AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 3, 1999
SECURITIES ACT FILE NO. 333-57127
INVESTMENT COMPANY ACT FILE NO. 811-08829
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM N-2
[X] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[X] PRE-EFFECTIVE AMENDMENT NO. 2
[ ] POST-EFFECTIVE AMENDMENT NO.
AND/OR
[X] REGISTRATION STATEMENT UNDER THE
[X] INVESTMENT COMPANY ACT OF 1940
AMENDMENT No. 2
------------------
SEVENTH AUTOMATIC
COMMON EXCHANGE SECURITY TRUST
(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-________.
------------------
<PAGE>
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
================================================================================
Title of Securities Proposed Maximum Amount of
Being Registered Aggregate Offering Price(1) Registration Fee
- --------------------------------------------------------------------------------
$___ Trust Automatic
Common Exchange Securities $10,000,000 $2,950(2)
================================================================================
(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>
SEVENTH AUTOMATIC COMMON EXCHANGE SECURITY TRUST
CROSS-REFERENCE SHEET
(PURSUANT TO RULE 481(A) UNDER THE SECURITIES ACT OF 1933)
PART A & B OF PROSPECTUS*
<TABLE>
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
<FN>
- ---------------------------
* 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.
</FN>
</TABLE>
<PAGE>
RED HERRING
- -----------
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
A REGISTRATION STATEMENT RELATING TO THE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. WE MAY NOT SELL THESE SECURITIES UNTIL THIS
REGISTRATION STATEMENT IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL
THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN
ANY STATE WHERE THE OFFER, SOLICITATION OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 3, 1999
_______ Securities
SEVENTH AUTOMATIC COMMON EXCHANGE SECURITY TRUST
$____ Trust Automatic Common Exchange Securities (TRACES(TM)/(sm))
(Subject to exchange into Shares of Common Stock of [Company])
---------------------------
The $____ Trust Automatic Common Exchange Securities are a new series
of securities issued by the Seventh Automatic Common Exchange Security Trust.
The Trust will pay quarterly distributions of $____ on each Security. On March
__, 2002, the Trust will exchange each Security for either:
o Between 0.___ shares and one share of Common Stock of [Company],
o Cash equal to the value of those shares, or
o A combination of shares and cash.
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 Common Stock during the twenty
business days before March __, 2002.
Under the circumstances described in this prospectus, some or all of
the shares or cash may be delivered between March __, 2002 and June __, 2002
instead of on March __, 2002. In that case, holders of the Securities may
receive part of the cash or shares on March __, 2002 and the rest between March
__, 2002 and June __, 2002.
This is the first issuance of Securities by the Trust. As a result,
there is currently no public market for the Securities. The Trust will apply to
list the Securities on the New York Stock Exchange under the symbol "____".
The Common Stock is currently traded on the New York Stock Exchange
under the symbol "____". The last reported sale price of the Common Stock on the
New York Stock Exchange on March __, 1999, was $_____ per share. The Company is
not affiliated with the Trust.
The Trust is a newly organized, finite term closed-end investment
company. Shares of this type of fund frequently trade at a discount from net
asset value. This risk is separate from the risk that the Trust's net asset
value will fall. The Trust cannot predict whether the Securities will trade at,
below or above net asset value. The risk of purchasing investments in a
closed-end company that might trade at a discount may be greater for investors
who wish to sell their investments soon after completion of this offering.
---------------------------
This prospectus sets forth concisely information about the Trust that
you should know before investing. You are advised to read this prospectus and to
retain it for future reference. Additional information about the Trust has been
filed with the Securities and Exchange Commission and is available upon written
or oral request and without charge. See "Further Information".
---------------------------
Consider carefully the "risk factors" beginning on page ___ of this
prospectus.
---------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
---------------------------
Per Security Total
------------ -----
Initial Public Offering Price..................$________ $________
Sales Load.....................................Not applicable Not applicable
Proceeds to the Trust..........................$________ $________
The Underwriters may, under certain circumstances, purchase up to an
additional ___ Securities from the Trust at the Initial Public Offering Price.
The Underwriters expect to deliver the Securities against payment in
New York, New York on March __, 1999.
---------------------------
GOLDMAN, SACHS & CO.
---------------------------
Prospectus dated _______, 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 __.
This prospectus includes a Glossary, beginning on page __. 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 contracts 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 March __, 2002 (the "Exchange
Date"), between 0.____ and 1 shares of 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 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 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 Common Stock.
o If the average market price is less than $_______, the holder of each
Security will receive one share of Common Stock.
This formula will be adjusted if the Company takes certain steps that combine,
split or dilute the value of the Common Stock. If this formula would require the
Trust to deliver a fraction of a share of 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 Common Stock above $_____. However, the
holders of the Securities will not receive any increase in the value of the
Common Stock unless that value rises higher than $____. The holders will bear
the entire amount of any decrease in the value of the 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 March __, 2002. The Trust will use the payments it
receives as these U.S. Treasury securities mature to pay the quarterly
distributions on the Securities.
2
<PAGE>
o Stock purchase contracts (the "Contracts") with [number of]
stockholders of the Company (each of which is referred to as a
"Seller"). Each Seller will be required to deliver shares of Common
Stock to the Trust on the Exchange Date. Alternatively, the Sellers
may choose to deliver the equivalent amount of cash. If the Sellers
perform their obligations, these Contracts will provide the Trust with
the shares of Common Stock or cash that the Trust must deliver to the
holders of the Securities on the Exchange Date.
Each Seller has the right to extend the Exchange Date under its
Contract to June __, 2002. If a Seller extends the Exchange Date under its
Contract, that Seller will not be required to deliver the shares of Common Stock
or cash under the Contract until June __, 2002. However, the Seller can then
accelerate the delivery of shares or cash to any date between March __, 2002 and
June __, 2002. If some of the Sellers extend or accelerate the Exchange Date
under their Contracts, the holders of the Securities will not receive the
corresponding portion of the shares or cash until the extended or accelerated
Exchange Date, and the number of shares or amount of cash included in that
delivery would be calculated as of the 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 Common Stock.
For more detail, please see "-The Securities-Modifications to Delivery
Requirements".
Each Seller will pledge collateral to the Trust to secure that Seller's
obligations under its Contract. The collateral will initially be the shares of
Common Stock that the Seller must deliver under the Contract. However, if a
Seller complies with its obligations under its Contract and its pledge, the
Seller may pledge U.S. Treasury securities instead of the shares of Common
Stock.
The Trust will not change its investments, even if the value of the
Contracts or the 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 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 "Underwriters").
In addition, the Trust has granted the Underwriters 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 Common Stock, cash or other securities, that it
receives from the Sellers under the Contracts.
Distributions. The holder of each Security will receive a distribution
of $____ each quarter. The Trust will pay these distributions on each March __,
June __, September __ and December __.
3
<PAGE>
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 June __, 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 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 COMMON STOCK. On the Exchange Date, each Security will be
exchanged automatically for between 0.__ shares and one share of Common Stock,
as determined by the formula described under "-The Trust's Investment
Objective". However, if any of the Sellers deliver cash instead of Common Stock
under the Contracts, the holders of the Securities will receive cash instead of
some or all of the Common Stock. The amount of cash will be based on the average
market price of the Common Stock during the twenty business days before the cash
is delivered. The number of shares of 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 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 Common Stock, or the holders of
the Securities may receive some or all of the Common Stock, cash or other
securities on a date other than March __, 2002:
o The Exchange Date for some or all of the shares and cash may be
extended and then accelerated by a Seller under its Contract as
described above. In this case, the holders of the Securities would not
receive some or all of 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
Contracts-Extension and Acceleration of the Exchange Date at the
Option of a Seller".
o A Seller may elect to deliver cash instead of Common Stock under its
Contract. If a Seller decides to deliver cash instead of Common Stock
under the Contracts, it may do so in connection with a "rollover
offering" - that is, an offering of securities that refinances the
Securities. If a Seller completes a rollover offering, the Seller will
deliver the cash under its Contract by the fifth business day after
completing that offering. In this case, the holders of the Securities
would not receive some or all of 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 Contracts-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 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 Sellers will be required to deliver any consideration other than
common equity securities to the Trust within five business days after
the Sellers receive that consideration. On the Exchange Date, the
Sellers would be required to deliver the common equity securities
included in the merger consideration. In this case,
4
<PAGE>
the holders of the Securities would 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 at the time of the
merger, a 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, a Seller may choose to deliver cash
equal to the value of those securities.
For further detail, please see "Investment Objective and Policies-The
Contracts-Reorganization Events".
o If the Company declares a dividend consisting of the shares of common
stock of another issuer, the Sellers will be required to deliver the
shares received in the dividend, together with the Common Stock. In
this case, the holders of Securities will receive both shares of
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 Contracts-Spin-Off Distributions".
o If a Seller defaults under its Contract or its collateral
arrangements, that Seller's Contract would be accelerated. In this
case, the holder of each Security would then receive an early
distribution of the shares of Common Stock, cash or other common
equity securities, instead of receiving the Common Stock, cash or
other securities that would otherwise be delivered on the Exchange
Date. For further detail, please see "Investment Objective and
Policies-The Contracts-Collateral Arrangements; Acceleration Upon
Default By a 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 Common Stock until they actually receive
shares of Common Stock in exchange for the Securities. For more detail, please
see "Description of Securities-Voting".
LISTING. The Trust will apply to list the Securities on the New York
Stock Exchange (the "NYSE") under the symbol ___.
THE COMPANY
[Insert Description of the Company.]
The Company has prepared a prospectus that describes the Company and
the 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.
5
<PAGE>
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 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 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 __. These risks include the following:
o The Trust will not dispose of the Contracts even if the price of the
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 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 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 Common Stock at the
Exchange Date is below $______. Holders will receive only ____% of any
increase in the value of the Common Stock over $____. On the other
hand, holders of Securities will bear all of any decrease in the value
of the Common Stock.
o The distributions on the Securities will be higher than the annual
dividends paid on the Common Stock in the past year. However, the
distributions on the Securities will remain fixed. As a result, if the
dividend on the Common Stock is raised, the distributions on the
Securities may then be lower than the dividends paid on the Common
Stock.
o The number of shares of Common Stock or amount of cash that holders
may receive on the Exchange Date will be adjusted if the Company takes
certain actions that have the effect of combining, splitting or
diluting the value of the 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 Common Stock, such as offerings of
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 Contracts. 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 Common Stock in the
secondary market. The trading prices of the 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.
6
<PAGE>
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 Common Stock unless they actually receive Common Stock
in exchange for the Securities. For example, holders of Securities
will not be entitled to vote the shares of Common Stock or receive
dividends.
FEES AND EXPENSES
UNDERWRITERS' COMPENSATION. The Sellers will compensate the
Underwriters 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 Contracts from the Sellers. The Underwriting Agreement requires the Sellers
to pay the Underwriters $____ 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 $_______. The Sellers will pay these
organizational and offering costs.
COSTS OF OTHER SERVICE PROVIDERS. At the closing of the offering of the
Securities, the Sellers will make a one-time, up-front payment to the Trust's
administrator, custodian, paying agent and trustees as compensation for their
services to the Trust. The Sellers will also pay the Trust's administrator
$_____ to cover the Trust's anticipated expenses. The Sellers will pay any
ongoing expenses of the Trust above these estimated amounts and the Sellers will
reimburse the Trust for any amounts it may pay as indemnification to the Trust's
administrator, custodian, paying agent or any trustee. If the Sellers do 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.
INVESTOR TRANSACTION EXPENSES
Maximum Sales Load (as a percentage of 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%
====
- --------------------
(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. [Name of
Administrator] will act as the administrator of the Trust.
(c) The organizational costs of the Trust in the amount of $10,000,
compensation payable to the Trust's administrator, custodian, paying agent
and trustees in the amount of $________ and approximately $_____ in costs
in connection with the offering of the Securities will be
7
<PAGE>
paid by the Sellers. 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 the
Sellers. See "The Trust--Expenses of the Trust". Absent these arrangements,
the Trust's "Other Expenses" and "Total Annual Expenses" would be
approximately __% of the Trust's net assets.
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 March __,
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". The
Sellers 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
DURING
NAME, AGE AND ADDRESS TITLE PAST FIVE YEARS COMPENSATION
- --------------------- ----- --------------- ------------
<S> <C> <C> <C>
Managing Trustee $_____
Trustee $_____
Trustee $_____
</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 any Underwriter or of the Trust's administrator, or of
any affiliate of any 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 [Name
of Administrator] as Administrator under an Administration Agreement, dated as
of March __, 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);
o instruct the Trust's paying agent to pay the distributions on the
Securities;
9
<PAGE>
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 Sellers), when the Trust is required to do so
under the Contracts;
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 Contracts
require the Trust to make a delivery, when the Trust is required to sell
fractional shares, when the collateral agreements securing the Contracts require
the Trust to sell collateral posted by a Seller, and when the Trust terminates.
CUSTODIAN. The Trust's assets will be held by [Name of Custodian] as
the Trust's custodian (the "Custodian") under a Custodian Agreement, dated as of
March __, 1999 (the "Custodian Agreement").
COLLATERAL AGENt. The Custodian will also act as collateral agent (the
"Collateral Agent") under the collateral agreements among the Collateral Agent,
the Trust and each of the Sellers (the "Collateral Agreements"). The Collateral
Agent will hold a perfected security interest in the Common Stock and U.S.
Government obligations or other assets pledged by the Sellers under the
Collateral Agreements. If any of the Sellers defaults under its Contract or
Collateral Agreement, it will be the Collateral Agent that sells the collateral
posted by that Seller and pays the proceeds of that sale to the Custodian for
distribution to the holders of the Securities.
PAYING AGENT. [Name of Paying Agent] will serve as the transfer agent,
registrar and paying agent (the "Paying Agent") for the Securities under a
Paying Agent Agreement, dated as of March __, 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 on 60 days' 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, merges without the Trust's
consent, or under several 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 its roles as Administrator, Custodian, Collateral Agent and
Paying Agent, [Name of Administrator, Custodian, Collateral Agent and Paying
Agent] has no other affiliation with, and is not engaged in any other
transactions with, the Trust.
INDEMNIFICATION
The Trust will indemnify each Trustee, the Administrator, the
Custodian, the Collateral Agent and the Paying Agent against any liabilities or
costs (including the costs of defending against any
10
<PAGE>
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
Sellers have agreed to reimburse the Trust for any amounts it may be required to
pay under these indemnifications. If the Sellers do 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, the Sellers 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 and the Trustees'
compensation described above. The Sellers 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;
and
o fidelity bond coverage for the Trustee.
In addition, the Sellers will pay the costs of organizing the Trust in the
amount of $__________ and estimated costs in connection with the initial
registration and public offering of the Securities in the amount of $_______.
The amount that the Sellers 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. The
Sellers have agreed to pay any excess expenses beyond this amount. If the
Sellers do 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
final Exchange Date. However, if all Contracts are accelerated, then the Trust
will terminate 10 business days after the Common Stock, cash or other common
equity securities required to be delivered under the last 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
Contracts.
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 Contracts will be valued on the basis of
the bid price received by the Trust for the Contracts, or any portion of the
Contracts covering not less than 1,000 shares, from an independent broker-dealer
firm unaffiliated with the Trust to be named by the Trustees who is in the
business of making bids on financial instruments similar to the Contracts and
with comparable terms, or if such a bid quotation is not available, as
determined in good faith by the Trustees.
11
<PAGE>
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 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 Sellers under the Contracts.
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 Contracts, 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 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 Common Stock over the twenty business days before the Exchange Date. The
value of the Common Stock (or cash or Marketable Securities received in lieu of
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 March __, 2002; and
o the Contracts.
The Trust has adopted the following fundamental policies:
o the Trust will invest at least 70% of its total assets in the
Contracts;
o the Contracts 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
12
<PAGE>
consideration does not include any Marketable Securities, a default by
a Seller under its 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 Contracts and the Common Stock or
other assets received pursuant to the Contracts 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.
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 __________ industry, which is the industry in which the
Company operates. The Trust is not permitted to purchase restricted securities.
THE COMPANY AND THE COMMON STOCK
[Insert description of the Company.]
The shares of 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 Common Stock on the NYSE Consolidated Tape and the cash
dividends per share of Common Stock. As of March __, 1999, there were ____
record holders of the Common Stock, including The Depository Trust
13
<PAGE>
Company, which holds shares of Common Stock on behalf of an indeterminate number
of beneficial owners.
<TABLE>
<CAPTION>
Dividend
HIGH LOW PER SHARE
-------- -------- ---------
<S> <C> <C> <C>
1996
First Quarter.................................................
Second Quarter................................................
Third Quarter.................................................
Fourth Quarter................................................
1997
First Quarter.................................................
Second Quarter................................................
Third Quarter.................................................
Fourth Quarter ...............................................
1998
First Quarter.................................................
Second Quarter................................................
Third Quarter.................................................
Fourth Quarter................................................
1999
First Quarter (through March __, 1999)........................ (1)
-------- -------- ---------
<FN>
- ---------------------------
(1) The first-quarter dividend with respect to the Common Stock is payable on
________ to holders of record on ________.
</FN>
</TABLE>
Holders will not be entitled to any rights with respect to the Common
Stock (including voting rights and rights to receive dividends or other
distributions on the Common Stock) unless they actually receive shares of Common
Stock in exchange for the Securities.
Please refer to the attached Company Prospectus, dated March __, 1999
(pages A-1 through A-_ hereto), which describes the Company and the 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 Common Stock (and an additional aggregate
_______ shares if the Underwriters exercise their over-allotment option).
THE CONTRACTS
The Trust will enter into a Contract with each Seller obligating that
Seller to deliver to the Trust on the Exchange Date a number of shares of Common
Stock equal to the product of the Exchange Rate (as defined below) times the
initial number of shares of Common Stock covered by that Contract. The aggregate
initial number of shares of Common Stock under the Contracts will equal the
aggregate number of Securities offered by this prospectus (and will be increased
if the Underwriters exercise their over-allotment option).
The aggregate purchase price that the Trust will pay under all the
Contracts will be $______. The Trust will pay this purchase price on the closing
date of this offering (or, for the portion of the Contracts relating to the
Securities to be sold under the Underwriters' 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 Sellers, taking into
consideration factors including the price, the expected dividend level and
volatility of the Common Stock, current interest rates, the term of the
Contracts, current market volatility generally, the collateral pledged by the
Sellers, the value of other similar instruments and the costs and anticipated
proceeds of the offering of the Securities.
14
<PAGE>
Each Contract provides that if the Seller under that Contract delivers
Securities to the Trust on or before the Exchange Date, the Seller's obligation
to deliver Common Stock (or cash) will be proportionately reduced. The delivery
of Securities in partial or complete satisfaction of a Seller's obligations will
not, however, affect the amount of 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 Contracts 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 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 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 Common Stock.
o If the Average Market Price is less than the Initial Price, the
Exchange Rate will be one share of Common Stock.
This formula will be adjusted if the Company takes certain steps that combine,
split or dilute the value of the Common Stock. See "-The Contracts-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 Common Stock to any holder, the Trust will instead deliver cash equal
to the value of that fraction of a share.
The "Average Market Price" per share of Common Stock on any date means
the average Closing Price of a share of Common Stock on the 20 Trading Days
immediately 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 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 Common
Stock deliverable under the Contracts, as described under "-The
Contracts-Dilution Adjustments", occurs before the Exchange Date, the Closing
Price as determined pursuant to the foregoing will be appropriately adjusted 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.
15
<PAGE>
For illustrative purposes only, the following chart shows the number of
shares of Common Stock that a holder would receive for each Security at various
Average Market Prices. The chart assumes that there would be no adjustments to
the number of shares of Common Stock deliverable under the Contracts by reason
of the occurrence of any of the events described under "-The Contracts-Dilution
Adjustments" and that the Exchange Dates under all of the Contracts occur on the
same date. 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 Common Stock:
NUMBER OF SHARES
AVERAGE MARKET PRICE OF COMMON STOCK
OF COMMON STOCK PER SECURITY
-------------------- ----------------
EXTENSION AND ACCELERATION OF THE EXCHANGE DATE AT THE OPTION OF A
SELLER. Each Seller has the right to extend the Exchange Date under that
Seller's Contract to June __, 2002. If a Seller extends the Exchange Date, that
Seller will not be required to deliver the shares of Common Stock or cash under
the Contract until June __, 2002. However, once a Seller extends the Exchange
Date, the Seller can then accelerate the delivery of shares or cash to any date
between March __, 2002 and June __, 2002. If some of the Sellers extend or
accelerate the Exchange Date, the holders of the Securities will not receive the
corresponding portion of the shares or cash until the extended or accelerated
Exchange Date, and the number of shares and amount of cash included in that
delivery would be calculated as of the extended or 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 a portion of the regular quarterly distribution on
the Securities proportionate to the number of shares of Common Stock covered by
those Sellers' Contracts. For example, if the Exchange Date is extended to June
__, 2002 for half the shares or cash deliverable on the Exchange Date, the
additional distribution would be equal to half the regular quarterly
distribution. If the final Exchange Date falls between March __, 2002 and June
__, 2002, the additional distribution will be pro-rated both to reflect the
number of securities covered by the extended and accelerated Contracts and the
number of days by which the Exchange Date is extended. For example, if the
Exchange Date for half the shares or cash deliverable on the Exchange Date is
extended to June __, 2002 and then accelerated to May __, 2002 (i.e., two-thirds
of the time between March __, 2002 and June __, 2002), the additional
distribution would be equal to two-thirds of one-half (or one-third) of the
regular quarterly distribution.
CASH SETTLEMENT; ROLLOVER OFFERINGS. A Seller may elect to deliver
cash, instead of shares of Common Stock, on the Exchange Date (whether or not
extended or accelerated) under its Contract. If a Seller chooses to deliver cash
instead of shares of 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.
A Seller may choose to deliver cash, instead of shares of Common Stock,
in connection with a "Rollover Offering". A "Rollover Offering" is a reoffering
or refinancing of Securities effected by a Seller not earlier than March __,
2002, by means of a completed public offering or offerings or
16
<PAGE>
another similar offering (which may include one or more exchange offers) by or
on behalf of the Seller. If a Seller chooses to carry out a Rollover Offering,
the "Average Market Price" will be the Closing Price per share of 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 a 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 Common
Stock in shares of that stock, (ii) subdivides or splits its outstanding shares
of Common Stock, (iii) combines its outstanding shares of Common Stock into a
smaller number of shares, or (iv) issues by reclassification of its shares of
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 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
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 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
Common Stock entitling them to purchase shares of Common Stock at a price per
share less than the Then-Current Market Price (as defined below) of the Common
Stock (other than rights to purchase 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
where
ER = the Exchange Rate before the adjustment;
OS = the number of shares of 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 Common Stock offered for
purchase pursuant to those rights or warrants; and
PS = the number of additional shares of Common Stock that the
aggregate offering price of the total number of shares of 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 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 Common Stock actually
delivered.
The "Then-Current Market Price" of the Common Stock, for the purpose of
making any dilution adjustment, means the average Closing Price per share of
Common Stock for the five Trading Days
17
<PAGE>
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 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 Common Stock of evidences of its indebtedness or other non-cash
assets (excluding any stock dividends or distributions in shares of Common Stock
described above and any Spin-Off Distributions (as defined below)) or issues to
all holders of Common Stock rights or warrants to subscribe for or purchase any
of its securities (other than rights or warrants referred to in the 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 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 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 Common Stock and any cash distributed in a Reorganization Event (as
defined below), by dividend or otherwise, to all holders of 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
where
ER = the Exchange Rate before the adjustment;
T = the Then-Current Market Price per share of Common Stock on the
record date for that distribution; and
D = the amount of that distribution applicable to one share of 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
Common Stock on that record date.
For purposes of these adjustments,
(a) the term "Permitted Dividend" means any quarterly cash dividend on 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 that dividend results in an
annualized dividend yield on the Common Stock above ______%; 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
18
<PAGE>
retained for this purpose by the Administrator) of all other
consideration paid by the Company with respect to one share of Common
Stock acquired in a tender offer or exchange offer by the Company,
over (ii) the Then-Current Market Price per share of Common Stock.
If any adjustment in the Exchange Rate 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 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 Common Stock become entitled to payment with respect to
that Excess Purchase Payment. There will be no adjustment under the Contracts
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. 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, each Seller
will be required to deliver on the Exchange Date, in lieu of each share of
Common Stock subject to that Seller's 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 Common Stock in the
Reorganization Event (the "Merger Consideration") includes Marketable
Securities, the Sellers 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 Sellers choose to deliver Marketable
Securities on the
19
<PAGE>
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 Sellers will be
required:
o within five business days after the Sellers receive 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 at the time of a
merger, the Sellers may choose to deliver cash equal to the Value of those
assets. Similarly, instead of delivering Marketable Securities on the Exchange
Date, the Sellers 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 Sellers 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
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
20
<PAGE>
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 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 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 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 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 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
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<PAGE>
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 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 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 Contracts, then the Seller under each Contract will be
required to deliver on the Exchange Date, together with each share of Common
Stock delivered under the Contract, the number of Marketable Securities
distributed in respect of a single share of Common Stock in that Spin-Off
Distribution. After the Company makes such a distribution, the "Closing Price"
of Common Stock, for purposes of calculating the Exchange Rate and for all other
purposes under the Contracts, will be determined by reference to (A) the Closing
Price per share of the 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. 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 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 Common Stock of Marketable Securities issued by an issuer other than
the Company.
COLLATERAL ARRANGEMENTS; ACCELERATION UPON DEFAULT BY A SELLER. Each
Seller's obligations under the Contract between that Seller and the Trust
initially will be secured by a security interest in the maximum number of shares
of Common Stock deliverable under that Contract (adjusted in accordance with the
dilution adjustment provisions of that Contract, described above), pursuant to a
Collateral Agreement among the Trust, that Seller and the Collateral Agent.
If a Reorganization Event occurs, the Collateral Agreements will
require each Seller to pledge as alternative collateral all Marketable
Securities deliverable in such event in exchange for the maximum number of
shares of Common Stock deliverable under that Seller's Contract at the time of
the Reorganization Event, plus cash in an amount equal to 100% of that 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 March __, 2002. A 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 its 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
22
<PAGE>
requiring a dilution adjustment under the Contracts occurs. If the
Reorganization Event is a Cash Merger, the collateral in respect of a 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 Agreements
will require each Seller to pledge as additional collateral all Marketable
Securities deliverable in such distribution in respect of the maximum number of
shares of Common Stock deliverable under that Seller's 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 Contracts occurs.
Unless a Seller is in default in its obligations under its Collateral
Agreement, the Seller will be permitted to substitute for the pledged shares of
Common Stock collateral consisting of short-term, direct obligations of the U.S.
Government. A 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 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 Common Stock or
Marketable Securities at the time of each valuation times the number of shares
of Common Stock or Marketable Securities for which those obligations are being
substituted.
The Collateral Agent will promptly pay over to each Seller any
dividends, interest, principal or other payments received by the Collateral
Agent on any collateral pledged by that Seller, including any substitute
collateral, unless that Seller is in default in its obligations under its
Collateral Agreement, or unless the payment of that amount to that Seller would
cause the collateral to become insufficient under its Collateral Agreement. Each
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 its Collateral
Agreement, unless an event of default occurs under that Seller's Contract or
Collateral Agreement.
If the Collateral Agent determines (an "Insufficiency Determination")
that the collateral pledged by any 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 that 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 Common Stock or Marketable Securities
in an amount sufficient to cause the collateral to meet the requirements under
that Collateral Agreement. The Collateral Agent will discontinue those sales and
purchases if a Collateral Event of Default occurs under the Seller's Collateral
Agreement.
A "Collateral Event of Default" under a Seller's 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 to include at
least the maximum number of shares of Common Stock covered by the Seller's
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 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
Common Stock (or Shares of Marketable Securities) times the difference between
(x) the maximum number of shares of Common Stock (or shares of Marketable
Securities) deliverable under that Seller's Contract at that time and (y) the
number of shares of 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
23
<PAGE>
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 that Seller.
If a Collateral Event of Default occurs under a Seller's Collateral
Agreement, or a Seller suffers a bankruptcy or insolvency, Seller's obligations
under its Contract will automatically be accelerated. In that event, that Seller
will become obligated to deliver the number of shares of 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 Common Stock) then deliverable under that
Seller's Contract, or any U.S. Government obligations then pledged as collateral
for the Seller's obligations.
If a Seller's Contract is accelerated, (i) the Collateral Agent will
distribute to the Trust, for distribution pro rata to the holders of the
Securities, the shares of Common Stock and Marketable Securities then pledged by
the defaulting Seller and/or cash generated from the sale of U.S. Government
obligations then pledged by the defaulting 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. After any distribution in accordance with the previous
sentence, the number of shares of Common Stock or Marketable Securities, as
applicable, deliverable to holders on the Exchange Date will be proportionately
reduced. In addition, if, by the Exchange Date, any substitute collateral has
not been replaced by 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 any Contract, the Collateral Agent will
distribute to the Trust for distribution pro rata to the holders the market
value of the Common Stock and Marketable Securities required to be delivered
under that Contract, in the form of any shares of Common Stock or Marketable
Securities then pledged by that Seller plus cash generated from the sale of U.S.
Government obligations then pledged by that Seller (or, after a Reorganization
Event, the market value of the alternative consideration required to be
delivered under that 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 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 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 Common Stock before that
period began.
THE SELLERS. The Sellers are [names of selling stockholders]. Please
see the caption "Selling Stockholders" in the Company Prospectus for information
about the Sellers.
THE U.S. TREASURY SECURITIES
The Trust will purchase and hold a series of zero-coupon ("stripped")
U.S. Treasury securities with face amounts and maturities corresponding to the
distributions payable with respect to the Securities and the payment dates 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 any
Contract is accelerated, then a proportionate amount of those U.S. Treasury
securities then held in the Trust will be sold by the Administrator and the
proceeds of that sale will
24
<PAGE>
be distributed pro rata to the holders, together with the amounts distributed
upon acceleration. See "-Collateral Arrangements; Acceleration Upon Default By a
Seller" and "The Trust-Trust Termination".
If a Seller extends the Exchange Date under its Contract, it will be
required to deliver additional U.S. Treasury securities to the Trust to pay that
Seller's proportionate share of the additional, partial distribution described
above under "-The Contract-Extension and Acceleration of the Exchange Date at
the Option of a Seller". If a 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 that Seller's
proportionate share of the 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 Underwriters
do not exercise their 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 June __, 1999 to holders of record as of the preceding business
day. Distributions will then be made on March __, June __, September __ and
December __ 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 Common Stock. See "Risk
Factors-Shareholder Rights".
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 Underwriters do not exercise their over-allotment
25
<PAGE>
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 an
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 DISTRIBUTIONS FROM ANNUAL INCLUSION OF
FROM U.S. TREASURY ANNUAL RETURN OF ORIGINAL ISSUE
U.S. TREASURY SECURITIES CAPITAL PER 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 [Name of Paying Agent], 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, 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").
26
<PAGE>
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.
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 Contracts even if the price of the
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.
27
<PAGE>
LIMITED OPPORTUNITY FOR INCREASE IN VALUE; RISK OF DECREASE IN VALUE OF COMMON
STOCK
Because the Contracts allow the Sellers to deliver less than a full
share of 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 Common Stock. If the price of 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 Common Stock at
the Exchange Date is below $______. Holders will receive only ____% of any
increase in the value of the Common Stock over $____. On the other hand, holders
of Securities will bear all of any decrease in the value of the Common Stock.
The value of the 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
Common Stock if the 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 Common Stock is raised,
distributions on the Securities may be lower than the dividends paid on the
Common Stock.
DILUTION ADJUSTMENTS
The number of shares of 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 Contracts-Dilution Adjustments". The number of shares to be
received by holders may not be adjusted for other events, such as offerings of
Common Stock for cash or in connection with acquisitions, that may adversely
affect the price of the Common Stock. 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 Common Stock, or that major stockholders will not sell any 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 Contracts, 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.
TRADING VALUE AFFECTED BY 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 Common Stock in the secondary
market. The trading prices of the 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 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
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and other factors that are difficult to predict and beyond the Trust's control.
The Trust believes, however, that because of the yield on the Securities and the
formula for determining the number of shares of Common Stock to be delivered on
the Exchange Date, the Securities will tend to trade at a premium to the market
value of the Common Stock if the Common Stock price falls and at a discount to
the market value of the Common Stock if the Common Stock price rises. There can,
however, be no assurance that the Securities will trade at a premium to the
market value of the 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 Common Stock unless and until they actually receive Common Stock
in exchange for the Securities. For example, holders of Securities will not be
entitled to vote the shares of Common Stock or receive dividends.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion of the principal United States federal income
tax consequences of ownership of Securities represents the opinion of Sullivan &
Cromwell, counsel to the Trust. It deals only with Securities held as capital
assets by a holder who acquires its Securities at the issue price from an
Underwriter pursuant to the original offering, and not with special classes of
holders, such as dealers in securities or currencies, 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.
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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 Contracts 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 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
Contracts and should not be required to include any original issue discount in
respect of such U.S. Treasury securities. See "Investment Objective and Policies
The Contracts".
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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
Common Stock delivered pursuant to such Contract. Because there can be no
assurance that the Internal Revenue Service will agree with this
characterization of the cash distribution paid on the extended Exchange Date,
holders are urged to consult their tax advisors concerning the tax consequences
of receiving such payment.
TAX BASIS OF THE U.S. TREASURY SECURITIES AND THE CONTRACTS. A holder's
initial tax basis in the Contracts and the U.S. Treasury securities,
respectively, will equal its pro rata portion of the amounts paid for them by
the Trust. It is currently anticipated that ____% and ____% of the net proceeds
of the offering will be used by the Trust to purchase the U.S. Treasury
securities and as payments for the Contracts, respectively. A holder's tax basis
in the U.S. Treasury securities will be increased by the amounts of original
issue discount included in income in respect of U.S. Treasury securities and
decreased by each amount of cash received in respect of U.S. Treasury
securities.
TREATMENT OF THE CONTRACTS. Each holder will be treated as having
entered into a pro rata portion of the Contracts and, at the Exchange Date under
each Contract, as having received a pro rata portion of the Common Stock or
cash, Marketable Securities or a combination of Common Stock, Marketable
Securities and cash delivered to the Trust.
DISTRIBUTION OF THE COMMON STOCk. The delivery of Common Stock to the
Trust pursuant to the Contracts and the Trust's distribution of Common Stock to
the holders will not be taxable to the holders. Each holder's basis in its
Common Stock will be equal to its basis in its pro rata portion of the Contracts
which are settled in Common Stock less the portion of that basis allocable to
any fractional shares of Common Stock for which cash is received. A holder will
recognize short-term capital gain or loss upon receipt by the Trust of cash in
lieu of fractional shares of 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 Common Stock will begin
on the day after it is acquired by the Trust.
DISTRIBUTION OF CASH. If the Trust receives cash upon settlement of the
Contracts, a holder will recognize capital gain or loss equal to the difference
between the holder's allocable portion of the amount of cash received and the
holder's basis in the Contracts 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
Contracts 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 Contracts. 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
Contracts should be treated for federal income tax purposes as prepaid forward
contracts for the purchase of a variable number of shares of Common Stock.
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The Internal Revenue Service could conceivably seek to treat the
Contracts differently. The Internal Revenue Service might, for example, seek to
treat the cash paid to the Sellers pursuant to the Contracts as loans to the
Sellers in exchange for contingent debt obligations of the Sellers. If the
Internal Revenue Service were to prevail in making such an assertion, a holder
might be required to include original issue discount in income over the life of
the Securities at a market rate of interest for the Seller, taking account of
all the relevant facts and circumstances. In addition, a holder would be
required to include interest (rather than capital gain) in income on the
Exchange Date in an amount equal to the excess, if any, of the value of the
Common Stock received on the Exchange Date (or the proceeds from cash settlement
of the Contracts) over the aggregate of the basis of the Contracts and any
interest on the Contracts previously included in income (or might be entitled to
an ordinary deduction to the extent of interest previously included in income
and not ultimately received) and any gain or loss attributable to the sale of
the Contracts 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 Contracts 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.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Trust has agreed to sell the Securities to the Underwriters, and the
Underwriters have agreed to purchase the Securities from the Trust. Under the
terms and conditions of the Underwriting Agreement, the Underwriters are
committed to take and pay for all of the Securities offered hereby, if any are
taken.
Securities sold by the Underwriters 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 the Underwriters 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 the
Underwriters 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, the Underwriters 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 March __, 1999.
In connection with the offering, the Underwriters 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 Underwriters 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.
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These activities by the Underwriters 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 the
Underwriters at any time. These transactions may be effected on the NYSE, in the
over-the-counter market or otherwise.
In light of the fact that proceeds from the sale of the Securities will
be used by the Trust to purchase the Contracts from the Sellers, the
Underwriting Agreement provides that the Sellers will pay to the Underwriters
the Underwriters' Compensation of $____ per Security.
The Trust has granted the Underwriters an option exercisable for 30
calendar days after the date of this prospectus to purchase up to an aggregate
of _______ additional Securities solely to cover over-allotments, if any. If the
Underwriters exercise their over-allotment option, they will receive the
Underwriters' Compensation referred to above for each Security so purchased.
The Company and the Sellers have agreed that, during the period
beginning from the date of this prospectus and continuing to and including the
date 90 days after the date of this prospectus, they will not offer, sell,
contract to sell or otherwise dispose of any Common Stock or other securities
that are substantially similar to the Common Stock, including but not limited to
any securities that are convertible or exchangeable for, or that represent the
right to receive, Common Stock or any such substantially similar securities, or
enter into any swap, option future, forward or other agreement that transfers,
in whole or in part, the economic consequences of ownership of Common Stock or
such other substantially similar securities, without the prior written consent
of Goldman Sachs and except as otherwise provided in the Underwriting Agreement.
The Securities will be a new issue of securities with no established
trading market. Application has been made to list the Securities on the NYSE
under the symbol "________". 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.
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 Company and the Sellers have agreed to indemnify the Underwriters
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 Underwriters by __________.
EXPERTS
The financial statement included in this prospectus has been audited by
_______________, independent accountants, as stated in their opinion appearing
herein, and has been so included in reliance upon that opinion given upon the
authority of that firm as experts in accounting and auditing.
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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
Seventh Automatic Common Exchange Security Trust:
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of Seventh Automatic
Common Exchange Security Trust (the "Trust") as of March __, 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.
New York, New York
March __, 1999
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SEVENTH AUTOMATIC COMMON EXCHANGE SECURITY TRUST
STATEMENT OF ASSETS AND LIABILITIES
March __, 1999
ASSETS
Cash................................................................... $ 100
------
Total assets........................................................... $ 100
======
LIABILITIES
....................................................................... $ 0
------
NET ASSETS
Balance applicable to 1 Security outstanding........................... $ 100
------
Net asset value per Security........................................... $ 100
======
- --------------------
(1) Seventh Automatic Common Exchange Security Trust (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 Sellers 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 existing stockholders of [Company] (the "Sellers")
relating to the Common Stock of [Company]. 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 [Name of Administrator] as administrator of the Trust. [Name of
Custodian and Paying Agent] will also serve as custodian, paying agent,
registrar and transfer agent with respect to the Securities. Ongoing fees
and anticipated expenses for the term of the Trust will be paid for by the
Sellers.
(3) The Trust issued one Security on March __, 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 the Underwriters. 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 March __, 1999, between the Trust and [Name of Administrator], as
Administrator.
"Administrator" means [Name of Administrator] (or its successor) in its
capacity as Administrator under the Administration Agreement.
"Appreciation Threshold Price" means $_______, subject to adjustment as
described under "-The Contracts-Dilution Adjustments".
"Average Market Price" per share of Common Stock or Marketable
Securities on any date means the average Closing Price per 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 will 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 20
Trading Days 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 a Contract 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.
"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 Contracts.
"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 Common Stock
covered by the Contracts at the time of the Reorganization Event; provided that
if the Reorganization Event is a Cash Merger, the Sellers' Cash Delivery
Obligation will be zero after the Sellers deliver the Accelerated Portion as
required under the Contracts.
"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 under the Contracts, as
described under "-The Contracts-Dilution
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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 [Name of Collateral Agent] (or its successor)
in its capacity as Collateral Agent under the Collateral Agreements.
"Collateral Agreements" means the Collateral Agreements, dated as of
March __, 1999, among the Sellers, [Name of Collateral Agent], as Collateral
Agent, and the Trust, securing the Sellers' obligations under their respective
Contracts.
"Collateral Event of Default" under any Seller's Collateral Agreement
means, at any time, (A) if no U.S. Government obligations are pledged as
substitute collateral at or before that time, failure of the collateral to
include at least the maximum number of shares of Common Stock covered by that
Seller's 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
Contracts-Collateral Arrangements; Acceleration Upon Default By a Seller"
above); (B) if any U.S. Government obligations are pledged as substitute
collateral for shares of Common Stock (or shares of Marketable Securities
deliverable pursuant to the Contracts) 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 Common Stock (or shares of Marketable Securities,
as the case may be) times the difference between (x) the maximum number of
shares of Common Stock (or shares of Marketable Securities) covered by that
Contract at that time and (y) the number of shares of 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 that Seller.
"Common Stock" means the Common Stock, par value $__ per share, of the
Company.
"Company" means [Company], a ___________ corporation.
"Company Prospectus" means the prospectus of the Company, dated March
__, 1999 (attached as pages A-1 through A-__ hereof), which describes the
Company and the Common Stock.
"Company Successor" means a surviving entity or subsequent surviving
entity of the Company.
"Contracts" means the forward purchase contracts between the Sellers
and the Trust relating to the Common Stock.
"Custodian" means [Name of Custodian] (or its successor) in its
capacity as Custodian under the Custodian Agreement.
"Custodian Agreement" means the Custodian Agreement, dated as of March
__, 1999, between the Trust and [Name of Custodian], 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.
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"Excess Purchase Payment" means the excess, if any, of (i) the cash and
the value (as determined by a nationally recognized independent investment
banking firm retained for this purpose by the Administrator, whose determination
shall be 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 (ii) the Then-Current Market Price per share of Common Stock.
"Exchange Date" means March __, 2002, subject to extension and
acceleration by the Sellers under their respective Contracts.
"Exchange Rate" means the rate of exchange of 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 Common Stock.
(iii) If the Average Market Price is less than the Initial Price, the
Exchange Rate will be one share of 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 Contracts-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 Contracts-Collateral
Arrangements; Acceleration Upon Default By a 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 [Name of Paying Agent] (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
March __, 1999, between the Trust and [Name of Paying Agent], as transfer agent,
registrar and paying agent.
39
<PAGE>
"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 ___%.
"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
consolidation or merger in which the Company is the continuing corporation and
in which the Common Stock outstanding immediately prior to the consolidation or
merger 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 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 March __, 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 Sellers.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Trust's $_____ Trust Automatic Common Exchange
Securities.
"Sellers" means [list selling stockholders].
"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 described in "Investment Objective and Policies-The
Contracts-Dilution Adjustments", means the average Closing Price per share of
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
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 Common Stock may be determined for any of
such Trading Days, the Then-Current Market Price shall be the Closing Price for
the Common Stock for the most recent Trading Day prior to five 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 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 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
40
<PAGE>
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 (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 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 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 the Seventh Automatic Common Exchange Security Trust.
"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 March __,
1999.
"Trustees" means the three trustees who will internally manage the
Trust.
"Underwriters" means Goldman, Sachs & Co., the Underwriters of the
Securities.
"Underwriters' Compensation" means the compensation of $____ per
Security payable to the Underwriters by the Sellers pursuant to the Underwriting
Agreement.
"United States 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".
41
<PAGE>
<TABLE>
<S> <C>
============================================================ ============================================================
NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO
GIVE ANY INFORMATION OR TO REPRESENT ANYTHING NOT CONTAINED ____________ SHARES
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 SEVENTH AUTOMATIC
CIRCUMSTANCES AND IN JURISDICTIONS WHERE IT IS LAWFUL TO DO COMMON EXCHANGE
SO. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CURRENT SECURITY TRUST
ONLY AS OF ITS DATE.
---------------------------
$____ TRUST AUTOMATIC COMMON
PAGE EXCHANGE SECURITIES
---- (TRACES(TM)/(SM))
Prospectus Summary.....................................
The Trust..............................................
Use of Proceeds........................................
Investment Objective and Policies...................... __________________
Description of Securities..............................
Risk Factors...........................................
Certain Federal Income Tax Considerations.............. PROSPECTUS
Underwriting...........................................
Validity of Securities................................. __________________
Experts................................................
Further Information....................................
Report of Independent Accountants......................
Statement of Assets and Liabilities....................
Glossary...............................................
Appendix A: Prospectus of [Company].................... A-1
--------------------------- GOLDMAN, SACHS & CO.
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.
============================================================ ============================================================
</TABLE>
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Part A - Report of Independent Accountants.
Statement of Assets and Liabilities.
Part B - None.
(b) Exhibits
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 and 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 Form of Subscription Agreement**
2.r Financial Data Schedule**
- ---------------------------
* Previously filed.
** To be filed by amendment.
ITEM 25. MARKETING ARRANGEMENTS
See the Form of Underwriting Agreement to be filed as Exhibit 2.h to
this Registration Statement.
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:
Registration fees...................................................... $
New York Stock Exchange listing fee....................................
Printing (other than certificates).....................................
Fees and expenses of qualification under state securities laws
(excluding fees of counsel)..........................................
Accounting fees and expenses...........................................
Legal fees and expenses................................................
NASD fees..............................................................
Miscellaneous..........................................................
Total.................................................................. $
=======
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 Goldman, Sachs &
Co. with respect to the Securities offered by the prospectus.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
NUMBER OF
TITLE OF CLASS RECORD HOLDERS
- -------------- --------------
$____ Trust Automatic Common Exchange Securities................ 1
ITEM 29. INDEMNIFICATION
The Underwriting Agreement, to be filed as Exhibit 2.h to this
Registration Statement, provides for indemnification of the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act").
The 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 Sellers 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 [Name of Administrator], 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 2nd day of March, 1999.
SEVENTH AUTOMATIC COMMON
EXCHANGE SECURITY TRUST
By:
----------------------------
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.
NAME TITLE DATE
---- ----- ----
Principal Executive Officer, March 2, 1999
- ------------------------ Principal Financial Officer,
Paul S. Efron Principal Accounting Officer and
Trustee
<PAGE>
<TABLE>
EXHIBIT INDEX
<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 and 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 Form of Subscription Agreement**
2.r Financial Data Schedule**
<FN>
- ---------------------------
* Previously filed.
** To be filed by amendment.
</FN>
</TABLE>
