as custodian, paying agent and collateral agent
for Second Automatic Common Exchange Security Trust (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
___________, 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 15 of the Custodian
Agreement, Section 5.4(b) of the Paying Agent Agreement, Section 7.6 of the
Trust Agreement.
<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 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
[______________________]
By_____________________
Address:
-5-
<PAGE> 6
SCHEDULE I
<TABLE>
<S> <C>
Directors & Officers Insurance $ _______
Fidelity Bond $ _______
Trustees Fees $ ______
Bank of New York
Acceptance Fee $ _______
Annual Administrative Fee $ _______
External Counsel Fees $ ________
Accounting Fees $ ________
Total $________
</TABLE>
-6-
<PAGE> 1
Exhibit 2.k.(vi)
FUND INDEMNITY AGREEMENT
FUND INDEMNITY AGREEMENT, dated as of ___________, 1997,
between Goldman, Sachs & Co. ("Goldman Sachs") and [_______________,
_______________ and _______________] (collectively, the "Trustees"), not in
their individual capacities but solely as trustees of Second Automatic Common
Exchange Security Trust (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
___________, 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
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<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.
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<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
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Address:
85 Broad Street
New York, NY 10004
TRUSTEES
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Address:
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Address:
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Address:
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Exhibit 2.p
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT is entered into as of the __ day of ________
_______ 1997, between ____________________, ____________________ and ___________
_________ (collectively, the "Trustee"), not in their individual capacities,
but solely as trustees of Second Automatic Common Exchange Security Trust, 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 Trustees agree to sell to the Purchaser, and
the Purchaser agrees to purchase from the Trustees, Automatic Common Exchange
Securities, representing undivided beneficial interest in the Trust (the
"Securities") at an aggregate purchase price of [$__________].
1.2 CLOSING. The purchase and sale of the Securities shall take
place at the offices of Sullivan & Cromwell, [125 Broad Street, New York, New
York] at _____ a.m., on ____________________, 1997, or at such other time (the
"Closing Date") and place as the Trustees and the Purchaser mutually agree
upon. At or after the Closing, the Trustees shall deliver to the Purchaser
certificates representing the Securities, registered in the name of the
Purchaser or its nominee. Payment for the Securities 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 Securities 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 Trustees with the Purchaser in reliance upon the Purchaser's representation
to the Trustees, which by the Purchaser's execution of this
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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 of
the Securities, and that the Purchaser has no present intention of selling,
granting any participation in, or otherwise distributing the Securities, 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 Securities.
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 Securities. 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 Trustees in a
transaction not involving a public offering and that under such laws and
applicable regulations such Securities 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 Securities unless and until:
(a) There is then in effect a registration statement under the Act
covering such proposed disposition
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<PAGE> 3
and such disposition is made in accordance with such registration statement;
(b) The Purchaser shall have furnished the Trustees with an opinion of
counsel, reasonably satisfactory to the Trustees, that such disposition will
not require registration of such Securities under the Act;
(c) Notwithstanding the provisions of subsections (a) and (b) above,
no such registration statement or opinion of counsel shall be necessary for a
transfer by the Purchaser to any affiliate of the Purchaser, if the transferee
agrees in writing to be subject to the terms hereof to the same extent as if it
were the original Purchaser hereunder.
2.5 LEGENDS. It is understood that the certificate evidencing the
Securities 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 Second Automatic Common Exchange Security Trust that such registration is
not required."
(b) Any legend required by the laws of any other applicable
jurisdiction.
The Purchaser and the Trustees 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.
2.6 AMENDMENT TO TRUST AGREEMENT; SPLIT OF THE SECURITIES. The
Purchaser consents to (a) the execution and delivery by the Trustees 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
Securities. 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
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<PAGE> 4
Securities to the Underwriters, each 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.
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<PAGE> 5
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TRUSTEES
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as Trustee
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as Trustee
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as Trustee
GOLDMAN, SACHS & CO.
By:
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Title:
Address: 85 Broad Street
New York, NY 10004
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