<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 28, 1998
SECURITIES ACT FILE NO. 333-50597
INVESTMENT COMPANY ACT FILE NO. 811-08761
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. 3 /X/
POST-EFFECTIVE AMENDMENT NO. / /
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 3 /X/
------------------------
ESTEE LAUDER 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, ESQ.
85 BROAD STREET
NEW YORK, NEW YORK 10004
(NAME AND ADDRESS OF AGENT FOR SERVICE)
------------------------
Copies to:
<TABLE>
<S> <C>
ROBERT E. BUCKHOLZ, JR., ESQ. JEAN E. HANSON, ESQ.
SULLIVAN & CROMWELL FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
125 BROAD STREET ONE NEW YORK PLAZA
NEW YORK, NEW YORK 10004 NEW YORK, NEW YORK 10004
</TABLE>
------------------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after
the effective date of this Registration Statement.
If any securities being registered on this form will be offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act of
1933, other than securities offered in connection with a dividend reinvestment
plan, check the following box. / /
/ / This form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act and the Securities Act
registration statement number of the earlier effective registration statement
for the same offering is 333- .
------------------------
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
PROPOSED
MAXIMUM PROPOSED MAXIMUM AMOUNT OF
AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TITLE OF SECURITIES BEING REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(2) FEE
<S> <C> <C> <C> <C>
Trust Automatic Common Exchange
Securities................................ 5,263,030 Securities $63.00 $331,570,890 $97,813(3)
</TABLE>
(1) Estimated pursuant to Rule 457(c) solely for the purpose of calculating the
registration fee on the basis of the average of the high and low prices of
the Class A Common Stock of The Estee Lauder Companies Inc. reported on the
New York Stock Exchange on May 15, 1998.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) Previously paid.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ESTEE LAUDER 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.
i
<PAGE>
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 laws of any such State.
SUBJECT TO COMPLETION, DATED MAY 28, 1998
4,576,548 Shares
Estee Lauder
Automatic Common Exchange Security Trust
$ Trust Automatic Common Exchange Securities (TRACESTM/SM)
(Subject to exchange into Shares of Class A Common Stock of The Estee Lauder
Companies Inc.)
------------------------
Each of the $ Trust Automatic Common Exchange Securities (the
'Securities') of Estee Lauder 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
Class A Common Stock, par value $.01 per share (the 'Class A Common Stock'), of
The Estee Lauder Companies Inc. (the 'Company') on the Exchange Date described
below.
The Trust is a newly organized, finite-term Trust established to acquire
and hold a fixed portfolio of stripped U.S. Treasury securities maturing on a
quarterly basis through June , 2001, and forward purchase contracts (the
'Contracts') with certain existing stockholders of the Company (the 'Sellers')
relating to the Class A Common Stock. The Trust's investment objective is to
provide each registered holder of Securities (each, a 'Holder') with a quarterly
distribution of $ per Security and, on the Exchange Date, a number of
shares of Class A Common Stock per Security equal to the Exchange Rate.
The Exchange Rate will vary in accordance with a formula, depending on the
Average Market Price (as defined herein) of the Class A Common Stock on the
Exchange Date:
-- if the Average Market Price is less than the Appreciation Threshold
Price but equal to or greater than the Initial Price, the Exchange
Rate will be the number of shares of Class A Common Stock having a
value (determined at the Average Market Price) equal to the Initial
Price;
-- if the Average Market Price is equal to or greater than the
Appreciation Threshold Price, the Exchange Rate will be 0. shares
of Class A Common Stock; and
-- if the Average Market Price is less than the Initial Price, the
Exchange Rate will be one share of Class A Common Stock.
For purposes of this formula, the Appreciation Threshold Price is $
and the Initial Price is $ . The formula will be subject to
adjustment in certain events. All Holders otherwise entitled to receive
fractional shares in respect of their aggregate holdings of Securities will
receive cash in lieu thereof.
In lieu of delivering Class A Common Stock, one of the Contracts (the
'Extendible Contract'), covering approximately 41.4% of the shares of Class A
Common Stock subject to all Contracts, entitles the Seller thereunder to elect
to pay cash upon settlement of such Contract in an amount equal to the then
Average Market Price of the number of shares of Class A Common Stock determined
pursuant to the above formula (the 'Cash Settlement Alternative'). Holders of
Securities will receive cash instead of a portion of the Class A Common Stock
otherwise deliverable upon settlement of the Contracts if such Seller elects the
Cash Settlement Alternative.
(Continued on next page)
See 'Risk Factors' beginning on Page 21 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>
Proceeds to
Price to Public Sales Load(1) 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 686,482 Securities at the price to 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
$ , $ and $ , respectively. See
'Underwriting'.
(4) In light of the fact that the proceeds of the sale of the Securities will be
used in part by the Trust to purchase the Contracts from the Sellers, the
Underwriting Agreement provides that the Sellers will pay to the
Underwriters as compensation ('Underwriters' Compensation') $ per
Security. See 'Underwriting'.
----------------------
The Securities 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 the Securities will be
ready for delivery in book entry form only through the facilities of The
Depository Trust Company, on or about June , 1998, against payment therefor in
immediately available funds.
Goldman, Sachs & Co.
Merrill Lynch & Co.
J.P. Morgan & Co.
----------------------
The date of this Prospectus is June , 1998.
<PAGE>
The Exchange Date under each Contract will be June , 2001, except that
the Extendible Contract permits the Seller thereunder to elect (i) to extend the
Exchange Date under such Contract to September , 2001, provided such Seller
delivers to the Trust additional U.S. Treasury securities sufficient to fund the
Trust's quarterly distribution on such date, and (ii) following such an
extension, to accelerate the Exchange Date under such Contract, to a date not
earlier than June , 2001, in connection with the consummation of a Rollover
Offering (as defined herein). If such Seller were to exercise its right to
extend the Exchange Date under the Extendible Contract, the Trustee will
distribute on June , 2001 those assets that are delivered to it under the
Contracts on that date, and it will distribute the assets that are delivered to
it on the extended Exchange Date promptly after it receives those assets.
Following the distribution on June , 2001, the value of the Securities will be
reduced, and there may be a reduction in the liquidity of the Securities during
the period from June , 2001 until the final Exchange Date, which will occur
not later than September , 2001. Holders of Securities will be entitled,
notwithstanding any such extension or acceleration, to receive the quarterly
distribution payable on June , 2001, and to receive an accrued distribution
amount through the final Exchange Date, if later.
Holders of Securities will receive distributions at a higher annual rate
than the current annual dividends paid on the Class A Common Stock. There is no
assurance, however, that this relative relationship will prevail 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 Class A Common Stock because Holders of Securities will realize no equity
appreciation if, on the Exchange Date, the Average Market Price of the Class A
Common Stock is at or below the Appreciation Threshold Price, and less than all
of the appreciation if at that time the Average Market Price is above the
Appreciation Threshold Price. Holders of Securities will realize the entire
decline in equity value if the Average Market Price is less than the price to
public per Security shown below.
The Company is not affiliated with the Trust.
Application has been made to list the Securities on the New York Stock
Exchange under the symbol 'ECT'. Prior to this offering there has been no public
market for the Securities. The last reported sale price of the Class A Common
Stock on the New York Stock Exchange on May 19, 1998, was $63 1/4 per share.
<PAGE>
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 Class A 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 U.S. Treasury securities and the Contracts acquired by the Trust with the
proceeds of the Securities. 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'. SUCH ACTIVITIES MAY
MAINTAIN THE MARKET PRICE OF THE SECURITIES AT A LEVEL ABOVE THAT WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH ACTIVITIES, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE>
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, as amended (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 initially acquire and
hold a fixed portfolio of stripped U.S. Treasury securities maturing on a
quarterly basis through June , 2001, and the Contracts with the Sellers
obligating each Seller, on the Exchange Date, to deliver to the Trust a number
of shares of Class A Common Stock equal to the product of the Exchange Rate
times the initial number of shares subject to such Seller's Contract (or to the
extent the Seller that has the Cash Settlement Alternative elects to deliver
cash in lieu of shares of Class A Common Stock, an amount of cash equal to the
Average Market Price thereof). The Trust's investment objective is to provide
the Holders of Securities 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
acquired by the Trust with the proceeds of the Securities) and, on the Exchange
Date, a number of shares of Class A Common Stock per Security equal to the
Exchange Rate (or to the extent the Seller that has the Cash Settlement
Alternative elects to deliver cash in lieu of shares of Class A Common Stock, an
amount of cash equal to the Average Market Price thereof).
The Exchange Date under each Contract will be June , 2001, except that
the Extendible Contract, which covers approximately 41.4% of the shares of Class
A Common Stock subject to all Contracts, permits the Seller thereunder (i) to
elect to extend the Exchange Date under such Contract to September , 2001,
provided such Seller delivers to the Trust additional U.S. Treasury securities
sufficient to fund the Trust's quarterly distribution on such date, and (ii)
following such an extension, to accelerate the Exchange Date, to a date not
earlier than June , 2001, in connection with the consummation of a Rollover
Offering. The Trustee will distribute on June , 2001 those assets that are
delivered to it on that date under the Contracts other than the Extendible
Contract and under the Extendible Contract if it is not extended. If the Seller
under the Extendible Contract exercises its right to extend the Exchange Date
under such Contract, the Trustee will distribute the assets that are delivered
to it under that Contract on the extended Exchange Date promptly after it
receives those assets. Following the distribution on June , 2001, the value of
the Securities will be reduced, and there may be a reduction in the liquidity of
the Securities during the period from June , 2001 until the final Exchange
Date, which will occur not later than September , 2001. The Holders of record
on the regular quarterly record date will receive the full scheduled quarterly
distribution on June , 2001. If the Exchange Date under the Extendible
Contract occurs after June , 2001, the Holders of record on such later
Exchange Date will receive a distribution, in an amount equal to a portion of
the regular quarterly distribution on the Securities proportionate to the number
of shares covered by the Extendible Contract, accruing to such Exchange Date but
not thereafter.
The Exchange Rate will vary in accordance with a formula, depending on the
Average Market Price of the Class A Common Stock on the Exchange Date:
o if the Average Market Price is less than the Appreciation Threshold Price
but equal to or greater than the Initial Price, the Exchange Rate will be
the number of shares of Class A Common Stock having a value (determined
at the Average Market Price) equal to the Initial Price;
o if the Average Market Price is equal to or greater than the Appreciation
Threshold Price, the Exchange Rate will be 0. shares of Class A Common
Stock; and
3
<PAGE>
o if the Average Market Price is less than the Initial Price, the Exchange
Rate will be one share of Class A Common Stock.
For purposes of this formula, the Appreciation Threshold Price is $ and the
Initial Price is $ . The formula will be subject to adjustment in certain
events.
The Exchange Rate formula provides the Trust with the potential for a
portion of any capital appreciation above the Appreciation Threshold Price on
the Class A Common Stock, but no protection from depreciation of the Class A
Common Stock.
All 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 Class A Common Stock initially subject thereto and $ (4,576,548
shares of Class A Common Stock) in the aggregate (assuming no exercise of the
Underwriters' over-allotment option) and is payable to the Sellers by the Trust
at the closing of the offering of the Securities, out of the proceeds of such
offering. The obligations of the Sellers under the Contracts will be secured by
a pledge of the Class A Common Stock (or at the election of the Sellers, by
substitute collateral consisting of short-term, direct obligations of the U.S.
Government). See 'Investment Objective and Policies--The Contracts--Collateral
Arrangements; Acceleration'.
The balance of the offering proceeds will be used to purchase a fixed
portfolio comprised of stripped U.S. Treasury securities with face amounts and
maturities corresponding to the quarterly distributions payable with respect to
the Securities and the payment dates thereof through June , 2001. The Seller
under the Extendible Contract may extend the Exchange Date under that Contract
to September , 2001 (subject to subsequent acceleration at the election of
such Seller in connection with a Rollover Offering), provided such Seller
delivers to the Trust, on or prior to June , 2001, additional U.S. Treasury
securities sufficent to fund the Trust's quarterly distribution on September ,
2001. If such Seller later accelerates the Exchange Date under such Contract,
such Seller will, pursuant to the Extendible Contract, repurchase such
additional U.S. Treasury securities from the Trust on or prior to the Exchange
Date, as accelerated, at a price equal to the aggregate unpaid distributions on
the Securities accruing to such Exchange Date.
THE OFFERING
The Trust is offering 4,576,548 Securities to the public at a purchase
price of $ per Security (which is equal to the last reported sale
price of the Class A Common Stock on the date of this Prospectus) through
Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and
J.P. Morgan Securities Inc. (the 'Underwriters'). In addition, the Underwriters
have been granted an option to purchase up to 686,482 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
Class A Common Stock. The annual distribution per Security is $ .
Based on the current annual dividend rate of $0.34 per share of Class A Common
Stock, the annual per share distribution per Security is $ greater
than the current annual per share dividend rate on the Class A Common Stock.
Future declarations of dividends on the Class A 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
through June , 2001 will consist solely of the cash received from the U.S.
Treasury securities acquired by the Trust with the proceeds of the Securities.
The Trust will not be entitled to any dividends that may be declared on the
Class A Common Stock. A portion of each year's distributions through June ,
2001 on the Securities will constitute a return of capital for U.S. federal
income tax purposes. See 'Investment Objectives and Policies--Tax Treatment of
Distributions'.
4
<PAGE>
Holders will receive distributions at a higher annual rate than the current
annual dividends paid on the Class A Common Stock. There is no assurance,
however, that this relative relationship will prevail 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
Class A Common Stock because Holders will realize no equity appreciation if, on
the Exchange Date, the Average Market Price of the Class A Common Stock is at or
below the Appreciation Threshold Price (which represents an appreciation of
% of the Initial Price). Moreover, because a Holder will only receive 0.
shares of Class A Common Stock per Security (or, in the case of a cash
settlement, the Average Market Price thereof) if the Average Market Price
exceeds the Appreciation Threshold Price, Holders will only be entitled to
receive upon exchange % of any appreciation of the value of the Class A
Common Stock in excess of the Appreciation Threshold Price. Holders of
Securities will realize the entire decline in equity value if the Average Market
Price on the Exchange Date is less than the price to public per Security shown
on the cover page hereof.
DISTRIBUTIONS. Holders are entitled to receive distributions at the rate
per Security of $ per annum or $ per quarter, payable
quarterly on each March , June , September and December or, if any such
date is not a business day, on the next succeeding business day, to Holders of
record as of each February , May , August and November , respectively.
The first distribution will be payable on September , 1998 to Holders of
record as of August , 1998. See 'Investment Objective and Policies--Tax
Treatment of Distributions'.
MANDATORY EXCHANGE. On the Exchange Date, each outstanding Security will
be exchanged automatically for between 0. shares and one share of Class A
Common Stock, subject to adjustment in the event of certain dividends or
distributions, subdivisions, splits, combinations, issuances of certain rights
or warrants or distributions of certain assets with respect to the Class A
Common Stock. In lieu of delivering Class A Common Stock, the Extendible
Contract, which covers approximately 41.4% of the shares of Class A Common Stock
subject to all Contracts, entitles the Seller thereunder to elect to pay cash
upon settlement of such Contract in an amount equal to the then Average Market
Price of the number of shares of Class A Common Stock determined pursuant to the
above formula (the 'Cash Settlement Alternative') and to elect to extend the
Exchange Date to September , 2001 (subject to acceleration to a date not
earlier than June , 2001 in connection with the consummation of a Rollover
Offering). Holders of Securities will receive cash instead of a portion of the
Class A Common Stock otherwise deliverable upon settlement of the Contracts if
such Seller elects the Cash Settlement Alternative.
The 'Average Market Price' per share of Class A Common Stock on any date
means the average Closing Price per share of Class A Common Stock for the 20
Trading Days immediately prior to, but not including, such date, provided that
for purposes of determining the payment required upon cash settlement of the
Extendible Contract in connection with a Rollover Offering, 'Average Market
Price' means the Closing Price per share of Class A Common Stock on the Trading
Day immediately preceding the date that the Rollover Offering is priced (the
'Pricing Date') or, if the Rollover Offering is priced after 4:00 P.M., New York
City time, on the Pricing Date, the Closing Price per share on the Pricing Date.
'Rollover Offering' means a reoffering or refinancing of up to % of the
Securities effected not earlier than June , 2001 by means of a completed
public offering or offerings (which may include one or more exchange offers) by
or on behalf of the Seller under the Extendible Contract. The Trustees will
notify the Holders of (i) any election of the Cash Settlement Alternative, and
whether it is intended to be in connection with a Rollover Offering, not less
than 30 nor more than 90 days prior to the Exchange Date, and (ii) any
acceleration of the Exchange Date in connection with a Rollover Offering, not
later than the Exchange Date.
In addition, in the event of a merger of the Company with 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 Class A Common Stock.
Further, the occurrence of certain defaults by the Sellers under the Contracts
or the collateral arrangements would
5
<PAGE>
cause the acceleration of the Contracts and the exchange of each Security for an
amount of shares of Class A Common Stock (or Marketable Securities), cash, or a
combination thereof, in respect of the shares of Class A 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 Class A Common Stock prior to
receipt of shares of Class A Common Stock by the Holders as a result of the
exchange of the Securities for the Class A Common Stock on the Exchange Date or
upon earlier settlement. See 'Investment Objective and Policies--The Company'
and 'Description of the Securities'.
THE COMPANY
The Estee Lauder Companies Inc. is one of the world's leading manufacturers
and marketers of quality skin care, makeup, fragrance and hair care products.
The Company's products are sold in over 100 countries and territories under the
following well-recognized brand names: Estee Lauder, Clinique, Aramis,
Prescriptives, Origins, MoAoC, Bobbi Brown essentials, jane and Aveda. The
Company is also the global licensee for fragrances and cosmetics for the Tommy
Hilfiger, Donna Karan New York and DKNY brands.
Reference is made to the accompanying prospectus of the Company (pages A-1
through A-23 hereof) which describes the Company and the shares of Class A
Common Stock of the Company deliverable to the Holders upon the exchange of the
Securities on the Exchange Date. The Company is not affiliated with the Trust
and will not receive any of the proceeds from the sale of the Securities. The
Company prospectus relates to an aggregate of 4,576,548 shares of Class A Common
Stock (plus an additional 686,482 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 acquired by the Trust with the proceeds from the sale of the
Securities to the Holders, 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 acquired by the Trust with the
proceeds from the sale of the Securities to the Holders 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 such U.S. Treasury securities will not be included in income,
however, but rather will reduce the aggregate tax basis of the Securities. A
Holder will have taxable gain or loss upon receipt by the Trust of cash in lieu
of Class A Common Stock. Holders should also be aware that there are alternative
characterizations of the assets of the Trust and the Securities which could
require Holders to include more interest in income than they would include in
income under the analysis set out above. See 'Certain Federal Income Tax
Considerations'.
MANAGEMENT AND ADMINISTRATION OF THE TRUST
The Trust will be internally managed and will not have an investment
adviser. The administration of the Trust will be overseen by three Trustees. The
day-to-day administration of the Trust will be carried out by The Chase
Manhattan Bank (or its successor) as trust administrator (the 'Administrator').
The Chase Manhattan Bank (or its successor) will also act as custodian (the
'Custodian') for the Trust's assets and ChaseMellon Shareholder Services, L.L.C.
(or its successor) will act as paying agent (the 'Paying Agent'), registrar and
transfer agent with respect to the Securities. Except as aforesaid, The Chase
Manhattan Bank and ChaseMellon Shareholder Services, L.L.C. have no other
affiliation with, and are not engaged in any other transaction with, the Trust.
See 'Management and Administration of the Trust'.
6
<PAGE>
LIFE OF THE TRUST
The Trust will terminate automatically on or shortly after the final
Exchange Date. Promptly after the final Exchange Date, the shares of Class A
Common Stock and any cash to be exchanged for the Securities and other remaining
Trust assets, if any, will be distributed pro rata to the 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 acquired by the Trust with the
proceeds from the sale of the Securities to Holders 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 Class A 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 Class A Common Stock. There is no assurance,
however, that this relative relationship will prevail 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
Class A Common Stock because Holders will realize no equity appreciation if, on
the Exchange Date, the Average Market Price of the Class A Common Stock is at or
below the Appreciation Threshold Price (which represents an appreciation of
% of the Initial Price). Moreover, because a Holder will only receive 0.
shares of Class A Common Stock per Security (or to the extent that the Seller
that has the Cash Settlement Alternative elects to deliver cash in lieu of
shares of Class A Common Stock, the Average Market Price thereof) if the Average
Market Price exceeds the Appreciation Threshold Price, Holders will only be
entitled to receive upon exchange % of any appreciation of the value of the
Class A Common Stock in excess of the Appreciation Threshold Price. Holders of
Securities will realize the entire decline in equity value if the Average Market
Price on the Exchange Date is less than the price to public per Security shown
on the cover page hereof.
The Trust is classified as a 'non-diversified' investment company under the
Investment Company Act. Consequently, the Trust is not limited by the Investment
Company Act in the proportion of its assets that may be invested in the
securities of a single issuer. Since the only assets held by the Trust will be
the U.S. Treasury securities and the Contracts, the Trust will be subject to
greater risk than would be the case for an investment company with diversified
investments. See 'Investment Objective and Policies' and 'Risk
Factors--Non-Diversified Status'.
The trading prices of the Securities in the secondary market will be
directly affected by the trading prices of the Class A Common Stock in the
secondary market. Trading prices of Class A 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 Class A 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 Class A Common Stock pursuant to the Contracts.
7
<PAGE>
LISTING
Application has been made to list the Securities on the New York Stock
Exchange (the 'NYSE') under the symbol 'ECT'.
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 the Trust's 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 (after reimbursement by the Sellers)................ %
---
Total Annual Expenses (after reimbursement by the Sellers)*... %
---
---
</TABLE>
- ------------------
* Absent the reimbursement, the Trust 'Other Expenses' and 'Total Annual
Expenses' would be equal to approximately % of the Trust's average net
assets.
SEC regulations also require that closed-end investment companies present
an illustration of cumulative expenses (both direct and indirect) that an
investor would bear. The example is required to factor in the applicable Sales
Load and to assume, in addition to a 5% annual return, the reinvestment of all
distributions at net asset value. INVESTORS SHOULD NOTE THAT THE ASSUMPTION OF A
5% ANNUAL RETURN DOES NOT ACCURATELY REFLECT THE FINANCIAL TERMS OF THE TRUST.
SEE 'INVESTMENT OBJECTIVE AND POLICIES--GENERAL'. ADDITIONALLY, THE TRUST DOES
NOT PERMIT THE REINVESTMENT OF DISTRIBUTIONS.
<TABLE>
<CAPTION>
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>
8
<PAGE>
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 April 21, 1998 pursuant to a trust agreement dated as of such date and
amended and restated as of June , 1998 (the 'Amended and Restated Trust
Agreement'). The address of the Trust is 85 Broad Street, New York, New York
10004 (telephone no. (212) 902-1000).
USE OF PROCEEDS
The net proceeds of this offering will be used immediately upon the closing
of this offering (a) to purchase a fixed portfolio comprised of stripped U.S.
Treasury securities with face amounts and maturities corresponding to the
quarterly distributions payable with respect to the Securities and the payment
dates thereof through June , 2001, and (b) to pay the purchase price under the
Contracts to the Sellers.
INVESTMENT OBJECTIVE AND POLICIES
GENERAL
With the proceeds of the Securities, the Trust will acquire and hold a
fixed portfolio of stripped U.S. Treasury securities maturing on a quarterly
basis through June , 2001 and the Contracts relating to the Class A Common
Stock of the Company. The Trust's investment objective is to provide each Holder
with a quarterly cash distribution of $ per Security (which amount equals
the pro rata portion of the fixed quarterly distributions from the proceeds of
the maturing U.S. Treasury securities held by the Trust) and, on the Exchange
Date, a number of shares of Class A Common Stock per Security equal to the
Exchange Rate (or if the Seller that has the Cash Settlement Alternative elects
to deliver cash in lieu of shares of Class A Common Stock, an amount in cash
equal to the Average Market Price thereof).
The Exchange Date under each Contract will be June , 2001, except that
the Extendible Contract, which covers approximately 41.4% of the shares of Class
A Common Stock subject to all Contracts, permits the Seller thereunder to elect
(i) to extend the Exchange Date under such Contract to September , 2001,
provided such Seller delivers to the Trust additional U.S. Treasury securities
sufficient to fund the Trust's quarterly distribution on such date, and (ii)
following such an extension, to accelerate the Exchange Date under such
Contract, to a date not earlier than June , 2001, in connection with the
consummation of a Rollover Offering. The Trustee will distribute on June ,
2001 those assets that are delivered to it on that date under the Contracts
other than the Extendible Contract and under the Extendible Contract if it is
not extended. If the Seller under the Extendible Contract exercises its right to
extend the Exchange Date under such Contract, the Trustee will distribute the
assets that are delivered to it under that Contract on the extended Exchange
Date promptly after it receives those assets. Following the distribution on June
, 2001, the value of the Securities will be reduced, and there may be a
reduction in the liquidity of the Securities during the period from June ,
2001 until the final Exchange Date, which will occur not later than September
, 2001. The Holders of record on the regular quarterly record date will
receive the full scheduled quarterly distribution on June , 2001. If the
Exchange Date under the Extendible Contract occurs after June , 2001, the
Holders of record on such later Exchange Date will receive distributions
accruing to such Exchange Date, in an amount equal to the regular quarterly
distribution on the Securities multiplied by a fraction, the numerator of which
is the number of shares covered by the Extendible Contract and the denominator
of which is the total number of shares covered by all the Contracts. No
distributions will accrue after the final Exchange Date.
9
<PAGE>
The Exchange Rate will vary in accordance with a formula, depending on the
Average Market Price of the Class A Common Stock on the Exchange Date:
o if the Average Market Price is less than the Appreciation Threshold Price
but equal to or greater than the Initial Price, the Exchange Rate will be
the number of shares of Class A Common Stock having a value (determined
at the Average Market Price) equal to the Initial Price;
o if the Average Market Price is equal to or greater than the Appreciation
Threshold Price, the Exchange Rate will be 0. shares of Class A Common
Stock; and
o if the Average Market Price is less than the Initial Price, the Exchange
Rate will be one share of Class A Common Stock.
The formula will be subject to adjustment in certain events. See '--The
Contracts--Dilution Adjustments'. For purposes of the first part of the formula,
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). All 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 'Average Market Price' per share of Class A Common Stock on any date
means the average Closing Price (as defined below) of a share of Class A Common
Stock on the 20 Trading Days (as defined below) immediately prior to but not
including such date, provided that for purposes of determining the payment
required upon cash settlement of the Extendible Contract in connection with a
Rollover Offering, 'Average Market Price' means the Closing Price per share of
Class A Common Stock on the Trading Day immediately preceding the date that the
Rollover Offering is priced (the 'Pricing Date') or, if the Rollover Offering is
priced after 4:00 P.M., New York City time, on the Pricing Date, the Closing
Price per share on the Pricing Date.
'Rollover Offering' means a reoffering or refinancing of up to % of the
Securities effected not earlier than June , 2001, by means of a completed
public offering or offerings (which may include one or more exchange offers) by
or on behalf of the Seller under the Extendible Contract. The Trustees will
notify the Holders of (i) any election of the Cash Settlement Alternative, and
whether it is intended to be in connection with a Rollover Offering, not less
than 30 nor more than 90 days prior to the Exchange Date, and (ii) any
acceleration of the Exchange Date in connection with a Rollover Offering, not
later than the Exchange Date.
The 'Closing Price' of the Class A 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 Class A Common Stock as
reported on the NYSE Consolidated Tape on such date of determination or, if the
Class A 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 Class A Common Stock is so listed, or if the
Class A 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 Class
A Common Stock is not so reported, the last quoted bid price for the Class A
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 Class A 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 Class A 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 70% 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
10
<PAGE>
of the Trust and that the U.S. Treasury securities acquired by the Trust with
the proceeds of the Securities 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 Class A Common Stock (or cash or Marketable Securities
received in lieu thereof) that will be received by Holders in respect of the
Securities on the Exchange Date may be more or less than the amount paid for the
Securities offered hereby.
For illustrative purposes only, the following chart shows the number of
shares of Class A Common Stock that a Holder would receive for each Security at
various Average Market Prices. The chart assumes that there would be no
adjustments to the number of shares of Class A 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
Average Market Price on the Exchange Date will be within the range set forth
below. Given the Initial Price of $ per Security and the Appreciation
Threshold Price of $ , a Holder would receive in connection with the
exchange of Securities on the Exchange Date the following number of shares of
Class A Common Stock:
<TABLE>
<CAPTION>
NUMBER OF SHARES
AVERAGE MARKET PRICE OF CLASS A
OF CLASS A COMMON STOCK COMMON STOCK
- --------------------------------------------------------- ----------------
<S> <C>
</TABLE>
TAX TREATMENT OF DISTRIBUTIONS
The following table sets forth information regarding the distributions to
be received on the U.S. Treasury securities to be acquired by the Trust with a
portion of the proceeds of the Securities (assuming no exercise of the
Underwriters' over-allotment option), the portion of each year's distributions
through June , 2001 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. Treasury securities with respect to a Holder who
acquires its Securities at the issue price from an Underwriter pursuant to the
original offering. See 'Certain Federal Income Tax Considerations--Recognition
of Original Issue Discount on the U.S. Treasury Securities'. Holders should not
be required to include any amounts in income upon the Trust's receipt of
additional U.S. Treasury securities as a result of the extension of the Exchange
Date and should not be required to include any original issue discount in income
in respect of such U.S. Treasury securities. See 'Certain Federal Income Tax
Considerations--Extension of the Exchange Date'.
<TABLE>
<CAPTION>
ANNUAL GROSS
ANNUAL GROSS DISTRIBUTIONS FROM ANNUAL RETURN OF ANNUAL INCLUSION OF
DISTRIBUTIONS FROM U.S. TREASURIES CAPITAL PER ORIGINAL ISSUE DISCOUNT
YEAR U.S. TREASURIES PER SECURITY SECURITY IN INCOME PER SECURITY
- ---------------------------- ------------------ ------------------ ---------------- -----------------------
<S> <C> <C> <C> <C>
1998........................
1999........................
2000........................
2001........................
</TABLE>
The annual distribution of $ per Security is payable quarterly on each
March , June , September and December , commencing September , 1998.
Quarterly distributions on the Securities through June , 2001 will consist
solely of the cash received from the U.S. Treasury
11
<PAGE>
securities acquired by the Trust with the proceeds of the Securities. The Trust
will not be entitled to any dividends that may be declared on the Class A Common
Stock. See 'Management and Administration of the Trust--Distributions'.
ENHANCED YIELD; LESS EQUITY APPRECIATION THAN CLASS A COMMON STOCK; NO
DEPRECIATION PROTECTION
Holders will receive distributions at a higher annual rate than the current
annual dividends paid on the Class A Common Stock. However, there is no
assurance that this relative relationship will prevail 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
Class A Common Stock because Holders will realize no equity appreciation if, on
the Exchange Date, the Average Market Price of the Class A Common Stock is at or
below the Appreciation Threshold Price (which represents an appreciation of
% of the Initial Price). Moreover, because Holders will only receive 0.
shares of Class A Common Stock per Security (or, in the case of cash settlement
of the Extendible Contract, the Average Market Price in respect of a portion
thereof) if the Average 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 Class A Common Stock in excess of the
Appreciation Threshold Price. Holders of Securities will realize the entire
decline in value if the Average Market Price on the Exchange Date is less than
the price to public per Security shown on the cover page hereof.
THE COMPANY
The Estee Lauder Companies Inc. is one of the world's leading manufacturers
and marketers of quality skin care, makeup, fragrance and hair care products.
The Company's products are sold in over 100 countries and territories under the
following well-recognized brand names: Estee Lauder, Clinique, Aramis,
Prescriptives, Origins, MoAoC, Bobbi Brown essentials, jane and Aveda. The
Company is also the global licensee for fragrances and cosmetics for the Tommy
Hilfiger, Donna Karan New York and DKNY brands.
The Class A Common Stock is traded on the NYSE. The following table sets
forth, for the fiscal quarters indicated, the reported high and low sales prices
of the Class A Common Stock on the NYSE Consolidated Tape and the cash dividends
per share of Class A Common Stock declared in respect of such quarters. As of
May 15, 1998, there were approximately 2,500 record holders of Class A Common
Stock and 12 record holders of the Company's Class B Common Stock, par value
$.01 per share (the 'Class B Company Stock').
<TABLE>
<CAPTION>
MARKET PRICE
OF
CLASS A
COMMON STOCK
-------------- CASH
HIGH LOW DIVIDENDS
---- --- ---------
<S> <C> <C> <C>
FISCAL 1997
First Quarter................................................................. $47 1/2 $343/4 $.085
Second Quarter................................................................ 53 1/2 423/8 .085
Third Quarter................................................................. 52 1/4 447/8 .085
Fourth Quarter................................................................ 52 1/2 393/8 .085
FISCAL 1998
First Quarter................................................................. $50 15/16 $443/4 $.085
Second Quarter................................................................ 56 3/8 39 .085
Third Quarter................................................................. 69 481/2 .085
Fourth Quarter (through May 19, 1998)......................................... 73 15/16 621/8 .085(1)
</TABLE>
- ------------------
(1) The dividend with respect to the Class A Common Stock and Class B Common
Stock is payable July 2, 1998 to holders of record on June 15, 1998.
12
<PAGE>
The Company expects to continue the payment of cash dividends in the
future, but there can be no assurance that such payment of cash dividends will
continue.
Holders will not be entitled to rights with respect to the Class A Common
Stock (including, without limitation, voting rights and rights to receive
dividends or other distributions in respect thereof) until receipt of shares of
Class A Common Stock by the Holders as a result of the exchange of the
Securities for the Class A Common Stock on the Exchange Date.
Reference is made to the accompanying prospectus of the Company, dated June
, 1998 (pages A-1 through A-23 hereof) (the 'Company Prospectus'), which
describes the Company and the shares of Class A Common Stock deliverable to the
Holders upon mandatory exchange of the Securities on the Exchange Date. The
Company is not affiliated with the Trust and will not receive any of the
proceeds from the sale of the Securities. The Company Prospectus relates to an
aggregate of 4,576,548 shares of Class A Common Stock (plus an additional
686,482 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 deliver to the Trust on the Exchange Date a number of shares of
Class A Common Stock equal to the product of the Exchange Rate times the initial
number of shares of Class A Common Stock subject to such Contract. The aggregate
initial number of shares of Class A 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). The Extendible
Contract, which covers approximately 41.4% of the shares of Class A Common Stock
subject to all Contracts, 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 then Average Market Price of the number of shares of
Class A Common Stock deliverable pursuant to such Contract (the 'Cash Settlement
Alternative'). If the Seller under the Extendible Contract elects to deliver
cash in lieu of shares of Class A Common Stock, such Seller would be required to
deliver cash in respect of all shares deliverable pursuant to the Extendible
Contract. The Trustees will notify the Holders of (i) any election of the Cash
Settlement Alternative, and whether it is intended to be in connection with a
Rollover Offering (which would affect the computation of the Average Market
Price in connection with such settlement, as described under '--General' above),
not less than 30 nor more than 90 days prior to the Exchange Date, and (ii) any
acceleration of the Exchange Date in connection with a Rollover Offering, not
later than the Exchange Date. The cash payment received by the Trust upon such
settlement in connection with a Rollover Offering will be distributed to Holders
within five business days of the Exchange Date. If notice of a cash settlement
in connection with a Rollover Offering is given but the Rollover Offering is not
completed, the Extendible Contract will settle by cash payment on June , 2001
(or September , 2001, if the Exchange Date was previously extended) and the
Average Market Price will be computed on the basis of the average Closing Price
for 20 Trading Days.
The Exchange Date under the Extendible Contract may be extended to
September , 2001 (subject to subsequent acceleration at the election of the
Seller thereunder in connection with a Rollover Offering), provided such Seller
delivers to the Trust, on or prior to June , 2001, additional U.S. Treasury
securities sufficient to fund the Trust's quarterly distribution on September
, 2001. If such Seller later accelerates the Exchange Date under such
Contract, such Seller will, pursuant to the Extendible Contract, repurchase such
additional U.S. Treasury securities from the Trust on or prior to the Exchange
Date as accelerated, at a price equal to the aggregate unpaid distributions on
the Securities accruing to such Exchange Date. The Trustees will notify the
Holders of (i) any extension of the Exchange Date to September , 2001, not
less than 30 nor more than 90 days prior to June , 2001 and (ii) any
subsequent acceleration in connection with a Rollover Offering, not later than
the Exchange Date, as so extended.
13
<PAGE>
Each Contract also provides that if the Seller thereunder delivers
Securities to the Trust on or prior to the Exchange Date, its obligation under
the Contract will be proportionately reduced. Such delivery of Securities in
partial or complete satisfaction of a Seller's obligations will affect the
relative amounts of Class A Common Stock and cash receivable by Holders of
Securities upon settlement of the Contracts.
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 Class A
Common Stock, current interest rates, the term of the Contracts, current market
volatility generally, the collateral security pledged by the Sellers, the value
of other similar instruments and the costs and anticipated proceeds of the
offering of the Securities. All matters relating to the administration of the
Contracts will be the responsibility of either the Administrator or the
Custodian.
DILUTION ADJUSTMENTS. The Exchange Rate is subject to adjustment if the
Company (i) pays a stock dividend or makes a distribution with respect to the
Class A Common Stock in shares of such stock, (ii) subdivides or splits its
outstanding shares of Class A Common Stock, (iii) combines its outstanding
shares of Class A Common Stock into a smaller number of shares, or (iv) issues
by reclassification of its shares of Class A Common Stock any shares of other
common stock of the Company. In any such event, the Exchange Rate shall be
adjusted as follows: for each share of Class A Common Stock that would have been
deliverable upon exchange prior to the adjustment, the Holder will receive the
number of shares of Class A 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 Class A Common Stock immediately prior to such event would
be entitled solely by reason of such event to hold immediately after such event.
In addition, if the Company issues rights or warrants to all holders of
Class A Common Stock entitling them to subscribe for or purchase shares of Class
A Common Stock at a price per share less than the Then-Current Market Price of
the Class A Common Stock (as defined below) (other than rights to purchase Class
A Common Stock pursuant to a plan for the reinvestment of dividends or
interest), then the Exchange Rate shall be adjusted pursuant to the following
formula:
A = ER X OS + AS
-------
OS + PS
where
ER = the Exchange Rate prior to the adjustment;
OS = the number of shares of Class A 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;
AS = the number of additional shares offered for subscription or purchase
pursuant to such rights or warrants; and
PS = 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 Class A Common Stock actually delivered.
The 'Then-Current Market Price' of the Class A Common Stock means the
average Closing Price per share of Class A Common Stock for a Calculation Period
of five 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 following a record date, as described below, immediately prior to
the
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earlier of the time such adjustment is effected and the related 'ex-date' on
which the shares of Class A 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 Class A
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 Class A Common Stock is determined for any
of such Trading Days, the most recently available Closing Price for the Class A
Common Stock prior to such five Trading Days shall be the Then-Current Market
Price. 'Calculation Period' means any period of Trading Days for which an
average security price must be determined pursuant to the Contracts.
In addition, if the Company pays a dividend or makes a distribution to all
holders of Class A Common Stock, in either case, of evidences of its
indebtedness or other non-cash assets (excluding any stock dividends or
distributions in shares of Class A Common Stock) or issues to all holders of
Class A Common Stock rights or warrants to subscribe for or purchase any of its
securities (other than rights or warrants referred to in the second paragraph of
this subsection), then the Exchange Rate shall be adjusted pursuant to the
following formula:
A = ER x T
-----
T - V
where
ER = the Exchange Rate prior to adjustment;
T = the Then-Current Market Price per share of Class A Common Stock; and
V = 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 Class A Common Stock.
In addition, if the Company distributes cash (other than an Excluded
Distribution), by dividend or otherwise, to all holders of Class A Common Stock
or makes an Excess Purchase Payment, then the Exchange Rate shall be adjusted
pursuant to the following formula:
A = ER x T
-----
T - D
where
ER = the Exchange Rate prior to adjustment;
T = the Then-Current Market Price on the record date in respect of such
distribution; and
D = the amount of such distribution applicable to one share of Class A
Common Stock that would not be a Permitted Dividend (or in the case of
an Excess Purchase Payment, the aggregate amount of such Excess
Purchase Payment divided by the number of outstanding shares of Class A
Common Stock on such record date).
For purposes of these adjustments,
(a) the term 'Excluded Distribution' means any Permitted Dividend, any cash
distributed in consideration of fractional shares of Class A Common
Stock and any cash distributed in a Reorganization Event;
(b) the term 'Permitted Dividend' means any quarterly cash dividend in
respect of the Class A Common Stock, other than a quarterly cash
dividend that exceeds the immediately preceding
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<PAGE>
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
Class A Common Stock in excess of 12.5%; and
(c) 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 Class A
Common Stock acquired in a tender offer or exchange offer by the
Company over (ii) the Then-Current Market Price per share of Class A
Common Stock.
If any adjustment in the Exchange Rate is required to be calculated
pursuant to the formulas 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 Class A
Common Stock entitled to receive such dividend, distribution or issuance or, if
the announcement of any such dividend, distribution or issuance is after such
record date, at the time such dividend, distribution or issuance shall be
announced by the Company; (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 Class A 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 canceled 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. If after an
announcement of a share repurchase, the Company reduces the repurchase price or
repurchases fewer shares than announced, upon completion of such share
repurchase, the Exchange Rate shall be further adjusted to equal the Exchange
Rate that would have been in effect had the adjustment for such repurchase been
based on the actual price and amount repurchased. 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 Reorganization Event, the Exchange Rate will be adjusted
such that, on the Exchange Date, each Holder will receive for each Security cash
in an amount equal to:
(i) if the Transaction Value (as defined below) is less than the
Appreciation Threshold Price but equal to or greater than the Initial Price, the
Initial Price,
(ii) if the Transaction Value is greater than or equal to the Appreciation
Threshold Price, 0. multiplied by the Transaction Value, and
(iii) if the Transaction Value is less than the Initial Price, the
Transaction Value;
provided, however, that if the consideration received by holders of Class A
Common Stock in such Reorganization Event does not include Marketable
Securities, then (a) the Sellers' delivery obligations under the Contracts will
be accelerated, and the Transaction Value will be deliverable promptly upon
consummation of the Reorganization Event; (b) the Custodian will liquidate the
U.S. Treasury securities
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<PAGE>
acquired by the Trust with the proceeds of the Securities and then held by the
Trust; and (c) such Transaction Value and the proceeds of such liquidation will
be distributed to the Holders.
Notwithstanding the foregoing, to the extent that any Marketable Securities
are received by holders of Class A Common Stock in such Reorganization Event,
then in lieu of delivering cash as provided above, the Sellers may at their
option deliver a proportional amount of such Marketable Securities on the
Exchange Date. If the Sellers elect to deliver such Marketable Securities on the
Exchange Date, Holders will be responsible for the payment of any and all
brokerage and other transaction costs upon the sale of such securities.
'Reorganization Event' means (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 Class A Common Stock outstanding immediately prior to the merger or
consolidation is not exchanged for cash, securities or other property of the
Company or another corporation), (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.
'Transaction Value' means (i) for any cash received in any such
Reorganization Event, the amount of cash received per share of Class A 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 Class A Common Stock as determined by a nationally recognized independent
investment banking firm retained for this purpose by the Administrator and (iii)
for any Marketable Securities received in any such Reorganization Event, an
amount equal to the average Closing Price per share of such securities on the 20
Trading Days immediately prior to the Exchange Date multiplied by the number of
such securities received for each share of Class A 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 such
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 such Marketable Securities prior to such 20 Trading Days. The
number of shares of such 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 such Marketable Securities between the time of the
Reorganization Event and the Exchange Date.
For purposes of determining the Transaction Value, the terms 'Trading Day'
and 'Closing Price' will have the same meanings, as applied to such Marketable
Securities, as these terms have as applied to the Class A Common Stock for
purposes of determining the Average Market Price.
'Marketable Securities' means any common equity securities (whether voting
or non-voting) 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 Class A Common Stock (other than through the
issuance of rights or warrants described above) for cash or in connection with
acquisitions.
COLLATERAL ARRANGEMENTS; ACCELERATION. Each Seller's obligations under the
Contract between such Seller and the Trust initially will be secured by a
security interest in the maximum number of shares of Class A Common Stock
subject to such Contract (subject to adjustment in accordance with the dilution
adjustment provisions of such Contract, described above), pursuant to a
Collateral Agreement between each Seller and The Chase Manhattan Bank, as
collateral agent (the 'Collateral
17
<PAGE>
Agent'). Unless a Seller is in default in its obligations under its Collateral
Agreement, such Seller will be permitted to substitute for the pledged shares of
Class A 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 Class A Common Stock at
the time of each valuation times the number of shares of Class A 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 Class A 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 June , 2001. 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 such Marketable Securities required to be pledged
shall be subject to adjustment if any event requiring a dilution adjustment
under the Contracts shall occur. The Sellers will be permitted to substitute
U.S. Government obligations for Marketable Securities pledged at the time of or
after any Reorganization Event. Any U.S. Government obligations so substituted
will be required to have an aggregate market value at the time of substitution
and at daily mark-to-market valuations thereafter of not less than 150% (or,
from and after any Insufficiency Determination that shall not be cured by the
close of business on the next business day thereafter, as described below, 200%)
of the product of the market price per share of such Marketable Securities at
the time of each valuation times the number of shares of such 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 Class A Common Stock or 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 Class A Common
Stock or shares of Marketable Securities subject to such Seller's 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 Class A 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 a Seller's 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 Class A 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
18
<PAGE>
pledged as substitute collateral for shares of Class A Common Stock (or shares
of Marketable Securities deliverable pursuant to the Contracts) 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 Class A Common Stock (or the
then-Average Market Price per share of such Marketable Securities, as the case
may be) times the difference between (x) the maximum number of shares of Class A
Common Stock (or shares of such Marketable Securities) subject to such Contract
at such time and (y) the number of shares of Class A Common Stock (or shares of
such 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 (a 'Defaulting Seller') will become obligated to deliver the initial
number of shares of Class A Common Stock (or, after a Reorganization Event, the
Marketable Securities or cash or a combination thereof deliverable in respect
thereof) subject to such Seller's Contract, or any U.S. Government obligations
then pledged in respect thereof.
Upon any acceleration under a Collateral Agreement, (i) the Collateral
Agent will deliver to the Trust, for distribution pro rata to the Holders, the
shares of Class A Common Stock then pledged by the Defaulting Seller, or cash
generated from the liquidation of U.S. Government obligations then pledged by
the Defaulting Seller, or a combination thereof (or, after a Reorganization
Event, the Marketable Securities then pledged by the Defaulting Seller, cash
generated from the liquidation of U.S. Government obligations then pledged by
the Defaulting Seller, or a combination thereof) and (ii) the Custodian will
liquidate a proportionate amount of the U.S. Treasury securities acquired by the
Trust with the proceeds of the Securities and then held by the Trust and
distribute the proceeds pro rata to the Holders. Following any distributions
upon acceleration and liquidation in accordance with the foregoing sentence, the
number of shares of Class A Common Stock or Marketable Securities, as
applicable, deliverable to Holders on the Exchange Date will be proportionately
reduced. In addition, in the event that by the Exchange Date any substitute
collateral has not been replaced by Class A Common Stock (or, after a
Reorganization Event, cash or Marketable Securities deliverable pursuant to the
Contracts) sufficient to meet the obligations under any Contract, the Collateral
Agent will deliver to the Trust for distribution pro rata to the Holders the
market value of the Class A Common Stock required to be delivered thereunder, in
the form of any shares of Class A Common Stock then pledged by the Sellers plus
cash generated from the liquidation of U.S. Government obligations then pledged
by the Sellers (or, after a Reorganization Event, the market value of the
alternative consideration required to be delivered thereunder, in the form of
any Marketable Securities then pledged, plus any cash then pledged, plus cash
generated from the liquidation of U.S. Government obligations then pledged). See
'--Trust Termination'.
DESCRIPTION OF THE SELLERS. The Sellers are The Estee Lauder 1994 Trust
(which will enter into the Extendible Contract), The LAL 4002 Trust and The RSL
4201 Trust. Reference is made to the caption 'TRACES Stockholders' in Company
Prospectus for information about the Sellers.
THE U.S. TREASURY SECURITIES
The Trust will purchase with a portion of the proceeds of the Securities
and hold a fixed portfolio of zero-coupon ('stripped') U.S. Treasury securities
with face amounts and maturities corresponding to the quarterly distributions
payable with respect to the Securities and the payment dates thereof through
June , 2001. Up to 30% of the Trust's total assets may be invested in these
U.S. Treasury securities. In the event that any Contract is accelerated, then a
proportionate amount of the U.S. Treasury securities acquired by the Trust with
the proceeds of the Securities and then held by the Trust shall be liquidated by
the Administrator and the proceeds thereof distributed pro rata to the Holders,
together
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<PAGE>
with the amounts distributed upon acceleration. See '--Collateral Arrangements;
Acceleration' and '--Trust Termination'.
Additional U.S. Treasury securities may be transferred to the Trust in
connection with an extension of the Exchange Date under the Extendible Contract
to September , 2001. If the Seller under such Contract later accelerates the
Exchange Date under such Contract, such Seller will, pursuant to the Extendible
Contract, repurchase such additional U.S. Treasury securities from the Trust on
or prior to the Exchange Date, at a price equal to the aggregate unpaid
distributions on the Securities accruing to the Exchange Date.
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 Class A Common Stock or other assets received pursuant to the Contracts
and, for cash management purposes, short-term obligations of the U.S.
Government; issue any securities or instruments except for the Securities; make
short sales or purchase securities on margin; write put or call options; borrow
money; underwrite securities; purchase or sell real estate, commodities or
commodities contracts including futures contracts; or make loans (other than the
purchase of stripped U.S. Treasury securities as described in this Prospectus).
The Trust also has adopted a fundamental policy that the Contracts may not be
disposed of during the term of the Trust and that the U.S. Treasury securities
acquired by the Trust with the proceeds of the Securities 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 cosmetics 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 final
Exchange Date. Alternatively, in the event that all Contracts are accelerated,
then any U.S. Treasury securities acquired by the Trust with the proceeds of the
Securities and then held by the Trust shall be liquidated by the Administrator
and the proceeds distributed pro rata to the Holders, together with the amounts
distributed upon acceleration, and the Trust shall be terminated. See
'--Collateral Arrangements; Acceleration' and '--The U.S. Treasury Securities'.
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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 acquired by the Trust with the proceeds of the Securities
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 Class A 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; CLASS A COMMON STOCK DEPRECIATION RISK
The Trust anticipates that on the Exchange Date, it will receive the Class
A Common Stock deliverable pursuant to the Contracts, which it will then
distribute to Holders. Although Holders will initially receive distributions at
a higher annual rate than the current annual dividends paid on the Class A
Common Stock, there is no assurance that this relative relationship will prevail
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 Class A Common Stock
subject to the Contracts where the Average Market Price equals or exceeds the
Initial Price (and therefore less than one full share of Class A Common Stock
for each outstanding Security), the Securities have more limited appreciation
potential than the Class A Common Stock. Therefore, the Securities may trade
below the value of the Class A Common Stock if the Class A Common Stock
appreciates in value. The value of the Class A Common Stock to be received by
Holders on the Exchange Date (and any cash received in lieu thereof) may be less
than the amount paid for the Securities. Holders of Securities will realize the
entire decline in value if the Average 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 Class A Common Stock that Holders are entitled to
receive at the termination of the Trust is subject to adjustment for certain
events arising from stock splits and combinations, stock dividends and certain
other actions of the Company that modify its capital structure. See 'Investment
Objective and Policies--The Contracts--Dilution Adjustments'. The number of
shares to be received by Holders may not be adjusted for other events, such as
offerings of Class A Common Stock for cash or in connection with acquisitions,
that may adversely affect the price of the Class A Common Stock and, because of
the relationship of the amount to be received pursuant to the Contracts to the
price of the Class A 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, Class A Common Stock in the future,
or as to the amount of any such offerings or sales. In addition, until the
receipt of the Class A Common Stock by Holders as a result of the exchange of
the Securities for the Class A Common Stock, Holders will not be entitled to any
rights with respect to the Class A 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 Class A Common
Stock (which may occur due to changes in the Company's financial condition,
results of operations or prospects, or because of complex and interrelated
political, economic, financial and other factors that can affect the
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<PAGE>
capital markets generally, the stock exchanges or quotation systems on which the
Class A 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 Class A Common Stock to be delivered on the Exchange Date,
the Securities will tend to trade at a premium to the market value of the Class
A Common Stock to the extent the Class A Common Stock price falls and at a
discount to the market value of the Class A Common Stock to the extent the Class
A Common Stock price rises. There can, however, be no assurance that the
Securities will trade at a premium to the market value of the Class A Common
Stock.
Shares of closed-end investment companies frequently trade at a discount
from net asset value. This characteristic of investments in a closed-end
investment company is a risk separate and distinct from the risk that the
Trust's net asset value will decrease. The Trust cannot predict whether its
shares will trade at, below or above net asset value. The risk of purchasing
investments in a closed-end investment company that might trade at a discount
may be greater for investors who wish to sell their investments soon after
completion of an initial public offering because for those investors,
realization of a gain or loss on their investments is likely to be more
dependent upon the existence of a premium or discount than upon portfolio
performance.
The Underwriters 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. The Underwriters may cease to make a market in the Securities at any
time without notice. Application has been made to list the Securities on the
NYSE. 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 NYSE will not be suspended. In the event of a delisting or suspension of
trading on such exchange, the Trust will apply for listing of the Securities on
another national securities exchange or for quotation on another trading market.
If the Securities are not listed or traded on any securities exchange or trading
market, or if trading of the Securities is suspended, pricing information for
the Securities may be more difficult to obtain, and the price and liquidity of
the Securities may be adversely affected.
NON-DIVERSIFIED STATUS
The Trust is considered non-diversified under the Investment Company Act,
which means that the Trust is not limited in the proportion of its assets that
may be invested in the obligations of a single issuer. Since the only assets
held or received by the Trust will be U.S. Treasury securities and the Contracts
or other assets consistent with the terms of the Contracts, the Trust will be
subject to greater risk than would be the case for an investment company with
diversified investments.
DESCRIPTION OF THE SECURITIES
Each Security represents an equal proportional interest in the Trust, and a
total of 4,576,548 Securities will be issued (assuming no exercise of the
Underwriters' over-allotment option). 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 & Co., as the initial Holder of Securities of the Trust. The
Trust intends to hold annual meetings as required by the rules of the NYSE. The
Trustees may call special meetings of Holders for action by Holder vote as may
be required by either the Investment Company Act or the Amended and Restated
Trust Agreement. The Holders have the right, upon the declaration in writing or
vote of more than two-thirds of the outstanding Securities, to remove a Trustee.
The Trustees will call a meeting of Holders to vote on the removal of a Trustee
upon the written request of the Holders
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of record of 10% of the Securities or to vote on other matters upon the written
request of the Holders of record of 51% of the Securities (unless substantially
the same matter was voted on during the preceding 12 months). The Trustees shall
establish, and notify the Holders in writing of, the record date for each such
meeting, which shall be not less than 10 nor more than 50 days before the
meeting date. Holders at the close of business on the record date will be
entitled to vote at the meeting. The Trust will also assist in communications
with other Holders as required by the Investment Company Act.
In calculating the net asset value of the Trust as required by the
Investment Company Act, the Amended and Restated Trust Agreement provides that
(i) the Treasury securities will be valued at the mean between the last current
bid and asked prices or, if quotations are not available, as determined in good
faith by the Trustees, (ii) short-term investments having a maturity of 60 days
or less will be valued at cost with accrued interest or discount earned included
in interest receivable and (iii) the Contracts will be valued on the basis of
the bid price received by the Trust in respect of the Contracts, or any portion
thereof covering not less than 1,000 shares, from an independent broker-dealer
firm unaffiliated with the Trust to be named by the Trustees who is in the
business of making bids on financial instruments similar to the Contracts and
with terms comparable thereto, or if such a bid quotation is not available, as
determined in good faith by the Trustee.
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 Securities Exchange
Act of 1934, as amended. DTC holds securities that its participants
('Participants') deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations ('Direct Participants'). Access to the DTC system is also
available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ('Indirect Participants').
Purchases of Securities within the DTC system must be made by or through
Direct Participants, which will receive a credit for the Securities on DTC's
records. The ownership interest of each actual purchaser of a Security
('Beneficial Owner') is in turn to be recorded on the Direct or Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchases, but Beneficial Owners are expected to receive
written confirmations providing details of the transactions, as well as periodic
statements of their holdings, from the Direct or Indirect Participants through
which the Beneficial Owners purchased Securities. Transfers of ownership
interests in Securities are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in Securities,
except upon a resignation of DTC.
DTC has no knowledge of the actual Beneficial Owners of the Securities;
DTC's records reflect only the identity of the Direct Participants to whose
accounts such Securities are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
23
<PAGE>
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Payments on the Securities will be made to DTC. DTC's practice is to credit
Direct Participants' accounts on the relevant payment date in accordance with
their respective holdings shown on DTC's records unless DTC has reason to
believe that it will not receive payments on such payment date. Payments by
Participants to Beneficial Owners will be governed by standing instructions and
customary practices and will be the responsibility of such Participant and not
of DTC or the Trust, subject to any statutory or regulatory requirements as may
be in effect from time to time. Payment of dividends to DTC is the
responsibility of the Trust, disbursement of such payments to Direct
Participants is the responsibility of DTC, and disbursement of such payments to
the Beneficial Owners is the responsibility of Direct and Indirect Participants.
Except as provided herein, a Beneficial Owner of an interest 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 (the 'Trustees'),
none of which is an 'interested person' of the Trust as defined in the
Investment Company Act. One of the Trustees will be designated as the 'Managing
Trustee' of the Trust. 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
acquired by the Trust with the proceeds of the Securities 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 & Co., the
initial Holder of the Trust, and who will serve as the Trustees are set forth
below. The positions and the principal occupations of the individual Trustees
during the past five years are also set forth below.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME, AGE AND ADDRESS TITLE DURING PAST FIVE YEARS
- --------------------------------------------------- ---------------- ----------------------
<S> <C> <C>
Donald J. Puglisi, 52.............................. Managing Trustee Professor of Finance
Department of Finance University of Delaware
University of Delaware
Newark, DE 19716
William R. Latham III, 53.......................... Trustee Professor of Economics
Department of Economics University of Delaware
University of Delaware
Newark, DE 19716
James B. O'Neill, 58............................... Trustee Professor of Economics
Center for Education & Entrepreneurship University of Delaware
University of Delaware
Newark, DE 19716
</TABLE>
Each Trustee who is not a director, officer or employee of any Underwriter
or the Administrator, or of any affiliate thereof, will be paid by the Sellers,
on behalf of the Trust, in respect of its annual fee and
24
<PAGE>
anticipated out-of-pocket expenses, a one-time, up-front fee of $10,800. The
Trust's Managing Trustee will also receive an additional up-front fee of $3,600
for serving in that capacity, resulting in total compensation to the Managing
Trustee of $14,400. The Trustees will not receive, either directly or
indirectly, any other compensation, including any pension or retirement
benefits, from the Trust. None of the Trustees receives any compensation for
serving as a trustee or director of any other affiliated investment company.
ADMINISTRATOR
The day-to-day affairs of the Trust will be managed by The Chase Manhattan
Bank as Trust Administrator pursuant to an Administration Agreement. Under the
Administration Agreement, the Trustees have delegated most of their operational
duties to the Administrator, including without limitation, the duties to: (i)
receive invoices for expenses incurred by the Trust; (ii) with the approval of
the Trustees, engage legal and other professional advisors (other than the
independent public accountants for the Trust); (iii) instruct the Paying Agent
to pay distributions on Securities as described herein; (iv) prepare and mail,
file or publish all notices, proxies, reports, tax returns and other
communications and documents, and keep all books and records, for the Trust; (v)
at the direction of the Trustees, institute and prosecute legal and other
appropriate proceedings to enforce the rights and remedies of the Trust; and
(vi) make all necessary arrangements with respect to meetings of Trustees and
any meetings of Holders. The Administrator, however, will not select the
independent public accountants for the Trust or sell or otherwise dispose of the
Trust assets (except in connection with an acceleration of a Contract or the
settlement of the Contracts and upon termination of the Trust), subject to the
Sellers' right to repurchase U.S. Treasury securities transferred to the Trust
in connection with an extension of the Exchange Date.
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.
The address of the Administrator is 450 West 33rd Street, New York, New
York 10001.
CUSTODIAN
The Trust's custodian (the 'Custodian') is The Chase Manhattan Bank
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 Class A 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 ChaseMellon Shareholder Services, L.L.C. 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.
Except for their roles as Administrator, Custodian, Paying Agent, registrar
and transfer agent for the Trust, The Chase Manhattan Bank and ChaseMellon
Shareholder Services, L.L.C. have no other affiliation with, and are not engaged
in any other transactions with, the Trust.
25
<PAGE>
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 & Co. have
agreed to reimburse the Trust for any amounts it may be required to pay as
indemnification to any Trustee, the Paying Agent, the Administrator or the
Custodian. Goldman, Sachs & Co. will in turn be reimbursed by the Sellers for
all such reimbursements paid by them.
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 acquired by the Trust with the proceeds of the Securities).
The first distribution, reflecting the Trust's operations from the date of this
offering, will be made on September , 1998 to Holders of record as of August
, 1998. Thereafter, distributions will be made on March , June , September
and December of each year to Holders of record as of each February , May
, August and November , respectively. A portion of each such distribution
through June , 2001 should be treated as a tax-free return of the Holder's
investment. See 'Investment Objective and Policies--Tax Treatment of
Distributions' and 'Certain Federal Income Tax Considerations--Recognition of
Interest on the U.S. Treasury Securities'.
In connection with any extension of the Exchange Date to September ,
2001, the Seller under the Extendible Contract will be required to deliver to
the Trust, on or prior to June , 2001, additional U.S. Treasury securities
sufficient to fund the Trust's quarterly distribution on September , 2001. If
such Seller later accelerates the Exchange Date under such Contract, such Seller
will, pursuant to the Extendible Contract, repurchase such additional U.S.
Treasury securities from the Trust on or prior to the Exchange Date as
accelerated, at a price equal to the aggregate unpaid distributions on the
Securities accruing to such Exchange Date.
Upon termination of the Trust, as described under the caption 'Investment
Objective and Policies-- Trust Termination', each Holder of Securities
outstanding on the date of the Trust's termination will receive any remaining
net assets of the Trust, subject to the repurchase by the Seller under the
Extendible Contract of the U.S. Treasury securities transferred to the Trust in
connection with an extension of the Exchange Date.
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 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, which will reduce the amount
available to distribute to Holders.
26
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion of the principal United States federal income tax
consequences of ownership of Securities represents the opinion of Sullivan &
Cromwell, 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 or different interpretation at any time, perhaps with
retroactive effect. It should be noted that the Trust has not sought a ruling
from the Internal Revenue Service with respect to the federal income tax
consequences of ownership of Securities, and the opinion of counsel of Sullivan
& Cromwell is not binding on the Internal Revenue Service.
Prospective purchasers of Securities should consult their own tax advisors
concerning the consequences, in their particular circumstances, under the Code
and the laws of any state, local or other taxing jurisdiction, of ownership of
Securities.
A United States Holder is a beneficial owner of Securities 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, under the grantor trust rules of the Code, each
Holder will be considered the owner of its pro rata portions of the stripped
U.S. Treasury securities and the Contracts acquired by the Trust with the
proceeds from the sale of the Securities to Holders. 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 acquired by the Trust with the proceeds from the sale of the
Securities to Holders as a bond that was originally issued on the date the Trust
acquired the U.S. Treasury security and will include original issue discount in
income over the life of such U.S. Treasury securities in an amount equal to the
Holder's pro rata portion of the excess of the amounts payable on such U.S.
Treasury securities over the price 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 such U.S. Treasury securities
held by the Trust, however. Consequently, a substantial portion of each
quarterly cash distribution to the Holders through June , 2001 will be treated
as a tax-free return of the Holders' investment in such U.S. Treasury securities
and will not be considered current income for federal income tax purposes. See
'Investment Objective and Policies--Tax Treatment of Distributions'.
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
27
<PAGE>
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.
EXTENSION OF THE EXCHANGE DATE. Holders should not be required to include
any amounts in income upon the Trust's receipt of additional U.S. Treasury
Securities as a result of an extension of the Exchange Date under the Extendible
Contract and should not be required to include any original issue discount in
respect of such U.S. Treasury Securities. See 'Investment Objective and
Policies--The Contracts'.
Although there is no direct authority for the treatment of the cash
distribution paid on the Securities on the extended Exchange Date, it is likely
that such distribution should not be considered income to a Holder upon receipt,
but instead should be considered to reduce a Holder's basis with respect to such
Holder's pro rata portion of the Extendible Contract held by the Trust, by
analogy to the treatment of rebates or option premiums. If such treatment is
respected, receipt of the cash distribution on the extended Exchange Date will
increase the amount of gain (or decrease the amount of loss) recognized by a
Holder on a subsequent sale or other disposition of the Extendible Contract
(including a disposition pursuant to cash settlement of such Contract) or the
Class A Common Stock delivered pursuant to such Contract. Because there can be
no assurance that the Internal Revenue Service will agree with this
characterization of the cash distribution paid on the extended Exchange Date,
Holders are urged to consult their tax advisors concerning the tax consequences
of receiving such payment.
TAX BASIS OF THE U.S. TREASURY SECURITIES AND THE CONTRACTS. A Holder's
initial tax basis in the Contracts and the U.S. Treasury securities,
respectively, will equal its pro rata portion of the amounts paid for them by
the Trust. It is currently anticipated that % and % of the net proceeds of
the offering will be used by the Trust to purchase the U.S. Treasury securities
and as payments for the Contracts, respectively, and that % of such net
proceeds will be used by the Trust as payment for the Extendible Contract. 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. A Holder's tax basis in the Extendible Contract should
be reduced by the receipt of the cash distribution paid on the Securities on the
extended Exchange Date (See '--Extension of the Exchange Date' above).
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 (including,
if applicable, the extended Exchange Date), as having received a pro rata
portion of the Class A Common Stock or cash, Marketable Securities or a
combination thereof delivered to the Trust.
DISTRIBUTION OF THE CLASS A COMMON STOCK. The delivery of Class A Common
Stock to the Trust pursuant to the Contracts and the Trust's distribution of
Class A Common Stock to the Holders will not be taxable to the Holders. Each
Holder's basis in its Class A Common Stock will be equal to its basis in its pro
rata portion of the Contracts which are settled in Class A Common Stock less the
portion of such basis allocable to any fractional shares of Class A Common Stock
for which cash is received. A Holder will recognize short-term capital gain or
loss upon receipt by the Trust of cash in lieu of fractional shares of Class A
Common Stock equal to the difference between the Holder's allocable portion of
the amount of cash received and the Holder's basis in such fractional shares.
The holding period for the Class A 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
Extendible Contract, a Holder will recognize capital gain or loss equal to the
difference between the Holder's allocable portion of the amount of cash received
and the Holder's basis for the Extendible Contract. Any gain or loss will be
capital gain or loss which is taxable to Holders as described below under
'--Sale of Securities'.
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 capital
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.
Long-term capital gain of an individual Holder will be subject to a maximum tax
rate of
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<PAGE>
28% in respect of property held for more than one year. The maximum rate is
reduced to 20% in respect of property held in excess of 18 months.
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 Class A Common Stock.
The Internal Revenue Service could conceivably seek to treat the Contracts
differently. The Internal Revenue Service might, for example, seek to treat all
or a portion of the cash paid to the Sellers pursuant to the Contracts 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
Class A Common Stock received on the Exchange Date (or the proceeds from cash
settlement of the Extendible Contract) 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 include in income the
amount of cash actually received each year in respect of the Securities.
BACKUP WITHHOLDING AND INFORMATION REPORTING. The payments of principal
and original issue discount on the U.S. Treasury securities, and the proceeds
received from cash settlement of the Contracts or 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.
29
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Trust has agreed to sell to each of the Underwriters named below, and each of
such Underwriters has severally agreed to purchase from the Trust, the
respective number of Securities set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SECURITIES
- -------------------------------------------------------------------------------- ---------
<S> <C>
Goldman, Sachs & Co.............................................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated........................................................
J.P. Morgan Securities Inc......................................................
Total...................................................................... 4,576,548
---------
---------
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Securities offered
hereby, if any are taken.
The Underwriters propose to offer the Securities in part directly to the
public at the price to the public set forth on the cover page of this Prospectus
and in part to certain securities dealers at such price less a concession of
$ per Security. The Underwriters may allow, and such dealers may re-allow, a
concession not in excess of $ per Security to certain brokers and dealers.
After the Securities are released for sale to the public, the offering price and
other selling terms may from time to time be varied by the Underwriters. The
sales load of $ per Security is equal to % of the initial public
offering price. Investors must pay for any Securities purchased in the initial
public offering on or before June , 1998.
In connection with the offering, the Underwriters may purchase and sell the
Securities and the Class A Common Stock in the open market. These transactions
may include over-allotment and stabilizing transactions and purchases to cover
short positions created by the Underwriters in connection with the offering.
Stabilizing transactions consist of certain bids or purchases for the purpose of
preventing or retarding a decline in the market price of the securities or the
Class A Common Stock; and short positions created by the Underwriters involve
the sale by the Underwriters of a greater number of Securities than they are
required to purchase from the Trust in the offering. The Underwriters also may
impose a penalty bid, whereby selling concessions allowed to broker-dealers in
respect of the Securities sold in the offering may be reclaimed by the
Underwriters if such securities are repurchased by the Underwriters in
stabilizing or covering transactions. These activities may stabilize, maintain
or otherwise affect the market price of the Securities which may be higher than
the price that might otherwise prevail in the open market, and these activities,
if commenced, may be discontinued at any time. These transactions may be
effected on the NYSE, in the over-the-counter market or otherwise.
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 686,482 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 Company, the Sellers, the other Lauder Family Members (as defined in
the Company Prospectus) who are stockholders of the Company (other than the
Lauder Foundation) and Morgan Guaranty Trust Company of New York ('Morgan
Guaranty') have agreed that, during the period beginning from the date of this
Prospectus and continuing to and including the date 90 days after the date of
this Prospectus, they will not offer, sell, contract to sell or otherwise
dispose of any Class A Common Stock or other securities which are convertible
into or exchangeable for Class A Common Stock without the prior written consent
of Goldman, Sachs & Co. except as otherwise provided in the Underwriting
Agreement and except for transfers among Lauder Family Members.
30
<PAGE>
The Securities will be a new issue of securities with no established
trading market. Application has been made to list the Securities on the NYSE
under the symbol 'ECT'. The Underwriters have advised the Trust 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.
Certain of the Underwriters and their affiliates have provided, are
currently providing, and expect to provide in the future, commercial and
investment banking services to the Company and its subsidiaries and certain
Lauder Family Members for which such Underwriters or their affiliates have
received and will receive fees and commissions. Morgan Guaranty, an affiliate of
J.P. Morgan Securities Inc., is a lender to the Company and certain Lauder
Family Members. More than 10% of the net proceeds of the offering may be used to
repay borrowings to Morgan Guaranty. Accordingly, the offering will be conducted
in accordance with NASD Conduct Rule 2710(c)(8).
The Underwriters have informed the Trust that they do not expect sales to
any accounts over which they exercise discretionary authority to exceed 5% of
the total number of Securities offered by them.
The Company and the Sellers have agreed to indemnify the Underwriters
against certain liabilities, including certain liabilities under the Securities
Act of 1933. The Sellers 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 by
Sullivan & Cromwell, New York, New York, and for the Underwriters by Fried,
Frank, Harris, Shriver & Jacobson (a partnership including professional
corporations), New York, New York.
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 SEC, Washington, D.C. 20549, a Registration
Statement under the Securities Act of 1933 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 SEC'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).
31
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Securityholders of
Estee Lauder Automatic Common Exchange Security Trust:
We have audited the accompanying statement of assets and liabilities of
Estee Lauder Automatic Common Exchange Security Trust as of May , 1998. 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 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 Estee Lauder Automatic
Common Exchange Security Trust as of May , 1998 in conformity with generally
accepted accounting principles.
New York, New York
May , 1998
32
<PAGE>
ESTEE LAUDER AUTOMATIC COMMON EXCHANGE SECURITY TRUST
STATEMENT OF ASSETS AND LIABILITIES
MAY , 1998
<TABLE>
<S> <C>
ASSETS
Cash...................................................................................................... $100
----
Total assets......................................................................................... $100
----
----
LIABILITIES
$ 0
----
Net Assets
Balance applicable to 1 Security outstanding.............................................................. $100
----
Net asset value per Security.............................................................................. $100
----
----
</TABLE>
- ------------------
Notes to Financial Statements
(1) Estee Lauder Automatic Common Exchange Security Trust (the 'Trust') was
established on April 21, 1998 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 the Selling Stockholders referred to below.
(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 fixed portfolio of stripped U.S. Treasury securities and forward
purchase contracts with existing stockholders of The Estee Lauder Companies
Inc. (the 'Selling Stockholders') relating to the Class A Common Stock, par
value $.01 per share, of The Estee Lauder Companies Inc. The Trust will be
internally managed and will not have an investment adviser. The
administration of the Trust, which will be overseen by the trustees, will be
carried out by The Chase Manhattan Bank as trust administrator. The Chase
Manhattan Bank will also serve as custodian for the Trust, and ChaseMellon
Shareholder Services, L.L.C. will serve as 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 the Selling
Stockholders.
(3) The Trust issued one Security on May , 1998 to Goldman, Sachs & Co. in
consideration for the aggregate purchase price of $100.
The Amended and Restated Trust Agreement of the Trust 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., Merrill Lynch, Pierce, Fenner & Smith Incorporated
and J.P. Morgan Securities, Inc. 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.
33
<PAGE>
GLOSSARY
'Administration Agreement' means the Administration Agreement between the
Trust and The Chase Manhattan Bank, as Trust Administrator.
'Administrator' means The Chase Manhattan Bank (or its successor) in its
capacity as Trust Administrator under the Administration Agreement.
'Amended and Restated Trust Agreement' means the trust agreement dated as
of April 21, 1998 pursuant to which the Trust was formed, as amended and
restated as of June , 1998.
'Appreciation Threshold Price' means $ .
'Average Market Price' per share of Class A Common Stock on any date means
the average Closing Price per share of Class A Common Stock for the 20 Trading
Days immediately prior to, but not including, such date, provided that for
purposes of determining the payment required upon cash settlement of the
Extendible Contract in connection with a Rollover Offering, 'Average Market
Price' means the Closing Price per share of Class A Common Stock on the Trading
Day immediately preceding the Pricing Date or, if the Rollover Offering is
priced after 4:00 P.M., New York City time, on the Pricing Date, the Closing
Price per share on the Pricing Date.
'Beneficial Owner' means an actual purchaser of a Security, which will not
receive written confirmation from DTC of their purchases of Securities but which
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.
'Calculation Period' means any period of Trading Days for which an average
security price must be determined pursuant to the Contracts.
'Cash Delivery Obligations' means, in respect of any Seller after a
Reorganization Event, 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.
'Cash Settlement Alternative' means the provision of the Extendible
Contract that permits The Estee Lauder 1994 Trust, as Seller, to elect to pay
cash upon settlement of such Contract in an amount equal to the then Average
Market Price of the number of shares of Class A Common Stock determined pursuant
to the definition of 'Exchange Rate'.
'Class A Common Stock' means the Class A Common Stock, par value $.01 per
share, of the Company.
'Class B Common Stock' means the Class B Common Stock, par value $.01 per
share, of the Company.
'Closing Price' of the Class A 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 Class A Common Stock as reported on the
NYSE Consolidated Tape on such date of determination or, if the Class A 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 Class A Common Stock is so listed, or if the Class A 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 Class A Common Stock is not so
reported, the last quoted bid price for the Class A 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 Class A 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.
'Code' means the Internal Revenue Code of 1986, as amended.
34
<PAGE>
'Collateral Agent' means The Chase Manhattan Bank (or its successor) in its
capacity as Collateral Agent under the Collateral Agreements.
'Collateral Agreements' means the Collateral Agreements between the Sellers
and The Chase Manhattan Bank, as Collateral Agent, securing the Sellers'
obligations under their respective Contracts.
'Collateral Event of Default' under any Seller's Collateral Agreement
means, at any time, (A) if no U.S. Government obligations shall be pledged as
substitute collateral at or prior to such time, failure of the collateral to
consist of at least the maximum number of shares of Class A 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 under 'Investment Objective and Policies--The Contracts-- Collateral
Arrangements; Acceleration' above); (B) if any U.S. Government obligations shall
be pledged as substitute collateral for shares of Class A Common Stock (or
shares of Marketable Securities deliverable pursuant to the Contracts) 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 Class A Common Stock (or
the then-Average Market Price per share of such Marketable Securities, as the
case may be) times the difference between (x) the maximum number of shares of
Class A Common Stock (or shares of such Marketable Securities) subject to such
Contract at such time and (y) the number of shares of Class A Common Stock (or
shares of such 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.
'Company' means The Estee Lauder Companies Inc., a Delaware corporation.
'Company Prospectus' means the prospectus of the Company, dated June ,
1998 (pages A-1 through A-23 hereof), which describes the Company and the shares
of Class A Common Stock deliverable to the Holders upon mandatory exchange of
the Securities on the Exchange Date.
'Company Successor' means a surviving entity or subsequent entity of the
Company.
'Contracts' means the forward purchase contracts between the Sellers and
the Trust relating to the Class A Common Stock.
'Custodian' means The Chase Manhattan Bank (or its successor) in its
capacity as Custodian under the Custodian Agreement.
'Custodian Agreement' means the Custodian Agreement between the Trust and
The Chase Manhattan Bank, as Custodian.
'Defaulting Seller' means a Seller with respect to which a Collateral Event
of Default has occurred under such Seller's Collateral Agreement or that is the
subject of a bankruptcy or insolvency.
'Direct Participants' means Participants of DTC, including brokers and
dealers, banks, trust companies, clearing corporation an certain other
organizations, that are direct Participants of DTC.
'DTC' means The Depository Trust Company.
'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 Class A Common Stock acquired in a tender offer or exchange offer
by the Company over (ii) the Then-Current Market Price per share of Class A
Common Stock.
'Exchange Date' means June , 2001, except that the Extendible Contract
permits The Estee Lauder 1994 Trust, as Seller, to elect (i) to extend the
Exchange Date under such Contract to September , 2001, provided such Seller
delivers to the Trust additional U.S. Treasury securities sufficient to fund the
Trust's quarterly distribution on such date and (ii) following such an
extension, to
35
<PAGE>
accelerate the Exchange Date under such Contract to a date not earlier than June
, 2001, in connection with the consummation of a Rollover Offering.
'Exchange Rate' means the rate of exchange of Class A Common Stock for
Securities on the Exchange Date, and shall be determined as follows (subject to
adjustment in certain events):
o if the Average Market Price is less than the Appreciation Threshold
Price but equal to or greater than the Initial Price, the Exchange
Rate will be the number of shares of Class A Common Stock having a
value (determined at the Average Market Price) equal to the Initial
Price;
o if the Average Market Price is equal to or greater than the
Appreciation Threshold Price, the Exchange Rate will be 0.
shares of Class A Common Stock; and
o if the Average Market Price is less than the Initial Price, the
Exchange Rate will be one share of Class A Common Stock.
'Excluded Distribution' means any Permitted Dividend, any cash distributed
in consideration of fractional shares of Class A Common Stock and any cash
distributed in a Reorganization Event.
'Extendible Contract' means the Contract to which The Estee Lauder 1994
Trust is a party, which permits that Seller to (i) elect to pay cash upon
settlement of such Contract in an amount equal to the then Average Market Price
of the number of shares of Class A Common Stock determined pursuant to the
definition of 'Exchange Rate' and (ii) to elect (a) to extend the Exchange Date
under such Contract to September , 2001, provided such Seller delivers to the
Trust additional U.S. Treasury securities sufficient to fund the Trust's
quarterly distribution on such date and (b) following such an extension, to
accelerate the Exchange Date under such Contract to a date not earlier than June
, 2001, in connection with the consummation of a Rollover Offering.
'Holders' means the registered holders of the Securities.
'Indirect Participants' means Participants of DTC, 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.
'Initial Price' means $ .
'Insufficiency Determination' means a determination by the Collateral Agent
that U.S. Government obligations pledged by any Seller as substitute collateral
shall fail to meet the requirements described under 'Investment Objective and
Policies--The Contracts--Collateral Arrangements; Acceleration' above 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 Class A Common Stock or shares of Marketable Securities subject to
such Seller's Contract.
'Investment Company Act' means the Investment Company Act of 1940, as
amended.
'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.
'Managing Trustee' means the Trustee of the Trust designated to serve as
Managing Trustee.
'Marketable Securities' means any common equity securities (whether voting
or non-voting) listed on a U.S. national securities exchange or reported by The
NASDAQ National Market.
'NYSE' means the New York Stock Exchange.
'Participants' means participants of DTC.
'Paying Agent' means ChaseMellon Shareholder Services, L.L.C. (or its
successor) in its capacity as transfer agent, registrar and Paying Agent under
the Paying Agent Agreement.
36
<PAGE>
'Paying Agent Agreement' means the Paying Agent Agreement between the Trust
and ChaseMellon Shareholder Services, L.L.C., as transfer agent, registrar and
Paying Agent.
'Permitted Dividend' means any quarterly cash dividend in respect of the
Class A 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 Class A Common Stock in excess of 12.5%.
'Pricing Date' means the date that a Rollover Offering is priced.
'Reorganization Event' means (A) any consolidation or merger of the
Company, or any 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 Class A Common Stock outstanding immediately prior to the merger or
consolidation is not exchanged for cash, securities or other property of the
Company or another corporation), (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.
'Rollover Offering' means a reoffering or refinancing of up to % of the
Securities effected not earlier than June , 2001 by means of a completed
public offering or offerings (which may include one or more exchange offers) by
or on behalf of the Seller under the Extendible Contract.
'SEC' means the Securities and Exchange Commission.
'Securities' means the $ Trust Automatic Common Exchange
Securities of the Trust.
'Sellers' means The Estee Lauder 1994 Trust, The LAL 4002 Trust and The RSL
4201 Trust.
'Then-Current Market Price' of the Class A Common Stock means the average
Closing Price per share of Class A Common Stock for a Calculation Period of five
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 following a record date, immediately prior to the earlier of the time such
adjustment is effected and the related 'ex-date' on which the shares of Class A
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 Class A 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 Class A
Common Stock is determined for any of such Trading Days, the most recently
available Closing Price for the Class A Common Stock prior to such five Trading
Days shall be the Then-Current Market Price.
'Trading Day' means a day on which the Class A 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' means (i) for any cash received in a Reorganization
Event, the mount of cash received per share of Class A 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 Class
A Common Stock as determined by a nationally recognized independent investment
banking firm retained for this purpose by the Administrator and (iii) for any
Marketable Securities received in any such Reorganization Event, an amount equal
to the average Closing Price per share of such securities on the 20 Trading Days
immediately prior to the Exchange Date multiplied by the number of such
securities received for each share of Class A 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
37
<PAGE>
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. For purposes of determining the Transaction Value, the
terms 'Trading Day' and 'Closing Price' will have the same meanings, as applied
to such Marketable Securities, as these terms have as applied to the Class A
Common Stock for purposes of determining the Average Market Price.
'Trust' means the Estee Lauder Automatic Common Exchange Security Trust.
'Trustees' means the three trustees who will internally manage the Trust.
'Underwriters' means Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated and J.P. Morgan Securities Inc., the Underwriters of the
Securities.
'Underwriters' Compensation' means the compensation of $ per Security
payable to the Underwriters by the Sellers pursuant to the Underwriting
Agreement.
'United States Holders' means a beneficial owner of Securities 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.
38
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 the
solicitation of an offer to buy securities other than the securities to which it
relates or an offer to sell or the solicitation of an offer to buy such
securities in any circumstances in which such offer or solicitation is unlawful.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----------
<S> <C>
Prospectus Summary........................... 3
The Trust.................................... 9
Use of Proceeds.............................. 9
Investment Objective and Policies............ 9
Risk Factors................................. 21
Description of the Securities................ 22
Management and Administration of the Trust... 24
Certain Federal Income Tax Considerations.... 27
Underwriting................................. 30
Validity of Securities....................... 31
Experts...................................... 31
Further Information.......................... 31
Report of Independent Accountants............ 32
Statement of Assets and Liabilities.......... 33
The Estee Lauder Companies Inc.
Class A Common Stock Prospectus............ Appendix A
</TABLE>
------------------
Until June , 1998 (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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4,576,548 Shares
\\
Estee Lauder Automatic
Common Exchange
Security Trust
$ Trust Automatic Common
Exchange Securities
(TRACESTM/SM)
----------------------
PROSPECTUS
----------------------
Goldman, Sachs & Co.
Merrill Lynch & Co.
J.P. Morgan & Co.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
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
<TABLE>
<S> <C> <C>
2.a.(i) Trust Agreement*
2.a.(ii) Form of Amended and Restated Trust Agreement
2.d Form of Specimen Certificate of Trust Automatic Common Exchange Security (included in Exhibit
2.a.(ii))
2.h Form of Underwriting Agreement**
2.j Form of Custodian Agreement
2.k.(i) Form of Administration Agreement
2.k.(ii) Form of Paying Agent Agreement
2.k.(iii)(a) Form of Purchase Contract (With Cash Settlement Option)
2.k.(iii)(b) Form of Purchase Contract (Without Cash Settlement Option)
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 and Consent of Counsel to the Trust**
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**
</TABLE>
- ------------------
* Previously Filed.
** To Be Filed By Amendment.
ITEM 25. MARKETING ARRANGEMENTS
See the Form of Underwriting Agreement filed as Exhibit 2.h to this
Registration Statement.
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses to be incurred in
connection with the offering described in this Registration Statement:
<TABLE>
<S> <C>
Registration fees.......................................................................... $ 97,813
New York Stock Exchange listing fee........................................................ 22,610
Printing (other than certificates)......................................................... 40,000
Fees and expenses of qualification under state securities laws
(excluding fees of counsel).............................................................. 0
Accounting fees and expenses............................................................... 50,000
Legal fees and expenses.................................................................... 200,000
NASD fees.................................................................................. 30,500
Miscellaneous.............................................................................. 34,077
--------
Total...................................................................................... $475,000
--------
--------
</TABLE>
C-1
<PAGE>
ITEM 27. PERSON CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Prior to April 21, 1998 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
4,576,548 Securities (plus the 686,482 Securities subject to the over-allotment
option) with Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated and J.P. Morgan Securities, Inc.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
NUMBER OF
TITLE OF CLASS RECORD HOLDERS
- ----------------------------------------------------------------------------
Trust Automatic Common Exchange Securities................ 1
ITEM 29. INDEMNIFICATION
The form of Underwriting Agreement filed as Exhibit 2.h to this
Registration Statement provides for indemnification of the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended (the 'Securities Act').
The form of Amended and Restated Trust Agreement filed as Exhibit 2.a.(ii)
to this Registration Statement provides for indemnification of 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 forms of Custodian Agreement,
Administration Agreement and Paying Agent Agreement filed as Exhibits 2.j,
2.k.(i) and 2.k.(ii) to this Registration Statement provide for indemnification
of 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 & Co. will indemnify the Trust for certain
indemnification expenses incurred under the Amended and Restated Trust
Agreement, the Custodian Agreement, the Administration Agreement and the Paying
Agent Agreement.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to trustees, officers and controlling persons of the
Registrant, pursuant to the foregoing provisions or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Not Applicable.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
The Trust's accounts, books and other documents are currently located at
the offices of the Registrant, c/o Goldman, Sachs & Co., 85 Broad Street, New
York, New York 10004 and at the offices of ChaseMellon Shareholder Services,
L.L.C., 450 West 33rd Street, New York, New York 10001, the Registrant's paying
agent, transfer agent and registrar.
C-2
<PAGE>
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% 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; and (ii) for
the purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of the securities at that time shall be deemed to be the initial
bona fide offering thereof.
C-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE
INVESTMENT COMPANY ACT OF 1940, THE REGISTRANT HAS DULY CAUSED THIS AMENDMENT TO
THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THERETO DULY AUTHORIZED, IN THE CITY OF NEW YORK, STATE OF NEW YORK, ON THE 28TH
DAY OF MAY, 1998.
ESTEE LAUDER AUTOMATIC COMMON
EXCHANGE SECURITY TRUST
By:
____________________________________
Paul S. Efron
Trustee
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSON, IN
THE CAPACITIES AND ON THE DATE INDICATED.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------------------ ---------------------------------------- -------------------
<C> <S> <C>
Principal Executive Officer, May 28, 1998
- ------------------------------------------ Principal Financial Officer,
Paul S. Efron Principal Accounting Officer and Trustee
</TABLE>
C-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ----------
<S> <C> <C>
2.a.(i) Trust Agreement*
2.a.(ii) Form of Amended and Restated Trust Agreement
2.d Form of Specimen Certificate of Trust Automatic Common Exchange Security (included in
Exhibit 2.a.(ii))
2.h Form of Underwriting Agreement**
2.j Form of Custodian Agreement
2.k.(i) Form of Administration Agreement
2.k.(ii) Form of Paying Agent Agreement
2.k.(iii)(a) Form of Purchase Contract (With Cash Settlement Option)
2.k.(iii)(b) Form of Purchase Contract (Without Cash Settlement Option)
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 and Consent of Counsel to the Trust**
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**
</TABLE>
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* Previously Filed.
** To Be Filed By Amendment.
<PAGE>
Draft of 5/18/98
EXHIBIT 2.a(ii)
AMENDED AND RESTATED
TRUST AGREEMENT
CONSTITUTING
ESTEE LAUDER AUTOMATIC COMMON EXCHANGE SECURITY TRUST
Dated as of June __, 1998
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
Page
ARTICLE I
DEFINITIONS
ARTICLE II
TRUST DECLARATION; PURPOSES, POWERS
AND DUTIES OF THE TRUSTEES; ADMINISTRATION
<S> <C>
SECTION 2.1 Declaration of Trust; Purposes of the
Trust.................................................................... 6
SECTION 2.2 General Powers and Duties of the
Trustees................................................................. 6
SECTION 2.3 Portfolio Acquisition............................................................ 8
SECTION 2.4 Portfolio Administration......................................................... 9
SECTION 2.5 Manner of Sales.................................................................. 12
SECTION 2.6 Limitations on Trustees' Powers.................................................. 12
ARTICLE III
ACCOUNTS AND PAYMENTS
SECTION 3.1 The Trust Account................................................................ 13
SECTION 3.2 Payment of Fees and Expenses..................................................... 14
SECTION 3.3 Distributions to Holders......................................................... 14
SECTION 3.4 Segregation...................................................................... 14
SECTION 3.5 Temporary Investments............................................................ 14
ARTICLE IV
REDEMPTION
SECTION 4.1 Redemption....................................................................... 15
ARTICLE V
ISSUANCE OF CERTIFICATES;
REGISTRY; TRANSFER OF SECURITIES
</TABLE>
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<TABLE>
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Page
<S> <C>
SECTION 5.1 Form of Certificate.............................................................. 15
SECTION 5.2 Transfer of Securities; Issuance,
Transfer and Interchange of
Certificates............................................................. 17
SECTION 5.3 Replacement of Certificates...................................................... 18
ARTICLE VI
ISSUANCE OF THE CONTRACTS
SECTION 6.1 Execution of the Contracts....................................................... 18
ARTICLE VII
TRUSTEES
SECTION 7.1 Trustees......................................................................... 18
SECTION 7.2 Vacancies........................................................................ 19
SECTION 7.3 Powers........................................................................... 19
SECTION 7.4 Meetings......................................................................... 20
SECTION 7.5 Resignation and Removal.......................................................... 20
SECTION 7.6 Liability........................................................................ 21
SECTION 7.7 Compensation..................................................................... 21
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Meetings of Holders.............................................................. 22
SECTION 8.2 Books and Records; Reports....................................................... 22
SECTION 8.3 Termination...................................................................... 24
SECTION 8.4 Amendment and Waiver............................................................. 25
SECTION 8.5 Accountants...................................................................... 26
SECTION 8.6 Nature of Holder's Interest...................................................... 27
SECTION 8.7 New York Law to Govern........................................................... 27
SECTION 8.8 Notices.......................................................................... 27
SECTION 8.9 Severability..................................................................... 28
SECTION 8.10 Counterparts..................................................................... 28
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
Page
<S> <C>
</TABLE>
<PAGE>
AMENDED AND RESTATED TRUST AGREEMENT
This Amended and Restated Trust Agreement, dated as of June
__, 1998 (the "Trust Agreement"), by and between Goldman Sachs & Co., as
sponsor (the "Sponsor"), and ________________, ________________ and
________________ as trustees (the "Trustees"), constituting Estee Lauder
Automatic Common Exchange Security Trust (the "Trust").
W I T N E S S E T H:
WHEREAS, the Sponsor and Paul S. Efron, as trustee, have
previously entered into a Declaration of Trust dated as of April 21, 1998 (the
"Original Agreement"), creating Fifth Automatic Common Exchange Security
Trust;
WHEREAS, the parties hereto desire to amend and
restate the Original Agreement in certain respects; and
WHEREAS, the Trust has previously issued to the Sponsor one
Security in consideration of the aggregate purchase price therefor of $100.00;
NOW, THEREFORE, the parties hereto agree to amend and
restate the Original Agreement as provided herein. Upon the execution and
delivery of copies hereof by the parties hereto, the Original Agreement will
be automatically amended and restated in its entirety to read as provided
herein.
ARTICLE I
DEFINITIONS
Whenever used in this Trust Agreement, the following words
and phrases shall have the meanings listed below. Any reference to any
agreement shall be a reference to such agreement as supplemented or amended
from time to time.
"Additional Purchase Price" - The Additional Purchase Price as
defined in the Contracts.
<PAGE>
"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.
"Average Market Price" - Average Market Price as defined in
the Contracts.
"Business Day" - A day on which the New York Stock Exchange,
Inc. is open for trading that is not a day on which banks in The City of New
York are authorized or obligated by law to close.
"Cash Settlement Alternative" - The Cash Settlement
Alternative as defined in certain of the Contracts.
"Certificate" - Any certificate evidencing the ownership of
Securities substantially in the form of Exhibit A hereto.
"Code" - The Internal Revenue Code of 1986, as amended from
time to time; each reference herein to any section of the Code or any regulation
thereunder shall constitute a reference to any successor provision thereto.
"Collateral Agent" - ____________________, 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.
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"Common Stock" - Class A Common Stock, par value $.01 per
share, of the Company.
"Company" - The Estee Lauder Companies Inc., a Delaware
corporation.
"Contracts" - The forward purchase contracts entered into by
the Trustees with one or more existing shareholders of the Company,
substantially in the form of Exhibit C hereto.
"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 February __, May __, August __ and
November __ of each year commencing August __, 1998, to and including June __,
2001 (or September __, 2001 if one or more of the Contracts is extended) 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 of Shares by the Trustees to the
Holders, subject to the adjustments and exceptions set forth in the Contracts
(or, to the extent one or more Sellers elect the Cash Settlement Alternative
under their respective Contracts, the amount in cash specified in
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<PAGE>
such Contracts as payable in respect thereof), in mandatory exchange for the
Securities on the Exchange Date.
"Exchange Date" - The Exchange Date as defined in the
Contracts; provided that if the Exchange Date under one or more Contracts is
extended pursuant to the terms of such Contracts, then the "Exchange Date"
shall refer to and include both the Exchange Date under any Contracts that are
not so extended, and the Exchange Date as extended pursuant to the terms of
the other Contracts, and the provisions of this agreement (including, without
limitation, Section 2.4(e) and (f)) shall be applied successively to each such
Exchange Date.
"Exchange Rate" - The Exchange Rate as defined in the
Contracts.
"Firm Purchase Price" - The Firm Purchase Price as defined in
the Contracts.
"First Time of Delivery" - The First Time of Delivery as
defined in the Underwriting Agreement.
"Holder" - The registered owner of any Security as recorded on
the books of the Paying Agent.
"Indemnity Agreement" - The Fund Indemnity 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.
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<PAGE>
"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 February __, May __, August __, and
November __ of each year commencing August __, 1998.
"Registration Statement" - Registration Statement on Form N-2
(Registration No. 333-50597) of the Trust, as amended.
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<PAGE>
"Reorganization Event" - A Reorganization Event as defined in
the Contracts.
"Second Time of Delivery" - The Second Time of Delivery as
defined in the Underwriting Agreement.
"Securities Act" - The Securities Act of 1933, as amended from
time to time.
"Security" - $____ Trust Automatic Common Exchange Security of
the Trust evidencing a Holder's undivided interest in the Trust and right to
receive a pro rata distribution upon liquidation of the Trust Estate.
"Sellers" - The persons named as Sellers in the Contracts.
"Shares" - Shares of Common Stock to be exchanged by the
Trustees for the Securities on the Exchange Date.
"Temporary Investments" - Direct short-term U.S. government
obligations, as specified from time to time by the Trustees or through standing
instructions from the Trustees to the Administrator or the Paying Agent.
"Transfer Agent and Registrar" - ________________, 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 U.S. 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.
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<PAGE>
"Underwriting Agreement" - The Underwriting Agreement as
described in the Prospectus.
ARTICLE II
TRUST DECLARATION; PURPOSES, POWERS
AND DUTIES OF THE TRUSTEES; ADMINISTRATION
SECTION 2.1 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
Underwriters the Securities, receive and redeliver additional U.S. Treasury
Securities pursuant to certain of the Contracts, 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 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
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<PAGE>
Custodian Agreement, the Administration Agreement, the Collateral
Agreements and the Paying Agent Agreement terminates, or the agent of
the Trust thereunder resigns or is discharged, to appoint a
substitute agent and enter into a new agreement with such substitute
agent containing provisions substantially similar to those contained
in the agreement being terminated; provided that in any such new
agreement (i) the Custodian and the Paying Agent shall each be a
commercial bank or trust company organized and existing under the
laws of the United States of America or any state therein, shall have
full trust powers and shall have minimum capital, surplus and
retained earnings of not less than $100,000,000; and (ii) the
Administrator and the Collateral Agent shall each be a reputable
financial institution qualified in all respects to carry out its
obligations under the Administration Agreement or the Collateral
Agreements, as the case may be;
(b) to hold the Trust Estate in trust, to create and
administer the Trust Account, to direct payments received by the
Trust to the Trust Account and to make payments out of the Trust
Account as set forth in Article III hereof;
(c) to issue and sell to the Underwriters an aggregate of up
to _________ 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;
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<PAGE>
(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 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
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<PAGE>
Securities, net of expenses payable in connection with the public
offering of the Securities as described in Section 3.2 hereof and net
of the purchase price paid for the Treasury Securities as provided in
paragraph (b) below; and, subject to the adjustments and exceptions
set forth in the Contracts, the Contracts shall entitle the Trust to
receive from each of the Sellers on the Exchange Date the Shares
subject thereto (or, if one or more Sellers elect the Cash Settlement
Alternative under their respective Contracts, the amount in cash
specified in such Contracts in respect thereof) so that the Trust may
execute the Exchange with the Holders; and
(b) to purchase for settlement at the First Time of
Delivery, and at the Second Time of Delivery, as appropriate, with
the proceeds of the sale of the Securities, net of 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, Merger or Acceleration
Adjustments. Upon receipt of any notice pursuant to Section 5.4(b) of
the Contracts of an event requiring an adjustment to the Exchange
Rate, or upon otherwise acquiring knowledge of such an event, to
calculate the required adjustment and furnish notice thereof to the
Collateral Agent and the Sellers, or to request from the Sellers such
further information as may be necessary to calculate or effect the
required adjustment;
(b) Selection of Independent Investment Bank.
Upon receipt of notice of (i) the occurrence of a
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Reorganization Event in which property other than cash or Marketable
Securities is to be received in respect of the Common Stock as
described in Section 6.2 of the Contracts or (ii) an Excess Purchase
Payment in which the Company has paid or will pay consideration other
than cash as described in Section 6.1(d) of the Contracts, to select
and retain a nationally recognized investment banking firm to
determine the market value of such property as provided in the
Contracts, and to deliver to the Sellers notice pursuant to Section
8.1 of the Contracts identifying the firm proposed to be selected and
retained, and to consult with the Sellers on such selection and
retention as provided in such Section 8.1;
(c) Acceleration. In the event (i) an acceleration of a
Contract shall occur due to an Event of Default as provided in
Article VII of the Contracts, or (ii) a Reorganization Event shall
occur in respect of which the consideration received by holders of
Common Stock does not include Marketable Securities, as contemplated
by Section 6.2 of the Contracts, to liquidate a proportionate amount
(in the case of clause (i)) or all (in the case of clause (ii)) of
the Treasury Securities and distribute the proceeds thereof pro rata
to each of the Holders of Securities, together with any shares of
Common Stock or other amounts to be distributed to the Holders of
Securities, in each case in accordance with the Contracts and the
Collateral Agreements;
(d) Additional U.S. Treasury Securities. To accept
additional U.S. Treasury securities delivered to the Trust in
connection with an extension of the Exchange Date at certain of the
Sellers' election in accordance with Section 1.3 of their respective
Contracts, and to redeliver such U.S. Treasury securities in
connection with an acceleration of the Exchange Date at any of such
Sellers' election in accordance with Section 1.3 of their respective
Contracts;
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<PAGE>
(e) Determination of Exchange Date Amounts. To calculate, on
the Exchange Date, the number of Shares (or, if one or more Sellers
elect the Cash Settlement Alternative under their respective
Contracts, the amount in cash) required to be delivered by each of
the Sellers under Section 1.1 of the Contracts or, if a
Reorganization Event shall have occurred, the amount of cash required
to be delivered by the Sellers, and the number of Marketable
Securities permitted to be delivered by the Sellers in lieu of all or
a portion of such cash, all as provided in Section 6.2 of the
Contracts, and to furnish notice of the amounts so determined to the
Collateral Agent and the Sellers; and
(f) Distribution of Exchange Consideration. Unless a
Reorganization Event shall have occurred (in which event distribution
of proceeds shall be governed by Section 8.3 below) or one or more
Sellers elect the Cash Settlement Alternative under their respective
Contracts (in which event the cash received in respect thereof shall
be distributed pro rata to the Holders of Securities promptly after
receipt thereof):
(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
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(net of any brokerage or related expenses) and (B) the
product of the number of Shares so sold and the Average
Market Price; and, in accordance with the Indemnity
Agreement, to pay such difference, if positive, to Goldman,
Sachs & Co., or to request payment of such difference, if
negative, from Goldman, Sachs & Co.;
(iii) Delivery of Shares. To deliver the
remaining Shares to the Transfer Agent and Registrar on the
Exchange Date, with instructions that such Shares be
re-registered and re-issued as follows: (A) for and in the
name of each Holder (other than the Depositary) who holds
Securities in definitive form, the Transfer Agent and
Registrar shall be instructed to issue definitive
certificates representing a number of Shares equal to such
Holder's pro rata share of the total delivered to the
Trustees under the Contracts, rounded down to the nearest
integral number; (B) the Transfer Agent and Registrar shall
be instructed to transfer all remaining Shares to the
account of the Custodian held through the Depositary, who
shall then be instructed to transfer and credit such Shares
to each 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 Average
Market Price;
(v) Distribution of Cash Received upon
Acceleration of Exchange Date. If the Exchange Date shall
have been accelerated pursuant to Section 1.3 of the
Contracts, to distribute to
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<PAGE>
each Holder its pro rata share of any cash
received by the Trust from Sellers in connection
therewith; and
(vi) Record Date. The distributions described
in this paragraph (f) 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, any
additional U.S. Treasury securities delivered to the Trust in
connection with an extension of the Exchange Date, 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;
(d) to make short sales or purchases on margin;
(e) to write put or call options;
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<PAGE>
(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, any other U.S. Treasury securities
delivered to the Trust 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. If so directed by
the Sellers, the Administrator is authorized to pay, from the amounts payable
to the Sellers pursuant to the
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Contracts, the fees and expenses of the Trust incurred in connection with the
offering of the Securities and the costs and expenses incurred in the
organization of the Trust.
SECTION 3.3 Distributions to Holders. On or shortly after
each Distribution Date the Trustees shall distribute to each Holder of record
at the close of business on the preceding Record Date, at the post office
address of the Holder appearing on the books of the Trust or Paying Agent or
by any other means mutually agreed upon by the Holder and the Trustees, an
amount equal to such Holder's 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
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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.
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
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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 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
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
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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 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.
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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 identi-
fication and satisfactory indemnity, complying with such other reasonable
regulations and conditions as the Paying Agent may prescribe and paying such
expenses and charges, including any bonding fee, as the Paying Agent may incur
or reasonably impose; provided that if the Trust has terminated or is in the
process of terminating, the Paying Agent, in lieu of issuing such new
Certificate, may, upon the terms and conditions set forth herein, make the
distributions set forth in Section 8.3(c) hereof. Any mutilated Certificate
shall be duly surrendered and cancelled before any duplicate Certificate shall
be issued in exchange and substitution therefor. Upon issuance of any
duplicate Certificate pur suant to this Section 5.3 hereof, the original
Certificate claimed to have been lost, stolen or destroyed shall become null
and void and of no effect, and any bona fide purchaser thereof shall have only
such rights as are afforded under Article 8 of the Uniform Commercial Code to
a Holder presenting a Certificate for transfer in the case of an overissue.
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<PAGE>
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
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provided above, the remaining Trustees in office, regardless of their number,
shall have the powers granted to the Trustees and shall discharge all the
duties imposed upon the Trustees by this Trust Agreement. Election shall be by
the affirmative vote of Holders of a majority of the Securities entitled to
vote present in person or by proxy at a special meeting of Holders called for
the purpose of electing any Trustee. Each individual Trustee shall be at least
21 years of age and shall not be under any legal disability. No Trustee who is
an "interested person", as defined in the Investment Company Act, may assume
office if it would cause the composition of the Trustees of the Trust not to
be in compliance with the percentage limitations on interested persons in
Section 10 of the Investment Company Act. Trustees need not be Holders. Notice
of the appointment or 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
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<PAGE>
such meeting or by attendance at the meeting unless the Trustee attends the
meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting has not been lawfully called or
convened). The Trustees shall act either by majority vote of the Trustees
present at a meeting at which at least a majority of the Trustees then in
office are present or by a unanimous written consent of the Trustees without a
meeting. Except as otherwise required under the Investment Company Act, all or
any of the Trustees may participate in a meeting of the Trustees by means of a
conference telephone call or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to such communications equipment shall
constitute presence in person at such meeting.
SECTION 7.5 Resignation and Removal. Any Trustee may resign
and be discharged of the trust created by the Trust Agreement by executing an
instrument in writing resigning as Trustee, filing the same with the
Administrator and sending notice thereof to the remaining Trustees, and such
resignation shall become effective immediately unless otherwise specified
therein. Any Trustee may be removed in 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 repre-
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<PAGE>
senting Securities and shall in no event assume or incur any liability, duty or
obligation to any Holder or to any other Person, other than as expressly
provided for herein. The Trustees may employ agents, attorneys, administrators,
accountants and auditors, and shall not be answerable for the default or
misconduct of any such Persons if such Persons shall have been selected with
reasonable care. Action in good faith may include action taken in good faith in
accordance with an opinion of counsel. In no event shall any Trustee be
personally liable for any expenses with respect to the Trust. Each Trustee shall
be indemnified from the Trust Account with respect to any claim, liability, loss
or expense incurred in acting as Trustee of the Trust, including the costs and
expenses of the defense against any such claim or liability, except in the case
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties of his office.
SECTION 7.7 Compensation. Each Trustee, other than a Trustee
who is a director, officer or employee of the Sponsor, any Underwriter, or the
Administrator or any affiliate thereof, shall receive a one-time, up-front fee
of $______, in respect of its annual fee and anticipated out-of-pocket
expenses. In addition, the Managing Trustee shall receive an additional
one-time, up-front fee of $_____ for serving in such capacity. The Trustees
will not receive any pension or retirement benefits. In the event of the
resignation or removal of a Trustee, such Trustee shall remit to the Trust the
portion of its fee ratable for the period from the day of such resignation or
removal through the Exchange Date.
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
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<PAGE>
the same matter was voted on during the preceding 12 months), and shall be
called as provided in Section 7.2 hereof (or as otherwise required by the
Investment Company Act and the rules and regulations thereunder, including,
without limitation, when requested by the Holders of not less than 10% of the
Securities outstanding for the purposes of voting upon the question of the
removal of any Trustee or Trustees). The Trustees shall establish, and notify
the Holders in writing of, the record date for each such meeting which shall
be not less than 10 nor more than 50 days before the meeting date. Holders at
the close of business on the record date will be entitled to vote at the
meeting. The Administrator shall, as soon as possible after any such record
date (or prior to such record date if appropriate), mail by first class mail
to each Holder a notice of meeting and a proxy statement and form of proxy in
the form approved by the Trustees and complying with the Investment Company
Act and the rules and regulations thereunder. Except as otherwise specified
herein or in any provision of the Investment Company Act and the rules and
regulations thereunder, any action may be taken by vote of Holders of a
majority of the Securities outstanding present in person or by proxy if
Holders of a majority of Securities outstanding on the record date are so
represented. Each Security shall have one vote and may be voted in person or
by duly executed proxy. Any proxy may be revoked by notice in writing, by a
subsequently dated proxy or by voting in person at the meeting, and no proxy
shall be valid after eleven months following the date of its execution. Any
Investment Company owning Securities in excess of the limits imposed by
Sections 12(d)(1)(A)(i) and 12(d)(1)(C) of the Investment Company Act will be
required to vote its Securities in proportion to the votes of all other
Holders.
SECTION 8.2 Books and Records; Reports. (a) The Trustees
shall keep a certified copy or duplicate original of this Trust Agreement on
file at the office of the Trust and the office of the Administrator available
for inspection at all reasonable times during its usual business hours by any
Holder. The Trustees shall keep proper books of record and account for all the
transactions under this Trust Agreement at the office of the Trust and the
office of the
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<PAGE>
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 distrib ute reports as required by Section
30 of the Investment Company Act and the rules and regulations thereunder. The
Trustees shall prepare and file such reports as may from time to time be
required to be filed or distributed to Holders under any applicable state or
Federal statute or rule or regulation thereunder, and shall file such tax
returns as may from time to time be required under any applicable state or
Federal statute or rule or regulation thereunder. One of the Trustees shall be
designated by resolution of the Trustees to make the filings and give the
notices required by Rule 17g-1 under the Investment Company Act.
(c) In calculating the net asset value of the Trust as
required by the Investment Company Act, (i) the Treasury Securities will be
valued at the mean between the last current bid and asked prices or, if
quotations are not available, as determined in good faith by the Trustees,
(ii) short-term investments having a maturity of 60 days or less will be
valued at cost with accrued interest or dis count earned included in interest
receivable and (iii) the Contracts will be valued on the basis of the bid
price received by the Trust in respect of the Contracts, or any portion
thereof covering not less than 1000 shares, from an independent broker-dealer
firm unaffiliated with the Trust to be named by the Trustees who is in the
business of making bids on financial instruments similar to the Contracts and
with terms comparable thereto.
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<PAGE>
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 VII thereof or Section 6.2 thereof, 10 Business Days after
the date on which the Trust shall receive the Shares or other consideration
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 Cer-
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<PAGE>
tificates, its interest in the Trust Estate. Together with the distribution to
the Holders, the Trustees shall furnish the Holders with a final statement as of
the date of the distribution of the amount distributable with respect to each
Security.
SECTION 8.4 Amendment and Waiver. (a) This Trust Agreement,
and any of the agreements referred to in Section 2.2(a) hereof, may be amended
from time to time by the Trustees for any purpose prior to the issuance and
sale to the Underwriters of the Securities and thereafter without the consent
of any of the Holders (i) to cure any ambiguity or to correct or supplement
any provision contained herein or therein which may be defective or
inconsistent with any other provision contained herein or therein; (ii) to
change any provision hereof or thereof as may be required by applicable law or
the Commission or any successor governmental agency exercising similar
authority; or (iii) to make 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, without the consent by vote of the Holders of all Securities
then outstanding, (i) 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
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(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 of this Agreement or the Agreements referred to in Section
2.2(a) hereof shall permit the Trust, the Trustees, the Administrator, the
Paying Agent or the Custodian to take any action or direct or permit any
Person to take any action that (i) would vary the investment of Holders within
the meaning of Treasury Regulation Section 301.7701-4(c), or (ii) would or
could cause the Trust, or direct or permit any action to be taken that would
or could cause the Trust, not to be a "grantor trust" under the Code.
SECTION 8.5 Accountants.
(a) The Trustees shall, in accordance with Section 30 of the
Investment Company Act, file annually with the Commission such information,
documents and reports as investment companies having securities registered on
a national securities exchange are required to file 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
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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.
(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,
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for the Shares, the Contracts, the Treasury Securities or other assets or
monies from time to time received, held and applied by the Trustees hereunder.
No Holder shall have any right except as provided herein to control or
determine the operation and management of the Trust or the obligations of the
parties hereto. Nothing set forth herein or in the certificates representing
Securities shall be construed to constitute the Holders from time to time as
partners or members of an association.
SECTION 8.7 New York Law to Govern. This Trust Agreement is
executed and delivered in the State of New York, and all laws or rules of
construction of the State of New York shall govern the rights of the parties
hereto and the Holders and the construction, validity and effect of the
provisions hereof.
SECTION 8.8 Notices. Any notice, demand, direction or
instruction to be given to the Sponsor hereunder shall be in writing and shall
be duly given if mailed or delivered to Goldman, Sachs & Co., 85 Broad Street,
New York, New York 10004, Attention: Registration Department, or at such other
address as shall be specified by the Sponsor to the other parties hereto in
writing. Any notice, demand, direction or instruction to be given to the Trust
and the Trustees hereunder shall be in writing and shall be duly given if
mailed or delivered to the Trust at __________________, New York, New York
_____ and to each Trustee at such Trustee's address set forth beneath its
signature below, or such other address as shall be specified to the other
parties hereto by such party in writing. Any notice to be given to a Holder
shall be duly given if mailed, first class postage prepaid, or by such other
substantially equivalent means as the Trustees may deem appropriate, or
delivered to such Holder at the address of such Holder appearing on the
registry of the Paying Agent.
SECTION 8.9 Severability. If any one or more of the
covenants, agreements, provisions or terms of this Trust Agreement shall be
for any reason whatsoever held invalid, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
agree-
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ments, provisions and terms of this Trust Agreement and shall in no way affect
the validity or enforceability of the other provisions of this Trust Agreement
or of the Certifi cates, 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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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:
<PAGE>
Schedule I
TREASURY SECURITIES
All terms specified are for stripped principal or interest components of
U.S. Treasury debt obligations.
FIRST TIME OF DELIVERY
<TABLE>
<CAPTION>
PAR ZERO-COUPON STRIP RATE PRICE COST
- ------------ ------------------------------------- ----------- -------------------- -------------
<S> <C> <C> <C> <C>
- ------------ ------------------------------------- ----------- -------------------- -------------
- ------------ ------------------------------------- ----------- -------------------- -------------
- ------------ ------------------------------------- ----------- -------------------- -------------
- ------------ ------------------------------------- ----------- -------------------- -------------
- ------------ ------------------------------------- ----------- -------------------- -------------
- ------------ ------------------------------------- ----------- -------------------- -------------
- ------------ ------------------------------------- ----------- -------------------- -------------
</TABLE>
SETTLEMENT DATE:
<PAGE>
SECOND TIME OF DELIVERY
<TABLE>
<CAPTION>
PAR ZERO-COUPON STRIP RATE PRICE COST
- ------------ ------------------------------------- ----------- -------------------- -------------
<S> <C> <C> <C> <C>
- ------------ ------------------------------------- ----------- -------------------- -------------
- ------------ ------------------------------------- ----------- -------------------- -------------
- ------------ ------------------------------------- ----------- -------------------- -------------
- ------------ ------------------------------------- ----------- -------------------- -------------
- ------------ ------------------------------------- ----------- -------------------- -------------
- ------------ ------------------------------------- ----------- -------------------- -------------
- ------------ ------------------------------------- ----------- -------------------- -------------
</TABLE>
SETTLEMENT DATE:
<PAGE>
Exhibit A
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to
Estee Lauder 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.
$____ TRUST AUTOMATIC COMMON EXCHANGE SECURITIES
ESTEE LAUDER AUTOMATIC COMMON EXCHANGE SECURITY TRUST
CUSIP NO. ___________
NO. ____________ ____________ SHARES
THIS CERTIFIES THAT CEDE & CO. IS THE RECORD OWNER OF ____________ $____ TRUST
AUTOMATIC COMMON EXCHANGE SECURITIES OF Estee Lauder AUTOMATIC COMMON EXCHANGE
SECURITY TRUST CONSTITUTING FRACTIONAL UNDIVIDED INTERESTS IN Estee Lauder
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
<PAGE>
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, __________________, NEW
YORK, NEW YORK _____. THIS CERTIFICATE IS TRANSFERABLE AND INTERCHANGEABLE BY
THE REGISTERED OWNER IN PERSON OR BY HIS DULY AUTHORIZED ATTORNEY AT THE
OFFICE OF THE PAYING AGENT UPON SURRENDER OF THIS CERTIFICATE PROPERLY
ENDORSED OR ACCOMPANIED BY A WRITTEN INSTRUMENT OF TRANSFER AND ANY 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.
Estee Lauder Automatic Common
Exchange Security Trust
DATED: June __, 1998
By
------------------------------
Managing Trustee
COUNTERSIGNED:
- --------------------,
as Paying Agent
By
------------------------------
Authorized Signature
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<PAGE>
S&C Draft of May 18, 1998
CUSTODIAN AGREEMENT
This CUSTODIAN AGREEMENT dated as of this _th day of May,
1998 by and between _____________, a _____________ banking corporation (the
"Custodian"), and William R. Latham III, James B. O'Neill and Donald J.
Puglisi (collectively, the "Trustees"), not in their individual capacities but
solely as Trustees of Estee Lauder 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
May __, 1998 (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 Estee Lauder Companies Inc. (the "Company"), and to issue
Trust Automatic Common Exchange Securities (the "Securities") in accordance
with the terms and conditions of the Trust Agreement;
WHEREAS, the Trustees desire to engage the services of the
Custodian to perform certain custodial duties for the Trust; and
WHEREAS, the Custodian is qualified and willing to assume
such duties, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties agree as follows:
1. Definitions. Capitalized terms not otherwise defined
herein shall have the respective meanings specified in the Trust Agreement.
<PAGE>
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, U.S. Treasury
securities delivered to the Trust in connection with an extension of the
Exchange Date, the Temporary Investments, any cash and any other property at
any time owned or held by the Trust (collectively, the "Assets"). The
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 Trustees from time to time or pursuant to
standing instructions from the Trustees,
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<PAGE>
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
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
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<PAGE>
duties hereunder. Notwithstanding any other provision of this Agreement, the
Custodian shall under no circumstances be liable for any punitive, exemplary,
indirect or consequential damages.
6. Trust Agreement Validity. The Custodian shall not be
responsible for the validity or sufficiency of the Trust Agreement or the due
execution thereof, or for the form, character, genuineness, sufficiency, value
or validity of any of the Assets and the Custodian shall in no event assume or
incur any liability, duty or obligation to any Holder or to the Trustees,
other than as expressly provided 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 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
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<PAGE>
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.
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
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<PAGE>
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.
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<PAGE>
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 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 Estee
Lauder Automatic Common Exchange Security Trust, c/o Donald J. Puglisi,
Managing Trustee, Puglisi & Associates, 850 Library Avenue, Suite 204, Newark,
Delaware 19711, and to the Custodian if mailed or delivered to _____________,
__________________________, Attention: ___________ or at such other address as
shall be
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<PAGE>
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 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>
IN WITNESS WHEREOF, the parties hereto have caused this
Custodian Agreement to be duly executed as of the day and year first above
written.
TRUSTEES
-------------------------
William R. Latham III,
as Trustee
-------------------------
James B. O'Neill,
as Trustee
-------------------------
Donald J. Puglisi,
as Trustee
-------------
By ______________________
Name:
Title:
<PAGE>
S&C Draft of May 8, 1998
ADMINISTRATION AGREEMENT
This ADMINISTRATION AGREEMENT, dated as of this __th day of
May, 1998, by and between _____________, a _____________ banking corporation
(the "Administrator"), and William R. Latham III, James B. O'Neill and Donald
J. Puglisi (collectively, the "Trustees"), not in their individual capacities
but solely as Trustees of Estee Lauder 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
May __, 1998 (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 Estee Lauder Companies Inc. (the "Company") and to issue
Trust Automatic Common Exchange Securities (the "Securities") in accordance
with the terms and conditions of the Trust Agreement;
WHEREAS, the Trustees desire to engage the services of the
Administrator to assume certain duties and responsibilities of the Trustees
under the Trust Agreement and the Investment Company Act and to undertake
certain services on behalf of and subject to the supervision of the Trustees
as provided herein; and
WHEREAS, the Administrator is qualified and willing to
assume such duties and responsibilities and to undertake to render such
services, subject to the supervision of the Trustees, on the terms and
conditions hereinafter set forth.
<PAGE>
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties agree as follows:
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<PAGE>
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
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<PAGE>
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;
(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 (or cause to be kept) 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
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<PAGE>
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;
(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
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<PAGE>
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 except to the extent that the Trustees shall have directed the
Administrator to retain such persons in which event the Administrator shall not
be liable for such persons' acts or omissions. The Administrator shall not be
liable and shall be fully protected in acting upon any writing or document
reasonably believed by it to be genuine and to have been given, signed or made
by the proper person or persons and shall not be held to have notice of any
change of authority of any person until receipt of written notice thereof from a
Trustee. Without limiting the generality of the preceding sentence, the
Administrator (i) at its own cost, may select and employ independent accountants
acceptable to the Trustees (other than the independent public accountants
referred to in clause (iii) of Section 2.2 of this Agreement and Section 2.2(d)
of the Trust Agreement) to keep the financial books and records of the Trust, to
prepare the financial statements of the Trust and to prepare Trust tax returns,
and (ii) should the Trustees fail to do so, may select and engage attorneys
acceptable to the Trustees to prepare annual, semiannual and periodical reports,
notices of meetings and proxy statements, annual reports to holders of the
Securities and other documents required under the Investment Company Act or the
Securities Exchange Act of 1934, as amended.
2.4 Power of Attorney. The Trust hereby appoints the
Administrator, acting through any duly appointed officer, its attorney-in-fact
and agent for the purpose of
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<PAGE>
performing the duties prescribed in Section 2.2(f)(iii) and 2.2(i).
2.5 Delivery of Certain Documents. The Trust will deliver to
the Administrator, promptly following the execution hereof: (a) a complete
conformed copy of the registration statement of the Trust under the Securities
Act of 1933, as amended, and the Investment Company Act, including all
amendments, exhibits and schedules thereto and (b) the EDGAR access codes
(Central Index Key, CIK Confirmation Code, Password and Password Modification
Access Code) employed to file such registration statement.
ARTICLE III
COMPENSATION OF ADMINISTRATOR
3.1 Compensation. 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 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.
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<PAGE>
ARTICLE IV
TERMINATION
4.1 Termination.
(a) This Agreement shall terminate immediately upon written
notice of termination from the Trustees to the Administrator if any of the
following events shall occur:
(i) If the Administrator shall violate any
provision of this Agreement, the Trust Agreement, or the Investment
Company Act, and after notice of such violation, shall not cure such
default within 30 days; or
(ii) If the Administrator shall be adjudged bankrupt or
insolvent by a court of competent juris diction, or an order shall be
made by a court of competent jurisdiction for the appointment of a
receiver, liquidator, or trustee of the Administrator, or of all or
substantially all of its property by reason of the foregoing, or
approving any petition filed against the Administrator for its
reorganization, and such adjudication or order shall remain in force
or unstayed for a period of 30 days; or
(iii) If the Administrator shall institute proceedings
for voluntary bankruptcy, or shall file a petition seeking
reorganization under the Federal bankruptcy laws, or for relief under
any law for the relief of debtors, or shall consent to the
appointment of a receiver of the Administrator or of all or
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
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<PAGE>
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
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<PAGE>
5.1 Books and Records; Inspection and Copying. The
Administrator shall keep (or cause to be kept) appropriate, and reasonably
detailed and accurate, books and records of all its activities pursuant to
this Agreement. The Trustees shall have the right to inspect such books and
records during the Administrator's normal business hours upon reasonable
request, and to make copies of the same at the expense of the Trust.
5.2 Access to Information. The Administrator shall make
available to each of 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
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<PAGE>
shall not be amended, changed, modified, or discharged, in whole or in part,
except by an instrument in writing signed by both parties hereto, or their
respective successors or permitted assigns.
6.3 Notices. Any notice, report or other communication
required or permitted to be given hereunder shall be in writing, and shall,
unless some other method of giving such notice, report or other communication
is accepted by the party to whom it is to be given or is required by the Trust
Agreement or the Investment Company Act, be given by being mailed by U.S.
first class mail, certified or registered, return receipt requested, postage
prepaid, to the following addresses of the parties hereto:
The Trust: Estee Lauder Automatic Common
Exchange Security Trust
c/o Donald J. Puglisi, Managing
Trustee
Puglisi & Associates
850 Library Avenue, Suite 204
Newark, Delaware 19711
Telephone: (302) 738-6680
Telecopier: (302) 738-7210
The Administrator: _____________
_____________
Attn: __________________
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.
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<PAGE>
6.4 Applicable Law. The provisions of this Agreement shall
be construed and interpreted in accordance with the laws of the State of New
York as at the time in effect except to the extent such law is preempted by
federal law.
6.5 Non-assignability. This Agreement and the rights and
obligations of the parties hereunder may not be assigned or delegated by
either party without the prior written consent of the other party.
6.6 Indemnification. The Trustees shall indemnify and hold
the Administrator harmless from and against any loss, damages, cost or expense
(including the costs of investigation, preparation for and defense of legal
and/or administrative proceedings related to a claim against it and reasonable
attorneys' fees and disbursements), liability or claim incurred by reason of any
inaccuracy in information furnished to the Administrator by the Trustees, or any
act or omission in the course of, connected with or arising out of any services
to be rendered hereunder, provided that the Administrator shall not be
indemnified and held harmless from and against any such loss, damages, cost,
expense, liability or claim incurred by reason of its willful misfeasance, bad
faith, or gross negligence in the performance of its duties, or its reckless
disregard of its duties and obligations hereunder. Such indemnity shall survive
the resignation, removal or discharge of the Administrator.
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>
IN WITNESS WHEREOF the parties have hereunto executed this
Administration Agreement as of the day and year first above written.
TRUSTEES
------------------------------
William R. Latham III,
as Trustee
------------------------------
James B. O'Neill,
as Trustee
------------------------------
Donald J. Puglisi,
as Trustee
-------------
By____________________________
Name:
Title:
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<PAGE>
S&C Draft of May 8, 1998
EXHIBIT 2.K(ii)
PAYING AGENT AGREEMENT
This PAYING AGENT AGREEMENT, dated as of this __th day of
May, 1998, by and between _____________, a _____________ banking corporation
(the "Paying Agent"), and William R. Latham III, James B. O'Neill and Donald
J. Puglisi (collectively, the "Trustees"), not in their individual capacities
but solely as Trustees of Estee Lauder 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
May __, 1998 (the "Trust Agreement").
W I T N E S S E T H
WHEREAS, the Trust is a non-diversified, closed-end
management investment company, as defined in the Investment Company Act of
1940 (the "Investment Company Act"), formed to purchase and hold the U.S.
treasury securities (the "Treasury Securities"), to enter into and hold
forward purchase contracts (the "Contracts") with one or more existing
shareholders of The Estee Lauder Companies Inc. (the "Company") and to issue
Trust Automatic Common Exchange Securities (the "Securities") to the public in
accordance with the terms and conditions of the Trust Agreement;
WHEREAS, the Trustees desire to engage the services of the
Paying Agent to assume certain responsibilities and to perform certain duties
as the transfer agent, registrar and paying agent with respect to the
Securities upon the terms and conditions of this Agreement; and
WHEREAS, the Paying Agent is qualified and willing to assume
such responsibilities and to perform such duties, subject to the supervision
of the Trustees, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties agree as follows:
<PAGE>
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, _____________,
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>
thereof paid upon maturity to the payment of the next succeeding Quarterly
Distribution. All such Temporary Investments shall be selected by the Trustees
from time to time or pursuant to standing instructions from the Trustees, and
the Paying Agent shall have no liability to the Trust or any Holder or any
other Person with respect to any such Temporary Investment.
2.4 Instructions from Administrator. The Paying Agent shall
receive and execute all instructions from the Administrator, except to the
extent they conflict with or are contrary to the terms of the Trust Agreement
or this Agreement.
ARTICLE III
TRANSFER AGENT AND REGISTRAR
3.1 Original Issue of Certificates. On the date Securities
sold pursuant to the Underwriting Agreement are originally issued,
certificates for the Securities shall be issued by the Trust, and, at the
request of the Trustees, registered in such names and such denominations as
the underwriters shall have previously requested of the Trustees, executed
manually or in facsimile by the Managing Trustee and countersigned by the
Paying Agent. At no time shall the aggregate number of Securities represented
by such countersigned certificates exceed the number of then outstanding
Securities.
3.2 Registry of Holders. The Paying Agent shall maintain a
registry of the Holders of the Securities.
3.3 Registration of Transfer of the Securities. The
Securities shall be registered for transfer or exchange, and new certificates
shall be issued, in the name of the designated transferee or transferees, upon
surrender of the old certificates in form deemed by the Paying Agent properly
endorsed for transfer with (a) all necessary endorsers' signatures guaranteed
in such manner and form as the Paying Agent may require by a guarantor
reasonably believed by the Paying Agent to be responsible, (b) such assurances
as the Paying Agent shall deem necessary or appropriate to evidence the
genuineness and effectiveness of each necessary endorsement and (c)
satisfactory evidence of compliance with all applicable laws relating to the
collection of taxes or funds necessary for the payment of such taxes.
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<PAGE>
3.4 Lost Certificates. The Paying Agent shall issue and
register replacement certificates for certificates represented to have been
lost, stolen or destroyed, upon the fulfillment of such requirements as shall
be deemed appropriate by the Trustees and the Paying Agent, subject at all
times to provisions of law, the Trust Agreement and resolutions adopted by the
Trustees with respect to lost securities. The Paying Agent may issue new
certificates in exchange for and upon the cancellation of mutilated
certificates. Any request by the Trustees to the Paying Agent to issue a
replacement or new certificate pursuant to this Section 3.4 shall be deemed to
be a representation and warranty by the Trustees to the Paying Agent that such
issuance will comply with such provisions of law and the Trust Agreement and
resolutions of the Trustees.
3.5 Transfer Books. The Paying Agent shall maintain the
transfer books listing the Holders of the Securities. In case of any written
request or demand for the inspection of the transfer books of the Trust or any
other books in the possession of the Paying Agent, the Paying Agent will
notify the Trustees and secure instructions as to permitting or refusing such
inspection. The Paying Agent reserves the right, however, to exhibit the
transfer books or other books to any person in case it is advised by its
counsel that its failure to do so would be unlawful.
3.6 Disposition of Cancelled Certificates; Records. The
Paying Agent shall retain certificates which have been cancelled in transfer
or in exchange and accompanying documentation in accordance with applicable
rules and regulations of the Commission for six calendar years from the date
of such cancellation, and shall make such records available during this period
at any time, or from time to time, for reasonable periodic, special, or other
examinations by representatives of the Commission and the Board of Governors
of the Federal Reserve System. Thereafter such records shall not be destroyed
by the Paying Agent but will be safely stored for possible future reference.
In case of any request or demand for the inspection of the register of the
Trust or any other books in the possession of the Paying Agent, the Paying
Agent will notify the Trustees and seek to secure instructions as to
permitting or refusing such inspection. The Paying Agent reserves the right,
however, to exhibit the register or other records to any person in case it is
advised by its counsel that its failure to do so would (i) be unlawful, or
(ii) expose it to liability, unless the Trustees shall have offered
indemnification satisfactory to the Paying Agent.
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<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE TRUSTEES
The Trustees represent and warrant to the Paying Agent that:
(a) the Trust is a validly existing trust under the laws of
the State of New York and the Trustees have full power under the
Trust Agreement to execute and deliver this Agreement and to
authorize, create and issue the Securities;
(b) this Agreement has been duly and validly authorized,
executed and delivered by the Trustees and constitutes the valid and
binding agreement of the Trustees, enforceable against the Trustees
in accordance with its terms, subject as to such enforceability to
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to
general equitable principles;
(c) the form of the certificate evidencing the Securities
complies with all applicable laws of the State of New York;
(d) the Securities have been duly and validly authorized,
executed and delivered by the Trustees and are validly issued;
(e) the offer and sale of the Securities has been registered
under the Securities Act of 1933 and the Trust has been registered
under the Investment Company Act and no further action by or before
any governmental body or authority of the United States or of any
state thereof is required in connection with the execution and
delivery of this Agreement or the issuance of the Securities;
(f) the execution and delivery of this Agreement and the
issuance and delivery of the Securities do not and will not conflict
with, violate, or result in a breach of, the terms, conditions or
provisions of, or constitute a default under, the Trust Agreement,
any law or regulation, any order or decree of any court or public
authority having jurisdiction over the Trust, or any mortgage,
indenture, contract, agreement or undertaking to which the Trustees
are a party or by which any of them are bound; and
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<PAGE>
(g) no taxes are payable upon or in respect of the execution
of this Agreement or the issuance of the Securities.
ARTICLE V
DUTIES AND RIGHTS
5.1 Duties. (a) The Paying Agent is acting solely as agent
for the Trustees hereunder and owes no fiduciary duties to any other Person by
reason of this Agreement.
(b) In the absence of bad faith, gross negligence or willful
misfeasance on its part in the performance of its duties hereunder or its
reckless disregard of its duties and obligations hereunder, the Paying Agent
shall not be liable for any action taken, suffered, or omitted in the
performance of its duties under this Agreement. The Paying Agent shall under
no circumstances be liable for any indirect or consequential damages
hereunder.
5.2 Rights. (a) The Paying Agent may rely and shall be
protected in acting or refraining from acting upon any communication
authorized hereby and upon any written instruction, notice, request,
direction, consent, report, certificate, share certificate or other
instrument, paper or document reasonably believed by it to be genuine. The
Paying Agent shall not be liable for acting upon any telephone communication
authorized hereby which the Paying Agent believes in good faith to have been
given by the Trustees.
(b) The Paying Agent may consult with legal counsel and the
advice of such counsel shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) The Paying Agent shall not be required to advance,
expend or risk its own funds or otherwise incur or become exposed to financial
liability in the performance of its duties hereunder.
(d) The Paying Agent may perform its duties and exercise its
rights hereunder either directly or by or through agents or attorneys
appointed with due care by it hereunder.
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<PAGE>
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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<PAGE>
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: Estee Lauder Automatic Common
Exchange Security Trust
c/o Donald J. Puglisi, Managing
Trustee
Puglisi & Associates
850 Library Avenue, Suite 204
Newark, Delaware 19711
Telephone: (302) 738-6680
Telecopier: (302) 738-7210
with a copy to the Administrator if the duties of the Administrator are being
performed by a Person other than the Person performing the obligations of the
Paying Agent.
If to the Paying Agent,
addressed: ----------------------------
----------------------------
----------------------------
Attn:
----------------------
Telephone:
-----------------
Telecopier:
----------------
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<PAGE>
With Cash Settlement Option Draft of 5/16/98
PURCHASE AGREEMENT
THIS AGREEMENT is made as of this ____ day of May __, 1998
between __________________, a ____________ ("Seller") and Estee Lauder Automatic
Common Exchange Security Trust, a trust organized under the laws of the State of
New York under and by virtue of an Amended and Restated Trust Agreement, dated
as of May __, 1998 (the "Trust Agreement") (such trust and the trustees thereof
acting in their capacity as such being referred to herein as "Purchaser").
WHEREAS, Seller owns shares of Class A Common Stock, par value
$.01 per share (the "Common Stock"), of The Estee Lauder Companies Inc., a
Delaware corporation (the "Company");
WHEREAS, Purchaser has filed with the Securities and Exchange
Commission a registration statement contemplating the offering of up to
___________ Trust Automatic Common Exchange Securities (the "Securities"), the
terms of which contemplate delivery by Purchaser to the holders thereof of a
number of shares of Common Stock (or, at the option of Sellers, cash in lieu
thereof) on the Exchange Date referred to herein;
WHEREAS, Seller has agreed, pursuant to the Collateral
Agreement (the "Collateral Agreement") dated as of May __, 1998, among
Purchaser, Seller, as Pledgor and ______________, as collateral agent (the
"Collateral Agent"), to grant Purchaser a security interest in shares of Common
Stock and in certain circumstances certain other collateral to secure the
obligations of Seller hereunder;
WHEREAS, Purchaser has agreed, pursuant to an underwriting
agreement, dated May __, 1998 (the "Underwriting Agreement"), among Purchaser,
the Sellers named therein, the Company and Goldman Sachs & Co. and Merrill
Lynch, Pierce, Fenner & Smith Incorporated 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>
DEFINITIONS
As used herein, the following words and phrases shall have the
following meanings:
"Additional Purchase Price" has the meaning
provided in Section 1.2(b).
"Additional Share Base Amount" means a number equal to the
number of Optional Securities that the Underwriters elect to purchase under the
Underwriting Agreement multiplied by a fraction, the numerator of which is the
Firm Share Base Amount and the denominator of which is the number of Firm
Securities.
"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 May __, 1998, or
any successor thereto.
"Appreciation Threshold Price" has the meaning
provided in Section 1.1(c).
"Average Market Price" per share of Common Stock on any date
means the average Closing Price of a share of Common Stock on the 20 Trading
Days immediately prior to but not including such date, provided that for
purposes of determining the payment required upon cash settlement of this
Agreement in connection with a Rollover Offering, "Average Market Price" means
the Closing Price per share of Common Stock on the Trading Day immediately
preceding the date that the Rollover Offering is priced (the "Pricing Date") or,
if the Rollover Offering is priced after 4:00 P.M., New York City time, on the
Pricing Date, the Closing Price per share on the Pricing Date.
"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.
<PAGE>
"Calculation Period" means any period of Trading Days for
which an average security price must be determined pursuant to this Agreement.
"Cash Settlement Alternative" has the meaning
provided in Section 1.3(d).
"Closing Price" of any common equity security (including the
Common Stock or any Marketable Securities) 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 such common equity security as reported on the NYSE
Consolidated Tape on such date of determination or, if such common equity
security is not listed for trading on the NYSE on any such date, as reported in
the composite transactions for the principal United States securities exchange
on which such common equity security is so listed, or if such common equity
security is not so listed on a United States national or regional securities
exchange, as reported by The NASDAQ National Market or, if such common equity
security Stock is not so reported, the last quoted bid price for such common
equity security 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 occurs prior to the Exchange Date, the Closing
Price of the Common Stock as determined pursuant to the foregoing will be
appropriately adjusted to reflect the occurrence of such event.
"Collateral Agreement" means the Collateral Agreement among
Seller, as Pledgor, _________, as Collateral Agent and Purchaser, dated as of
May __, 1998.
"common equity security" means any security of any class of
capital stock which has no preference in respect of dividends or of amounts
payable in the event of any voluntary or involuntary liquidation, dissolution or
winding up of the issuer thereof and which is not subject to redemption by the
issuer thereof.
"Company Successor" has the meaning provided in
Section 6.2.
"Contract Shares" has the meaning provided in
Section 1.1(b).
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<PAGE>
"Custodian" means ___________________, custodian for Purchaser
under the Custodian Agreement dated as of ____________, 1998, 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 May __, 2001, subject to (i) extension
by Seller pursuant to Section 1.3(e) and (ii) subsequent acceleration by Seller
pursuant to Section 1.3(f).
"Exchange Rate" has the meaning provided in
Section 1.1(c).
"Firm Purchase Price" has the meaning provided in
Section 1.2(a).
"Firm Share Base Amount" has the meaning provided
in Section 1.1(a).
"Firm Shares" has the meaning provided in
Section 1.1(a).
"First Time of Delivery" has the meaning provided
in Section 1.3(a).
"Initial Price" has the meaning provided in
Section 1.1(c).
"Liens" has the meaning provided in the Collateral
Agreement.
"Marketable Securities" has the meaning provided
in Section 6.2.
"NYSE" means the New York Stock Exchange, Inc.
"Permitted Dividend" has the meaning provided in
Section 6.1(d).
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<PAGE>
"Reorganization Event" has the meaning provided in
Section 6.2.
"Rollover Offering" means a reoffering or refinancing of all
(but not less than all) of the Securities effected not earlier than May __, 2001
by means of a completed public offering or offerings (which may include one or
more exchange offers) by or on behalf of Seller and the other sellers that have
entered into purchase agreements with the Purchaser.
"Second Time of Delivery" has the meaning provided
in Section 1.1(b).
"Then-Current Market Price" of the Common Stock, for the
purpose of applying any adjustment pursuant to Section 6.1, means the average
Closing Price per share of the Common Stock for the Calculation Period of 5
Trading Days immediately prior to the time such adjustment is effected (or, in
the case of an adjustment effected at the opening of business on the Business
Day next following a record date as described in Section 6.1(f)(i), immediately
prior to the earlier of the time such adjustment is effected and the related
ex-date); provided that if no Closing Price for the Common Stock is determined
for one or more (but not all) of such Trading Days, such Trading Day shall be
disregarded in the calculation of the Then-Current Market Price (but no
additional Trading Days shall be added to the Calculation Period). If no Closing
Price for the Common Stock may be determined for any of such Trading Days, the
Then-Current Market Price shall be the Closing Price for the Common Stock for
the most recent Trading Day prior to such 5 Trading Days for which a Closing
Price for the Common Stock may be determined pursuant to the "Closing Price"
definition. The "ex-date" with respect to any dividend, distribution or issuance
shall mean the first date on which the shares of Common Stock trade regular way
on their principal market without the right to receive such dividend,
distribution or issuance.
"Trading Day" in respect of any common equity security means a
day on which such common equity security (A) is not suspended from trading on
any national or regional securities exchange or association or over-the-counter
market at the close of business and (B) has traded at least once on the national
or regional securities
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<PAGE>
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.
"Transfer Restrictions" has the meaning provided
in the Collateral Agreement.
"Transferred Security" has the meaning provided in
Section 1.3(g).
"Trust Agreement" means the Amended and Restated Trust
Agreement constituting Estee Lauder Automatic Common Exchange Security Trust,
dated as of May __, 1998.
"U.S. Government Securities" has the meaning
provided in the Collateral Agreement.
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
on the Exchange Date, and Purchaser agrees to purchase and acquire from Seller
on the Exchange Date, 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 on the Exchange
Date, and Purchaser shall have a right to purchase on the Exchange Date, 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 on the Exchange Date, 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
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"Second Time of Delivery"). The Firm Shares and the Additional Shares (if any)
are collectively referred to herein as the "Contract Shares".
(c) Exchange Rate. The "Exchange Rate" shall be determined in
accordance with the following formula, subject to adjustment as a result of
certain events as provided in Article VI: (i) if the Average 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 Average Market
Price; (ii) if the Average Market Price is equal to or greater than the
Appreciation Threshold Price, _______ and (iii) if the Average Market Price is
less than the Initial Price, 1.
1.2 Purchase Price. (a) Firm Purchase Price. The
purchase price for the Firm Shares (the "Firm Purchase Price") shall be
$_________________ in cash.
(b) Additional Purchase Price. The purchase price for the
Additional Shares (the "Additional Purchase Price") shall be an amount equal to
(i) the difference between (1) the aggregate proceeds to Purchaser from the sale
of the Optional Securities and (2) the aggregate cost to Purchaser, as notified
by Purchaser to Seller at the Second Time of Delivery, of the Additional STRIPS,
multiplied by (ii) a fraction, the numerator of which is the Firm Share Base
Amount and the denominator of which is the number of Firm Securities.
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 May __,
1998 (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 &
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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) Sale and Delivery of Contract Shares. On the Exchange
Date, Seller agrees to sell and deliver the Contract Shares to Purchaser. Sale
and delivery shall be effected by delivery by the Collateral Agent to the
Custodian, for the account of Purchaser, of shares of Common Stock then held by
the Collateral Agent as collateral under the Collateral Agreement, in an amount
equal to the number of Contract Shares, rounded down to the nearest whole
number. Instead of any fractional shares of Common Stock that would otherwise
be deliverable to Purchaser at the Exchange Date, Seller agrees to make a cash
payment in respect of such fractional shares of Common Stock in an amount equal
to the value thereof at the Average Market Price. Notwithstanding the
foregoing, if a Reorganization Event shall have occurred prior to the Exchange
Date then, in lieu of the foregoing, delivery shall be effected as follows: (i)
in the case of any cash required to be delivered on the Exchange Date as
provided in Section 6.2, by wire transfer of immediately available funds to an
account designated by Purchaser; or (ii) in the case of any Marketable
Securities elected by Seller to be delivered in lieu of cash as provided in
Section 6.2, at Seller's election, by instruction to the Collateral Agent to
deliver to the Custodian, for the account of Purchaser, a specified number of
Marketable Securities then held as collateral under the Collateral Agreement, as
provided in Section 6(g) of the Collateral Agreement.
(d) Cash Settlement Alternative. At its option, Seller may
deliver to Purchaser on the Exchange Date, in lieu of the Contract Shares, an
amount in cash equal to the Average Market Price of the Contract Shares (the
"Cash Settlement Alternative"), paid by wire transfer to an account designated
by Custodian, in Federal (immediately available) funds; provided that in
connection with a Rollover Offering which is consummated and as to which Seller
has duly elected the Cash Settlement Alternative, such cash payment shall be
made not later than the fifth Trading Day after the Exchange Date. Seller may
request the Cash Settlement Alternative in respect of all, but not less than
all, Contract Shares and may do so by notice to Purchaser, the Collateral Agent
and the Custodian not less
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than 35 days prior to the Exchange Date (specifying whether such cash settlement
is being made in connection with a Rollover Offering). If Seller elects the Cash
Settlement Alternative and so notifies Purchaser, Purchaser shall provide notice
of such election (specifying whether such cash settlement is being made in
connection with a Rollover Offering) to the holders of the Securities, not less
than thirty (30) nor more than ninety (90) days prior to the Exchange Date.
(e) Extension of Exchange Date. At its option, Seller may, by
notice given to Purchaser not earlier than March __, 2001 and not later than
April __, 2001, elect to extend the Exchange Date to August __, 2001, provided
that such extension shall be effective only if Seller shall have:
(i) delivered to the Custodian, for the account of and subject
to the exclusive control of Purchaser, free of any adverse claims, U.S.
Government Securities which through the scheduled payment of principal
and interest in accordance with their terms will provide, not later
than one Business Day before August __, 2001, cash in an amount equal
to not less than the product of (1) $______ and (2) a fraction, the
numerator of which is the sum of the Firm Share Base Amount and the
Additional Share Base Amount and the denominator of which is the number
of Firm Securities; and
(ii) delivered to Purchaser (1) a certificate of Seller
substantially in the form of Exhibit A hereto and dated the date of
such delivery (A) identifying the U.S. Government Securities being
transferred, (B) certifying that with respect to such U.S. Government
Securities the representations and warranties contained in such Exhibit
A hereto are true and correct on and as of the date thereof and (C)
certifying that such U.S. Government Securities satisfy the condition
set forth in paragraph 1.3(e)(i), and (2) an opinion, dated the date of
such delivery, of counsel addressed to Purchaser confirming the
representations contained in the second sentence of paragraph 2(c) to
Exhibit A hereto.
In addition, Seller hereby covenants and agrees to take all other actions
necessary to cause Purchaser to be a protected purchaser of such U.S. Government
Securities, within the
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meaning of Article 8 of the New York Uniform Commercial Code, as amended.
If Seller elects to extend the Exchange Date and so notifies
Purchaser, Purchaser shall provide notice of such election to the holders of the
Securities not later than April __, 2001.
(f) Acceleration of Exchange Date. At any time after the
Exchange Date has been extended pursuant to Section 1.3(e) hereof, Seller may,
at its option in connection with the consummation of a Rollover Offering,
accelerate the Exchange Date to any date on or after May __, 2001, by notice to
Purchaser not later than ____ a.m. on the date to which the Exchange Date is
accelerated; provided that such acceleration shall be effective only if at or
prior to ___ a.m. on such accelerated Exchange Date, Seller has paid to
Purchaser, by wire transfer to an account designated by Custodian, in Federal
(immediately available) funds, an amount equal to the product of (i) the
aggregate accrued and unpaid quarterly distributions on all outstanding
Securities (computed on the basis of an aggregate quarterly distribution of
$______ and a 360-day year comprised of 12 30-day months) and (ii) a fraction,
the numerator of which is the sum of the Firm Share Base Amount and the
Additional Share Base Amount and the denominator of which is the number of Firm
Securities. Upon receipt of such amount in immediately available funds,
Purchaser shall promptly deliver to Seller, free of any adverse claim, the U.S.
Government Securities previously delivered by Seller to Purchaser pursuant to
Section 1.3(e) (together with any payments theretofore received by Purchaser in
respect thereof).
If Seller elects to accelerate the Exchange Date and so
notifies Purchaser, Purchaser shall provide notice of such election to the
holders of the Securities not later than the accelerated Exchange Date.
(g) Satisfaction of Obligations. Notwithstanding any other
provision of this Article I, if on or prior to the Exchange Date, Seller
transfers Securities (any Securities so transferred being hereinafter referred
to as the "Transferred Securities") to Purchaser, free and clear of any adverse
claim, for cancellation, then the number of Contract Shares deliverable by
Seller pursuant to this Agreement shall be reduced by a number equal to the
product
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of (i) the number of Contract Shares and (ii) a fraction, the numerator of which
is the number of Transferred Securities and the denominator of which is the sum
of the Firm Share Base Amount and the Additional Share Base Amount.
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) it will
not treat this Agreement, any portion of this Agreement, or any obligation
hereunder as giving rise to any interest income or other inclusions of ordinary
income; (ii) it 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) it will treat this
Agreement in its entirety as a forward contract for the delivery of such
Contract Shares, cash or Marketable Securities; and (iv) it will not take any
action (including filing any tax return or form or taking any position in any
tax proceeding) that is inconsistent with the obligations contained in 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 it will not buy shares of Common Stock for its 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
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(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 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
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 the Common Stock in shares of such stock;
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(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 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
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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) 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 the Company
shall, after the date hereof, declare 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 make 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
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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
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
Average 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:
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(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 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 after an announcement of a share
repurchase requiring an adjustment pursuant to this Section 6.1, the Company
reduces the repurchase price or repurchases
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fewer shares than announced, then upon completion of such share repurchase the
Exchange Rate shall be further adjusted to equal the Exchange Rate that would
have been in effect had the adjustment for such repurchase been based on the
actual price and amount repurchased. 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 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,
0.______ multiplied by the Transaction Value, and (iii) if the Transaction Value
is less than the Initial Price, the Transaction Value. Notwithstanding the
foregoing, (A) if the consideration received by holders of Common Stock in such
Reorganization Event does not include Marketable Securities, then the Seller's
delivery obligation under this Agreement will be accelerated, and the Seller
will deliver the Transaction
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Value to Purchaser promptly upon consummation of the Reorganization Event; and
(B) 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 such 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 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
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Securities or the issuer thereof between the time of the Reorganization Event
and the Exchange Date. 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 itself or
its debts under any bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, or shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against it, or shall take any action to authorize any of the
foregoing;
(b) an involuntary case or other proceeding shall be commenced
against the Seller seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 60 days; or an order for relief shall
be entered against the Seller under the federal bankruptcy laws as now or
hereafter in effect; or
(c) a Collateral Event of Default within the meaning of the
Collateral Agreement;
then, upon the occurrence of any such event, Seller shall become obligated to
deliver the Contract Shares (or, after a Reorganization Event, the Marketable
Securities or cash or combination thereof deliverable in respect thereof), or
any U.S. Government Securities then pledged under the Collateral Agreement in
respect thereof. Purchaser and Seller agree
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that such amount is a reasonable pre-estimate of loss and not a penalty. Such
amount is payable for the loss of bargain and Purchaser will not be entitled to
recover additional damages 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,
____________________, at ____________________________________________, Telecopy
No. _____________, attention _________________; notices to Seller shall be
directed to it at _______________________________, Telecopy No. _____________.
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
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agreement among the parties with respect to the subject matter hereof and
supersedes all prior agreements, understandings and negotiations, both written
and oral, among the parties with respect to the subject matter of this
Agreement.
8.5 Amendments; Waivers. Any provision of this Agreement may
be amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by Purchaser and Seller or, in the case of
a waiver, by the party against whom the waiver is to be effective. No failure or
delay by either party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law.
8.6 No Third Party Rights; Successors and Assigns. This
Agreement is not intended and shall not be construed to create any rights in any
person other than Seller and Purchaser and their respective successors and
assigns and no person shall assert any rights as third party beneficiary
hereunder. Whenever any of the parties hereto is referred to, such reference
shall be deemed to include the successors and assigns of such party. All the
covenants and agreements herein contained by or on behalf of the Seller and
Purchaser shall bind, and inure to the benefit of, their respective successors
and assigns whether so expressed or not, and shall be enforceable by and inure
to the benefit of Purchaser and its successors and assigns.
8.7 Counterparts. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
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IN WITNESS WHEREOF, the parties have signed this Agreement as
of the date and year first above written.
SELLER:
-----------------------------------
PURCHASER:
______________________, as trustee,
______________________, as trustee,
______________________, as trustee,
each as trustee of Estee Lauder
Automatic Common Exchange Security
Trust
<PAGE>
Exhibit A
to
Purchase Agreement
CERTIFICATE FOR EXTENSION OF EXCHANGE DATE
The undersigned, ___________________ ("Seller), hereby
certifies, pursuant to Section 1.3(e) of the Purchase Agreement, dated as of May
__, 1998, among Seller and Estee Lauder AUTOMATIC COMMON EXCHANGE SECURITY TRUST
(the "Purchase Agreement"; terms defined in the Purchase Agreement being used
herein as defined therein), that:
1. Seller is transferring the following U.S.
Government Securities to Purchaser:
2. Seller hereby represents and warrants to Purchaser that:
(a) Consents to Transfer. No Transfer Restrictions exist
with respect to or otherwise apply to the transfer by Seller of such U.S.
Government Securities to Purchaser.
(b) Delivery. Seller has delivered to the Custodian, for the
account of and subject to the exclusive control of Purchaser, free of any
adverse claims, U.S. Government Securities which through the scheduled payment
of principal and interest in accordance with their terms will provide, not later
than one Business Day before August __, 2001, cash in an amount equal to not
less than the product of (1) $______ and (2) a fraction, the numerator of which
is the sum of the Firm Share Base Amount and the Additional Share Base Amount
and the denominator of which is the number of Firm Securities.
(c) Title. Seller has good and marketable title to such U.S.
Government Securities, free of all Liens and Transfer Restrictions. Upon
delivery of such U.S. Government Securities to Purchaser, Purchaser will obtain
good and marketable title to such U.S. Government Securities free of any adverse
claims.
IN WITNESS WHEREOF, the undersigned has executed this
certificate this ____ day of ____________, _____.
--------------------------------
Name:
Title:
<PAGE>
Without Cash Settlement Option Draft of 5/10/98
PURCHASE AGREEMENT
THIS AGREEMENT is made as of this ____ day of May __, 1998
between __________________, a ____________ ("Seller") and Estee Lauder
Automatic Common Exchange Security Trust, a trust organized under the laws of
the State of New York under and by virtue of an Amended and Restated Trust
Agreement, dated as of May __, 1998 (the "Trust Agreement") (such trust and
the trustees thereof acting in their capacity as such being referred to herein
as "Purchaser").
WHEREAS, Seller owns shares of Class A Common Stock, par
value $.01 per share (the "Common Stock"), of The Estee Lauder Companies Inc.,
a Delaware corporation (the "Company");
WHEREAS, Purchaser has filed with the Securities and
Exchange Commission a registration statement contemplating the offering of up
to ___________ Trust Automatic Common Exchange Securities (the "Securities"),
the terms of which contemplate delivery by Purchaser to the holders thereof of
a number of shares of Common Stock on the Exchange Date referred to herein;
WHEREAS, Seller has agreed, pursuant to the Collateral
Agreement (the "Collateral Agreement") dated as of May __, 1998, among
Purchaser, Seller, as Pledgor and ______________, as collateral agent (the
"Collateral Agent"), to grant Purchaser a security interest in shares of
Common Stock and in certain circumstances certain other collateral to secure
the obligations of Seller hereunder;
WHEREAS, Purchaser has agreed, pursuant to an underwriting
agreement, dated May __, 1998 (the "Underwriting Agreement"), among Purchaser,
the Sellers named therein, the Company and Goldman Sachs & Co. and Merrill
Lynch, Pierce, Fenner & Smith Incorporated 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;
<PAGE>
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:
DEFINITIONS
As used herein, the following words and phrases shall have
the following meanings:
"Additional Purchase Price" has the meaning provided in
Section 1.2(b).
"Additional Share Base Amount" means a number equal to the
number of Optional Securities that the Underwriters elect to purchase under
the Underwriting Agreement multiplied by a fraction, the numerator of which is
the Firm Share Base Amount and the denominator of which is the number of Firm
Securities.
"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 May __, 1998, or
any successor thereto.
"Appreciation Threshold Price" has the meaning provided in
Section 1.1(c).
"Average Market Price" per share of Common Stock on any date
means the average Closing Price of a share of Common Stock on the 20 Trading
Days immediately prior to but not including such date.
<PAGE>
"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 any common equity security (including the
Common Stock or any Marketable Securities) 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 such common equity security as reported on the NYSE
Consolidated Tape on such date of determination or, if such common equity
security is not listed for trading on the NYSE on any such date, as reported in
the composite transactions for the principal United States securities exchange
on which such common equity security is so listed, or if such common equity
security is not so listed on a United States national or regional securities
exchange, as reported by The NASDAQ National Market or, if such common equity
security Stock is not so reported, the last quoted bid price for such common
equity security 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 occurs prior to the Exchange Date, the Closing
Price of the Common Stock as determined pursuant to the foregoing will be
appropriately adjusted to reflect the occurrence of such event.
"Collateral Agreement" means the Collateral Agreement among
Seller, as Pledgor, _________, as Collateral Agent and Purchaser, dated as of
May __, 1998.
"common equity security" means any security of any class of
capital stock which has no preference in respect of dividends or of amounts
payable in the event of any voluntary or involuntary liquidation, dissolution
or winding up of the issuer thereof and which is not subject to redemption by
the issuer thereof.
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"Company Successor" has the meaning provided in Section 6.2.
"Contract Shares" has the meaning provided in Section 1.1(b).
"Custodian" means ___________________, custodian for
Purchaser under the Custodian Agreement dated as of ____________, 1998, 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 May __, 2001, subject to (i) extension
by Seller pursuant to Section 1.3(d) and (ii) subsequent acceleration by Seller
pursuant to Section 1.3(e).
"Exchange Rate" has the meaning provided in Section 1.1(c).
"Firm Purchase Price" has the meaning provided in Section
1.2(a).
"Firm Share Base Amount" has the meaning provided in Section
1.1(a).
"Firm Shares" has the meaning provided in Section 1.1(a).
"First Time of Delivery" has the meaning provided in Section
1.3(a).
"Initial Price" has the meaning provided in Section 1.1(c).
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<PAGE>
"Liens" has the meaning provided in the Collateral Agreement.
"Marketable Securities" has the meaning provided in Section
6.2.
"NYSE" means the New York Stock Exchange, Inc.
"Permitted Dividend" has the meaning provided in Section
6.1(d).
"Reorganization Event" has the meaning provided in Section
6.2.
"Rollover Offering" means a reoffering or refinancing of all
(but not less than all) of the Securities effected not earlier than May __,
2001 by means of a completed public offering or offerings (which may include
one or more exchange offers) by or on behalf of Seller and the other sellers
that have entered into purchase agreements with the Purchaser.
"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
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Common Stock for the most recent Trading Day prior to such 5 Trading Days for
which a Closing Price for the Common Stock may be determined pursuant to the
"Closing Price" definition. The "ex-date" with respect to any dividend,
distribution or issuance shall mean the first date on which the shares of
Common Stock trade regular way on their principal market without the right to
receive such dividend, distribution or issuance.
"Trading Day" in respect of any common equity security means
a day on which such common equity security (A) is not suspended from trading
on any national or regional securities exchange or association or
over-the-counter market at the close of business and (B) has traded at least
once on the national or regional securities exchange or association or
over-the-counter market that is the primary market for the trading of such
security.
"Transaction Value" has the meaning provided in Section 6.2.
"Transfer Restrictions" has the meaning provided in the
Collateral Agreement.
"Transferred Security" has the meaning provided in Section
1.3(f).
"Trust Agreement" means the Amended and Restated Trust
Agreement constituting Estee Lauder Automatic Common Exchange Security Trust,
dated as of May __, 1998.
"U.S. Government Securities" has the meaning provided in the
Collateral Agreement.
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 on the Exchange Date, and
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Purchaser agrees to purchase and acquire from Seller on the Exchange Date, 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 on the
Exchange Date, and Purchaser shall have a right to purchase on the Exchange
Date, 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 on the
Exchange Date, which notice shall specify the Additional Share Base Amount and
the date on which Purchaser shall deliver the purchase price for the
Additional Shares, which shall be the Second Time of Delivery specified
pursuant to Section 2 of the Underwriting Agreement (the "Second Time of
Delivery"). The Firm Shares and the Additional Shares (if any) are
collectively referred to herein as the "Contract Shares".
(c) Exchange Rate. The "Exchange Rate" shall be determined
in accordance with the following formula, subject to adjustment as a result of
certain events as provided in Article VI: (i) if the Average 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
Average Market Price; (ii) if the Average Market Price is equal to or greater
than the Appreciation Threshold Price, _______ and (iii) if the Average 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.
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<PAGE>
(b) Additional Purchase Price. The purchase price for the
Additional Shares (the "Additional Purchase Price") shall be an amount equal
to (i) the difference between (1) the aggregate proceeds to Purchaser from the
sale of the Optional Securities and (2) the aggregate cost to Purchaser, as
notified by Purchaser to Seller at the Second Time of Delivery, of the
Additional STRIPS, multiplied by (ii) a fraction, the numerator of which is
the Firm Share Base Amount and the denominator of which is the number of Firm
Securities.
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 May
__, 1998 (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) Sale and Delivery of Contract Shares. On the Exchange
Date, Seller agrees to sell and deliver the Contract Shares to Purchaser. Sale
and 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
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<PAGE>
amount equal to the value thereof at the Average Market Price. Notwithstanding
the foregoing, if a Reorganization Event shall have occurred prior to the
Exchange Date then, in lieu of the foregoing, delivery shall be effected as
follows: (i) in the case of any cash required to be delivered on the Exchange
Date as provided in Section 6.2, by wire transfer of immediately available
funds to an account designated by Purchaser; or (ii) in the case of any
Marketable Securities elected by Seller to be delivered in lieu of cash as
provided in Section 6.2, at Seller's election, by instruction to the
Collateral Agent to deliver to the Custodian, for the account of Purchaser, a
specified number of Marketable Securities then held as collateral under the
Collateral Agreement, as provided in Section 6(g) of the Collateral Agreement.
(d) Extension of Exchange Date. At its option, Seller may,
by notice given to Purchaser not earlier than March __, 2001 and not later
than April __, 2001, elect to extend the Exchange Date to August __, 2001,
provided that such extension shall be effective only if [(A) all other sellers
that have entered into purchase agreements with the Trust elect to extend such
purchase agreements to August __, 2001 and (B)] Seller shall have:
(i) delivered to the Custodian, for the account of and
subject to the exclusive control of Purchaser, free of any adverse
claims, U.S. Government Securities which through the scheduled
payment of principal and interest in accordance with their terms will
provide, not later than one Business Day before August __, 2001,
money in an amount equal to not less than the product of (1) $______
and (2) a fraction, the numerator of which is the sum of the Firm
Share Base Amount and the Additional Share Base Amount and the
denominator of which is the number of Firm Securities; and
(ii) delivered to Purchaser (1) a certificate of
Seller substantially in the form of Exhibit A hereto
and dated the date of such delivery (A) identifying the U.S.
Government Securities being transferred, (B) certifying that with
respect to such U.S. Government
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<PAGE>
Securities the representations and warranties contained in such
Exhibit A hereto are true and correct on and as of the date thereof
and (C) certifying that such U.S. Government Securities satisfy the
condition set forth in paragraph 1.3(d)(i), and (2) an opinion,
dated the date of such delivery, of counsel addressed to Purchaser
confirming the representations contained in the second sentence of
paragraph 2(c) to Exhibit A hereto.
In addition, Seller hereby covenants and agrees to take all other actions
necessary to cause Purchaser to be a protected purchaser of such U.S.
Government Securities, within the meaning of Article 8 of the New York Uniform
Commercial Code, as amended.
If Seller elects to extend the Exchange Date and so notifies
Purchaser, Purchaser shall provide notice of such election to the holders of
the Securities not later than April __, 2001.
(e) Acceleration of Exchange Date. At any time after the
Exchange Date has been extended pursuant to Section 1.3(d) hereof, Seller may,
at its option in connection with the consummation of a Rollover Offering,
accelerate the Exchange Date to any date on or after May __, 2001, by notice
to Purchaser not later than ____ a.m. on the date to which the Exchange Date
is accelerated; provided that such acceleration shall be effective only if
[(A) all other sellers that have entered into purchase agreements with the
Trust elect to accelerate such purchase agreements to the same date and (B)]
at or prior to ___ a.m. on such accelerated Exchange Date, Seller has paid to
Purchaser, by wire transfer to an account designated by Custodian, in Federal
(immediately available) funds, an amount equal to the product of (i) the
aggregate accrued and unpaid quarterly distributions on all outstanding
Securities (computed on the basis of an aggregate quarterly distribution of
$______ and a 360-day year comprised of 12 30-day months) and (ii) a fraction,
the numerator of which is the sum of the Firm Share Base Amount and the
Additional Share Base Amount and the denominator of which is the number
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<PAGE>
of Firm Securities. Upon receipt of such amount in immediately available funds,
Purchaser shall promptly deliver to Seller, free of any adverse claim, the U.S.
Government Securities previously delivered by Seller to Purchaser pursuant to
Section 1.3(d) (together with any payments theretofore received by Purchaser in
respect thereof).
If Seller elects to accelerate the Exchange Date and so
notifies Purchaser, Purchaser shall provide notice of such election to the
holders of the Securities not later than the accelerated Exchange Date.
(g) Satisfaction of Obligations. Notwithstanding any other
provision of this Article I, if on or prior to the Exchange Date, Seller
transfers Securities (any Securities so transferred being hereinafter referred
to as the "Transferred Securities") to Purchaser, free and clear of any
adverse claim, for cancellation, then the number of Contract Shares
deliverable by Seller pursuant to this Agreement shall be reduced by a number
equal to the product of (i) the number of Contract Shares and (ii) a fraction,
the numerator of which is the number of Transferred Securities and the
denominator of which is the sum of the Firm Share Base Amount and the
Additional Share Base Amount.
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
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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.
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) it will
not treat this Agreement, any portion of this Agreement, or any obligation
hereunder as giving rise to any interest income or other inclusions of
ordinary income; (ii) it 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) it will
treat this
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Agreement in its entirety as a forward contract for the delivery of such
Contract Shares, cash or Marketable Securities; and (iv) it will not take any
action (including filing any tax return or form or taking any position in any
tax proceeding) that is inconsistent with the obligations contained in 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 it will not buy shares of Common Stock for its 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 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.
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<PAGE>
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
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 the 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
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(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 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
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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) 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 the Company
shall, after the date hereof, declare 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 make an Excess Purchase Payment, then the Exchange Rate will be
multiplied by a Dilution
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<PAGE>
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
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 Average Market Price, the Then-Current Market Price or the Transaction
Value, there shall occur any event requiring an adjustment to be effected
pursuant to
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<PAGE>
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
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<PAGE>
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 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 after an announcement
of a share repurchase requiring an adjustment pursuant to this Section 6.1, the
Company reduces the repurchase price or repurchases fewer shares than announced,
then upon completion of such share repurchase the Exchange Rate shall be further
adjusted to equal the Exchange Rate that would have been in effect had the
adjustment for such repurchase been based on the actual price and amount
repurchased. 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
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<PAGE>
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 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, 0.______ multiplied by the Transaction Value, and
(iii) if the Transaction Value is less than the Initial Price, the Transaction
Value. Notwithstanding the foregoing, (A) if the consideration received by
holders of Common Stock in such Reorganization Event does not include Marketable
Securities, then the Seller's delivery obligation under this Agreement will be
accelerated, and the Seller will deliver the Transaction Value to Purchaser
promptly upon consummation of the Reorganization Event; and (B) 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 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
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<PAGE>
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 between the time of the Reorganization Event
and the Exchange Date. 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 itself or its debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
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<PAGE>
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall take any action to authorize
any of the foregoing;
(b) an involuntary case or other proceeding shall be commenced
against the Seller seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 60 days; or an order for relief shall
be entered against the Seller under the federal bankruptcy laws as now or
hereafter in effect; or
(c) a Collateral Event of Default within the meaning of the
Collateral Agreement;
then, upon the occurrence of any such event, Seller shall become obligated to
deliver the Contract Shares (or, after a Reorganization Event, the Marketable
Securities or cash or combination thereof deliverable in respect thereof), or
any U.S. Government Securities then pledged under the Collateral Agreement in
respect thereof. Purchaser and Seller agree that such amount is a reasonable
pre-estimate of loss and not a penalty. Such amount is payable for the loss of
bargain and Purchaser will not be entitled to recover additional damages 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
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<PAGE>
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,
____________________, at _____________________________________________, Telecopy
No. _____________, attention _________________; notices to Seller shall be
directed to it at _______________________________, Telecopy No. ______________.
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
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<PAGE>
an amendment, by Purchaser and Seller or, in the case of a waiver, by the party
against whom the waiver is to be effective. No failure or delay by either party
in exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by law.
8.6 No Third Party Rights; Successors and Assigns. This
Agreement is not intended and shall not be construed to create any rights in
any person other than Seller and Purchaser and their respective successors and
assigns and no person shall assert any rights as third party beneficiary
hereunder. Whenever any of the parties hereto is referred to, such reference
shall be deemed to include the successors and assigns of such party. All the
covenants and agreements herein contained by or on behalf of the Seller and
Purchaser shall bind, and inure to the benefit of, their respective successors
and assigns whether so expressed or not, and shall be enforceable by and inure
to the benefit of Purchaser and its successors and assigns.
8.7 Counterparts. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as
if the signatures thereto and hereto were upon the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties have signed this Agreement
as of the date and year first above written.
SELLER:
___________________________________
PURCHASER:
______________________, as trustee,
______________________, as trustee,
______________________, as trustee,
each as trustee of Estee Lauder
Automatic Common Exchange Security
Trust
<PAGE>
Exhibit A
to
Purchase Agreement
CERTIFICATE FOR EXTENSION OF EXCHANGE DATE
The undersigned, ___________________ ("Seller), hereby
certifies, pursuant to Section 1.3(e) of the Purchase Agreement, dated as of
May __, 1998, among Seller and Estee Lauder AUTOMATIC COMMON EXCHANGE SECURITY
TRUST (the "Purchase Agreement"; terms defined in the Purchase Agreement being
used herein as defined therein), that:
1. Seller is transferring the following U.S. Government
Securities to Purchaser:
2. Seller hereby represents and warrants to Purchaser that:
(a) Consents to Transfer. No Transfer Restrictions exist
with respect to or otherwise apply to the transfer by Seller of such U.S.
Government Securities to Purchaser.
(b) Delivery. Seller has delivered to the Custodian, for the
account of and subject to the exclusive control of Purchaser, free of any
adverse claims, U.S. Government Securities which through the scheduled payment
of principal and interest in accordance with their terms will provide, not
later than one Business Day before August __, 2001, money in an amount equal
to not less than the product of (1) $______ and (2) a fraction, the numerator
of which is the sum of the Firm Share Base Amount and the Additional Share
Base Amount and the denominator of which is the number of Firm Securities.
(c) Title. Seller has good and marketable title to such U.S.
Government Securities, free of all Liens and Transfer Restrictions. Upon
delivery of such U.S. Government Securities to Purchaser, Purchaser will obtain
good and marketable title to such U.S. Government Securities free of any
adverse claims.
IN WITNESS WHEREOF, the undersigned has executed this
certificate this ____ day of ____________, _____.
<PAGE>
________________________________
Name:
Title:
<PAGE>
S&C Draft of May 8, 1998
FUND EXPENSE AGREEMENT
FUND EXPENSE AGREEMENT, dated as of May __, 1998, between
Goldman, Sachs & Co. ("Goldman Sachs") and _____________ (the "Service
Provider"), in its capacities as custodian, paying agent and collateral agent
for Estee Lauder 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
May __, 1998 (the "Trust Agreement"); and
WHEREAS, Goldman Sachs, as sponsor under the Trust
Agreement, desires to make provisions for the payment of certain initial and
on-going expenses of the Trust;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained in this Agreement, the parties agree as follows:
1. Definitions. (a) Capitalized terms used herein and not
defined herein shall have the meanings ascribed thereto in the Trust Agreement.
(b) The following terms shall have the following meanings:
"Additional Expense" means the Ordinary Expense the incurring
of which will require the Service Provider to provide the Additional Expense
Notice pursuant to Section 3(a) hereof and any Ordinary Expense incurred
thereafter.
"Additional Expense Notice" means the notice required to be
given by the Service Provider to Goldman Sachs pursuant to Section 3(a)(i)
hereof.
"First Time of Delivery" shall have the meaning ascribed
thereto in the Underwriting Agreement.
"Ordinary Expense" of the Trust means any expense of the
Trust other than any expense of the Trust arising under Section 6.6 of the
Administration Agreement, Section 15 of the Custodian Agreement, Section 5.4(b)
of the Paying Agent Agreement, or Section 7.6 of the Trust Agreement.
<PAGE>
"Up-front Fee Amount" means the amount set forth as such on
Schedule I hereto payable as a one-time payment to the Service Provider in
respect of its collective services as Administrator, Custodian, Paying Agent
and Collateral Agent for the entire term of the Trust.
"Up-front Expense Amount" means the amount set forth as such
on Schedule I hereto payable as a one-time payment to the Service Provider in
respect of Ordinary Expenses anticipated to be incurred by the Administrator on
behalf of the Trust, pursuant to the Administration Agreement, during the term
of the Trust.
2. Agreement to Pay Up-front Fees and Expenses. Goldman Sachs
agrees to pay to the Service Provider in Federal (same day) funds at the First
Time of Delivery the Up-front Fee Amount and the Up-front Expense Amount.
3. Agreement to Pay Additional Expenses. (a) Prior to
incurring any Ordinary Expense on behalf of the Trust that, together with all
prior Ordinary Expenses incurred by the Administrator on behalf of the Trust,
would cause the aggregate amount of Ordinary Expenses of the Trust to exceed
the Up-front Expense Amount, the Administrator shall provide to Goldman Sachs
(i) prompt written notice to the effect that the aggregate amount of Ordinary
Expenses of the Trust will exceed the Up-front Expense Amount, and (ii) an
accounting, in such detail as shall be reasonably acceptable to Goldman Sachs,
of all Ordinary Expenses incurred on behalf of the Trust through the date of
the Additional Expense Notice.
(b) From and after the date of the Additional Expense Notice,
the Service Provider agrees that it will not, without the prior written consent
of Goldman Sachs, incur on behalf of the Trust (i) any single expense in excess
of $1,000 or (ii) in any calendar period, expenses aggregating in excess of
$3,000. 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
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<PAGE>
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.
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<PAGE>
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.
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<PAGE>
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:
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<PAGE>
SCHEDULE I
Directors & Officers Insurance $ 82,500
Fidelity Bond $ 7,000
Tax on Directors & Officers
Insurance and Fidelity Bond $ 4,000
Trustees Fees $ 36,000
- -------------
Acceptance Fee $ 5,000
Annual Administrative Fee $125,000
External Counsel Fees $100,000
Accounting Fees $100,000
---------------
Total $459,500
---------------
---------------
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<PAGE>
S&C Draft of May 8, 1998
FUND INDEMNITY AGREEMENT
FUND INDEMNITY AGREEMENT, dated as of May __, 1998, between
Goldman, Sachs & Co. ("Goldman Sachs") and William R. Latham III, James B.
O'Neill and Donald J. Puglisi (collectively, the "Trustees"), not in their
individual capacities but solely as trustees of Estee Lauder 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
May __, 1998 (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(e) and 6.6 of the Administration Agreement, Section 15 of
the Custodian Agreement, Section 5.4(b) of the Paying Agent Agreement and
Section 7.6 of the Trust Agreement (collectively, "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>
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>
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>
IN WITNESS WHEREOF, the parties have caused this Fund
Indemnity Agreement to be executed by their authorized representatives the
date first above written.
GOLDMAN, SACHS & CO.
By_______________________
Address: 85 Broad Street
New York, NY 10004
TRUSTEES
---------------------------------
Name: William R. Latham III
Address: Department of Economics
University of Delaware
Newark, Delaware 19716
---------------------------------
Name: James B. O'Neill
Address: Center for Economic
Education and
Entrepreneurship
University of Delaware
Newark, Delaware 19716
---------------------------------
Name: Donald J. Puglisi
Address: Department of Finance
University of Delaware
Newark, Delaware 19716
<PAGE>
S&C Draft of May 8, 1998
EXHIBIT 2.p
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT is entered into as of the __th
day of May 1998, between Paul S. Efron (the "Trustee"), not in his individual
capacity, but solely as trustee of Estee Lauder 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 SECURITY
1.1 SALE AND ISSUANCE OF UNITS. Subject to the terms and
conditions of this Agreement, the Trustee agrees to sell to the Purchaser, and
the Purchaser agrees to purchase from the Trustee, one Estee Lauder Automatic
Common Exchange Security, representing an undivided beneficial interest in the
Trust (the "Security") at an aggregate purchase price of $100.
1.2 CLOSING. The purchase and sale of the Security shall
take place at the offices of Sullivan & Cromwell, 125 Broad Street, New York,
New York at 9:30 a.m., on May __, 1998, or at such other time (the "Closing
Date") and place as the Trustee and the Purchaser mutually agree upon. At or
after the Closing, the Trustee shall deliver to the Purchaser a certificate
representing the Security, registered in the name of the Purchaser or its
nominee. Payment for the Security shall be made on the Closing Date by the
Purchaser by bank wire transfers or by delivery of certified or official bank
checks, in either case in immediately available funds, of an amount equal to
the purchase price of the Security purchased by the Purchaser.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
PURCHASER. The Purchaser hereby represents and warrants to, and covenants for
the benefit of, the Trust that:
2.1 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is
made by the Trustee with the Purchaser in reliance upon the Purchaser's
representation to the Trustee, which by the Purchaser's execution of this
Agreement the Purchaser hereby confirms, that the Security is 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
<PAGE>
or distribution by the Purchaser of the Security, and that the Purchaser has
no present intention of selling, granting any participation in, or otherwise
distributing the Security, in either case in violation of any securities
registration requirement under applicable law, but subject nevertheless, to
any requirement of law that the disposition of its property shall at all times
be within its control. By executing this Agreement, the Purchaser further
represents that the Purchaser does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participation to such person or to any third person, with respect to the
Security.
2.2 INVESTMENT EXPERIENCE. The Purchaser acknowledges that
it can bear the economic risk of the investment for an indefinite period of
time and has such knowledge and experience in financial and business matters
(and particularly in the business in which the Trust operates) as to be
capable of evaluating the merits and risks of the investment in the Security.
The Purchaser is an "accredited investor" as defined in Rule 501(a) of
Regulation D under the Securities Act of 1933, as amended (the "Act").
2.3 RESTRICTED SECURITIES. The Purchaser understands that
the Security is characterized as a "restricted security" under the United
States securities laws inasmuch as it is being acquired from the Trustee in a
transaction not involving a public offering and that under such laws and
applicable regulations such Security may be resold without registration under
the Act only in certain circumstances. In this connection, the Purchaser
represents that it understands the resale limitations imposed by the Act and
is generally familiar with the existing resale limitations imposed by Rule
144.
2.4 FURTHER LIMITATIONS ON DISPOSITION. The Purchaser
further agrees not to make any disposition directly or indirectly of all or
any portion of the Security unless and until:
(a) There is then in effect a registration statement under
the Act covering such proposed disposition and such disposition is made in
accordance with such registration statement;
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<PAGE>
(b) The Purchaser shall have furnished the Trustee with an
opinion of counsel, reasonably satisfactory to the Trustee, that such
disposition will not require registration of such Securities under the Act; or
(c) Notwithstanding the provisions of subsections (a) and
(b) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by the Purchaser to any affiliate of the Purchaser,
if the transferee agrees in writing to be subject to the terms hereof to the
same extent as if it were the original Purchaser hereunder.
2.5 LEGENDS. It is understood that the certificate
evidencing the Security may bear either or both of the following legends:
(a) "These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration statement in
effect with respect to the securities under such Act or an opinion of
counsel reasonably satisfactory to the Trustee of Estee Lauder
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 Trustee agree that the legend
contained in the paragraph (a) above shall be removed at a holder's request
when they are no longer necessary to ensure compliance with federal securities
laws.
2.6 AMENDMENT TO TRUST AGREEMENT; SPLIT OF THE SECURITIES.
The Purchaser consents to (a) the execution and delivery by the Trustee and
Goldman, Sachs & Co., as sponsor of the Trust, of an Amended and Restated
Trust Agreement in the form attached hereto and (b) the split of the
Purchaser's Security. Subsequent to the determination of the public offering
price per Security and related underwriting discount for the Securities to be
sold to the Underwriters (as defined in the aforementioned Amended and
Restated Trust Agreement) but prior to the sale of the Securities to the
Underwriters, the Security purchased hereby shall be split into a greater
number of Securities so that immediately following such split the value of
each
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<PAGE>
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>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
TRUSTEE
------------------------------
Paul S. Efron
as Trustee
GOLDMAN, SACHS & CO.
By:
---------------------------
Title:
Address: 85 Broad Street
New York, NY 10004
