FORM OF AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this _____ day of _____________, 1999, by and between Pilgrim Government
Securities Income Fund, Inc. (the "Acquiring Fund"), a California corporation
with its principal place of business at 00 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000,
Xxxxxxx, Xxxxxxx 00000 and Pilgrim Government Securities Fund (the "Acquired
Fund"), a Massachusetts business trust with its principal place of business at
00 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxx 00000.
This Agreement is intended to be and is adopted as a plan of reorganization
and liquidation within the meaning of Section 368(a)(1) of the United States
Internal Revenue Code of 1986, as amended (the "Code"). The reorganization (the
"Reorganization") will consist of the transfer of all of the assets of the
Acquired Fund to the Acquiring Fund in exchange solely for Class A, Class B,
Class C and Class T voting shares of common stock (no par value per share) of
the Acquiring Fund (the "Acquiring Fund Shares"), the assumption by the
Acquiring Fund of all liabilities of the Acquired Fund, and the distribution of
the Acquiring Fund Shares to the shareholders of the Acquired Fund in complete
liquidation of the Acquired Fund as provided herein, all upon the terms and
conditions hereinafter set forth in this Agreement.
WHEREAS, the Acquired Fund and the Acquiring Fund are open-end, registered
investment companies of the management type and the Acquired Fund owns
securities which generally are assets of the character in which the Acquiring
Fund is permitted to invest;
WHEREAS, the Directors of the Acquiring Fund have determined that the
exchange of all of the assets of the Acquired Fund for Acquiring Fund Shares and
the assumption of all liabilities of the Acquired Fund by the Acquiring Fund is
in the best interests of the Acquiring Fund and its shareholders and that the
interests of the existing shareholders of the Acquiring Fund would not be
diluted as a result of this transaction; and
WHEREAS, the Trustees of the Acquired Fund, have determined that the
exchange of all of the assets of the Acquired Fund for Acquiring Fund Shares and
the assumption of all liabilities of the Acquired Fund by the Acquiring Fund is
in the best interests of the Acquired Fund and its shareholders and that the
interests of the existing shareholders of the Acquired Fund would not be diluted
as a result of this transaction;
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND TO THE ACQUIRING FUND IN EXCHANGE
FOR THE ACQUIRING FUND SHARES, THE ASSUMPTION OF ALL ACQUIRED FUND
LIABILITIES AND THE LIQUIDATION OF THE ACQUIRED FUND
1.1 Subject to the requisite approval of the Acquired Fund and the
Acquiring Fund shareholders and the other terms and conditions herein set forth
and on the basis of the representations and warranties contained herein, the
Acquired Fund agrees to transfer all of the Acquired Fund's assets, as set forth
in paragraph 1.2, to the Acquiring Fund, and the Acquiring Fund agrees in
exchange therefor: (i) to deliver to the Acquired Fund the number of full and
fractional Class A, Class B, Class C and Class T Acquiring Fund Shares
determined by dividing the value of the Acquired Fund's net assets with respect
to each class, computed in the manner and as of the time and date set forth in
paragraph 2.1, by the net asset value of one Acquiring Fund Share of the same
class, computed in the manner and as of the time and date set forth in paragraph
2.2; and (ii) to assume all liabilities of the Acquired Fund. Such transactions
shall take place at the closing provided for in paragraph 3.1 (the "Closing").
1.2 The assets of the Acquired Fund to be acquired by the Acquiring Fund
shall consist of all assets and property, including, without limitation, all
cash, securities, commodities and futures interests and dividends or interests
receivable that are owned by the Acquired Fund and any deferred or prepaid
expenses shown as an asset on the books of the Acquired Fund on the closing date
provided for in paragraph 3.1 (the "Closing Date").
1.3 The Acquired Fund will endeavor to discharge all of its known
liabilities and obligations prior to the Closing Date. The Acquiring Fund shall
also assume all of the liabilities of the Acquired Fund, whether accrued or
contingent, known or unknown, existing at the Valuation Date. On or as soon as
practicable prior to the Closing Date, the Acquired Fund will declare and pay to
its shareholders of record one or more dividends and/or other distributions so
that it will have distributed substantially all (and in no event less than 98%)
of its investment company taxable income (computed without regard to any
deduction for dividends paid) and realized net capital gain, if any, for the
current taxable year through the Closing Date.
1.4 Immediately after the transfer of assets provided for in paragraph 1.1,
the Acquired Fund will distribute to the Acquired Fund's shareholders of record
with respect to each class of its shares, determined as of immediately after the
close of business on the Closing Date (the "Acquired Fund Shareholders"), on a
pro rata basis within that class, the Acquiring Fund Shares of the same class
received by the Acquired Fund pursuant to paragraph 1.1, and will completely
liquidate. Such distribution and liquidation will be accomplished, with respect
to each class of the Acquired Fund's shares, by the transfer of the Acquiring
Fund Shares then credited to the account of the Acquired Fund on the books of
the Acquiring Fund to open accounts on the share records of the Acquiring Fund
in the names of the Acquired Fund Shareholders. The aggregate net asset value of
Class A, Class B, Class C and Class T Acquiring Fund Shares to be so credited to
Class A, Class B, Class C and Class T Acquired Fund Shareholders shall, with
respect to each class, be equal to the aggregate net asset value of the Acquired
Fund shares of that same class owned by such shareholders on the Closing Date.
All issued and outstanding shares of the Acquired Fund will simultaneously be
canceled on the books of the Acquired Fund, although share certificates
representing interests in Class A, Class B, Class C and Class T shares of the
Acquired Fund will represent a number of the same class of Acquiring Fund Shares
after the Closing Date, as determined in accordance with Section 2.3. The
Acquiring Fund shall not issue certificates representing the Class A, Class B,
Class C and Class T Acquiring Fund Shares in connection with such exchange.
1.5 Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be issued in
the manner described in the Acquiring Fund's then-current prospectus and
statement of additional information.
1.6 Any reporting responsibility of the Acquired Fund including, but not
limited to, the responsibility for filing of regulatory reports, tax returns, or
other documents with the Securities and Exchange Commission (the "Commission"),
any state securities commission, and any federal, state or local tax authorities
or any other relevant regulatory authority, is and shall remain the
responsibility of the Acquired Fund.
2. VALUATION
2.1 The value of the Acquired Fund's assets to be acquired by the Acquiring
Fund hereunder shall be the value of such assets computed as of immediately
after the close of business of the New York Stock Exchange and after the
declaration of any dividends on the Closing Date (such time and date being
hereinafter called the "Valuation Date"), using the valuation procedures set
forth in the Acquiring Fund's Articles of Incorporation and then-current
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prospectus or statement of additional information, and valuation procedures
established by the Acquiring Fund's Board of Directors.
2.2 The net asset value of a Class A, Class B, Class C and Class T
Acquiring Fund Share shall be the net asset value per share computed with
respect to that class as of immediately after the close of business of the New
York Stock Exchange and after the declaration of any dividends on the Valuation
Date, using the valuation procedures set forth in the Acquiring Fund's Articles
of Incorporation and then-current prospectus or statement of additional
information and valuation procedures established by the Acquiring Fund's Board
of Directors.
2.3 The number of the Class A, Class B, Class C and Class T Acquiring Fund
Shares to be issued (including fractional shares, if any) in exchange for the
Acquired Fund's assets shall be determined with respect to each such class by
dividing the value of the net assets with respect to the Class A, Class B, Class
C and Class T shares of the Acquired Fund, as the case may be, determined using
the same valuation procedures referred to in paragraph 2.1, by the net asset
value of an Acquiring Fund Share, determined in accordance with paragraph 2.2.
2.4 All computations of value shall be made by the Acquiring Fund's
designated record keeping agent.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be March ___, 2000, or such other date as the
parties may agree to in writing. All acts taking place at the Closing shall be
deemed to take place simultaneously as of immediately after the close of
business on the Closing Date unless otherwise agreed to by the parties. The
close of business on the Closing Date shall be as of 4:00 p.m., Eastern Time.
The Closing shall be held at the offices of the Acquiring Fund or at such other
time and/or place as the parties may agree.
3.2 The Acquiring Company shall direct State Street Bank and Trust Company,
as custodian for the Acquired Fund (the "Custodian"), to deliver, at the
Closing, a certificate of an authorized officer stating that (i) the Acquired
Fund's portfolio securities, cash, and any other assets ("Assets") shall have
been delivered in proper form to the Acquiring Fund within two business days
prior to or on the Closing Date, and (ii) all necessary taxes in connection with
the delivery of the Assets, including all applicable federal and state stock
transfer stamps, if any, have been paid or provision for payment has been made.
The Acquired Fund's portfolio securities represented by a certificate or other
written instrument shall be presented by the Acquired Fund Custodian to the
custodian for the Acquiring Fund for examination no later than five business
days preceding the Closing Date, and shall be transferred and delivered by the
Acquired Fund as of the Closing Date for the account of the Acquiring Fund duly
endorsed in proper form for transfer in such condition as to constitute good
delivery thereof. The Acquired Fund's portfolio securities and instruments
deposited with a securities depository, as defined in Rule 17f-4 under the
Investment Company Act of 1940, as amended (the "1940 Act"), shall direct the
Custodian to deliver as of the Closing Date by book entry in accordance with the
customary practices of such depositories and the custodian for Acquiring Fund.
The cash to be transferred by the Acquired Fund shall be delivered by wire
transfer of federal funds on the Closing Date.
3.3 The Acquired Fund shall direct DST Systems, Inc. (the "Transfer
Agent"), on behalf of the Acquired Fund, to deliver at the Closing a certificate
of an authorized officer stating that its records contain the names and
addresses of the Acquired Fund Shareholders and the number and percentage
ownership of outstanding Class A, Class B, Class C and Class T shares owned by
each such shareholder immediately prior to the Closing. The Acquiring Fund shall
issue and deliver a confirmation evidencing the Acquiring Fund Shares to be
credited on the Closing Date to the Secretary of the Acquired Fund, or provide
evidence satisfactory to the Acquired Fund that such Acquiring Fund Shares have
been credited to the Acquired Fund's account on the books of the Acquiring Fund.
At the Closing each party shall deliver to the other such bills of sale, checks,
assignments, share certificates, if any, receipts or other documents as such
other party or its counsel may reasonably request.
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3.4 In the event that on the Valuation Date (a) the New York Stock Exchange
or another primary trading market for portfolio securities of the Acquiring Fund
or the Acquired Fund shall be closed to trading or trading thereupon shall be
restricted, or (b) trading or the reporting of trading on such Exchange or
elsewhere shall be disrupted so that, in the judgment of the Board of Directors
of the Acquiring Fund and Board of Trustees of the Acquired Fund, accurate
appraisal of the value of the net assets of the Acquiring Fund or the Acquired
Fund is impracticable, the Closing Date shall be postponed until the first
business day after the day when trading shall have been fully resumed and
reporting shall have been restored.
4. REPRESENTATIONS AND WARRANTIES
4.1 The Acquired Fund represents and warrants to the Acquiring Fund as
follows:
(a) The Acquired Fund is a business trust duly organized and validly
existing under the laws of the Commonwealth of Massachusetts with power under
the Acquired Fund's Declaration of Trust to own all of its properties and assets
and to carry on its business as it is now being conducted;
(b) The Acquired Fund is a registered investment company classified as a
management company of the open-end type, and its registration with the
Commission as an investment company under the 1940 Act, and the registration of
its shares under the Securities Act of 1933, as amended ("1933 Act"), are in
full force and effect;
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquired Fund of
the transactions contemplated herein, except such as have been obtained under
the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act")
and the 1940 Act and such as may be required by state securities laws;
(d) The current prospectus and statement of additional information of the
Acquired Fund and each prospectus and statement of additional information of the
Acquired Fund used during the three years previous to the date of this Agreement
conforms or conformed at the time of its use in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and does not or did not at the time of
its use include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
materially misleading;
(e) On the Closing Date, the Acquired Fund will have good and marketable
title to the Acquired Fund's assets to be transferred to the Acquiring Fund
pursuant to paragraph 1.2 and full right, power, and authority to sell, assign,
transfer and deliver such assets hereunder free of any liens or other
encumbrances, and upon delivery and payment for such assets, the Acquiring Fund
will acquire good and marketable title thereto, subject to no restrictions on
the full transfer thereof, including such restrictions as might arise under the
1933 Act, other than as disclosed to the Acquiring Fund;
(f) The Acquired Fund is not engaged currently, and the execution, delivery
and performance of this Agreement will not result, in (i) a material violation
of its Declaration of Trust or By-Laws or of any agreement, indenture,
instrument, contract, lease or other undertaking to which the Acquired Fund is a
party or by which it is bound, or (ii) the acceleration of any obligation, or
the imposition of any penalty, under any agreement, indenture, instrument,
contract, lease, judgment or decree to which the Acquired Fund is a party or by
which it is bound;
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(g) The Acquired Fund has no material contracts or other commitments (other
than this Agreement) that will be terminated with liability to it prior to the
Closing Date;
(h) Except as otherwise disclosed in writing to and accepted by the
Acquiring Fund, no litigation or administrative proceeding or investigation of
or before any court or governmental body is presently pending or, to its
knowledge, threatened against the Acquired Fund or any of its properties or
assets that, if adversely determined, would materially and adversely affect its
financial condition or the conduct of its business. The Acquired Fund knows of
no facts which might form the basis for the institution of such proceedings and
is not a party to or subject to the provisions of any order, decree or judgment
of any court or governmental body which materially and adversely affects its
business or its ability to consummate the transactions herein contemplated;
(i) The Statement of Assets and Liabilities, Statements of Operations and
Changes in Net Assets, and Schedule of Investments of the Acquired Fund at
December 31, 1998 have been audited by PricewaterhouseCoopers LLP, independent
accountants, and are in accordance with generally accepted accounting principles
("GAAP") consistently applied, and such statements (copies of which have been
furnished to the Acquiring Fund) present fairly, in all material respects, the
financial condition of the Acquired Fund as of such date in accordance with
GAAP, and there are no known contingent liabilities of the Acquired Fund
required to be reflected on a balance sheet (including the notes thereto) in
accordance with GAAP as of such date not disclosed therein;
(j) Since December 31, 1998, there has not been any material adverse change
in the Acquired Fund's financial condition, assets, liabilities or business,
other than changes occurring in the ordinary course of business, or any
incurrence by the Acquired Fund of indebtedness maturing more than one year from
the date such indebtedness was incurred, except as otherwise disclosed to and
accepted by the Acquiring Fund. For the purposes of this subparagraph (j), a
decline in net asset value per share of the Acquired Fund due to declines in
market values of securities in the Acquired Fund's portfolio, the discharge of
Acquired Fund liabilities, or the redemption of Acquired Fund Shares by
shareholders of the Acquired Fund shall not constitute a material adverse
change;
(k) On the Closing Date, all Federal and other tax returns and reports of
the Acquired Fund required by law to have been filed by such date (including any
extensions) shall have been filed and are or will be correct in all material
respects, and all Federal and other taxes shown as due or required to be shown
as due on said returns and reports shall have been paid or provision shall have
been made for the payment thereof, and to the best of the Acquired Fund's
knowledge, no such return is currently under audit and no assessment has been
asserted with respect to such returns;
(l) For each taxable year of its operation (including the taxable year
ending on the Closing Date), the Acquired Fund has met the requirements of
Subchapter M of the Code for qualification as a regulated investment company and
has elected to be treated as such, has been eligible to and has computed its
federal income tax under Section 852 of the Code, and will have distributed all
of its investment company taxable income and net capital gain (as defined in the
Code) that has accrued through the Closing Date, and before the Closing Date
will have declared dividends sufficient to distribute all of its investment
company taxable income and net capital gain for the period ending on the Closing
Date;
(m) All issued and outstanding shares of the Acquired Fund are, and on the
Closing Date will be, duly and validly issued and outstanding, fully paid and
non-assessable by the Acquired Fund (recognizing that, under Massachusetts law,
it is theoretically possible that shareholders of the Acquired Fund could, under
certain circumstances, be held personally liable for obligations of the Acquired
Fund) and have been offered and sold in every state and the District of Columbia
in compliance in all material respects with applicable registration requirements
of the 1933 Act and state securities laws. All of the issued and outstanding
shares of the Acquired Fund will, at the time of Closing, be held by the persons
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and in the amounts set forth in the records of the Transfer Agent, on behalf of
the Acquired Fund, as provided in paragraph 3.3. The Acquired Fund does not have
outstanding any options, warrants or other rights to subscribe for or purchase
any of the shares of the Acquired Fund, nor is there outstanding any security
convertible into any of the Acquired Fund shares;
(n) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Closing Date by all necessary action, if any,
on the part of the Trustees of the Acquired Fund, and, subject to the approval
of the shareholders of the Acquired Fund, this Agreement will constitute a valid
and binding obligation of the Acquired Fund, enforceable in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors' rights and to
general equity principles;
(o) The information to be furnished by the Acquired Fund for use in
registration statements, proxy materials and other documents filed or to be
filed with any federal, state or local regulatory authority (including the
National Association of Securities Dealers, Inc.), which may be necessary in
connection with the transactions contemplated hereby, shall be accurate and
complete in all material respects and shall comply in all material respects with
Federal securities and other laws and regulations thereunder applicable thereto;
and
(p) The proxy statement of the Acquired Fund (the "Acquired Fund Proxy
Statement") to be included in the Registration Statement referred to in
paragraph 5.6, insofar as it relates to the Acquired Fund, will, on the
effective date of the Registration Statement and on the Closing Date (i) not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which such statements were made, not materially
misleading provided, however, that the representations and warranties in this
subparagraph (p) shall not apply to statements in or omissions from the Acquired
Fund Proxy Statement and the Registration Statement made in reliance upon and in
conformity with information that was furnished by the Acquiring Fund for use
therein, and (ii) comply in all material respects with the provisions of the
1933 Act, the 1934 Act and the 1940 Act and the rules and regulations
thereunder.
4.2 The Acquiring Fund represents and warrants to the Acquired Fund as
follows:
(a) The Acquiring Fund is a corporation duly organized and validly existing
under the laws of the State of California with power under the Acquiring Fund's
Articles of Incorporation to own all of its properties and assets and to carry
on its business as it is now being conducted;
(b) The Acquiring Fund is a registered investment company classified as a
management company of the open-end type, and its registration with the
Commission as an investment company under the 1940 Act and the registration of
its shares under the 1933 Act are in full force and effect;
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquiring Fund of
the transactions contemplated herein, except such as have been obtained under
the 1933 Act, the 1934 Act and the 1940 Act and such as may be required by state
securities laws;
(d) The current prospectus and statement of additional information of the
Acquiring Fund and each prospectus and statement of additional information of
the Acquiring Fund used during the three years previous to the date of this
Agreement conforms or conformed at the time of its use in all material respects
to the applicable requirements of the 1933 Act and the 1940 Act and the rules
and regulations of the Commission thereunder and does not or did not at the time
of its use include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
materially misleading;
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(e) On the Closing Date, the Acquiring Fund will have good and marketable
title to the Acquiring Fund's assets, free of any liens of other encumbrances,
except those liens or encumbrances as to which the Acquired Fund has received
notice and necessary documentation at or prior to the Closing;
(f) The Acquiring Fund is not engaged currently, and the execution,
delivery and performance of this Agreement will not result, in (i) a material
violation of the Acquiring Fund's Articles of Incorporation or By-Laws or of any
agreement, indenture, instrument, contract, lease or other undertaking to which
the Acquiring Fund is a party or by which it is bound, or (ii) the acceleration
of any obligation, or the imposition of any penalty, under any agreement,
indenture, instrument, contract, lease, judgment or decree to which the
Acquiring Fund is a party or by which it is bound;
(g) Except as otherwise disclosed in writing to and accepted by the
Acquired Fund, no litigation or administrative proceeding or investigation of or
before any court or governmental body is presently pending or, to its knowledge,
threatened against the Acquiring Fund or any of its properties or assets that,
if adversely determined, would materially and adversely affect its financial
condition or the conduct of its business. The Acquiring Fund knows of no facts
which might form the basis for the institution of such proceedings and is not a
party to or subject to the provisions of any order, decree or judgment of any
court or governmental body which materially and adversely affects its business
or its ability to consummate the transactions herein contemplated;
(h) The Statement of Assets and Liabilities, Statements of Operations and
Changes in Net Assets and Schedule of Investments of the Acquiring Fund at June
30, 1999 have been audited by KPMG LLP, independent accountants, and is in
accordance with GAAP consistently applied, and such statements (copies of which
have been furnished to the Acquired Fund) present fairly, in all material
respects, the financial condition of the Acquiring Fund as of such date in
accordance with GAAP, and there are no known contingent liabilities of the
Acquiring Fund required to be reflected on a balance sheet (including the notes
thereto) in accordance with GAAP as of such date not disclosed therein;
(i) Since June 30, 1999, there has not been any material adverse change in
the Acquiring Fund's financial condition, assets, liabilities or business, other
than changes occurring in the ordinary course of business, or any incurrence by
the Acquiring Fund of indebtedness maturing more than one year from the date
such indebtedness was incurred, except as otherwise disclosed to and accepted by
the Acquired Fund. For purposes of this subparagraph (i), a decline in net asset
value per share of the Acquiring Fund due to declines in market values of
securities in the Acquiring Fund's portfolio, the discharge of Acquiring Fund
liabilities, or the redemption of Acquiring Fund Shares by shareholders of the
Acquiring Fund, shall not constitute a material adverse change;
(j) On the Closing Date, all Federal and other tax returns and reports of
the Acquiring Fund required by law to have been filed by such date (including
any extensions) shall have been filed and are or will be correct in all material
respects, and all Federal and other taxes shown as due or required to be shown
as due on said returns and reports shall have been paid or provision shall have
been made for the payment thereof, and to the best of the Acquiring Fund's
knowledge no such return is currently under audit and no assessment has been
asserted with respect to such returns;
(k) For each taxable year of its operation, the Acquiring Fund has met the
requirements of Subchapter M of the Code for qualification as a regulated
investment company and has elected to be treated as such, has been eligible to
and has computed its federal income tax under Section 852 of the Code, has
distributed all of its investment company taxable income and net capital gain
(as defined in the Code) for periods ending prior to the Closing Date, and will
do so for the taxable year including the Closing Date;
(l) All issued and outstanding Acquiring Fund Shares are, and on the
Closing Date will be, duly and validly issued and outstanding, fully paid and
non-assessable and have been offered and sold in every state and the District of
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Columbia in compliance in all material respects with applicable registration
requirements of the 1933 Act and state securities laws. The Acquiring Fund does
not have outstanding any options, warrants or other rights to subscribe for or
purchase any Acquiring Fund Shares, nor is there outstanding any security
convertible into any Acquiring Fund Shares;
(m) The execution, delivery and performance of this Agreement will have
been fully authorized prior to the Closing Date by all necessary action, if any,
on the part of the Directors of the Acquiring Fund and this Agreement will
constitute a valid and binding obligation of the Acquiring Fund, enforceable in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or affecting
creditors' rights and to general equity principles;
(n) The Class A, Class B, Class C and Class T Acquiring Fund Shares to be
issued and delivered to the Acquired Fund, for the account of the Acquired Fund
Shareholders, pursuant to the terms of this Agreement, will on the Closing Date
have been duly authorized and, when so issued and delivered, will be duly and
validly issued Acquiring Fund Shares, and will be fully paid and non-assessable;
(o) The information to be furnished by the Acquiring Fund for use in the
registration statements, proxy materials and other documents that may be
necessary in connection with the transactions contemplated hereby shall be
accurate and complete in all material respects and shall comply in all material
respects with Federal securities and other laws and regulations applicable
thereto; and
(p) That insofar as it relates to the Acquiring Fund, the Registration
Statement relating to the Acquiring Fund Shares issuable hereunder, the Acquired
Fund Proxy Statement and the proxy statement of the Acquiring Fund (the latter
referred to herein as the "Acquiring Fund Proxy Statement") to be included in
the Registration Statement, and any amendment or supplement to the foregoing,
will, from the effective date of the Registration Statement through the date of
the meeting of shareholders of the Acquired Fund contemplated therein (i) not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which such statements were made, not materially
misleading provided, however, that the representations and warranties in this
subparagraph (p) shall not apply to statements in or omissions from the
Registration Statement and the Acquiring Fund Proxy Statement made in reliance
upon and in conformity with information that was furnished by the Acquired Fund
for use therein, and (ii) comply in all material respects with the provisions of
the 1933 Act, the 1934 Act and the 1940 Act and the rules and regulations
thereunder.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1 The Acquiring Fund and the Acquired Fund each will operate its business
in the ordinary course between the date hereof and the Closing Date, it being
understood that such ordinary course of business will include the declaration
and payment of customary dividends and distributions, and any other distribution
that may be advisable.
5.2 Each of the Acquired Fund and the Acquiring Fund will call a meeting of
its shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated herein.
5.3 The Acquired Fund covenants that the Class A, Class B, Class C and
Class T Acquiring Fund Shares to be issued hereunder are not being acquired for
the purpose of making any distribution thereof, other than in accordance with
the terms of this Agreement.
5.4 The Acquired Fund will assist the Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requests concerning the beneficial
ownership of the Acquired Fund shares.
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5.5 Subject to the provisions of this Agreement, the Acquiring Fund and the
Acquired Fund will each take, or cause to be taken, all action, and do or cause
to be done, all things reasonably necessary, proper or advisable to consummate
and make effective the transactions contemplated by this Agreement.
5.6 The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus")
which will include the Acquired Fund Proxy Statement referred to in paragraph
4.1(p) and the Acquiring Fund Proxy Statement referred to in paragraph 4.2(p),
all to be included in a Registration Statement on Form N-14 of the Acquiring
Fund (the "Registration Statement"), in compliance with the 1933 Act, the 1934
Act and the 1940 Act, in connection with the meeting of the shareholders of the
Acquired Fund and the Acquiring Fund to consider approval of this Agreement and
the transactions contemplated herein.
5.7 As soon as is reasonably practicable after the Closing, the Acquired
Fund will make a liquidating distribution to its shareholders consisting of the
Class A, Class B, Class C and Class T Acquiring Fund Shares received at the
Closing.
5.8 The Acquiring Fund and the Acquired Fund shall each use its reasonable
best efforts to fulfill or obtain the fulfillment of the conditions precedent to
effect the transactions contemplated by this Agreement as promptly as
practicable.
5.9 The Acquired Fund covenants that it will, from time to time, as and
when reasonably requested by the Acquiring Fund, execute and deliver or cause to
be executed and delivered all such assignments and other instruments, and will
take or cause to be taken such further action as the Acquiring Fund may
reasonably deem necessary or desirable in order to vest in and confirm the
Acquiring Fund's title to and possession of all the assets and otherwise to
carry out the intent and purpose of this Agreement.
5.10 The Acquiring Fund will use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and such of
the state blue sky or securities laws as may be necessary in order to continue
its operations after the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to consummate the transactions
provided for herein shall be subject, at the Acquired Fund's election, to the
performance by the Acquiring Fund of all the obligations to be performed by it
hereunder on or before the Closing Date, and, in addition thereto, the following
further conditions:
6.1 All representations and warranties of the Acquiring Fund contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date, with the same force and effect as if
made on and as of the Closing Date;
6.2 The Acquiring Fund shall have delivered to the Acquired Fund a
certificate executed in its name by its President or Vice President and its
Treasurer or Assistant Treasurer, in a form reasonably satisfactory to the
Acquired Fund and dated as of the Closing Date, to the effect that the
representations and warranties of the Acquiring Fund made in this Agreement are
true and correct at and as of the Closing Date, except as they may be affected
by the transactions contemplated by this Agreement and as to such other matters
as the Acquired Fund shall reasonably request;
6.3 The Acquiring Fund shall have performed all of the covenants and
complied with all of the provisions required by this Agreement to be performed
or complied with by the Acquiring Fund on or before the Closing Date; and
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6.4 The Acquired Fund and the Acquiring Fund shall have agreed on the
number of full and fractional Acquiring Fund Shares of each Class to be issued
in connection with the Reorganization after such number has been calculated in
accordance with paragraph 1.1.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to complete the transactions provided
for herein shall be subject, at the Acquiring Fund's election to the performance
by the Acquired Fund of all of the obligations to be performed by it hereunder
on or before the Closing Date and, in addition thereto, the following
conditions:
7.1 All representations and warranties of the Acquired Fund contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date, with the same force and effect as if
made on and as of the Closing Date;
7.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets and liabilities, as of the Closing Date,
certified by the Treasurer of the Acquired Fund;
7.3 The Acquired Fund shall have delivered to the Acquiring Fund on the
Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer or Assistant Treasurer, in form and substance
satisfactory to the Acquiring Fund and dated as of the Closing Date, to the
effect that the representations and warranties of the Acquired Fund made in this
Agreement are true and correct at and as of the Closing Date, except as they may
be affected by the transactions contemplated by this Agreement, and as to such
other matters as the Acquiring Fund shall reasonably request;
7.4 The Acquired Fund shall have performed all of the covenants and
complied with all of the provisions required by this Agreement to be performed
or complied with by the Acquired Fund on or before the Closing Date;
7.5 The Acquired Fund and the Acquiring Fund shall have agreed on the
number of full and fractional Acquiring Fund Shares of each Class to be issued
in connection with the Reorganization after such number has been calculated in
accordance with paragraph 1.1;
7.6 The Acquired Fund shall have declared and paid a distribution or
distributions prior to the Closing that, together with all previous
distributions, shall have the effect of distributing to its shareholders (i) all
of its investment company taxable income and all of its net realized capital
gains, if any, for the period from the close of its last fiscal year to 4:00
p.m. Eastern time on the Closing; and (ii) any undistributed investment company
taxable income and net realized capital gains from any period to the extent not
otherwise already distributed.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND THE
ACQUIRED FUND
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Acquired Fund or the Acquiring Fund, the other
party to this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement:
8.1 The Agreement and the transactions contemplated herein shall have been
approved by (i) the requisite vote of the holders of the outstanding shares of
the Acquired Fund in accordance with the provisions of the Acquired Fund's
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Declaration of Trust, By-Laws, applicable Massachusetts law and the 1940 Act,
and certified copies of the resolutions evidencing such approval shall have been
delivered to the Acquiring Fund, and (ii) the requisite vote of the holders of
the outstanding shares of the Acquiring Fund in accordance with the provisions
of the Acquiring Company's Articles of Incorporation, By-Laws, applicable
California law and the 1940 Act, and certified copies of the resolutions
evidencing such approval shall have been delivered to the Acquired Fund.
Notwithstanding anything herein to the contrary, neither the Acquiring Fund nor
the Acquired Fund may waive the conditions set forth in this paragraph 8.1;
8.2 On the Closing Date no action, suit or other proceeding shall be
pending or, to its knowledge, threatened before any court or governmental agency
in which it is sought to restrain or prohibit, or obtain damages or other relief
in connection with, this Agreement or the transactions contemplated herein;
8.3 All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities deemed necessary by
the Acquiring Fund or the Acquired Fund to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties of the
Acquiring Fund or the Acquired Fund, provided that either party hereto may for
itself waive any of such conditions;
8.4 The Registration Statement shall have become effective under the 1933
Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending, threatened
or contemplated under the 1933 Act; and
8.5 The parties shall have received the opinion of Dechert Price & Xxxxxx
addressed to the Acquiring Fund and Acquired Fund substantially to the effect
that, based upon certain facts, assumptions, and representations, the
transaction contemplated by this Agreement shall constitute a tax-free
reorganization for Federal income tax purposes, unless, based on the
circumstances existing at the time of the Closing, Dechert Price & Xxxxxx
determines that the transaction contemplated by this Agreement does not qualify
as such. The delivery of such opinion is conditioned upon receipt by Dechert
Price & Xxxxxx of representations it shall request of the Acquiring Fund and the
Acquired Fund. Notwithstanding anything herein to the contrary, neither the
Acquiring Fund nor the Acquired Fund may waive the condition set forth in this
paragraph 8.5.
9. BROKERAGE FEES AND EXPENSES
9.1 The Acquiring Fund represents and warrants to the other that there are
no brokers or finders entitled to receive any payments in connection with the
transactions provided for herein.
9.2 The expenses relating to the proposed Reorganization will be paid by
the Acquired Fund and the Acquiring Fund pro rata based upon the relative net
assets of the Funds as of the close of business on the record date for
determining the shareholders of the Acquired Fund and the Acquiring Fund
entitled to vote on the Reorganization. The costs of the Reorganization shall
include, but not be limited to, costs associated with obtaining any necessary
order of exemption from the 1940 Act, preparation of the Registration Statement,
printing and distributing the Acquiring Fund's prospectus and the Acquired
Fund's and Acquiring Fund's proxy materials, legal fees, accounting fees,
securities registration fees, and expenses of holding shareholders' meetings.
Notwithstanding any of the foregoing, expenses will in any event be paid by the
party directly incurring such expenses if and to the extent that the payment by
the other party of such expenses would result in the disqualification of such
party as a "regulated investment company" within the meaning of Section 851 of
the Code.
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10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Acquiring Fund and the Acquired Fund agree that neither party has
made any representation, warranty or covenant not set forth herein and that this
Agreement constitutes the entire agreement between the parties.
10.2 The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated hereunder. The
covenants to be performed after the Closing shall survive the Closing.
11. TERMINATION
This Agreement and the transactions contemplated hereby may be terminated
and abandoned by mutual agreement of the parties hereto or by either party by
resolution of the party's Board of Trustees or Directors, at any time prior to
the Closing Date, if circumstances should develop that, in the opinion of such
Board, make proceeding with the Agreement inadvisable.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the authorized officers of the
Acquired Fund and the Acquiring Fund; provided, however, that following the
meeting of the shareholders of the Acquiring Fund and the Acquired Fund called
pursuant to paragraph 5.2 of this Agreement, no such amendment may have the
effect of changing the provisions for determining the number of the Class A,
Class B, Class C and Class T Acquiring Fund Shares to be issued to the Acquired
Fund Shareholders under this Agreement to the detriment of such shareholders
without their further approval.
13. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy or certified mail addressed to the Acquiring Fund or to the
Acquired Fund, 00 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxx 00000,
attn: Xxxxx X. Xxxxxxxx, in each case with a copy to Dechert Price & Xxxxxx,
0000 Xxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000, attn: Xxxxxxx X. Xxxxxx.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY
14.1 The Article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware without regard to its principles of conflicts
of laws.
14.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
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14.5 It is expressly agreed that the obligations of the parties hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents, or employees of the Acquired Fund personally, but shall bind only the
trust property of the Acquired Fund, as provided in the Declaration of Trust of
the Acquired Fund. The execution and delivery by such officers shall not be
deemed to have been made by any of them individually or to impose any liability
on any of them personally, but shall bind only the trust property of the
Acquired Fund as provided in its Declaration of Trust.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by its President or Vice President and its seal to be affixed
thereto and attested by its Secretary or Assistant Secretary.
Attest: PILGRIM GOVERNMENT SECURITIES
INCOME FUND, INC.
By:
-------------------------------- -------------------------------
SECRETARY
Its:
-------------------------------- -------------------------------
Attest: PILGRIM GOVERNMENT SECURITIES
INCOME FUND, INC.
By:
-------------------------------- -------------------------------
SECRETARY
Its:
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