EXHIBIT 99.4
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made as of this
23rd day of January, 2002, by and between XXXXXX XXXXXXX INSTITUTIONAL FUND
TRUST, a Pennsylvania business trust ("the Trust") on behalf of the following
Portfolios of the Trust:
(i) Investment Grade Fixed Income Portfolio
(ii) High Yield Portfolio
(iii) Core Plus Fixed Income Portfolio
(each an "Acquiring Fund") and
(iv) Special Purpose Fixed Income (a "Target Fund") and
XXXXXX XXXXXXX INSTITUTIONAL FUND, INC. (the "Company"), a Maryland corporation
on behalf of the following Portfolios of the Company:
(i) Fixed Income III Portfolio and
(ii) High Yield II Portfolio (each a "Target Fund")
Where appropriate, references to the Acquiring Fund mean to the Trust, on
behalf of the Acquiring Fund and references to the Target Fund mean the Company,
on behalf of the Fixed Income III Portfolio or High Yield II Portfolio or the
Trust, on behalf of the Special Purpose Fixed Income Portfolio.
This Agreement is intended to be and is adopted as a "plan of
reorganization" within the meaning of Treasury Regulations Section 1.368-2(g),
for a reorganization under Section 368(a)(1) of the Internal Revenue Code of
1986, as amended (the "Code"). The reorganization ("Reorganization") will
consist of the transfer to the Acquiring Fund of substantially all of the assets
of the of the Target Fund in exchange for the assumption by the Acquiring Fund
of all stated liabilities of the Target Fund and the issuance by the Acquiring
Fund of shares of beneficial interest, par value $0.01 per share (the "Acquiring
Fund Shares"), to be distributed, after the Closing Date hereinafter referred
to, to the shareholders of the Target Fund in liquidation of the Target Fund as
provided herein, all upon the terms and conditions hereinafter set forth in this
Agreement.
In consideration of the premises and of the covenants and agreements
hereinafter set forth, the parties hereto covenant and agree as follows:
1. THE REORGANIZATION AND LIQUIDATION OF THE TARGET FUND
1.1 Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein, the Target
Fund agrees to assign, deliver and otherwise transfer the Target Fund
Assets (as defined in paragraph 1.2) to the Acquiring Fund and the
Acquiring Fund agrees in exchange therefor to assume all of the Target
Fund stated liabilities on the Closing Date as set forth in paragraph
1.3(a) and to deliver to the Target Fund the number of Acquiring Fund
Shares, including fractional shares, determined in the manner set
forth in paragraph 2.3. Such transactions shall take place at the
closing provided for in paragraph 3.1 ("Closing").
1.2 (a) The "Target Fund Assets" shall consist of all property, including
without limitation, all cash (other than the "Cash Reserve" (as
defined in paragraph 1.3(b)), cash equivalents, securities and
dividend and interest receivables owned by the Target Fund, and any
deferred or prepaid expenses shown as an asset on the Target Funds'
books on the Valuation Date.
(b) On or prior to the Valuation Date, the Target Fund will provide
the Acquiring Fund with a list of all of assets to be assigned,
delivered and otherwise transferred to the Acquiring Fund and of the
stated liabilities to be assumed by the Acquiring Fund pursuant to
this Agreement. The Target Fund reserves the right to sell any of the
securities on such list but will not, without the prior approval of
the Acquiring Fund, acquire any additional securities other than
securities of the type in which the Acquiring Fund is permitted to
invest and in amounts agreed to in writing by the Acquiring Fund. The
Acquiring Fund will, within a reasonable time prior to the Valuation
Date, furnish the Target Fund with a statement of its investment
objectives, policies and restrictions and a list of the securities, if
any, on the list referred to in the first sentence of this paragraph
that do not conform to the Acquiring Fund's investment objective,
policies and restrictions. In the event that the Target Fund holds any
investments that the Acquiring Fund is not permitted to hold, the
Target Fund will dispose of such securities on or prior to the
Valuation Date. In addition, if it is determined that the portfolios
of the Target Fund and the Acquiring Fund, when aggregated, would
contain investments exceeding certain percentage limitations imposed
upon the Acquiring Fund with respect to such investments, the Target
Fund if requested by the Acquiring Fund will, on or prior to the
Valuation Date, dispose of and/or reinvest a sufficient amount of such
investments as may be necessary to avoid violating such limitations as
of the Closing Date (as defined in paragraph 3.1).
1.3 (a) The Target Fund will endeavor to discharge all of its liabilities
and obligations on or prior to the Valuation Date. The Acquiring Fund
will assume all stated liabilities, which include, without limitation,
all expenses, costs, charges and reserves reflected on an unaudited
Statement of Assets and Liabilities of the Target Fund prepared by the
Treasurer of the [Company/Trust], on behalf of the Target Fund, as of
the Valuation Date in accordance with generally accepted accounting
principles consistently applied from the prior audited period.
(b) On the Valuation Date, the Target Fund may establish a cash
reserve, which shall not exceed 5% of the Target Funds' net assets as
of the close of business on the Valuation Date ("Cash Reserve") to be
retained by the Target Fund and used for the payment of its
liabilities not discharged prior to the Valuation Date and for the
expenses of dissolution.
1.4 In order for the Target Fund to comply with Section 852(a)(1) of the
Code and to avoid having any investment company taxable income or net
capital gain (as defined in Sections 852(b)(2) and 1222(11) of the
Code, respectively) in the short taxable year ending with its
dissolution, the Target Fund will on or before the Valuation Date (a)
declare a dividend in an amount large enough so that it will have
declared dividends of all of its investment company taxable income and
net capital gain, if any, for such taxable year (determined without
regard to any deduction for dividends paid) and (b) distribute such
dividend.
1.5 On the Closing Date or as soon as practicable thereafter, the Target
Fund will distribute the Acquiring Fund Shares received by the Target
Fund pursuant to paragraph 1.1 pro
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rata to its shareholders of record determined as of the close of
business on the Valuation Date ("Target Fund Shareholders"). Class A
Shareholders of Fixed Income III Portfolio will receive Institutional
Class Shares of Investment Grade Fixed Income Portfolio. Class B
Shareholders will receive Adviser Class Shares. Class A Shareholders
of High Yield II Portfolio will receive Institutional Class Shares of
High Yield Portfolio. Class B Shareholders will receive Adviser Class
Shares. Special Purpose Fixed Income Shareholders will receive
Institutional Class Shares of Core Plus Fixed Income Portfolio. Such
distribution will be accomplished by an instruction, signed by the
Secretary of the Company or the Trust, as applicable, to transfer
Acquiring Fund Shares then credited to the Target Funds' account on
the books of the Acquiring Fund, to open accounts on the books of the
Acquiring Fund in the names of the Target Fund Shareholders and
representing the respective pro rata number of Acquiring Fund Shares
due to such Target Fund Shareholders. All issued and outstanding
shares of the Target Fund simultaneously will be canceled on the
Target Funds' books; however, share certificates representing
interests in the Target Fund will represent a number of Acquiring Fund
Shares after the Closing Date as determined in accordance with
paragraph 2.3. The Acquiring Fund will issue certificates representing
the Acquiring Fund Shares in connection with such exchange only upon
the written request of a Target Fund Shareholder.
1.6 Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund's transfer agent. The Acquiring Fund Shares will be
issued in the manner described in the Trust's current Prospectus and
Statement of Additional Information.
1.7 Any transfer taxes payable upon issuance of the Acquiring Fund Shares
in a name other than the registered holder of the Acquiring Fund
Shares on the Target Funds' books as of the close of business on the
Valuation Date shall, as a condition of such issuance and transfer, be
paid by the person to whom the Acquiring Fund Shares are to be issued
and transferred.
1.8 Any reporting responsibility of the Target Fund, is and shall remain
the responsibility of the Target Fund up to and including the date on
which the Target Fund is dissolved pursuant to paragraph 1.9.
1.9 Within one year after the Closing Date, the Target Fund shall pay or
make provision for the payment of all its liabilities and taxes, and
distribute to the shareholders of the Target Fund as of the close of
business on the Valuation Date any remaining amount of the Cash
Reserve (as reduced by the estimated cost of distributing it to
shareholders). If and to the extent that any trust, escrow account, or
other similar entity continues after the close of such one-year period
in connection either with making provision for payment of liabilities
or taxes or with distributions to shareholders of the Target Fund,
such entity shall either (i) qualify as a liquidating trust under
Section 7701 of the Code (and applicable Treasury Regulations
thereunder) or other entity which does not constitute a continuation
of the Target Fund for federal income tax purposes, or (ii) be subject
to a waiver under Section 368(a)(2)(G)(ii) of the complete
distribution requirement of Section 368(a)(2)(G)(i) of the Code. The
Target Fund shall be dissolved as a portfolio of the Company or the
Trust, as applicable, promptly following the making of all
distributions pursuant to paragraph 1.5 (and, in any event, within one
year after the Closing Date).
1.10 Copies of all books and records maintained on behalf of the Target
Fund in connection with its obligations under the Investment Company
Act of 1940, as amended (the "1940 Act"), the Code, state blue sky
laws or otherwise in connection with this Agreement will
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promptly after the Closing be delivered to officers of the Acquiring
Fund or their designee and the Acquiring Fund or its designee shall
comply with applicable record retention requirements to which the
Target Fund is subject under the 1940 Act.
2. VALUATION
2.1 The value of the Target Fund Assets shall be the value of such assets
computed as of 4:00 p.m. on the New York Stock Exchange on the third
business day following the receipt of the requisite approval by
shareholders of the Target Fund of this Agreement or at such time on
such earlier or later date after such approval as may be mutually
agreed upon in writing (such time and date being hereinafter called
the "Valuation Date"), using the valuation procedures set forth in the
Trust's then current Prospectus and Statement of Additional
Information.
2.2 The net asset value of an Acquiring Fund Share shall be the net asset
value per share computed on the Valuation Date, using the valuation
procedures set forth in the Trust's then current Prospectus and
Statement of Additional Information.
2.3 The number of Acquiring Fund Shares (including fractional shares, if
any) to be issued hereunder shall be determined, with respect to each
class, by dividing the aggregate net asset value of the applicable
class of Target Fund shares (calculated in accordance with paragraph
2.1) by the net asset value per share of the applicable class of
shares of the Acquiring Fund. For purposes of this paragraph, the
aggregate net asset value of the shares of the Target Fund shall not
include the amount of the Cash Reserve.
2.4 All computations of value shall be made by X.X. Xxxxxx Investor
Services Company in accordance with its regular practice in pricing
the Acquiring Fund. The Acquiring Fund shall cause X.X. Xxxxxx
Investor Services Company to deliver a copy of its valuation report at
the Closing.
3. CLOSING AND CLOSING DATE
3.1 The Closing shall take place on the next business day following the
Valuation Date (the "Closing Date"). The Closing shall be held as of
5:00 p.m. Eastern time, or at such other time as the parties may
agree. The Closing shall be held in a location mutually agreeable to
the parties hereto. All acts taking place at the Closing shall be
deemed to take place simultaneously as of 5:00 p.m. Eastern time on
the Closing Date unless otherwise provided.
3.2 Portfolio securities held by the Target Fund and represented by a
certificate or other written instrument shall be presented by it or on
its behalf to X.X. Xxxxxx Chase & Co. (the "Custodian"), as custodian
for the Acquiring Fund, for examination no later than five business
days preceding the Valuation Date. Such portfolio securities (together
with any cash or other assets) shall be delivered by the Target Fund
to the Custodian for the account of the Acquiring Fund on or before
the Closing Date in conformity with applicable custody provisions
under the 1940 Act and duly endorsed in proper form for transfer in
such condition as to constitute good delivery thereof in accordance
with the custom of brokers. The portfolio securities shall be
accompanied by all necessary Federal and state stock transfer stamps
or a check for the appropriate purchase price of such stamps.
Portfolio securities and instruments deposited with a securities
depository (as defined in Rule 17f-4 under the 0000 Xxx) shall be
delivered on or before the Closing
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Date by book-entry in accordance with customary practices of such
depository and the Custodian. The cash delivered shall be in the form
of a Federal Funds wire, payable to the order of "X.X. Xxxxxx Xxxxx &
Co., Custodian for the Acquiring Fund."
3.3 In the event that on the Valuation Date, (a) the New York Stock
Exchange shall be closed to trading or trading thereon 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 both the
Target Fund and Acquiring Fund, accurate appraisal of the value of the
net assets of the Acquiring Fund or the Target Fund Assets is
impracticable, the Valuation Date shall be postponed until the first
business day after the day when trading shall have been fully resumed
without restriction or disruption and reporting shall have been
restored.
3.4 If requested, the Target Fund shall deliver to the Acquiring Fund or
its designee (a) at the Closing, a list, certified by the Secretary of
the Company or Trust, as applicable, of the names, addresses and
taxpayer identification numbers of the Target Fund Shareholders and
the number and percentage ownership of outstanding Target Fund shares
owned by each such Target Fund Shareholder, all as of the Valuation
Date, and (b) as soon as practicable after the Closing, all original
documentation (including Internal Revenue Service forms, certificates,
certifications and correspondence) relating to the Target Funds'
taxpayer identification numbers and their liability for or exemption
from back-up withholding. The Acquiring Fund shall issue and deliver
to such Secretary a confirmation evidencing delivery of Acquiring Fund
Shares to be credited on the Closing Date to the Target Fund or
provide evidence satisfactory to the Target Fund that such Acquiring
Fund Shares have been credited to the Target Funds' 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.
4. COVENANTS OF THE TARGET FUND AND ACQUIRING FUND
4.1 Except as otherwise expressly provided herein with respect to the
Target Fund, the Acquiring Fund and the Target 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 customary dividends and other distributions.
4.2 The Trust, will prepare and file with the Securities and Exchange
Commission ("Commission") a registration statement on Form N-14 under
the Securities Act of 1933, as amended ("1933 Act"), relating to the
Acquiring Shares ("Registration Statement"). The Target Fund will
provide the Trust with the Proxy Materials as described in paragraph
4.3 below, for inclusion in the Registration Statement. The Target
Fund will further provide the Trust with such other information and
documents relating to the Target Fund as are reasonably necessary for
the preparation of the Registration Statement.
4.3 The Target Fund will call a meeting of the Target Fund shareholders to
consider and act upon this Agreement and to take all other action
necessary to obtain approval of the transactions contemplated herein.
The Target Fund will prepare the notice of meeting, form of proxy and
proxy statement (collectively, "Proxy Materials") to be used in
connection with such meeting; provided that the Trust will furnish the
Target Fund with
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its currently effective prospectus for inclusion in the Proxy
Materials and with such other information relating to the Acquiring
Fund as is reasonably necessary for the preparation of the Proxy
Materials.
4.4 The Target Fund will assist the Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requests concerning the
beneficial ownership of Target Fund Shares.
4.5 Subject to the provisions of this Agreement, the Target Fund and the
Acquiring 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.
4.6 The Target Fund shall furnish or cause to be furnished to the
Acquiring Fund within 30 days after the Closing Date a statement of
the Target Funds' assets and liabilities as of the Closing Date, which
statement shall be certified by the Treasurer of the Company or Trust,
as applicable, and shall be in accordance with generally accepted
accounting principles consistently applied. As promptly as
practicable, but in any case within 60 days after the Closing Date,
the Target Fund shall furnish the Acquiring Fund, in such form as is
reasonably satisfactory to the Acquiring Fund, a statement certified
by the Treasurer of the Company or Trust, as applicable, of earnings
and profits of the Target Fund for Federal income tax purposes that
will be carried over to the Acquiring Fund pursuant to Section 381 of
the Code.
4.7 As soon after the Closing Date as is reasonably practicable, the
Target Fund (a) shall prepare and file all Federal and other tax
returns and reports of the Target Fund required by law to be filed
with respect to all periods ending on or before the Closing Date but
not theretofore filed and (b) shall pay all Federal and other taxes
shown as due thereon and/or all Federal and other taxes that were
unpaid as of the Closing Date, including without limitation, all taxes
for which the provision for payment was made as of the Closing Date
(as represented in paragraph 5.2(k)).
4.8 The Trust agrees to use all reasonable efforts to obtain the approvals
and authorizations required by the 1933 Act and the 1940 Act and to
make such filings required by the state Blue Sky and securities laws
as it may deem appropriate in order to continue its operations after
the Closing Date.
5. REPRESENTATIONS AND WARRANTIES
5.1 The Trust represents and warrants to the applicable Target Fund, on
behalf of the applicable Acquiring Fund, as follows:
(a) The Trust is a validly existing Pennsylvania business trust with
full power to carry on its business as presently conducted;
(b) The Trust is a duly registered, open-end, management investment
company, 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) All of the issued and outstanding shares of the Acquiring Fund
have been offered and sold in compliance in all material respects with
applicable registration requirements
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of the 1933 Act and state securities laws. Shares of the Acquiring
Fund are registered in all jurisdictions in which they are required to
be registered under state securities laws and other laws, and said
registrations, including any periodic reports or supplemental filings,
are complete and current, all fees required to be paid have been paid,
and the Acquiring Fund is not subject to any stop order and is fully
qualified to sell its shares in each state in which its shares have
been registered;
(d) The current Prospectus and Statement of Additional Information of
the Trust conforms in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the regulations
thereunder and do not 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 misleading;
(e) The Trust is not in, and the execution, delivery and performance
of this Agreement will not result in a material violation of any
provision of the Trust's Declaration of Trust or By-Laws or of any
agreement, indenture, instrument, contract, lease or other undertaking
to which the Trust is a party or by which it is bound;
(f) 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 which, if adversely determined, would materially
and adversely affect its financial condition or the conduct of its
business; and the Trust knows of no facts that 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, or
is reasonably likely to materially and adversely effect, its business
or its ability to consummate the transactions herein contemplated;
(g) The Statement of Assets and Liabilities, Statement of Operations,
Statement of Changes in Net Assets and Financial Highlights for the
year ended September 30, 2001, of the Trust audited by Deloitte &
Touche LLP (copies of which have been furnished to the Target Fund)
fairly present, in all material respects, the Acquiring Fund's
financial condition as of such date in accordance with generally
accepted accounting principles, and its results of such operations,
changes in its net assets and financial highlights for such period,
and as of such date there were no known liabilities of the Acquiring
Fund (contingent or otherwise) not disclosed therein that would be
required in accordance with generally accepted accounting principles
to be disclosed therein;
(h) All issued and outstanding Acquiring Fund Shares are, and at the
Closing Date will be, duly and validly issued and outstanding, fully
paid and nonassessable with no personal liability attaching to the
ownership thereof, except as set forth in the Trust's current
Prospectus incorporated by reference in the Registration Statement.
The Acquiring Fund does not have outstanding any options, warrants or
other rights to subscribe for or purchase any of its shares;
(i) The execution, delivery and performance of this Agreement have
been duly authorized by all necessary action on the part of the Trust,
and this Agreement constitutes a valid and binding obligation of the
Trust 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. No
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other consents, authorizations or approvals are necessary in
connection with the Trust's performance of this Agreement;
(j) The Acquiring Fund Shares to be issued and delivered to
the Target Fund, for the account of the Target Fund
Shareholders, pursuant to the terms of this Agreement will
at 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 with no personal liability attaching to the
ownership thereof, except as set forth in the Trust's
current Statement of Additional Information incorporated by
reference in the Statement of Additional Information to this
Registration Statement;
(k) All material Federal and other tax returns and reports
of the Trust required by law to be filed on or before the
Closing Date have been filed and are correct, and all
Federal and other taxes shown as due or required to be shown
as due on said returns and reports have been paid or
provision has been made for the payment thereof, and to the
best of the Trust's knowledge, no such return is currently
under audit and no assessment has been asserted with respect
to any such return;
(l) For each taxable year since its inception, the Trust has
met the requirements of Subchapter M of the Code for
qualification and treatment as a "regulated investment
company" and neither the execution or delivery of nor the
performance of its obligations under this Agreement will
adversely affect, and no other events are reasonably likely
to occur which will adversely affect the ability of the
Trust to continue to meet the requirements of Subchapter M
of the Code;
(m) Since its inception there has been no change by the
Trust in accounting methods, principles, or practices,
including those required by generally accepted accounting
principles;
(n) The information furnished or to be furnished by the
Trust for use in registration statements, proxy materials
and other documents 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 applicable thereto; and
(o) The Proxy Materials to be included in the Registration
Statement (only insofar as they relate to the Acquiring
Fund) will, on the effective date of the Registration
Statement and on the Closing Date, 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.
5.2 The Company, on behalf of the Fixed Income III Portfolio and
High Yield II Portfolio and the Trust, on behalf of the
Special Purpose Fixed Income Fund represents and warrants to
the applicable Acquiring Fund, as follows:
(a) The [Company] [Trust] is a validly existing [Maryland
corporation] [Pennsylvania business trust] with full power
to carry on its business as presently conducted;
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(b) The [Company] [Trust] is a duly registered, open-end,
management investment company, 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) All of the issued and outstanding shares of beneficial
interest of the Target Fund have been offered and sold in
compliance in all material respects with applicable
requirements of the 1933 Act and state securities laws.
Shares of the Target Fund are registered in all
jurisdictions in which they are required to be registered
and said registrations, including any periodic reports or
supplemental filings, are complete and current, all fees
required to be paid have been paid, and the Target Fund is
not subject to any stop order and is fully qualified to sell
its shares in each state in which its shares have been
registered;
(d) The current Prospectus and Statement of Additional
Information of the [Company] [Trust] conform in all material
respects to the applicable requirements of the 1933 Act and
the 1940 Act and the regulations thereunder and do not
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 misleading;
(e) The [Company] [Trust] is not, and the execution,
delivery and performance of this Agreement will not result,
in a material violation of any provision of the [Company's]
[Trust's] [Articles of Incorporation] [Declaration of Trust]
or By-Laws or of any agreement, indenture, instrument,
contract, lease or other undertaking to which the [Company]
[Trust] is a party or by which it is bound;
(f) 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 Target Fund or any of its properties or assets which, if
adversely determined, would materially and adversely affect
its financial condition or the conduct of its business; and
the [Company] [Trust] knows of no facts that 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, or is reasonably likely to
materially and adversely effect, its business or its ability
to consummate the transactions herein contemplated;
(g) The Statement of Assets and Liabilities, Statement of
Operations, Statement of Changes in Net Assets and Financial
Highlights of the [Company for the year ended December 31,
2001 audited by Ernst & Young LLP] [Trust for the year ended
September 30, 2001 audited by Deloitte & Touche LLP,]
(copies of which have been or will be furnished to the
Trust) fairly present, in all material respects, the Target
Funds' financial condition as of such date, and its results
of operations, changes in its net assets and financial
highlights for such period in accordance with generally
accepted accounting principles, and as of such date there
were no known liabilities of the Target Fund (contingent or
otherwise) not disclosed therein that would be required in
accordance with generally accepted accounting principles to
be disclosed therein;
(h) The [Company] [Trust] has no material contracts or other
commitments (other than this Agreement) that will be
terminated with liability to it prior to the Closing Date;
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(i) All issued and outstanding shares of the Target Fund
are, and at the Closing Date will be, duly and validly
issued and outstanding, fully paid and nonassessable with no
personal liability attaching to the ownership thereof,
except in the case of Special Purpose Fixed Income as set
forth in the Trust's current Statement of Additional
Information incorporated by reference in the Statement of
Additional Information to this Registration Statement. The
Target Fund does not have outstanding any options, warrants
or other rights to subscribe for or purchase any of its
shares, nor is there outstanding any security convertible to
any of its shares. All such shares will, at the time of
Closing, be held by the persons and in the amounts set forth
in the list of shareholders submitted to the Acquiring Fund
pursuant to paragraph 3.4;
(j) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the
Closing Date by all necessary action on the part of the
[Company] [Trust], and subject to the approval of the Target
Funds' shareholders, this Agreement constitutes a valid and
binding obligation of the [Company] [Trust], 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. No other consents, authorizations
or approvals are necessary in connection with the
[Company's] [Trust's] performance of this Agreement;
(k) All material Federal and other tax returns and reports
of the [Company] [Trust] required by law to be filed on or
before the Closing Date shall have been filed and are
correct and all Federal and other taxes shown as due or
required to be shown as due on said returns and reports have
been paid or provision has been made for the payment
thereof, and to the best of the [Company's] [Trust's]
knowledge, no such return is currently under audit and no
assessment has been asserted with respect to any such
return;
(l) For each taxable year since its inception, the [Company]
[Trust], has met all the requirements of Subchapter M of the
Code for qualification and treatment as a "regulated
investment company" and neither the execution or delivery of
nor the performance of its obligations under this Agreement
will adversely affect, and no other events are reasonably
likely to occur which will adversely affect, the ability of
the [Company] [Trust] to continue to meet the requirements
of Subchapter M of the Code;
(m) At the Closing Date, the [Company] [Trust] will have
good and valid title to the Target Fund Assets, subject to
no liens (other than the obligation, if any, to pay the
purchase price of portfolio securities purchased by the
Target Fund which have not settled prior to the Closing
Date), security interests or other encumbrances, and full
right, power and authority to assign, deliver and otherwise
transfer such assets hereunder, 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 any
restrictions as might arise under the 1933 Act;
(n) On the effective date of the Registration Statement, at
the time of the meeting of the Target Funds' shareholders
and on the Closing Date, the Proxy Materials (exclusive of
the currently effective Trust Prospectus contained therein)
will (i) comply in all material respects with the provisions
of the 1933 Act, the Securities Exchange Act of 1934, as
amended ("1934 Act") and the 0000 Xxx and the regulations
thereunder and (ii) 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 not misleading. Any
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other information furnished by the [Company] [Trust] for use
in the Registration Statement or in any other manner that may
be necessary in connection with the transactions contemplated
hereby shall be accurate and complete and shall comply in all
material respects with applicable Federal securities and other
laws and regulations thereunder;
(o) The Target Fund will, on or prior to the Valuation Date,
declare one or more dividends or other distributions to
shareholders that, together with all previous dividends and
other distributions to shareholders, shall have the effect
of distributing to the shareholders all of its investment
company taxable income and net capital gain, if any, through
the Valuation Date (computed without regard to any deduction
for dividends paid);
(p) The [Company] [Trust] has maintained or has caused to be
maintained on its behalf all books and accounts as required
of a registered investment company in compliance with the
requirements of Section 31 of the 1940 Act and the Rules
thereunder; and
(q) The Target Fund is not acquiring the Acquiring Fund
Shares to be issued hereunder for the purpose of making any
distribution thereof other than in accordance with the terms
of this Agreement.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TARGET FUND
The obligations of the Target Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by the
Trust on behalf of the applicable Acquiring Fund of all the obligations to be
performed by it hereunder on or before the Closing Date and, in addition
thereto, the following conditions:
6.1 All representations and warranties of the Trust 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 Trust shall have delivered to the Target Fund, a
certificate of its President and Treasurer, in a form
reasonably satisfactory to the Target Fund and dated as of the
Closing Date, to the effect that the representations and
warranties of the Trust 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 Target Fund shall
reasonably request;
6.3 The Target Fund, shall have received a favorable opinion from
Mayer, Brown, Xxxx & Maw, counsel to the Trust, dated as of
the Closing Date, to the effect that:
(a) The Trust is a validly existing Pennsylvania business
trust, and has the power to own all of its properties and
assets and to carry on its business as presently conducted
(Pennsylvania counsel may be relied upon in delivering such
opinion);
(b) the Trust is a duly registered, open-end, management
investment company, and its registration with the Commission
as an investment company under the 1940 Act is in full force
and effect;
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(c) this Agreement has been duly authorized, executed and
delivered by the Trust and, assuming that the Registration
Statement complies with the 1933 Act, the 1934 Act and the
1940 Act and regulations thereunder and assuming due
authorization, execution and delivery of this Agreement by the
[Company] [Trust], is a valid and binding obligation of the
Trust enforceable against the Trust 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;
(d) the Acquiring Fund Shares to be issued to the Target Fund
Shareholders as provided by this Agreement are duly authorized
and upon such delivery will be validly issued, fully paid and
non-assessable (except as set forth in the Trust's Statement
of Additional Information), and no shareholder of the Trust
has any preemptive rights to subscription or purchase in
respect thereof (Pennsylvania counsel may be relied upon in
delivering such opinion);
(e) the execution and delivery of this Agreement did not,
and the consummation of the transactions contemplated hereby
will not, violate the Trust's Declaration of Trust or
By-Laws (Pennsylvania counsel may be relied upon in
delivering such opinion); and
(f) to the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental authority
of the United States or any state is required for the
consummation by Trust 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 under state
securities laws; and
6.4 As of the Closing Date, there shall have been no material
change in the applicable Acquiring Fund's investment
objective, policies and restrictions nor any increase in the
investment management fees from those described in the Trust's
Prospectus dated January 31, 2001 and Statement of Additional
Information dated January 31, 2001.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of an Acquiring Fund to complete the transactions
provided for herein shall be subject, at its election, to the performance by
[Company] [Trust], on behalf of the applicable Target Fund, of all 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 [Company] [Trust]
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 [Company] [Trust] shall have delivered to the Acquiring
Fund at the Closing a certificate of its President and its
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 [Company] [Trust] 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 Trust shall reasonably request;
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7.3 The Target Fund shall have delivered to the Acquiring Fund, a
statement of the Target Fund Assets and its liabilities,
together with a list of the Target Funds' portfolio securities
and other assets showing the respective adjusted bases and
holding periods thereof for income tax purposes, as of the
Closing Date, certified by the Treasurer of the [Company]
[Trust];
7.4 The Target Fund shall have delivered to the Trust within
three business days after the Closing a letter from [Ernst &
Young LLP] [Deloitte & Touche LLP] dated as of the Closing
Date stating that (a) such firm has performed a limited
review of the Federal and state income tax returns of
[Company] [Trust] for each of the last three taxable years
and, based on such limited review, nothing came to their
attention that caused them to believe that such returns did
not properly reflect, in all material respects, the Federal
and state income tax liabilities of the Target Fund for the
periods covered thereby, (b) for the period from
_____________200_ to and including the Closing Date, such
firm has performed a limited review (based on unaudited
financial data) to ascertain the amount of applicable
Federal, state and local taxes and has determined that same
either have been paid or reserves have been established for
payment of such taxes, and, based on such limited review,
nothing came to their attention that caused them to believe
that the taxes paid or reserves set aside for payment of
such taxes were not adequate in all material respects for
the satisfaction of all Federal, state and local tax
liabilities for the period from ____________ 200_ to and
including the Closing Date and (c) based on such limited
reviews, nothing came to their attention that caused them to
believe that the [Company] [Trust] would not qualify as a
regulated investment company for Federal income tax purposes
for any such year or period;
7.5 The Trust shall have received at the Closing a favorable
opinion from Mayer, Brown, Xxxx & Maw, counsel to the
[Company][Trust], dated as of the Closing Date to the effect
that:
(a) The [Company] [Trust] is a validly existing [Maryland
corporation] [Pennsylvania business trust] and has the power
to own all of its properties and assets and to carry on its
business as presently conducted ([Maryland] [Pennsylvania]
counsel may be relied upon in delivering such opinion);
(b) the [Company] [Trust] is a duly registered, open-end,
management investment company under the 1940 Act, and its
registration with the Commission as an investment company
under the 1940 Act is in full force and effect;
(c) this Agreement has been duly authorized, executed and
delivered by the [Company] [Trust], and, assuming that the
Registration Statement complies with the 1933 Act, the 1934
Act and the 1940 Act and the regulations thereunder and
assuming due authorization, execution and delivery of this
Agreement by the Trust, is a valid and binding obligation of
the [Company] [Trust] enforceable against the [Company]
[Trust] 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;
(d) the execution and delivery of this Agreement did not,
and the consummation of the transactions contemplated hereby
will not, violate the [Company's] [Trust's] [Articles of
Incorporation] [Declaration of Trust] or By-Laws ([Maryland]
[Pennsylvania] counsel may be relied upon in delivering such
opinion); and
A-13
(e) to the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental authority
of the United States or any state is required for the
consummation by the [Company] [Trust] 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 under state securities laws; and
7.6 On the Closing Date, the Target Fund Assets shall include no
assets that the Acquiring Fund, by reason of limitations of
the fund's Declaration of Trust or otherwise, may not properly
acquire.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TARGET FUND AND
THE ACQUIRING FUND
The obligations of the [Company] [Trust], on behalf of a Target Fund,
and the Trust on behalf of the applicable Acquiring Fund, hereunder are each
subject to the further conditions that on or before the Closing Date:
8.1 This Agreement and the transactions contemplated herein shall
have been approved by the requisite vote of the holders of the
outstanding shares of the Target Fund in accordance with the
provisions of the [Company's] [Trust's] [Articles of
Incorporation] [Declaration of Trust], and certified copies of
the resolutions evidencing such approval shall have been
delivered to the Trust;
8.2 On the Closing Date, no action, suit or other proceeding shall
be pending 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
(including those of the Commission and of state Blue Sky and
securities authorities, including "no-action" positions of and
exemptive orders from such Federal and state authorities)
deemed necessary by Target Fund or Acquiring Fund to permit
consummation, in all material respects, of the transactions
contemplated herein shall have been obtained, except where
failure to obtain any such consent, order or permit would not
involve risk of a material adverse effect on the assets or
properties of the Trust or the Target Fund or Acquiring Fund;
8.4 The Registration Statement shall have become effective under
the 1933 Act, 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;
8.5 The Target Fund shall have declared and paid a dividend or
dividends and/or other distribution or distributions that,
together with all previous such dividends or distributions,
shall have the effect of distributing to the Target Fund
Shareholders all of the Target Funds' investment company
taxable income (computed without regard to any deduction for
dividends paid) and all of its net capital gain (after
reduction for any capital loss carry-forward and computed
without regard to any deduction for dividends paid) for all
taxable years ending on or before the Closing Date; and
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8.6 The parties shall have received the opinion of the law firm of
Mayer, Brown, Xxxx & Maw (based on such representations as
such law firm shall reasonably request), addressed to the
Trust on behalf of the Acquiring Fund and the [Company/Trust],
on behalf of the Target Fund, which opinion may be relied upon
by the shareholders of the Target Fund, substantially to the
effect that, for Federal income tax purposes:
(a) The transfer of the Target Funds' assets in exchange for
the Acquiring Fund Shares and the assumption by the
Acquiring Fund of certain stated liabilities of the Target
Fund followed by the distribution by the Target Fund of
Acquiring Fund Shares to the Target Fund Shareholders in
exchange for their Target Fund Shares pursuant to and in
accordance with the terms of the Reorganization Agreement
will constitute a "reorganization" within the meaning of
Section 368(a)(1)(C) of the Code, and the Trust and the
[Company] [Trust] will each be a "party to a reorganization"
within the meaning of Section 368(b) of the Code;
(b) No gain or loss will be recognized by the Acquiring Fund
upon the receipt of the assets of the Target Fund solely in
exchange for the Acquiring Fund Shares and the assumption by
the Acquiring Fund of the stated liabilities of the Target
Fund;
(c) No gain or loss will be recognized by the Target Fund
upon the transfer of the assets of the Target Fund to the
Acquiring Fund in exchange for the Acquiring Fund Shares and
the assumption by the Acquiring Fund of the stated
liabilities or upon the distribution of the Acquiring Fund
Shares to the Target Fund Shareholders in exchange for their
Target Fund Shares;
(d) No gain or loss will be recognized by the Target Fund
Shareholders upon the exchange of the Target Fund Shares for
Acquiring Fund Shares;
(e) The aggregate tax basis for Acquiring Fund Shares
received by each Target Fund Shareholder pursuant to the
reorganization will be the same as the aggregate tax basis
of the Target Fund Shares held by each such Target Fund
Shareholder immediately prior to the Reorganization;
(f) The holding period of Acquiring Fund Shares to be
received by each Target Fund Shareholder will include the
period during which the Target Fund Shares surrendered in
exchange therefor were held (provided such Target Fund
Shares were held as capital assets on the date of the
Reorganization);
(g) The tax basis of the assets of Target Fund acquired by the
Acquiring Fund will be the same as the tax basis of such
assets to the Target Fund immediately prior to the
Reorganization; and
(h) The holding period of the assets of the Target Fund in the
hands of the Acquiring Fund will include the period during
which those assets were held by the Acquiring Fund.
(i) Notwithstanding anything herein to the contrary, neither
the Acquiring Fund nor the Target Fund may waive the
conditions set forth in this paragraph 8.6.
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9. FEES AND EXPENSES
9.1 (a) The Target Funds shall equally bear all of the expenses of
proxy solicitation including the cost of preparing and mailing
the Proxy Statement and Prospectus. The Target Funds and the
Acquiring Funds will each bear all of their respective
expenses incurred in connection with the entering into, and
carrying out of, the provisions of this Agreement, including
legal, accounting, Commission registration fees and Blue Sky
expenses, legal and accounting fees, filing and portfolio
transfer taxes (if any) incurred in connection with the
consummation of the transactions contemplated herein.
(b) In the event the transactions contemplated herein are not
consummated by reason of the Target Fund being either
unwilling or unable to go forward (other than by reason of the
nonfulfillment or failure of any condition to the Target
Funds' obligations specified in this Agreement), the Target
Funds' only obligation hereunder shall be to reimburse the
Acquiring Fund for all reasonable out-of-pocket fees and
expenses incurred by the Acquiring Fund in connection with
those transactions.
(c) In the event the transactions contemplated herein are not
consummated by reason of the Acquiring Fund being either
unwilling or unable to go forward (other than by reason of the
nonfulfillment or failure of any condition to the Acquiring
Fund's obligations specified in this Agreement), the Acquiring
Fund's only obligation hereunder shall be to reimburse the
Target Fund for all reasonable out-of-pocket fees and expenses
incurred by the Target Fund in connection with those
transactions.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 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 herein, except that the
representations, warranties and covenants of the [Company]
[Trust] hereunder shall not survive the dissolution and
complete liquidation of the Target Fund in accordance with
Section 1.9.
11. TERMINATION
11.1 This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the
Closing:
(a) by the mutual written consent of the Target Fund, and the
Acquiring Fund;
(b) by either, the Target Fund, or the Acquiring Fund, by
notice to the other, without liability to the terminating
party on account of such termination (providing the
terminating party is not otherwise in material default or
breach of this Agreement) if the Closing shall not have
occurred on or before August 15, 2002; or
(c) by either the Target Fund, or the Acquiring Fund, in
writing without liability to the terminating party on account
of such termination (provided the terminating party is not
otherwise in material default or breach of this Agreement), if
(i) the other party shall fail to perform in any material
respect its agreements contained herein required to be
performed on or prior to the Closing Date, (ii) the other
party materially breaches any of
A-16
its representations, warranties or covenants contained herein,
(iii) the Target Fund shareholders fail to approve this
Agreement at any meeting called for such purpose at which a
quorum was present or (iv) any other condition herein
expressed to be precedent to the obligations of the
terminating party has not been met and it reasonably appears
that it will not or cannot be met.
11.2 (a) Termination of this Agreement pursuant to paragraphs
11.1(a) or (b) shall terminate all obligations of the parties
hereunder and there shall be no liability for damages on the
part of the [Company] [Trust] or the Trust, or the trustees or
officers of the [Company] [Trust] or the Trust, to any other
party or its trustees or officers.
(b) Termination of this Agreement pursuant to paragraph
11.1(c) shall terminate all obligations of the parties
hereunder and there shall be no liability for damages on the
part of the [Company] [Trust] or the Trust, or the trustees
or officers of the [Company] [Trust] or the Trust, except
that any party in breach of this Agreement shall, upon
demand, reimburse the non-breaching party for all reasonable
out-of-pocket fees and expenses incurred in connection with
the transactions contemplated by this Agreement, including
legal, accounting and filing fees.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner
as may be mutually agreed upon in writing by the parties.
13. MISCELLANEOUS
13.1 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.
13.2 This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original.
13.3 This Agreement shall be governed by and construed in
accordance with the laws of Pennsylvania.
13.4 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.
13.5 The obligations and liabilities of the Trust hereunder are
solely those of the Trust. It is expressly agreed that no
shareholder, nominee, trustee, officer, agent, or employee of
the Trust shall be personally liable hereunder. The execution
and delivery of this Agreement have been authorized by the
trustees of the Trust and signed by authorized officers of the
Trust acting as such, and neither such authorization by such
trustees nor such execution and delivery by such officers
shall be deemed to have been made by any of them individually
or to impose any liability on any of them personally.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by a duly authorized officer.
XXXXXX XXXXXXX INSTITUTIONAL FUND TRUST on behalf of
THE ACQUIRING FUNDS and SPECIAL PURPOSE FIXED INCOME
PORTFOLIO
By:
------------------------------------------------
Name: Xxxx X. Xxxxxx
Title: Secretary
XXXXXX XXXXXXX INSTITUTIONAL FUND, INC. on behalf of
FIXED INCOME III PORTFOLIO and HIGH YIELD II PORTFOLIO
By:
------------------------------------------------
Name: Xxxx X. Xxxxxx
Title: Secretary
A-18
