<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 25, 1999
SECURITIES ACT FILE NO. 333-77547
INVESTMENT COMPANY ACT FILE NO. 811-9319
- --------------------------------------------------------------------------------
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. 1
[ ] POST-EFFECTIVE AMENDMENT NO.
AND/OR
[X] REGISTRATION STATEMENT UNDER THE
[X] INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 1
------------
AMERITRADE 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:
John Evangelakos, Esq.
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
---------------------------------------------
As soon as practicable after the effective date of this Registration Statement.
If any securities being registered on this form will be offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act of
1933, other than securities offered in connection with a dividend reinvestment
plan, check the following box. [ ]
It is proposed that this filing will become effective when declared
effective pursuant to section 8(c).
If appropriate, check the following box:
[ ] This amendment designates a new effective date for a previously filed
registration statement.
[ ] This form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act and the Securities Act
registration statement number of the earlier effective registration statement
for the same offering is 333-________.
------------
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
===========================================================================================
Title of Securities Proposed Maximum Amount of
Being Registered Aggregate Offering Price(1) Registration Fee
- ------------------------------------------ --------------------------- ----------------
<S> <C> <C>
Trust Automatic Common Exchange Securities $10,000,000 $2,780(2)
=========================== ================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL HEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE> 2
AMERITRADE 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>
<CAPTION>
ITEM
NUMBER CAPTION LOCATION IN PROSPECTUS
- ------ ------- ----------------------
<S> <C> <C>
1. Outside Front Cover.............................. Front Cover Page
2. Cover Pages; Other Offering Information.......... Front Cover Page; Underwriting
3. Fee Table and Synopsis........................... Prospectus Summary
4. Financial Highlights............................. Not Applicable
5. Plan of Distribution............................. Front Cover Page; Prospectus Summary;
Underwriting
6. Selling Shareholders............................. Not Applicable
7. Use of Proceeds.................................. Prospectus Summary-The Trust's Investment
Policies; Use of Proceeds; Investment Objective
and Policies
8. General Description of the Registrant............ Front Cover Page; Prospectus Summary;
The Trust; Investment Objective and Policies;
Risk Factors
9. Management....................................... The Trust
10. Capital Stock, Long-Term Debt, and Other
Securities...................................... Investment Objective and Policies; Description of
the Securities; Certain Federal Income Tax
Considerations
11. Defaults and Arrears on Senior Securities........ Not Applicable
12. Legal Proceedings................................ Not Applicable
13. Table of Contents of the Statement
of Additional Information....................... Not Applicable
14. Cover Page....................................... Not Applicable
15. Table of Contents................................ Not Applicable
16. General Information and History.................. The Trust
17. Investment Objective and Policies................ Investment Objective and Policies
18. Management....................................... The Trust
19. Control Persons and Principal Holders of
Securities...................................... The Trust
20 Investment Advisory and Other Services........... The Trust
21. Brokerage Allocation and Other Practices......... Investment Objective and Policies
22. Tax Status....................................... Certain Federal Income Tax Considerations
23. Financial Statements............................. Statement of Assets and Liabilities
</TABLE>
- ---------------
* Pursuant to the General Instructions to Form N-2, all information required
to be set forth in Part B: Statement of Additional Information has been
included in Part A: The Prospectus. Information required to be included in
Part C is set forth under the appropriate item so numbered in Part C of
this Registration Statement.
<PAGE> 3
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.
SUBJECT TO COMPLETION, DATED JUNE 25, 1999
_______ Securities
Ameritrade Automatic Common Exchange Security Trust
$____ Trust Automatic Class A Common Exchange
Securities (TRACES(TM)/(sm))
(Subject to exchange into Shares of Class A Common Stock of
Ameritrade Holding Corporation)
The $____ Trust Automatic Common Exchange Securities are a new series of
securities issued by the Ameritrade Automatic Common Exchange Security Trust.
The Trust will pay quarterly distributions of $____ on each Security. On July
__, 2002, the Trust will exchange each Security for either:
o Between 0.___ shares and one share of Class A Common Stock of Ameritrade
Holding Corporation,
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 Class A Common Stock during the
twenty business days before July __, 2002.
Under the circumstances described in this prospectus, some or all of the
shares or cash may be delivered between July __, 2002 and October __, 2002
instead of on July __, 2002. In that case, holders of the Securities may receive
part of the cash or shares on July __, 2002 and the rest between July __, 2002
and October __, 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 "____". There
is no minimum required purchase of Securities in this offering.
The Class A Common Stock is currently quoted on the Nasdaq National Market
under the symbol "AMTD". The last reported sale price of the Class A Common
Stock on the Nasdaq National Market on June __, 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.
----------------
<TABLE>
<CAPTION>
Per Security Total
------------ -----
<S> <C> <C>
Initial Public Offering Price............................ $_________ $________
Sales Load............................................... Not applicable Not applicable
Proceeds to the Trust.................................... $_________ $________
</TABLE>
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 July __, 1999.
----------------
GOLDMAN, SACHS & CO.
----------------
Prospectus dated _______, 1999.
<PAGE> 4
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 July __, 2002 (the "Exchange
Date"), between 0.____ and 1 shares of Class A Common Stock (or cash equal to
the value of some or all of those shares). The number of shares, or amount of
cash, that a holder will receive in exchange for a single Security will vary,
depending on the average market price of the Class A Common Stock over the
twenty business days before the Exchange Date.
o If the average market price is less than $_______ but equal to or
greater than $______, the holder of each Security will receive the
number of shares of Class A Common Stock that has a value equal to
$_______.
o If the average market price is equal to or greater than $_______, the
holder of each Security will receive 0.__ shares of Class A Common
Stock.
o If the average market price is less than $_______, the holder of each
Security will receive one share of Class A Common Stock.
This formula will be adjusted if the Company takes certain steps that combine,
split or dilute the value of the Class A Common Stock. If this formula would
require the Trust to deliver a fraction of a share of Class A Common Stock to
any holder, the Trust will instead deliver cash equal to the value of that
fraction of a share.
Because of this formula, the holders of the Securities will receive part of
any increase in the value of the Class A Common Stock above $_____. However, the
holders of the Securities will not receive any increase in the value of the
Class A Common Stock unless that value rises higher than $____. The holders will
bear the entire amount of any decrease in the value of the Class A Common Stock.
For more detail, please see "Investment Objective and Policies".
THE TRUST'S INVESTMENT POLICIES
To achieve its investment objective, the Trust will invest all the proceeds
of the Securities in:
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<PAGE> 5
o "Stripped" U.S. Treasury securities that will mature during each
quarter through July __, 2002. The Trust will use the payments it
receives as these U.S. Treasury securities mature to pay the quarterly
distributions on the Securities.
o 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 Class A
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 Class A 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
October __, 2002. If a Seller extends the Exchange Date under its Contract, that
Seller will not be required to deliver the shares of Class A Common Stock or
cash under the Contract until October __, 2002. However, the Seller can then
accelerate the delivery of shares or cash to any date between July __, 2002 and
October __, 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 Class A 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
Class A 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 Class A
Common Stock.
The Trust will not change its investments, even if the value of the
Contracts or the Class A Common Stock falls significantly or the financial
condition of the Company suffers. Furthermore, because the Trust is a grantor
trust for purposes of the U.S. federal tax laws, the trustees of the Trust will
not have the power to change the Trust's investments.
For more detail, please see "Investment Objective and Policies".
THE OFFERING
The Trust is offering _________ Securities to the public at a purchase
price of $____ per Security. This price is equal to the last reported sale price
of the Class A Common Stock on the date of this prospectus. The Securities are
being offered through Goldman, Sachs & Co. ("Goldman Sachs"), 85 Broad Street,
New York, New York 10004 (the "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".
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<PAGE> 6
THE SECURITIES
The Trust will pass through to the holders of the Securities all payments
that it receives on the U.S. Treasury securities that it purchases with the
proceeds of the Securities. Similarly, the Trust will deliver to the holders of
the Securities all shares of Class A Common Stock, cash or other securities,
that it receives from the 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 January __,
April__, July __ and October __. 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 July __, 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 CLASS A COMMON STOCK. On the Exchange Date, each Security will
be exchanged automatically for between 0.__ shares and one share of Class A
Common Stock, as determined by the formula described under "-The Trust's
Investment Objective". However, if any of the Sellers deliver cash instead of
Class A Common Stock under the Contracts, the holders of the Securities will
receive cash instead of some or all of the Class A Common Stock. The amount of
cash will be based on the average market price of the Class A Common Stock
during the twenty business days before the cash is delivered. The number of
shares of Class A Common Stock or amount of cash that will be delivered in
exchange for the Securities will be adjusted if the Company takes certain
actions that have the effect of combining, splitting or diluting the value of
the Class A Common Stock.
MODIFICATIONS TO DELIVERY REQUIREMENTS. In some circumstances, the holders
of the Securities may receive cash, other common equity securities or other
property instead of or in addition to the Class A Common Stock, or the holders
of the Securities may receive some or all of the Class A Common Stock, cash or
other securities on a date other than July __, 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 Class A Common Stock
under its Contract. If a Seller decides to deliver cash instead of
Class A 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".
4
<PAGE> 7
o If the Company merges with another entity, the Company is liquidated,
or certain similar events occur, holders of Securities may receive
other common equity securities, cash or other property equal to the
value of the other consideration received by the Company's
stockholders in that transaction, rather than shares of Class A Common
Stock. If at least 30% of the consideration received by the Company's
stockholders in the merger consists of cash or cash equivalents, then
the 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, 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 Class A Common
Stock. In this case, the holders of Securities will receive both
shares of Class A Common Stock and shares of the other issuer, or cash
equal to the value of those shares. For further detail, please see
"Investment Objective and Policies-The 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 Class A Common Stock, cash or other
common equity securities, instead of receiving the Class A 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 Class A 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
Ameritrade Holding Corporation (the "Company"), founded in 1975, is a
leading provider of online discount brokerage services that provides its retail
brokerage services through its wholly-owned subsidiaries Ameritrade and
Accutrade. The Company also provides clearing and
5
<PAGE> 8
execution services to Ameritrade and Accutrade, as well as to independent
broker-dealers and other entities, through its subsidiary Advanced Clearing, and
provides wholesale discount brokerage services to depository institutions
through its subsidiary AmeriVest.
The Company has prepared a prospectus that describes the Company and the
Class A Common Stock (the "Company Prospectus"). The Company Prospectus appears
as Annex A to this prospectus.
The Company files reports, proxy statements and other information with the
Securities and Exchange Commission (the "SEC"), as described below under "Where
You Can Find More Information on Ameritrade". The Company is not affiliated with
the Trust and will not receive any of the proceeds from the sale of the
Securities.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The Trust will be treated as a grantor trust under the U.S. federal income
tax laws. This means that under these laws, each holder will be treated as if it
owned directly its proportionate share of the assets held by the Trust.
Similarly, income and original issue discount received by the Trust will
generally be treated as income of the holders.
Under the U.S. federal income tax laws, the U.S. Treasury securities held
by the Trust will be treated as having "original issue discount" that will
accrue over the term of the U.S. Treasury securities. However, when the Trust
actually receives cash on these U.S. Treasury securities, these cash payments
will not be included in the holders' income. Instead, these payments will reduce
the holders' aggregate tax basis in the Securities. A holder will have taxable
gain or loss if the Trust receives cash instead of Class A Common Stock.
Holders should be aware that the Trust's assets could be characterized
differently under the federal income tax laws. Other characterizations could
require holders to include more interest in 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
Class A Common Stock falls significantly or the financial condition of
the Company suffers. The holders will bear the entire amount of any
decrease in the value of the Class A Common Stock.
o Similarly, the Trust will not dispose of the U.S. Treasury securities
before they mature or the Trust terminates, whichever comes first,
even if their value falls significantly.
o If the price of Class A Common Stock rises, a holder of a Security
will not receive all of this increase in value. Holders will not
receive any of this increase if the average market price of the Class
A Common Stock at the Exchange Date is below $______. Holders will
receive only ____% of any increase in the value of the Class A Common
Stock over $____. On the other hand, holders of Securities will bear
all of any decrease in the value of the Class A Common Stock.
o The distributions on the Securities will be higher than the annual
dividends, if any, paid on the Class A Common Stock in the past year.
However, the distributions on the Securities will
6
<PAGE> 9
remain fixed. As a result, to the extent dividends are paid on the
Class A Common Stock and if the dividend on the Class A Common Stock
is raised, the distributions on the Securities may then be lower than
the dividends paid on the Class A Common Stock.
o The number of shares of Class A Common Stock or amount of cash that
holders may receive on the Exchange Date will be adjusted if the
Company takes certain actions that have the effect of combining,
splitting or diluting the value of the Class A Common Stock. The
number of shares to be received by holders may not be adjusted for
other events that may adversely affect the price of the Class A Common
Stock, such as offerings of Class A Common Stock for cash or in
connection with acquisitions.
o The only assets held by the Trust will be the U.S. Treasury securities
and the 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 Class A Common Stock in
the secondary market. The trading prices of the Class A Common Stock
will be influenced by the Company's operating results and prospects
and by economic, financial and other factors and market conditions.
The trading prices of the Securities will also be affected by
fluctuations in interest rates and other factors that are difficult to
predict and beyond the Trust's control.
o There can be no assurance that a secondary market will develop for the
Securities. If a secondary market does develop, there can be no
assurance that it will provide the holders with liquidity for their
investment or that it will continue for the life of the Securities.
o Holders of the Securities will not be entitled to any rights with
respect to the Class A Common Stock unless they actually receive Class
A Common Stock in exchange for the Securities. For example, holders of
Securities will not be entitled to vote the shares of Class A Common
Stock or receive dividends.
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.
7
<PAGE> 10
DISCLOSURE REQUIRED BY 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
<TABLE>
<S> <C>
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%
====
</TABLE>
- ---------------
(a) See "Underwriting".
(b) See "The Trust". The Trust will be internally managed; consequently,
there will be no separate investment advisory fee paid by the Trust.
[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
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 $300 and assuming (1) no
annual expenses and (2) a 5% annual return throughout the period................... $300 $300
</TABLE>
8
<PAGE> 11
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
April 30, 1999 under a trust agreement, which was amended and restated as of
July __, 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
July __, 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);
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<PAGE> 12
o instruct the Trust's paying agent to pay the distributions on the
Securities;
o prepare, mail, file and publish all notices, proxies, reports, tax
returns and other documents for the Trust, or direct the Trust's
paying agent to do so, and keep the Trust's books and records;
o select and engage an independent investment banking firm (after
consultation with the 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
July __, 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 Class A 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 July __, 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.
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<PAGE> 13
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 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 Class A 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
11
<PAGE> 14
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.
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 Class A Common Stock (or cash equal to the value of some or all
of those shares). The number of shares, or amount of cash, that a holder will
receive in exchange for a single Security will vary, depending on the average
market price of the Class A Common Stock over the twenty business days before
the Exchange Date. The value of the Class A Common Stock (or cash or Marketable
Securities received in lieu of Class A Common Stock) that will be received by a
holder under the Securities may be more or less than the amount the holder paid
for the Securities.
To achieve its investment objective, the Trust will use the proceeds of the
Securities to buy and hold:
o a portfolio of stripped U.S. Treasury securities that will mature
during each quarter through July __, 2002; and
o the Contracts.
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<PAGE> 15
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 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 Class A 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 discount brokerage industry, which is the industry in which
the Company operates. The Trust is not permitted to purchase restricted
securities.
THE COMPANY AND THE CLASS A COMMON STOCK
The Company, founded in 1975, is a leading provider of online discount
brokerage services that provides its retail brokerage services through its
wholly-owned subsidiaries Ameritrade and Accutrade. The Company also provides
clearing and execution services to Ameritrade and Accutrade, as well as to
independent broker-dealers and other entities, through its subsidiary Advanced
Clearing, and provides wholesale discount brokerage services to depository
institutions through its subsidiary AmeriVest.
The Company provides technology-based brokerage services to retail
investors through a variety of electronic mediums, primarily the Internet. The
Company provides services to a broad market of self-directed retail investors
who are value conscious. The Company's goal is to provide its online discount
brokerage customers the best execution using the best information at the best
value. The Company was the first brokerage firm to offer touch-tone trading in
1988 and the first to offer trading over the Internet in 1994.
The key elements of the Company's business strategy are to:
o Establish Ameritrade as the dominant brand in online trading
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<PAGE> 16
o Focus on online discount brokerage services
o Expand its capacity and infrastructure to meet expected increases in
trading volume
o Continue to offer innovative technologies and service enhancements to
its customers
o Be the lowest cost provider of quality brokerage services
o Expand its access to international customers
The Company completed the initial public offering of the Class A Common
Stock on March 7, 1997, at a price per share of $15.00. Since March 4, 1997, the
Class A Common Stock has been quoted on The Nasdaq National Market under the
symbol "AMTD". The following table shows for the periods indicated the high and
low closing sabs prices per share of the Class A Common Stock as reported by
The Nasdaq National Market. The Company has never paid dividends on the Class A
Common Stock. As of July __, 1999, there were ____ record holders of the Class A
Common Stock, including The Depository Trust Company, which holds shares of
Class A Common Stock on behalf of an indeterminate number of beneficial owners.
<TABLE>
<CAPTION>
HIGH LOW
----------- ---------
<S> <C> <C>
Fiscal Year Ended September 26, 1997
Second Quarter (since March 4, 1997)................... $ 1.88 $ 1.35
Third Quarter.......................................... $ 1.53 $ 0.98
Fourth Quarter ........................................ $ 2.24 $ 1.22
Fiscal Year Ended September 25, 1998
First Quarter.......................................... $ 3.25 $ 1.50
Second Quarter......................................... $ 2.59 $ 1.86
Third Quarter.......................................... $ 2.74 $ 1.91
Fourth Quarter......................................... $ 4.47 $ 2.16
Fiscal Year Ended September 24, 1999
First Quarter.......................................... $ 6.50 $ 1.88
Second Quarter......................................... $ 22.50 $ 5.00
Third Quarter..........................................
</TABLE>
Holders will not be entitled to any rights with respect to the Class A
Common Stock (including voting rights and rights to receive dividends or other
distributions on the Class A Common Stock) unless they actually receive shares
of Class A Common Stock in exchange for the Securities.
14
<PAGE> 17
The Company files reports, proxy statements and other information with the
SEC, as described below under "Where You Can Find More Information on
Ameritrade". The Company is not affiliated with the Trust and will not receive
any of the proceeds from the sale of the Securities.
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 Class
A Common Stock equal to the product of the Exchange Rate (as defined below)
times the initial number of shares of Class A Common Stock covered by that
Contract. The aggregate initial number of shares of Class A 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 Class A 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.
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 Class A 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 Class A Common Stock or cash
that will be received by the holder of each Security that remains outstanding on
the Exchange Date.
All matters relating to the administration of the 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 Class A Common Stock on the Exchange
Date:
o If the Average Market Price is less than $_______ (the "Appreciation
Threshold Price") but equal to or greater than $_____ (the "Initial
Price"), the Exchange Rate will be the number of shares of Class A
Common Stock having a value (determined at the Average Market Price)
equal to the Initial Price.
o If the Average Market Price is equal to or greater than the
Appreciation Threshold Price, the Exchange Rate will be _______ shares
of Class A Common Stock.
o If the Average Market Price is less than the Initial Price, the
Exchange Rate will be one share of Class A Common Stock.
This formula will be adjusted if the Company takes certain steps that combine,
split or dilute the value of the Class A Common Stock. See "-The
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 Class A Common Stock to any holder, the Trust will
instead deliver cash equal to the value of that fraction of a share.
15
<PAGE> 18
The "Average Market Price" per share of Class A Common Stock on any date
means the average Closing Price of a share of Class A Common Stock on the 20
Trading Days immediately before but not including that date. The Average Market
Price will be calculated in a different manner if a Seller carries out a
Rollover Offering (as defined below), as described under "-Cash Settlement;
Rollover Offerings".
The "Closing Price" of the Class A Common Stock (or any other common equity
security) on any date means the closing sale price (or, if no closing sale price
is reported, the last reported sale price) of that security as reported on the
NYSE Consolidated Tape on that date or, if the security is not listed for
trading on the NYSE on that date, as reported in the composite transactions for
the principal United States national or regional securities exchange on which
the security is so listed, or if the security is not listed on a United States
national or regional securities exchange on that date, as reported by the Nasdaq
National Market or, if the security is not reported by that market on that date,
the last quoted bid price for the security in the over-the-counter market as
reported by the National Quotation Bureau or any similar organization. However,
if any event that results in an adjustment to the number of shares of Class A
Common Stock deliverable under the 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.
For illustrative purposes only, the following chart shows the number of
shares of Class A Common Stock that a holder would receive for each Security at
various Average Market Prices. The chart assumes that there would be no
adjustments to the number of shares of Class A Common Stock deliverable under
the Contracts by reason of the occurrence of any of the events described under
"-The Contracts-Dilution Adjustments" 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 Class A Common
Stock:
<TABLE>
<CAPTION>
NUMBER OF SHARES
AVERAGE MARKET PRICE OF CLASS A COMMON STOCK
OF CLASS A COMMON STOCK PER SECURITY
----------------------- -----------------------
<S> <C>
</TABLE>
EXTENSION AND ACCELERATION OF THE EXCHANGE DATE AT THE OPTION OF A SELLER.
Each Seller has the right to extend the Exchange Date under that Seller's
Contract to October __, 2002. If a Seller extends the Exchange Date, that Seller
will not be required to deliver the shares of Class A Common Stock or cash under
the Contract until October __, 2002. However, once a Seller extends the Exchange
Date, the Seller can then accelerate the delivery of shares or
16
<PAGE> 19
cash to any date between July __, 2002 and October __, 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 Class A Common Stock covered
by those Sellers' Contracts. For example, if the Exchange Date is extended to
October __, 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 July __, 2002 and October
__, 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 October __, 2002 and then accelerated to September __, 2002 (i.e.,
two-thirds of the time between July __, 2002 and October __, 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 Class A 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 Class A Common Stock, the amount of that cash will be equal
to the value, based on the Average Market Price at the Exchange Date, of the
number of shares that the Seller would otherwise be required to deliver on the
Exchange Date.
A Seller may choose to deliver cash, instead of shares of Class A Common
Stock, in connection with a "Rollover Offering". A "Rollover Offering" is a
reoffering or refinancing of Securities effected by a Seller not earlier than
July __, 2002, by means of a completed public offering or offerings or another
similar offering (which may include one or more exchange offers) by or on behalf
of the Seller. If a Seller chooses to carry out a Rollover Offering, the
"Average Market Price" will be the Closing Price per share of Class A Common
Stock on the Trading Day immediately before the date that the Rollover Offering
is priced (the "Pricing Date") or, if the Rollover Offering is priced after 4:00
P.M., New York City time, on the Pricing Date, the Closing Price per share on
the Pricing Date.
If 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 Class A Common
Stock in shares of that stock, (ii) subdivides or splits its outstanding shares
of Class A Common Stock, (iii) combines its outstanding shares of Class A Common
Stock into a smaller number of shares, or (iv) issues by reclassification of its
shares of Class A Common Stock any shares of other common stock of the Company.
In any such event, the Exchange Rate will be adjusted as follows: for each share
of Class A Common Stock that would have been deliverable under a Security upon
exchange before the adjustment, the holder of that Security will receive the
number of shares of Class A
17
<PAGE> 20
Common Stock (or, in the case of a reclassification referred to in clause (iv)
above, the number of shares of other common stock of the Company issued pursuant
to that reclassification), or the fraction of such shares, that a stockholder
who held one share of Class A Common Stock immediately before that event would
be entitled solely by reason of that event to hold immediately after that event.
In addition, if the Company issues rights or warrants to all holders of
Class A Common Stock entitling them to purchase shares of Class A Common Stock
at a price per share less than the Then-Current Market Price (as defined below)
of the Class A Common Stock (other than rights to purchase Class A Common Stock
pursuant to a plan for the reinvestment of dividends or interest), then the
Exchange Rate will be adjusted pursuant to the following formula:
A = ER x OS + AS
-------
OS + PS
where
ER = the Exchange Rate before the adjustment;
OS = the number of shares of Class A Common Stock outstanding immediately
before the time (determined as described below) the adjustment is
effected by reason of the issuance of those rights or warrants;
AS = the number of additional shares of Class A Common Stock offered for
purchase pursuant to those rights or warrants; and
PS = the number of additional shares of Class A Common Stock that the
aggregate offering price of the total number of shares of Class A
Common Stock so offered for purchase would purchase at the
Then-Current Market Price.
To the extent that, after expiration of those rights or warrants, any of the
shares of Class A Common Stock offered by such rights or warrants are not
actually delivered, the Exchange Rate will be further adjusted to equal the
Exchange Rate that would have been in effect if the foregoing adjustment had
been made upon the basis of delivery of only the number of shares of Class A
Common Stock actually delivered.
The "Then-Current Market Price" of the Class A Common Stock, for the
purpose of making any dilution adjustment, means the average Closing Price per
share of Class A Common Stock for the five Trading Days immediately before the
time that adjustment is effected (or, in the case of an adjustment effected at
the opening of business on the business day after a record date, as described
below, immediately before the earlier of the time the adjustment is effected and
the related "ex-date" on which the shares of Class A Common Stock first trade
regular way on their principal market without the right to receive the relevant
dividend, distribution or issuance).
In addition, if the Company pays a dividend or makes a distribution to all
holders of Class A Common Stock of evidences of its indebtedness or other
non-cash assets (excluding any stock dividends or distributions in shares of
Class A Common Stock described above and any Spin-Off Distributions (as defined
below)) or issues to all holders of Class A Common Stock rights or warrants to
subscribe for or purchase any of its securities (other than rights or warrants
referred to in the second paragraph of this subsection), then the Exchange Rate
will be adjusted pursuant to the following formula:
A = ER x T
-----
T - V
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<PAGE> 21
where
ER = the Exchange Rate before the adjustment;
T = the Then-Current Market Price per share of Class A Common Stock; and
V = the fair market value (as determined by a nationally recognized
independent investment banking firm retained for this purpose by the
Administrator) as of the time the adjustment is effected of the
portion of those evidences of indebtedness, non-cash assets or rights
or warrants applicable to one share of Class A Common Stock.
In addition, if the Company distributes cash, other than any Permitted
Dividend (as defined below), any cash distributed in consideration of fractional
shares of Class A Common Stock and any cash distributed in a Reorganization
Event (as defined below), by dividend or otherwise, to all holders of Class A
Common Stock or makes an Excess Purchase Payment (as defined below), then the
Exchange Rate will be adjusted pursuant to the following formula:
A = ER x T
-----
T - D
where
ER = the Exchange Rate before the adjustment;
T = the Then-Current Market Price per share of Class A Common Stock on
the record date for that distribution; and
D = the amount of that distribution applicable to one share of Class A
Common Stock that would not be a Permitted Dividend or, in the case of
an Excess Purchase Payment, the aggregate amount of that Excess
Purchase Payment divided by the number of outstanding shares of Class
A Common Stock on that record date.
For purposes of these adjustments,
(a) the term "Permitted Dividend" means any quarterly cash dividend on the
Class A Common Stock, other than a quarterly cash dividend that
exceeds the immediately preceding quarterly cash dividend, and then
only to the extent that the per share amount of that dividend results
in an annualized dividend yield on the Class A Common Stock above
______%; and
(b) the term "Excess Purchase Payment" means the excess, if any, of (i)
the cash and the value (as determined by a nationally recognized
independent investment banking firm retained for this purpose by the
Administrator) of all other consideration paid by the Company with
respect to one share of Class A Common Stock acquired in a tender
offer or exchange offer by the Company, over (ii) the Then-Current
Market Price per share of Class A Common Stock.
If any adjustment in the Exchange Rate must be made pursuant to the
formulas described above, corresponding adjustments will be made to the Initial
Price and the Appreciation Threshold Price.
Dilution adjustments will be effected: (i) in the case of any dividend,
distribution or issuance described above, as of the opening of business on the
business day after the record date for determination of holders of Class A
Common Stock entitled to receive that dividend, distribution or issuance or, if
the announcement of any such dividend, distribution or issuance is after that
19
<PAGE> 22
record date, at the time that dividend, distribution or issuance is announced by
the Company; (ii) in the case of any subdivision, split, combination or
reclassification described above, on the effective date of that transaction;
(iii) in the case of any Excess Purchase Payment for which the Company
announces, at or before the time it commences the relevant share repurchase, the
repurchase price for those shares to be repurchased, on the date of that
announcement; and (iv) in the case of any other Excess Purchase Payment, on the
date that the holders of Class A Common Stock become entitled to payment with
respect to that Excess Purchase Payment. There will be no adjustment under the
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 Class A
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 Class A 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 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,
20
<PAGE> 23
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 Class A 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
TV = the Transaction Value.
Similarly, the Appreciation Threshold Price will be adjusted pursuant to the
following formula:
A = ATP x MS
--
TV
21
<PAGE> 24
where
ATP = the Appreciation Threshold Price before the adjustment;
MS = the Value of a share of the Marketable Securities; and
TV = the Transaction Value.
The Exchange Rate will be adjusted pursuant to the following formula:
A = ER x SC
--
MS
where
ER = the Exchange Rate (computed on the basis of the adjusted Initial
Price and Appreciation Threshold Price and the Average Market Price of
the Marketable Securities);
SC = the aggregate Value of the Marketable Securities included in the
Merger Consideration received in exchange for a single share of Class
A Common Stock; and
MS = the Value of a share of the Marketable Securities.
For purposes of the foregoing formulas, "Value" means (i) in respect of
cash, the amount of such cash; (ii) in respect of any property other than cash
or Marketable Securities, an amount equal to the market value on the date the
Reorganization Event is consummated (as determined by a nationally recognized
independent investment banking firm retained for this purpose by the
Administrator); and (iii) in respect of any share of Marketable Securities, an
amount equal to the average Closing Price per share of those Marketable
Securities for the 20 Trading Days immediately before the date the
Reorganization Event is consummated.
A "Reorganization Event" is (A) any consolidation or merger of the Company,
or any surviving entity or subsequent surviving entity of the Company (a
"Company Successor"), with or into another entity (other than a merger or
consolidation in which the Company is the continuing corporation and in which
the Class A Common Stock outstanding immediately before the merger or
consolidation is not exchanged for cash, securities or other property of the
Company or another corporation), (B) any sale, transfer, lease or conveyance to
another corporation of the property of the Company or any Company Successor as
an entirety or substantially as an entirety, (C) any statutory exchange of
securities of the Company or any Company Successor with another corporation
(other than in connection with a merger or acquisition) or (D) any liquidation,
dissolution or winding up of the Company or any Company Successor.
"Transaction Value" means the sum of (i) for any cash received in the
Reorganization Event, the amount of such cash received per share of Class A
Common Stock, (ii) for any property other than cash or Marketable Securities
received in the Reorganization Event, an amount equal to the market value on the
date the Reorganization Event is consummated of the property received per share
of Class A Common Stock (as determined by a nationally recognized independent
investment banking firm retained for this purpose by the Administrator) and
(iii) for any Marketable Securities received in the Reorganization Event, an
amount equal to the average Closing Price per share of those Marketable
Securities for the 20 Trading Days immediately before the Exchange Date (or, in
the case of a Cash Merger, for the 20 Trading Days immediately before the date
the Reorganization Event is consummated) multiplied by the number of those
Marketable Securities received for each share of Class A Common Stock.
22
<PAGE> 25
The number of shares of Marketable Securities included in the calculation
of Transaction Value for purposes of the preceding clause (iii) will be adjusted
if a dilution event of the type described under "--Dilution Adjustments" occurs
with respect to the issuer of the Marketable Securities between the time of the
Reorganization Event and the Exchange Date.
"Marketable Securities" means any common equity securities (whether voting
or non-voting) listed on a U.S. national or regional securities exchange or
reported by the NASDAQ National Market.
No dilution adjustments will be made for events, other than those described
above, such as offerings of Class A Common Stock (other than through the
issuance of rights or warrants described above) for cash or in connection with
acquisitions.
SPIN-OFF DISTRIBUTIONS. If the Company makes a "Spin-Off Distribution"
during the term of the Contracts, then the Seller under each Contract will be
required to deliver on the Exchange Date, together with each share of Class A
Common Stock delivered under the Contract, the number of Marketable Securities
distributed in respect of a single share of Class A Common Stock in that
Spin-Off Distribution. After the Company makes such a distribution, the "Closing
Price" of Class A Common Stock, for purposes of calculating the Exchange Rate
and for all other purposes under the Contracts, will be determined by reference
to (A) the Closing Price per share of the Class A Common Stock and (B) the
product of (x) the Closing Price per share of the spun-off Marketable Securities
and (y) the number of shares of such Marketable Securities distributed per share
of Class A Common Stock in the Spin-Off Distribution. The number of shares of
Marketable Securities that the Seller is required to deliver, and the formula
for determining the "Closing Price" in the preceding sentence, will be adjusted
if any event that would, if it had occurred with respect to the Class A Common
Stock or the Company, have required an adjustment pursuant to the provisions
described under "-Dilution Adjustments" occurs with respect to those Marketable
Securities or their issuer between the time of the Spin-Off Distribution and the
Exchange Date.
A "Spin-Off Distribution" means a distribution by the Company to holders of
Class A Common Stock of Marketable Securities issued by an issuer other than the
Company.
COLLATERAL ARRANGEMENTS; ACCELERATION UPON DEFAULT BY 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 Class A 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 Class
A 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 July __, 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 requiring a dilution adjustment under the Contracts occurs. If the
Reorganization Event is a Cash Merger, the collateral in respect of a
23
<PAGE> 26
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 Class A 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
Class A 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 Class A Common Stock, or for Marketable Securities received in a
Reorganization Event or Spin-Off Distribution, will be required to have an
aggregate market value at the time of delivery and at daily mark-to-market
valuations after that time of not less than 150% (or, from and after any
Insufficiency Determination that is not cured by the close of business on the
next business day, as described below, 200%) of the product of the market price
of the Class A Common Stock or Marketable Securities at the time of each
valuation times the number of shares of Class A Common Stock or Marketable
Securities for which those obligations are being substituted.
The Collateral Agent will promptly pay over to 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 Class A 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 Class A 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 Class A Common Stock (or shares of
Marketable Securities) at that time, failure of those U.S. Government
obligations to have a market value at that time of at least 105% of the market
price per share of Class A Common Stock (or Shares of Marketable Securities)
times the difference between (x) the maximum number of shares of Class A Common
Stock (or shares of Marketable Securities)
24
<PAGE> 27
deliverable under that Seller's Contract at that time and (y) the number of
shares of Class A Common Stock (or shares of Marketable Securities) pledged as
collateral at that time; and (C) at any time after a Reorganization Event in
which consideration other than Marketable Securities was delivered, failure of
any U.S. Government obligations pledged as collateral for Cash Delivery
Obligations to have a market value at that time of at least 105% of those Cash
Delivery Obligations, if that failure is not cured within one business day after
notice of that failure is delivered to 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 Class A Common Stock
(or, after a Reorganization Event or Spin-Off Distribution, the Marketable
Securities or cash or a combination of Marketable Securities and cash
deliverable instead of or in addition to those shares of Class A Common Stock)
then deliverable under 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 Class A 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 Class A 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 Class A Common Stock (or, after a
Reorganization Event or Spin-Off Distribution, cash or Marketable Securities, as
applicable) sufficient to meet the Seller's obligations under any Contract, the
Collateral Agent will distribute to the Trust for distribution pro rata to the
holders the market value of the Class A Common Stock and Marketable Securities
required to be delivered under that Contract, in the form of any shares of Class
A 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 Class A Common Stock is determined for one
or more (but not all) of the Trading Days during the relevant period,
those Trading Days will be disregarded in the calculation of the
market price. No additional Trading Days will be added to the
calculation period.
o If no Closing Price for the Class A Common Stock is determined for any
of the Trading Days during the relevant period, the market price will
be the most recently available Closing Price for the Class A Common
Stock before that period began.
THE SELLERS. The following table sets forth the name of each Seller, the
aggregate number of shares of Class A Common Stock beneficially owned by each
Seller as of July __, 1999, the maximum number of shares of Class A Common Stock
being sold by each Seller to the Trust pursuant to the Contracts, and the number
of shares that each Seller will retain after giving effect to such sale.
25
<PAGE> 28
<TABLE>
<CAPTION>
SHARES BENEFICIALLY MAXIMUM NUMBER NUMBER OF SHARES
OWNED PRIOR TO THE OF SHARES TO BE RETAINED AFTER
SELLER OFFERING SOLD TO THE TRUST SUCH SALE
- ------ ------------------- ----------------- ----------------
<S> <C> <C> <C>
</TABLE>
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 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 October __, 1999 to holders of record as of the preceding
business day. Distributions will then be made on January __, April __, July __
and
26
<PAGE> 29
October __ of each year to holders of record as of the preceding business day.
Part of each distribution will be treated as a tax-free return of the holder's
investment. See "-Tax Treatment of Distributions" and "Certain Federal Income
Tax Considerations-Recognition of Original Issue Discount on the U.S. Treasury
Securities".
Upon termination of the Trust, as described under the caption "The
Trust-Trust Termination", each holder will receive any remaining net assets of
the Trust.
Quarterly distributions on the Securities will consist solely of the cash
received from the U.S. Treasury securities. The Trust will not be entitled to
any dividends that may be declared on the Class A Common Stock. See "Risk
Factors-Shareholder Rights".
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 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
SECURITIES PER SECURITY SECURITY IN INCOME PER SECURITY
YEAR ------------- ------------------ ---------------- ----------------------
- ----
<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.
27
<PAGE> 30
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").
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.
28
<PAGE> 31
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 Class
A Common Stock falls significantly or the financial condition of the Company
suffers (or if, after a Reorganization Event or Spin-Off Distribution,
comparable developments occur affecting any Marketable Securities or the issuer
of those Marketable Securities).
Similarly, the Trust will not dispose of the U.S. Treasury securities held
by the Trust before they mature or the Trust terminates, whichever comes first,
even if their value falls significantly.
LIMITED OPPORTUNITY FOR INCREASE IN VALUE; RISK OF DECREASE IN VALUE OF CLASS A
COMMON STOCK
Because the Contracts allow the Sellers to deliver less than a full share
of Class A Common Stock for each outstanding Security if the Average Market
Price is higher than the Initial Price, the Securities have more limited
appreciation potential than the Class A Common Stock. If the price of Class A
Common Stock rises, a holder of a Security will not receive all of this increase
in value. Holders will not receive any of this increase if the average market
price of the Class A Common Stock at the Exchange Date is below $______. Holders
will receive only ____% of any increase in the value of the Class A Common Stock
over $____. On the other hand, holders of Securities will bear all of any
decrease in the value of the Class A Common Stock. The value of the Class A
Common Stock to be received by holders on the Exchange Date (and any cash
received in lieu of those shares) may be less than the amount paid for the
Securities. Furthermore, the Securities may trade below the value of the Class A
Common Stock if the Class A Common Stock appreciates in value.
FIXED RATE OF DISTRIBUTIONS
The distributions on the Securities will be at a fixed rate for the entire
term of the Trust. To the extent dividends are paid on the Class A Common Stock
and the dividend on the Class A Common Stock is raised, distributions on the
Securities may be lower than the dividends paid on the Class A Common Stock.
DILUTION ADJUSTMENTS
The number of shares of Class A Common Stock that holders are entitled to
receive at the termination of the Trust will be adjusted for some events, like
stock splits and combinations, stock dividends and certain other actions of the
Company that modify its capital structure. See "Investment Objective and
Policies-The Contracts-Dilution Adjustments". The number of shares to be
received by holders may not be adjusted for other events, such as offerings of
Class A Common Stock for cash or in connection with acquisitions, that may
adversely affect the price of
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<PAGE> 32
the Class A Common Stock. These other events may adversely affect the trading
price of the Securities. There can be no assurance that the Company will not
take any of the foregoing actions, or that it will not make offerings of Class A
Common Stock, or that major stockholders will not sell any Class A Common Stock,
in the future, or as to the amount of any such offerings or sales.
NON-DIVERSIFIED STATUS
The Trust is considered non-diversified under the Investment Company Act,
which means that the Trust is not limited in the proportion of its assets that
may be invested in the obligations of a single issuer. The only assets held by
the Trust will be the U.S. Treasury securities and the 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 CLASS A COMMON STOCK PRICE AND OTHER FACTORS
The Trust is a newly organized closed-end investment company with no
previous operating history and the Securities are innovative securities. It is
not possible to predict how the Securities will trade in the secondary market.
The trading prices of the Securities in the secondary market will be
directly affected by the trading prices of the Class A Common Stock in the
secondary market. The trading prices of the Class A Common Stock may fluctuate,
due to changes in the Company's financial condition, results of operations or
prospects, or because of complex and interrelated political, economic, financial
and other factors that can affect the capital markets generally, the stock
exchanges or quotation systems on which the Class A Common Stock is traded and
the market segment of which the Company is a part. The trading price of the
Securities may also fluctuate due to, among other things, fluctuations in
interest rates and other factors that are difficult to predict and beyond the
Trust's control. The Trust believes, however, that because of the yield on the
Securities and the formula for determining the number of shares of Class A
Common Stock to be delivered on the Exchange Date, the Securities will tend to
trade at a premium to the market value of the Class A Common Stock if the Class
A Common Stock price falls and at a discount to the market value of the Class A
Common Stock if the Class A Common Stock price rises. There can, however, be no
assurance that the Securities will trade at a premium to the market value of the
Class A Common Stock.
Shares of closed-end investment companies frequently trade at a discount
from net asset value. This characteristic of investments in a closed-end
investment company is a risk separate and distinct from the risk that the
Trust's net asset value will fall. The Trust cannot predict whether its shares
will trade at, below or above net asset value. The risk of purchasing
investments in a closed-end investment company that might trade at a discount
may be greater for investors who wish to sell their investments soon after
completion of an initial public offering because for those investors,
realization of a gain or loss on their investments is likely to be more
dependent upon the existence of a premium or discount than upon portfolio
performance.
LIMITED TRADING MARKET FOR SECURITIES
Goldman Sachs currently intends, but is not obligated, to make a market in
the Securities. There can be no assurance that a secondary market will develop
or, if a secondary market does develop, that it will provide the holders with
liquidity of investment or that it will continue for the life of the Securities.
Goldman Sachs may stop making a market in the Securities at any time without
notice. The Trust will apply to list the Securities on the NYSE. If that
application is accepted, there can be no assurance that the Securities will not
later be delisted or that trading in
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<PAGE> 33
the Securities on the NYSE will not be suspended. If the Securities are delisted
or suspended from trading on that exchange, the Trust will apply for listing of
the Securities on another national or regional securities exchange or for
quotation on another trading market. If the Securities are not listed or traded
on any securities exchange or trading market, or if trading of the Securities is
suspended, pricing information for the Securities may be more difficult to
obtain, and the price and liquidity of the Securities may be adversely affected.
SHAREHOLDER RIGHTS
Holders of the Securities will not be entitled to any rights with respect
to the Class A Common Stock unless and until they actually receive Class A
Common Stock in exchange for the Securities. For example, holders of Securities
will not be entitled to vote the shares of Class A Common Stock or receive
dividends.
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.
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.
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<PAGE> 34
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".
Although there is no direct authority for the treatment of the cash
distribution paid on the Securities on the extended Exchange Date, it is likely
that such distribution should not be considered income to a holder upon receipt,
but instead should be considered to reduce a holder's basis with respect to such
holder's pro rata portion of the Contract held by the Trust, by analogy to the
treatment of rebates or option premiums. If this treatment is respected, receipt
of the cash distribution on the extended Exchange Date will increase the amount
of gain (or decrease the amount of loss) recognized by a holder on a sale or
other disposition of the Contract (including a disposition pursuant to cash
settlement of such Contract) or on a subsequent sale or other disposition of the
Class A Common Stock delivered pursuant to such Contract. Because there can be
no assurance that the Internal Revenue Service will agree with this
characterization of the cash distribution paid on the extended Exchange Date,
holders are urged to consult their tax advisors concerning the tax consequences
of receiving such payment.
TAX BASIS OF THE U.S. TREASURY SECURITIES AND THE 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.
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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 Class A Common Stock or
cash, Marketable Securities or a combination of Class A Common Stock, Marketable
Securities and cash delivered to the Trust.
DISTRIBUTION OF THE CLASS A COMMON STOCK. The delivery of Class A Common
Stock to the Trust pursuant to the Contracts and the Trust's distribution of
Class A Common Stock to the holders will not be taxable to the holders. Each
holder's basis in its Class A Common Stock will be equal to its basis in its pro
rata portion of the Contracts which are settled in Class A Common Stock less the
portion of that basis allocable to any fractional shares of Class A Common Stock
for which cash is received. A holder will recognize short-term capital gain or
loss upon receipt by the Trust of cash in lieu of fractional shares of Class A
Common Stock equal to the difference between the holder's allocable portion of
the amount of cash received and the holder's basis in those fractional shares.
The holding period for the Class A Common Stock will begin on the day after it
is acquired by the Trust.
DISTRIBUTION OF CASH. If the Trust receives cash upon settlement of the
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 Class A Common Stock.
The Internal Revenue Service could conceivably seek to treat the Contracts
differently. The Internal Revenue Service might, for example, seek to treat the
cash paid to the Sellers pursuant to the Contracts as loans to the Sellers in
exchange for contingent debt obligations of the Sellers. If the Internal Revenue
Service were to prevail in making such an assertion, a holder might be required
to include original issue discount in income over the life of the Securities at
a market rate of interest for the Seller, taking account of all the relevant
facts and circumstances. In addition, a holder would be required to include
interest (rather than capital gain) in income on the Exchange Date in an amount
equal to the excess, if any, of the value of the Class A Common Stock received
on the Exchange Date (or the proceeds from cash settlement of the 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
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<PAGE> 36
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 July __, 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.
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,
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they will not offer, sell, contract to sell or otherwise dispose of any Class A
Common Stock or other securities that are substantially similar to the Class A
Common Stock, including but not limited to any securities that are convertible
or exchangeable for, or that represent the right to receive, Class A Common
Stock or any such substantially similar securities, or enter into any swap,
option future, forward or other agreement that transfers, in whole or in part,
the economic consequences of ownership of Class A 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 and the
Underwriters by Sullivan & Cromwell, New York.
EXPERTS
The financial statement included in this prospectus has been audited by
_______________, independent accountants, as stated in their opinion appearing
herein, and has been so included in reliance upon that opinion given upon the
authority of that firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION ON THE TRUST
The Trust has filed with the Securities and Exchange Commission a
Registration Statement under the Securities Act of 1933 with respect to the
Securities. You can find more information concerning the Securities and the
Trust in the Registration Statement of which this prospectus is a part. You may
read and copy the Registration Statement at the SEC's office in Washington, D.C.
Please call the SEC at 1-800-SEC-0330 for more information on their copy
charges. The Registration Statement is also available on the SEC's website
(http://www.sec.gov). The Securities will be listed on the NYSE and you may
inspect information concerning the Trust and the Securities at the offices of
the NYSE, 20 Broad Street, New York, New York 10005.
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WHERE YOU CAN FIND MORE INFORMATION ON AMERITRADE
The Company files reports, proxy statements and other information with the
Securities and Exchange Commission. Its filings are available over the Internet
at the SEC's web site (http://www.sec.gov). You may also read and copy any
document the Company files with the SEC at the SEC's public reference rooms at:
o 450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20549;
o Seven World Trade Center
13th Floor
New York, New York 10048; and
o Citicorp Center
500 West Madison Street
Suite 1400
Chicago, Illinois 60601.
Please call the SEC at 1-800-SEC-0330 for more information on the public
reference room and their copy charges. You may also inspect the reports and
other information the Company files with the SEC at the office of [NASDAQ, 1735
K STREET, N.W., WASHINGTON, D.C. 20006]
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Securityholders of Ameritrade Automatic Class A
Common Exchange Security Trust:
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of Ameritrade Automatic
Class A Common Exchange Security Trust (the "Trust") as of July __, 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
July __, 1999
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AMERITRADE AUTOMATIC COMMON EXCHANGE SECURITY TRUST
STATEMENT OF ASSETS AND LIABILITIES
JULY __, 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) Ameritrade Automatic Common Exchange Security Trust (the "Trust") was
established on April 30, 1999 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 Ameritrade Holding
Corporation (the "Sellers") relating to the Class A Common Stock of
Ameritrade Holding Corporation. 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 [JUNE O], 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
July __, 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 Class A Common Stock or Marketable
Securities on any date means the average Closing Price per share of Class A
Common Stock or Marketable Securities for the Calculation Period consisting of
the 20 Trading Days immediately prior to but not including such date; provided
that if no Closing Price for the Class A Common Stock or Marketable Securities
is determined for one or more (but not all) of such Trading Days, such Trading
Days shall be disregarded in the calculation of the Average Market Price (but no
additional Trading Days will be added to the Calculation Period). If no Closing
Price for the Class A Common Stock or Marketable Securities may be determined
for any of such Trading Days, the Average Market Price shall be the Closing
Price for the Class A Common Stock or Marketable Securities for the most recent
Trading Day prior to such 20 Trading Days for which a Closing Price for the
Class A Common Stock or Marketable Securities may be determined pursuant to the
definition of "Closing Price". Notwithstanding the foregoing, for purposes of
determining the payment required upon cash settlement of a Contract in
connection with a Rollover Offering, "Average Market Price" means the Closing
Price per share of Class A Common Stock or Marketable Securities on the Trading
Day immediately prior to the date that the Rollover Offering is priced (the
"Pricing Date") or, if the Rollover Offering is priced after 4:00 P.M., New York
City time, on the Pricing Date, the Closing Price per share on the Pricing Date.
"Beneficial Owner" means an actual purchaser of a Security, which will not
receive written confirmation from DTC of its purchases of Securities but which
is expected to receive written confirmations providing details of the
transactions, as well as periodic statements of its holdings, from the Direct or
Indirect Participants through which the Beneficial Owner purchased Securities.
"Calculation Period" means any period of Trading Days for which an average
security price must be determined pursuant to the 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 Class A 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.
"Class A Common Stock" means the Class A Common Stock, par value $0.01 per
share, of the Company.
"Closing Price" of any common equity security (including the Class A Common
Stock or any Marketable Securities) on any date of determination means the
closing sale price (or, if no closing sale price is reported, the last reported
sale price) of such common equity security as reported on the NYSE Consolidated
Tape on such date of determination or, if such common equity security is not
listed for trading on the NYSE on such date, as reported in the composite
transactions for the principal United States national or regional securities
exchange on which such common equity
39
<PAGE> 42
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 Class A Common Stock or Marketable
Securities deliverable under the Contracts, as described under "-The
Contracts-Dilution Adjustments", occurs during any Calculation Period, the
Closing Price as determined pursuant to the foregoing for each Trading Day in
the Calculation Period occurring prior to the date on which such adjustment is
effected will be appropriately adjusted to reflect the occurrence of such event.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral Agent" means [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 July
__, 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 Class A 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 Class A 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 Class A Common Stock (or shares of Marketable
Securities, as the case may be) times the difference between (x) the maximum
number of shares of Class A Common Stock (or shares of Marketable Securities)
covered by that Contract at that time and (y) the number of shares of Class A
Common Stock (or shares of Marketable Securities) pledged as collateral at that
time; and (C) at any time after a Reorganization Event in which consideration
other than Marketable Securities has been delivered, failure of any U.S.
Government obligations pledged as collateral for Cash Delivery Obligations to
have a market value at that time of at least 105% of those Cash Delivery
Obligations, if that failure is not cured within one business day after notice
of that failure is delivered to that Seller.
"Company" means Ameritrade Holding Corporation, a Delaware corporation.
"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 Class A Common Stock.
"Custodian" means [NAME OF CUSTODIAN] (or its successor) in its capacity as
Custodian under the Custodian Agreement.
40
<PAGE> 43
"Custodian Agreement" means the Custodian Agreement, dated as of July __,
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.
"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 Class A Common Stock acquired in a tender offer or exchange offer by
the Company, over (ii) the Then-Current Market Price per share of Class A Common
Stock.
"Exchange Date" means July __, 2002, subject to extension and acceleration
by the Sellers under their respective Contracts.
"Exchange Rate" means the rate of exchange of Class A Common Stock for
Securities on the Exchange Date, and will be determined as follows (adjusted in
certain events):
(i) If the Average Market Price is less than the Appreciation Threshold
Price but equal to or greater than the Initial Price, the Exchange
Rate will be a fraction (rounded upward or downward to the nearest
1/10,000th or, if there is not a nearest 1/10,000th, to the next lower
1/10,000th) equal to the Initial Price divided by the Average Market
Price.
(ii) If the Average Market Price is equal to or greater than the
Appreciation Threshold Price, the Exchange Rate will be 0.____ shares
of Class A Common Stock.
(iii) If the Average Market Price is less than the Initial Price, the
Exchange Rate will be one share of Class A Common Stock.
"holders" means the registered holders of the Securities.
"Indirect Participants" means Participants of DTC, such as securities
brokers and dealers, banks and trust companies, that clear through or maintain a
custodial relationship with a Direct Participant, either directly or indirectly.
"Initial Price" means $_______, subject to adjustment as described under
"-The 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.
41
<PAGE> 44
"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 July
__, 1999, between the Trust and [NAME OF PAYING AGENT], as transfer agent,
registrar and paying agent.
"Permitted Dividend" means any quarterly cash dividend in respect of the
Class A Common Stock, other than a quarterly cash dividend that exceeds the
immediately preceding quarterly cash dividend, and then only to the extent that
the per share amount of such dividend results in an annualized dividend yield on
the Class A Common Stock in excess of ___%.
"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 Class A 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 July __, 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 Class A Common
Exchange Securities.
"Sellers" means [J. Joe Ricketts and Marlene M. Ricketts]
"Spin-Off Distribution" means a distribution by the Company to holders of
Class A Common Stock of Marketable Securities issued by an issuer other than the
Company.
"Then-Current Market Price" of the Class A Common Stock, for the purpose of
applying any adjustment described in "Investment Objective and Policies-The
Contracts-Dilution Adjustments", means the average Closing Price per share of
Class A Common Stock for the Calculation Period consisting of five Trading Days
immediately prior to the time such adjustment is effected (or, in the case of an
adjustment effected at the opening of business on the business day after a
record date, immediately prior to the earlier of the time such adjustment is
effected and the related ex-date); provided that if no Closing Price for the
Class A Common Stock is determined for one or more (but not all) of such Trading
Days, such Trading Days will be disregarded in the calculation of the
Then-Current Market Price (but no additional Trading Days will be added to the
Calculation Period). If no Closing Price for the Class A Common Stock may be
determined for any of such Trading Days, the Then-Current Market Price shall be
the Closing Price for the Class A Common Stock for the most recent Trading Day
prior to five Trading Days for which a Closing Price for the Class A Common
42
<PAGE> 45
Stock may be determined pursuant to the definition of "Closing Price". The
ex-date with respect to any dividend, distribution or issuance shall mean the
first date on which the shares of Class A Common Stock trade regular way on
their principal market without the right to receive such dividend, distribution
or issuance.
"Trading Day" in respect of any common equity security means a day on which
such common equity security (A) is not suspended from trading on any United
States national or regional securities exchange or association or
over-the-counter market at the close of business and (B) has traded at least
once on the United States national or regional securities exchange or
association or over-the-counter market that is the primary market for the
trading of that security.
"Transaction Value" means, with respect to any Reorganization Event, the
sum of: (i) for any cash received in such Reorganization Event, the amount of
such cash received per share of Class A Common Stock; (ii) for any property
other than cash or Marketable Securities received in such Reorganization Event,
an amount equal to the market value on the date such Reorganization Event is
consummated of such property received per share of Class A Common Stock as
determined by a nationally recognized independent investment banking firm
retained for this purpose by the Administrator, whose determination shall be
final; and (iii) for any Marketable Securities received in such Reorganization
Event, an amount equal to the average Closing Price per share of these
Marketable Securities for the Calculation Period of 20 Trading Days immediately
prior to the Exchange Date (or, in the case of a Cash Merger, for the 20 Trading
Days immediately before the date the Reorganization Event is consummated),
multiplied by the number of such Marketable Securities received for each share
of Class A Common Stock; provided that if no Closing Price for such Marketable
Securities may be determined for one or more (but not all) of such Trading Days,
such Trading Days shall be disregarded in the calculation of such average
Closing Price (but no additional Trading Days shall be added to the Calculation
Period). If no Closing Price for the Marketable Securities may be determined for
any of such Trading Days, the calculation in the preceding clause (iii) will be
based on the Closing Price for the Marketable Securities for the most recent
Trading Day prior to such 20 Trading Days for which a Closing Price for the
Marketable Securities may be determined pursuant to the definition of "Closing
Price".
"Trust" means the Ameritrade Automatic Class A Common Exchange Security
Trust.
"Trust Agreement" means the trust agreement dated as of April 30, 1999
pursuant to which the Trust was formed, as amended and restated as of July __,
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
43
<PAGE> 46
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".
44
<PAGE> 47
- --------------------------------------------------------------------------------
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the Securities offered hereby, but only under
circumstances and in jurisdictions where it is lawful to do so. The information
contained in this prospectus is current only as of its date.
----------
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
Prospectus Summary......................................................
The Trust...............................................................
Use of Proceeds.........................................................
Investment Objective and Policies.......................................
Description of Securities...............................................
Risk Factors............................................................
Certain Federal Income Tax Considerations...............................
Underwriting............................................................
Validity of Securities..................................................
Experts.................................................................
Where You Can Find More
Information on the Trust..............................................
Where You Can Find More
Information on Ameritrade.............................................
Report of Independent Accountants.......................................
Statement of Assets and Liabilities.....................................
Glossary................................................................
</TABLE>
----------
Through and including ________, 1999 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these Securities, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to a dealer's obligation to deliver a prospectus when acting
as an underwriter and with respect to an unsold allotment or subscription.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
________ Securities
AMERITRADE AUTOMATIC
COMMON EXCHANGE
SECURITY TRUST
$____ Trust Automatic Common
Exchange Securities
(TRACES(TM)/(SM))
----------
PROSPECTUS
----------
GOLDMAN, SACHS & CO.
- --------------------------------------------------------------------------------
<PAGE> 48
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.
C-1
<PAGE> 49
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses to be incurred in
connection with the offering described in this Registration Statement:
<TABLE>
<S> <C>
Registration fees..................................................... $
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................................................................. $
-------
</TABLE>
ITEM 27. PERSON CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Before April 30, 1999 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
<TABLE>
<CAPTION>
NUMBER OF
TITLE OF CLASS RECORD HOLDERS
- -------------- --------------
<S> <C>
$____ Trust Automatic Common Exchange Securities...................... 1
</TABLE>
ITEM 29. INDEMNIFICATION
The Underwriting Agreement, to be filed as Exhibit 2.h to this Registration
Statement, provides for indemnification 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,
C-2
<PAGE> 50
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.
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> 51
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this amendment to
the registration statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of New York, State of New York, on the
24th day of June, 1999.
AMERITRADE AUTOMATIC COMMON
EXCHANGE SECURITY TRUST
By: /s/ Paul S. Efron
----------------------------------
Paul S. Efron
Trustee
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed below by the following person, in
the capacities and on the date indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ Paul S. Efron Principal Executive Officer, June 24, 1999
- ----------------- Principal Financial Officer,
Paul S. Efron Principal Accounting Officer and
Trustee
</TABLE>
<PAGE> 52
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------ ----------- ------
<S> <C> <C>
2.a.(i) Trust Agreement*
2.a.(ii) Form of Amended and Restated Trust Agreement**
2.d Form of Specimen Certificate of $____ Trust Automatic
Common Exchange Security (included in Exhibit 2.a.(ii))**
2.h Form of Underwriting Agreement**
2.j Form of Custodian Agreement**
2.k.(i) Form of Administration Agreement**
2.k.(ii) Form of Paying Agent Agreement**
2.k.(iii) Form of Purchase Contract**
2.k.(iv) Form of Collateral Agreement**
2.k.(v) Form of Fund Expense 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**
</TABLE>
- ----------
* Previously filed.
** To be filed by amendment.
