<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 17, 1999
SECURITIES ACT FILE NO. 333-57125
INVESTMENT COMPANY ACT FILE NO. 811-8827
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. 4 /X/
POST-EFFECTIVE AMENDMENT NO. / /
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 4 /X/
------------------------
ESTEE LAUDER AUTOMATIC
COMMON EXCHANGE SECURITY TRUST II
(EXACT NAME OF REGISTRANT AS SPECIFIED IN 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:
ROBERT E. BUCKHOLZ, JR., ESQ.
SULLIVAN & CROMWELL
125 BROAD STREET
NEW YORK, NEW YORK 10004
------------------------
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. / /
It is proposed that this filing will become effective when declared
effective pursuant to section 8(c).
If appropriate, check the following box:
/ / This amendment designates a new effective date for a previously filed
registration statement.
/ / 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
AGGREGATE OFFERING AMOUNT OF
TITLE OF SECURITIES BEING REGISTERED PRICE(1) REGISTRATION FEE
<S> <C> <C>
$ Trust Automatic Common Exchange Securities............................ $172,500,000 $47,955(2)
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Previously paid.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ESTEE LAUDER AUTOMATIC COMMON EXCHANGE SECURITY TRUST II
CROSS-REFERENCE SHEET
(PURSUANT TO RULE 481(a) 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. Cover Pages; Other Offering Information........... Front Cover Page; Underwriting
3. Fee Table and Synopsis............................ Prospectus Summary
4. Financial Highlights.............................. Not Applicable
5. Plan of Distribution.............................. Front Cover Page; Prospectus Summary; Underwriting
6. Selling Shareholders.............................. Not Applicable
7. Use of Proceeds................................... Prospectus Summary-The Trust's Investment
Policies; 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........................................ 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........................................ The Trust
19. Control Persons and Principal Holders of
Securities...................................... The Trust
20. Investment Advisory and Other Services............ The Trust
21. Brokerage Allocation and Other Practices.......... Investment Objective and Policies
22. Tax Status........................................ Certain Federal Income Tax Considerations
23. Financial Statements.............................. Statement of Assets and Liabilities
</TABLE>
- ------------------
* Pursuant to the General Instructions to Form N-2, all information required to
be set forth in Part B: Statement of Additional Information has been included
in Part A: The Prospectus. Information required to be included in Part C is
set forth under the appropriate item so numbered in Part C of this
Registration Statement.
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE
SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION
WHERE THE OFFER OR SALE IS NOT PERMITTED.
Subject to Completion. Dated February 17, 1999.
Securities
Estee Lauder
Automatic Common Exchange Security Trust II
$ Trust Automatic Common Exchange Securities
(TRACES(Trademark)/(Service Mark)) (Subject to exchange into Shares of Class A
Common Stock of The Estee Lauder Companies Inc.)
------------------------
The $ Trust Automatic Common Exchange Securities are a new series of
securities issued by the Estee Lauder Automatic Common Exchange Security Trust
II. The Trust will pay quarterly distributions of $ on each Security. On
February , 2002, the Trust will exchange each Security for either:
o Between 0. shares and one share of Class A Common Stock of The
Estee Lauder Companies Inc., or
o Cash equal to the value of those shares.
The number of shares or amount of cash that will be delivered in exchange
for each Security will be based on the price of the Class A Common Stock during
the twenty business days before February , 2002.
Under the circumstances described in this prospectus, the shares or cash
may be delivered between February , 2002 and May , 2002, instead of on
February , 2002.
This is the first issuance of Securities by the Trust. As a result, there
is currently no public market for the Securities. The Securities have been
approved for listing on the New York Stock Exchange under the symbol "ECJ".
The Class A Common Stock is currently traded on the New York Stock Exchange
under the symbol "EL". The last reported sale price of the Class A Common Stock
on the New York Stock Exchange on February 11, 1999, was $84 9/16 per share. The
Estee Lauder Companies Inc. is not affiliated with the Trust.
The Trust is a newly organized, finite term closed-end investment company.
Shares of this type of fund frequently trade at a discount from net asset value.
This risk is separate from the risk that the Trust's net asset value will fall.
The Trust cannot predict whether the Securities 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 this offering.
----------------------
This prospectus sets forth information about the Trust that you should know
before investing. You are advised to read this prospectus and to retain it for
future reference. Additional information about the Trust has been filed with the
Securities and Exchange Commission and is available upon written or oral request
and without charge. See "Further Information".
Consider carefully the "risk factors" beginning on page 27 of this
prospectus.
----------------------
Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved of these securities or passed upon the accuracy
or adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
----------------------
<TABLE>
<CAPTION>
Per Security Total
------------------ ------------------
<S> <C> <C>
Initial Public Offering Price................ $ $
Sales Load................................... Not applicable Not applicable
Proceeds to the Trust........................ $ $
</TABLE>
The Underwriter may, under certain circumstances, purchase up to an
additional Securities from the Trust at the Initial Public Offering
Price.
----------------------
The Underwriter expects to deliver the Securities against payment in New
York, New York on February , 1999.
Goldman, Sachs & Co.
----------------------
Prospectus dated February , 1999.
<PAGE>
PROSPECTUS SUMMARY
This summary is not a complete description of the Trust or the Securities.
It does not contain all the information that may be important to you. To
understand this offering fully, you must read this entire prospectus carefully,
including the Risk Factors beginning on page 27.
This prospectus includes a Glossary, beginning on page 36. You should refer
to the Glossary if you wish to understand the terms used in this prospectus in
detail.
THE TRUST
The Trust is a newly organized trust that exists only to offer the
Securities. The Trust's only activities will be to issue the Securities and to
invest in the U.S. Treasury securities and stock purchase contract described in
this prospectus.
THE TRUST'S INVESTMENT OBJECTIVE
The Trust's investment objective is to give the holder of each Security a
quarterly cash distribution of $ and, on February , 2002 (the
"Exchange Date"), between 0. and 1 shares of Class A Common Stock (or cash
equal to the value of those shares). The number of shares, or amount of cash,
that a holder will receive in exchange for a single Security will vary,
depending on the average market price of the Class A Common Stock over the
twenty business days before the Exchange Date.
o If the average market price is less than $ but equal to or
greater than $ , the holder of each Security will receive the
number of shares of Class A Common Stock that has a value equal to
$ .
o If the average market price is equal to or greater than $ , the
holder of each Security will receive 0. shares of Class A Common
Stock.
o If the average market price is less than $ , the holder of each
Security will receive one share of Class A Common Stock.
This formula will be adjusted if the Company takes certain steps that combine,
split or dilute the value of the Class A Common Stock. If this formula would
require the Trust to deliver a fraction of a share of Class A Common Stock to
any holder, the Trust will instead deliver cash equal to the value of that
fraction of a share.
Because of this formula, the holders of the Securities will receive part of
any increase in the value of the Class A Common Stock above $ .
However, the holders of the Securities will not receive any increase in the
value of the Class A Common Stock unless that value rises higher than
$ . The holders will bear the entire amount of any decrease in the
value of the Class A Common Stock.
For more detail, please see "Investment Objective and Policies".
THE TRUST'S INVESTMENT POLICIES
To achieve its investment objective, the Trust will invest all the proceeds
of the Securities in:
o "Stripped" U.S. Treasury securities that will mature during each quarter
through February , 2002. The Trust will use the payments it receives as
these U.S. Treasury securities mature to pay the quarterly distributions
on the Securities.
o A stock purchase contract (the "Contract") with a stockholder of the
Company (the "Seller"). The Seller will be required to deliver shares of
Class A Common Stock to the Trust on the Exchange Date. Alternatively,
the Seller may choose to deliver the equivalent amount of cash. If the
Seller performs its obligations, the Contract will provide the Trust with
the shares of
2
<PAGE>
Class A Common Stock or cash that the Trust must deliver to the holders
of the Securities on the Exchange Date.
The Seller has the right to extend the Exchange Date under the Contract to
May , 2002. If the Seller extends the Exchange Date, the Seller will not be
required to deliver the shares of Class A Common Stock or cash under the
Contract until May , 2002. However, the Seller can then accelerate the
delivery of shares or cash to any date between February , 2002 and May ,
2002. If the Seller extends or accelerates the Exchange Date under the Contract,
the holders of the Securities will not receive the shares or cash in exchange
for the Securities until the extended or accelerated Exchange Date and the
number of shares or amount of cash to be delivered would be calculated as of
such extended or accelerated Exchange Date. However, the holders of the
Securities would receive an additional, partial cash distribution on the
Securities for the period of the delay.
In some circumstances, the holders of the Securities may receive cash or
other common equity securities instead of or in addition to the Class A Common
Stock. For more detail, please see "--The Securities--Modifications to Delivery
Requirements".
The Seller will pledge collateral to the Trust to secure the Seller's
obligations under the Contract. The collateral will initially be the shares of
Class A Common Stock that the Seller must deliver under the Contract. However,
if the Seller complies with its obligations under the Contract and its pledge,
the Seller may pledge U.S. Treasury securities instead of the shares of Class A
Common Stock.
The Trust will not change its investments, even if the value of the
Contract or the Class A Common Stock falls significantly or the financial
condition of the Company suffers. Furthermore, because the Trust is a grantor
trust for purposes of the U.S. federal tax laws, the trustees of the Trust will
not have the power to change the Trust's investments.
For more detail, please see "Investment Objective and Policies".
THE OFFERING
The Trust is offering Securities to the public at a
purchase price of $ per Security. This price is equal to the last reported
sale price of the Class A Common Stock on the date of this prospectus. The
Securities are being offered through Goldman, Sachs & Co. ("Goldman Sachs"), 85
Broad Street, New York, New York 10004 (the "Underwriter").
In addition, the Trust has granted the Underwriter an option to purchase up
to additional Securities. These Securities may be used only to cover
over-allotments. For more detail, please see "Underwriting".
THE SECURITIES
The Trust will pass through to the holders of the Securities all payments
that it receives on the U.S. Treasury securities that it purchases with the
proceeds of the Securities. Similarly, the Trust will deliver to the holders of
the Securities all shares of Class A Common Stock, cash or other securities,
that it receives from the Seller under the Contract.
DISTRIBUTIONS. The holder of each Security will receive a distribution of
$ each quarter. The Trust will pay these distributions on each February ,
May , August and November . However, if the Trust would be required to
make a distribution on a Saturday, Sunday or legal holiday, the Trust will pay
that distribution on the next business day instead. The Trust will make each
payment to the holder of the Security whose name appears in the Trust's books on
the business day before the applicable payment date. The first distribution will
be payable on May , 1999 to holders of record on the previous business day.
The only source of cash for the quarterly distributions on the Securities
will be the cash received from the U.S. Treasury securities purchased by the
Trust with the proceeds of the Securities. Part of
3
<PAGE>
each year's distributions on the Securities will be treated as a return of
capital under the U.S. federal income tax laws. For more detail, please see
"Description of Securities--Distributions--Tax Treatment of Distributions" and
"Certain Federal Income Tax Considerations".
EXCHANGE FOR CLASS A COMMON STOCK. On the Exchange Date, each Security
will be exchanged automatically for between 0. shares and one share of Class A
Common Stock, as determined by the formula described under "--The Trust's
Investment Objective". However, if the Seller delivers cash instead of Class A
Common Stock under the Contract, the holders of the Securities will receive cash
instead of the Class A Common Stock. The amount of cash will be based on the
average market price of the Class A Common Stock during the twenty business days
before the cash is delivered. The number of shares of Class A Common Stock or
amount of cash that will be delivered in exchange for the Securities will be
adjusted if the Company takes certain actions that have the effect of combining,
splitting or diluting the value of the Class A Common Stock.
MODIFICATIONS TO DELIVERY REQUIREMENTS. In some circumstances, the holders
of the Securities may receive cash, other common equity securities or other
property instead of or in addition to the Class A Common Stock, or the holders
of the Securities may receive the Class A Common Stock, cash or other securities
on a date other than February , 2002:
o The Exchange Date may be extended and then accelerated by the Seller as
described above. In this case, the holders of the Securities would not
receive the shares and cash until the extended or accelerated date, but
the holders would receive an additional, partial cash distribution on the
Securities for the period of delay. For further detail, please see
"Investment Objective and Policies--The Contract--Extension and
Acceleration of the Exchange Date at the Option of the Seller".
o The Seller may elect to deliver cash instead of Class A Common Stock
under the Contract. If the Seller decides to deliver cash instead of
Class A Common Stock under the Contract, it may do so in connection with
a "rollover offering"--that is, an offering of securities that refinances
the Securities. If the Seller completes a rollover offering, the Seller
will deliver the cash under the Contract by the fifth business day after
completing that offering. In this case, the holders of the Securities
would not receive the cash payable on exchange of the Securities until
the Seller pays it to the Trust. For further detail, please see
"Investment Objective and Policies--The Contract--Cash Settlement;
Rollover Offerings".
o If the Company merges with another entity, the Company is liquidated, or
certain similar events occur, holders of Securities may receive other
common equity securities, cash or other property equal to the value of
the other consideration received by the Company's stockholders in that
transaction, rather than shares of Class A Common Stock. If at least 30%
of the consideration received by the Company's stockholders in the merger
consists of cash or cash equivalents, then the Seller will be required to
deliver any consideration other than common equity securities to the
Trust within five business days after the Seller receives that
consideration. On the Exchange Date, the Seller would be required to
deliver the common equity securities included in the merger
consideration. In this case, the holders of the Securities will receive
cash or other property representing part of the merger consideration on a
date before the scheduled Exchange Date, and common equity securities
representing the rest of the merger consideration on the Exchange Date.
Instead of delivering any non-cash consideration after a merger, the
Seller may choose to deliver cash equal to the value of those assets.
Similarly, instead of delivering the common equity securities on the
Exchange Date, the Seller may choose to deliver cash equal to the value
of those securities.
For further detail, please see "Investment Objective and Policies--The
Contract--Reorganization Events".
4
<PAGE>
o If the Company declares a dividend consisting of the shares of common
stock of another issuer, the Seller will be required to deliver the
shares received in the dividend, together with the Class A Common Stock.
In this case, the holders of Securities will receive both shares of
Class A Common Stock and shares of the other issuer, or cash equal to the
value of those shares. For further detail, please see "Investment
Objective and Policies--The Contract--Spin-Off Distributions".
o If the Seller defaults under the Contract or its collateral arrangements,
the Contract would be accelerated. In this case, the holder of each
Security would then receive an early distribution of the shares of
Class A Common Stock, cash or other common equity securities, instead of
receiving the Class A Common Stock, or cash or other securities, that
would otherwise be delivered on the Exchange Date. For further detail,
please see "Investment Objective and Policies--The Contract--Collateral
Arrangements; Acceleration Upon Default By the Seller".
For more detail, please see "Investment Objective and Policies".
VOTING RIGHTS. Holders will have the right to vote on changes to the terms
of the Securities, on the replacement of the trustees of the Trust and the
Trust's custodian, paying agent, transfer agent, registrar and other agents, and
on other matters affecting the Trust, as described below under the caption
"Description of Securities". However, holders of the Securities will not have
any voting rights with respect to the Class A Common Stock until they actually
receive shares of Class A Common Stock in exchange for the Securities. For more
detail, please see "Description of Securities--Voting".
LISTING. The Securities have been approved for listing on the New York
Stock Exchange (the "NYSE") under the symbol "ECJ".
THE COMPANY
The Company, founded in 1946 by Estee and Joseph Lauder, 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. Each
brand is distinctly positioned within the cosmetics market.
The Company has prepared a prospectus that describes the Company and the
Class A Common Stock (the "Company Prospectus"). The Company Prospectus is
attached as Annex A to this prospectus. The Company is not affiliated with the
Trust and will not receive any of the proceeds from the sale of the Securities.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The Trust will be treated as a grantor trust under the U.S. federal income
tax laws. This means that under these laws, each holder will be treated as if it
owned directly its proportionate share of the assets held by the Trust.
Similarly, income and original issue discount received by the Trust will
generally be treated as income of the holders.
Under the U.S. federal income tax laws, the U.S. Treasury securities held
by the Trust will be treated as having "original issue discount" that will
accrue over the term of the U.S. Treasury securities. However, when the Trust
actually receives cash on these U.S. Treasury securities, these cash payments
will not be included in the holders' income. Instead, these payments will reduce
the holders' aggregate tax basis in the Securities. A holder will have taxable
gain or loss if the Trust receives cash instead of Class A Common Stock.
Holders should be aware that the Trust's assets could be characterized
differently under the federal income tax laws. Other characterizations could
require holders to include more interest in
5
<PAGE>
income than they would under the analysis outlined above. For more detail,
please see "Certain Federal Income Tax Considerations".
RISK FACTORS
An investment in the Securities involves risk. Some of the risks of an
investment in the Securities are described under "Risk Factors", beginning on
page 27. These risks include the following:
o The Trust will not dispose of the Contract even if the price of the
Class A Common Stock falls significantly or the financial condition of
the Company suffers. The holders will bear the entire amount of any
decrease in the value of the Class A Common Stock.
o Similarly, the Trust will not dispose of the U.S. Treasury securities
before they mature or the Trust terminates, whichever comes first, even
if their value falls significantly.
o If the price of Class A Common Stock rises, a holder of a Security will
not receive all of this increase in value. Holders will not receive any
of this increase if the average market price of the Class A Common Stock
at the Exchange Date is below $ . Holders will receive only %
of any increase in the value of the Class A Common Stock over $ . On
the other hand, holders of Securities will bear all of any decrease in
the value of the Class A Common Stock.
o The distributions on the Securities will be higher than the annual
dividends paid on the Class A Common Stock in the past year. However, the
distributions on the Securities will remain fixed. As a result, if the
dividend on the Class A Common Stock is raised, the distributions on the
Securities may then be lower than the dividends paid on the Class A
Common Stock.
o The number of shares of Class A Common Stock or amount of cash that
holders may receive on the Exchange Date will be adjusted if the Company
takes certain actions described in this prospectus that have the effect
of combining, splitting or diluting the value of the Class A Common
Stock. The number of shares to be received by holders may not be adjusted
for other events that may adversely affect the price of the Class A
Common Stock, such as offerings of Class A Common Stock for cash or in
connection with acquisitions.
o The only assets held by the Trust will be the U.S. Treasury securities
and the Contract. An investment in the Trust will be riskier than an
investment in an investment company with diversified investments.
o 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. The trading prices of the 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. The trading
prices of the Securities will also be affected by fluctuations in
interest rates and other factors that are difficult to predict and beyond
the Trust's control.
o There can be no assurance that a secondary market will develop for the
Securities. If a secondary market does develop, there can be no assurance
that it will provide the holders with liquidity for their investment or
that it will continue for the life of the Securities.
o Holders of the Securities will not be entitled to any rights with respect
to the Class A Common Stock unless they actually receive Class A Common
Stock in exchange for the Securities. For example, holders of Securities
will not be entitled to vote the shares of Class A Common Stock or
receive dividends.
6
<PAGE>
FEES AND EXPENSES
UNDERWRITER'S COMPENSATION. The Seller will compensate the Underwriter for
the offering of the Securities because a significant portion of the proceeds of
the sale of the Securities will be used by the Trust to purchase the Contract
from the Seller. The Underwriting Agreement requires the Seller to pay the
Underwriter $ for each Security sold in the offering.
ORGANIZATIONAL AND OFFERING COSTS. The Trust's organizational costs will be
approximately $10,000. The Trust's costs in connection with the offering of the
Securities will be approximately $ . Goldman Sachs and the Seller will
pay these organizational and offering costs.
COSTS OF OTHER SERVICE PROVIDERS. At the closing of the offering of the
Securities, Goldman Sachs will make a one-time, up-front payment of $ to
the Trust's administrator, custodian, paying agent and trustees as compensation
for their services to the Trust. Goldman Sachs will also pay the Trust's
administrator $ to cover the Trust's anticipated expenses. Goldman Sachs
will pay any ongoing expenses of the Trust above these estimated amounts and the
Seller will reimburse the Trust for any amounts it may pay as indemnification to
the Trust's administrator, custodian, paying agent or any trustee. If Goldman
Sachs or the Seller does not pay these expenses and obligations, the Trust will
have to pay them, and this will reduce the amount available to distribute to
holders.
DISCLOSURE REQUIRED BY THE SECURITIES AND EXCHANGE COMMISSION. The
Securities and Exchange Commission (the "SEC") requires the Trust to present its
expenses in the following format. The SEC has stated that it intends this
requirement to assist investors in understanding the various costs and expenses
that an investor in the Securities will bear directly or indirectly.
Because the Trust will not bear any fees or expenses, investors will not
bear any expenses directly.
<TABLE>
<S> <C>
INVESTOR TRANSACTION EXPENSES
Maximum Sales Load (as a percentage of the Initial Public
Offering Price)................................................ %(a)
Dividend Reinvestment and Cash Purchase Plan Fees................ N/A
ANNUAL EXPENSES (AS A PERCENTAGE OF NET ASSETS)
Management Fees(b)............................................... 0%
Other Expenses(c)................................................ 0%
-----
Total Annual Expenses(c).................................... 0%
-----
-----
</TABLE>
- ------------------
(a) See "Underwriting".
(b) See "The Trust". The Trust will be internally managed; consequently, there
will be no separate investment advisory fee paid by the Trust. The Chase
Manhattan Bank will act as the administrator of the Trust.
(c) The organization costs of the Trust in the amount of $10,000 and
compensation payable to the Trust's trustees, administrator, custodian,
collateral agent and paying agent in the amount of $ will be paid by
Goldman Sachs. Approximately $ in respect of costs associated with the
initial registration and offering of the Securities will be paid by Goldman
Sachs and the Seller. Anticipated ongoing expenses of the Trust over the
term of the Trust, estimated to be approximately $ , as well as any
unanticipated operating expenses of the Trust, will also be paid by Goldman
Sachs. See "The Trust--Expenses of the Trust". Absent such arrangements, the
Trust's "Other Expenses" and "Total Annual Expenses" would be approximately
% of the Trust's net assets.
7
<PAGE>
The SEC also requires that closed-end investment companies present an
illustration of cumulative expenses (both direct and indirect) that an investor
would bear. The example must factor in the applicable Sales Load and must assume
that investors will receive a 5% annual return and will reinvest all
distributions at net asset value. PLEASE NOTE THAT THE ASSUMPTION OF A 5% ANNUAL
RETURN DOES NOT ACCURATELY REFLECT THE TRUST'S TERMS. SEE "INVESTMENT OBJECTIVE
AND POLICIES". ALSO, THE TRUST DOES NOT PERMIT HOLDERS TO REINVEST THE
DISTRIBUTIONS ON THE SECURITIES.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
- ------------------------------------------------------------------------- ---------- ----------
<S> <C> <C>
You would bear the following expenses on a $10,000 investment, including
the applicable Sales Load of $ and assuming (1) no annual expenses
and (2) a 5% annual return throughout the period....................... $ $
</TABLE>
8
<PAGE>
THE TRUST
CREATION AND FORM OF THE TRUST
The Trust is a newly organized New York trust. It is a registered,
non-diversified, closed-end management investment company under the Investment
Company Act of 1940 (the "Investment Company Act"). The Trust was formed on
June 17, 1998 under a trust agreement, which was amended and restated as of
February , 1999 to reflect the terms of this offering (the "Trust Agreement").
The Trust's address is 85 Broad Street, New York, New York 10004 (telephone no.
(212) 902-1000).
THE TRUSTEES
The Trust will be internally managed by three trustees (the "Trustees").
One of the Trustees will be designated as the Trust's "Managing Trustee". The
Trustees will be responsible for the Trust's general management and operations.
However, the Trustees will not have the power to vary the investments held by
the Trust. See "Investment Objective and Policies". Goldman Sachs will pay each
Trustee, on behalf of the Trust, a one-time, up-front fee to cover the Trustee's
annual fee and anticipated out-of-pocket expenses. The Managing Trustee will
also receive an additional up-front fee for serving in that capacity.
Goldman Sachs, as the Trust's sponsor and the initial holder of the Trust's
Securities, has elected three individuals to serve as the Trustees. Their names,
ages, addresses and titles, their principal occupations during the past five
years and their compensation are as follows:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME, AGE AND ADDRESS TITLE DURING PAST FIVE YEARS COMPENSATION
- ------------------------------------------ ----------------- ------------------------ ------------
<S> <C> <C> <C>
Donald J. Puglisi, 53 .................... Managing Trustee Professor of Finance $ 14,400
Department of Finance University of Delaware
University of Delaware
Newark, DE 19716
William R. Latham III, 54 ................ Trustee Professor of Economics $ 10,800
Department of Economics University of Delaware
University of Delaware
Newark, DE 19716
James B. O'Neill, 59 ..................... Trustee Professor of Economics $ 10,800
Center for Education & University of Delaware
Entrepreneurship
University of Delaware
Newark, DE 19716
</TABLE>
None of the Trustees is an "interested person" of the Trust as defined in
the Investment Company Act. Furthermore, none of the Trustees is a director,
officer or employee of the Underwriter or of the Trust's administrator, or of
any affiliate of the Underwriter or the Trust's administrator. Each of the
Trustees serves as a trustee of other similar trusts, but none of the Trustees
receives any compensation for serving as a trustee or director of any other
affiliated investment company.
OTHER SERVICE PROVIDERS
ADMINISTRATOR. The Trust's day-to-day affairs will be managed by The Chase
Manhattan Bank as Administrator under an Administration Agreement, dated as of
February , 1999 (the "Administration Agreement"). Under the Administration
Agreement, the Trustees have delegated most of their operational duties to the
Administrator, including the duties to:
o receive and pay invoices for expenses incurred by the Trust;
o with the approval of the Trustees, engage legal and other professional
advisors (other than the independent public accountants for the Trust);
9
<PAGE>
o instruct the Trust's paying agent to pay the distributions on the
Securities;
o prepare, mail, file and publish all notices, proxies, reports, tax
returns and other documents for the Trust, or direct the Trust's paying
agent to do so, and keep the Trust's books and records;
o select and engage an independent investment banking firm (after
consultation with the Seller), when the Trust is required to do so under
the Contract;
o at the direction of the Trustees, institute and prosecute legal and other
appropriate proceedings to enforce the Trust's rights and remedies, but
the Administrator is required to do so only if it receives any indemnity
that it requests; and
o make all necessary arrangements for meetings of the Trustees and any
meetings of holders.
The Administrator will not select the independent public accountants for
the Trust. The Administrator also will not sell any of the Trust's assets, or
permit any other agent of the Trust to do so, except when the Contract requires
the Trust to make a delivery, when the Trust is required to sell fractional
shares, when the collateral agreement securing the Contract requires the Trust
to sell collateral posted by the Seller, and when the Trust terminates.
CUSTODIAN. The Trust's assets will be held by The Chase Manhattan Bank as
the Trust's custodian (the "Custodian") under a Custodian Agreement, dated as of
February , 1999 (the "Custodian Agreement").
COLLATERAL AGENT. The Custodian will also act as collateral agent (the
"Collateral Agent") under the collateral agreement with the Trust and the Seller
(the "Collateral Agreement"). The Collateral Agent will hold a perfected
security interest in the Class A Common Stock and U.S. Government obligations or
other assets pledged by the Seller under the Collateral Agreement. If the Seller
defaults under the Contract or the Collateral Agreement, it will be the
Collateral Agent that sells the collateral posted by the Seller and pays the
proceeds of that sale to the Custodian for distribution to the holders of the
Securities.
PAYING AGENT. ChaseMellon Shareholder Services, L.L.C. will serve as the
transfer agent, registrar and paying agent (the "Paying Agent") for the
Securities under a Paying Agent Agreement, dated as of February , 1999 (the
"Paying Agent Agreement").
OTHER INFORMATION CONCERNING THE TRUST'S AGENTS. The Administrator, the
Custodian, the Collateral Agent and the Paying Agent each have the right to
resign at any time upon required notice to the Trust. The Trustees have the
right to remove any of these agents of the Trust at any time on 60 days' notice
or immediately if the agent defaults under the applicable agreement or the
Investment Company Act, suffers a bankruptcy, or under certain other
circumstances. In order to ensure that all the agents of the Trust are the same
financial institution or affiliate financial institutions, if any of these
agents resigns or is removed, the appointment of each of the other agents
automatically terminates. However, no resignation or removal of any of these
agents will be effective until a successor is appointed. If any of these agents
resigns or is removed, the Trustees are required to appoint a successor with the
qualifications specified in the Trust Agreement.
Except for their respective roles as Administrator, Custodian, Collateral
Agent and Paying Agent, 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.
INDEMNIFICATION
The Trust will indemnify each Trustee, the Administrator, the Custodian and
the Paying Agent against any liabilities or costs (including the costs of
defending against any liability) that it may incur in acting in that capacity,
except for willful misfeasance, bad faith, gross negligence or reckless
disregard of their respective duties or where applicable law prohibits that
indemnification. The Seller has agreed to reimburse the Trust for any amounts it
may be required to pay under these
10
<PAGE>
indemnifications. If the Seller does not pay these amounts, the Trust will have
to pay them, and this will reduce the amount available to distribute to holders.
EXPENSES OF THE TRUST
At the closing of the offering of the Securities, Goldman Sachs will pay to
the Administrator, the Custodian, the Collateral Agent and the Paying Agent a
one-time, up-front payment of $ to cover their fees. Goldman Sachs will
also pay the Administrator a one-time up-front payment of $ to cover the
Trust's anticipated expenses. The anticipated Trust expenses to be paid by the
Administrator out of this amount include, among other things:
o expenses for legal and independent accountants' services;
o costs of printing proxies, Securities certificates and holder reports;
o fidelity bond coverage for the Trustee; and
o the Trustees' compensation described above.
In addition, Goldman Sachs will pay the costs of organizing the Trust in the
amount of $10,000 and Goldman Sachs and the Seller will pay estimated costs in
connection with the initial registration and public offering of the Securities
in the amount of $ .
The amount that Goldman Sachs will pay to the Administrator to cover the
Trust's ongoing expenses 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. It is possible, however, that the actual
operating expenses of the Trust will be substantially more than this amount.
Goldman Sachs has agreed to pay any excess expenses beyond this amount. If
Goldman Sachs does not pay those excess expenses, the Trust will have to pay
them, and this will reduce the amount available to distribute to holders.
TRUST TERMINATION
The Trust will terminate automatically ten business days after the Exchange
Date. However, if the Contract is accelerated, then the Trust will terminate 10
business days after the Class A Common Stock, cash or other common equity
securities required to be delivered under the Contract are delivered. If the
Trust terminates before all the distributions on the Securities have been paid,
the Trust's Administrator will sell any U.S. Treasury securities then held in
the Trust and distribute the proceeds pro rata to the holders of the Securities,
together with the shares or cash delivered under the Contract.
VALUATION FOR INVESTMENT COMPANY ACT PURPOSES
In calculating the Trust's net asset value as required by the Investment
Company Act, the Trust Agreement provides that (i) the U.S. Treasury securities
held by the Trust 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 Contract will be valued on the basis of the
bid price received by the Trust for the Contract, or any portion of the Contract
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 Contract and with
comparable terms, or if such a bid quotation is not available, as determined in
good faith by the Trustees.
INVESTMENT COMPANY ACT EXEMPTION
The SEC has issued an order that exempts the Trust from the requirements of
Section 12(d)(1) of the Investment Company Act that restrict the amount of
Securities that registered investment companies could otherwise own.
Accordingly, registered investment companies may hold
11
<PAGE>
Securities in excess of the limits imposed by Sections 12(d)(1)(A)(i) and
12(d)(1)(C) of the Investment Company Act. However, any such investment company
will be required to vote its Securities in proportion to the votes of all other
holders.
USE OF PROCEEDS
The net proceeds of this offering will be used immediately upon the closing
of this offering to:
o purchase a portfolio of stripped U.S. Treasury securities with face
amounts and maturities corresponding to the quarterly distributions
payable with respect to the Securities; and
o pay the purchase price to the Seller under the Contract.
INVESTMENT OBJECTIVE AND POLICIES
This prospectus includes a Glossary that states the definitions given to
some of the capitalized terms used in this prospectus in the Contract, the Trust
Agreement and the Collateral Agreement. You should refer to the Glossary if you
wish to understand the terms used in this prospectus in detail. Some of these
definitions are summarized in the descriptions below.
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS; FUNDAMENTAL POLICIES
The Trust's investment objective is to give the holder of each Security a
quarterly cash distribution of $ and, on the Exchange Date, between
0. and 1 shares of Class A Common Stock (or cash equal to the value of some
or all of those shares). The number of shares, or amount of cash, that a holder
will receive in exchange for a single Security will vary, depending on the
average market price of the Class A Common Stock over the twenty business days
before the Exchange Date. The value of the Class A Common Stock (or cash or
Marketable Securities received in lieu of Class A Common Stock) that will be
received by a holder under the Securities may be more or less than the amount
the holder paid for the Securities.
To achieve its investment objective, the Trust will use the proceeds of the
Securities to buy and hold:
o a portfolio of stripped U.S. Treasury securities that will mature during
each quarter through February , 2002; and
o the Contract.
The Trust has adopted the following fundamental policies:
o the Trust will invest at least 70% of its total assets in the Contract;
o the Contract may not be disposed of during the term of the Trust;
o the U.S. Treasury securities held by the Trust may not be disposed of
before the earliest of their respective maturities, the occurrence of a
Reorganization Event where the consideration does not include any
Marketable Securities, a default by the Seller under the Contract, and
the termination of the Trust; and
o the Trust may not purchase any securities or instruments other than the
U.S. Treasury securities, the Contract and the Class A Common Stock or
other assets received pursuant to the Contract and, for cash management
purposes, the short-term obligations of the U.S. Government described
under "--Temporary Investments" below; issue any securities or
instruments except for the Securities; make short sales or purchases on
margin; write put or call options; borrow money; underwrite securities;
purchase or sell real estate, commodities or commodities contracts; make
loans (other than the purchase of stripped U.S. Treasury securities as
described in this prospectus); or take any action that would or could
cause the Trust not to be a "grantor trust" for purposes of the U.S.
federal income tax laws.
12
<PAGE>
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.
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.
THE COMPANY AND THE CLASS A COMMON STOCK
The Company, founded in 1946 by Estee and Joseph Lauder, 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. Each
brand is distinctly positioned within the cosmetics market.
The Company is a pioneer in the cosmetics industry and believes it is a
leader in the industry due to the global recognition of its brand names, its
leadership in product innovation, its strong market position in key geographic
markets and the consistently high quality of its products. The Company sells
products principally through limited distribution channels to complement the
images associated with its brands. These channels, encompassing over 9,000
points of sale, consist primarily of upscale department stores, speciality
retailers, upscale perfumeries and pharmacies and, to a lesser extent,
free-standing company stores, stores on cruise ships, in-flight and duty free
shops in airports and cities. The Company believes that its strategy of pursuing
limited distribution strengthens its relationships with retailers, enables its
brands to be among the best selling product lines at the stores and heightens
the aspirational quality of its brands. With the acquisitions of jane and Aveda
in fiscal 1998, the Company has broadened its distribution to include new
channels, namely self-select outlets and salons.
The Company's fiscal year ends on June 30.
The shares of Class A Common Stock are traded on the NYSE. The following
table sets forth, for the calendar quarters indicated, the reported high and low
sales prices of the shares of Class A Common Stock on the NYSE Consolidated Tape
and the cash dividends per share of Class A Common Stock. As of February 9,
1999, there were 2,566 record holders of the Class A Common Stock, including The
Depository Trust Company, which holds shares of Class A Common Stock on behalf
of an indeterminate number of beneficial owners.
<TABLE>
<CAPTION>
CASH
DIVIDEND
HIGH LOW PER SHARE
---- --- ---------
<S> <C> <C> <C>
FISCAL 1998
First Quarter................................................................. $50 15/16 $44 3/4 $.085
Second Quarter................................................................ 56 3/8 39 .085
Third Quarter................................................................. 69 48 1/2 .085
Fourth Quarter................................................................ 73 15/16 60 7/8 .085
FISCAL 1999
First Quarter................................................................. $70 1/4 $49 1/2 $.085
Second Quarter................................................................ 86 1/2 46 11/16 .085
Third Quarter (through February 11, 1999)..................................... 85 3/4 76 3/4 .085(1)
</TABLE>
- ------------------
(1) The third-quarter dividend with respect to the Class A Common Stock is
payable on April 6, 1999 to holders of record on March 16, 1999.
13
<PAGE>
Holders will not be entitled to any rights with respect to the Class A
Common Stock (including voting rights and rights to receive dividends or other
distributions on the Class A Common Stock) unless they actually receive shares
of Class A Common Stock in exchange for the Securities.
Please refer to the attached Company Prospectus, dated February , 1999
(pages A-1 through A- hereto), which describes the Company and the Class A
Common Stock. 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 shares of Class A Common Stock (and an
additional aggregate shares if the Underwriter exercises its
over-allotment option).
THE CONTRACT
The Trust will enter into a Contract with the Seller obligating the Seller
to 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 (as defined below) times
the initial number of shares of Class A Common Stock covered by the Contract.
The aggregate initial number of shares of Class A Common Stock under the
Contract will equal the aggregate number of Securities offered by this
prospectus (and will be increased if the Underwriter exercises its
over-allotment option).
The aggregate purchase price that the Trust will pay under the Contract
will be $ . The Trust will pay this purchase price on the closing date of
this offering (or, for the portion of the Contract relating to the Securities to
be sold under the Underwriter's over-allotment option, on the closing date for
the exercise of that option). This purchase price was arrived at by arm's-length
negotiation between the Trust and the Seller, taking into consideration factors
including the price, the expected dividend level and volatility of the Class A
Common Stock, current interest rates, the term of the Contract, current market
volatility generally, the collateral pledged by the Seller, the value of other
similar instruments and the costs and anticipated proceeds of the offering of
the Securities.
The Contract provides that if the Seller delivers Securities to the Trust
on or before the Exchange Date, the Seller's obligation to deliver Class A
Common Stock (or cash) will be proportionately reduced. The delivery of
Securities in partial or complete satisfaction of the Seller's obligations will
not, however, affect the amount of Class A Common Stock or cash that will be
received by the holder of each Security that remains outstanding on the Exchange
Date.
All matters relating to the administration of the Contract will be the
responsibility of either the Administrator or the Custodian.
THE EXCHANGE RATE. The "Exchange Rate" will be calculated by a formula
based 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 shares of Class A
Common Stock.
o If the Average Market Price is less than the Initial Price, the Exchange
Rate will be one share of Class A Common Stock.
This formula will be adjusted if the Company takes certain steps that combine,
split or dilute the value of the Class A Common Stock. See "--The
Contract--Dilution Adjustments". 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). If this formula would require the Trust to deliver a
fraction of a share of Class A Common Stock to any holder, the Trust will
instead deliver cash equal to the value of that fraction of a share.
14
<PAGE>
The "Average Market Price" per share of Class A Common Stock on any date
means the average Closing Price of a share of Class A Common Stock on the 20
Trading Days immediately before but not including that date. The Average Market
Price will be calculated in a different manner if a Seller carries out a
Rollover Offering (as defined below), as described under "--Cash Settlement;
Rollover Offerings".
The "Closing Price" of the Class A Common Stock (or any other common equity
security) on any date means the closing sale price (or, if no closing sale price
is reported, the last reported sale price) of that security as reported on the
NYSE Consolidated Tape on that date or, if the security is not listed for
trading on the NYSE on that date, as reported in the composite transactions for
the principal United States national or regional securities exchange on which
the security is so listed, or if the security is not listed on a United States
national or regional securities exchange on that date, as reported by the NASDAQ
National Market or, if the security is not reported by that market on that date,
the last quoted bid price for the security in the over-the-counter market as
reported by the National Quotation Bureau or any similar organization. However,
if any event that results in an adjustment to the number of shares of Class A
Common Stock deliverable under the Contract, as described under "--The
Contract--Dilution Adjustments", occurs before the Exchange Date, the Closing
Price as determined pursuant to the foregoing will be appropriately adjusted, in
the manner described under "--The Contract--Dilution Adjustments" to reflect the
occurrence of that event.
A "Trading Day" for any common equity security means a day on which the
security (A) is not suspended from trading on any United States 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 United States national
or regional securities exchange or association or over-the-counter market that
is the primary market for the trading of that security.
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 Contract by reason of the occurrence of any of the events described under
"-The Contract-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 COMMON STOCK
OF CLASS A COMMON STOCK PER SECURITY
- ------------------------ -----------------------
<S> <C>
</TABLE>
EXTENSION AND ACCELERATION OF THE EXCHANGE DATE AT THE OPTION OF THE
SELLER. The Seller has the right to extend the Exchange Date under the Contract
to May , 2002. If the Seller extends the Exchange Date, it will not be
required to deliver the shares of Class A Common Stock or cash until May ,
2002. However, once the Seller extends the Exchange Date, it can then accelerate
the delivery of shares or cash to any date between February , 2002 and May ,
2002. If the Seller extends or accelerates the Exchange Date, the holders of the
Securities will not receive shares or cash in exchange for the Securities until
the extended or accelerated Exchange Date, and the number of shares and amount
of cash to be delivered would be calculated as of the extended or
15
<PAGE>
accelerated Exchange Date. However, the holders of the Securities would receive
an additional, partial cash distribution on the Securities on the extended or
accelerated Exchange Date.
The amount of the additional, partial distribution that would be paid on
the Securities would be pro-rated to reflect the number of days by which the
Exchange Date is extended beyond February , 2002. For example, if the Exchange
Date is extended to May , 2002 and then accelerated to April , 2002 (i.e.,
two-thirds of the time between February , 2002 and May , 2002), the
additional distribution would be equal to two-thirds of the regular quarterly
distribution.
CASH SETTLEMENT; ROLLOVER OFFERINGS. The Seller may elect to deliver cash,
instead of shares of Class A Common Stock, on the Exchange Date (whether or not
extended or accelerated) under the Contract. If the Seller chooses to deliver
cash instead of shares of Class A Common Stock, the amount of that cash will be
equal to the value, based on the Average Market Price at the Exchange Date, of
the number of shares that the Seller would otherwise be required to deliver on
the Exchange Date.
The Seller also may choose to deliver cash, instead of shares of Class A
Common Stock, in connection with a "Rollover Offering". A "Rollover Offering" is
a reoffering or refinancing of Securities effected by the Seller not earlier
than February , 2002, by means of a completed public offering or offerings, or
another similar offering (which may include one or more exchange offers), by or
on behalf of the Seller. If the Seller chooses to carry out a Rollover Offering,
the "Average Market Price" will be the Closing Price per share of Class A Common
Stock on the Trading Day immediately before 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.
If the Seller carries out a Rollover Offering that is consummated on or
before the Exchange Date, the cash payable by the Seller will be delivered to
the Trust within five Trading Days of the Exchange Date (which may be extended
and accelerated as described above), instead of on the Exchange Date itself.
Accordingly, the holders of the Securities may not receive a portion of the cash
deliverable in exchange for the Securities until the fifth Trading Day after the
Exchange Date.
DILUTION ADJUSTMENTS. The Exchange Rate will be adjusted if the Company
(i) pays a stock dividend or makes a distribution with respect to the Class A
Common Stock in shares of that 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 will be adjusted as follows: for
each share of Class A Common Stock that would have been deliverable under a
Security upon exchange before the adjustment, the holder of that Security 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 to that reclassification), or the
fraction of such shares, that a stockholder who held one share of Class A Common
Stock immediately before that event would be entitled solely by reason of that
event to hold immediately after that event.
In addition, if the Company issues rights or warrants to all holders of
Class A Common Stock entitling them to purchase shares of Class A Common Stock
at a price per share less than the Then-Current Market Price (as defined below)
of the Class A Common Stock (other than rights to purchase Class A Common Stock
pursuant to a plan for the reinvestment of dividends or interest), then the
Exchange Rate will be adjusted pursuant to the following formula:
A = ER X OS + AS
-------
OS + PS
16
<PAGE>
where
ER = the Exchange Rate before the adjustment;
OS = the number of shares of Class A Common Stock outstanding immediately
before the time (determined as described below) the adjustment is
effected by reason of the issuance of those rights or warrants;
AS = the number of additional shares of Class A Common Stock offered for
purchase pursuant to those rights or warrants; and
PS = the number of additional shares of Class A Common Stock that the
aggregate offering price of the total number of shares of Class A
Common Stock so offered for purchase would purchase at the
Then-Current Market Price.
To the extent that, after expiration of those rights or warrants, any of the
shares of Class A Common Stock offered by such rights or warrants are not
actually delivered, the Exchange Rate will be further adjusted to equal the
Exchange Rate that would have been in effect if the foregoing adjustment had
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, for the
purpose of making any dilution adjustment, means the average Closing Price per
share of Class A Common Stock for the five Trading Days immediately before the
time that adjustment is effected (or, in the case of an adjustment effected at
the opening of business on the business day after a record date, as described
below, immediately before the earlier of the time the 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).
In addition, if the Company pays a dividend or makes a distribution to all
holders of Class A Common Stock of evidences of its indebtedness or other
non-cash assets (excluding any stock dividends or distributions in shares of
Class A Common Stock described above and any Spin-Off Distributions (as defined
below)) 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
will be adjusted pursuant to the following formula:
A = ER X T
-----
T - V
where
ER = the Exchange Rate before the 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 effected of the portion
of those evidences of indebtedness, non-cash assets or rights or
warrants applicable to one share of Class A Common Stock.
In addition, if the Company distributes cash (other than any Permitted
Dividend (as defined below), any cash distributed in consideration of fractional
shares of Class A Common Stock and any cash distributed in a Reorganization
Event (as defined below)), by dividend or otherwise, to all holders of Class A
Common Stock or makes an Excess Purchase Payment (as defined below), then the
Exchange Rate will be adjusted pursuant to the following formula:
A = ER X T
-----
T - D
17
<PAGE>
where
ER = the Exchange Rate before the adjustment;
T = the Then-Current Market Price per share of Class A Common Stock on the
record date for that distribution; and
D = the amount of that 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 that Excess
Purchase Payment divided by the number of outstanding shares of
Class A Common Stock on that record date.
For purposes of these adjustments,
(a) the term "Permitted Dividend" means any quarterly cash dividend on 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 that dividend results in an
annualized dividend yield on the Class A Common Stock above 12.5%; and
(b) the term "Excess Purchase Payment" means the excess, if any, of (i) the
cash and the value (as determined by a nationally recognized
independent investment banking firm retained for this purpose by the
Administrator) 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 must be made pursuant to the
formulas described above, corresponding adjustments will be made to the Initial
Price and the Appreciation Threshold Price.
Dilution adjustments will be effected: (i) in the case of any dividend,
distribution or issuance described above, as of the opening of business on the
business day after the record date for determination of holders of Class A
Common Stock entitled to receive that dividend, distribution or issuance or, if
the announcement of any such dividend, distribution or issuance is after that
record date, at the time that dividend, distribution or issuance is announced by
the Company; (ii) in the case of any subdivision, split, combination or
reclassification described above, on the effective date of that transaction;
(iii) in the case of any Excess Purchase Payment for which the Company
announces, at or before the time it commences the relevant share repurchase, the
repurchase price for those shares to be repurchased, on the date of that
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 to that Excess Purchase Payment. There will be no adjustment under the
Contract for any dividends, distributions, issuances or repurchases that may be
declared or announced after the Exchange Date.
If an adjustment is made because the Company announces or declares a record
date for a dividend, distribution, issuance or repurchase, and the dividend,
distribution, issuance or repurchase does not actually occur, then the Exchange
Rate will be further adjusted to equal the Exchange Rate that would have been in
effect if the adjustment for that dividend, distribution, issuance or repurchase
had not been made. If an adjustment is made because the Company announces a
share repurchase, and the Company reduces the repurchase price or repurchases
fewer shares than announced, then upon completion of that share repurchase, the
Exchange Rate will be further adjusted to equal the Exchange Rate that would
have been in effect if the adjustment for that repurchase had been based on the
actual price and amount repurchased. All dilution adjustments 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). No adjustment in the Exchange Rate will
be required unless that adjustment would require an increase or decrease of at
least one percent in the Exchange Rate.
18
<PAGE>
However, any adjustments that are not required to be made because of this limit
will be carried forward and taken into account in any subsequent adjustment.
REORGANIZATION EVENTS. If a Reorganization Event occurs, the Seller will
be required to deliver on the Exchange Date, in lieu of each share of Class A
Common Stock subject to the Contract, cash in an amount equal to:
o 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.
o If the Transaction Value is greater than or equal to the Appreciation
Threshold Price, 0. multiplied by the Transaction Value.
o If the Transaction Value is less than the Initial Price, the Transaction
Value.
This amount of cash is referred to as the "Basic Reorganization Event Amount".
If the consideration received by the holders of Class A Common Stock in the
Reorganization Event (the "Merger Consideration") includes Marketable
Securities, the Seller may choose to deliver those Marketable Securities on the
Exchange Date in lieu of delivering the cash value of those Marketable
Securities as described above. If the Seller chooses to deliver Marketable
Securities on the Exchange Date, the holders of the Securities will be
responsible for paying all brokerage and other transaction costs when they
resell those securities.
Notwithstanding the foregoing, if at least 30% of the Merger Consideration
consists of cash or cash equivalents (a "Cash Merger"), then delivery of the
Merger Consideration, other than any consideration consisting of Marketable
Securities, will be accelerated as follows. The Seller will be required:
o within five business days after the Seller receives the Merger
Consideration, to deliver to the Trust the portion of the Merger
Consideration, other than Marketable Securities, calculated as described
below (the "Accelerated Portion") (and the Trust will promptly distribute
this property to the holders of the Securities); and
o on the Exchange Date, to deliver to the Trust the number of Marketable
Securities calculated as described below.
Instead of delivering any non-cash consideration after a merger, the Seller
may choose to deliver cash equal to the Value of those assets. Similarly,
instead of delivering Marketable Securities on the Exchange Date, the Seller may
choose to deliver cash equal to the value, based on the Average Market Price at
the Exchange Date, of the number of Marketable Securities that the Seller would
otherwise be required to deliver on the Exchange Date.
The Accelerated Portion per Security will be the portion of the Merger
Consideration, other than Marketable Securities, that has a Value (as defined
below) equal to the amount determined pursuant to the following formula:
AP = BREA X OC
--
TV
where
AP = the Value of the Accelerated Portion;
BREA = the Basic Reorganization Event Amount;
OC = the Value of the portion of the Merger Consideration received in
exchange for a single share of Common Stock that consists of assets
other than Marketable Securities; and
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<PAGE>
TV = the Transaction Value.
The number of Marketable Securities that the Trust will be required to
deliver on the Exchange Date in exchange for each Security will be determined by
applying the Exchange Rate, adjusted as described below, to the Average Market
Price of the Marketable Securities on the Exchange Date. To calculate the
Exchange Rate, the Initial Price will be adjusted pursuant to the following
formula:
A = IP X MS
--
TV
where
IP = the Initial Price before the adjustment;
MS = the Value of a share of the Marketable Securities; and
TV = the Transaction Value.
Similarly, the Appreciation Threshold Price will be adjusted pursuant to
the following formula:
A = ATP X MS
--
TV
where
ATP = the Appreciation Threshold Price before the adjustment;
MS = the Value of a share of the Marketable Securities; and
TV = the Transaction Value.
The Exchange Rate will be adjusted pursuant to the following formula:
A = ER X SC
--
MS
where
ER = the Exchange Rate (computed on the basis of the adjusted Initial Price
and Appreciation Threshold Price and the Average Market Price of the
Marketable Securities);
SC = the aggregate Value of the Marketable Securities included in the
Merger Consideration received in exchange for a single share of
Class A Common Stock; and
MS = the Value of a share of the Marketable Securities.
For purposes of the foregoing formulas, "Value" means (i) in respect of
cash, the amount of such cash; (ii) in respect of any property other than cash
or Marketable Securities, an amount equal to the market value on the date the
Reorganization Event is consummated (as determined by a nationally recognized
independent investment banking firm retained for this purpose by the
Administrator); and (iii) in respect of any share of Marketable Securities, an
amount equal to the average Closing Price per share of those Marketable
Securities for the 20 Trading Days immediately before the date the
Reorganization Event is consummated.
A "Reorganization Event" is (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 before the merger or
consolidation is not exchanged for cash, securities or other property of the
Company or another corporation), (B) any
20
<PAGE>
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 the sum of (i) for any cash received in the
Reorganization Event, the amount of such cash received per share of Class A
Common Stock, (ii) for any property other than cash or Marketable Securities
received in the Reorganization Event, an amount equal to the market value on the
date the Reorganization Event is consummated of the 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 the Reorganization Event, an
amount equal to the average Closing Price per share of those Marketable
Securities for the 20 Trading Days immediately before the Exchange Date (or, in
the case of a Cash Merger, for the 20 Trading Days immediately before the date
the Reorganization Event is consummated) multiplied by the number of those
Marketable Securities received for each share of Class A Common Stock.
The number of shares of Marketable Securities included in the calculation
of Transaction Value for purposes of the preceding clause (iii) will be adjusted
if a dilution event of the type described under "--Dilution Adjustments" occurs
with respect to the issuer of the Marketable Securities between the time of the
Reorganization Event and the Exchange Date.
"Marketable Securities" means any common equity securities (whether voting
or non-voting) listed on a U.S. national or regional 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.
SPIN-OFF DISTRIBUTIONS. If the Company makes a "Spin-Off Distribution"
during the term of the Contract, then the Seller will be required to deliver on
the Exchange Date, together with each share of Class A Common Stock delivered
under the Contract, the number of Marketable Securities distributed in respect
of a single share of Class A Common Stock in that Spin-Off Distribution. After
the Company makes such a distribution, the "Closing Price" of Class A Common
Stock, for purposes of calculating the Exchange Rate and for all other purposes
under the Contract, will be determined by reference to (A) the Closing Price per
share of the Class A Common Stock and (B) the product of (x) the Closing Price
per share of the spun-off Marketable Securities and (y) the number of shares of
such Marketable Securities distributed per share of Class A Common Stock in the
Spin-Off Distribution. The number of shares of Marketable Securities that the
Seller is required to deliver, and the formula for determining the "Closing
Price" in the preceding sentence, will be adjusted if any event that would, if
it had occurred with respect to the Class A Common Stock or the Company, have
required an adjustment pursuant to the provisions described under "--Dilution
Adjustments" occurs with respect to those Marketable Securities or their issuer
between the time of the Spin-Off Distribution and the Exchange Date.
A "Spin-Off Distribution" means a distribution by the Company to holders of
Class A Common Stock of Marketable Securities issued by an issuer other than the
Company.
COLLATERAL ARRANGEMENTS; ACCELERATION UPON DEFAULT BY THE SELLER. The
Seller's obligations under the Contract initially will be secured by a security
interest in the maximum number of shares of Class A Common Stock deliverable
under the Contract (adjusted in accordance with the dilution adjustment
provisions of the Contract, described above), pursuant to the Collateral
Agreement.
21
<PAGE>
If a Reorganization Event occurs, the Collateral Agreement will require the
Seller to pledge as alternative collateral all Marketable Securities deliverable
in such event in exchange for the maximum number of shares of Class A Common
Stock deliverable under the Contract at the time of the Reorganization Event,
plus cash in an amount equal to 100% of the Seller's Cash Delivery Obligations
(as defined below). Instead of delivering cash, the Seller may choose to deliver
U.S. Government obligations with an aggregate market value, when pledged and at
daily mark-to-market valuations after that time, of not less than 105% of those
Cash Delivery Obligations. The Collateral Agent will be required, under the
Collateral Agreements, to invest any such cash in U.S. Treasury securities
maturing on or before February , 2002. The Seller's "Cash Delivery
Obligations" will be the Transaction Value of any Merger Consideration, other
than Marketable Securities, in respect of the maximum number of shares covered
by the Contract at the time of the Reorganization Event. The number of shares of
Marketable Securities required to be pledged will be adjusted if any event
requiring a dilution adjustment under the Contract occurs. If the Reorganization
Event is a Cash Merger, the collateral in respect of the Seller's Cash Delivery
Obligations will be released when the Seller delivers the Accelerated Portion.
If the Company makes a Spin-Off Distribution, the Collateral Agreement will
require the Seller to pledge as additional collateral all Marketable Securities
deliverable in such distribution in respect of the maximum number of shares of
Class A Common Stock deliverable under the Contract at the time of such Spin-Off
Distribution. The number of these Marketable Securities required to be pledged
will also be adjusted if any event requiring a dilution adjustment under the
Contract occurs.
Unless the Seller is in default in its obligations under the Collateral
Agreement, the 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. The Seller may substitute short-term, direct U.S.
Government obligations in substitution for the pledge shares of Marketable
Securities at any time. Any U.S. Government obligations pledged as substitute
collateral for the Class A Common Stock, or for Marketable Securities received
in a Reorganization Event or Spin-Off Distribution, will be required to have an
aggregate market value at the time of delivery and at daily mark-to-market
valuations after that time of not less than 150% (or, from and after any
Insufficiency Determination that is not cured by the close of business on the
next business day, as described below, 200%) of the product of the market price
of the Class A Common Stock or Marketable Securities at the time of each
valuation times the number of shares of Class A Common Stock or Marketable
Securities for which those obligations are being substituted.
The Collateral Agent will promptly pay over to the Seller any dividends,
interest, principal or other payments received by the Collateral Agent on any
collateral pledged by the Seller, including any substitute collateral, unless
the Seller is in default in its obligations under the Collateral Agreement, or
unless the payment of that amount to the Seller would cause the collateral to
become insufficient under the Collateral Agreement. The Seller will have the
right to vote any pledged shares of Marketable Securities for so long as those
shares are owned by it and pledged under the Collateral Agreement, unless an
event of default occurs under the Contract or Collateral Agreement.
If the Collateral Agent determines (an "Insufficiency Determination") that
the collateral pledged by the Seller fails to meet the foregoing requirements at
any valuation, and that failure is not cured by the close of business on the
business day after that determination, then, unless a Collateral Event of
Default (as defined below) under the Collateral Agreement has occurred and is
continuing, the Collateral Agent will commence (i) sales of the collateral
consisting of U.S. Government obligations and (ii) purchases, using the proceeds
of those sales, of shares of Class A Common Stock or Marketable Securities in an
amount sufficient to cause the collateral to meet the requirements under the
Collateral Agreement. The Collateral Agent will discontinue those sales and
purchases if a Collateral Event of Default occurs under the Collateral
Agreement.
A "Collateral Event of Default" under the Collateral Agreement means, at
any time, (A) if no U.S. Government obligations are pledged as substitute
collateral at that time, failure of the collateral
22
<PAGE>
to include at least the maximum number of shares of Class A Common Stock covered
by the Contract at that time (or, if a Reorganization Event or Spin-Off
Distribution has occurred at or before that 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 are pledged
as substitute collateral for shares of Class A Common Stock (or shares of
Marketable Securities) at that time, failure of those U.S. Government
obligations to have a market value at that time of at least 105% of the market
price per share of Class A Common Stock (or Shares of Marketable Securities)
times the difference between (x) the maximum number of shares of Class A Common
Stock (or shares of Marketable Securities) deliverable under the Contract at
that time and (y) the number of shares of Class A Common Stock (or shares of
Marketable Securities) pledged as collateral at that time; and (C) at any time
after a Reorganization Event in which consideration other than Marketable
Securities was delivered, failure of any U.S. Government obligations pledged as
collateral for Cash Delivery Obligations to have a market value at that time of
at least 105% of those Cash Delivery Obligations, if that failure is not cured
within one business day after notice of that failure is delivered to the Seller.
If a Collateral Event of Default occurs under the Collateral Agreement, or
the Seller suffers a bankruptcy or insolvency, the Seller's obligations under
the Contract will automatically be accelerated. In that event, the Seller will
become obligated to deliver the number of shares of Class A Common Stock (or,
after a Reorganization Event or Spin-Off Distribution, the Marketable Securities
or cash or a combination of Marketable Securities and cash deliverable instead
of or in addition to those shares of Class A Common Stock) then deliverable
under the Contract, or any U.S. Government obligations then pledged as
collateral for the Seller's obligations.
If the Contract is accelerated, (i) the Collateral Agent will distribute to
the Trust, for distribution to the holders of the Securities, the shares of
Class A Common Stock and Marketable Securities then pledged by the Seller and/or
cash generated from the sale of U.S. Government obligations then pledged by the
Seller and (ii) the Custodian will sell the stripped U.S. Treasury securities
acquired by the Trust at the closing of this offering and then held by the
Trust, and distribute the proceeds pro rata to the holders. If, by the Exchange
Date, any substitute collateral has not been replaced by Class A Common Stock
(or, after a Reorganization Event or Spin-Off Distribution, cash or Marketable
Securities, as applicable) sufficient to meet the Seller's obligations under the
Contract, the Collateral Agent will distribute to the Trust for distribution pro
rata to the holders the market value of the Class A Common Stock and Marketable
Securities required to be delivered under the Contract, in the form of any
shares of Class A Common Stock or Marketable Securities then pledged by the
Seller plus cash generated from the sale of U.S. Government obligations then
pledged by the Seller (or, after a Reorganization Event, the market value of the
alternative consideration required to be delivered under the Contract, in the
form of any Marketable Securities then pledged, plus any cash then pledged, plus
cash generated from the sale of U.S. Government obligations then pledged).
CALCULATION OF MARKET PRICES. In calculating any market price, including
any Average Market Price, Then-Current Market Price, Value or Transaction Value:
o If no Closing Price for the Class A Common Stock is determined for one or
more (but not all) of the Trading Days during the relevant period, those
Trading Days will be disregarded in the calculation of the market price.
No additional Trading Days will be added to the calculation period.
o If no Closing Price for the Class A Common Stock is determined for any of
the Trading Days during the relevant period, the market price will be the
most recently available Closing Price for the Class A Common Stock before
that period began.
THE SELLER. The Seller is The Estee Lauder 1994 Trust. Please see the
caption "TRACES Stockholder" in the Company Prospectus for information about the
Seller.
23
<PAGE>
THE U.S. TREASURY SECURITIES
The Trust will purchase and hold a series of zero-coupon ("stripped") U.S.
Treasury securities with face amounts and maturities corresponding to the
distributions payable with respect to the Securities and the payment dates under
the Securities. See "Description of Securities--Distributions". Up to 30% of the
Trust's total assets may be invested in these U.S. Treasury securities. If the
Contract is accelerated, then the U.S. Treasury securities then held in the
Trust will be sold by the Administrator and the proceeds of that sale will be
distributed pro rata to the holders, together with the amounts distributed upon
acceleration. See "--Collateral Arrangements; Acceleration Upon Default By the
Seller" and "The Trust--Trust Termination".
If the Seller extends the Exchange Date to May , 2002, it will be
required to deliver additional U.S. Treasury securities to the Trust to pay the
additional, partial distribution described above under
"--The Contract-Extension and Acceleration of the Exchange Date at the Option of
the Seller". If the Seller later accelerates the Exchange Date, the Seller will
be required to repurchase those additional U.S. Treasury securities from the
Trust on or before the Exchange Date, at a price equal to the total amount of
unpaid distributions on the Securities through 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
before the next distribution date. Under the Paying Agent Agreement, the Paying
Agent is responsible for investing, as instructed by the Trustees, all such cash
that is not paid to cover Trust expenses in short-term U.S. Treasury securities
maturing on or shortly before the next quarterly distribution date. Not more
than 5% of the Trust's total assets will be invested in those short-term
obligations or held in cash at any one time.
DESCRIPTION OF SECURITIES
Each Security represents an equal proportional interest in the Trust, and a
total of Securities will be issued (assuming that the Underwriter does
not exercise its over-allotment option). The Securities have no preemptive,
redemption or conversion rights. The 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".
DISTRIBUTIONS
AMOUNT AND TIMING. The Trust intends to distribute to holders on a
quarterly basis an amount equal to $ per Security. This amount equals the
pro rata portion of the fixed quarterly cash distributions from the proceeds of
the maturing U.S. Treasury securities held by the Trust. The first distribution
will be made on May , 1999 to holders of record as of the preceding business
day. Distributions will then be made on February , May , August and
November of each year to holders of record as of the preceding business day.
Part of each distribution will be treated as a tax-free return of the holder's
investment. See "--Tax Treatment of Distributions" and "Certain Federal Income
Tax Considerations--Recognition of Original Issue Discount on the U.S. Treasury
Securities".
Upon termination of the Trust, as described under the caption "The
Trust--Trust Termination", each holder will receive any remaining net assets of
the Trust.
Quarterly distributions on the Securities will consist solely of the cash
received from the U.S. Treasury securities. The Trust will not be entitled to
any dividends that may be declared on the Class A Common Stock. See "Risk
Factors--Shareholder Rights".
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<PAGE>
The Trust does not permit the reinvestment of distributions.
TAX TREATMENT OF DISTRIBUTIONS. The following table sets forth information
regarding the distributions to be received on the stripped U.S. Treasury
securities described under "Investment Objective and Policies" above (assuming
that the Underwriter does not exercise its over-allotment option), the portion
of each year's distributions that will constitute a return of capital for U.S.
federal income tax purposes and the amount of original issue discount accruing
(assuming a yield-to-maturity accrual election in respect of any short-term U.S.
Treasury securities) on those U.S. Treasury securities with respect to a holder
that acquires its Securities at the issue price from the Underwriter pursuant to
the original offering. See "Certain Federal Income Tax Considerations--
Recognition of Original Issue Discount on the U.S. Treasury Securities".
<TABLE>
<CAPTION>
ANNUAL GROSS
ANNUAL GROSS DISTRIBUTIONS FROM
DISTRIBUTIONS FROM U.S. TREASURY ANNUAL RETURN OF ANNUAL INCLUSION OF
U.S. TREASURY SECURITIES CAPITAL PER ORIGINAL ISSUE DISCOUNT
YEAR SECURITIES PER SECURITY SECURITY IN INCOME PER SECURITY
- ---------------------------- ------------------ ------------------ ---------------- -----------------------
<S> <C> <C> <C> <C>
1999........................
2000........................
2001........................
2002........................
</TABLE>
VOTING
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 have been selected initially by Goldman
Sachs, as the Trust's sponsor and the initial holder of the Trust's Securities.
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 Trust Agreement. The
holders have the right, upon the declaration in writing or vote of more than
two-thirds of the outstanding Securities, to remove a Trustee. The Trustees will
call a meeting of holders to vote on the removal of a Trustee upon the written
request of the holders of record of 10% of the Securities or to vote on other
matters upon the written request of the holders of record of 51% of the
Securities (unless substantially the same matter was voted on during the
previous 12 months). The Trustees will establish, and notify the holders in
writing of, the record date for each such meeting. The record date must be not
less than 10 nor more than 50 days before the meeting date. Holders at the close
of business on the record date will be entitled to vote at the meeting. The
Trust will also assist in communications with other holders as required by the
Investment Company Act.
BOOK-ENTRY-ONLY ISSUANCE
The Depository Trust Company ("DTC") will act as securities depository for
the Securities. The information in this section concerning DTC and DTC's
book-entry system is based upon information obtained from DTC. The Securities
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 or ChaseMellon Shareholder Services,
L.L.C., as DTC's custodian.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also 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,
25
<PAGE>
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 a
Direct Participant, 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 those Securities are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Payments on the Securities will be made to DTC. DTC's practice is to credit
Direct Participants' accounts on the relevant payment date in accordance with
their respective holdings shown on DTC's records unless DTC has reason to
believe that it will not receive payments on that payment date. Payments by
Participants to Beneficial Owners will be governed by standing instructions and
customary practices and will be the responsibility of that 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 those payments to Direct
Participants is the responsibility of DTC, and disbursement of those 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 those circumstances, if a successor securities depository is not obtained,
certificates representing the Securities will be printed and delivered in
accordance with DTC's instructions.
26
<PAGE>
RISK FACTORS
INTERNAL MANAGEMENT; NO PORTFOLIO MANAGEMENT AND NO CHANGE IN ASSETS
The Trust will not be managed like a typical closed-end investment company.
The Trust will be internally managed by its Trustees and will not have any
separate investment adviser.
The Trust will not dispose of the Contract even if the price of the Class A
Common Stock falls significantly or the financial condition of the Company
suffers (or if, after a Reorganization Event or Spin-Off Distribution,
comparable developments occur affecting any Marketable Securities or the issuer
of those Marketable Securities).
Similarly, the Trust will not dispose of the U.S. Treasury securities held
by the Trust before they mature or the Trust terminates, whichever comes first,
even if their value falls significantly.
LIMITED OPPORTUNITY FOR INCREASE IN VALUE; RISK OF DECREASE IN VALUE OF CLASS A
COMMON STOCK
Because the Contract allows the Seller to deliver less than a full share of
Class A Common Stock for each outstanding Security if the Average Market Price
is higher than the Initial Price, the Securities have more limited appreciation
potential than the Class A Common Stock. If the price of Class A Common Stock
rises, a holder of a Security will not receive all of this increase in value.
Holders will not receive any of this increase if the average market price of the
Class A Common Stock at the Exchange Date is below $ . Holders will
receive only % of any increase in the value of the Class A Common Stock
over $ . On the other hand, holders of Securities will bear all of any
decrease in the value of the Class A Common Stock. The value of the Class A
Common Stock to be received by holders on the Exchange Date (and any cash
received in lieu of those shares) may be less than the amount paid for the
Securities. Furthermore, the Securities may trade below the value of the Class A
Common Stock if the Class A Common Stock appreciates in value.
FIXED RATE OF DISTRIBUTIONS
The distributions on the Securities will be at a fixed rate for the entire
term of the Trust. If the dividend on the Class A Common Stock is raised,
distributions on the Securities may be lower than the dividends paid on the
Class A Common Stock.
DILUTION ADJUSTMENTS
The number of shares of Class A Common Stock that holders are entitled to
receive at the termination of the Trust will be adjusted for some events, like
stock splits and combinations, stock dividends and certain other actions of the
Company that modify its capital structure. See "Investment Objective and
Policies--The Contract--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. These 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 Class A Common Stock, or that major stockholders will not sell
any Class A Common Stock, in the future, or as to the amount of any such
offerings or sales.
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. The only assets held by
the Trust will be the U.S. Treasury securities and the Contract, and potentially
a small amount of other short-term investments. As a result, an investment in
the Trust will be riskier than an investment in an investment company with
diversified investments.
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<PAGE>
TRADING VALUE AFFECTED BY CLASS A COMMON STOCK PRICE AND OTHER FACTORS
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 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. The trading prices of the Class A Common Stock may fluctuate,
due to changes in the Company's financial condition, results of operations or
prospects, or because of complex and interrelated political, economic, financial
and other factors that can affect the capital markets generally, the stock
exchanges or quotation systems on which the Class A Common Stock is traded and
the market segment of which the Company is a part. The trading price of the
Securities may also fluctuate due to, among other things, 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 if the Class
A Common Stock price falls and at a discount to the market value of the Class A
Common Stock if 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 fall. 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.
LIMITED TRADING MARKET FOR SECURITIES
Goldman Sachs currently intends, but is not obligated, to make a market in
the Securities. There can be no assurance that a secondary market will develop
or, if a secondary market does develop, that it will provide the holders with
liquidity of investment or that it will continue for the life of the Securities.
Goldman Sachs may stop making a market in the Securities at any time without
notice. The Trust will apply to list the Securities on the NYSE. If that
application is accepted, 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. If the Securities are delisted or suspended from trading on that
exchange, the Trust will apply for listing of the Securities on another national
or regional 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.
SHAREHOLDER RIGHTS
Holders of the Securities will not be entitled to any rights with respect
to the Class A Common Stock unless and until they actually receive Class A
Common Stock in exchange for the Securities. For example, holders of Securities
will not be entitled to vote the shares of Class A Common Stock or receive
dividends.
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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 the
Underwriter pursuant to the original offering, and not with special classes of
holders, such as dealers in securities or currencies, traders that elect to mark
to market, 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 under the Code, 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 Internal
Revenue Service is not required to agree with the opinion of Sullivan &
Cromwell.
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,
(iii) an estate the income of which is subject to United States federal income
tax without regard to its source or (iv) a trust if a court within the United
States is able to exercise primary supervision over the administration of the
trust and one or more United States persons have the authority to control all
substantial decisions of the trust.
Holders should be aware that there are alternative characterizations of the
Trust's assets 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 Contract in the Trust. 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 initially acquired by the Trust as a bond
that was originally issued on the date the Trust acquired such security. A
holder will include original issue discount in income over the life of the U.S.
Treasury securities in an amount equal to the holder's pro rata portion of the
excess of the amounts payable on those U.S. Treasury securities over the amount
paid for the U.S. Treasury securities by the Trust. The amount of that excess
will constitute only part of the total amounts payable in respect of U.S.
Treasury securities held by the Trust, however. Consequently, a substantial
portion of each quarterly cash distribution to the holders will be treated as a
tax-free return of the holders' investment in the U.S. Treasury securities and
will not be considered current income for federal income tax purposes. See
"Description of Securities--Distributions--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
29
<PAGE>
a maturity of one year or less from the date it is purchased) held by the Trust
also will be required to be included in income by the holders as it is accrued.
Unless a holder elects to accrue the original issue discount on a short-term
U.S. Treasury security according to a constant yield method based on daily
compounding, that 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 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
Contract".
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 Contract held by the Trust, by analogy to the
treatment of rebates or option premiums. If this 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 sale or
other disposition of the Contract (including a disposition pursuant to cash
settlement of such Contract) or on a subsequent sale or other disposition of 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 CONTRACT. A holder's
initial tax basis in the Contract 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 payment for the Contract, respectively. A holder's tax basis
in the U.S. Treasury securities will be increased by the amounts of original
issue discount included in income in respect of U.S. Treasury securities and
decreased by each amount of cash received in respect of U.S. Treasury
securities.
TREATMENT OF THE CONTRACT. Each holder will be treated as having entered
into a pro rata portion of the Contract and, at the Exchange Date, as having
received a pro rata portion of the Class A Common Stock, cash or Marketable
Securities or combination of Class A Common Stock, Marketable Securities and
cash delivered to the Trust.
DISTRIBUTION OF THE CLASS A COMMON STOCK. The delivery of Class A Common
Stock to the Trust pursuant to the Contract 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 Contract which is settled in Class A Common Stock less the
portion of that 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 those 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
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 in the Contract settled for cash. 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
Contract underlying the Securities. As a result, the holder will 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
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<PAGE>
Contract. Any gain or loss will be long-term capital gain or loss if the holder
has held the Securities for more than one year. Long-term capital gain of an
individual holder will be subject to a maximum tax rate of 20%.
ALTERNATIVE CHARACTERIZATIONS. Sullivan & Cromwell believes the Contract
should be treated for federal income tax purposes as a prepaid forward contract
for the purchase of a variable number of shares of Class A Common Stock.
The Internal Revenue Service could conceivably seek to treat the Contract
differently. The Internal Revenue Service might, for example, seek to treat the
cash paid to the Seller pursuant to the Contract as loans to the Seller in
exchange for contingent debt obligations of the Seller. 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 Contract) over
the aggregate of the basis of the Contract and any interest on the Contract
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) and any gain or loss attributable to the sale of the Contract could be
treated as ordinary income or loss. 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 on 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 Contract or the sale of Securities, may be
subject to U.S. backup withholding tax at the rate of 31% if the holder of those
Securities 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 that
holder's U.S. federal income tax liability and may entitle that 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.
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<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Trust has agreed to sell the Securities to the Underwriter, and the Underwriter
has agreed to purchase the Securities from the Trust. Under the terms and
conditions of the Underwriting Agreement, the Underwriter is committed to take
and pay for all of the Securities offered hereby, if any are taken.
Securities sold by Goldman Sachs to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus. Any
Securities sold by Goldman Sachs to securities dealers may be sold at a discount
of up to $ per Security from the initial public offering price. Any such
securities dealers may resell any Securities purchased from Goldman Sachs to
certain other brokers or dealers at a discount of up to $ per Security from
the initial public offering price. If all the Securities are not sold at the
initial public offering price, Goldman Sachs may change the initial public
offering price and the other selling terms. 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 February
, 1999.
In connection with the offering, Goldman Sachs may purchase and sell
Securities in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the Underwriter of a greater number of
Securities than it is required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the Securities while
the offering is in progress.
These activities by Goldman Sachs may stabilize, maintain or otherwise
affect the market price of the Securities. As a result, the price of the
Securities may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by Goldman
Sachs 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 Contract from the Seller, the Underwriting
Agreement provides that the Seller will pay to the Underwriter the Underwriter's
Compensation of $ per Security.
The Trust has granted the Underwriter an option exercisable for 30 calendar
days after the date of this prospectus to purchase up to an aggregate of
additional Securities solely to cover over-allotments, if any. If
the Underwriter exercises its over-allotment option, it will receive the
Underwriter's Compensation referred to above for each Security so purchased.
The Company, Leonard A. Lauder and the Seller (and the trustees of the
Seller, not in their individual capacities but solely as trustees of the Seller)
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 that are substantially similar to
the Class A Common Stock, including but not limited to any securities that are
convertible or exchangeable for, or that represent the right to receive,
Class A Common Stock or any such substantially similar securities (other than
dispositions among Lauder Family Members, as such term is defined in the Company
Prospectus, or pursuant to employee stock option plans and employment agreements
in each case existing on, or upon the conversion or exchange of convertible or
exchangeable securities outstanding as of, the date of this prospectus), without
the prior written consent of Goldman Sachs and except as otherwise provided in
the Underwriting Agreement. The Seller can enter into private exchange
transactions with private exchange funds or partnerships.
The Securities will be a new issue of securities with no established
trading market. The Securities have been approved for listing on the NYSE under
the symbol "ECJ". Goldman Sachs has advised the Company that it intends to make
a market in the Securities, but it is 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.
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<PAGE>
Goldman Sachs has informed the Trust that it does not expect sales to any
accounts over which it exercises discretionary authority to exceed 5% of the
total Securities offered by this prospectus.
The Underwriter and certain of its affiliates have provided, are currently
providing, and expect to provide in the future, commercial and investment
banking services to the Company and certain Lauder Family Members (as defined in
the Company Prospectus) for which the Underwriter or its affiliates have
received and will receive fees and commissions.
The Company and the Seller have agreed to indemnify the Underwriter against
certain liabilities, including certain liabilities under the Securities Act of
1933.
Goldman Sachs has subscribed for one Security at a purchase price of
$100.00. Goldman Sachs will surrender this Security upon the closing of the
offering made by this prospectus. No Securities will be sold to the public until
the Securities subscribed for have been purchased and the purchase price of the
Securities 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 Underwriter 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
Pricewaterhouse-Coopers LLP, independent accountants, as stated in their opinion
appearing herein, and has been so included in reliance upon that opinion given
upon the authority of that firm as experts in accounting and auditing.
FURTHER INFORMATION
The Trust has filed with the Securities and Exchange Commission,
Washington, D.C. 20549, a Registration Statement under the Securities Act of
1933, as amended, with respect to the Securities offered hereby. More
information concerning the Securities and the Trust may be found in the
Registration Statement of which this prospectus constitutes a part. The
Registration Statement may be inspected without charge at the Commission's
office in Washington, D.C., and copies of all or any part of the Registration
Statement may be obtained from that office after payment of the fees prescribed
by the Commission. The Registration Statement is also available on the
Commission's website (http://www.sec.gov). The Securities will be listed on the
NYSE and information concerning the Trust and the Securities may also be
inspected at the offices of the NYSE, 20 Broad Street, New York, New York 10005.
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Securityholders of
Estee Lauder Automatic Common Exchange Security Trust II:
In our opinion, the accompanying statement of assets and liabilities
presents fairly, in all material respects, the financial position of Estee
Lauder Automatic Common Exchange Security Trust II (the "Trust") as of February
1, 1999, in conformity with generally accepted accounting principles. 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 of this financial statement in accordance with
generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by the Trust's management and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 1, 1999
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ESTEE LAUDER AUTOMATIC COMMON EXCHANGE SECURITY TRUST II
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 1, 1999
<TABLE>
<S> <C>
ASSETS
Cash...................................................................................................... $100
----
Total assets.............................................................................................. $100
----
----
LIABILITIES
$ 0
----
Net Assets
Balance applicable to 1 Security outstanding.............................................................. $100
----
Net asset value per Security.............................................................................. $100
----
----
</TABLE>
- ------------------
(1) Estee Lauder Automatic Common Exchange Security Trust II (the "Trust") was
established on June 17, 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, as amended. Costs incurred in connection with the Trust's organization
will be paid by the Seller 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.
The Trust is a newly organized, finite-term trust established to purchase
and hold a portfolio of stripped U.S. treasury securities and a forward
purchase contract with an existing stockholder of The Estee Lauder Companies
Inc. (the "Seller") relating to the Class A Common Stock of The Estee Lauder
Companies Inc. The Trust will be internally managed and will not have an
investment adviser. The Trust's administration, which will be overseen by
the trustees, will be carried out by The Chase Manhattan Bank as
administrator of the Trust. The Chase Manhattan Bank will also serve as
custodian for the Trust, and its affiliate, 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 Seller.
(3) The Trust issued one Security on January 28, 1999 to Goldman, Sachs & Co. in
consideration for a purchase price of $100. The Trust Agreement provides
that before the offering, the Trust will split the outstanding Security as
of the date that the price and underwriting discount of the Securities being
offered to the public is determined, but before the sale of the Securities
to Goldman Sachs. 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.
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GLOSSARY
"Administration Agreement" means the Administration Agreement, dated as of
February , 1999, between the Trust and The Chase Manhattan Bank, as
Administrator.
"Administrator" means The Chase Manhattan Bank (or its successor) in its
capacity as Administrator under the Administration Agreement.
"Appreciation Threshold Price" means $ , subject to adjustment as
described under "--The Contract--Dilution Adjustments".
"Average Market Price" per share of Class A Common Stock or Marketable
Securities on any date means the average Closing Price per share of Class A
Common Stock or Marketable Securities for the Calculation Period consisting of
the 20 Trading Days immediately prior to but not including such date; provided
that if no Closing Price for the Class A Common Stock or 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 the Average Market Price (but no
additional Trading Days will be added to the Calculation Period). If no Closing
Price for the Class A Common Stock or Marketable Securities may be determined
for any of such Trading Days, the Average Market Price shall be the Closing
Price for the Class A Common Stock or Marketable Securities for the most recent
Trading Day prior to such 20 Trading Days for which a Closing Price for the
Class A Common Stock or Marketable Securities may be determined pursuant to the
definition of "Closing Price". Notwithstanding the foregoing, for purposes of
determining the payment required upon cash settlement of the Contract in
connection with a Rollover Offering, "Average Market Price" means the Closing
Price per share of Class A Common Stock or Marketable Securities on the Trading
Day immediately prior to 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.
"Beneficial Owner" means an actual purchaser of a Security, which will not
receive written confirmation from DTC of its purchases of Securities but which
is expected to receive written confirmations providing details of the
transactions, as well as periodic statements of its holdings, from the Direct or
Indirect Participants through which the Beneficial Owner purchased Securities.
"Calculation Period" means any period of Trading Days for which an average
security price must be determined pursuant to the Contract.
"Cash Delivery Obligations" means, at any time, (A) if no Reorganization
Event has occurred, zero, and (B) from and after any Reorganization Event, the
Transaction Value of any Consideration other than Marketable Securities included
in the Merger Consideration in such Reorganization Event, multiplied by the
maximum number of shares of Class A Common Stock covered by the Contract at the
time of the Reorganization Event; provided that if the Reorganization Event is a
Cash Merger, the Seller's Cash Delivery Obligation will be zero after the Seller
delivers the Accelerated Portion as required under the Contract.
"Class A Common Stock" means the Class A Common Stock, par value $0.01 per
share, of the Company.
"Closing Price" of any common equity security (including the Class A Common
Stock or any Marketable Securities) on any date of determination means the
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 such date, as reported in the composite
transactions for the principal United States national or regional 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 on such date, as reported by the NASDAQ National Market or,
if such common equity security is not so reported on such date, the last quoted
bid price for such common equity security in the over-the-counter market as
reported by the National Quotation Bureau or any
36
<PAGE>
similar organization; provided that if any event that results in an adjustment
to the number of shares of Class A Common Stock or Marketable Securities
deliverable under the Contract, as described under "--The Contract--Dilution
Adjustments", occurs during any Calculation Period, the Closing Price as
determined pursuant to the foregoing for each Trading Day in the Calculation
Period occurring prior to the date on which such adjustment is effected will be
appropriately adjusted to reflect the occurrence of such event.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral Agent" means The Chase Manhattan Bank (or its successor) in its
capacity as Collateral Agent under the Collateral Agreements.
"Collateral Agreement" means the Collateral Agreement, dated as of February
, 1999, among the Seller, The Chase Manhattan Bank, as Collateral Agent, and
the Trust, securing the Seller's obligations under the Contract.
"Collateral Event of Default" under the Collateral Agreement means, at any
time, (A) if no U.S. Government obligations are pledged as substitute collateral
at or before that time, failure of the collateral to include at least the
maximum number of shares of Class A Common Stock covered by the Contract at that
time (or, if a Reorganization Event or Spin-Off Distribution has occurred at or
before that 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 Contract--Collateral Arrangements;
Acceleration Upon Default By the Seller" above); (B) if any U.S. Government
obligations are pledged as substitute collateral for shares of Class A Common
Stock (or shares of Marketable Securities deliverable pursuant to the Contract)
at that time, failure of those U.S. Government obligations to have a market
value at that time of at least 105% of the market price per share of Class A
Common Stock (or shares of 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 those Marketable Securities) covered by the Contract at that time and
(y) the number of shares of Class A Common Stock (or shares of Marketable
Securities) pledged as collateral at that time; and (C) at any time after a
Reorganization Event in which consideration other than Marketable Securities has
been delivered, failure of any U.S. Government obligations pledged as collateral
for Cash Delivery Obligations to have a market value at that time of at least
105% of those Cash Delivery Obligations, if that failure is not cured within one
business day after notice of that failure is delivered to the Seller.
"Company" means The Estee Lauder Companies Inc., a Delaware corporation.
"Company Prospectus" means the prospectus of the Company, dated February
, 1999 (attached as pages A-1 through A- hereof), which describes the Company
and the Class A Common Stock.
"Company Successor" means a surviving entity or subsequent surviving entity
of the Company.
"Contract" means the forward purchase contracts between the Seller 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, dated as of February
, 1999, between the Trust and The Chase Manhattan Bank, as Custodian.
"Direct Participants" means Participants of DTC, including brokers and
dealers, banks, trust companies, clearing corporations and 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
37
<PAGE>
by the Administrator, whose determination shall be final) 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 February , 2002, subject to extension and
acceleration by the Seller under the Contract.
"Exchange Rate" means the rate of exchange of Class A Common Stock for
Securities on the Exchange Date, and will be determined as follows (adjusted in
certain events):
(i) 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 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, the Exchange Rate will be 0. shares of
Class A Common Stock.
(iii) If the Average Market Price is less than the Initial Price, the
Exchange Rate will be one share of Class A Common Stock.
"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 $ , subject to adjustment as described under
"--The Contract--Dilution Adjustments".
"Insufficiency Determination" means a determination by the Collateral Agent
that the collateral pledged by any Seller fails to meet the requirements
described under "Investment Objective and Policies--The Contract--Collateral
Arrangements; Acceleration Upon Default By the Seller".
"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 designated to serve as Managing
Trustee.
"Marketable Securities" means any common equity securities (whether voting
or non-voting) listed on a U.S. national or regional securities exchange or
reported by the NASDAQ National Market.
"NYSE" means the New York Stock Exchange, Inc.
"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.
"Paying Agent Agreement" means the Paying Agent Agreement, dated as of
February , 1999, 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%.
38
<PAGE>
"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 consolidation or merger as referred to in
clause (A)) or (D) any liquidation, dissolution or winding up of the Company or
any Company Successor.
"Rollover Offering" means a reoffering or refinancing of Securities
effected not earlier than February , 2002, by means of a completed public
offering or offerings, or another similar offering (which may include one or
more exchange offers), by or on behalf of the Seller.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Trust's $ Trust Automatic Common Exchange
Securities.
"Seller" means The Estee Lauder 1994 Trust.
"Spin-Off Distribution" means a distribution by the Company to holders of
Class A Common Stock of Marketable Securities issued by an issuer other than the
Company.
"Then-Current Market Price" of the Class A Common Stock, for the purpose of
applying any adjustment described in "Investment Objective and Policies--The
Contract--Dilution Adjustments", means the average Closing Price per share of
Class A Common Stock for the Calculation Period consisting 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 after a
record date, 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
Class A Common Stock is determined for one or more (but not all) of such Trading
Days, such Trading Days will be disregarded in the calculation of the Then-
Current Market Price (but no additional Trading Days will be added to the
Calculation Period). If no Closing Price for the Class A Common Stock may be
determined for any of such Trading Days, the Then-Current Market Price shall be
the Closing Price for the Class A Common Stock for the most recent Trading Day
prior to such five Trading Days for which a Closing Price for the Class A Common
Stock may be determined pursuant to the definition of "Closing Price". The
"ex-date" with respect to any dividend, distribution or issuance shall mean the
first date on which the shares of Class A 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 United
States 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 United States national or regional securities exchange or
association or over-the-counter market that is the primary market for the
trading of that security.
"Transaction Value" means, with respect to any Reorganization Event, the
sum of: (i) for any cash received in such Reorganization Event, the amount of
such cash received per share of Class A Common Stock; (ii) for any property
other than cash or Marketable Securities received in such Reorganization Event,
an amount equal to the market value on the date such 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, whose determination shall be
final); and (iii) for any Marketable Securities received in such Reorganization
Event, an amount equal to the average Closing Price per share of these
Marketable Securities for the Calculation Period of 20 Trading Days immediately
prior to the
39
<PAGE>
Exchange Date (or, in the case of a Cash Merger, for the 20 Trading Days
immediately before the date the Reorganization Event is consummated) multiplied
by the number of such Marketable Securities received for each share of Class A
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 Days shall be disregarded in the calculation of such average Closing
Price (but no additional Trading Days shall be added to the Calculation Period).
If no Closing Price for the Marketable Securities may be determined for any of
such Trading Days, the calculation in the preceding clause (iii) will be based
on the Closing Price for the Marketable Securities for the most recent Trading
Day prior to such 20 Trading Days for which a Closing Price for the Marketable
Securities may be determined pursuant to the definition of "Closing Price".
"Trust" means Estee Lauder Automatic Common Exchange Security Trust II.
"Trust Agreement" means the trust agreement dated as of June 17, 1998
pursuant to which the Trust was formed, as amended and restated as of February
, 1999.
"Trustees" means the three trustees who will internally manage the Trust.
"Underwriter" means Goldman, Sachs & Co., the Underwriter of the
Securities.
"Underwriter's Compensation" means the compensation of $ per Security
payable to the Underwriter by the Seller pursuant to the Underwriting Agreement.
"United States Holder" 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 covered by United States federal income taxation on a net
income basis in respect of Securities.
"Value" means (i) in respect of cash, the amount of such cash; (ii) in
respect of any property other than cash or Marketable Securities, an amount
equal to the market value on the date the Reorganization Event is consummated
(as determined by a nationally recognized independent investment banking firm
retained for this purpose by the Administrator); and (iii) in respect of any
share of Marketable Securities, an amount equal to the average Closing Price per
share of those Marketable Securities for the 20 Trading Days immediately before
the date the Reorganization Event is consummated; 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 Days shall be disregarded in the
calculation of such average Closing Price (but no additional Trading Days shall
be added to the Calculation Period). If no Closing Price for the Marketable
Securities may be determined for any of such Trading Days, the calculation in
the preceding clause (iii) will be based on the Closing Price for the Marketable
Securities for the most recent Trading Day prior to such 20 Trading Days for
which a Closing Price for the Marketable Securities may be determined pursuant
to the definition of "Closing Price".
40
<PAGE>
------------------------------------------------------------
------------------------------------------------------------
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the Securities offered hereby, but only under
circumstances and in jurisdictions where it is lawful to do so. The information
contained in this prospectus is current only as of its date.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----------
<S> <C>
Prospectus Summary........................... 2
The Trust.................................... 9
Use of Proceeds.............................. 12
Investment Objective and Policies............ 12
Description of Securities.................... 24
Risk Factors................................. 27
Certain Federal Income Tax Considerations.... 29
Underwriting................................. 32
Validity of Securities....................... 33
Experts...................................... 33
Further Information.......................... 33
Report of Independent Accountants............ 34
Statement of Assets and Liabilities.......... 35
Glossary..................................... 36
Appendix A: Prospectus of The Estee Lauder
Companies Inc.............................. A-1
</TABLE>
------------------
Through and including ,1999 (the 25th day after the date of
this prospectus), all dealers effecting transactions in these Securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to a dealer's obligation to deliver a prospectus
when acting as an underwriter and with respect to an unsold allotment or
subscription.
Shares
Estee Lauder Automatic
Common Exchange
Security Trust II
$ Trust Automatic Common
Exchange Securities
(TRACES(Trademark/Service Mark))
----------------------
PROSPECTUS
----------------------
Goldman, Sachs & Co.
------------------------------------------------------------
------------------------------------------------------------
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
<TABLE>
<S> <C> <C>
Part A-- Report of Independent Accountants.
Statement of Assets and Liabilities.
Part B-- None.
</TABLE>
(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) Form of Purchase Contract
2.k.(iv) Form of Collateral Agreement
2.k.(v) Form of Fund Expense Agreement
2.k.(vi) Form of Fund Indemnity Agreement
2.l Opinion and Consent of Counsel to the Trust
2.n.(i) Tax Opinion and Consent of Counsel to the Trust
2.n.(ii) Consent of Independent Public Accountants*
2.n.(iii) Consents to Being Named as Trustee*
2.p Subscription Agreement*
2.r Financial Data Schedule
</TABLE>
- ------------------
* Previously filed.
ITEM 25. MARKETING ARRANGEMENTS
See the Form of Underwriting Agreement to be filed as Exhibit 2.h to this
Registration Statement.
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses to be incurred in
connection with the offering described in this Registration Statement:
<TABLE>
<S> <C>
Registration fees.......................................................................... $ 47,955
New York Stock Exchange listing fee........................................................ 16,400
Printing (other than certificates)......................................................... 40,000
Fees and expenses of qualification under state securities laws (excluding fees of
counsel)................................................................................. 0
Accounting fees and expenses............................................................... 96,500
Legal fees and expenses.................................................................... 200,000
NASD fees.................................................................................. 17,750
Miscellaneous.............................................................................. 31,395
--------
Total...................................................................................... $450,000
--------
--------
</TABLE>
- ------------------
C-1
<PAGE>
ITEM 27. PERSON CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Before June 17, 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 the
Securities offered hereby with Goldman, Sachs & Co.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
NUMBER OF
TITLE OF CLASS RECORD HOLDERS
- ---------------------------------------------------------------------------- --------------
<S> <C>
$ Trust Automatic Common Exchange Securities............................ 1
</TABLE>
ITEM 29. INDEMNIFICATION
The form of Underwriting Agreement, filed as Exhibit 2.h to this
Registration Statement, provides for indemnification of the Underwriter against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act").
The Amended and Restated Trust Agreement filed as Exhibit 2.a.(ii) to this
Registration Statement provides for indemnification to each Trustee against any
claim or liability incurred in acting as Trustee of the Trust, except in the
case of willful misfeasance, bad faith, gross negligence or reckless disregard
of the Trustee's duties. The Custodian Agreement, Administration Agreement and
Paying Agent Agreement filed as Exhibits 2.j, 2.k.(i) and 2.k.(ii) to this
Registration Statement provide for indemnification to the Custodian,
Administrator and Paying Agent against any loss or expense incurred in the
performance of their obligations under the respective agreements, unless such
loss or expense is due to willful misfeasance, bad faith, gross negligence or
reckless disregard of their obligations. The Fund Indemnity Agreement filed as
Exhibit 2.k.(vi) to this Registration Statement provides that the Seller will
indemnify the Trust for certain indemnification expenses incurred under the
Trust Agreement, the Custodian Agreement, the Administration Agreement and the
Paying Agent Agreement.
Insofar as indemnification for liability 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. If a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a trustee, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Not Applicable.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
The Trust's accounts, books and other documents are currently located at
the offices of the Registrant, c/o Goldman, Sachs & Co., 85 Broad Street, New
York, New York 10004 and at the offices of The Chase Manhattan Bank, 450 West
33rd Street, New York, New York 10001, the Registrant's Administrator.
C-2
<PAGE>
ITEM 32. MANAGEMENT SERVICES
Not applicable.
ITEM 33. UNDERTAKINGS
(a) The Registrant hereby undertakes to suspend offering of the Securities
until it amends its prospectus if (1) subsequent to the effective date of its
Registration Statement, the net asset value falls more than 10 percent from its
net asset value as of the effective date of the Registration Statement or
(2) the net asset value increases to an amount greater than its net proceeds as
stated in the prospectus.
(b) The Registrant hereby undertakes that (i) for the purpose of
determining any liability under the Securities Act, the information omitted from
the form of prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the Registrant
under Rule 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective; (ii) for the
purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of the securities at that time shall be deemed to be the initial
bona fide offering thereof.
C-3
<PAGE>
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
BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THERETO DULY AUTHORIZED, IN THE CITY
OF NEW YORK, STATE OF NEW YORK, ON THE 17TH DAY OF FEBRUARY, 1999.
ESTEE LAUDER AUTOMATIC COMMON
EXCHANGE SECURITY TRUST II
By: /s/ PAUL S. EFRON
-----------------------------------
Paul S. Efron
Trustee
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSON, IN THE CAPACITIES AND ON THE DATE
INDICATED.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------------------ ---------------------------------------- -------------------
<S> <C> <C>
/s/ PAUL S. EFRON Principal Executive Officer, February 17, 1999
- ------------------------------------------ Principal Financial Officer,
Paul S. Efron Principal Accounting Officer and Trustee
</TABLE>
<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) Form of Purchase Contract
2.k.(iv) Form of Collateral Agreement
2.k.(v) Form of Fund Expense Agreement
2.k(vi) Form of Fund Indemnity Agreement
2.l Opinion and Consent of Counsel to the Trust
2.n.(i) Tax Opinion and Consent of Counsel to the Trust
2.n.(ii) Consent of Independent Public Accountants*
2.n.(iii) Consents to Being Named as Trustee*
2.p Subscription Agreement*
2.r Financial Data Scheduled
</TABLE>
- ------------------
* Previously filed.
<PAGE>
Exhibit 2.a(ii)
S&C Draft of February 16, 1999
AMENDED AND RESTATED
TRUST AGREEMENT
CONSTITUTING
ESTEE LAUDER AUTOMATIC COMMON EXCHANGE SECURITY TRUST II
Dated as of February 17, 1999
<PAGE>
Table of Contents
Page
----
ARTICLE I
DEFINITIONS
ARTICLE II
TRUST DECLARATION; PURPOSES, POWERS
AND DUTIES OF THE TRUSTEES; ADMINISTRATION
SECTION 2.1 Declaration of Trust; Purposes of the Trust................... 6
SECTION 2.2 General Powers and Duties of the Trustees..................... 7
SECTION 2.3 Portfolio Acquisition......................................... 9
SECTION 2.4 Portfolio Administration...................................... 9
SECTION 2.5 Manner of Sales............................................... 13
SECTION 2.6 Limitations on Trustees' Powers............................... 14
ARTICLE III
ACCOUNTS AND PAYMENTS
SECTION 3.1 The Trust Account............................................. 15
SECTION 3.2 Payment of Fees and Expenses.................................. 15
SECTION 3.3 Distributions to Holders...................................... 15
SECTION 3.4 Segregation................................................... 15
SECTION 3.5 Temporary Investments......................................... 15
ARTICLE IV
REDEMPTION
SECTION 4.1 Redemption................................................... 16
ARTICLE V
ISSUANCE OF CERTIFICATES; REGISTRY; TRANSFER OF SECURITIES
SECTION 5.1 Form of Certificate........................................... 16
SECTION 5.2 Transfer of Securities; Issuance, Transfer and
Interchange of Certificates....................................... 18
SECTION 5.3 Replacement of Certificates................................... 19
<PAGE>
ARTICLE VI
ISSUANCE OF THE CONTRACT
SECTION 6.1 Execution of the Contract..................................... 19
ARTICLE VII
TRUSTEES
SECTION 7.1 Trustees...................................................... 20
SECTION 7.2 Vacancies..................................................... 20
SECTION 7.3 Powers........................................................ 21
SECTION 7.4 Meetings...................................................... 21
SECTION 7.5 Resignation and Removal....................................... 21
SECTION 7.6 Liability..................................................... 22
SECTION 7.7 Compensation.................................................. 22
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Meetings of Holders........................................... 23
SECTION 8.2 Books and Records; Reports.................................... 24
SECTION 8.3 Termination................................................... 25
SECTION 8.4 Amendment and Waiver.......................................... 26
SECTION 8.5 Accountants................................................... 27
SECTION 8.6 Nature of Holder's Interest................................... 28
SECTION 8.7 New York Law to Govern........................................ 29
SECTION 8.8 Notices....................................................... 29
SECTION 8.9 Severability.................................................. 29
SECTION 8.10 Counterparts.................................................. 29
EXHIBITS
EXHIBIT A Form of Certificate........................................... A-1
EXHIBIT B Collateral Agreement.......................................... B-1
EXHIBIT C Contract...................................................... C-1
EXHIBIT D Indemnity Agreement........................................... D-1
EXHIBIT E Expense Agreement............................................. E-1
SCHEDULES
SCHEDULE I Form of Treasury Securities................................... I-1
<PAGE>
AMENDED AND RESTATED TRUST AGREEMENT
This Amended and Restated Trust Agreement, dated as of
February 17, 1999 (the "Trust Agreement"), by and between Goldman, Sachs & Co.,
as sponsor (the "Sponsor"), and Donald J. Puglisi, William R. Latham III and
James B. O'Neill, as trustees (the "Trustees"), constituting Estee Lauder
Automatic Common Exchange Security Trust II (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 Trust Agreement, dated as of June 17, 1998 (the
"Original Agreement"), creating Sixth Automatic Common Exchange Security Trust;
and
WHEREAS, as of the date of this Amended and Restated Trust
Agreement, Paul S. Efron has resigned as trustee and the Sponsor has appointed
the Trustees as the trustees of the Trust; and
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.
<PAGE>
"Accelerated Portion" - The Accelerated Portion as defined in
the Contract.
"Additional Purchase Price" - The Additional Purchase Price as
defined in the Contract.
"Administration Agreement" - The Administration Agreement,
dated as of the date hereof, between the Adminis trator and the Trust, and any
substitute agreement therefor entered into pursuant to Section 2.2(a) hereof.
"Administrator" - The Chase Manhattan Bank, 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 Contract.
"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 Merger" - Cash Merger as defined in the Contract.
"Cash Settlement Alternative" - The Cash Settlement
Alternative as defined in the Contract.
"Certificate" - Any certificate evidencing the ownership of
Securities substantially in the form of Exhibit A hereto.
"Code" - The Internal Revenue Code of 1986, as amended from
time to time; each reference herein to any section of the Code or any regulation
thereunder shall constitute a reference to any successor provision thereto.
"Collateral Agent" - The Chase Manhattan Bank, or its
successor as permitted under the Collateral Agreement.
"Collateral Agreement" - The Collateral Agreement between the
Collateral Agent and the Seller, securing the
-2-
<PAGE>
Seller's obligations under the Contract, substantially in the form of Exhibit B
hereto.
"Commencement Date" - The day on which the Underwriting
Agreement is executed.
"Commission" - The United States Securities and Exchange
Commission.
"Common Stock" - Class A Common Stock, par value $.01 per
share, of the Company.
"Company" - The Estee Lauder Companies Inc., a Delaware
corporation.
"Contract" - The forward purchase contract between the Trust
and the Seller, substantially in the form of Exhibit C hereto.
"Custodian" - The Chase Manhattan Bank, 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 Trust, and any substitute
agreement therefor entered into pursuant to Section 2.2(a) hereof.
"Distribution Date" - Each February __, May __, August __ and
November __ of each year commencing March __, 1998, to and including the
Exchange Date or if any such date is not a Business Day, then the first Business
Day thereafter.
"DTC" - The Depository Trust Company, or any successor
thereto.
"Excess Purchase Payment" - Excess Purchase Payment as defined
under the Contract.
"Exchange" - The delivery of Shares by the Trustees to the
Holders, subject to the adjustments and exceptions set forth in the Contract
(or, to the extent the Seller elects the Cash Settlement Alternative, the amount
in cash specified in the Contract as payable in respect
-3-
<PAGE>
thereof), in mandatory exchange for the Securities on the Exchange Date.
"Exchange Date" - The Exchange Date as defined in the
Contract; provided that if the Exchange Date under the Contract is extended,
then the "Exchange Date" shall refer to the Exchange Date as so extended.
"Exchange Rate" - The Exchange Rate as defined in the
Contract.
"Expense Agreement" - The Fund Expense Agreement dated as of
the date hereof between the Trust and the Sponsor substantially in the form of
Exhibit E hereto.
"Event of Default" - An Event of Default as defined in the
Contract.
"Firm Purchase Price" - The Firm Purchase Price as defined in
the Contract.
"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 Trust and the Sponsor substantially in the form
of Exhibit D hereto.
"Investment Company" - Investment Company as defined in
Section 3 of the Investment Company Act.
"Investment Company Act" - The Investment Company Act of 1940,
as amended from time to time; each reference herein to any section of such Act
or any rule or regulation thereunder shall constitute a reference to any
successor provision thereto.
"Managing Trustee" - The Trustee designated the Managing
Trustee by resolution of the Trustees.
"Marketable Securities" - Marketable Securities as defined in
the Contract.
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"Merger Consideration" - Merger Consideration as defined in
the Contract.
"Original Agreement" - The meaning specified in the recitals
hereof.
"Participant" - A Person having a book-entry only system
account with the Depositary.
"Paying Agent" - ChaseMellon Shareholder Services, L.L.C., or
its successor as permitted under Section 6.6 of the Paying Agent Agreement or
appointed pursuant to Section 2.2(a) hereof.
"Paying Agent Agreement" - The Paying Agent Agree ment, dated
as of the date hereof, between the Paying Agent and the Trust, 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" - $0.____ per Security paid to each
Holder on each Distribution Date.
"Record Date" - The Business Day preceding each
Distribution Date.
"Registration Statement" - The Registration Statement on
Form N-2 (Registration Nos. 333-57125 and 811-8827) of the Trust, as amended.
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"Reorganization Event" - A Reorganization Event as defined in
the Contract.
"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.
"Seller" - The Estee Lauder 1994 Trust, a trust organized
under the laws of the State of New York.
"Shares" - Shares of Common Stock to be exchanged by the
Trustees for the Securities on the Exchange Date; provided that after a Spin-Off
Distribution, all references to "Shares" shall include the shares distributed in
such event, and provided, further that after any Reorganization Event, all
references to "Shares" shall refer to the Marketable Securities received in such
event.
"Spin-Off Distribution" - A Spin-Off Distribution as defined
in the Contract.
"Temporary Investments" - Direct short-term U.S. government
obligations, as specified from time to time as provided in Section 3.5.
"Transfer Agent and Registrar" - ChaseMellon Shareholder
Services, L.L.C., as Transfer Agent and Registrar for the Common Stock.
"Treasury Securities" - The U.S. Government Securities
purchased by the Trustees at the First Time of Delivery and, if applicable, the
Second Time of Delivery, as provided in Section 2.3(b) hereof.
"Trust Account" - The account created pursuant to Section 3.1
hereof.
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"Trust Estate" - The Contract and the U.S. Government
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.
"Underwriter" - Goldman, Sachs & Co.
"Underwriting Agreement" - The Underwriting Agreement as
described in the Prospectus.
"U.S. Government Securities" - Direct obligations of the
United States of America.
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 Con tract, issue and sell to the Sponsor and the
Underwriter the Securities, receive and redeliver additional U.S. Government
Securities upon an extension of the Exchange Date pursuant to the Contract, 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 Underwriter, 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:
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(a) to enter into and perform (and, in accordance with Section
8.4 hereof, amend) the Contract, the Collateral Agreement, the
Underwriting Agreement, the Indemnity Agreement, the Custodian
Agreement, the Administration Agreement and the Paying Agent Agreement
and to perform all obligations of the Trustees (including the
obligation to provide indemnity hereunder and thereunder) and enforce
all rights and remedies of the Trust under each of such agreements; and
if any of the Custodian Agreement, the Administration Agreement, the
Collateral Agreement 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; pro vided 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 Agreement, 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 Underwriter an aggregate of up to
______________ [TOTAL NUMBER OF SECURITIES UNDER THE UNDERWRITING
AGREEMENT, INCLUDING THE OVER-ALLOTMENT OPTION] Securities (including
those Securities subject to the over-allotment option of the
Underwriter 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 Underwriter but
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prior to the sale of the Securities to the Underwriter, the Security
originally issued to the Sponsor shall be split into a greater number
of Securities so that immediately following such split the value of
each Security held by the Sponsor will equal the aforesaid public
offering price;
(d) to select independent public accountants and, subject to
the provisions of Section 8.5 hereof, to engage such independent public
accountants;
(e) to engage legal counsel and, to the extent required by
Section 2.4 hereof, to engage professional advisors and pay reasonable
compensation thereto;
(f) to defend any action commenced against the Trustees or the
Trust and to prosecute any action which the Trustees deem necessary to
protect the Trust and the rights and interests of Holders, and to pay
the costs thereof;
(g) to arrange for the bonding of officers and employees of
the Trust as required by Section 17(g) of the Investment Company Act
and the rules and regulations thereunder;
(h) to delegate any and all of its powers and duties hereunder
as contemplated by the Collateral Agreement, 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 Contract with respect to the Shares
subject thereto with the Seller on the Commencement Date for settlement
on the date or dates
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provided thereunder and, subject to satisfaction of the conditions set
forth in the Contract, to pay the Firm Purchase Price and the
Additional Purchase Price, if any, thereunder with the proceeds of the
sale of the Securities, net of 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 Contract, the Contract
shall entitle the Trust to receive from the Seller on the Exchange Date
the Shares subject thereto (or, if the Seller elects the Cash
Settlement Alternative, the amount in cash specified in the Contract)
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, 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.
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 Contract 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 Seller, or to request from the Seller such further
information as may be necessary to calculate or effect the required
adjustment;
(b) Selection of Independent Investment Bank. Upon receipt of
notice of (i) the occurrence of a Reorganization Event in which
property other than cash or Marketable Securities is to be received in
respect of the Common Stock as described in Section 6.2 of the
Contract, (ii) an Excess Purchase Payment in which the Company has paid
or will pay consideration other than
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cash as described in Section 6.1(d) of the Contract, or (iii) the
declaration or payment of a dividend or distribution to all holders of
Common Stock of evidences of its indebtedness or other non-cash assets
or the issuance of Common Stock rights or warrants as described in
Section 6.1(c) of the Contract, to retain the nationally recognized
investment banking firm selected by the Administrator to determine the
market value of such property as provided in the Contract, and to
deliver to the Seller notice pursuant to Section 8.1 of the Contract
identifying the firm proposed to be selected and retained, and to cause
the Administrator to consult with the Seller on such selection and
retention as provided in such Section 8.1;
(c) Acceleration. In the event (i) an acceleration of the
Contract shall occur due to an Event of Default as provided in Article
VII of the Contract, 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 con templated by Section 6.2
of the Contract, 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 distrib uted to the Holders of Securities, in each
case in accordance with the Contract and the Collateral Agreement;
(d) Additional U.S. Government Securities. To accept
additional U.S. Government Securities delivered to the Trust in
connection with an extension of the Exchange Date at the Seller's
election in accordance with Section 1.3 of the Contract, and to
redeliver such U.S. Government Securities in connection with an
acceleration of the Exchange Date at the Seller's election in
accordance with Section 1.3 of the Contract;
(e) Delivery of Cash Settlement Alternative Election Notice to
Holders of Securities. Upon receipt of a notice from the Seller of its
election of the Cash Settlement Alternative, as provided by Section
1.3(d)
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of the Contract, or of the extension of the Exchange Date, as provided
by Section 1.3(e) of the Contract, or of the acceleration of the
Exchange Date, as provided by Section 1.3(f) of the Contract, to give
notice of such election, extension or acceleration as provided in the
Contract;
(f) Determination of Exchange Date Amounts. To calculate, on
the Exchange Date, the number of Shares (or, if the Seller elects the
Cash Settlement Alternative, the amount in cash) required to be
delivered by the Seller under Section 1.1 of the Contract or, if a
Reorganization Event shall have occurred, the amount of cash required
to be delivered by the Seller, and the number of Marketable Securities
permitted to be delivered by the Seller in lieu of all or a portion of
such cash, all as provided in Section 6.2 of the Contract, and to
furnish notice of the amounts so determined to the Collateral Agent and
the Seller;
(g) Distribution of Exchange Consideration. Unless a
Reorganization Event other than a Cash Merger in which the Merger
Consideration includes Marketable Securities (it being understood that
in the case of such a Cash Merger, this provision shall relate to the
portion of the Merger Consideration that consists of Marketable
Securities), shall have occurred (in which event distribution of
proceeds shall be governed by Section 8.3 below) or the Seller elects
the Cash Settlement Alternative (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 Contract 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;
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(ii) Cash for Fractional Shares. To sell, in
the principal market therefor, on the Exchange Date, a number
of Shares equal to the aggregate number of fractional Shares
determined pursuant to clause (i) (B) above, rounded down to
the nearest integral number; and to determine the difference
between (A) the aggregate proceeds of such sale (net of any
brokerage or related expenses) and (B) the product of the
number of Shares so sold and the Average Market Price; and, in
accordance with the Indemnity Agreement, to pay such
difference, if positive, to the Seller, or to request payment
of such difference, if negative, from Seller;
(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
Contract on the Exchange Date, 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 the beneficial owners of
Securities who own through 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;
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(v) Distribution of Cash Received upon
Acceleration of Exchange Date. If the Exchange Date shall have
been accelerated pursuant to Section 1.3(f) of the Contract,
to distribute to each Holder its pro rata share of any cash
received by the Trust from the Seller in connection therewith;
and
(vi) Record Date. The distributions described
in this paragraph (g) shall be made to Holders of record as of
the close of business on the Business Day preceding the
Exchange Date;
(h) Application to List Securities. If the Securities are
delisted or suspended from trading on the New York Stock Exchange,
Inc., to apply for listing of the Securities on another national or
regional securities exchange or for quotation on another trading
market; and
(i) Distribution of Accelerated Portion. If a Cash Merger
shall occur, to distribute promptly to each Holder of Securities such
Holder's pro rata share of the Accelerated Portion delivered under the
Contract.
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 Contract, the Treasury Securities, any additional
U.S. Government Securities delivered to the Trust in connection with an
extension of the Exchange Date under the Contract, the Temporary
Investments contemplated by Section 3.5 hereof and, in the event of a
Reorganization Event or a Spin-Off Distribution, Marketable Securities
or any other property received in such event;
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(b) to dispose of the Contract 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;
(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 (other than the purchase of the Treasury
Securities pursuant to Section 2.3 hereof); 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 Contract, the Treasury Securities, any other U.S. Government Securities
delivered to the Trust and any Temporary
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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
Underwriter of the Securi ties remaining after the purchase of the Contract and
the Treasury Securities shall be credited to the Trust Account.
SECTION 3.2 Payment of Fees and Expenses. The Administrator is
authorized to pay, to the extent not paid by third parties, the fees and
expenses of the Trust incurred in connection with the public offering of the
Securities and the costs and expenses incurred in connection with the
organization and operation 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
the Quarterly Distribution with respect to all Securities held by such Holder
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
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hold any Temporary Investment to its maturity and shall apply the proceeds
thereof upon maturity to the payment of the next succeeding Quarterly
Distribution. All such Temporary Investments shall be selected from time to time
by the Trustees or pursuant to standing instructions from the Trustees to the
Administrator, and the Administrator and/or Paying Agent shall have no liability
to the Trust or any Holder or any other Person with respect to the payment or
performance of 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 Certifi cate evidencing
Securities shall be executed manually or in facsimile by the Managing Trustee
and countersigned 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 countersignature 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.
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The Certificates delivered to the Underwriter at the First
Time of Delivery and the Second Time of Delivery (if any) will be issued in the
form of a global Certificate or Certificates representing the Securities issued
to the Underwriter, to be delivered to 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 Trustees as
provided above. 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
Managing Trustee may execute and the Paying Agent shall countersign 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
countersigned manually by the Paying Agent upon the same conditions and in
substantially the same manner, and with
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like effect, as the definitive Certificates. Without unreasonable delay the
Managing Trustee shall execute and shall furnish definitive Certificates to the
Paying Agent 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 countersign 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 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.
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
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with the instructions of the Trustees; provided, however, that the Paying Agent
shall not be required to destroy cancelled Certificates.
The Paying Agent may adopt other reasonable rules and
regulations for the registration, transfer and tender of Securities as it may,
in its discretion, deem necessary.
SECTION 5.3 Replacement of Certificates. In case any
Certificate shall become mutilated or be destroyed, stolen or lost, the Paying
Agent shall execute and deliver a new Certificate in exchange and substitution
therefor upon the Holder's furnishing the Paying Agent with proper
identification and satisfactory indemnity of the Trustees and the Paying Agent,
complying with such other reasonable regulations and conditions as the Paying
Agent may prescribe and paying such expenses and charges, including any bonding
fee, as the Paying Agent may incur or reasonably impose; provided that if the
Trust has terminated or is in the process of terminating, the Paying Agent, in
lieu of issuing such new Certificate, may, upon the terms and conditions set
forth herein, make the distributions set forth in Section 8.3(c) hereof. Any
mutilated Certificate shall be duly surrendered and cancelled before any
duplicate Certificate shall be issued in exchange and substitution therefor.
Upon issuance of any duplicate Certificate pursuant to this Section 5.3 hereof,
the original Certificate claimed to have been lost, stolen or destroyed shall
become null and void and of no effect, and any bona fide purchaser thereof shall
have only such rights as are afforded under Article 8 of the Uniform Commercial
Code to a Holder presenting a Certificate for transfer in the case of an
overissue.
ARTICLE VI
ISSUANCE OF THE CONTRACT
SECTION 6.1 Execution of the Contract. The Contract shall be
executed manually or in facsimile by the Managing Trustee and executed manually
by the Seller and shall be dated the date of execution and delivery by the
Seller.
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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 a meeting of Holders is called for the
purpose of electing Trustees and, then, until such Trustee's successor is duly
elected and qualified. Holders may not cumulate their votes in the election of
Trustees. Each Trustee shall not be considered to have qualified for the office
unless such Trustee shall agree to be bound by the terms of this Trust Agreement
and shall evidence his consent by executing this Trust Agreement or a supplement
hereto.
SECTION 7.2 Vacancies. Any vacancy in the office of a Trustee
may be filled in compliance with Sections 10 and 16 of the Investment Company
Act by the vote, within thirty days, of the remaining Trustees; provided that if
required by Section 16 of the Investment Company Act, the Trustees shall
forthwith cause to be held as promptly as possible and in any event within sixty
days (unless the Commission by order shall extend such period) a meeting of
Holders for the purpose of electing Trustees in compliance with Sections 10 and
16 of the Investment Company Act. Until a vacancy in the office of any Trustee
is filled as provided above, the remaining Trustees in office, regardless of
their number, shall have the powers granted to the Trustees and shall discharge
all the duties imposed upon the Trustees by this Trust Agreement. Election shall
be by the affirmative vote of Holders of a majority of the Securities entitled
to vote present in person or by proxy at a special meeting of Holders called for
the purpose of electing any Trustee. Each individual Trustee shall be at least
21 years of age and shall not be under any legal disability. No Trustee who is
an "interested person", as defined in the Investment Company Act, may assume
office if it would cause the composition of the Trustees of the Trust not to be
in compliance with the percentage limitations on interested persons in Section
10 of the Investment Company Act. Trustees need not be Holders. Notice of the
appointment or
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election of a successor Trustee shall be mailed promptly after acceptance of
such appointment by the successor Trustee to each Holder.
SECTION 7.3 Powers. The Trust will be managed solely by the
Trustees, who will, subject to the provisions of Article II hereof, have
complete and exclusive control over the management, conduct and operation of the
Trust's business, and shall have the rights, powers and authority of a board of
directors of a corporation organized under New York law. The Trustees shall have
fiduciary responsibility for the safekeeping and use of all funds and assets of
the Trust and shall not employ, or permit another to employ, such funds or
assets in any manner except for the exclusive benefit of the Trust and except in
accordance with the terms of this Trust Agreement. Subject to the continuing
supervision of the Trustees and as permitted by applicable law, the functions of
the Trust shall be performed by the Custodian, the Paying Agent, the
Administrator and such other entities engaged to perform such functions as the
Trustees may determine, including, without limitation, any or all administrative
functions.
SECTION 7.4 Meetings. Meetings of the Trustees shall be held
from time to time upon the call of any Trustee on not less than 48 hours' notice
(which may be waived by any or all of the Trustees in writing either before or
after such meeting or by attendance at the meeting unless the Trustee attends
the meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting has not been lawfully called or
convened). The Trustees shall act either by majority vote of the Trustees
present at a meeting at which at least a majority of the Trustees then in office
are present or by a unanimous written consent of the Trustees without a meeting.
Except as otherwise required under the Investment Company Act, all or any of the
Trustees may participate in a meeting of the Trustees by means of a conference
telephone call or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to such communications equipment shall constitute presence in person at
such meeting.
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<PAGE>
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 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 to the extent permitted by law
from the Trust Estate 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.
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<PAGE>
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, pursuant to the Expense
Agreement, a one-time, up-front fee of $10,800, in respect of its annual fee and
anticipated out-of-pocket expenses. In addition, the Managing Trustee shall
receive, pursuant to the Expense Agreement, an additional one-time, up-front fee
of $3,600 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 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
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<PAGE>
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, which shall be located at 450 West 33rd Street, New
York, New York 10001, and the office of the Administrator available for
inspection at all reasonable times during its usual business hours by any
Holder. The Trustees shall keep proper books of record and account for all the
transactions under this Trust Agreement at the office of the Trust and the
office of the Administrator, and such books and records shall be open to
inspection by any Holder at all reasonable times during usual business hours.
The Trustees shall retain all books and records in compliance with Section 31 of
the Investment Company Act and the rules and regulations thereunder.
(b) With each payment to Holders the Paying Agent shall set
forth, either in the instruments by means of which payment is made or in a
separate statement, the amount being paid from the Trust Account expressed as a
dollar amount per Security and the other information required under Section 19
of the Investment Company Act and the rules and regulations thereunder. The
Trustees shall prepare and file or 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
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<PAGE>
thereunder. One of the Trustees shall be designated by resolution of the
Trustees to make the filings and give the notices required by Rule 17g-1 under
the Investment Company Act.
(c) In calculating the net asset value of the Trust as
required by the Investment Company Act, (i) the Treasury Securities will be
valued at the mean between the last current bid and asked prices or, if
quotations are not available, as determined in good faith by the Trustees, (ii)
short-term investments having a maturity of 60 days or less will be valued at
cost with accrued interest or discount earned included in interest receivable
and (iii) the Contract will be valued on the basis of the bid price received by
the Trust in respect of the Contract, 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 Contract and with terms comparable thereto
or if such a bid quotation is not available, as determined in good faith by the
Trustees.
SECTION 8.3 Termination. (a) This Trust Agree ment and the
Trust created hereby shall terminate upon the earliest of (i) the date 90 days
after the execution of this Trust Agreement if (x) the Securities have not
theretofore been issued to the Underwriter under the Underwriting Agreement 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 Contract, the Treasury Securities and any other securities held hereunder,
(iii) the date 10 Business Days after the Exchange Date (or, if the Contract
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 the Seller, or the proceeds
of any sale of collateral pursuant to Section 8(c) of the Collateral Agreement),
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
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<PAGE>
Holder shall not operate to terminate this Trust Agreement, nor entitle his
legal representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of the Trust, and shall
not otherwise affect the rights, obligations and liabilities of the parties
hereto.
(b) Written notice of any termination shall be sent to Holders
specifying the record date for any distribution to Holders and the time of
termination as determined by the Trustees, upon which the books maintained by
the Paying Agent pursuant to Section 5.2 hereof shall be closed.
(c) For purposes of termination under Sections 8.3(a)(ii),
(iii) and (iv) hereof, within five Business Days after such termination, the
Trustees shall, subject to any applicable provisions of law, effect the sale of
any remaining property of the Trust, and the Paying Agent shall distribute pro
rata as soon as practicable thereafter to each Holder, upon surrender for
cancellation of its Certificates, its interest in the Trust Estate. Together
with the distribution to the Holders, the Trustees shall furnish the Holders
with a final statement as of the date of the distribution of the amount
distributable with respect to each Security.
SECTION 8.4 Amendment and Waiver. (a) This Trust Agreement,
and any of the agreements referred to in Section 2.2(a) hereof, may be amended
from time to time by the Trustees for any purpose prior to the issuance and sale
to the Underwriter 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).
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<PAGE>
(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 (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.
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<PAGE>
SECTION 8.5 Accountants.
(a) The Trustees shall, in accordance with Section 30 of the
Investment Company Act, file annually with the Commission such information,
documents and reports as investment companies having securities registered on a
national securities exchange are required to file annually pursuant to Section
13(a) of the Securities Exchange Act of 1934, as amended, and the rules and
regulations issued thereunder. The Trustees shall transmit to the Holders, at
least semi-annually, the reports required by Section 30(d) of the Investment
Company Act and the rules and regulations thereunder, including, without
limitation, a balance sheet accompanied by a statement of the aggregate value of
investments on the date of such balance sheet, a list showing the amounts and
values of such investments owned on the date of such balance sheet, and a
statement of income for the period covered by the report. Financial statements
contained in such annual reports shall be accompanied by a certificate of
independent public accounts based upon an audit not less in scope or procedures
than that which independent public accountants would ordinarily make for the
purpose of presenting comprehensive and dependable financial statements and
shall contain such information as the Commission may prescribe. Each such report
shall state that such independent public accountants have verified investments
owned, either by actual examination or by receipt of a certificate from the
Custodian.
(b) The independent public accountants referred to in
subsection (a) above shall be selected at a meeting held within thirty days
before or after the beginning of the fiscal year by the vote, cast in person, of
a majority of the Trustees who are not "interested persons" as defined in the
Investment Company Act and such selection shall be submitted for ratification at
the first meeting of Holders to be held as set forth in Section 8.1 hereof, and
thereafter as required by the Investment Company Act and the rules and
regulations thereunder. The employment of any independent public accountant for
the Trust shall be conditioned upon the right of the Holders by a vote of the
lesser of (i) 67% or more of the Securities present at a special meeting of
Holders, if Holders of more than 50% of Securities outstanding are present or
represented by proxy at such meeting or (ii) more than 50% of the Securities
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<PAGE>
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,
for the Shares, the Contract, 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 450 West 33rd Street, New York, New York 10001 and
to each Trustee at such Trustee's address set forth beneath its signature below,
or
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<PAGE>
such other address as shall be specified to the other parties hereto by such
party in writing. Any notice to be given to a Holder shall be duly given if
mailed, first class postage prepaid, or by such other substantially equivalent
means as the Trustees may deem appropriate, or delivered to such Holder at the
address of such Holder appearing on the registry of the Paying Agent.
SECTION 8.9 Severability. If any one or more of the covenants,
agreements, provisions or terms of this Trust Agreement shall be for any reason
whatsoever held invalid, then such covenants, agreements, provisions or terms
shall be deemed severable from the remaining covenants, agree ments, provisions
and terms of this Trust Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Trust Agreement or of the
Certificates, or the rights of the Holders thereof.
SECTION 8.10 Counterparts. This Trust Agreement may be
executed in counterparts, and as so executed will constitute one agreement,
binding on all of the parties hereto.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed.
GOLDMAN, SACHS & CO.
By:
--------------------------------
TRUSTEES:
----------------------------------
Name: William R. Latham III
Address: Department of Economics
University of Delaware
Newark, Delaware 19716
---------------------------------
Name: James B. O'Neill
Address: Department of Economics
University of Delaware
Newark, Delaware 19716
---------------------------------
Name: Donald J. Puglisi
Address: Department of Economics
University of Delaware
Newark, Delaware 19716
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<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 CUSIP
- -------------- ----------------------------------- ------------ -------------------- -------------------------- ------------------
<S> <C> <C> <C> <C> <C>
- -------------- ----------------------------------- ------------ -------------------- -------------------------- ------------------
- -------------- ----------------------------------- ------------ -------------------- -------------------------- ------------------
- -------------- ----------------------------------- ------------ -------------------- -------------------------- ------------------
- -------------- ----------------------------------- ------------ -------------------- -------------------------- ------------------
- -------------- ----------------------------------- ------------ -------------------- -------------------------- ------------------
- -------------- ----------------------------------- ------------ -------------------- -------------------------- ------------------
- -------------- ----------------------------------- ------------ -------------------- -------------------------- ------------------
- -------------- ----------------------------------- ------------ -------------------- -------------------------- ------------------
- -------------- ----------------------------------- ------------ -------------------- -------------------------- ------------------
- -------------- ----------------------------------- ------------ -------------------- -------------------------- ------------------
- -------------- ----------------------------------- ------------ -------------------- -------------------------- ------------------
- -------------- ----------------------------------- ------------ -------------------- -------------------------- ------------------
============== =================================== ============ ==================== ========================== ==================
</TABLE>
SETTLEMENT DATE: February __, 1999
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<PAGE>
SECOND TIME OF DELIVERY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
PAR ZERO-COUPON STRIP RATE PRICE COST CUSIP
- -------------- ----------------------------------- ------------ -------------------- -------------------------- ------------------
<S> <C> <C> <C> <C> <C>
- -------------- ----------------------------------- ------------ -------------------- -------------------------- ------------------
- -------------- ----------------------------------- ------------ -------------------- -------------------------- ------------------
- -------------- ----------------------------------- ------------ -------------------- -------------------------- ------------------
- -------------- ----------------------------------- ------------ -------------------- -------------------------- ------------------
- -------------- ----------------------------------- ------------ -------------------- -------------------------- ------------------
- -------------- ----------------------------------- ------------ -------------------- -------------------------- ------------------
- -------------- ----------------------------------- ------------ -------------------- -------------------------- ------------------
- -------------- ----------------------------------- ------------ -------------------- -------------------------- ------------------
- -------------- ----------------------------------- ------------ -------------------- -------------------------- ------------------
- -------------- ----------------------------------- ------------ -------------------- -------------------------- ------------------
- -------------- ----------------------------------- ------------ -------------------- -------------------------- ------------------
============== =================================== ============ ==================== ========================== ==================
</TABLE>
SETTLEMENT DATE: February __, 1999
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<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 II or its agent for registration of
transfer, exchange, or payment, and any certificate issued is registered in the
name of Cede & Co. (or in such other name as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein. This certificate may be exchanged by
an authorized representative of DTC in whole or in part for securities in
definitive form, registered in the names of such holders as such representative
of DTC shall specify, in which case, a new certificate will be issued in the
name of Cede & Co. (or in such other name as is requested by such authorized
representative of DTC) representing the securities not issued in definitive
form.
THIS CERTIFICATE IS ISSUED UNDER AND IS SUBJECT TO THE TERMS, PROVISIONS AND
CONDITIONS OF THE TRUST AGREEMENT REFERRED TO BELOW TO WHICH THE HOLDER OF THIS
CERTIFICATE BY VIRTUE OF THE ACCEPTANCE HEREOF ASSENTS AND IS BOUND.
$____ TRUST AUTOMATIC COMMON EXCHANGE SECURITIES
ESTEE LAUDER AUTOMATIC COMMON EXCHANGE SECURITY TRUST II
CUSIP NO.
-----------
NO. SHARES
----------- ------------
THIS CERTIFIES THAT CEDE & CO. IS THE RECORD OWNER OF ____________ OF THE $____
TRUST AUTOMATIC COMMON EXCHANGE SECURITIES OF ESTEE LAUDER AUTOMATIC COMMON
EXCHANGE SECURITY TRUST II 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 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, 450 WEST 33RD STREET, NEW
<PAGE>
YORK, NEW YORK 10001. THIS CERTIFICATE IS TRANSFERABLE AND EXCHANGEABLE 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 SATIS FACTORY 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 II
DATED:
By
------------------------------
[Name]
Managing Trustee
COUNTERSIGNED:
ChaseMellon Shareholder Services, L.L.C.,
as Paying Agent
By
------------------------------------
Authorized Signature
-2-
<PAGE>
Exhibit 2.h
Estee Lauder Automatic Common Exchange Security Trust II
(subject to exchange into shares of Class A
Common Stock of The Estee Lauder Companies Inc.)
$[ ] Trust Automatic Common Exchange Securities
Underwriting Agreement
February __, 1999
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Ladies and Gentlemen:
Estee Lauder Automatic Common Exchange Security Trust II, a trust duly
created under the laws of the State of New York (such trust and the trustees
thereof acting in their capacities as such being referred to herein as the
"Trust"), proposes, subject to the terms and conditions stated herein, to issue
and sell to the Underwriter named in Schedule I hereto (the "Underwriter") an
aggregate of [ ] shares of the $[ ] Automatic Common Exchange Securities of the
Trust specified above (the "Firm Securities") and, at the election of the
Underwriter, up to an aggregate of [ ] additional shares of the $[ ] Automatic
Common Exchange Securities (the "Optional Securities") (the Firm Securities and
the Optional Securities which the Underwriter elects to purchase pursuant to
Section 2 hereof are herein collectively called the "Securities").
The $[ ] Automatic Common Exchange Securities of the Trust to be
outstanding after giving effect to the sales contemplated hereby are hereinafter
called the "Automatic Common Exchange Securities". Each Automatic Common
Exchange Security may be exchanged for one or fewer shares of Class A Common
Stock, par value $.01 per share ("Stock"), of The Estee Lauder Companies Inc., a
Delaware corporation (the "Company"), on _______, 2002 (the "Exchange Date") to
be delivered pursuant to a forward purchase contract (the "Contract"), dated
_______, 1999, between the Trust and a certain existing stockholder of the
Company identified in Schedule II hereto (the "Selling Stockholder"). In lieu of
delivery of shares of Stock, the Contract provides that the Selling Stockholder
may elect (i) to pay cash or deliver other securities on the Exchange Date for
each share of Stock then deliverable and (ii) to extend the Exchange Date to a
date not later than ________, 2002, in each case subject to the terms and
conditions of the Contract. The Trust will enter into a Contract with the
Selling Stockholder obligating that Selling Stockholder to deliver to the Trust
on the Exchange Date a number of shares of Stock equal to the product of the
Exchange Rate (as such term is defined in the Trust Prospectus (as defined in
Section 1(c)(i))) times the initial number of shares of Stock subject to such
Contract. The Selling Stockholder's obligations under such Contract will be
secured by a pledge of shares of Stock and, if applicable, other collateral
pursuant to the terms of a collateral agreement, dated _______, 1999, between
the Selling Stockholder, The Chase Manhattan Bank ("Chase Manhattan"), as
collateral agent (in such capacity, the "Collateral Agent"), and the Trust (the
"Collateral Agreement").
<PAGE>
1. (a) The Company represents and warrants to, and agrees with, each of
the Underwriter, the Trust and the Selling Stockholder that:
(i) A registration statement on Form S-3 (File No. 333-71681)
(the "Initial Company Registration Statement") in respect of the shares
of Stock deliverable pursuant to the Contract has been filed with the
Securities and Exchange Commission (the "Commission"); the Initial
Company Registration Statement and any post-effective amendment
thereto, each in the form heretofore delivered to you, and, excluding
exhibits thereto but including all documents incorporated by reference
in the prospectus contained therein, have been declared effective by,
or have been filed with, as the case may be, the Commission in such
form; other than a registration statement, if any, increasing the size
of the offering (a "Company Rule 462(b) Registration Statement") filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended
(the "Act"), which became effective upon filing, no other document with
respect to the Initial Company Registration Statement has heretofore
been filed with the Commission; and no stop order suspending the
effectiveness of the Initial Company Registration Statement, any
post-effective amendment thereto or the Company Rule 462(b)
Registration Statement, if any, has been issued and no proceeding for
that purpose has been initiated or threatened by the Commission (any
preliminary prospectus included in the Initial Company Registration
Statement or filed with the Commission pursuant to Rule 424(a) of the
rules and regulations of the Commission under the Act, is hereinafter
called a "Company Preliminary Prospectus"; the various parts of the
Initial Company Registration Statement and the Company 462(b)
Registration Statement, if any, including all exhibits thereto and
including (A) the information contained in the form of final prospectus
filed with the Commission pursuant to Rule 424(b) under the Act in
accordance with Section 5(a) hereof and deemed by virtue of Rule 430A
under the Act to be part of the Initial Company Registration Statement
at the time it was declared effective or such part of the Company Rule
462(b) Registration Statement, if any, became or hereafter becomes
effective and (B) the documents incorporated by reference in the
prospectus contained in the Initial Company Registration Statement at
the time such part of the Initial Company Registration Statement became
effective as amended at the time such part of the Initial Company
Registration Statement became effective, are hereinafter collectively
called the "Company Registration Statement"; such final prospectus, in
the form first filed pursuant to Rule 424(b) under the Act, is
hereinafter called the "Company Prospectus"; the Trust Registration
Statement (as defined in Section 1(c)(i) hereof) and the Company
Registration Statement are hereinafter collectively called the
"Registration Statements" and the Trust Prospectus and the Company
Prospectus are hereinafter collectively called the "Prospectuses"; any
reference herein to any Company Preliminary Prospectus or the Company
Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under
the Act, as of the date of such Company Preliminary Prospectus or
Company Prospectus, as the case may be; any reference to any amendment
or supplement to any Company Preliminary Prospectus or the Company
Prospectus shall be deemed to refer to and include any documents filed
after the date of such Company Preliminary Prospectus or Company
Prospectus, as the case may be, under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and incorporated by reference in
such Company Preliminary Prospectus or Company Prospectus, as the case
may be; and any reference to any amendment to the Company Registratio
Statement shall be deemed to refer to and include any annual report of
the Company filed pursuant to Section 13(a) or 15(d) of the Exchange
Act after the effective date of the Initial Company Registration
Statement that is incorporated by reference in the Company Registration
Statement);
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(ii) No order preventing or suspending the use of any Company
Preliminary Prospectus has been issued by the Commission, and each
Company Preliminary Prospectus, at the time of filing thereof,
conformed in all material respects to the requirements of the Act and
the rules and regulations of the Commission thereunder, and did not
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that this representation
and warranty shall not apply to any statements or omissions made in
reliance upon and in conformity with information furnished in writing
to the Company by the Underwriter expressly for use therein;
(iii) The documents incorporated by reference in the Company
Prospectus, when they became effective or were filed with the
Commission, as the case may be, conformed in all material respects to
the requirements of the Act or the Exchange Act, as applicable, and the
rules and regulations of the Commission thereunder, and none of such
documents contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; and any further documents
so filed and incorporated by reference in the Company Prospectus or any
further amendment or supplement thereto, when such documents become
effective or are filed with the Commission, as the case may be, will
conform in all material respects to the requirements of the Act or the
Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by the
Underwriter expressly for use therein;
(iv) The Company Registration Statement conforms, and the
Company Prospectus and any further amendments or supplements to the
Company Registration Statement or the Company Prospectus, when they
become effective or are filed with the Commission, will conform, in all
material respects to the requirements of the Act and the rules and
regulations of the Commission thereunder and the Company Registration
Statement and any amendment thereto do not and will not, as of the
applicabl effective date, contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and the Company
Prospectus does not, and as amended or supplemented will not, as of the
applicable filing date, contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading; provided, however, that
this representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information
furnished in writing to the Company by the Underwriter or by the
Selling Stockholder expressly for use therein;
(v) Neither the Company nor any of its subsidiaries has
sustained since the date of the latest audited financial statements
included or incorporated by reference in the Company Prospectus any
material loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Company Prospectus;
and, since the respective dates as of which information is given in the
Company Registration Statement and the Company Prospectus, there has
not been any change in the capital stock (other than pursuant to
employee stock option plans and employment
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<PAGE>
agreements in each case existing on the date of this Agreement) or long
term debt of the Company or any of its subsidiaries or any material
adverse change, or any development involving a prospective material
adverse change, in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations of
the Company and its subsidiaries taken as a whole, in each case,
otherwise than as set forth or contemplated in the Company Prospectus;
(vi) The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title
to all personal property owned by them, in each case free and clear of
all liens, encumbrances and defects except such as are described in the
Company Prospectus or such as do not materially affect the value of
such property and do not interfere with the use made and proposed to be
made of such property by the Company and its subsidiaries or such as do
not and would not, individually or in the aggregate, have a material
adverse effect on the business, prospects, operations, financial
condition or results of operations of the Company and its subsidiaries
taken as a whole (a "Material Adverse Effect") and any real property
and buildings held under lease by the Company and its subsidiaries are
held by them under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company
and its subsidiaries and do not, and would not, individually or in the
aggregate, have a Material Adverse Effect;
(vii) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Company
Prospectus, and has been duly qualified as a foreign corporation for
the transaction of business and is in good standing under the laws of
each other jurisdiction in which it owns or leases properties or
conducts any business so as to require such qualification, except where
failure to be so qualified would not have a Material Adverse Effect;
and each subsidiary of the Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
its jurisdiction of incorporation, except where failure to be in such
good standing would not have a Material Adverse Effect;
(viii) The Company has an authorized capitalization as set
forth in the Company Prospectus, and all of the issued shares of
capital stock of the Company have been duly and validly authorized and
issued and are fully paid and non-assessable and conform to the
description of the Stock contained in the Company Prospectus; and all
of the issued shares of capital stock of each subsidiary of the Company
have been duly and validly authorized and issued, are fully paid and
non-assessable and (except for directors' qualifying shares and as
disclosed in the Company Prospectus) are owned directly or indirectly
by the Company (except for minority interests in certain subsidiaries
of the Company, as set forth on Schedule III attached hereto), free and
clear of all liens, encumbrances, equities or claims;
(ix) The compliance by the Company with all of the provisions
of this Agreement and the consummation of the transactions herein
contemplated will not conflict with or result in a breach or violation
of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries is bound
or t which any of the property or assets of the Company or any of its
subsidiaries is subject, nor will such action result in any violation
of the provisions of the
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<PAGE>
Certificate of Incorporation or By-laws of the Company or any statute
or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Company or any of its subsidiaries or
any of their properties except for foreign and state securities and
Blue Sky laws, and except for breaches, violations or defaults (other
than any relating to the Certificate of Incorporation or By-laws of the
Company) that would not, individually or in the aggregate, have a
Material Adverse Effect or in the aggregate impair the Company's
ability to consummate the transactions herein contemplated; and no
consent, approval, authorization, order, registration or qualification
of or with any such court or governmental agency or body is required
for the consummation by the Company of the transactions contemplated by
thi Agreement, except the registration under the Act of the shares of
Stock and such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky
laws in connection with the purchase and distribution of the shares of
Stock by the Trust pursuant to the Contract;
(x) Neither the Company nor any of Estee Lauder Inc., Aramis
Inc., Clinique Laboratories, Inc., Estee Lauder International, Inc.,
Estee Lauder Cosmetics Ltd., Clinique Laboratories K.K., Estee Lauder
K.K., Estee Lauder N.V. and Estee Lauder A.G. Lachen (each, a
"Principal Subsidiary" and collectively, the "Principal Subsidiaries")
is in violation of its Certificate of Incorporation or By-laws and
neither the Company nor any of its subsidiaries is in default in the
performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to which
it is a party or by which it or any of its properties may be bound,
which default would have a Material Adverse Effect;
(xi) The statements set forth in the Prospectus under the
caption "Description of Capital Stock", insofar as they purport to
constitute a summary of the terms of the Stock, and under the caption
"Certain Relationships and Related Transactions" set forth in the
Company's proxy statement dated September 30, 1998 and incorporated by
reference into the Company's Annual Report on Form 10-K for the year
ended June 30, 1998, insofar as they purport to summarize the
provisions of th laws, documents and transactions referred to therein
for purposes of complying with the requirements of Form S-3, are
accurate and correct in all material respects;
(xii) Other than as set forth in the Company Prospectus, there
are no legal or governmental proceedings pending to which the Company
or any of its subsidiaries is a party or of which any property of the
Company or any of its subsidiaries is the subject which, if determined
adversely to the Company or any of its subsidiaries, would individually
or in the aggregate have a Material Adverse Effect; and, to the
Company's knowledge, no such proceedings are threatened or contemplate
by governmental authorities or threatened by others;
(xiii) The Company is not an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in
the Investment Company Act of 1940, as amended (the "Investment Company
Act" and, together with the Act, the "Acts");
(xiv) The Stock is listed on the New York Stock Exchange;
(xv) Arthur Andersen LLP, who have certified certain financial
statements of the Company and its subsidiaries, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder;
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<PAGE>
(xvi) Each of the Company and its subsidiaries owns or has
rights to adequate foreign and domestic patents, patent licenses,
trademarks, service marks, trade names, inventions, copyrights and
know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures) (collectively, the "Intellectual Property") necessary to
carry on their respective businesses as of the date hereof, and neither
the Company nor any of its subsidiaries is aware that it would
interfere with, infringe upon or otherwise come into conflict with any
Intellectual Property rights of third parties as a result of the
operation of the business of the Company or any subsidiary as of the
date hereof that, individually or in the aggregate, if subject to an
unfavorable decision, ruling or finding would have a Material Adverse
Effect; and
(xvii) There are no contracts or documents of a character
required to be described in the Company Registration Statement or the
Company Prospectus or to be filed as exhibits to the Company
Registration Statement that are not so described or filed.
(b) The Selling Stockholder represents and warrants to, and
agrees with, each of the Underwriter, the Company and the Trust that:
(i) It has been duly created, is validly existing as a trust
under the laws of the jurisdiction of its organization and has the
power and authority to own and sell its property and to conduct its
business;
(ii) The compliance by the Selling Stockholder with all of the
provisions of this Agreement, and the Contract, the power of attorney
in connection with this transaction (the "Power of Attorney"), the
Custody Agreement in connection with this transaction (the "Custody
Agreement") and the Collateral Agreement, each to which the Selling
Stockholder is a party, and the consummation of the transactions herein
and therein contemplated will not conflict with or result in a breach o
violation of any of the terms or provisions of, or constitute a default
under, any statute, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Selling
Stockholder is a party or by which the Selling Stockholder is bound or
to which any of the property or assets of the Selling Stockholder is
subject, nor will such action result in any violation of the provisions
of the constitutive documents of the Selling Stockholder, or any
statute or any order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Selling Stockholder or any
of the property of the Selling Stockholder; and no consent, approval,
authorization, order, registration or qualification of or with any such
court or governmental agency or body is required for the execution and
delivery of or compliance by the Selling Stockholder with or the
consummation by the Selling Stockholder of the transactions
contemplated by this Agreement, the Contract the Collateral Agreement,
the Power of Attorney or the Custody Agreement, except the registration
under the Act of the Stock and such consents, approvals,
authorizations, registrations or qualifications as may be required
under state securities or Blue Sky laws in connection with the purchase
and distribution of the Stock by the Trust pursuant to the Contract;
(iii) This Agreement has been duly authorized, executed and
delivered by the Selling Stockholder. The Contract, the Collateral
Agreement, the Power of Attorney and the Custody Agreement have been
duly authorized, executed and delivered by the Selling Stockholder and,
assuming due authorization, execution and delivery by the other parties
thereto, constitute valid and legally binding agreements of the Selling
Stockholder, enforceable in accordance with their respective terms,
subject, as to enforcement, to bankruptcy, insolvency,
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<PAGE>
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles;
(iv) The Selling Stockholder has, and immediately prior to
each Time of Delivery (as defined in Section 4(a) hereof) the Selling
Stockholder will have, good and valid title to the shares of Stock to
be pledged and assigned by it under the Collateral Agreement, free and
clear of all liens, encumbrances, equities or claims other than those
created pursuant to such Collateral Agreement; all consents, approvals,
authorizations and orders necessary for the Selling Stockholder to
pledge and assign the shares of Stock to be pledged and assigned by the
Selling Stockholder pursuant to such Collateral Agreement have been
obtained; the Selling Stockholder has full right, power and authority
to pledge and assign the shares of Stock to be pledged and assigned by
the Selling Stockholder pursuant to such Collateral Agreement; and upon
delivery of such shares of Stock to the Collateral Agent, as defined in
the Collateral Agreement, for the benefit of the Trust and payment
therefor pursuant to the Contract, good and valid title to such shares
of Stock, free and clear of all liens, encumbrances, equities or
claims, will pass to the Trust;
(v) The representations and warranties of the Selling
Stockholder set forth in Section 3 of such Collateral Agreement are
true and correct on and as of the date hereof with the same effect as
though such representations and warranties had been set forth in full
in this Agreement;
(vi) During the period beginning from the date hereof and
continuing to and including the date 90 days after the date of the
Prospectuses, the Selling Stockholder will not offer, sell, contract to
sell or otherwise dispose of, except as provided hereunder, any Stock
or any securities of the Company that are substantially similar to the
Stock, including but not limited to any securities that are convertible
into or exchangeable for, or that represent the right to receive, Stock
or any such substantially similar securities (other than dispositions
among Lauder Family Members (as such term is defined in the Company
Prospectus) or pursuant to employee stock option plans and employment
agreements in each case existing on, or upon the conversion or exchange
of convertible or exchangeable securities outstanding as of, the date
of this Agreement, provided that this provision shall continue to apply
with respect to the securities received upon such conversion or
exchange) without your prior written consent;
(vii) The Selling Stockholder has not taken and will not take,
directly or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities; and
(viii) To the extent that any statements or omissions made in
the Registration Statements, any Preliminary Prospectus, the
Prospectuses or any amendment or supplement thereto are made in
reliance upon and in conformity with written information furnished to
the Company or the Trust, as the case may be, by the Selling
Stockholder expressly for use therein, (A) such Preliminary Prospectus
and the Registration Statements did, and the Prospectuses and any
further amendments or supplements to the Registration Statements and
the Prospectuses, when they become effective or are filed with the
Commission, as the case may be, will conform in all material respects
to the requirements of the Acts and the rules and regulations of the
Commission thereunder, (B) the Registration Statements and any
amendment or supplement thereto do not and will not, as of the
applicable effective date, contain any untrue statement of a
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<PAGE>
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading and
(C) the Prospectuses do not, and as amended or supplemented will not,
as of the applicable filing date, contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
In order to document the Underwriter's compliance with the reporting
and withholding provisions of the Tax Equity and Fiscal Responsibility Act of
1982 with respect to the transactions herein contemplated, the Selling
Stockholder agrees to deliver to you prior to or at the First Time of Delivery
(as hereinafter defined) a properly completed and executed United States
Treasury Department Form W-9 (or other applicable form or statement specified by
Treasury Department regulations in lieu thereof).
The Selling Stockholder represents and warrants that certificates in
negotiable form and containing no restrictive legends representing all of the
shares of Stock to be pledged and assigned by the Selling Stockholder hereunder
have been placed in custody under a Custodial Agreement, in the form heretofore
furnished to you, duly executed and delivered by the Selling Stockholder to
Chase Manhattan, as custodian (the "POA Custodian"), and that the Selling
Stockholder has duly executed and delivered a Power of Attorney, in the form
heretofore furnished to you, appointing the persons indicated in Schedule II
hereto, and each of them, as the Selling Stockholder's attorneys-in-fact (the
"Attorneys-in-Fact") with authority to execute and deliver this Agreement on
behalf of the Selling Stockholder, to execute and deliver the Contract and the
Collateral Agreement, to authorize the delivery of the shares of Stock to be
pledged and assigned by the Selling Stockholder hereunder and otherwis to act on
behalf of the Selling Stockholder in connection with the transactions
contemplated by this Agreement, the Custody Agreement, the Contract and the
Collateral Agreement.
The Selling Stockholder specifically agrees that the shares of Stock
represented by the certificates held in custody for the Selling Stockholder
under the Custody Agreement are subject to the interests of the Collateral Agent
for the benefit of the Trust hereunder, and that the arrangements made by the
Selling Stockholder for such custody, and the appointment by the Selling
Stockholder of the Attorneys-in-Fact by the Power of Attorney, are to that
extent irrevocable. The Selling Stockholder specifically agrees that the
obligations of the Selling Stockholder hereunder shall not be terminated by
operation of law, whether by the death or incapacity of any trustee or the
termination of the trust or by the occurrence of any other event. If the Selling
Stockholder or any such trustee should die or become incapacitated, or if the
trust should be terminated, or if any other such event should occur, before the
delivery of the shares of Stock hereunder, certificates representing the shares
of Stock shall be delivered by or on behalf of the Selling Stockholder in
accordance with the terms and conditions of this Agreement, of the Contract, of
the Collateral Agreement and of the Custody Agreement, as appropriate, and
actions taken by the Attorneys-in-Fact pursuant to the Powers of Attorney shall
be as valid as if such death, incapacity, termination or other event had not
occurred, regardless of whether or not the Custodian, the Attorneys-in-Fact, or
any of them, shall have received notice of such death, incapacity, termination,
dissolution or other event.
(c) The Trust represents and warrants to, and agrees with, each of the
Underwriter, the Selling Stockholder and the Company that:
(i) A notification on Form N-8A (the "Notification") of
registration of the Trust as an investment company has been filed with
the Commission; a registration statement on Form N-2 (File No.
333-57125 and File No. 811-8827) (the "Initial Trust Registration
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<PAGE>
Statement") in respect of the Securities has been filed with the
Commission; the Initial Trust Registration Statement and any
post-effective amendment thereto, each in the form heretofore delivered
to you, and, excluding exhibits thereto, have been declared effective
by the Commission in such form; no other document with respect to the
Initial Trust Registration Statement has heretofore been filed with the
Commission; and no stop order suspending the effectiveness of the
Initial Trust Registration Statement, or any post-effective amendment
thereto has been issued and no proceeding for that purpose has been
initiated or threatened by the Commission (any preliminary prospectus
included in the Initial Trust Registration Statement or filed with the
Commission pursuant to Rule 497(a) of the rules and regulations of the
Commission under the Act, is hereinafter called a "Trust Preliminary
Prospectus"; the various parts of the Initial Trust Registration
Statement including all exhibits thereto and including the information
contained in the form of final prospectus filed with the Commission
pursuant to Rule 497(h) under the Act in accordance with Section 5(a)
hereof and deemed by virtue of Rule 430A under the Act to be part of
the Initial Trust Registration Statement at the time it was declared
effective, as amended at the time such part of the registration
statement became effective, are hereinafter collectively called the
"Trust Registration Statement"; and such final prospectus, in the form
first filed pursuant to Rule 497(h) under the Act, is hereinafter
called the "Trust Prospectus");
(ii) No order preventing or suspending the use of any Trust
Preliminary Prospectus has been issued by the Commission, and each
Trust Preliminary Prospectus, at the time of filing thereof, conformed
in all material respects to the requirements of the Acts, and the rules
and regulations of the Commission thereunder, and did not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in
reliance upon and in conformity with information furnished in writing
to the Trust by the Underwriter or by the Selling Stockholder expressly
for use therein;
(iii) The Notification and the Trust Registration Statement
conform, and the Trust Prospectus and any further amendments or
supplements to the Notification, the Trust Registration Statement or
the Trust Prospectus will conform, in all material respects to the
requirements of the Acts and the rules and regulations of the
Commission thereunder and do not and will not, as of the applicable
effective date as to the Trust Registration Statement and any amendment
thereto and as of the applicable filing date as to the Trust Prospectus
and any amendment or supplement thereto, contain an untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Trust by the
Underwriter or by the Selling Stockholder expressly for use therein;
(iv) Since the respective dates as of which information is
given in the Trust Registration Statement and the Trust Prospectus,
there has not been any material adverse change, or any development
involving a prospective material adverse change, in or affecting the
general affairs, management, financial position, results of operations,
prospects, investment objectives, investment policies, or liabilities
of the Trust, otherwise than as set forth or contemplated in the Trust
Prospectus, and there have been no transactions entered into by the
Trust which are material to the Trust other than those in the ordinary
course of its business or as described in the Trust Prospectus;
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<PAGE>
(v) The Trust has been duly created, is validly existing as a
trust under the laws of the State of New York, with power and authority
to own its properties and conduct its business as described in the
Trust Prospectus and to enter into and perform its obligations under
this Agreement and the Fundamental Agreements (as defined in Section
1(c)(vii) hereof); the Trust has all necessary consents, approvals,
authorizations, orders, registrations or qualifications, of and from,
and has made all declarations and filings with, all courts and
governmental agencies and bodies, to own and use its assets and to
conduct its business in the manner described in the Trust Prospectus,
except to the extent that the failure to obtain or file the foregoing
would not have a material adverse effect on the Trust and except the
registration under the Act of the Securities and such consents,
approvals, authorizations, registrations or qualifications as may be
required under state securities or Blue Sky laws in connection with the
purchase and distribution of the Securities by the Underwriter; the
Trust has no subsidiaries;
(vi) The Trust is registered with the Commission as a
non-diversified, closed-end management investment company under the
Investment Company Act and no order of suspension or revocation of such
registration has been issued or proceedings therefor initiated or, to
the knowledge of the Trust, threatened by the Commission; no person is
serving or acting as an officer or trustee of the Trust except in
accordance with the provisions of the Investment Company Act;
(vii) Each of the Contract, the Collateral Agreement, the
Administration Agreement between Chase Manhattan and the Trust (the
"Administration Agreement"), the Custodian Agreement between Chase
Manhattan and the Trust (the "Custodian Agreement"), the Paying Agent
Agreement between ChaseMellon Shareholder Services, L.L.C. and the
Trust (the "Paying Agent Agreement"), the Fund Expense Agreement among
Goldman, Sachs & Co., Chase Manhattan and the Trust (the "Fund Expense
Agreemen ) and the Fund Indemnity Agreement between the Selling
Stockholder and the Trust (the "Fund Indemnity Agreement") (the
Contract, the Collateral Agreement, the Administration Agreement, the
Custodian Agreement, the Paying Agent Agreement, the Fund Expense
Agreement and the Fund Indemnity Agreement are herein collectively
called the "Fundamental Agreements") has been duly authorized, executed
and delivered by the Trust and, assuming due authorization, execution
and delivery by the other parties thereto, constitutes a valid and
legally binding agreement of the Trust, enforceable in accordance with
its terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles;
(viii) The Amended and Restated Trust Agreement dated as of
________, 1999 (the "Trust Agreement") and the Fundamental Agreements
comply with all applicable provisions of the Acts, and all approvals of
such agreements required under the Investment Company Act by the
holders of the Automatic Common Exchange Securities and the trustees
have been obtained and are in full force and effect;
(ix) All of the outstanding Automatic Common Exchange
Securities have been duly and validly authorized and issued and are
fully paid and non-assessable, and the form of certificates used to
evidence the Automatic Common Exchange Securities is in due and proper
form and complies with all provisions of applicable law; the Trust
Agreement and the Fundamental Agreements conform to the descriptions
thereof contained in the Trust Prospectus;
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<PAGE>
(x) The Securities have been duly authorized and, when issued
and delivered pursuant to this Agreement, will be validly issued, fully
paid and nonassessable; the Securities will conform to the description
thereof in the Trust Prospectus; no person has rights to registration
of any securities because of the filing of the Trust Registration
Statement;
(xi) The issue and sale of the Securities and the compliance
by the Trust with all of the provisions of the Securities, this
Agreement and each Fundamental Agreement and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of,
or constitute a default under, the Trust Agreement or any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Trust is a party or by which the Trust is bound
or to which any of the property or assets of the Trust is subject, nor
will such action result in any violation of any statute or any order,
rule or regulation of any court or governmental agency or body having
jurisdiction over the Trust or any of its properties; and no consent,
approval, authorization, order, registration or qualification of or
with any such court or governmental agency or body is required for the
issue and sale of the Securities or the consummation by the Trust of
the transactions contemplated by this Agreement or the Fundamental
Agreements, other than the registration under the Act of the Securities
and such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky
laws in connection with the purchase and distribution of the Securities
by the Underwriter;
(xii) Assuming due authorization, execution and delivery by
the parties other than the Trust, the Fundamental Agreements are in
full force and effect and the Trust is not in default in the
performance or observance of any obligation, covenant or condition
thereunder and, to the knowledge of the Trust, no event has occurred
which with the passage of time or the giving of notice or both would
constitute a default thereunder; the Trust is not in default in the
performance or observance of any obligation, covenant or condition
contained in any other agreement or instrument to which it is a party
or by which it or any of its properties may be bound;
(xiii) The statements set forth in the Trust Prospectus under
the caption "Description of the Securities", insofar as they purport to
constitute a summary of the terms of the Securities, under the caption
"Certain Federal Income Tax Considerations", and under the caption
"Underwriting", insofar as they purport to describe the provisions of
the laws and agreements referred to therein, are accurate, complete and
fair in all material respects;
(xiv) Other than as set forth in the Trust Prospectus, there
are no legal or governmental proceedings pending to which the Trust is
a party or of which any property of the Trust is the subject which, if
determined adversely to the Trust, would individually or in the
aggregate have a material adverse effect on the current or future
financial position, or results of operations of the Trust; and, to the
best of the Trust's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(xv) There are no material restrictions, limitations or
regulations with respect to the ability of the Trust to invest its
assets as described in the Trust Prospectus, other than as described
therein;
(xvi) The Automatic Common Exchange Securities outstanding
prior to the issuance of the Securities and the Securities have been
approved for listing on the New York
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Stock Exchange subject to notice of issuance; the Trust's Registration
Statement on Form 8-A under the Exchange Act is effective; and
(xvii) PricewaterhouseCoopers LLP, who have certified certain
financial statements included in the Trust Registration Statement, are
independent public accountants as required by the Act and the rules and
regulations of the Commission thereunder.
2. Subject to the terms and conditions herein set forth, (a) the Trust
agrees to issue and sell to the Underwriter, and the Underwriter agrees to
purchase from the Trust, at a purchase price of $[ ] per Security, the number of
Firm Securities set forth opposite the name of such Underwriter in Schedule I
hereto and (b) in the event and to the extent that the Underwriter shall
exercise the election to purchase Optional Securities as provided below, the
Trust agrees to issue and sell t the Underwriter, and the Underwriter agrees to
purchase from the Trust, at the same purchase price set forth in clause (a) of
this Section 2, that portion of the aggregate number of Optional Securities as
to which such election shall have been exercised (to be adjusted by you so as to
eliminate fractional securities). The agreements in this Section made by the
Trust are for the benefit of and enforceable by the Underwriter and the Selling
Stockholder. The agreements in this Section made by the Underwriter are for the
benefit of and are enforceable by the Selling Stockholder and the Trust.
The Trust hereby grants to the Underwriter the right to purchase at its
election up to [ ] Optional Securities, at the purchase price set forth in
clause (a) of the first paragraph of this Section 2, for the sole purpose of
covering overallotments in the sale of the Firm Securities. Any such election to
purchase Optional Securities may be exercised only by written notice from you to
the Trust (with copies to Jeffrey J. Weinberg, Weil, Gotshal & Manges LLP, 767
Fifth Avenue, New York, New York 10153), given within a period of 30 calendar
days after the date of this Agreement, setting forth the aggregate principal
amount of Optional Securities to be purchased and the date on which such
Optional Securities are to be delivered, as determined by you but in no event
earlier than the First Time of Delivery (as defined in Section 4(a) hereof) or,
unless you and the Trust otherwise agree in writing, earlier than two or later
than ten business days after the date of such notice.
As compensation to the Underwriter for its commitments hereunder, and
in view of the fact that the proceeds of the sale of the Securities will be used
by the Trust as specified in the Contract, the Selling Stockholder at each Time
of Delivery will pay to the Underwriter an amount equal to $[ ] per Security for
the Securities to be delivered at such Time of Delivery. Alternatively, as a
matter of convenience, the Underwriter may deduct such amount from the purchase
price of the Securities, and in such event the Selling Stockholder shall be
deemed to have paid the same.
3. Upon the authorization by you of the release of the Firm Securities,
the Underwriter proposes to offer the Firm Securities for sale upon the terms
and conditions set forth in the Trust Prospectus.
4. (a) The Securities to be purchased by the Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as the Underwriter may request upon at least forty-eight hours' prior
notice to the Trust, shall be delivered by or on behalf of the Trust to the
Underwriter against payment by or on behalf of such Underwriter of the purchase
price therefor by wire transfer or certified or official bank check or checks,
payable to the order of th Trust in Federal (same day) funds. The Trust will
cause the certificates representing the Securities to be made available for
checking and packaging at least twenty-four hours prior to the Time of Delivery
(as defined below) at the office of Goldman, Sachs & Co., 85 Broad Street, New
York, New York 10004 (the "Designated Office"). The time and date of such
delivery and payment shall be, with respect to the Firm Securities,
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9:30 a.m.,
New York City time, on February _, 1999 or such other time an date as Goldman,
Sachs & Co. and the Trust may agree upon in writing, and, with respect to the
Optional Securities, 9:30 a.m., New York City time, on the date specified by
Goldman, Sachs & Co. in the written notice given by Goldman, Sachs & Co. of the
Underwriter's election to purchase such Optional Securities, or such other time
and date as Goldman, Sachs & Co. and the Trust may agree upon in writing. Such
time and date for delivery of the Firm Securities is herein called the "First
Time of Delivery", such time and date for delivery of the Optional Securities,
if not the First Time of Delivery, is herein called the "Second Time of
Delivery", and each such time and date for delivery is herein called a "Time of
Delivery".
(b) The documents to be delivered at each Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including the
cross-receipt for the Securities and any additional documents requested by the
Underwriter pursuant to Section 7(o) hereof, will be delivered at the offices of
Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York 10153 (the
"Closing Location"), and the Securities will be delivered at the Designated
Office, all at such Time of Delivery. A meeting will be held at the Closing
Location at 3:30 p.m., New York City time, on the New York Business Day next
preceding such Time of Delivery, at which meeting the final drafts of the
documents to be delivered pursuant to the preceding sentence will be available
for review by the parties hereto. For the purposes of this Section 4, "New York
Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York City are generally
authorized or obligated by law or executive order to close.
5. (a) The Trust agrees with the Underwriter:
(i) To prepare the Trust Prospectus in a form approved by you
and to file such Trust Prospectus pursuant to Rule 497(h) under the Act
not later than the Commission's close of business on the second
business day following the execution and delivery of this Agreement,
or, if applicable, such earlier time as may be required by Rule
430A(a)(3) under the Act; to make no further amendment or any
supplement to the Trust Registration Statement or Trust Prospectus
prior to the last Time of Delivery which shall be disapproved by you
promptly after reasonable notice thereof; to advise you, promptly after
it receives notice thereof, of the time when any amendment to the Trust
Registration Statement has been filed or becomes effective or any
supplement to the Trust Prospectus or any amended prospectus has been
filed and to furnish you with copies thereof; to file promptly all
reports and any definitive proxy or information statements required to
be filed by the Trust with the Commission pursuant to the Acts and the
Exchange Act subsequent to the date of the Trust Prospectus and for so
long as the delivery of a prospectus is required in connection with the
offering or sale of the Securities; to advise you, promptly after it
receives notice thereof, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any Trust
Preliminary Prospectus or prospectus or any order pursuant to Section
8(e) of the Investment Company Act, of the suspension of the
qualification of the Securities for offering or sale in any
jurisdiction, of the initiation or threatening of any proceeding for
any such purpose, or of any request by the Commission for the amending
or supplementing of the Trust Registration Statement or Trust
Prospectus or for additional information; and, in the event of the
issuance of any stop order or of any order preventing or suspending the
use of any Trust Preliminary Prospectus or prospectus or suspending any
such qualification or order pursuant to Section 8(e) of the Investment
Company Act, promptly to use its best efforts to obtain the withdrawal
of such order;
(ii) Promptly from time to time to take such action as you may
reasonably request to qualify the Securities for offering and sale
under the securities laws of such
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jurisdictions as you may request and to comply with such laws so as to
permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the
distribution of the Securities, provided that in connection therewith
the Trust shall not be required to qualify as a foreign trust or
association or to file a general consent to service of process in any
jurisdiction;
(iii) Prior to 12:00 noon, New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time
to time, at the expense of the Selling Stockholder, to furnish the
Underwriter with copies of the Trust Prospectus in New York City in
such quantities as you may reasonably request, and, if the delivery of
a prospectus is required at any time prior to the expiration of nine
months after the time of issue of the Trust Prospectus in connection
wit the offering or sale of the Securities and if at such time any
event shall have occurred as a result of which the Trust Prospectus as
then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made when such Trust Prospectus is delivered, not
misleading, or, if for any other reason it shall be necessary during
such period to amend or supplement the Trust Prospectus in order to
comply with the Act, to notify you and upon your request to prepare and
furnish without charge to the Underwriter and to any dealer in
securities as many copies as you may from time to time reasonably
request of an amended Trust Prospectus or a supplement to the Trust
Prospectus which will correct such statement or omission or effect such
compliance; and in case the Underwriter is required to deliver a
prospectus in connection with sales of any of the Securities at any
time nine months or more after the time of issue of the Trust
Prospectus, upon your request but at the expense of such Underwriter,
to prepare and deliver to such Underwriter as many copies as you may
request of an amended or supplemented Trust Prospectus complying with
Section 10(a)(3) of the Act;
(iv) To make generally available to the Trust's security
holders as soon as practicable, but in any event not later than
eighteen months after the effective date of the Trust Registration
Statement (as defined in Rule 158(c) under the Act), an earnings
statement of the Trust (which need not be audited) complying with
Section 11(a) of the Act and the rules and regulations of the
Commission thereunder (including, at the option of the Trust, Rule
158);
(v) To use the net proceeds received by it from the sale of
the Securities pursuant to this Agreement in the manner specified in
the Trust Prospectus under the caption "Use of Proceeds"; and
(vi) To use its best efforts to maintain the listing of the
Automatic Common Exchange Securities and the Securities on the New York
Stock Exchange.
(b) The Company agrees with the Underwriter:
(i) To prepare the Company Prospectus in a form approved by
you and to file such Company Prospectus pursuant to Rule 424(b) under
the Act not later than the Commission's close of business on the second
business day following the execution and delivery of this Agreement,
or, if applicable, such earlier time as may be required by Rule
430A(a)(3) under the Act; to make no further amendment or any
supplement to the Company Registration Statement or Company Prospectus
prior to the last Time of Delivery which shall be disapproved by you
promptly after reasonable notice thereof, such disapproval not to be
unreasonably
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<PAGE>
exercised; to advise you, promptly after it receives notice thereof, of
the time when any amendment to the Company Registration Statement has
been filed or becomes effective or any supplement to the Company
Prospectus or any amended Company Prospectus has been filed and to
furnish you with copies thereof; to file promptly all reports and any
definitive prox or information statements required to be filed by the
Company with the Commission pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of the Company
Prospectus and for so long as the delivery of a prospectus is required
in connection with the offering or sale of the Securities; to advise
you, promptly after it receives notice thereof, of the issuance by the
Commission of any stop order or of any order preventing or suspending
the use of any Company Preliminary Prospectus or prospectus, of the
suspension of the qualification of the shares of Stock to be delivered
pursuant to the Contract for offering or sale in any jurisdiction, of
the initiation or threatening of any proceeding for any such purpose,
or of any request by the Commission for the amending or supplementing
of the Company Registration Statement or Company Prospectus or for
additional information; and, in the event of the issuance of any stop
order or any order preventing or suspending the us of any Company
Preliminary Prospectus or prospectus or suspending any such
qualification, to promptly use its best efforts to obtain the
withdrawal of such order;
(ii) If the Company elects to rely upon Rule 462(b), to file a
Company Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) by 10:00 p.m., Washington, D.C. time, on
the date of this Agreement, and at the time of filing either pay to the
Commission the filing fee for the Rule 462(b) Registration Statement or
give irrevocable instructions for the payment of such fee pursuant to
Rule 111(b) under the Act;
(iii) Promptly from time to time to take such action as you
may reasonably request to qualify the Securities for offering and sale
under the securities laws of such jurisdictions as you may request and
to comply with such laws so as to permit the continuance of sales and
dealings therein in such jurisdictions for as long as may be necessary
to complete the distribution of the Securities, provided that in
connection therewith the Company shall not be required to qualify as a
foreign corporation or to file a general consent to service of process
in any jurisdiction;
(iv) Prior to 12:00 noon, New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time
to time to furnish the Underwriter with copies of the Company
Prospectus in such quantities as you may reasonably request, and, if
the delivery of a prospectus is required at any time prior to the
expiration of nine months after the time of issue of the Company
Prospectus in connection with the offering or sale of the Securities
and if at such time any events shall have occurred as a result of which
the Company Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made when such Company Prospectus
is delivered, not misleading, or, if for any other reason it shall be
necessary during such same period to amend or supplement the Company
Prospectus or to file under the Exchange Act any document incorporated
by reference in the Company Prospectus in order to comply with the Act
or the Exchange Act, to notify you and upon your request to file such
document and to prepare and furnish without charge to the Underwriter
and to any dealer in securities as many copies as you may from time to
time reasonably request of an amended Company Prospectus or a
supplement to the Company Prospectus which will correct such statement
or omission or effect such compliance and in case the Underwriter is
required to deliver a prospectus in connection
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<PAGE>
with sales of any of the Securities at any time nine months or more
after the time of issue of the Company Prospectus, upon your request
but at the expense of such Underwriter, to prepare and deliver to such
Underwriter as many copies as you may request of an amended or
supplemented Company Prospectus complying with Section 10(a)(3) of the
Act;
(v) To make generally available to its security- holders as
soon as practicable, but in any event not later than eighteen months
after the effective date of the Registration Statement (as defined in
Rule 158(c) under the Act), an earning statement of the Company and its
subsidiaries (which need not be audited) complying with Section 11(a)
of the Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);
(vi) During the period beginning from the date hereof and
continuing to and including the date 90 days after the First Time of
Delivery, not to offer, sell, contract to sell or otherwise dispose of
any Stock or any securities of the Company (other than pursuant to
employee stock option plans and employment agreements, in each case,
existing on, or upon the conversion or exchange of convertible or
exchangeable securities outstanding as of, the date of this Agreement)
which ar substantially similar to the Stock, including but not limited
to any securities that are convertible into or exchangeable for, or
that represent the right to receive, Stock or such substantially
similar securities without your prior written consent;
(vii) To make available to its stockholders as soon as
practicable after the end of each fiscal year an annual report
(including a balance sheet and statements of income, stockholders'
equity and cash flows of the Company and its consolidated subsidiaries
certified by independent public accountants) and, to make available to
its stockholders as soon as practicable after the end of each of the
first three quarters of each fiscal year (beginning with the fiscal
quarter ending after the effective date of the Registration Statement),
consolidated summary financial information of the Company and its
subsidiaries for such quarter in reasonable detail;
(viii) During a period of five years from the effective date
of the Registration Statement, to furnish to you copies of all reports
or other communications (financial or other) furnished to stockholders,
and to deliver to you (i) as soon as they are available, copies of any
reports and financial statements furnished to or filed with the
Commission or any national securities exchange on which any class of
securities of the Company is listed; and (ii) such additional
information concerning the business and financial condition of the
Company as you may from time to time reasonably request. Such financial
statements will be on a consolidated basis to the extent the accounts
of the Company and its subsidiaries are consolidated in reports
furnished to its stockholders generally or to the Commission; and
(ix) To use its best efforts to maintain the listing of the
Stock on the New York Stock Exchange.
6. The Trust, the Company, the Selling Stockholder and the Underwriter
covenant and agree with each other that (a) the Underwriter will pay or cause to
be paid the following: (i) the organizational expenses and the ongoing expenses
of the Trust and all fees, disbursements and expenses of the Trust's counsel and
the Trust's accountants in connection with the registration of the Securities
under the Acts; (ii) the fees in connection with filing the Trust Registration
Statement; and (iii) the filing fees incident to, and the fees and disbursements
of counsel for the Trust in connection with, securing any required review
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by the NASD of the terms of the sale of the Securities; (b) the Selling
Stockholder will pay or cause to be paid the following: (i) subject to Clause
(a) (ii) above, the fees, disbursements and expenses of the Company's outside
accountants and of the Company's outside counsel in connection with the
registration of the Securities and the Stock under the Act and al other expenses
in connection with the preparation, printing and filing of the Notification, the
Trust Registration Statement, the Company Registration Statement, any Trust
Preliminary Prospectus or Company Preliminary Prospectus, the Trust Prospectus
and the Company Prospectus and amendments and supplements thereto and the
mailing and delivering of copies thereof to the Underwriter and dealers; (ii)
the cost of printing or producing this Agreement and any Blue Sky Memorandum,
closing documents (including any compilations thereof) and any other documents
in connection with the offering, purchase, sale and delivery of the Securities
and the Stock; (iii) the filing fees incident to, and the fees and disbursements
of counsel for the Underwriter in connection with, securing any required review
by the NASD of the terms of the sale of the Stock; (iv) all costs and expenses
incident to the listing of the Securities on the New York Stock Exchange or
other national or regional exchange; (v) the cost of preparing certificates
representing the Securities; (vi) the cost and charges of any transfer agent or
registrar for the Securities; (vii) all expenses and taxes incident to the sale
and delivery of the shares of Stock to be sold or pledged by the Selling
Stockholder; (viii) all fees, expenses and costs in connection with the
marketing of the Securities; and (ix) all other costs and expenses incident to
the performance of the Selling Stockholder's obligations hereunder which are not
otherwise specifically provided for in this Section, including (x) any fees and
expenses of counsel for the Selling Stockholder, (y) the fees and expenses of
the Attorneys-in-Fact and the POA Custodian, and (z) all expenses and taxes
incident to the sale and delivery of the shares of Stock to be sold or pledged
by the Selling Stockholder and (c) the Company will pay or cause to be paid (i)
the cost of preparing Stock certificates; and (ii) the cost and charges of any
transfer agent or registrar for the Stock. In connection with Clause (b)(ix)(z)
of the preceding sentence, Goldman, Sachs & Co. agrees to pay New York State
stock transfer tax, and the Selling Stockholder agrees to reimburse Goldman,
Sachs & Co. for associated carrying costs if such tax payment is not rebated on
the day of payment and for any portion of such tax payment not rebated. It is
understood, however, that the Company shall bear, and the Selling Stockholder
shall not be required to pay or to reimburse the Company for, the cost of any
other matters not directly relating to the sale and purchase of the Securities
pursuant to this Agreement, and that, except as provided in this Section,
Section 8 and Section 10 hereof, the Underwriter will pay all of its own costs
and expenses, including the fees of its counsel, transfer taxes on resale of any
of the Securities by it, and any advertising expenses connected with any offers
it may make.
7. The obligations of the Underwriter hereunder, as to the Securities
to be delivered at each Time of Delivery, shall be subject, in its discretion,
to the condition that all representations and warranties of the Trust, the
Company and the Selling Stockholder herein are, at and as of such Time of
Delivery, true and correct, the condition that the Trust, the Company and the
Selling Stockholder shall have performed all of its and their obligations
hereunder theretofore to be performed, an the following additional conditions:
(a) The Prospectuses shall have been filed with the Commission
pursuant to Rule 424(b) or Rule 497(h), as applicable, within the applicable
time period prescribed for such filing by the rules and regulations under the
Act and in accordance with Sections 5(a)(i) and 5(b)(i) hereof; if the Company
has elected to rely upon Rule 462(b), the Company Rule 462(b) Registration
Statement shall have become effective by 10:00 p.m., Washington, D.C. time, on
the date of this Agreement; no stop order suspending the effectiveness of the
Registration Statements or any part thereof, and no order pursuant to Section
8(e) of the Investment Company Act affecting this transaction, shall have been
issued and no proceeding for that purpose shall have been initiated or
threatened by the Commission; and all requests
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<PAGE>
for additional information on the part of the Commission shall have been
complied with to your reasonable satisfaction;
(b) Fried, Frank, Harris, Shriver & Jacobson, counsel for the
Underwriter, shall have furnished to you their written opinion (a draft of such
opinion is attached as Annex II(a) hereto), dated such Time of Delivery, with
respect to paragraphs (i), (ii), (iii), (v), (vi) and (viii) of subsection (c)
below and paragraphs (i), (ii) and (vi) of subsection (e) below, as well as a
statement to the effect of the text following paragraph (xii) of subsection (e)
below, and such other related matters as you may reasonably request, and such
counsel shall have received such papers and information as they may reasonably
request to enable them to pass upon such matters;
(c) Sullivan & Cromwell, counsel for the Trust, shall have
furnished to you their written opinion (a draft of such opinion is attached as
Annex II(b) hereto), dated such Time of Delivery, in form and substance
satisfactory to you, to the effect that:
(i) The Trust (x) has been duly formed and is validly existing
as a trust under the laws of the State of New York and (y) is
registered with the Commission under the Investment Company Act as a
non-diversified, closed-end management investment company;
(ii) The Securities have been duly authorized and validly
issued and are fully paid and non-assessable and are entitled to the
benefits provided by the Trust Agreement;
(iii) The Securities will be exchanged for shares of Stock in
accordance with the terms of the Trust Agreement and the Contract
(unless a Reorganization Event occurs or the Seller elects the Cash
Settlement Alternative (each as defined in the Contract)), subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles;
(iv) All regulatory consents, authorizations, approvals and
filings required to be obtained or made by the Trust under the Federal
laws of the United States and the laws of the State of New York for the
issuance, sale and delivery of the Securities by the Trust to you have
been obtained or made;
(v) This Agreement has been duly authorized, executed and
delivered by the Trust;
(vi) Each Fundamental Agreement has been duly authorized,
executed and delivered by the Trust and, assuming due authorization,
execution and delivery by the other parties thereto, constitutes a
valid and legally binding agreement of the Trust enforceable in
accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to
general equity principles;
(vii) The statements in the Trust Prospectus under the caption
"Certain Federal Income Tax Considerations", to the extent that such
statements constitute summaries of the legal matters referred to
therein, fairly represent their opinion as to such matters; and
(viii) On the basis of information which was reviewed in the
course of the performance of the services referred to in their opinion,
considered in the light of their understanding of the applicable law
and the experience they have gained through their practice
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<PAGE>
under the Acts, such counsel confirm to you that, in their opinion, the
Trust Registration Statement, as of its effective date, and the Trust
Prospectus, as of the date of the Trust Prospectus, appeared on their
face to be appropriately responsive in all material respects to the
requirements of the Acts and the applicable rules and regulations of
the Commission thereunder; and that nothing that came to their
attention in the course of such review has caused them to believe that
the Trust Registration Statement, as of its effective date, contained
any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading o that the Trust Prospectus, as of
the date of the Trust Prospectus, contained any untrue statement of a
material fact or omitted to state any material fact necessary in order
to make the statements therein, in the light of the circumstances under
which they were made, not misleading; also, nothing that has come to
such counsel's attention in the course of certain procedures (as
described in such opinion) has caused such counsel to believe that the
Trust Prospectus, as of the date and time of delivery of such opinion,
contained any untrue statement of a material fact or omitted to state
any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; provided, however, that such opinion may state that the
limitations inherent in the independent verification of factual matters
and the character of determinations involved in the registration
process are such, however, that such counsel do not assume any
responsibility for the accuracy, completeness or fairness of the
statements contained in the Trust Registration Statement or the Trust
Prospectus except for those made under the captions "Investment
Objective and Policies", "Description of the Securities" and
"Underwriting" in the Trust Prospectus insofar as such statements
relate to provisions of documents referred to therein, and such counsel
need not express any opinion or belief as to the financial statements
or other financial data contained in the Trust Registration Statement
or the Trust Prospectus; and provided further that such counsel may
state that they have not participated in the preparation of the Company
Registration Statement or the Company Prospectus, and need not express
any opinion or belief with respect thereto or with respect to
information relating to the Company contained in the Trust Prospectus
under the captions "Prospectus Summary--The Company" and "Investment
Objectives and Policies--The Company".
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction other than the laws of the State of
New York and the Federal laws of the United States.
(d) Sullivan & Cromwell, counsel for the Trust, shall have
furnished to the Selling Stockholder their written opinion (a draft of such
opinion is attached as Annex II(c) hereto), dated such Time of Delivery, with
respect to paragraphs (i)(y), (iv) and (vii) of subsection (c) above and, in
addition, to the effect that the statements in the Trust Prospectus under the
captions "Investment Objective and Policies", "Description of the Securities"
and "Underwriting", insofar as such statements summarize provisions of the
documents referred to therein, are accurate in all material respects and fairly
summarize the matters referred to therein, provided, however, that such counsel
may state that in rendering such opinion, such counsel are not passing upon the
Federal income tax treatment of the Selling Stockholder in connection with the
transactions described in the Trust Prospectus, that such counsel express no
opinion as to such matters, and that the Selling Stockholder shoul draw no
inference with respect to such matters from the language set out in the Trust
Prospectus.
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction other than the laws of the State of
New York and the Federal laws of the United States.
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(e) Weil, Gotshal & Manges, LLP, counsel for the Company, shall
have furnished to you their written opinion (a draft of such opinion is attached
as Annex II(d) hereto), dated such Time of Delivery, in form and substance
satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with corporate power and authority to own its properties
and conduct its business as described in the Company Prospectus;
(ii) The Company has an authorized capitalization as set forth
in the Company Prospectus, and all of the shares of Stock to be pledged
under the Collateral Agreement have been duly and validly authorized
and issued and are fully paid and non-assessable; and the shares of
Stock conform to the description of the Stock contained in the Company
Prospectus;
(iii) The Company is duly qualified to transact business and
in good standing under the laws of each other jurisdiction where it
owns or leases properties or conducts any business so as to require
such qualification, except where the failure to be in good standing
would not have a Material Adverse Effect (such counsel being entitled
to rely in respect of the opinion in this clause upon opinions of local
counsel and in respect of matters of fact upon certificates of officers
o the Company, provided that such counsel shall state that they believe
that both you and they are justified in relying upon such opinions and
certificates);
(iv) Each of the Principal Subsidiaries which is incorporated
in the United States ("U.S. Principal Subsidiaries") has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation; and, to the best
of such counsel's knowledge, all of the issued shares of capital stock
of each U.S. Principal Subsidiary have been duly and validly authorized
and issued, are fully paid and non-assessable, and are owned directly
or indirectly by the Company, free and clear of all liens, encumbrances
or claims;
(v) To such counsel's knowledge and other than as set forth in
the Company Prospectus, there are no legal or governmental proceedings
pending or overtly threatened against the Company or any of its
subsidiaries or involving the Company or any of its subsidiaries or any
property of the Company or any of its subsidiaries which would be
required to be disclosed in the Company Prospectus;
(vi) This Agreement has been duly authorized, executed and
delivered by the Company;
(vii) The compliance by the Company with all of the provisions
of this Agreement and the consummation of the transactions herein
contemplated will not conflict with or result in a breach or violation
of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument known to such counsel to which the Company or
any of its subsidiaries is a party or by which the Company or any of
its subsidiaries is bound or to which any of the property or assets of
the Company or any of its subsidiaries is subject, and that is material
to the Company and its subsidiaries taken as a whole, nor will such
action result in any violation of the provisions of the Certificate of
Incorporation or By-laws of the Company or any New York, Delaware
corporate or Federal law, rule or regulation (other than foreign and
state securities or Blue Sky laws, as to which such counsel expresses
no opinion, and other than Federal securities laws, as to which
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such counsel expresses no opinion except as otherwise set forth
herein), or any judgment, writ, injunction, decree, order or ruling of
any court or governmental authority binding on the Company of which
such counsel is aware;
(viii) No consent, approval, authorization, order,
registration or qualification of or with any New York, Delaware
corporate or Federal governmental authority is required for the
consummation by the Company of the transactions contemplated by this
Agreement, except the registration under the Act of the Securities and
such consents, approvals, authorizations, registrations or
qualifications as may be required under state or foreign securities or
Blue Sky laws as to which such counsel need express no opinion (it
being understood that the opinion may be limited to those comments,
approvals, authorizations, orders, registrations or qualifications
that, in such counsel's experience, are normally applicable to the
transactions of the type contemplated by this Agreement);
(ix) The statements set forth in the Company Prospectus under
the caption "Description of Capital Stock", insofar as they purport to
constitute a summary of the terms of the Stock (including shares of
Stock subject to the Contract), are accurate and correct in all
material respects;
(x) The Company is not an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in
the Investment Company Act;
(xi) The documents incorporated by reference in the Company
Prospectus (other than the financial statements and related notes, the
financial statement schedules and other financial and accounting data
therein, as to which such counsel need express no opinion), when they
became effective or were filed with the Commission, as the case may be,
each appeared to comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations of the
Commission thereunder; and
(xii) The Company Registration Statement and the Company
Prospectus and any further amendments and supplements thereto made by
the Company prior to such Time of Delivery (other than the financial
statements and related notes, the financial statement schedules and
other financial and accounting data included in the Company
Registration Statement or Company Prospectus, as to which such counsel
need express no opinion) comply as to form in all material respects
with the requirements of the Act and the rules and regulations
thereunder.
In addition, such counsel shall state that it has participated in
conferences with directors, officers and other representatives of the Company,
the Selling Stockholder, representatives of the independent public accountants
for the Company, representatives of the Underwriter and representatives of
counsel for the Underwriter, at which conferences the contents of the Company
Registration Statement, the Company Prospectus and related matters were
discussed, and, although such counsel has not independently verified and is not
passing upon and assumes no responsibility for the accuracy, completeness or
fairness of the statements contained in the Company Registration Statement and
Company Prospectus, except to the extent specified in subsection (ix) of this
Section 7(e), no facts have come to such counsel's attention which leads such
counsel to believe that the Company Registration Statement (including any
documents incorporated by reference therein), on the effective date thereof (or,
in the case of documents incorporated by reference, when such documents became
effective or were filed), contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements contained therein not misleading or that the Company
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Prospectus, on the date thereof or on the date hereof, contained or contains an
untrue statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading (it being understood that such counsel expresses no view with respect
to the financial statements and related notes, the financial statement schedules
and the other financial and accounting data included in the Company Registration
Statement or Company Prospectus) and they do not know of any contracts or other
documents of a character required to be filed as an exhibit to the Company
Registration Statement or required to be incorporated by reference into the
Company Prospectus or required to be described in the Company Registration
Statement or the Company Prospectus which are not filed or described as
required.
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction other than the laws of the State of
New York, the corporate laws of the State of Delaware and the federal laws of
the United States;
(f) Debevoise and Plimpton, counsel for The Estee Lauder 1994
Trust, the Selling Stockholder, shall have furnished to you their written
opinion (a draft of each such opinion is attached as Annex II(e) hereto), dated
such Time of Delivery, in form and substance satisfactory to you, to the effect
that:
(i) The Selling Stockholder validly exists as a trust under,
and is governed by, the laws of the State of New York; and the trustee
of the Selling Stockholder has the requisite power and authority, on
behalf of the Selling Stockholder, to enter into this Agreement and the
Power of Attorney, Custody Agreement, Contract and Collateral
Agreement, and to consummate the transactions contemplated hereby and
thereby;
(ii) The Power of Attorney and the Custody Agreement have been
duly executed and delivered by the Selling Stockholder and constitute
valid and binding agreements of the Selling Stockholder enforceable in
accordance with their terms, subject to customary bankruptcy and
equitable principles qualifications;
(iii) This Agreement has been duly executed and delivered by
or on behalf of the Selling Stockholder; each of the Contract and the
Collateral Agreement has been duly executed and delivered by or on
behalf of the Selling Stockholder and constitutes a valid and binding
agreement of the Selling Stockholder enforceable in accordance with its
terms, subject to customary bankruptcy and equitable principles
qualifications;
(iv) The compliance by the Selling Stockholder with all of the
provisions of this Agreement and the Power of Attorney, the Custody
Agreement, the Contract and the Collateral Agreement and the
consummation of the transactions herein and therein contemplated will
not conflict with or result in a breach or violation of, or constitute
a default under, (i) any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument known by such counsel to
which the Selling Stockholder is a party or by which the Selling
Stockholder is bound, or to which any of the property or assets of the
Selling Stockholder is subject, (ii) the provisions of the constitutive
documents of the Selling Stockholder, (iii) any present law, or present
regulation of any government agency or authority, of the State of New
York or the United States of America known by such counsel to be
applicable to the Selling Stockholder or its properties or (iv) any
court decree or order bindin upon the Selling Stockholder or its
properties;
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(v) No consent, approval, authorization or order of any United
States or New York court or governmental agency or body is required by
or of the Selling Stockholder for the consummation of the transactions
contemplated by this Agreement, the Contract and the Collateral
Agreement, except for the registration of the Securities and the Stock,
under the Acts and such as may be required under state or foreign
securities or Blue Sky laws, rules or regulations in connection with th
purchase and distribution of the Securities and the Stock (it being
understood that this opinion is limited to those consents, approvals,
authorizations, orders, registrations or qualifications that, in our
experience, are normally applicable to transactions of the type
contemplated by this Agreement);
(vi) Assuming due authorization, execution and delivery
thereof in the State of New York by the Trust and the Collateral Agent,
the Collateral Agreement, together with the delivery of (x) the
certificates in registered form representing the Stock pledged
thereunder by the Selling Stockholder and (y) undated stock powers with
respect thereto endorsed in blank, to the Collateral Agent for the
benefit of the Trust, creates in favor of the Collateral Agent for the
benefit of the Trust a perfected security interest in such Stock under
the Uniform Commercial Code as in effect in the State of New York (the
"New York UCC"); upon such delivery, at the First Time of Delivery,
assuming that (A) the Collateral Agent and the Trust will acquire the
security interest in such shares without notice of any adverse claim
(within the meaning of the New York UCC) and (B) the Selling
Stockholder has rights in the shares of Stock subject to such
Collateral Agreement, the Collateral Agent will acquire such security
interest in such shares of Stock for the benefit of the Trust free of
any adverse claim (within the meaning of the New York UCC); and
(vii) Assuming (A) due authorization, execution and delivery
of the Contract and the Collateral Agreement by the Trust and the
Collateral Agreement by the Collateral Agent, (B) the Selling
Stockholder continues to be the sole registered owner of the shares of
Stock to be sold by it, (C) the holders of Securities acquire such
shares of Stock without notice of any adverse claim (within the meaning
of the New York UCC) and (D) undated stock powers with respect to the
certificates representing such shares of Stock endorsed in blank are
delivered to the holders of Securities, upon payment for and delivery
to the holders of Securities of the shares of Stock in accordance with
the Contract and Collateral Agreement, the holders of Securities will
acquire all of the rights of the Selling Stockholder in such shares of
Stock and will also acquire their interest in such shares of Stock free
of any adverse claim (within the meaning of the New York UCC).
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction other than the laws of the State of
New York and the Federal laws of the United States and in rendering the opinion
in subparagraphs (vi) and (vii) such counsel may rely upon a certificate of the
Selling Stockholder in respect of matters of fact as to ownership of, and liens,
encumbrances, equities or claims on the shares of Stock to be sold by the
Selling Stockholder, provided that such counsel shall state that they believe
that both you and they are justified in relying upon such certificate.
(g) On the date of the Trust Prospectus at a time prior to the
execution of this Agreement, at 9:30 a.m., New York City time, on the effective
date of any post-effective amendment to the Trust Registration Statement filed
subsequent to the date of this Agreement and also at each Time of Delivery,
PricewaterhouseCoopers LLP shall have furnished to you a letter or letters,
dated the respective dates of delivery thereof, in form and substance
satisfactory to you;
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(h) On the date of the Company Prospectus at a time prior to the
execution of this Agreement, at 9:30 a.m., New York City time, on the effective
date of any post-effective amendment to the Company Registration Statement filed
subsequent to the date of this Agreement and also at each Time of Delivery, the
accounting firm listed in Section 1(a)(xv) hereof shall have furnished to you a
letter or letters, dated the respective dates of delivery thereof, in form and
substance satisfactory to you, to the effect set forth in Annex I hereto;
(i) (i) Since the respective dates as of which information is
given in the Trust Registration Statement and the Trust Prospectus, there shall
not have been any change, or any development involving a prospective change, in
or affecting the general affairs, management, financial position, results of
operations, prospects, investment objectives, investment policies or liabilities
of the Trust, otherwise than as set forth or contemplated in the Trust
Prospectus, (ii) neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included in
the Company Prospectus or incorporated by reference therein any loss or
interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Company Prospectus, and (iii) since the respective dates as
of which information is given in the Company Prospectus there shall not have
been any change in the capital stock, short-term debt or long-term debt of the
Company or any of its subsidiaries or any change, or any development involving a
prospective change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company and its
subsidiaries, taken as a whole, otherwise than as set forth or contemplated in
the Company Prospectus, the effect of which, in any such case described in
clause (i), (ii) or (iii), is in your judgment so material and adverse as to
make it impracticable or inadvisable to proceed with the public offering or the
delivery of the Securities being issued at such Time of Delivery on the terms
and in the manner contemplated in the Trust Prospectus;
(j) On or after the date hereof there shall not have occurred any
of the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange; (ii) a suspension or
material limitation in trading in the securities of the Company or the Trust on
the New York Stock Exchange; (iii) a general moratorium on commercial banking
activities declared by either Federal or New York State authorities; or (iv) the
outbreak or material escalatio of hostilities involving the United States or the
declaration by the United States of a national emergency or war, if the effect
of any such event specified in this clause (iv) in your judgment makes it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Securities being issued at such Time of Delivery on the terms and in the
manner contemplated in the Trust Prospectus;
(k) The Securities shall have been duly listed, subject to notice
of issuance, on the New York Stock Exchange;
(l) Each Fundamental Agreement shall have been executed and
delivered by all parties thereto and the Selling Stockholder shall have
delivered to the Collateral Agent the number of shares of Stock required by the
Collateral Agreement to be initially pledged thereunder in accordance with the
requirements of such Collateral Agreement;
(m) The Trust and the Company shall have complied with the
provisions of Section 5(a)(iii) and 5(b)(iii) hereof with respect to the
furnishing of prospectuses on the New York Business Day next succeeding the date
of this Agreement;
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(n) The Trust, the Company and the Selling Stockholder shall have
furnished or caused to be furnished to you at such Time of Delivery certificates
of officers of the Trust, the Company and the Selling Stockholder, respectively,
satisfactory to you as to the accuracy of the representations and warranties of
the Trust, the Company and the Selling Stockholder, respectively, herein and in
the Contract and Collateral Agreement at and as of such Time of Delivery, as to
the satisfaction and performance by the Trust, the Company and the Selling
Stockholder of all of their respective obligations hereunder and thereunder to
be performed at or prior to such Time of Delivery, as to the matters set forth
in subsections (a) and (i) of this Section (except in the case of the Selling
Stockholder) and as to such other matters relating to the transactions
contemplated herein and therein as you may reasonably request; and
(o) The Company shall have obtained and delivered to the
Underwriter executed copies of an agreement from Leonard A. Lauder, and from
each trustee of the Selling Stockholder in his or her capacity as a trustee, to
the effect set forth in Subsection 1(b)(vi) hereof in form and substance
satisfactory to you.
8. (a) (i) The Company and the Selling Stockholder will indemnify and
hold harmless the Trust and the Underwriter against any losses, claims, damages
or liabilities, joint or several, to which the Trust or the Underwriter may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Company Preliminary Prospectus, the Company Registration
Statement or the Company Prospectus, or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Trust and the
Underwriter for any legal or other expenses reasonably incurred by the Trust or
the Underwriter in connection with investigating or defending any such action or
claim as such expenses are incurred; provided, however, that the Company and the
Selling Stockholder shall not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any Company Preliminary Prospectus, the Company Registration Statement or the
Company Prospectus, or any such amendment or supplement thereto, in reliance
upon and in conformity with written information furnished to the Company by the
Underwriter expressly for use therein. (ii) The Selling Stockholder will
indemnify and hold harmless the Trust and the Underwriter against any losses,
claims, damages or liabilities, joint or several, to which the Trust or the
Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Trust Preliminary Prospectus, the Trust
Registration Statement or the Trust Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse the Trust and the
Underwriter for any legal or other expenses reasonably incurred by the Trust or
the Underwriter in connection with investigating or defending any such action or
claim as such expenses are incurred; provided, however, that the Selling
Stockholder shall not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any Trust Preliminary Prospectus, the Trust Registration Statement or the Trust
Prospectus, or any such amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Trust by the Underwriter
expressly for use therein. Notwithstanding the provisions of this Section 8, in
no event shall the Selling Stockholder be liable under this Section 8 for an
amount in excess
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of the gross proceeds from the transactions contemplated by this Agreement and
the Fundamental Agreements received by the Selling Stockholder from the sale of
the Securities.
(b) The Underwriter will indemnify and hold harmless the Company,
the Trust and the Selling Stockholder against any losses, claims, damages or
liabilities to which the Company, the Trust or the Selling Stockholder may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Company Preliminar Prospectus or Trust Preliminary Prospectus,
either of the Registration Statements or either of the Prospectuses, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in any Company
Preliminary Prospectus or Trust Preliminary Prospectus, either of the
Registration Statements or either of the Prospectuses, or any amendment or
supplement thereto, in reliance upon and in conformity with written information
furnished to the Trust or the Company by the Underwriter expressly for use
therein; and will reimburse the Company, the Trust and the Selling Stockholder
for any legal or other expenses reasonably incurred by the Company, the Trust or
the Selling Stockholder in connection with investigating or defending any such
action or claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (which shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party),and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by or
on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company, the Trust and the Selling Stockholder
on the one hand and the Underwriter on the other from the offering of the
Securities. If, however, the allocation provided by
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the immediately preceding sentence is not permitted by applicable law or if the
indemnified party failed to give the notice required under subsection (c) above,
then each indemnifying party shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company, the Trust and
the Selling Stockholder on the one hand and the Underwriter on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company, the Trust and the Selling Stockholder on the one hand and the
Underwriter on the other shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses) received by the
Company, the Trust and the Selling Stockholder bear to the total underwriting
discounts and commissions received by the Underwriter, in each case as set forth
in the table on the cover page of the Trust Prospectus. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company, the Trust or the
Selling Stockholder on the one hand or the Underwriter on the other and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company, the Trust, the
Selling Stockholder and the Underwriter agree that it would not be just and
equitable if contribution pursuant to this subsection (d) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to above in this subsection (d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (d), the Underwriter shall not be required to contribute any amount
in excess of the amount by which the total price at which the Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omissio
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
(e) The obligations of the Company and the Selling Stockholder
under this Section 8 shall be in addition to any liability which the Company and
the Selling Stockholder may otherwise have and shall extend, upon the same terms
and conditions, to each person, if any, who controls the Underwriter within the
meaning of the Act; and the obligations of the Underwriter under this Section 8
shall be in addition to any liability which the Underwriter may otherwise have
and shall extend, upon the same terms and conditions, to each officer and
director of the Company or the Selling Stockholder, to each trustee of the Trust
and to each person, if any, who controls the Company, the Trust or the Selling
Stockholder within the meaning of the Act.
9. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the Trust, the Selling Stockholder and the
Underwriter, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of the Underwriter or any controlling person of the
Underwriter, or the Company the Trust or the Selling Stockholder or any officer
or director or controlling person of the Company, the Trust or the Selling
Stockholder and shall survive delivery of and payment for the Securities.
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10. If for any reason any Securities are not delivered by or on behalf
of the Trust as provided herein, the Selling Stockholder will reimburse the
Underwriter for all out-of-pocket expenses approved in writing by you, including
fees and disbursements of counsel, reasonably incurred by the Underwriter in
making preparations for the purchase, sale and delivery of the Securities not so
delivered, but the Company, the Trust and the Selling Stockholder shall then be
under no further liability to the Underwriter in respect of the Securities not
so delivered except as provided in Sections 6 and 8 hereof.
11. In all dealings hereunder, the parties hereto shall be entitled to
act and rely upon any statement, request, notice or agreement made or given by
you; and in all dealings with the Selling Stockholder hereunder, you, the Trust
and the Company shall be entitled to act and rely upon any statement, request,
notice or agreement on behalf of the Selling Stockholder made or given by any or
all of the Attorneys-in-Fact for the Selling Stockholder.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriter shall be delivered or sent by mail, telex or
facsimile transmission to Goldman, Sachs & Co., 85 Broad Street, New York, New
York 10004, Attention: Registration Department; if to the Trust shall be
delivered or sent by mail, telex or facsimile transmission to the Trust at 450
West 33rd Street, New York, New York 10001, if to the Company shall be delivered
or sent by mail, telex or facsimile transmission to the address of the Company
set forth in the Registration Statement, Attention: Secretary; and if to the
Selling Stockholder shall be delivered or sent by mail, telex or facsimile
transmission to counsel for the Selling Stockholder at its address set forth in
Schedule II hereto. Any such statements, requests, notices or agreements shall
take effect upon receipt thereof.
12. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriter, the Company, the Trust, the Selling Stockholder
and, to the extent provided in Sections 8 and 9 hereof, the officers and
directors of the Company, the Trust, the Selling Stockholder and each person who
controls the Company, the Selling Stockholder or the Underwriter, and their
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of any of the Securities from the Underwriter shall be
deemed a successor or assign by reason merely of such purchase.
13. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
14. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
15. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
-28-
<PAGE>
If the foregoing is in accordance with your understanding, please sign
and return to us eight counterparts hereof, and upon the acceptance hereof by
you, this letter and such acceptance hereof shall constitute a binding agreement
between the Underwriter, the Trust, the Company and the Selling Stockholder.
Very truly yours,
THE ESTEE LAUDER COMPANIES INC.
By:
---------------------------------
Leonard A. Lauder
Chief Executive Officer
ESTEE LAUDER AUTOMATIC COMMON
EXCHANGE SECURITY TRUST II
By:
---------------------------------
Donald J. Puglisi
By:
---------------------------------
William R. Latham III
By:
---------------------------------
James B. O'Neill
each a trustee of the Estee Lauder
Automatic Common Exchange
Security Trust II
-29-
<PAGE>
LEONARD A. LAUDER, RONALD S. LAUDER
AND IRA T. WENDER AS TRUSTEES OF
THE TRUST, U/A/D JUNE 2, 1994,
AS AMENDED, BETWEEN ESTEE LAUDER,
AS SETTLOR, AND SUCH TRUSTEES
---------------------------------
Leonard A. Lauder, Trustee
---------------------------------
Ronald S. Lauder, Trustee
---------------------------------
Ira T. Wender, Trustee
-30-
<PAGE>
Accepted as of the date hereof:
Goldman, Sachs & Co.
By:
--------------------------------
(Goldman, Sachs & Co.)
-31-
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Number of Optional
Total Securities to be
Number of Purchased if
Firm Securities Maximum Option
Underwriter to be Purchased Exercised
- ----------- --------------- ------------------
<S> <C> <C>
Goldman, Sachs & Co....................................
--------------- ------------------
Total
--------------- ------------------
--------------- ------------------
</TABLE>
<PAGE>
SCHEDULE II
<TABLE>
<CAPTION>
Number of
Total Optional Securities
Number of to be Delivered
Firm Securities if Maximum Option
to be Delivered Exercised
--------------- ------------------
<S> <C> <C>
The Selling Stockholder*:
The Estee Lauder 1994 Trust.............................
--------------- ------------------
Total........................................
--------------- ------------------
--------------- ------------------
</TABLE>
* The Selling Stockholder has appointed Robert J. Bigler and Spencer G.
Smul, and each of them, as the Attorneys-in-Fact for the Selling
Stockholder.
-1-
<PAGE>
SCHEDULE III
Minority Interests of Certain Subsidiaries
Not Held Directly or Indirectly by the Company
<TABLE>
<CAPTION>
Subsidiary Interest Held by Company
- ---------- ------------------------
<S> <C>
Santo Spirito S.r.l. 80% (joint venture with Aveda distributor in
Italy that operates one Aveda store in Milan)
I.M. Cosmetics S.A. 55% (joint venture with distributor in Greece; the
subsidiary also is responsible for the Company's
business in Romania)
</TABLE>
-2-
<PAGE>
ANNEX I
Pursuant to Section 7(h) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriter to the effect that:
(i) They are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of the
Act and the applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
financial forecasts and/or pro forma financial information) examined by
them and included or incorporated by reference in the Registration
Statement or the Prospectus comply as to form in all material respects
with the applicable accounting requirements of the Act or the Exchange
Act, as applicable, and the related published rules and regulations
thereunder; and, if applicable, they have made a review in accordance
with standards established by the American Institute of Certified
Public Accountants of the consolidated interim financial statements,
selected financial data, pro forma financial information, financial
forecasts and/or condensed financial statements derived from audited
financial statements of the Company for the periods specified in such
letter, as indicated in their reports thereon, copies of which have
been separately furnished to the representatives of the Underwriter
(the "Representatives");
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants
of the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus and/or included in the Company's quarterly
reports on Form 10-Q incorporated by reference into the Prospectus; and
on the basis of specified procedures including inquiries of officials
of the Company who have responsibility for financial and accounting
matters regarding whether the unaudited condensed consolidated
financial statements referred to in paragraph (vi)(A)(i) below comply
as to form in all material respects with the applicable accounting
requirements of the Act and the Exchange Act and the related published
rules and regulations, nothing came to their attention that caused them
to believe that the unaudited condensed consolidated financial
statements do not comply as to for in all material respects with the
applicable accounting requirements of the Act and the Exchange Act and
the related published rules and regulations;
(iv) The unaudited selected financial information with respect
to the consolidated results of operations and financial position of the
Company for the five most recent fiscal years included in the
Prospectus and included or incorporated by reference in Item 6 of the
Company's Annual Report on Form 10-K for the most recent fiscal year
incorporated by reference in the Prospectus agrees with the
corresponding amounts (after restatement where applicable) in the
audited consolidated financial statements for such five fiscal years
which were included or incorporated by reference in the Company's
Annual Reports on Form 10-K for such fiscal years;
(v) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K
and on the basis of limited procedures specified in such letter nothing
came to their attention as a result of the foregoing
<PAGE>
procedures that caused them to believe that this information does not
conform in all material respects with the disclosure requirements of
Items 301, 302 and 402, respectively, of Regulation S-K;
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available
interim financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its subsidiaries
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus, inquiries of officials of
the Company and its subsidiaries responsible for financial and
accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused
them to believe that:
(A) (i) the unaudited condensed consolidated statements of
income, consolidated balance sheets and consolidated
statements of cash flows included in the Company's Quarterly
Reports on Form 10-Q incorporated by reference in the
Prospectus do not comply as to form in all material respects
with the applicable accounting requirements of the Exchange
Act as it applies to Form 10-Q and the related published rules
and regulations, or (ii) any material modifications should be
made to the unaudited condensed consolidated statements of
income, consolidated balance sheets and consolidated
statements of cash flows included in the Company's Quarterly
Reports on Form 10-Q incorporated by reference in the
Prospectus, for them to be in conformity with generally
accepted accounting principles;
(B) any other unaudited income statement data and balance
sheet items included in the Prospectus do not agree with the
corresponding items in the unaudited consolidated financial
statements from which such data and items were derived, and
any such unaudited data and items were not determined on a
basis substantially consistent with the basis for the
corresponding amounts in the audited consolidated financial
statements included or incorporated by reference in the
Company's Annual Report on Form 10-K for the most recent
fiscal year;
(C) the unaudited financial statements which were not included
in the Prospectus but from which were derived the unaudited
condensed financial statements referred to in Clause (A) and
any unaudited income statement data and balance sheet items
included in the Prospectus and referred to in Clause (B) were
not determined on a basis substantially consistent with the
basis for the audited financial statements included or
incorporated by reference in the Company's Annual Report on
Form 10-K for the most recent fiscal year;
(D) any unaudited pro forma consolidated condensed financial
statements included or incorporated by reference in the
Prospectus do not comply as to form in all material respects
with the applicable accounting requirements of the Act and the
published rules and regulations thereunder or the pro forma
adjustments have not been properly applied to the historical
amounts in the compilation of those statements;
(E) as of a specified date not more than five days prior to
the date of such letter, there have been any changes in the
consolidated capital stock (other than issuances of capital
stock upon exercise of options and stock appreciation rights,
upon earn-outs of
-2-
<PAGE>
performance shares and upon conversions of convertible
securities, in each case which were outstanding on the date of
the latest balance sheet included or incorporated by reference
in the Prospectus) or any increase in the consolidated
long-term debt of the Company and its subsidiaries, or any
decreases in consolidated net current assets or stockholders'
equity or other items specified by the Representatives, or any
increases in any items specified by the Representatives, in
each case as compared with amounts shown in the latest balance
sheet included or incorporated by reference in the Prospectus,
except in each case for changes, increases or decreases which
the Prospectus discloses have occurred or may occur or which
are described in such letter; and
(F) for the period from the date of the latest financial
statements included or incorporated by reference in the
Prospectus to the specified date referred to in Clause (E)
there were any decreases in consolidated net revenues or
operating profit or the total or per share amounts of
consolidated net income or other items specified by the
Representatives, or any increases in any items specified by
the Representatives, in each case as compared with the
comparable period of the preceding year and with any other
period of corresponding length specified by the
Representatives, except in each case for increases or
decreases which the Prospectus discloses have occurred or may
occur or which are described in such letter; and
(vii) In addition to the examination referred to in their
report(s) included or incorporated by reference in the Prospectus and
the limited procedures, inspection of minute books, inquiries and other
procedures referred to in paragraphs (iii) and (vi) above, they have
carried out certain specified procedures, not constituting an
examination in accordance with generally accepted auditing standards,
with respect to certain amounts, percentages and financial information
specifie by the Representatives which are derived from the general
accounting records of the Company and its subsidiaries, which appear in
the Prospectus (excluding documents incorporated by reference) or in
Part II of, or in exhibits and schedules to, the Registration Statement
specified by the Representatives or in documents incorporated by
reference in the Prospectus specified by the Representatives, and have
compared certain of such amounts, percentages and financial information
with the accounting records of the Company and its subsidiaries and
have found them to be in agreement.
<PAGE>
Exhibit 2.j
S&C Draft of February 16, 1999
CUSTODIAN AGREEMENT
This CUSTODIAN AGREEMENT dated as of February 17, 1999, by and
between The Chase Manhattan Bank, a New York banking corporation (the
"Custodian"), and Estee Lauder Automatic Common Exchange Security Trust II, 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 February 17, 1999 (the
"Trust Agreement") (such trust and the trustees thereof acting in their capacity
as such being referred to herein as the "Trust").
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 a forward
purchase contract (the "Contract") with an existing stockholder 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 Trust desires to engage the services of the
Custodian to perform certain custodial duties for the Trust; and
WHEREAS, the Custodian is qualified and willing to assume such
duties, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties agree as follows:
1. Definitions. Capitalized terms not otherwise
defined herein shall have the respective meanings specified
in the Trust Agreement.
2. Appointment of Custodian; Transfer of Assets. The Trust
hereby constitutes and appoints the Custodian, and
<PAGE>
the Custodian accepts such appointment, as custodian of all of the property,
including but not limited to, the Contract, the Treasury Securities, any U.S.
Government 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 Trust
hereby deposits the Assets with the Custodian and the Custodian hereby accepts
such into its custody and the Trust 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 at the instruction of the Paying Agent 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, and the Custodian shall have no liability to the Trust or any
Holder or any other Person with respect to any such Temporary Investments.
-2-
<PAGE>
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 or Paying Agent as may be received by the Custodian
from time to time.
5. Custodian's Actions Taken In Good Faith. In connection
with the performance of its duties under this Agreement, the Custodian shall be
under no liability to the Trust or any Holder for any action taken in good faith
in reliance on any paper, order, certification, list, demand, request, consent,
affidavit, notice, opinion, direction, endorsement, assignment, resolution,
draft or other document, prima facie properly executed, or for the disposition
of the Assets pursuant to the Trust Agreement or in respect of any action taken
or suffered under the Trust Agreement in good faith, in accordance with an
opinion of counsel or at the direction of the Trustees pursuant hereto; provided
that this provision shall not protect the Custodian against any liability to
which it would otherwise be subject by reason of its reckless disregard of its
obligations and duties hereunder. In addition, the provisions of Section 9(a)
of the Collateral Agreement shall apply, mutatis mutandis, to the Custodian in
the performance of its duties hereunder as if it were the Collateral Agent
acting under the Collateral Agreement. Notwithstanding any other provision of
this Agreement, the Custodian shall under no
-3-
<PAGE>
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 Trust
for all such taxes and charges, for any tax or charge imposed against the Trust
and for any expenses, including counsel fees, interest, penalties and additions
to tax which the Custodian may sustain or incur with respect to such taxes or
charges.
9. Custodian Resignation, Succession. (a) The Custodian
may resign by executing an instrument in writing resigning as Custodian and
delivering the same to the Trustees, not less than 60 days before the date
specified in such instrument when, subject to clause (b) of this paragraph 9,
such resignation is to take effect; provided, however, that no such resignation
shall be effective unless a successor Custodian shall have been appointed and
have accepted the duties of Custodian hereunder. Upon receiving
-4-
<PAGE>
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 Trust 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 Trust may remove the Custodian immediately and
appoint a successor Custodian. The termination of the Administration Agreement,
the Collateral 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 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,
-5-
<PAGE>
together with all necessary instruments of transfer and assignment or other
documents properly executed necessary to effect such transfer and such of the
records or copies thereof maintained by the resigning Custodian in the
administration hereof as may be requested by the successor Custodian, and shall
thereupon be discharged from all duties and responsibilities hereunder. Any
resignation or removal of the Custodian shall become effective upon such
acceptance of appointment by the successor Custodian. The indemnification of the
resigning Custodian provided for hereunder shall survive any resignation,
discharge or removal of the Custodian hereunder.
12. Custodian Merger, Consolidation. Any corporation into
which the Custodian may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Custodian shall be a party, shall be the successor
Custodian hereunder and under the Trust Agreement without the execution or
filing of any paper, instrument or further act to be done on the part of the
parties hereto, provided that such corporation meets the requirements set forth
in the Trust Agreement and provided further that the Trust has given its prior
written consent to the Custodian with respect to any such merger, conversion or
consolidation.
13. Compensation; Expenses. The Custodian shall receive
compensation for performing the usual, ordinary, normal and recurring services
under this Custodian Agreement and, with the prior written approval of the
Trustees, reimbursement for any and all expenses and disbursements incurred
hereunder, as provided in Section 3.1 of the Administration Agreement.
14. Section 17(f) Qualification. The Custodian hereby
represents that it is qualified to act as a custodian under Section 17(f) of the
Investment Company Act.
15. Custodian's Limited Liability. The Trust 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
-6-
<PAGE>
it and reasonable attorneys' fees and disbursements), liability or claim
incurred by reason of any inaccuracy in information furnished to the Custodian
by the Trust, 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 II, c/o Donald J. Puglisi,
Managing Trustee, Puglisi & Associates, 850 Library Avenue, Suite 204, Newark,
Delaware 19711, and to the Custodian if mailed or delivered to The Chase
Manhattan Bank, 450 West 33rd Street, New York, New York 10001, Attention:
Collateral Management Services, or at such other address as shall be specified
by the addressee to the other party hereto in writing.
20. No Third Party Beneficiaries. Nothing herein, express or
implied, shall give to any Person, other than the Trustees, the Custodian and
their respective
-7-
<PAGE>
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.
-8-
<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.
ESTEE LAUDER AUTOMATIC COMMON
EXCHANGE SECURITY TRUST II
-------------------------
William R. Latham, III,
as Trustee
-------------------------
James B. O'Neill,
as Trustee
-------------------------
Donald J. Puglisi,
as Trustee
THE CHASE MANHATTAN BANK
as Custodian
By
----------------------
Name:
Title:
<PAGE>
Exhibit 2.k.(i)
S&C Draft of February 16, 1999
ADMINISTRATION AGREEMENT
This ADMINISTRATION AGREEMENT, dated as of February 17, 1999,
by and between The Chase Manhattan Bank, a New York banking corporation (the
"Administrator"), and Estee Lauder Automatic Common Exchange Security Trust II,
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 February 17, 1999 (the
"Trust Agreement") (such trust and the trustees thereof acting in their capacity
as such being referred herein as the "Trust").
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 a forward
purchase contract (the "Contract") with The Estee Lauder 1994 Trust (the
"Seller"), an existing stockholder 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 Trust desires to engage the services of the
Administrator to assume certain duties and responsibilities of the Trustees of
the Trust under the Trust Agreement and the Investment Company Act and to
undertake certain services on behalf of and subject to the supervision of the
Trustees as provided herein; and
WHEREAS, the Administrator is qualified and willing to assume
such duties and responsibilities and to undertake to render such services,
subject to the supervision of the Trustees, on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties agree as follows:
<PAGE>
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 Trust hereby engages the Administrator,
and the Administrator hereby accepts such engagement, 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 assets of the
Trust, the fees and expenses of the Trust to the extent specified in
Section 3.2 of the Trust Agreement;
(b) instruct the Paying Agent to effect the transactions set
forth in Sections 2.3, 2.4 and 2.5 and Article III of the Trust
Agreement;
(c) when the Trust is required to select and engage an
independent investment banking firm under the
-2-
<PAGE>
Contract, to select and engage such a firm, subject to the requirements
of the Contract (including Section 8.1 thereof) and inform the Trustees
promptly after making such selection and engagement;
(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 Chase Manhattan Bank (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 the
Seller pursuant to the Fund Indemnity Agreement dated the date hereof
between the Seller and the Trust (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 regulations or otherwise;
provided, however, that responsibility for the adequacy and accuracy of
any such notices, proxies, reports, communications, books, records,
returns and other documents shall be that of the Trustees; and provided
further, however, that the Administrator shall have no liability for
the adequacy
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or accuracy of such notices, proxies, reports, communications, books,
records, returns and other documents;
(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 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
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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. In addition, the provisions of Section 9(a) of
the Collateral Agreement shall apply, mutatis mutandis, to the Administrator in
the performance of its duties hereunder as if it were the Collateral Agent
acting under the Collateral Agreement. Without limiting the generality of the
preceding sentences, 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 performing the duties prescribed in Section
2.2(f)(iii) and 2.2(i).
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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.
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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 Trust
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 Trust
from time to time.
ARTICLE IV
TERMINATION
4.1 Termination.
(a) This Agreement shall terminate immediately upon written
notice of termination from the Trust 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
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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 a receiver,
conservator, liquidator, or trustee for the Administrator or for all or
substantially all of its property shall be appointed, or a court of
competent jurisdiction shall approve 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 or
conservator for or in respect of the Administrator or 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 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 Trust.
(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.
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(c) This Agreement may be terminated by either party hereto
without penalty upon 60 days' prior written notice to the other party hereto;
provided that neither party hereto may terminate this Agreement pursuant to this
Section 4.1(c) unless a successor Administrator shall have been appointed and
shall have accepted the duties of the Administrator. If, within 30 days after
notice by the Administrator to the Trustees of termination of this Agreement, no
successor Administrator shall have been selected and accepted the duties of the
Administrator, the Administrator may apply to a court of competent jurisdiction
for the appointment of a successor Administrator.
4.2 Effect of Termination. The Administrator shall forthwith
upon termination of this Agreement deliver to the Trustees any records or other
property of the Trust then in the possession or custody of the Administrator.
Any obligation to indemnify the Administrator pursuant to Section 6.6 shall
survive the termination of this Agreement.
ARTICLE V
RECORDS AND REPORTS
5.1 Books and Records; Inspection and Copying. The
Administrator shall keep (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 Contract 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
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MISCELLANEOUS
6.1 Binding Effect. Any corporation into which the
Administrator may be merged or converted or with which it may be consolidated,
or any corporation resulting from any merger, conversion or consolidation to
which the Administrator shall be a party, shall be the successor Administrator
hereunder and under the Trust Agreement without the execution or filing of any
paper, instrument or further act to be done on the part of the parties hereto,
provided that such corporation meets the requirements set forth in the Trust
Agreement and provided further that the Trustees have given their prior written
consent to the Administrator with respect to any such merger, conversion or
consolidation. This Agreement shall be binding on and inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
6.2 Entire Agreement. This Agreement contains the entire
agreement between the parties with respect to the matters contained herein and
supersedes all prior agreements or understandings, whether oral or written. This
Agreement shall not be amended, changed, modified, or discharged, in whole or in
part, except by an instrument in writing signed by both parties hereto, or their
respective successors or permitted assigns.
6.3 Notices. Any notice, report or other communication
required or permitted to be given hereunder shall be in writing, and shall,
unless some other method of giving such notice, report or other communication is
accepted by the party to whom it is to be given or is required by the Trust
Agreement or the Investment Company Act, be given by being mailed by U.S. first
class mail, certified or registered, return receipt requested, postage prepaid,
to the following addresses of the parties hereto:
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The Trust: Estee Lauder Automatic Common
Exchange Security Trust II
c/o Donald J. Puglisi,
Managing Trustee
Puglisi & Associates
850 Library Avenue, Suite 204
Newark, Delaware 19711
Telephone: (302) 738-6680
Telecopier: (302) 738-7210
The Administrator: The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
Attn: Collateral Management
Services
Telephone: (212) 946-8584
Telecopier: (212) 946-3638
Any party may at any time give written notice to the other
party that it wishes to change its address for the purposes of this Section 6.3.
6.4 Applicable Law. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect except to the extent such law is preempted by federal
law.
6.5 Non-assignability. This Agreement and the rights and
obligations of the parties hereunder may not be assigned or delegated by either
party without the prior written consent of the other party.
6.6 Indemnification. The Trust 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 Trust, or any
act or omission in the course of, connected with or arising out of any services
to be rendered hereunder, provided that the
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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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IN WITNESS WHEREOF the parties have hereunto executed this
Administration Agreement as of the day and year first above written.
ESTEE LAUDER AUTOMATIC COMMON
EXCHANGE SECURITY TRUST II
------------------------------
William R. Latham III,
as Trustee
------------------------------
James B. O'Neill,
as Trustee
------------------------------
Donald J. Puglisi,
as Trustee
THE CHASE MANHATTAN BANK
By
----------------------------
Name:
Title:
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Exhibit 2.k.(ii)
S&C Draft of February 16, 1999
PAYING AGENT AGREEMENT
This PAYING AGENT AGREEMENT, dated as of February 17, 1999, by
and between ChaseMellon Shareholder Services, L.L.C., a New Jersey limited
liability company (the "Paying Agent"), and Estee Lauder Automatic Common
Exchange Security Trust II, 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
[Pricing Date] (the "Trust Agreement") (such trust and the trustees thereof
acting in their capacity as such being referred to herein as the "Trust").
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 a forward
purchase contract (the "Contract") with an existing shareholder 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 Trust desires 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
hereby appoints the Paying Agent and the Paying Agent hereby accepts such
appointment and agrees to act in accordance with its standard procedures and the
written instructions of the Administrator and the provisions set forth in this
Article II as Paying Agent with respect to the Securities. Without limiting the
generality of the foregoing, ChaseMellon Shareholder Services, L.L.C., 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, or
cause to be delivered, 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 Trust so
delivered.
2.3 Payments and Investments. The Paying Agent shall make
payments out of the Trust Account as provided for in Article III 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 receipt of written
instructions to do so 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
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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 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 written instructions from the Administrator.
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 Underwriter
shall have previously requested of the Trustees, executed manually or in
facsimile by the Managing Trustee and countersigned manually 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 medallion guaranteed, (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
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all applicable laws relating to the collection of taxes or funds necessary for
the payment of such taxes.
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 receipt of (a) evidence acceptable to it of
the loss, theft or destruction and (b) a surety bond acceptable to the Paying
Agent, sufficient to indemnify and save it and the Trustees harmless. 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 Trust to the Paying Agent that such
issuance will comply with any applicable provisions of the 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
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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.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE TRUST
The Trust represents and warrants 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 on behalf of the Trust
and to authorize, create and issue the Securities;
(b) this Agreement has been duly and validly authorized,
executed and delivered by the Trustees on behalf of the Trust and
constitutes the valid and binding agreement of the Trust, enforceable
against the Trust 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 Trust 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
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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 Trust is a party or by
which it is bound; and
(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. The Paying Agent is acting solely as agent for the
Trust hereunder and owes no fiduciary duties to any other Person by reason of
this Agreement.
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.
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(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.
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 Trust shall indemnify the Paying Agent for, and hold
it harmless against, any loss, liability, claim or expense ("Loss") arising out
of or in connection with its duties under this Agreement, including the costs
and expenses of defending itself against any Loss, unless such Loss shall be a
result of the Paying Agent's gross negligence or intentional misconduct. In no
case will the Paying Agent be liable for special, indirect, incidental or
consequential loss or damages of any kind whatsoever (including but not limited
to lost profits), even if the Paying Agent has been advised of the possibility
of such damages. The indemnification provided by this Section 5.4(b) shall
survive the termination of this Agreement and the resignation or removal of the
Paying Agent.
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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 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 shall
have 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,
and the Trust shall pay all fees and expenses, including but not limited to the
cost of legal counsel, reasonably incurred by the Paying Agent in applying to
such court for the appointment of a successor Paying Agent.
(b) Except as otherwise provided in this para graph (b), the
respective rights and duties of the Trustees and the Paying Agent under this
Agreement shall cease upon termination of this Agreement. The Trust's
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' written
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 Trust.
6.2 Communications. Except for communications authorized to be
made by telephone pursuant to this Agreement, all notices, requests and other
communications to
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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 II
c/o Donald J. Puglisi,
Managing Trustee
Puglisi & Associates
850 Library Avenue, Suite 204
Newark, Delaware 19711
Telephone: (302) 738-6680
Telecopier: (302) 738-7210
with a copy to the Administrator if the duties of the Administrator are being
performed by a Person other than the Person performing the obligations of the
Paying Agent.
If to the Paying Agent,
addressed: Chase Mellon Shareholder
Services, L.L.C.
450 West 33rd Street
New York, New York 10001
Attn: Robert Kavanagh
Telephone: (212) 273-8240
Telecopier: (212) 947-7628
or such other address or telecopy number as such party may hereafter specify for
such purpose by notice to the other party. Each such notice, request or
communication shall be effective when delivered at the address specified herein.
Communications shall be given on behalf of the Trust by the Trustees (or by the
Administrator, provided that the Trustees shall not have delivered to the Paying
Agent an instrument in writing revoking the authorization of the Administrator
to act for it pursuant hereto) and on behalf of the Paying Agent by a Vice
President, Assistant Vice President or Relationship Officer of the Paying Agent
assigned to its Corporate Trust Department.
6.3 Entire Agreement. This Agreement contains
the entire agreement between the parties relating to the
subject matter hereof, and there are no other
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representations, endorsements, promises, agreements or understandings, oral,
written or inferred, between the parties relating to the subject matter hereof.
6.4 No Third Party Beneficiaries. Nothing herein, express or
implied, shall give to any Person, other than the Trust, the Paying Agent and
their respective successors and assigns, any benefit of any legal or equitable
right, remedy or claim hereunder.
6.5 Amendment; Waiver. (a) This Agreement shall not be deemed
or construed to be modified, amended, rescinded, cancelled or waived, in whole
or in part, except by a written instrument signed by a duly authorized
representative of the party to be charged. The Trustees shall notify the Paying
Agent of any change in the Trust Agreement prior to the effective date of any
such change.
(b) Failure of either party hereto to exercise any right or
remedy hereunder in the event of a breach hereof by the other party shall not
constitute a waiver of any such right or remedy with respect to any subsequent
breach.
6.6 Successors and Assigns. Any corporation into which the
Paying Agent may be merged or converted or with which it may be consolidated, or
any corporation resulting from any merger, conversion or consolidation to which
the Paying Agent shall be a party, shall be the successor Paying Agent hereunder
and under the Trust Agreement without the execution or filing of any paper,
instrument or further act to be done on the part of the parties hereto, provided
that such corporation meets the requirements set forth in the Trust Agreement.
This Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the respective successors of each of the Trust and the Paying
Agent. This Agreement shall not be assignable by either the Trustees or the
Paying Agent, without the prior written consent of the other party.
6.7 Severability. If any clause, provision or section hereof
shall be ruled invalid or unenforceable by any court of competent jurisdiction,
the invalidity or unenforceability of such clause, provision or section shall
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not affect any of the remaining clauses, provisions or sections hereof.
6.8 Execution in Counterparts. This Agreement may be executed
in several counterparts, each of which shall be an original and all of which
shall constitute but one and the same instrument.
6.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to principles of conflicts of law.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Paying
Agent Agreement to be duly executed and delivered as of the date first above
written.
ESTEE LAUDER AUTOMATIC COMMON
EXCHANGE SECURITY TRUST II
------------------------------
William R. Latham, III,
as Trustee
------------------------------
James B. O'Neill,
as Trustee
------------------------------
Donald J. Puglisi,
as Trustee
CHASEMELLON SHAREHOLDER
SERVICES, L.L.C.
By:
---------------------------
Name:
Title:
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<PAGE>
Exhibit 2.k.(iii)
S&C Draft of February 16, 1999
PURCHASE AGREEMENT
THIS AGREEMENT is made as of February 17, 1999, between The
Estee Lauder 1994 Trust, a trust organized under the laws of the State of New
York ("Seller"), and Estee Lauder Automatic Common Exchange Security Trust II, 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 February 17, 1999 (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
[AGGREGATE NUMBER OF SHARES REGISTERED] $____ 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,
under certain circumstances, 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 February 17, 1999, among
Purchaser, Seller, as Pledgor and The Chase Manhattan Bank, 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 February 17, 1999 (the "Underwriting Agreement"), among
Purchaser, Seller, the Company and Goldman Sachs & Co. (the "Underwriter"), to
issue and sell to the Underwriter an aggregate of [NUMBER OF FIRM SECURITIES]
Securities (the "Firm Securities") and, at the Underwriter's option, up to
[NUMBER OF OPTIONAL SECURITIES] 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:
"Accelerated Portion" means, in relation to any Cash Merger,
the portion of the Merger Consideration received by Seller, other than
Marketable Securities, that has a Value equal to the amount determined by
multiplying the Basic Reorganization Event Amount by a fraction, the numerator
of which is the Value of the portion of such Merger Consideration received in
exchange for a single share of Common Stock that consists of assets other than
Marketable Securities, and the denominator of which is the aggregate Transaction
Value of such Merger Consideration received in exchange for a single share of
Common Stock.
"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 Underwriter elects to purchase under the
Underwriting Agreement.
"Additional Shares" has the meaning provided in Section
1.1(b).
"Additional STRIPS" means the U.S. Treasury obligations
purchased by Purchaser for settlement at the Second Time of Delivery.
"Administrator" means The Chase Manhattan Bank, administrator
for Purchaser under the Administration Agreement dated as of February 17, 1999,
or any successor thereto.
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"Appreciation Threshold Price" has the meaning provided in
Section 1.1(c).
"Average Market Price" per share of Common Stock or Marketable
Securities on any date means the average Closing Price of a share of Common
Stock or Marketable Securities for the Calculation Period consisting of the 20
Trading Days immediately prior to but not including such date; provided that if
no Closing Price for the Common Stock or 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 the Average Market Price (but no additional
Trading Days shall be added to the Calculation Period). If no Closing Price for
the Common Stock or Marketable Securities may be determined for any of such
Trading Days, the Average Market Price shall be the Closing Price for the Common
Stock or Marketable Securities for the most recent Trading Day prior to such
Calculation Period for which a Closing Price for the Common Stock or Marketable
Securities may be determined pursuant to the definition of "Closing Price".
Notwithstanding the foregoing, 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 or
Marketable Securities on the Trading Day immediately prior to 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.
"Basic Reorganization Event Amount" has the meaning provided
in Section 6.2(a).
"Business Day" means any day on which commercial banks are
open for business in New York City and the New York Stock Exchange is not
closed.
"Calculation Period" means any period of Trading Days for
which an average security price must be determined pursuant to this Agreement.
"Cash Merger" has the meaning specified in Section 6.2(b).
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"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 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 such date, as reported in the
composite transactions for the principal United States national or regional
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 on such date, as reported by the NASDAQ National
Market or, if such common equity security is not so reported on such date, the
last quoted bid price for such common equity security in the over-the-counter
market as reported by the National Quotation Bureau or any similar organization;
provided that if any event that results in an adjustment to the number of shares
of Common Stock or Marketable Securities deliverable hereunder pursuant to
Article VI occurs during any Calculation Period, the Closing Price as determined
pursuant to the foregoing for each Trading Day in the Calculation Period
occurring prior to the date on which such adjustment is effected will be
adjusted in accordance with Article VI hereof to reflect the occurrence of such
event.
"Collateral Agreement" means the Collateral Agreement among
Seller, as Pledgor, The Chase Manhattan Bank, as Collateral Agent and Purchaser,
dated as of February 17, 1999.
"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.
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"Contract Shares" has the meaning provided in Section 1.1(b).
"Custodian" means The Chase Manhattan Bank, custodian for
Purchaser under the Custodian Agreement dated as of February 17, 1999, 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 February 22, 2002 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.
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"Marketable Securities" has the meaning provided in Section
6.2(c).
"Merger Consideration" has the meaning specified in Section
6.2(a).
"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
Securities effected not earlier than February 22, 2002 by means of a completed
public offering or offerings, or another similar offering (which may include one
or more exchange offers), by or on behalf of Seller.
"Second Time of Delivery" has the meaning provided in Section
1.1(b).
"Spin-Off Distribution" means a distribution by the Company to
holders of Common Stock of Marketable Securities issued by an issuer other than
the Company.
"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 Common Stock for the Calculation Period consisting 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 Days 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
definition of "Closing Price". 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 United States 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 United States 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(c).
"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 II,
dated as of February 17, 1999.
"U.S. Government Securities" has the meaning provided in the
Collateral Agreement.
"Value" has the meaning provided in Section 6.2(c).
I.
SALE AND PURCHASE
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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 [NUMBER OF SHARES INITIALLY SUBJECT TO
CONTRACT, ASSUMING NO EXERCISE OF OVER-ALLOTMENT OPTION](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
Underwriter exercises its 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, 0._____ and (iii) if the Average Market Price is
less than the Initial Price, 1.
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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
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.
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 February
22, 1999 (the "First Time of Delivery") at the offices of Weil, Gotshal & Manges
LLP, 767 Fifth Avenue, New York, New York 10153, 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. Except
as otherwise provided in this Agreement, 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
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value thereof at the Average Market Price. In addition, if the difference
between (A) the aggregate proceeds of any the sale (net of any brokerage or
related expenses) of any shares of Common Stock by the Trust pursuant to Section
2.4(g)(ii) of the Trust Agreement and (B) the product of the number of shares of
Common Stock so sold and the Average Market Price, is negative, Seller shall pay
such difference to the Trust; if such difference is positive, the Trust shall
pay the absolute value of such difference to Seller. 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; (ii) in the case of any Marketable Securities
elected by Seller to be delivered in lieu of cash as provided in Section 6.2(a),
at Seller's election, by instruction to the Collateral Agent to deliver to the
Custodian, for the account of Purchaser, the applicable number of Marketable
Securities then held as collateral under the Collateral Agreement, as provided
in Section 6(g) of the Collateral Agreement or (iii) in the case of any cash
included in the Accelerated Portion as provided in Section 6.2(b), by wire
transfer as provided in clause (i) above or in the case of any non-cash assets
included in such Accelerated Portion, by delivery to the Custodian, for the
account of Purchaser of such assets.
(d) Cash Settlement Alternative. At its option, Seller may
deliver to Purchaser on the Exchange Date (whether or not extended pursuant to
Section 1.3(e) or accelerated pursuant to Section 1.3(f)), 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 the Custodian, in Federal (immediately available) funds;
provided, however, that if Seller elects the Cash Settlement Alternative in
connection with a Rollover Offering, as provided below, and such Rollover
Offering has been consummated on or before the Exchange Date, such cash payment
shall be made not later than the fifth Trading Day after the Exchange Date.
Seller may elect the Cash Settlement Alternative in respect of all, but not
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less than all, Contract Shares and may do so by notice to Purchaser, the
Collateral Agent and the Custodian not less than 35 days prior to the Exchange
Date as then in effect (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 as then in
effect.
(e) Extension of Exchange Date. At its option, Seller may, by
notice given to Purchaser not earlier than December 22, 2001 and not later than
January 22, 2002, elect to extend the Exchange Date to May 22, 2002, 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 and clear of any Liens and
Transfer Restrictions, 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 May 22,
2002, cash in an amount not less than the product of (1) $[_______]
[INSERT AGGREGATE REGULAR QUARTERLY DISTRIBUTION UNDER ALL FIRM
SECURITIES] 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 Firm Share Base Amount; 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) cer tifying 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 conditions
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
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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 January 22, 2002.
(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 February 22, 2002, by
notice to Purchaser not later than 10:00 a.m. on the date to which the Exchange
Date is accelerated, and the number of Contract Shares and amount of cash to be
delivered pursuant to Section 1.3(c) shall be calculated as of such accelerated
Exchange Date; provided that such acceleration shall be effective only if at or
prior to 10:00 a.m. on such accelerated Exchange Date, Seller has paid to
Purchaser, by wire transfer to an account designated by the 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
$[________] [INSERT AGGREGATE REGULAR QUARTERLY DISTRIBUTION UNDER ALL FIRM
SECURITIES] 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 Firm Share
Base Amount. Upon receipt of such amount in immediately available funds,
Purchaser shall promptly deliver to Seller, free and clear of any Liens and
Transfer Restrictions, 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).
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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 Agreement, if on or prior to the Exchange Date as then in
effect, Seller transfers Securities (any Securities so transferred being
hereinafter referred to as the "Transferred Securities") to Purchaser, free and
clear of any Liens and Transfer Restrictions, 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
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
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(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 Underwriter 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
(or any cash or Marketable Securities in lieu thereof) 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 clauses
(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
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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.
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
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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
(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).
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<PAGE>
(b) Right or Warrant Issuances. If the Company shall, after
the date hereof, issue, or declare a record date in respect of an issuance of,
rights or warrants to all holders of Common Stock entitling them to subscribe
for or purchase shares of Common Stock at a price per share less than the
Then-Current Market Price of the Common Stock (other than rights to purchase
Common Stock pursuant to a plan for the reinvestment of dividends or interest),
then, in each such case, the Exchange Rate shall be multiplied by a Dilution
Adjustment equal to a fraction of which the numerator shall be the number of
shares of Common Stock outstanding immediately prior to the time the adjustment
is effected by reason of the issuance of such rights or warrants, plus the
number of additional shares of Common Stock offered for subscription or purchase
pursuant to such rights or warrants, and of which the denominator shall be the
number of shares of Common Stock outstanding immediately prior to the time the
adjustment is effected, plus the number of additional shares of Common Stock
which the aggregate offering price of the total number of shares of Common Stock
so offered for subscription or purchase pursuant to such rights or warrants
would purchase at the Then-Current Market Price of the Common Stock, which shall
be determined by multiplying the total number of shares so offered for
subscription or purchase by the exercise price of such rights or warrants and
dividing the product so obtained by such Then-Current Market Price. To the
extent that, after the expiration of such rights or warrants, any of 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 (A) any dividends or distributions referred to in
paragraph (a) above and (B) any Spin-Off Distributions) or shall issue to all
holders of
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<PAGE>
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 ThenCurrent 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, whose determination shall be
final) 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 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 12.5%
and (B) "Excess Purchase Payment" means the excess, if any, of (x) the cash and
the value (as determined by a
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<PAGE>
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. (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:
(i) in the case of any dividend, distribution or issuance, as
of 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;
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<PAGE>
(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 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, 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.
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<PAGE>
6.2 Adjustment for Consolidation, Merger or Other
Reorganization Event. (a) 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 consolidation referred to in clause
(i) immediately above) 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"), then on the Exchange Date Purchaser
shall receive, in lieu of the Contract Shares, cash in an amount (the "Basic
Reorganization Event Amount") equal to the Dilution Adjustment (or successive
Dilution Adjustments), if any, that have been applied to the Exchange Rage
pursuant to Section 6.1 at or prior to the time of such Reorganization Event,
multiplied by 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, if the consideration received by the
holders of the Common Stock in the Reorganization Event (the "Merger
Consideration") includes any Marketable Securities, 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 definition
of "Transaction Value" below) of such Marketable Securities, but not exceeding,
as a percentage of the total consideration required to be delivered, the
percentage of
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<PAGE>
the total Transaction Value attributable to such Marketable Securities.
(b) Notwithstanding paragraph (a) above, if at least 30% of
the Merger Consideration consists of cash or cash equivalents (a "Cash Merger"),
then Seller shall be required (i) within five business days after Seller
receives the Merger Consideration, to deliver the Accelerated Portion to the
Purchaser, provided that to the extent the Accelerated Portion consists of
property other than cash or cash equivalents, Seller may, at its option,
deliver, in lieu of such other property, cash in an amount equal to the Value of
such other property; and (ii) on the Exchange Date, to deliver to the Purchaser
the number of Marketable Securities equal to the product of (x) the sum of the
Firm Share Base Amount and the Additional Share Base Amount and (y) the Exchange
Rate, adjusted as described in the next sentence, and the provisions of Section
1.3(c) shall apply mutatis mutandis to such Marketable Securities, provided that
Seller may exercise the Cash Settlement Alternative in respect of such
Marketable Securities, in which case Section 1.3(d) shall apply to such
election, mutatis mutandis, to such Marketable Securities. For purposes of
calculating such Exchange Rate, (A) the Initial Price and Appreciation Threshold
Price shall each be adjusted by multiplying the Initial Price or Appreciation
Threshold Price, as applicable, as then in effect, by a fraction, the numerator
of which is the Value of a share of the Marketable Securities included in the
Merger Consideration on the date the Cash Merger is closed, and the denominator
of which shall be the aggregate Transaction Value; and (B) the Exchange Rate
shall be adjusted by multiplying the Exchange Rate (computed on the basis of the
adjusted Initial Price and Appreciation Threshold Price and the Average Market
Price of the Marketable Securities) by a fraction, the numerator of which is the
aggregate Value of the Marketable Securities included in the Merger
Consideration received in exchange for a single share of Common Stock, and the
denominator of which is the Value of a share of the Marketable Securities
included in the Merger Consideration on the date the Cash Merger is closed.
(c) As used in this Agreement:
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<PAGE>
"Transaction Value" means, with respect to any Reorganization
Event, the sum of: (x) for any cash received in such Reorganization Event, the
amount of such cash received per share of Common Stock; (y) for any property
other than cash or Marketable Securities received in 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, whose determination shall be final); 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 consisting of 20 Trading Days immediately prior to the
Exchange Date (or, in the case of a Cash Merger, for the Calculation Period
consisting of the 20 Trading Days immediately prior to the date the
Reorganization Event is consummated), 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 Days shall be disregarded
in the calculation of such average Closing Price (but no additional Trading Days
shall be added to the Calculation Period). If no Closing Price for the
Marketable Securities may be determined for any of such Trading Days, the
calculation in the preceding clause (z) shall be based on the Closing Price for
the Marketable Securities for which a Closing Price for the Marketable
Securities may be determined pursuant to the definition of "Closing Price".
"Value" means (i) in respect of cash, the amount of such cash;
(ii) in respect of any property other than cash or Marketable Securities, an
amount equal to the market value on the date the Reorganization Event is
consummated (as determined by a nationally recognized independent investment
banking firm retained for this purpose by the Administrator, whose determination
shall be final); and (iii) in respect of any share of Marketable Securities, an
amount equal to the average Closing Price per share of such Marketable
Securities for the Calculation Period consisting of the 20 Trading Days
immediately prior to the date the Reorganization Event is consummated; provided
that if no
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<PAGE>
Closing Price for such Marketable Securities may be determined for one or more
(but not all) of such Trading Days, such Trading Days shall be disregarded in
the calculation of such average Closing Price (but no additional Trading Days
shall be added to the Calculation Period). If no Closing Price for the
Marketable Securities may be determined for any of such Trading Days, the
calculation in the preceding clause (iii) shall be based on the Closing Price
for the Marketable Securities for which a Closing Price for the Marketable
Securities may be determined pursuant to the definition of "Closing Price".
"Marketable Securities" means any common equity securities
(whether voting or non-voting) listed on a U.S. national or regional securities
exchange or reported by the Nasdaq National Market.
6.3 Spin-Off Distributions. If the Company shall, after the
date hereof, effect a Spin-Off Distribution, then for all purposes of this
Agreement, from and after the record date in respect of such Spin-Off
Distribution, (i) the Contract Shares shall be deemed to include both (A) that
number of shares of Common Stock equal to the product of (x) the sum of the Firm
Share Base Amount and the Additional Share Base Amount and (y) the Exchange Rate
and (B) that number of Marketable Securities of the class distributed in such
Spin-Off Distribution equal to the product of (x) the sum of the Firm Share Base
Amount and the Additional Share Base Amount, (y) the Exchange Rate, and (z) the
number of shares of such Marketable Securities distributed per share of Common
Stock in the Spin Off Distribution; (ii) Seller's obligations under Sections 1.3
shall include delivery of such Marketable Securities together with the shares of
Common Stock comprising the Contract Shares and the provisions of Section 1.3(c)
through (f) shall apply, mutatis mutandis, to such Marketable Securities; and
(iii) the "Closing Price" of Common Stock shall thereafter be deemed to be equal
to the sum of(A) the Closing Price per share of Common Stock and (B) the product
of (x) the Closing Price per share of the spun-off Marketable Securities and (y)
the number of shares of such Marketable Securities distributed per share of
Common Stock in the Spin-Off Distribution.
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<PAGE>
6.4 Adjustments with Respect to Marketable Securities. The
number of shares of any Marketable Securities included in any calculation
pursuant to this Agreement 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 or Section 6.2, shall occur with
respect to such Marketable Securities or the issuer thereof between the time of
the Reorganization Event (or, in the case of an adjustment occurring during a
Calculation Period, the first day of such Calculation Period) 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 or Section 6.2.
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 Seller or
Seller's 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 Seller or any substantial
part of Seller's 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 Seller, or shall take any action to
authorize any of the foregoing;
(b) an involuntary case or other proceeding shall be commenced
against Seller seeking liquidation, reorganization or other relief with respect
to Seller or Seller's 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 Seller or any
substantial part of Seller's 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
-25-
<PAGE>
against 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 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 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, The Chase
Manhattan Bank, at 450 West 33rd Street, New York, New York 10001, Telecopy No.
(212) 946-3638, attention Collateral Management Services;
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<PAGE>
notices to Seller shall be directed to it at the addresses specified in the
Collateral Agreement.
8.3 Governing Law; Severability. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York.
To the extent permitted by law, the unenforceability or invalidity of any
provision or provisions of this Agreement shall not render any other provision
or provisions herein contained unenforceable or invalid.
8.4 Entire Agreement. Except as expressly set forth herein,
this Agreement constitutes the entire agreement among the parties with respect
to the subject matter hereof and supersedes all prior agreements, understandings
and negotiations, both written and oral, among the parties with respect to the
subject matter of this Agreement.
8.5 Amendments; Waivers. Any provision of this Agreement may
be amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by Purchaser and Seller or, in the case of
a waiver, by the party against whom the waiver is to be effective. No failure or
delay by either party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law.
8.6 No Third Party Rights; Successors and Assigns. This
Agreement is not intended and shall not be construed to create any rights in any
person other than Seller and Purchaser and their respective successors and
assigns and no person shall assert any rights as third party beneficiary
hereunder. Whenever any of the parties hereto is referred to, such reference
shall be deemed to include the successors and assigns of such party. All the
covenants and agreements herein contained by or on behalf of Seller and
Purchaser shall bind, and inure to the benefit of, their respective successors
and assigns whether so expressed or
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<PAGE>
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:
THE ESTEE LAUDER 1994 TRUST
By
-------------------------------
Leonard A. Lauder
By
-------------------------------
Ronald S. Lauder
By
-------------------------------
Ira T. Wender
each a trustee of The Estee
Lauder 1994 Trust
PURCHASER:
ESTEE LAUDER AUTOMATIC COMMON
EXCHANGE SECURITY TRUST II
-----------------------------
Donald J. Puglisi,
as Trustee
-----------------------------
William R. Latham III,
as Trustee
-----------------------------
James B. O'Neill,
as Trustee
<PAGE>
Exhibit A
to
Purchase Agreement
CERTIFICATE FOR EXTENSION OF EXCHANGE DATE
The undersigned, The Estee Lauder 1994 Trust ("Seller"),
hereby certifies, pursuant to Section 1.3(e) of the Purchase Agreement, dated as
of February 22, 1999, among Seller and Estee Lauder Automatic Common Exchange
Security Trust II (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:
[INSERT LIST OF TRANSFERRED U.S. GOVERNMENT SECURITIES]
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 and clear of
any Liens and Transfer Restrictions, 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 May 22, 2002, cash in an
amount not less than the product of (1) $[____________] [INSERT AGGREGATE
REGULAR QUARTERLY DISTRIBUTION UNDER ALL FIRM SECURITIES] 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 Firm Share Base
Amount.
(c) Title. Seller has good and marketable title to such U.S.
Government Securities, free and clear 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.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this
certificate this ____ day of ____________, _____.
--------------------------------
Name:
Title:
<PAGE>
Exhibit 2.k.(iv)
S&C Draft of February 16, 1999
COLLATERAL AGREEMENT
Among
THE ESTEE LAUDER 1994 TRUST,
As Pledgor,
THE CHASE MANHATTAN BANK, As Collateral Agent
and
ESTEE LAUDER AUTOMATIC COMMON EXCHANGE SECURITY TRUST II
Dated as of
February 17, 1999
<PAGE>
The following Table of Contents has been inserted for
convenience of reference only and does not constitute a part of the Collateral
Agreement.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
1. The Security Interests..................................................................... 1
2. Definitions................................................................................ 3
3. Representations and Warranties of the Pledgor.............................................. 7
4. Representations and Warranties of the Collateral Agent .................................... 8
5. Certain Covenants of the Pledgor........................................................... 8
6. Administration of the Collateral and Valuation of the
Securities................................................................................. 10
7. Income and Voting Rights on Collateral..................................................... 16
8. Remedies upon Events of Default............................................................ 17
9. The Collateral Agent....................................................................... 20
10. Miscellaneous.............................................................................. 24
11. Termination of Collateral Agreement........................................................ 25
12. No Personal Liability of Trustees.......................................................... 25
</TABLE>
Exhibit A - Notice of Pledge Value
Exhibit B - Certificate for Substituted Collateral
Exhibit C - Certificate for Additional Collateral
<PAGE>
COLLATERAL AGREEMENT
THIS COLLATERAL AGREEMENT (the "Agreement"), dated as of
February 17, 1999, among The Estee Lauder 1994 Trust, a trust duly created under
the laws of the State of New York (the "Pledgor"), The Chase Manhattan Bank, a
New York banking corporation, as collateral agent (the "Collateral Agent")
hereunder for the benefit of Estee Lauder Automatic Common Exchange Security
Trust II, a trust duly created under the laws of the State of New York (such
trust and the trustees thereof acting in their capacity as such being referred
to herein as the "Trust" or "Purchaser"), and the Trust;
WITNESSETH:
WHEREAS, pursuant to the Purchase Agreement (the "Purchase
Agreement"), dated as of February 17, 1999, between the Pledgor and Purchaser,
the Pledgor has agreed to sell and Purchaser has agreed to purchase Class A
Common Stock, par value $.01 per share ("Class A Common Stock"), of The Estee
Lauder Companies Inc., a Delaware corporation (the "Company"), subject to the
terms and conditions of the Purchase Agreement;
NOW, THEREFORE, to secure the performance by the Pledgor of
its obligations under the Purchase Agreement and to secure the observance and
performance of the covenants and agreements contained herein and in the Purchase
Agreement, the parties hereto agree as follows:
1. The Security Interests.
In order to secure the observance and performance of the
covenants and agreements contained herein and in the Purchase Agreement:
(a) Security Interests. Effective upon and subject to the
receipt by the Pledgor of the Firm Purchase Price at the First Time of Delivery,
the Pledgor hereby grants, sells, conveys, assigns, transfers and pledges unto
the Collateral Agent, as agent of and for the benefit of the Trust, a security
interest in and to, and a lien upon and right of set-off against, all of its
right, title and interest in and to (i) the Pledged Items described in
paragraphs (b) and (c); (ii) all additions to and substi-
<PAGE>
tutions for such Pledged Items; (iii) all income, products and proceeds and
collections received or to be received, or derived or to be derived, now or any
time hereafter from or in connection with the Pledged Items; and (iv) all powers
and rights now owned or hereafter acquired under or with respect to the Pledged
Items (such Pledged Items, additions, substitutions, products and proceeds,
collections, powers and rights being herein collectively called the
"Collateral"). The Collateral Agent shall have all of the rights, remedies and
recourses with respect to the Collateral afforded a secured party by the UCC, in
addition to, and not in limitation of, the other rights, remedies and recourses
afforded to the Collateral Agent by this Agreement.
(b) First Time of Delivery. At the First Time of Delivery, the
Pledgor shall either (1) deliver to the Collateral Agent in pledge hereunder one
or more certificates in registered form representing in the aggregate at least
[INSERT NUMBER OF FIRM SECURITIES] shares of the Class A Common Stock,
registered in the name of the Collateral Agent or its nominee or duly endorsed
in blank or accompanied by undated stock powers with respect thereto duly
endorsed in blank, or (2) if such shares of Class A Common Stock are not held in
certificated form but are held in book entry form by The Depository Trust
Company or other comparable depositary, transfer such shares of Class A Common
Stock to an account (other than an account of the Pledgor) designated by the
Collateral Agent with The Depositary Trust Company or such other depositary, as
applicable.
(c) Second Time of Delivery. Effective upon and subject to the
receipt by the Pledgor of the Additional Purchase Price, at the Second Time of
Delivery, the Pledgor shall either (1) deliver to the Collateral Agent in pledge
hereunder one or more certificates in registered form representing in the
aggregate Class A Common Stock representing the Additional Share Base Amount of
Class A Common Stock, registered in the name of the Collateral Agent or its
nominee or duly endorsed in blank or accompanied by undated stock powers with
respect thereto duly endorsed in blank, or (2) if such shares of Class A Common
Stock are not held in certificated form but are held in book entry form by The
Depository Trust Company or other comparable depositary, transfer such number of
shares of Class A Common Stock representing the Additional Share Base Amount of
Class A
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Common Stock to an account of the Collateral Agent or to an account (other than
an account of the Pledgor) designated by the Collateral Agent with The
Depositary Trust Company or such other depositary, as applicable.
2. Definitions.
Capitalized terms used and not otherwise defined herein shall
have the meanings ascribed to them in the Purchase Agreement. Capitalized terms
used herein shall have the meanings as follows:
"Authorized Representative" of the Pledgor means any trustee
or other representative as to whom Pledgor shall have delivered notice to the
Collateral Agent that such trustee or other representative is authorized to act
hereunder on behalf of Pledgor.
"Business Day" means any day except a Saturday, Sunday or
other day on which banking institutions in New York City are authorized or
obligated by law or regulation to close or a day on which the New York Stock
Exchange, Inc. is closed.
"Cash Delivery Obligations" means, at any time (A) if no
Reorganization Event shall have occurred prior to such time, zero, and (B) from
and after any Reorganization Event, the Dilution Adjustment (or successive
Dilution Adjustments) that shall have been applied to the Exchange Rate pursuant
to Section 6.1 of the Purchase Agreement at or prior to the Reorganization
Event, times the product of: (i) the Firm Share Base Amount plus the Additional
Share Base Amount (if any) and (ii) the Transaction Value of any Merger
Consideration other than Marketable Securities included in the Merger
Consideration, provided that if the Reorganization Event is a Cash Merger, the
Cash Delivery Obligations shall again be zero after the Seller has delivered the
Accelerated Portion to the Trust as required under the Purchase Agreement.
"Collateral" has the meaning specified in Section 1(a).
"Collateral Agent" means the financial institution identified
as such in the preliminary paragraph hereof, or any successor appointed in
accordance with Section 9.
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"Collateral Agreement" means this Collateral Agreement and
any exhibits hereto.
"Collateral Event of Default" has the meaning specified in
Section 6(e).
"Collateral Requirement" means, as of any date and with
respect to: (i) any Class A Common Stock, 100%; (ii) any Marketable Securities,
100%; (iii) any U.S. Government Securities pledged in respect of Cash Delivery
Obligations, 105%; and (iv) any other U.S. Government Securities, an aggregate
market value at the time of substitution and daily mark-to-market valuations
thereafter of not less than 150%, provided that upon and after any failure to
cure an Insufficiency Determination by 4:00 p.m. New York City time on the next
Business Day following telephonic notice of such Insufficiency Determination as
described in Section 6(e), which insufficiency shall be continuing on such next
business day, the Collateral Requirement relating to any U.S. Government
Securities shall be 200%. The portion of any pledged U.S. Government Securities
that shall be deemed at any time to be in respect of Cash Delivery Obligations
shall be as provided in Section 6(e).
"Distribution Date" has the meaning specified in the Trust
Agreement.
"Eligible Collateral" means (i) unless and until a
Reorganization Event shall occur, Class A Common Stock,(ii) U.S. Government
Securities, (iii) from and after any Reorganization Event, the Marketable
Securities distributed in such Reorganization Event, and (iv) if a Spin-Off
Distribution occurs, the Marketable Securities distributed in such Spin-Off
Distribution; provided, in each case, that the Pledgor has good and marketable
title thereto, free of all Liens (other than the Liens created by this
Collateral Agreement) and Transfer Restrictions and that the Collateral Agent
has a valid, first priority perfected security interest therein and first lien
thereon, and provided further that to the extent the number of shares of Class A
Common Stock or Marketable Securities pledged hereunder exceeds at any time the
Maximum Deliverable Number thereof, such excess shares shall not be Eligible
Collateral.
"Event of Default" means the occurrence of: (i) an
event described in clause (a) or (b) of Article VII of the
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Purchase Agreement, (ii) a Collateral Event of Default, (iii) a failure by
Pledgor to have caused the Collateral to meet the requirements described in
Section 5(d) on the Exchange Date or (iv) if a Reorganization Event shall have
occurred prior to the Exchange Date, failure by Pledgor to cause to be delivered
to Purchaser on the Exchange Date the consideration then required to be
delivered pursuant to Section 6.2 of the Purchase Agreement.
"Ineligible Collateral" means Collateral that does not
constitute "Eligible Collateral".
"Lien" means any lien, mortgage, security interest, pledge,
charge, encumbrance or adverse claim of any kind.
"Market Value" means, as of any date: (a) with respect to any
Class A Common Stock (except as otherwise provided in Section 6(e)(2)), the
Closing Price of the Class A Common Stock on such date; (b) with respect to any
U.S. Government Security, the product of (x)(i) the average unit bid price for
such security as published on the Trading Day prior to such date in the New York
edition of The Wall Street Journal or The New York Times or the average unit bid
price set forth on the applicable page of the Bloomberg system, or, if not so
published, (ii) the lower bid price quoted (which quotation shall be evidenced
in writing) on the Trading Day prior to such date by either of two nationally
recognized dealers making a market in such security which are members of the
National Association of Securities Dealers, Inc. and (y) the number of such
units comprised in the outstanding principal amount of such security; and (c)
with respect to any share of Marketable Securities, the Closing Price thereof on
the Trading Day prior to such date; provided that the "Market Value" of any
Ineligible Collateral shall be zero.
"Maximum Deliverable Number" means, on any date, with respect
to the Class A Common Stock, the product of the Firm Share Base Amount plus the
Additional Share Base Amount (if any), multiplied successively by each Dilution
Adjustment by which the Exchange Rate shall have been multiplied on or prior to
such date pursuant to the Dilution Adjustments provided for under Section 6.1 of
the Purchase Agreement. The Maximum Deliverable Number of Marketable Securities
of any class means, on any date, the product of (i) the Firm Share Base Amount
plus the Additional Share
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Base Amount (if any) and (ii) the number of Marketable Securities included in
the Merger Consideration in the applicable Reorganization Event or Spin-Off
Distribution for each share of Class A Common Stock, multiplied successively by
(x) each Dilution Adjustment by which the Exchange Rate with respect to the
Class A Common Stock shall have been multiplied on or prior to the date of such
Reorganization Event or Spin-Off Distribution Event pursuant to the adjustments
provided for under Article VI of the Purchase Agreement, and (y) each Dilution
Adjustment by which the Exchange Rate with respect to such Marketable Securities
shall have been multiplied on or prior to such date and after the date of such
Reorganization Event or Spin-Off Distribution pursuant to the adjustments
provided for under Article VI of the Purchase Agreement.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Pledge Value" means, as of any date, the sum of the aggregate
Market Value of each particular type of Collateral as of such date, divided by
the Collateral Requirement for such type of Collateral.
"Pledge Value Requirement" means, as of any date, (a) the
aggregate Market Value on such date of the Maximum Deliverable Number of shares
of Class A Common Stock on such date or, from and after a Reorganization Event,
the Maximum Deliverable Number of the Marketable Securities included in the
Merger Consideration in such Reorganization Event, plus (b) from and after a
Reorganization Event, the Cash Delivery Obligations, plus (c) from and after a
Spin-Off Distribution, the Market Value on such date of the Maximum Deliverable
Number of the Marketable Securities distributed in such Spin-Off Distribution.
"Pledged Items" means, as of any date, any and all securities
and instruments delivered by the Pledgor to be held by the Collateral Agent
under this Collateral Agreement as Collateral, whether Eligible Collateral or
Ineligible Collateral and whether or not then required to be held by the
Collateral Agent hereunder.
"Prior Collateral" has the meaning specified in
Section 6(b)(1).
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"Responsible Officer" means, when used with respect to the
Collateral Agent, any vice president, assistant vice president, assistant
treasurer or assistant secretary located in the division or department of the
Collateral Agent responsible for performing the obligations of the Collateral
Agent under this Collateral Agreement.
"Transfer Restriction" means, with respect to any item of
Collateral, any condition to or restriction on the ability of the holder thereof
to sell, assign or otherwise transfer such item of Collateral or to enforce the
provisions thereof or of any document related thereto whether set forth in such
item of Collateral itself or in any document related thereto, including, without
limitation, (i) any requirement that any sale, assignment or other transfer or
enforcement of such item of Collateral be consented to or approved by any
Person, including, without limitation, the issuer thereof or any other obligor
thereon, (ii) any limitations on the type or status, financial or otherwise, of
any purchaser, pledgee, assignee or transferee of such item of Collateral, (iii)
any requirement of the delivery of any certificate, consent, agreement, opinion
of counsel, notice or any other document of any Person to the issuer of, any
other obligor on or any registrar or transfer agent for, such item of
Collateral, prior to the sale, pledge, assignment or other transfer or
enforcement of such item of Collateral and (iv) any registration or
qualification requirement for such item of Collateral pursuant to any federal or
state securities law that has not been satisfied; provided that the required
delivery of any assignment from the seller, pledgor, assignor or transferor of
such item of Collateral, together with any evidence of the corporate or other
authority of such Person, shall not constitute a "Transfer Restriction".
"Trustee" or "Trustees" means any trustee or trustees of the
Trust identified on the signature pages hereto, or any successor as such trustee
or trustees.
"UCC" means the Uniform Commercial Code as in effect in the
State of New York.
"U.S. Government Securities" means direct obligations of the
United States of America that mature on a date that is one year or less from the
date such obligations are pledged hereunder, but in any event prior to the
Exchange Date then in effect.
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3. Representations and Warranties of the Pledgor.
The Pledgor hereby represents and warrants to the Collateral
Agent and the Trust that:
(a) No Transfer Restrictions. No Transfer Restrictions exist
with respect to or otherwise apply to the assignment of, or transfer by the
Pledgor of possession of, any items of Collateral to the Collateral Agent
hereunder, or the subsequent sale or transfer of such items of Collateral by the
Collateral Agent pursuant to the terms hereof.
(b) Title to Collateral; Perfected Security Interest. The
Pledgor has good and marketable title to the Pledged Items, free of all Liens
(other than the Lien created by this Collateral Agreement) and Transfer
Restrictions. Upon delivery of the Pledged Items described in paragraphs (b) and
(c) of Section 1 to the Collateral Agent hereunder, the Collateral Agent will
obtain a valid, first priority perfected security interest in, and a first lien
upon, such Pledged Items subject to no other Lien. None of the Collateral is or
shall be pledged by the Pledgor as collateral for any other purpose.
4. Representations and Warranties of the Collateral Agent.
The Collateral Agent represents and warrants to the Pledgor
and the Trust that:
(a) Corporate Existence and Power. The Collateral Agent is a
banking corporation, duly incorporated, validly existing and in good standing
under the laws of the jurisdiction of its incorporation, and has all corporate
powers and all material governmental licenses, authorizations, consents and
approvals required to enter into, and perform its obligations under, this
Collateral Agreement.
(b) Authorization and Non-Contravention. The execution,
delivery and performance by the Collateral Agent of this Collateral Agreement
have been duly authorized by all necessary corporate action on the part of the
Collateral Agent (no action by the shareholders of the Collateral Agent being
required) and do not and will not violate, contravene
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or constitute a default under any provision of applicable law or regulation or
of the charter or by-laws of the Collateral Agent or of any material agreement,
judgment, injunction, order, decree or other instrument binding upon the
Collateral Agent.
(c) Binding Effect. This Collateral Agreement constitutes a
valid and binding agreement of the Collateral Agent enforceable against the
Collateral Agent in accordance with its terms.
5. Certain Covenants of the Pledgor.
The Pledgor agrees that, so long as any of its obligations
under the Purchase Agreement remain outstanding:
(a) Title to Collateral. The Pledgor shall at all times
hereafter have good and marketable title to the Collateral pledged by it, free
of all Liens (other than the Liens created by this Collateral Agreement) and
Transfer Restrictions, and, subject to the terms of this Collateral Agreement,
will at all times hereafter have good, right and lawful authority to assign,
transfer and pledge such Collateral and all such additions thereto and
substitutions therefor under this Collateral Agreement.
(b) Pledge Value Requirement. The Pledgor shall cause the
aggregate Pledge Value of the Collateral to be equal to or greater than the
Pledge Value Requirement at all times, and shall pledge additional Collateral in
the manner described in Section 6(d) as necessary to cause such requirement to
be met.
(c) Pledge upon Reorganization Event. Upon the occurrence of
a Reorganization Event, the Pledgor shall immediately cause to be delivered to
the Collateral Agent, in the manner provided in Section 6(d): (i) cash in an
amount equal to 100% of Pledgor's Cash Delivery Obligations (or U.S. Government
Securities having an aggregate Market Value when pledged and at daily
mark-to-market valuations thereafter at least equal to 105% of the Cash Delivery
Obligations); and (ii) Marketable Securities in an amount at least equal to the
Maximum Deliverable Number thereof, or, at Pledgor's election, U.S. Government
Securities having an aggregate Market Value at least equal to 150% of such
Maximum Deliverable Number of Marketable Securities; in each case to be held as
substitute Collateral hereunder.
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(d) Pledge Upon Spin-Off Distribution. Upon the occurrence of
a Spin-Off Distribution, the Pledgor shall immediately cause to be delivered to
the Collateral Agent, in the manner provided in Section 5(d), Marketable
Securities in an amount at least equal to the Maximum Deliverable Number
thereof, or, at Pledgor's election, U.S. Government Securities having an
aggregate Market Value at least equal to 150% of such Maximum Deliverable Number
of Marketable Securities, in each case to be held as additional Collateral
hereunder.
(e) Pledge of Purchase Agreement Consideration.
Notwithstanding the Pledgor's right to substitute Collateral pursuant to Section
6(b), the Pledgor shall cause the Collateral to include, on the Exchange Date,
unless a Reorganization Event shall have occurred, a number of shares of Class A
Common Stock at least equal to the number of shares of Class A Common Stock and,
if a Spin-Off Distribution has occurred, the number of shares of Marketable
Securities distributed in such Spin-Off Distribution required to be delivered
under the Purchase Agreement on the Exchange Date.
(f) Further Assurances. The Pledgor shall, at its expense and
in such manner and form as the Trust or the Collateral Agent may reasonably
require, give, execute, deliver, file and record any financing statement,
notice, instrument, document, agreement or other papers that may be necessary or
desirable in order to create, preserve, perfect, substantiate or validate any
security interest granted pursuant hereto or to enable the Collateral Agent to
exercise and enforce its rights and the rights of the Trust hereunder with
respect to such security interest. To the extent permitted by applicable law,
the Pledgor hereby authorizes the Collateral Agent to execute and file, in the
name of the Pledgor or otherwise, UCC financing or continuation statements
(which may be carbon, photographic, photostatic or other reproductions of this
Agreement or of a financing statement relating to this Agreement) which the
Collateral Agent may reasonably deem necessary or appropriate to further
perfect, or maintain the perfection of, the security interests granted hereby.
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6. Administration of the Collateral and Valuation of the
Securities.
(a) Valuation of Collateral. The Collateral Agent shall
determine as of 4:00 p.m., New York City time, on each Business Day whether the
Pledge Value is at least equal to the Pledge Value Requirement and whether an
Insufficiency Determination or Collateral Event of Default shall have occurred
and, from and after any Reorganization Event, Spin-Off Distribution or
substitution of U.S. Government Securities for pledged Class A Common Stock or
Marketable Securities pursuant to paragraph (b) of this Section 6, shall
determine the Pledge Value and the Pledge Value Requirement on each Business Day
and shall provide written notice of the Pledge Value and the Pledge Value
Requirement, in the form of Exhibit A, to the Pledgor.
(b) Substitution of Collateral. Pledgor may substitute
Collateral in accordance with the following provisions:
(1) Unless an Event of Default or a failure by the Pledgor to
meet any of its obligations under Section 5(b) or (c) hereof has
occurred and is continuing, the Pledgor shall have the right at any
time and from time to time to deposit Eligible Collateral with the
Collateral Agent in substitution for Pledged Items previously deposited
hereunder ("Prior Collateral") and to obtain the release of such Prior
Collateral from the Lien hereof.
(2) If the Pledgor wishes to deposit Eligible Collateral with
the Collateral Agent in substitution for Prior Collateral, it shall (i)
give written notice to the Collateral Agent identifying the Prior
Collateral to be released from the Lien hereof, (ii) deliver to the
Collateral Agent concurrently with such Eligible Collateral a
certificate of the Pledgor substantially in the form of Exhibit B
hereto and dated the date of such delivery, (A) identifying the items
of Eligible Collateral being substituted for the Prior Collateral and
the Prior Collateral that is to be transferred to the Pledgor and (B)
certifying that the representations and warranties contained in such
Exhibit B hereto are true and correct on and as of the date thereof and
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(iii) deliver to the Collateral Agent concurrently with such Eligible
Collateral an opinion (dated the date of such delivery) of counsel
addressed to the Collateral Agent confirming the representations
contained in the second sentence of paragraph 3(b) of Exhibit B
hereto. The Pledgor hereby covenants and agrees to take all actions
required under Section 6(d) and any other actions necessary to create
for the benefit of the Collateral Agent a valid, first priority
perfected security interest in, and a first lien upon, such Eligible
Collateral deposited with the Collateral Agent in substitution for
Prior Collateral.
(3) No such substitution shall be made unless and until the
Collateral Agent shall have determined that the aggregate Pledge Value
of all of the Collateral at the time of such proposed substitution,
after giving effect to the proposed substitution, shall at least equal
the Pledge Value Requirement.
(c) Additional Collateral. The Pledgor may pledge additional
Collateral hereunder at any time and shall pledge additional collateral when
required under this Collateral Agreement. Concurrently with the delivery of any
additional Eligible Collateral, the Pledgor shall deliver (i) a certificate of
the Pledgor substantially in the form of Exhibit C hereto and dated the date of
such delivery, (A) identifying the additional items of Eligible Collateral being
pledged and (B) certifying that with respect to such items of additional
Eligible Collateral the representations and warranties contained in such Exhibit
C hereto are true and correct on and as of the date thereof and (ii) an opinion,
dated the date of such delivery, of counsel addressed to the Collateral Agent
confirming the representations contained in the second sentence of paragraph
2(b) of Exhibit C hereto. The Pledgor hereby covenants and agrees to take all
actions required under Section 6(d) and any other actions necessary to create
for the benefit of the Collateral Agent a valid, first priority perfected
security interest in, and a first lien upon, such additional Eligible
Collateral.
(d) Delivery of Collateral. The Pledgor shall deliver the
Collateral to the Collateral Agent in accordance with the following provisions:
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(1) Pledged Class A Common Stock. In the case of Collateral
consisting of Class A Common Stock, by either (1) delivery to the
Collateral Agent of one or more certificates representing such shares
of Class A Common Stock, registered in the name of the Collateral Agent
or its nominee or duly endorsed in blank or accompanied by undated
stock powers duly executed in blank, or (2) if such shares of Class A
Common Stock are not held in certificated form but are held in book
entry form by The Depository Trust Company or any other comparable
depositary, transfer of such shares of Common Stock to an account of
the Collateral Agent or to an account (other than an account of the
Pledgor) designated by the Collateral Agent with The Depository Trust
Company or such other depositary, as applicable;
(2) Pledged U.S. Government Securities. In the case of
Collateral consisting of U.S. Government Securities, by transfer
thereof through the Book Entry System of the Federal Reserve System to
the account of the Collateral Agent or to an account (other than an
account of the Pledgor) designated by the Collateral Agent; and
(3) Pledged Marketable Securities. In the case of Collateral
consisting of Marketable Securities, by either (1) delivery of
certificates evidencing such Marketable Securities, registered in the
name of the Collateral Agent or its nominee or duly endorsed in blank
or accompanied by stock powers duly executed in blank, or (2) if such
Marketable Securities are not held in certificated form but are held in
book entry form by The Depository Trust Company or any other comparable
depositary, by transfer to an account of the Collateral Agent or to an
account (other than an account of the Pledgor) designated by the
Collateral Agent or to an account (other than an account of the
Pledgor) designated by the Collateral Agent with The Depositary Trust
Company or such other depositary, as applicable. Each such delivery of
Marketable Securities shall be accompanied by an opinion of counsel
satisfactory to the Collateral Agent that the Collateral Agent has
obtained a valid, first priority perfected security interest in, and a
first lien upon, such Marketable Securities.
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Upon delivery of any Pledged Item under this Collateral Agreement, the
Collateral Agent shall examine such Pledged Item and any opinions and
certificates delivered pursuant to Sections 6(b) or (c) or otherwise pursuant to
the terms hereof in connection therewith to determine that they comply as to
form with the requirements for Eligible Collateral. The Pledgor hereby
designates the Collateral Agent as the person in whose name any Collateral held
in book entry form in the Federal Reserve System shall be registered.
(e) Insufficiency Determination.
(1) If as of 4:00 p.m., New York City time, on any Business
Day the Collateral Agent determines that the aggregate Pledge Value of the
Collateral is less than the Pledge Value Requirement (any such determination, an
"Insufficiency Determination"), the Collateral Agent shall promptly notify the
Pledgor of such determination by telephone call to an Authorized Representative
of the Pledgor followed by a written confirmation of such call.
(2) If, by 4:00 p.m., New York City time on the next Business
Day following the day on which telephonic notice shall have been given pursuant
to the preceding paragraph (e)(1), the Pledgor shall have failed to deliver, in
the manner set forth in paragraphs (c) and (d) of this Section 6, sufficient
additional Eligible Collateral so that, after giving effect to such delivery,
the aggregate Pledge Value of the Collateral, as of such next business day, is
at least equal to the Pledge Value Requirement, then (x) the Collateral
Requirement with respect to any U.S. Government Securities pledged hereunder
(other than in respect of Cash Delivery Obligations) shall be increased from
150% to 200%, and (y) unless a Collateral Event of Default shall have occurred
and be continuing, the Collateral Agent shall:
(i) commence sales, in the manner described in paragraph (3)
below, of such portion of the Collateral consisting of U.S. Government
Securities as may be required to be sold in order to generate proceeds
sufficient to purchase Class A Common Stock or, after a Reorganization
Event or Spin-Off Distribution, Marketable Securities of the applicable
type, as described in the following clause (ii); and
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(ii) commence purchases, in the manner described in paragraph
(3) below, of Class A Common Stock or, after a Reorganization Event or
Spin-Off Distribution, Marketable Securities of the applicable type, in
an amount sufficient to cause the aggregate Pledge Value of the
Collateral to be at least equal to the Pledge Value Requirement.
Notwithstanding the foregoing, the Collateral Agent shall discontinue sales and
purchases pursuant to the preceding clauses (i) and (ii), respectively, if at
any time a Collateral Event of Default shall have occurred and be continuing.
The Collateral Agent shall determine the Market Value and the Pledge Value of
the Collateral after each purchase of Class A Common Stock or Marketable
Securities pursuant to the preceding clause (ii) in order to determine whether
the Pledge Value Requirement is met and whether a Collateral Event of Default
has occurred. Solely for purposes of such calculation, the Market Value of the
Class A Common Stock or Marketable Securities shall be: (A) the most recent
sales price as reported in the composite transactions for the principal
securities exchange on which the Class A Common Stock or Marketable Securities,
as the case may be, are then listed or, if such securities are not so listed,
the last quoted ask price for such securities in the over-the-counter market as
reported by the NASDAQ National Market or, if not so reported, by the National
Quotation Bureau or a similar organization; or (B) if higher, in the case of
Class A Common Stock, the most recent available Closing Price.
A "Collateral Event of Default" shall mean,
at any time, the occurrence of any of the following: (A) if no U.S. Government
Securities shall be pledged as substitute Collateral at such time, failure of
the Collateral to include at least the Maximum Deliverable Number of shares of
Class A Common Stock at such time (or, if a Reorganization Event or Spin-Off
Distribution has occurred at or before such time, failure of the Collateral to
include the Maximum Deliverable Number of any Marketable Securities received in
connection with such Reorganization Event or Spin-Off Distribution at that
time); (B) if any U.S. Government Securities shall be pledged as substitute
collateral for shares of Class A Common Stock (or Marketable Securities) at that
time, failure of such U.S. Government Securities to have a Market Value at such
time of at least 105% of the Market Value of the Class A Common Stock (or
Marketable
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Securities) times the difference between (x) the Maximum Deliverable Number of
shares of Class A Common Stock (or Marketable Securities) under the Contract at
such time and (y) the number of shares of Class A Common Stock (or Marketable
Securities) pledged as Collateral hereunder at such time; and (C) at any time
after a Reorganization Event in which consideration other than Marketable
Securities was delivered, failure of any U.S. Government Securities pledged as
collateral for Cash Delivery Obligations to have a Market Value at such time of
at least 105% of such Cash Delivery Obligations, if such failure is not cured
within one Business Day after notice of such failure is delivered to Seller. For
purposes of this Agreement, the portion of any pledged U.S. Government
Securities that shall be deemed to be in respect of Cash Delivery Obligations at
any time (and therefore not pledged as substitute Collateral) shall be a portion
having a Market Value equal to 105% of the Cash Delivery Obligations at such
time (or, if less, the aggregate Market Value of all U.S. Government Securities
pledged at such time).
(3) Collateral sold and Class A Common Stock or shares of
Marketable Securities purchased by the Collateral Agent pursuant to the
preceding paragraphs (e)(1) and (2) may be sold and purchased on any securities
exchange or in any over-the-counter market or in any private purchase
transaction, and at such price or prices, in each case as the Collateral Agent
may deem satisfactory. The Pledgor covenants and agrees that it will execute and
deliver such documents and take such other action as the Collateral Agent deems
necessary or advisable in order that any such sales and purchases may be made in
compliance with law.
(f) Release of Excess Collateral. If on any Business Day the
Collateral Agent determines that the aggregate Pledge Value of the Pledgor's
Eligible Collateral exceeds the Pledge Value Requirement and no Event of Default
or failure by the Pledgor to meet any of its obligations under Sections 5 or 6
hereof has occurred and is continuing, the Pledgor may obtain the release from
the Lien hereof of any Collateral having an aggregate Pledge Value on such
Business Day less than or equal to such excess, upon delivery to the Collateral
Agent of a written notice from an Authorized Representative of the Pledgor
indicating the items of Collateral to be released. Such Collateral shall be
released only after the Collateral Agent shall have determined that the
aggregate Pledge Value of all of the
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Collateral remaining after such release as determined on such Business Day is at
least equal to the Pledge Value Requirement.
(g) Delivery of Purchase Agreement Consideration. On the
Exchange Date, unless (i) a Reorganization Event shall have occurred prior
thereto or, (ii) if permitted under the Purchase Agreement, Seller shall have
elected the Cash Settlement Alternative pursuant to Section 1.3(d) of the
Purchase Agreement and made the cash payment required by that Section, the
Collateral Agent shall deliver to the Trust Class A Common Stock and, if a
Spin-Off Distribution has occurred, Marketable Securities then held by it
hereunder representing the number of shares of Class A Common Stock and
Marketable Securities distributed in such Spin-Off Distribution then required to
be delivered by Pledgor under the Purchase Agreement. If a Reorganization Event
shall have occurred prior to the Exchange Date, then, (A) if such Reorganization
Event is a Cash Merger, the Collateral Agent shall deliver to the Trust all cash
or other assets then held by the Collateral Agent and required to be delivered
under the Purchase Agreement; and (B) in any other case, if so instructed by the
Pledgor by the close of business on the Business Day preceding the Exchange
Date, the Collateral Agent shall deliver to the Trust, to the extent permitted
to be delivered in lieu of cash required to be delivered on such date under
Section 6.2 of the Purchase Agreement, the Marketable Securities then held by
the Collateral Agent hereunder. Upon such delivery, the Trust shall hold such
Class A Common Stock or Marketable Securities, as the case may be, absolutely
and free from any claim or right whatsoever.
(h) Investment of Cash Collateral. The Collateral Agent shall
invest any cash received by it pursuant to Section 6.2 of the Purchase Agreement
in U.S. Treasury Securities maturing on or before February 22, 2002.
7. Income and Voting Rights on Collateral.
(a) Unless an Event of Default or failure by the Pledgor to
meet any of its obligations under Section 5(b) or (c) hereof has occurred and is
continuing, the Pledgor shall be entitled to receive for its own account all
dividends, interest and, if any, principal and premium relating to all of the
Collateral, unless the payment thereof to the Pledgor would reduce the aggregate
Pledge Value of the Collateral
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<PAGE>
below the Pledge Value Requirement. The Collateral Agent agrees to remit to the
Pledgor on the Business Day received or the first Business Day thereafter all
such payments received by it. If an Event of Default or failure by the Pledgor
to meet any of its obligations under Section 5(b) or (c) hereof has occurred and
is continuing, all such payments made or accrued after and during the
continuance of such default or failure shall be retained by the Collateral
Agent, and any such payments which are received by the Pledgor shall be received
in trust for the benefit of the Trust, shall be segregated from other funds of
the Pledgor and shall forthwith be paid over to the Collateral Agent. Any such
payments so retained by, or paid over to, the Collateral Agent shall be held by
the Collateral Agent as Collateral hereunder.
(b) Unless an Event of Default has occurred and is continuing,
the Pledgor shall have the right, from time to time, to vote and to give
consents, ratifications and waivers with respect to the Collateral, and the
Collateral Agent shall, upon receiving a written request from the Pledgor,
deliver to the Pledgor or as specified in such request such proxies, powers of
attorney, consents, ratifications and waivers in respect of any of the
Collateral which is registered in the name of the Collateral Agent or its
nominee as shall be specified in such request and be in form and substance
satisfactory to the Collateral Agent.
If an Event of Default shall have occurred and be continuing,
the Collateral Agent shall have the right to the extent permitted by law, and
the Pledgor shall take all such action as may be necessary or appropriate to
give effect to such right, to vote and to give consents, ratifications and
waivers, and take any other action with respect to any or all of the Collateral
with the same force and effect as if the Collateral Agent were the absolute and
sole owner thereof.
8. Remedies upon Events of Default.
(a) If any Event of Default shall have occurred and be
continuing, the Collateral Agent may exercise on behalf of the Trust all the
rights of a secured party under the UCC (whether or not in effect in the
jurisdiction where such rights are exercised) and, in addition, without being
required to give any notice, except as herein provided or as
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may be required by mandatory provisions of law, shall: (i) deliver all
Collateral consisting of Class A Common Stock or Marketable Securities (but not,
in either case, in excess of the number of shares thereof deliverable under the
Purchase Agreement at such time) to the Trust on the date of such Event of
Default (in either case, the "Delivery Date"), whereupon the Trust shall hold
such Class A Common Stock or Marketable Securities absolutely free from any
claim or right of whatsoever kind, including any equity or right of redemption
of the Pledgor which may be waived, and the Pledgor, to the extent permitted by
law, hereby specifically waives all rights of redemption, stay or appraisal
which it has or may have under any law now existing or hereafter adopted; and
(ii) if such delivery shall be insufficient to satisfy in full all of the
obligations of Pledgor under the Purchase Agreement, sell all of the remaining
Collateral, or such lesser portion thereof as may be necessary to generate
proceeds sufficient to satisfy in full all of the obligations of Pledgor under
the Purchase Agreement, at public or private sale or at any broker's board or on
any securities exchange, for cash, upon credit or for future delivery, and at
such price or prices as the Collateral Agent may deem satisfactory. The Pledgor
covenants and agrees that it will execute and deliver such documents and take
such other action as the Collateral Agent reasonably deems necessary or
advisable in order that any such sale may be made in compliance with law. Upon
any such sale the Collateral Agent shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral so sold. Each purchaser at any
such sale shall hold the Collateral so sold absolutely and free from any claim
or right of whatsoever kind, including any equity or right of redemption of the
Pledgor which may be waived, and the Pledgor, to the extent permitted by law,
hereby specifically waives all rights of redemption, stay or appraisal which it
has or may have under any law now existing or hereafter adopted. The notice (if
any) of such sale required by Article 9 of the UCC shall (1) in case of a public
sale, state the time and place fixed for such sale, (2) in case of sale at a
broker's board or on a securities exchange, state the board or exchange at which
such sale is to be made and the day on which the Collateral, or the portion
thereof so being sold, will first be offered for sale at such board or exchange,
and (3) in the case of a private sale, state the day after which such sale may
be consummated. Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as the Collateral Agent
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may fix in the notice of such sale. At any such sale the Collateral may be sold
in one lot as an entirety or in separate parcels, as the Collateral Agent may
determine. The Collateral Agent shall not be obligated to make any such sale
pursuant to any such notice. The Collateral Agent may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for the
sale, and such sale may be made at any time or place to which the same may be so
adjourned. In case of any sale of all or any part of the Collateral on credit or
for future delivery, the Collateral so sold may be retained by the Collateral
Agent until the selling price is paid by the purchaser thereof, but the
Collateral Agent shall not incur any liability in case of the failure of such
purchaser to take up and pay for the Collateral so sold and, in case of any such
failure, such Collateral may again be sold upon like notice. The Collateral
Agent, instead of exercising the power of sale herein conferred upon it, may
proceed by a suit or suits at law or in equity to foreclose the security
interests and sell the Collateral, or any portion thereof, under a judgment or
decree of a court or courts of competent jurisdiction.
(b) Power of Attorney. Upon any delivery or sale of all or any
part of any Collateral made either under the power of delivery or sale given
hereunder or under judgment or decree in any judicial proceedings for
foreclosure or otherwise for the enforcement of this Collateral Agreement, the
Collateral Agent is hereby irrevocably appointed the true and lawful attorney of
the Pledgor, in the name and stead of the Pledgor, to make all necessary deeds,
bills of sale and instruments of assignment, transfer or conveyance of the
property thus delivered or sold. For that purpose the Collateral Agent may
execute all such documents and instruments. This power of attorney shall be
deemed coupled with an interest, and the Pledgor hereby ratifies and confirms
all that its attorneys acting under such power, or such attorneys' successors or
agents, shall lawfully do by virtue of this Collateral Agreement. If so
requested by the Collateral Agent, by the Trustees or by any purchaser of the
Collateral or a portion thereof, the Pledgor shall further ratify and confirm
any such delivery or sale by executing and delivering to the Collateral Agent,
to the Trustees or to such purchaser or purchasers at the expense of the Pledgor
all proper deeds, bills of sale, instruments of
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<PAGE>
assignment, conveyance of transfer and releases as may be designated in any
such request.
(c) Application of Collateral and Proceeds. In the case
of an Event of Default, the Collateral Agent may proceed to realize upon the
security interest in the Collateral against any one or more of the types of
Collateral, at any one time, as the Collateral Agent shall determine in its sole
discretion subject to the foregoing provisions of this Section 8. The proceeds
of any sale of, or other realization upon, or other receipt from, any of the
remaining Collateral shall be applied by the Collateral Agent in the following
order of priorities:
first, to the payment to the Trust of an amount equal to: (A)
the aggregate Market Value of a number of shares of Class A Common
Stock and, if a Spin-Off Distribution has occurred, Marketable
Securities distributed in such Spin-Off Distribution equal to (1) the
number of shares of Class A Common Stock and Marketable Securities, as
the case may be, required to be delivered under the Purchase Agreement
on the Delivery Date minus (2) the number of shares of Class A Common
Stock and Marketable Securities, as the case may be, delivered by the
Collateral Agent to the Trust on the Delivery Date as described above;
or (B) from and after a Reorganization Event, the sum of (1) the Cash
Delivery Obligations on the Delivery Date and (2) the aggregate Market
Value on the Delivery Date of a number of Marketable Securities
distributed in such Reorganization Event equal to (x) the number
thereof permitted to be delivered on the Delivery Date under Section
6.2 of the Purchase Agreement minus (y) the number thereof delivered by
the Collateral Agent to the Trust on the Delivery Date as described
above;
second, to the payment to the Collateral Agent of the expenses
of such sale or other realization, including reasonable compensation to
the Collateral Agent and its agents and counsel, and all expenses,
liabilities and advances incurred or made by the Collateral Agent in
connection therewith, including brokerage fees in connection with the
sale by the Collateral Agent of any Pledged Item; and
finally, if all of the obligations of the Pledgor
hereunder and under the Purchase Agreement have been
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<PAGE>
fully discharged or sufficient funds have been set aside by the
Collateral Agent at the request of the Pledgor for the discharge
thereof, any remaining proceeds shall be released to the Pledgor.
9. The Collateral Agent.
The Collateral Agent accepts its duties and responsibilities
hereunder as agent for the Trust, on and subject to the following terms and
conditions:
(a) Performance of Duties. The Collateral Agent undertakes to
perform such duties and only such duties as are expressly set forth herein and,
beyond the exercise of reasonable care in the performance of such duties, no
implied covenants or obligations shall be read into this Collateral Agreement
against the Collateral Agent. No provision hereof shall be construed to relieve
the Collateral Agent from liability for its own grossly negligent action,
grossly negligent failure to act or its own wilful misconduct, subject to the
following:
(1) The Collateral Agent may consult with counsel, and the
advice or opinion of such counsel shall be full and complete
authorization and protection in respect of an action taken or suffered
hereunder in good faith and in accordance with such advice or opinion
of counsel.
(2) The Collateral Agent shall not be liable with respect to
any action taken, suffered or omitted by it in good faith (i)
reasonably believed by it to be authorized or within the discretion or
rights or powers conferred on it by this Collateral Agreement or (ii)
in accordance with any direction or request of the Trustees.
(3) The Collateral Agent shall not be liable for any error of
judgment made in good faith by any of its officers, unless the
Collateral Agent was grossly negligent in ascertaining the pertinent
facts.
(4) In the absence of bad faith on its part, the Collateral
Agent may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any note, notice,
resolution, consent, certificate, affidavit, letter, telegram,
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<PAGE>
teletype message, statement, order or other document believed by it to
be genuine and correct and to have been signed or sent by the proper
Person or Persons.
(5) No provision of this Collateral Agreement shall require
the Collateral Agent to expend or risk its own funds or otherwise incur
any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it
shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(6) The Collateral Agent may perform any duties hereunder
either directly or by or through agents or attorneys, and the
Collateral Agent shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care
by it hereunder. In furtherance thereof, any subsidiary owned or
controlled by the Collateral Agent, or its successors, as agent for the
Collateral Agent, may perform any or all of the duties of the
Collateral Agent relating to the valuation of securities and other
instruments constituting Collateral hereunder.
(7) In no event shall the Collateral Agent be personally
liable for any taxes or other governmental charges imposed upon or in
respect of (i) the collateral or (ii) the income or other distributions
thereon.
(8) Unless and until the Collateral Agent shall have received
notice from the Pledgor, or unless and until a Responsible Officer of
the Collateral Agent shall have actual knowledge to the contrary, the
Collateral Agent shall be entitled to deem and treat all Collateral
delivered to it hereunder as Eligible Collateral hereunder, provided
that the Collateral Agent has carried out the duties specified in
Section 6 with respect to such Collateral at the time of delivery
thereof.
The Collateral Agent shall not be responsible for the correctness of the
recitals and statements herein which are made by the Pledgor or for any
statement or certificate delivered by the Pledgor pursuant hereto. Except as
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<PAGE>
specifically provided herein, the Collateral Agent shall not be responsible for
the validity, sufficiency, collectibility or marketability of any Collateral
given to or held by it hereunder or for the validity or sufficiency of the
Purchase Agreement or the Lien on the Collateral purported to be created hereby.
(b) Knowledge. The Collateral Agent shall not be deemed to
have knowledge of any Event of Default (except a Collateral Event of Default),
unless and until a Responsible Officer of the Collateral Agent shall have actual
knowledge thereof or shall have received written notice thereof.
(c) Merger. Any corporation or association into which the
Collateral Agent may be converted or merged, or with which it may be
consolidated, or to which it may sell or transfer its agency business and assets
as a whole or substantially as a whole, or any corporation or association
resulting from any such conversion, sale, merger, consolidation or transfer to
which it is a party, shall be and become a successor Collateral Agent hereunder
and vested with all of the title to the Collateral and all of the powers,
discretions, immunities, privileges and other matters as was its predecessor
without, except as provided above, the execution or filing of any instrument or
any further act, deed or conveyance on the part of any of the parties hereto,
anything herein to the contrary notwithstanding.
(d) Resignation. The Collateral Agent and any successor
Collateral Agent may at any time resign by giving thirty days' written notice by
registered or certified mail to the Pledgor and notice to the Trust in
accordance with the provisions of Section 10(d) hereof. Such resignation shall
take effect upon the appointment of a successor Collateral Agent by the Trust.
(e) Removal. The Collateral Agent may be removed at any time
by an instrument or concurrent instruments in writing delivered to the
Collateral Agent and to the Pledgor and signed by the Trust.
(f) Appointment of Successor. (1) If the Collateral Agent
hereunder shall resign or be removed, or be dissolved or shall be in the course
of dissolution or liquidation or otherwise become incapable of action hereunder,
or if it shall be taken under the control of any
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<PAGE>
public officer or officers or of a receiver appointed by a court, a successor
may be appointed by the Trust by an instrument or concurrent instruments in
writing signed by the Trust or by its attorneys in fact fully authorized. A copy
of such instrument or concurrent instruments shall be sent by registered mail to
the Pledgor.
(2) Every such temporary or permanent successor Collateral
Agent appointed pursuant to the provisions hereof shall be a trust company or
bank in good standing, having a reported capital and surplus of not less than
$100,000,000 and capable of holding the Collateral in the State of New York, if
there be such an institution willing, qualified and able to accept the duties of
the Collateral Agent hereunder upon customary terms.
(g) Acceptance by Successor. Every temporary or permanent
successor Collateral Agent appointed hereunder shall execute, acknowledge and
deliver to its predecessor and also to the Pledgor an instrument in writing
accepting such appointment hereunder, whereupon such successor, without any
further act, deed or conveyance, shall become fully vested with all the estates,
properties, rights, powers, duties and obligations of its predecessors. Such
predecessor shall, nevertheless, on the written request of its successor or the
Pledgor, execute and deliver an instrument transferring to such successor all
the estates, properties, rights and powers of such predecessor hereunder. Every
predecessor Collateral Agent shall deliver all Collateral held by it as the
Collateral Agent hereunder to its successor. Should any instrument in writing
from the Pledgor be required by a successor Collateral Agent for more fully and
certainly vesting in such successor the estates, properties, rights, powers,
duties and obligations hereby vested or intended to be vested in the
predecessor, any and all such instruments in writing shall, at the request of
the temporary or permanent successor Collateral Agent, be forthwith executed,
acknowledged and delivered by the Pledgor.
10. Miscellaneous.
(a) Benefit of Agreement; Successors and Assigns. Whenever any
of the parties hereto is referred to, such reference shall be deemed to include
the successors and assigns of such party. All the covenants and agreements
herein contained by or on behalf of the Pledgor and the
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<PAGE>
Collateral Agent shall bind, and inure to the benefit of, their respective
successors and assigns whether so expressed or not, and shall be enforceable by
and inure to the benefit of the Trust and its successors and assigns.
(b) Separability. To the extent permitted by law, the
unenforceability or invalidity of any provision or provisions of this Collateral
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
(c) Amendments and Waivers. Any term, covenant, agreement or
condition of this Collateral Agreement may be amended or compliance therewith
may be waived (either generally or in a particular instance and either
retrospectively or prospectively) but only by a writing signed by the Collateral
Agent, the Pledgor and the Trust.
(d) Notices. (1) Any notice provided for herein, unless
otherwise specified, shall be in writing (including transmittals by telex or
telecopier) and shall be given to a party at the address set forth opposite such
party's name on the signature pages hereto or at such other address as may be
designated by notice duly given in accordance with this Section 10(d) to each
other party hereto.
(2) Each such notice given pursuant to paragraph (1) shall be
effective (i) if sent by certified mail (return receipt requested), 72 hours
after being deposited in the United States mail, postage prepaid; (ii) if given
by telex or telecopier, when such telex or telecopied notice is transmitted; or
(iii) if given by any other means, when delivered at the address specified in
this Section 10(d).
(e) Governing Law. This Collateral Agreement shall in all
respects be construed in accordance with and governed by the laws of the State
of New York; provided that as to Pledged Items located in any jurisdiction other
than the State of New York, the Collateral Agent on behalf of the Trust shall
have all of the rights to which a secured party is entitled under the laws of
such other jurisdiction.
(f) Counterparts. This Collateral Agreement may be executed,
acknowledged and delivered in any number of counterparts and such counterparts
taken together shall constitute one and the same instrument.
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<PAGE>
11. Termination of Collateral Agreement.
This Collateral Agreement and the rights hereby granted by the
Pledgor in the Collateral shall cease, terminate and be void upon fulfillment of
all of the obligations of the Pledgor under the Purchase Agreement, and the
Pledgor shall have no further liability hereunder upon such termination. Any
Collateral remaining at the time of such termination (including any Class A
Common Stock held following Seller's election of the Cash Settlement Alternative
and payment in respect thereof pursuant to the Purchase Agreement, if permitted
thereunder) shall be fully released and discharged from the Lien hereof and
delivered to the Pledgor by the Collateral Agent, all at the expense of the
Pledgor.
12. No Personal Liability of Trustees.
By executing this Collateral Agreement none of the Trustees
assumes any personal liability hereunder.
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<PAGE>
IN WITNESS WHEREOF, the Pledgor has caused this Collateral
Agreement to be duly executed on its behalf, and the Collateral Agent has caused
this Collateral Agreement to be duly executed on its behalf, as of the date
hereof.
PLEDGOR:
THE ESTEE LAUDER 1994 TRUST
By
--------------------------------
Leonard A. Lauder
By
--------------------------------
Ronald S. Lauder
By
--------------------------------
Ira T. Wender
each a Trustee of the Estee
Lauder 1994 Trust
Addresses for Notices:
767 Fifth Avenue
New York, NY 10153
Attention: Leonard A. Lauder
Telecopy: 212-572-6745
767 Fifth Avenue
New York, NY 10153
Attention: Ronald S. Lauder
Telecopy: 212-572-4046
c/o Patterson, Belknap, Webb & Tyler
1133 Avenue of the Americas
New York, NY 10036
Attention: Ira T. Wender
Telecopy: 212-336-2222
<PAGE>
With copies to:
The Estee Lauder Companies Inc.
767 Fifth Avenue
New York, NY 10153
Attention: Joan Krupskas
Telecopy: 212-572-6633
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Attention: Jeffrey J. Weinberg
Telecopy: 212-310-8007
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Attention: Bruce D. Haims
Telecopy: 212-909-6836
<PAGE>
COLLATERAL AGENT:
The Chase Manhattan Bank,
as Collateral Agent
By
----------------------------
Name:
Title:
Address for Notices:
450 West 33rd Street
New York, New York 10001
Attention: Collateral Management
Services
THE TRUST:
ESTEE LAUDER AUTOMATIC COMMON
EXCHANGE SECURITY TRUST II
---------------------------------
Donald J. Puglisi,
as Trustee
---------------------------------
William R. Latham III,
as Trustee
---------------------------------
James B. O'Neill,
as Trustee
Address for Notices:
c/o Donald J. Puglisi,
Managing Trustee
Puglisi & Associates
850 Library Avenue, Suite 204
Newark, Delaware 19711
Telecopier: 302-738-6680
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<PAGE>
Exhibit A
to
Collateral Agreement
NOTICE OF PLEDGE VALUE
To: 767 Fifth Avenue
New York, NY 10153
Attention: Leonard A. Lauder
Telecopy: 212-572-6745
767 Fifth Avenue
New York, NY 10153
Attention: Ronald S. Lauder
Telecopy: 212-572-4046
c/o Patterson, Belknap, Webb & Tyler
1133 Avenue of the Americas
New York, NY 10036
Attention: Ira T. Wender
Telecopy: 212-336-2222
The Chase Manhattan Bank, as Collateral Agent (the "Collateral
Agent") under the Collateral Agreement, dated as of February 17, 1999 (the
"Collateral Agreement"), among the Pledgor, the Collateral Agent and Estee
Lauder Automatic Common Exchange Security Trust II, hereby notifies you,
pursuant to Section 6(a) of the Collateral Agreement, that as of 4:00 p.m. New
York City time on _________ __, ____:
1. The Pledge Value was $__________; and
2. The Pledge Value Requirement was $__________.
Terms used and not otherwise defined herein shall have the
meanings set forth in the Collateral Agreement.
THE CHASE MANHATTAN BANK,
as Collateral Agent
By:__________________________
Name:
Title:
cc: The Estee Lauder Companies Inc.
767 Fifth Avenue
New York, NY 10153
<PAGE>
Attention: Joan Krupskas
Telecopy: 212-572-6633
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Attention: Jeffrey J. Weinberg
Telecopy: 212-310-8007
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Attention: Bruce D. Haims
Telecopy: 212-909-6836
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<PAGE>
Exhibit B
to
Collateral Agreement
CERTIFICATE FOR SUBSTITUTED COLLATERAL
The undersigned, The Estee Lauder 1994 Trust (the "Pledgor"),
hereby certifies, pursuant to Section 6(b) of the Collateral Agreement, dated as
of February 17, 1999, among the Pledgor, The Chase Manhattan Bank, as Collateral
Agent, and Estee Lauder Automatic Common Exchange Security Trust II (the
"Collateral Agreement"; terms defined in the Collateral Agreement being used
herein as defined therein), that:
1. The Pledgor is delivering the following securities to the
Collateral Agent to be held by the Collateral Agent as substituted Collateral
(the "Substituted Collateral"):
[INSERT DESCRIPTION OF SUBSTITUTE COLLATERAL]
2. The Pledgor requests that the Collateral Agent transfer to
the Pledgor the following Prior Collateral, pursuant to Section 6(b) of the
Collateral Agreement:
[INSERT DESCRIPTION OF PRIOR COLLATERAL]
3. The Pledgor hereby represents and warrants to the
Collateral Agent and the Trust that:
(a) Consents to Transfer. No Transfer Restrictions exist with
respect to or otherwise apply to the assignment of, or transfer by the Pledgor
of possession of, any items of Substituted Collateral to the Collateral Agent
under the Collateral Agreement, or the subsequent sale or transfer of such items
of Substituted Collateral by the Collateral Agent pursuant to the terms of the
Collateral Agreement.
(b) Title to Collateral; Perfected Security Interest. The
Pledgor has good and marketable title to the Substituted Collateral, free of all
Liens (other than the Lien created by the Collateral Agreement) and Transfer
Restrictions. Upon delivery of the Collateral to the Collateral Agent, the
Collateral Agent will obtain a valid, first priority perfected security interest
in, and a first lien upon, such Substituted Collateral subject to no other Lien.
None of such Substituted Collateral is or shall be pledged by the Pledgor as
collateral for any other purpose.
<PAGE>
This Certificate may be relied upon by the Trust as fully and
to the same extent as if this Certificate had been specifically addressed to the
Trust.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate this _____ day of ____________, ____.
----------------------------------
Name:
Title:
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<PAGE>
Exhibit C
to
Collateral Agreement
CERTIFICATE FOR ADDITIONAL COLLATERAL
The undersigned, The Estee Lauder 1994 Trust (the "Pledgor"),
hereby certifies, pursuant to Section 6(c) of the Collateral Agreement, dated as
of February 17, 1999, among the Pledgor, The Chase Manhattan Bank, as Collateral
Agent and Estee Lauder Automatic Common Exchange Security Trust II (the
"Collateral Agreement"; terms defined in the Collateral Agreement being used
herein as defined therein), that:
1. The Pledgor is delivering the following securities to the
Collateral Agent to be held by the Collateral Agent as additional Collateral
(the "Additional Collateral"):
[INSERT DESCRIPTION OF ADDITIONAL COLLATERAL]
2. The Pledgor hereby represents and warrants to the
Collateral Agent that:
(a) Consents to Transfer. No Transfer Restrictions exist with
respect to or otherwise apply to the assignment of, or transfer by the Pledgor
of possession of, any items of Additional Collateral to the Collateral Agent
under the Collateral Agreement, or the subsequent sale or transfer of such items
of Additional Collateral by the Collateral Agent pursuant to the terms of the
Collateral Agreement.
(b) Title to Collateral; Perfected Security Interest. The
Pledgor has good and marketable title to the Additional Collateral, free of all
Liens (other than the Lien created by the Collateral Agreement) and Transfer
Restrictions. Upon delivery of the Collateral to the Collateral Agent, the
Collateral Agent will obtain a valid, first priority perfected security interest
in, and a first lien upon, such additional Collateral subject to no other Lien.
None of such Additional Collateral is or shall be pledged by the Pledgor as
collateral for any other purpose.
This Certificate may be relied upon by the Trust as fully and
to the same extent as if this Certificate had been specifically addressed to the
Trust.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate this _____ day of ____________, ____.
<PAGE>
-------------------------------------
Name:
Title:
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<PAGE>
Exhibit 2.k.(v)
S&C Draft of February 16, 1999
FUND EXPENSE AGREEMENT
FUND EXPENSE AGREEMENT, dated as of February 17, 1999, among
Goldman, Sachs & Co. ("Goldman Sachs"), The Chase Manhattan Bank (the "Service
Provider"), for itself in its capacities as administrator, custodian and
collateral agent and for its affiliate, ChaseMellon Shareholder Services, L.L.C.
in its capacity as Paying Agent for Estee Lauder Automatic Common Exchange
Security Trust II (the "Trust"), and 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
February 17, 1999 (the "Trust Agreement"); and
WHEREAS, Goldman Sachs 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.
-1-
<PAGE>
"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.
"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 services, as Administrator, Custodian and Collateral Agent, and
those of ChaseMellon Shareholder Services, L.L.C., as Paying 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 or cause to be paid 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,
-2-
<PAGE>
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 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 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 Expense 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
-3-
<PAGE>
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. Reimbursement from Excess Funds. In consideration of the
agreements of Goldman Sachs in this Agreement, the Trust agrees that it shall
reimburse Goldman Sachs for any payments made hereunder by paying over to
Goldman Sachs, prior to the termination of the Trust, any funds held by the
Trust after satisfaction in full of the obligation of the Trust to pay
distributions in respect of the Securities, the obligation of the Trust to
distribute cash and Common Stock to the holders of the Securities of the Trust
on the Exchange Date, and satisfaction or provision for all other obligations
and liabilities of the Trust, whether present or future, contingent or
otherwise, as principal or surety or otherwise.
9. 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.
10. 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.
11. Amendments. The Service Provider agrees that it will not
consent to any amendment of the Administration Agreement, the Custodian
Agreement or the Collateral Agreement without the prior written consent of
Goldman
Sachs.
12. Payment to ChaseMellon Shareholder Services, L.L.C. The
Service Provider agrees that it shall pay over to ChaseMellon Shareholder
Services, L.L.C. that portion of
-4-
<PAGE>
the payments made to the Service Provider hereunder that is due and payable to
ChaseMellon Shareholder Services, L.L.C. in connection with its role as Paying
Agent for the Trust.
13. 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.
14. 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.
15. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
16. Governing Law. This Agreement shall be governed by and be
construed in accordance with the laws of the State of New York.
17. Counterparts. This Agreement may be signed in
counterparts with all of such counterparts constituting one and the same
instrument.
-5-
<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
ESTEE LAUDER AUTOMATIC COMMON
EXCHANGE SECURITY TRUST II
______________________________________
Name: William R. Latham III
as Trustee
______________________________________
Address: Department of Economics
University of Delaware
Newark, Delaware 19716
______________________________________
Name: James B. O'Neill
as Trustee
Address: Center for Economic
Education and
Entrepreneurship
University of Delaware
Newark, Delaware 19716
-6-
<PAGE>
______________________________________
Name: Donald J. Puglisi
as Trustee
Address: Department of Finance
University of Delaware
Newark, Delaware 19716
-7-
<PAGE>
THE CHASE MANHATTAN BANK
By____________________________________
Name:
Title:
Address: 450 West 33rd Street
New York, NY 10001
-8-
<PAGE>
SCHEDULE I
Up-front Fee Amount: $230,000
Up-front Expense Amount:
Trustees Fees $ 36,000
Wall Street Concepts Fees $ 3,000
Accounting Fees $ 96,500
Other $ 15,000
--------
Total Up-front Expense Amount $150,500
========
-9-
<PAGE>
Exhibit 2.k.(vi)
S&C Draft of February 16, 1999
FUND INDEMNITY AGREEMENT
FUND INDEMNITY AGREEMENT, dated as of February 17, 1999,
between The Estee Lauder 1994 Trust, a trust organized under the laws of the
State of New York (the "Selling Stockholder"), and Estee Lauder Automatic Common
Exchange Security Trust II, 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
February 17, 1999 (the "Trust Agreement") (such trust and the trustees thereof
acting in their capacity as such being referred to herein as the "Trust").
WHEREAS, the Selling Stockholder 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. The Selling Stockholder 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 the Selling Stockholder
shall be made in New York Clearing House funds no later than five Business Days
after the receipt by the Selling Stockholder, 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, the Selling Stockholder 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
<PAGE>
by any demand, bill, invoice or other communication received from any third
party claimant (a "Claimant") in respect of such Indemnification Expense.
4. Right to Contest. The Trust agrees that the Selling
Stockholder may, and the Selling Stockholder 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 the Selling Stockholder shall determine to be reasonable,
the Selling Stockholder and such Claimant are unable to resolve amicably any
disagreement regarding such claim for Indemnification Expense, the Selling
Stockholder shall retain counsel reasonably satisfactory to the Trust to
represent the Trust in any resulting proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. It is understood that
the Selling Stockholder 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). The Selling Stockholder 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, the Selling Stockholder 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. The Selling Stockholder 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.
-2-
<PAGE>
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 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. 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.
11. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
12. Governing Law. This Agreement shall be governed by and be
construed in accordance with the laws of the State of New York.
13. Counterparts. This Agreement may be signed in counterparts
with all of such counterparts constituting one and the same instrument.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Fund
Indemnity Agreement to be executed by their authorized representatives the date
first above written.
THE ESTEE LAUDER 1994 TRUST
By _________________________________
Name: Spencer G. Smul
as Attorney-in-Fact
ESTEE LAUDER AUTOMATIC COMMON
EXCHANGE SECURITY TRUST II
____________________________________
Name: William R. Latham III,
as Trustee
Address: Department of Economics
University of Delaware
Newark, Delaware 19716
____________________________________
Name: James B. O'Neill,
as Trustee
Address: Center for Economic
Education and
Entrepreneurship
University of Delaware
Newark, Delaware 19716
____________________________________
Name: Donald J. Puglisi,
as Trustee
Address: Department of Finance
University of Delaware
Newark, Delaware 19716
-4-
<PAGE>
Exhibit 2.l
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
(212) 558-4000
February 17, 1999
Estee Lauder Automatic Common Exchange Security Trust II,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
In connection with the registration under the Securities Act of 1933
(the "Act") and the Investment Company Act of 1940 (the "Investment Company
Act") of the Trust Automatic Common Exchange Securities (the "Securities") of
Estee Lauder Automatic Common Exchange Security Trust II, a New York trust (the
"Trust"), we, as your counsel, have examined such trust records, certificates
and other documents, and such questions of law, as we have considered necessary
or appropriate for the purposes of this opinion. Upon the basis of such
examination, we advise you that, in our opinion, when the registration statement
relating to the Securities (the "Registration Statement") has become effective
under the Act, the Trust's Amended and Restated Trust Agreement has been duly
executed and delivered by the parties thereto, and the Securities have been duly
issued and sold as contemplated by the Registration Statement, the Securities
will be validly issued, fully paid and nonassessable.
The foregoing opinion is limited to the Federal laws of the United
States and the laws of the State of New York, and we are expressing no opinion
as to the effect of the laws of any other jurisdiction.
<PAGE>
Estee Lauder Automatic Common
Exchange Security Trust II -2-
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the heading "Validity of
Securities" in the Prospectus. In giving such consent, we do not thereby admit
that we are in a category of persons whose consent is required under Section 7
of the Act.
Very truly yours,
/s/ SULLIVAN & CROMWELL
<PAGE>
Exhibit 2.n.(i)
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
(212) 558-4000
(212) 558-3588
February 17, 1999
Estee Lauder Automatic Common Exchange Security Trust II,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Dear Sirs:
We have acted as special tax counsel to Estee Lauder Common Exchange
Security Trust II (the "Trust") in connection with the Registration Statement on
Form N-2 of the Trust filed with the Securities and Exchange Commission (the
"Registration Statement") and hereby confirm to you our opinion as set forth
under the heading "Certain Federal Income Tax Considerations" in the Prospectus
included in the Registration Statement.
We hereby consent to the filing with the Securities and Exchange
Commission of this letter as an exhibit to the Registration Statement and the
reference to us under the heading "Certain Federal Income Tax Considerations".
In giving such consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act of 1933.
Very truly yours,
/s/ Sullivan & Cromwell
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ESTEE LAUDER
AUTOMATIC COMMON EXCHANGE SECURITY TRUST II STATEMENT OF ASSETS AND LIABILITIES
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> FEB-01-1999
<PERIOD-END> FEB-01-1999
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 100
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 100
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 100
<SHARES-COMMON-STOCK> 1
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 100
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 0
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 100
<PER-SHARE-NAV-BEGIN> 100
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 100
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
