Exhibit 2.k.(i)
ADMINISTRATION AGREEMENT
This ADMINISTRATION AGREEMENT, dated as of this ____ day of ___, 1997,
by and between The Bank of New York, a New York banking corporation (the
"Administrator"), and Xxxxxxx X. Xxxxxx III, Xxxxx X. X'Xxxxx and Xxxxxx X.
Xxxxxxx (collectively, the "Trustees"), not in their individual capacities but
solely as Trustees of Reader's Digest Automatic Common Exchange Security Trust
(the "Trust"), a trust organized under the laws of the State of New York under
and by virtue of an Amended and Restated Trust Agreement, dated as of ___ __,
1997 (the "Trust Agreement").
W I T N E S S E T H
WHEREAS, the Trust is a non-diversified, closed-end management
investment company, as defined in the Investment Company Act of 1940 (the
"Investment Company Act"), formed to purchase and hold certain U.S. treasury
securities (the "Treasury Securities"), to enter into and hold forward purchase
contracts (the "Contracts") with one or more existing shareholders of The
Reader's Digest Association, Inc. (the "Company") and to issue Trust Automatic
Common Exchange Securities (the "Securities") in accordance with the terms and
conditions of the Trust Agreement;
WHEREAS, the Trustees desire to engage the services of the
Administrator to assume certain duties and responsibilities of the Trustees
under the Trust Agreement and the Investment Company Act and to undertake
certain services on behalf of and subject to the supervision of the Trustees as
provided herein; and
WHEREAS, the Administrator is qualified and willing to assume such
duties and responsibilities and to undertake to render such services, subject to
the supervision of the Trustees, on the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. Capitalized terms not otherwise defined herein shall
have the respective meanings specified in the Trust Agreement.
ARTICLE II
ENGAGEMENT OF ADMINISTRATOR
2.1 Engagement. The Trustees hereby engage the Administrator, and the
Administrator hereby agrees to be so engaged, to provide the services
hereinafter enumerated.
2.2 Services of Administrator. Subject to the supervision of the
Trustees, the Administrator shall effect the matters set forth further in
Sections 2.3, 2.4 and 2.5 of the Trust Agreement, to the extent such
responsibilities can lawfully be delegated to the Administrator; provided,
however, that the Administrator shall not (i) render investment advisory
services to the Trust as defined in the Investment Company Act or the Investment
Advisers Act of 1940; (ii) have the power of the Trustees to sell the Contract
or the Treasury Securities except as provided in Sections 2.5 of the Trust
Agreement; or (iii) have the power to select the independent public accountants
for the Trust. Additionally, the Administrator shall be responsible for
rendering the following services:
(a) instruct the Paying Agent to pay out of the net proceeds
of the sale of the Securities the fees and expenses of the Trust
incurred in connection with the offering of the Securities as specified
in Schedule I to the Fund Expense Agreement;
(b) instruct the Paying Agent to pay out of the net proceeds
of the sale of the Securities the fees and expenses of the Trust
incurred in connection with the organization of the Trust as specified
in Schedule I to the Fund Expense Agreement;
(c) instruct the Paying Agent to effect the transactions set
forth in Sections 2.3, 2.4 and 2.5 of the Trust Agreement and to
otherwise perform the duties of the Paying Agent referred to in the
Trust Agreement;
-2-
(d) with the approval of the Trustees, engage legal and other
professional advisors, subject to clause 2.2 (iii) above;
(e) receive all demands, bills and invoices for expenses
incurred by or on behalf of the Trust, and pay the same, or cause the
Paying Agent to pay the same, out of moneys paid to the Administrator
pursuant to the Fund Expense Agreement dated the date hereof between
Xxxxxxx, Sachs & Co., and The Bank of New York (the "Fund Expense
Agreement") but in no event out of any assets of the Trust except, as
provided in paragraphs (a) and (b) hereof, and give notice to Xxxxxxx,
Xxxxx & Co. pursuant to the Fund Indemnity Agreement dated the date
hereof between Xxxxxxx, Sachs & Co. and the Trustees (the "Fund
Indemnity Agreement") of any claim for Indemnification Expenses (as
defined in the Fund Indemnity Agreement) or any threatened claim for
Indemnification Expenses;
(f) (i) prepare and mail, file or publish, or, as appropriate,
direct the Paying Agent to prepare and mail, file or publish, any
notices, proxies, reports and other communications required to be
mailed or published pursuant to the Trust Agreement and the Investment
Company Act, (ii) keep (or cause to be kept) all the books and records
of the Trust (other than those to be kept by the Paying Agent), and
(iii) prepare (or cause to be prepared) and, as necessary, file (or
cause to be filed) any and all reports, returns and other documents as
required under the Investment Company Act, the Securities Exchange Act
of 1934, or the Code, or, as reasonably requested by the Trustees,
under any other applicable laws, rules or regulations or otherwise;
provided, however, that responsibility for the adequacy and accuracy of
any such reports, returns, etc. shall be that of the Trustees and
provided, further, that the Administrator shall have no liability for
the adequacy or accuracy of such reports, returns, etc.;
(g) at the request of the Trustees and upon being furnished
with such reasonable security and indemnity against any related expense
or liability as the Administrator may require, institute and prosecute,
in accordance with the instructions of the Trustees, legal or other
appropriate proceedings to enforce any and all rights and remedies of
the Trust;
-3-
(h) receive and review on behalf of the Trust all notices,
reports, certificates and other documents regarding the Contract and
the Treasury Securities;
(i) make all necessary arrangements with respect to meetings
of Trustees and meetings of Holders, including, without limitation, the
preparation of notices, proxies and minutes, subject to the approval of
Trustees; and
(j) in conjunction with the Trustees, determine and publish,
in such manner as the Trustees shall direct in writing, the Trust's net
asset value in accordance with the Trust's policy as set forth in the
Prospectus.
2.3 Certain Rights of the Administrator. In connection with the
performance of its duties under this Agreement, the Administrator shall not be
liable to the Trust, the Trustees or any Holder (i) for any action taken or for
refraining from taking any action hereunder except in the case of its willful
misfeasance, bad faith, gross negligence or the reckless disregard of its duties
hereunder, (ii) with respect to any action taken or omitted to be taken by it in
good faith in accordance with the directions of the Trustees or of any Trustee
or (iii) in connection with the performance of its duties under Section 2.2(j)
hereof, for good faith reliance upon information furnished by third parties
selected by the Administrator with due care. The Administrator shall under no
circumstances be liable for any indirect or consequential damages. The
Administrator may consult with counsel and the written advice of such counsel
shall be full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in reliance
thereon. The Administrator may perform its duties and exercise its rights
hereunder either directly or by or through agents or attorneys appointed with
due care by it but shall be liable for the acts and omissions of such persons to
the same extent as if the functions had been performed by the Administrator
itself. Without limiting the generality of the preceding sentence, the
Administrator (i) at its own cost, may select and employ independent accountants
acceptable to the Trustees (other than the independent public accountants
referred to in clause (iii) of Section 2.2 of this Agreement and Section 2.2(d)
of the Trust Agreement) to keep the financial books and records of the Trust, to
prepare the financial statements of the Trust and to prepare Trust tax returns,
and (ii) should the Trustees fail to do so, may select and engage attorneys
acceptable to the Trustees to prepare annual, semiannual and
-4-
periodical reports, notices of meetings and proxy statements, annual reports to
holders of the Securities and other documents required under the Investment
Company Act or the Securities Exchange Act of 1934, as amended.
2.4 Power of Attorney. The Trust hereby appoints the Administrator,
acting through any duly appointed officer, its attorney-in-fact and agent for
the purpose of performing the duties prescribed in Section 2.2(f)(iii) and
2.2(i).
2.5 Delivery of Certain Documents. The Trust will deliver to the
Administrator, promptly following the execution hereof: (a) a complete conformed
copy of the registration statement of the Trust under the Securities Act of
1933, as amended, and the Investment Company Act, including all amendments,
exhibits and schedules thereto and (b) the XXXXX access codes (Central Index
Key, CIK Confirmation Code, Password and Password Modification Access Code)
employed to file such registration statement.
ARTICLE III
COMPENSATION OF ADMINISTRATOR
3.1 Compensation. For services to be rendered by the Administrator
pursuant to this Agreement, and for the payment of Trust expenses pursuant to
Section 2.2(e) hereof, the Administrator shall receive only such fees and
expenses as shall be paid to it pursuant to the terms of the Fund Expense
Agreement and shall have no recourse to the assets of the Trust for the payment
of any such amounts. No provision of this Administration Agreement shall require
the Administrator to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it.
3.2 Additional Services. If and to the extent that the Trustees shall
request the Administrator to render services for the Trust, other than those to
be rendered by the Administrator hereunder, and if the Administrator agrees to
render such services, such additional services shall be compensated separately
on terms to be agreed upon between the Administrator and the Trustees from time
to time.
-5-
ARTICLE IV
TERMINATION
4.1 Termination.
(a) This Agreement shall terminate immediately upon written notice of
termination from the Trustees to the Administrator if any of the following
events shall occur:
(i) If the Administrator shall violate any provision
of this Agreement, the Trust Agreement, or the Investment Company Act,
and after notice of such violation, shall not cure such default within
30 days; or
(ii) If the Administrator shall be adjudged bankrupt or
insolvent by a court of competent juris diction, or an order shall be
made by a court of competent jurisdiction for the appointment of a
receiver, liquidator, or trustee of the Administrator, or of all or
substantially all of its property by reason of the foregoing, or
approving any petition filed against the Administrator for its
reorganization, and such adjudication or order shall remain in force or
unstayed for a period of 30 days; or
(iii) If the Administrator shall institute proceedings for
voluntary bankruptcy, or shall file a petition seeking reorganization
under the Federal bankruptcy laws, or for relief under any law for the
relief of debtors, or shall consent to the appointment of a receiver of
the Administrator or of all or substantially all of its property, or
shall make a general assignment for the benefit of its creditors, or
shall admit in writing its inability to pay its debts generally as they
become due; or
(iv) Upon the voluntary or involuntary dissolution of the
Administrator, or unless the Trust shall have given its prior written
consent thereto, the merger or consolidation of the Administrator with
any other entity.
If any of the events specified in clauses (ii), (iii) or (iv) of this
Section 4.1(a) shall occur, the Administrator shall give immediate written
notice thereof to the Trustees.
-6-
(b) Notwithstanding anything to the contrary contained herein, this
Agreement shall terminate immediately (i) upon termination of the Trust
Agreement, (ii) upon termination of the Paying Agent Agreement, (iii) upon
termination of the Collateral Agreement, (iv) upon termination of the Custodian
Agreement or (v) upon the resignation or removal of the Custodian.
(c) This Agreement may be terminated by either party hereto without
penalty upon 60 days' prior written notice to the other party hereto; provided
that neither party hereto may terminate this Agreement pursuant to this Section
4.1(c) unless a successor Administrator shall have been appointed and shall have
accepted the duties of the Administrator. If, within 30 days after notice by the
Administrator to the Trustees of termination of this Agreement, no successor
Administrator shall have been selected and accepted the duties of the
Administrator, the Administrator may apply to a court of competent jurisdiction
for the appointment of a successor Administrator.
4.2 Effect of Termination. The Administrator shall forthwith upon
termination of this Agreement deliver to the Trustees any records or other
property of the Trust then in the possession or custody of the Administrator.
Any obligation to indemnify the Administrator pursuant to Section 6.6 shall
survive the termination of this Agreement.
ARTICLE V
RECORDS AND REPORTS
5.1 Books and Records; Inspection and Copying. The Administrator shall
keep (or cause to be kept) appropriate, and reasonably detailed and accurate,
books and records of all its activities pursuant to this Agreement. The Trustees
shall have the right to inspect such books and records during the
Administrator's normal business hours upon reasonable request, and to make
copies of the same at the expense of the Trust.
5.2 Access to Information. The Administrator shall make available to
each of the Trustees all information it receives and compiles with respect to
the Contracts and the Treasury Securities, the monies available to the Trust,
the financial condition of the Trust and all other relevant matters concerning
the Trust.
-7-
ARTICLE VI
MISCELLANEOUS
6.1 Binding Effect. Any corporation into which the Administrator may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the
Administrator shall be a party, shall be the successor Administrator hereunder
and under the Trust Agreement without the execution or filing of any paper,
instrument or further act to be done on the part of the parties hereto, provided
that such corporation meets the requirements set forth in the Trust Agreement
and provided further that the Trustees have given their prior written consent to
the Administrator with respect to any such merger, conversion or consolidation.
This Agreement shall be binding on and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
6.2 Entire Agreement. This Agreement contains the entire agreement
between the parties with respect to the matters contained herein and supersedes
all prior agreements or understandings, whether oral or written. This Agreement
shall not be amended, changed, modified, or discharged, in whole or in part,
except by an instrument in writing signed by both parties hereto, or their
respective successors or permitted assigns.
6.3 Notices. Any notice, report or other communication required or
permitted to be given hereunder shall be in writing, and shall, unless some
other method of giving such notice, report or other communication is accepted by
the party to whom it is to be given or is required by the Trust Agreement or the
Investment Company Act, be given by being mailed by U.S. first class mail,
certified or registered, return receipt requested, postage prepaid, to the
following addresses of the parties hereto:
The Trust: Reader's Digest Automatic Common
Exchange Security Trust
c/o Xxxxxx X. Xxxxxxx, Managing
Trustee
Xxxxxxx & Associates
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
-8-
The Administrator: The Bank of New York
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Any party may at any time give written notice to the other party that
it wishes to change its address for the purposes of this Section 6.3.
6.4 Applicable Law. The provisions of this Agreement shall be construed
and interpreted in accordance with the laws of the State of New York as at the
time in effect except to the extent such law is preempted by federal law.
6.5 Non-assignability. This Agreement and the rights and obligations of
the parties hereunder may not be assigned or delegated by either party without
the prior written consent of the other party.
6.6 Indemnification. The Trustees shall indemnify and hold the
Administrator harmless from and against any loss, damages, cost or expense
(including the costs of investigation, preparation for and defense of legal
and/or administrative proceedings related to a claim against it and reasonable
attorneys' fees and disbursements), liability or claim incurred by reason of any
inaccuracy in information furnished to the Administrator by the Trustees, or any
act or omission in the course of, connected with or arising out of any services
to be rendered hereunder, provided that the Administrator shall not be
indemnified and held harmless from and against any such loss, damages, cost,
expense, liability or claim incurred by reason of its willful misfeasance, bad
faith, or gross negligence in the performance of its duties, or its reckless
disregard of its duties and obligations hereunder.
6.7. Provisions of Law to Control. This Agreement shall be subject to
the applicable provisions of the Investment Company Act and the rules and
regulations of the Commission thereunder. To the extent that any provisions
herein contained conflict with any applicable provisions of the Investment
Company Act or such rules and regulations, the latter shall control.
6.8. Counterparts. This Agreement may be signed in counterparts with
all counterparts constituting one and the same instrument.
-9-
IN WITNESS WHEREOF the parties have hereunto executed this
Administration Agreement as of the day and year first above written.
TRUSTEES
_______________________________________
Xxxxxxx X. Xxxxxx III,
as Trustee
_______________________________________
Xxxxx X. X'Xxxxx,
as Trustee
_______________________________________
Xxxxxx X. Xxxxxxx,
as Trustee
THE BANK OF NEW YORK
By_____________________________________
Name:
Title:
-10-
