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Exhibit 4
AGREEMENT AND PLAN OF REORGANIZATION
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This Agreement and Plan of Reorganization (the "Agreement") is made as
of ___________, 199_ by and between The One Group(R), a Massachusetts business
trust, ("One Group") and Pegasus Funds, a Massachusetts business trust
("Pegasus"). The capitalized terms used herein shall have the meaning ascribed
to them in this Agreement.
I. PLAN OF REORGANIZATION
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(a) Pegasus will sell, assign, convey, transfer and deliver to One Group,
and One Group will acquire, on the Exchange Date all of the properties and
assets existing at the Valuation Time in Pegasus Money Market Fund ("Pegasus
Money Market"), Pegasus Treasury Money Market Fund ("Pegasus Treasury"), Pegasus
Municipal Money Market Fund ("Pegasus Municipal"), Pegasus Michigan Municipal
Money Market Fund ("Pegasus Michigan Money Market"), Pegasus Cash Management
Money Market Fund ("Pegasus Cash Management"), Pegasus Treasury Prime Cash
Management Money Market Fund ("Pegasus Treasury Prime Cash"), Pegasus U.S.
Government Securities Cash Management Money Market Fund ("Pegasus Government
Cash"), Pegasus Municipal Cash Management Money Market Fund ("Pegasus Municipal
Cash"), Pegasus Treasury Cash Management Fund ("Pegasus Treasury Cash"), Pegasus
Short Bond Fund ("Pegasus Short Bond"), Pegasus Intermediate Bond Fund ("Pegasus
Intermediate Bond"), Pegasus Multi Sector Bond Fund ("Pegasus Multi Sector"),
Pegasus Bond Fund ("Pegasus Bond"), Pegasus High Yield Bond Fund ("Pegasus High
Yield"), Pegasus Intermediate Municipal Bond Fund ("Pegasus Intermediate
Municipal"), Pegasus Municipal Bond Fund ("Pegasus Municipal Bond"), Pegasus
Michigan Municipal Bond Fund ("Pegasus Michigan Municipal"), Pegasus Short
Municipal Bond Fund ("Pegasus Short Municipal"), Pegasus Equity Income Fund
("Pegasus Equity Income"), Pegasus Equity Index Fund ("Pegasus
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Equity Index"), Pegasus Growth and Value Fund ("Pegasus Value"), Pegasus
Intrinsic Value Fund ("Pegasus Intrinsic Value"), Pegasus Growth Fund ("Pegasus
Growth"), Pegasus Mid-Cap Opportunity Fund ("Pegasus Mid-Cap"), Pegasus
Small-Cap Opportunity Fund ("Pegasus Small-Cap"), Pegasus International Equity
Fund ("Pegasus International"), Pegasus Market Expansion Index Fund ("Pegasus
Expansion"), Pegasus Managed Assets Growth Fund ("Pegasus Managed Assets"),
Pegasus Managed Assets Balanced Fund ("Pegasus Managed Balanced"), and Pegasus
Managed Assets Conservative Fund ("Pegasus Managed Conservative") (Pegasus Money
Market, Pegasus Treasury, Pegasus Municipal, Pegasus Michigan Municipal, Pegasus
Cash Management, Pegasus Treasury Prime Cash, Pegasus Government Cash, Pegasus
Municipal Cash, Pegasus Treasury Cash, Pegasus Short Bond, Pegasus Intermediate
Bond, Pegasus Multi Sector, Pegasus Bond, Pegasus High Yield, Pegasus
Intermediate Municipal, Pegasus Municipal Bond, Pegasus Michigan Municipal,
Pegasus Short Municipal, Pegasus Equity Income, Pegasus Equity Index, Pegasus
Value, Pegasus Intrinsic Value, Pegasus Growth, Pegasus Mid-Cap, Pegasus
Small-Cap, Pegasus International, Pegasus Expansion, Pegasus Managed Assets,
Pegasus Managed Balanced, and Pegasus Managed Conservative, each is a "Pegasus
Fund" and are collectively the "Pegasus Funds"), such acquisition to be made by
The One Group Prime Money Market Fund ("One Group Prime"), The One Group U.S.
Treasury Securities Money Market Fund ("One Group Treasury Securities"), The One
Group Municipal Money Market Fund ("One Group Municipal"), The One Group
Michigan Municipal Money Market Fund, ("One Group Michigan Money Market"), The
One Group Cash Management Money Market Fund ("One Group Cash Management"), The
One Group Treasury Prime Cash Management Money Market Fund ("One Group Treasury
Prime Cash"), The One Group U.S. Government Securities Cash Management Money
Market Fund ("One Group Government
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Cash"), The One Group Municipal Cash Management Money Market ("One Group
Municipal Cash"), The One Group Treasury Cash Management ("One Group Treasury
Cash"), The One Group Limited Volatility Bond Fund ("One Group Limited
Volatility"), The One Group Intermediate Bond Fund ("One Group Intermediate
Bond"), The One Group Income Bond Fund ("One Group Income"), The One Group Bond
Fund ("One Group Bond"), The One Group High Yield Bond Fund ("One Group High
Yield"), The One Group Intermediate Tax-Free Bond Fund ("One Group Intermediate
Tax-Free"), The One Group Municipal Bond Fund ("One Group Municipal Bond"), The
One Group Michigan Municipal Bond Fund ("One Group Michigan Municipal"), The One
Group Short Municipal Bond Fund ("One Group Short Municipal"), The One Group
Equity Income Fund ("One Group Equity Income"), The One Group Equity Index Fund
("One Group Equity Index"), The One Group Value Growth Fund ("One Group Value"),
the One Group Disciplined Value Fund ("One Group Disciplined"), The One Group
Large Company Growth Fund ("One Group Growth"), The One Group Mid-Cap
Opportunities Fund ("One Group Mid-Cap"), The One Group Small Cap Opportunity
Fund ("One Group Small Cap"), The One Group International Equity Fund ("One
Group International"), The One Group Small Cap Index Fund ("One Group Small Cap
Index"), The One Group Investor Growth Fund ("One Group Investor Growth"), The
One Group Investor Growth & Income Fund ("One Group Investor Income") and The
One Group Investor Balanced Fund ("One Group Investor Balanced") (One Group
Prime, One Group Treasury Securities, One Group Municipal, One Group Michigan
Money Market, One Group Cash Management, One Group Treasury Prime Cash, One
Group Government Cash, One Group Municipal Cash, One Group Treasury Cash, One
Group Limited Volatility, One Group Intermediate Bond, One Group Income, One
Group Bond, One Group High Yield, One Group Intermediate Tax-Free, One Group
Municipal Bond,
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One Group Michigan Municipal, One Group Short Municipal, One Group Income
Equity, One Group Equity Index, One Group Value, One Group Disciplined, One
Group Growth, One Group Mid-Cap, One Group Small Cap, One Group International,
One Group Small Cap Index, One Group Investor Growth, One Group Investor Income
and One Group Investor Balanced, each is a "One Group Fund" and are collectively
the "One Group Funds"), respectively, of One Group. For purposes of this
Agreement the respective Pegasus Funds correspond to the One Group Funds as
follows: Pegasus Money Market corresponds to One Group Prime; Pegasus Treasury
corresponds to One Group Treasury Securities; Pegasus Municipal corresponds to
One Group Municipal; Pegasus Michigan Money Market corresponds to One Group
Michigan Money Market; Pegasus Cash Management corresponds to One Group Cash
Management; Pegasus Treasury Prime Cash corresponds to One Group Treasury Prime
Cash; Pegasus Government Cash corresponds to One Group Government Cash; Pegasus
Municipal Cash corresponds to One Group Municipal Cash; Pegasus Treasury Cash
corresponds to One Group Treasury Cash; Pegasus Short Bond corresponds to One
Group Limited Volatility; Pegasus Intermediate Bond corresponds to One Group
Intermediate Bond; Pegasus Multiple Sector Bond corresponds to One Group Income;
Pegasus Bond corresponds to One Group Bond; Pegasus High Yield corresponds to
One Group High Yield; Pegasus Intermediate Municipal corresponds to One Group
Intermediate Tax-Free; Pegasus Municipal Bond corresponds to One Group Municipal
Bond; Pegasus Michigan Municipal corresponds to One Group Michigan Municipal;
Pegasus Short Municipal corresponds to One Group Short Municipal; Pegasus Equity
Income corresponds to One Group Income Equity; Pegasus Equity Index corresponds
to One Group Equity Index; Pegasus Value corresponds to One Group Value; Pegasus
Intrinsic Value corresponds to One Group Disciplined; Pegasus Growth corresponds
to One Group Growth;
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Pegasus Mid-Cap corresponds to One Group Mid-Cap; Pegasus Small-Cap corresponds
to One Group Small Cap; Pegasus International corresponds to One Group
International; Pegasus Expansion corresponds to One Group Small Cap Index;
Pegasus Managed Assets corresponds to One Group Investor Growth; Pegasus Managed
Balanced corresponds to One Group Investor Income; and Pegasus Managed
Conservative corresponds to One Group Investor Balanced. In consideration
therefor, each One Group Fund shall, on the Exchange Date, assume all of the
liabilities of the corresponding Pegasus Fund, which liabilities shall include
any obligation of the corresponding Pegasus Fund to indemnify the Trustees and
officers of Pegasus Funds to the fullest extent permitted by applicable law and
by Pegasus's Declaration of Trust, as in affect as of the date of this
Agreement, and issue a number of full and fractional One Group Class A, Class B
or Class I shares of the corresponding One Group Fund (collectively, "Shares")
having an aggregate net asset value equal to the value of all of the assets of
each Pegasus Fund transferred to the corresponding One Group Fund on such date
less the value of all of the liabilities of each Pegasus Fund assumed by the
corresponding One Group Fund on that date. It is intended that each
reorganization described in this Agreement shall be a tax-free reorganization
under the Internal Revenue Code of 1986, as amended (the "Code").
(b) Upon consummation of the transactions described in paragraph (a) of
this Agreement, each Pegasus Fund shall distribute in complete liquidation to
its respective shareholders of record as of the Exchange Date the Shares
received by it, each shareholder being entitled to receive that number of Shares
equal to the proportion which the number of shares of beneficial interest of the
applicable class of the Pegasus Fund held by such shareholder bears to the
number of such shares of such class of the Pegasus Fund outstanding on such
date. Pegasus Class I, Class A and Class B shareholders will receive One Group
Class I, Class A and Class B shares,
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respectively. Class I and Class S shareholders of Pegasus Cash Management,
Pegasus Treasury Prime Cash, Pegasus Government Cash, Pegasus Municipal Cash,
and Pegasus Treasury Cash, will receive Class I and Class A shares,
respectively, of One Group Cash Management, One Group Treasury Prime Cash, One
Group Government Cash, One Group Municipal Cash, and One Group Treasury Cash,
respectively.
II. AGREEMENT
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One Group and Pegasus represent, warrant and agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF PEGASUS. Pegasus and each Pegasus
Fund jointly and severally represent and warrant to and agree with One Group and
each One Group Fund that:
(a) Pegasus is a business trust duly established and validly existing
under the laws of the Commonwealth of Massachusetts and has power to own all of
its properties and assets and to carry out its obligations under this Agreement.
Pegasus and each Pegasus Fund is not required to qualify as a foreign
association in any jurisdiction. Pegasus and each Pegasus Fund has all necessary
federal, state and local authorizations to carry on its business as now being
conducted and to fulfill the terms of this Agreement, except as set forth in
Section 1(l).
(b) Pegasus is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as an open-end management investment company, and such
registration has not been revoked or rescinded and is in full force and effect.
Each Pegasus Fund has elected to qualify and has qualified as a regulated
investment company under Part I of Subchapter M of the Code, as of and since its
first taxable year, and qualifies and intends to continue to qualify as a
regulated investment company for its taxable year ending upon its liquidation.
Each Pegasus
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Fund has been a regulated investment company under such sections of the Code at
all times since its inception.
(c) The statements of assets and liabilities, statements of operations,
statements of changes in net assets and schedules of portfolio investments
(indicating their market values) for each Pegasus Fund at and for the year ended
December 31, 1997, such statements and schedules having been audited by Xxxxxx
Xxxxxxxx, LLP, independent accountants to Pegasus, have been furnished to One
Group. Unaudited statements of net assets, statement of operations, statement of
changes in net assets, and schedules of portfolio investments for the period
ended June 30, 1998 also have been provided to One Group.
(d) The prospectuses of each Pegasus Fund dated April 30, 1998
(collectively, the "Pegasus Prospectuses") and the Statement of Additional
Information for the Pegasus Funds dated April 30, 1998 and on file with the
Securities and Exchange Commission (the "Commission"), which have been
previously furnished to One Group, did not as of their dates and do not as of
the date hereof 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.
(e) There are no material legal, administrative or other proceedings
pending or, to the knowledge of Pegasus or any Pegasus Fund, threatened against
Pegasus or any Pegasus Fund which assert liability on the part of Pegasus or any
Pegasus Fund.
(f) There are no material contracts outstanding to which Pegasus or any
Pegasus Fund is a party, other than as disclosed in the Pegasus Prospectuses and
the corresponding Statement of Additional Information, or in the Registration
Statement and the Proxy Statement as defined herein.
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(g) Neither Pegasus nor any Pegasus Fund has any known liabilities of a
material nature, contingent or otherwise, other than those shown as belonging to
it on its above referenced statement of assets and liabilities as of June 30,
1998, and those incurred in the ordinary course of Pegasus's business as an
investment company since that date. Prior to the Exchange Date, Pegasus will
advise One Group of all known material liabilities, contingent or otherwise,
incurred by it and each Pegasus Fund subsequent to June 30, 1998, whether or not
incurred in the ordinary course of business.
(h) As used in this Agreement, the term "Investments" shall mean each
Pegasus Fund's investments shown on the schedule of its portfolio investments as
of June 30, 1998 referred to in Section 1(c) hereof, as supplemented with such
changes as Pegasus or each Pegasus Fund shall make after June 30, 1998, which
changes have been disclosed to One Group, and changes made on and after the date
of this Agreement after advising One Group of such proposed changes, and changes
resulting from stock dividends, stock split-ups, mergers and similar corporate
actions.
(i) Each Pegasus Fund has filed or will file all federal and state tax
returns which, to the knowledge of Pegasus's officers, are required to be filed
by each Pegasus Fund and has paid or will pay all federal and state taxes shown
to be due on said returns or on any assessments received by each Pegasus Fund.
All tax liabilities of each Pegasus Fund have been adequately provided for on
its books, and no tax deficiency or liability of any Pegasus Fund has been
asserted, and no question with respect thereto has been raised, by the Internal
Revenue Service or by any state or local tax authority for taxes in excess of
those already paid.
(j) As of both the Valuation Time and the Exchange Date and except for
shareholder approval as described in Section 8(a) and otherwise as described in
Section 1(1), Pegasus on behalf of each Pegasus Fund will have full right, power
and authority to sell, assign, transfer and
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deliver the Investments and any other assets and liabilities of each Pegasus
Fund to be transferred to the corresponding One Group Fund pursuant to this
Agreement. At the Exchange Date, subject only to the delivery of the Investments
and any such other assets and liabilities as contemplated by this Agreement, One
Group will, on behalf of each One Group Fund, acquire the Investments and any
such other assets subject to no encumbrances, liens or security interests in
favor of any third party creditor of Pegasus or a Pegasus Fund and, except as
described in Section 1(k), without any restrictions upon the transfer thereof.
(k) No registration under the Securities Act of 1933, as amended (the
"1933 Act"), of any of the Investments would be required if they were, as of the
time of such transfer, the subject of a public distribution by either of Pegasus
or One Group, except as previously disclosed to One Group by Pegasus in writing.
(l) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by Pegasus or any
Pegasus Fund of the transactions contemplated by this Agreement, except such as
may be required under the 1933 Act, the Securities Exchange Act of 1934, as
amended (the "1934 Act"), the 1940 Act, state securities or blue sky laws (which
term as used herein shall include the laws of the District of Columbia and of
Puerto Rico) or the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 (the
"H-S-R Act"), assuming that, for purposes of this representation, the Pegasus
Funds and The One Group may be considered affiliated persons or affiliated
persons of affiliated persons solely by reason of having a common investment
advisor.
(m) The registration statement (the "Registration Statement") filed with
the Commission by One Group on Form N-14 relating to the Shares issuable
hereunder, and the proxy statement of Pegasus included therein (the "Proxy
Statement"), on the effective date of the Registration
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Statement and insofar as they relate to Pegasus and the Pegasus Funds, (i) will
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 and (ii) will 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; and at the time of the shareholders' meeting referred to in Section
8(a) below and on the Exchange Date, the prospectus contained in the
Registration Statement of which the Proxy Statement is a part (the
"Prospectus"), as amended or supplemented by any amendments or supplements filed
with the Commission by One Group, insofar as it relates to Pegasus and the
Pegasus Funds, will 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; provided, however, that the representations
and warranties in this subsection shall apply only to statements of fact
relating to Pegasus and any Pegasus Fund contained in the Registration
Statement, the Prospectus or the Proxy Statement, or omissions to state in any
thereof a material fact relating to Pegasus or any Pegasus Fund, as such
Registration Statement, Prospectus and Proxy Statement shall be furnished to
Pegasus in definitive form as soon as practicable following effectiveness of the
Registration Statement and before any public distribution of the Prospectus or
Proxy Statement.
(n) All of the issued and outstanding shares of beneficial interest of
each Pegasus Fund have been offered for sale and sold in conformity with all
applicable federal and state securities laws.
(o) Each of the Pegasus Funds is qualified, and will at all times through
the Exchange Date qualify for taxation as a "regulated investment company" under
Sections 851 and 852 of the Code.
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(p) At the Exchange Date, each of the Pegasus Funds, as One Group may
reasonably direct via written instructions, will have sold such of its assets,
if any, as necessary to assure that, after giving effect to the acquisition of
the assets pursuant to this Agreement, each of the One Group Funds (other than
One Group Michigan Money Market and One Group Michigan Municipal) will remain a
"diversified company" within the meaning of Section 5(b) (l) of the 1940 Act and
in compliance with such other mandatory investment restrictions as are set forth
in the One Group Prospectuses previously furnished to Pegasus.
2. REPRESENTATIONS AND WARRANTIES OF ONE GROUP. One Group and each One
Group Fund jointly and severally represent and warrant to and agree with Pegasus
and each Pegasus Fund that:
(a) One Group is a business trust duly established and validly existing
under the laws of The Commonwealth of Massachusetts and has power to carry on
its business as it is now being conducted and to carry out this Agreement. One
Group and each One Group Fund is not required to qualify as a foreign
association in any jurisdiction. One Group and each One Group Fund has all
necessary federal, state and local authorizations to own all of its properties
and assets and to carry on its business as now being conducted and to fulfill
the terms of this Agreement, except as set forth in Section 2(i).
(b) One Group is registered under the 1940 Act as an open-end management
investment company, and such registration has not been revoked or rescinded and
is in full force and effect. Each One Group Fund that has had active operations
prior to the Exchange Date, has elected to qualify and has qualified as a
regulated investment company under Part I of Subchapter M of the Code, as of and
since its first taxable year, and qualifies and intends to continue to qualify
as a regulated investment company for its taxable year ending June 30, 1999.
Each One Group Fund
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that has had active operations prior to the Exchange Date, has been a regulated
investment company under such sections of the Code at all times since its
inception. Each One Group Fund that has not had active operations prior to the
Exchange Date intends to qualify as a regulated investment company under Part I
of Subchapter M under the Code.
(c) The statements of assets and liabilities, statements of operations,
statements of changes in net assets and schedules of portfolio investments
(indicating their market values) for each One Group Fund for the year ended June
30, 1998, such statements and schedules having been audited by
PricewaterhouseCoopers LLP, independent accountants to One Group, have been
furnished to Pegasus. Such statements of assets and liabilities and schedules
fairly present the financial position of the One Group Funds as of their
respective dates, and said statements of operations and changes in net assets
fairly reflect the results of its operations and changes in financial position
for the periods covered thereby in conformity with generally accepted accounting
principles.
(d) The prospectuses of each One Group Fund dated November 1, 1998,
(collectively, the "One Group Prospectuses"), and the Statement of Additional
Information for the One Group Funds, dated November 1, 1998, and on file with
the Commission, which have been previously furnished to Pegasus, did not as of
their dates and do not as of the date hereof 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.
(e) There are no material legal, administrative or other proceedings
pending or, to the knowledge of One Group or any One Group Fund, threatened
against One Group or any One Group Fund which assert liability on the part of
One Group or any One Group Fund.
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(f) There are no material contracts outstanding to which One Group or any
One Group Fund is a party, other than as disclosed in the One Group Prospectuses
and the corresponding Statement of Additional Information or in the Registration
Statement and the Proxy Statement.
(g) Neither One Group nor any One Group Fund has any known liabilities of
a material nature, contingent or otherwise, other than those shown as belonging
to it on its above referenced statement of assets and liabilities as of June 30,
1998 referred to above and those incurred in the ordinary course of the business
of One Group as an investment company or any One Group Fund since such date.
Prior to the Exchange Date, One Group will advise Pegasus of all known material
liabilities, contingent or otherwise, incurred by it and each One Group Fund
subsequent to June 30, 1998, whether or not incurred in the ordinary course of
business.
(h) Each One Group Fund has filed or will file all federal and state tax
returns which, to the knowledge of One Group's officers, are required to be
filed by each One Group Fund and has paid or will pay all federal and state
taxes shown to be due on said returns or on any assessments received by each One
Group Fund. All tax liabilities of each One Group Fund have been adequately
provided for on its books, and no tax deficiency or liability of any One Group
Fund has been asserted, and no question with respect thereto has been raised, by
the Internal Revenue Service or by any state or local tax authority for taxes in
excess of those already paid.
(i) No consent, approval, authorization or order of any governmental
authority is required for the consummation by One Group or any One Group Fund of
the transactions contemplated by this Agreement, except such as may be required
under the 1933 Act, the 1934 Act, the 1940 Act, state securities or Blue Sky
laws or the H-S-R Act.
(j) As of both the Valuation Time and the Exchange Date and otherwise as
described in Section 2 (i), One Group on behalf of each One Group Fund will have
full right, power and
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authority to purchase the Investments and any other assets and assume the
liabilities of each Pegasus Fund to be transferred to the corresponding One
Group Fund pursuant to this Agreement.
(k) The Registration Statement, the Prospectus and the Proxy Statement,
on the effective date of the Registration Statement and insofar as they relate
to One Group and the One Group Funds: (i) will 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 and (ii) will 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; and at the time of the
shareholders' meeting referred to in Section 8(a) and at the Exchange Date, the
Prospectus, as amended or supplemented by any amendments or supplements filed
with the Commission by One Group or any One Group Fund, will 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;
provided, however, that none of the representations and warranties in this
subsection shall apply to statements in or omissions from the Registration
Statement, the Prospectus or the Proxy Statement made in reliance upon and in
conformity with information furnished by Pegasus or any Pegasus Fund for use in
the Registration Statement, the Prospectus or the Proxy Statement.
(l) Shares to be issued to each Pegasus Fund have been duly authorized
and, when issued and delivered pursuant to this Agreement and the Prospectus,
will be legally and validly issued and will be fully paid and nonassessable by
One Group and no shareholder of One Group will have any preemptive right of
subscription or purchase in respect thereof.
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(m) The issuance of Shares pursuant to this Agreement will be in
compliance with all applicable federal and state securities laws.
(n) Each One Group Fund that has had active operations prior to the
Exchange Date is qualified and will at all times through the Exchange Date
qualify for taxation as a "regulated investment company" under Sections 851 and
852 of the Code. Each One Group Fund that has not had active operations prior to
the Exchange Date, upon the filing of its first income tax return at the
completion of its first taxable year will elect to be a regulated investment
company and until such time will take all steps necessary to ensure
qualification as a regulated investment company.
3. REORGANIZATION. (a) Subject to the requisite shareholder approval as
described in Section 8(a) and to the other terms and conditions contained herein
(including each Pegasus Fund's obligation to distribute to its respective
shareholders all of its investment company taxable income and net capital gain
as described in Section 9(k) hereof ), Pegasus and each Pegasus Fund agree to
sell, assign, convey, transfer and deliver to the corresponding One Group Fund,
and One Group and each One Group Fund agree to acquire from the corresponding
Pegasus Fund, on the Exchange Date all of the Investments and all of the cash
and other assets of each Pegasus Fund in exchange for that number of Shares of
the corresponding One Group Fund provided for in Section 4 and the assumption by
the corresponding One Group Fund of all the liabilities of the Pegasus Fund.
Pursuant to this Agreement, each Pegasus Fund will, as soon as practicable after
the Exchange Date, distribute in liquidation all of the Shares received by it to
its shareholders in exchange for their shares of beneficial interest of such
Pegasus Fund.
(b) Pegasus, on behalf of each Pegasus Fund, will pay or cause to be paid
to the corresponding One Group Fund any interest and cash dividends received by
it on or after the
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Exchange Date with respect to the Investments transferred to the One Group Funds
hereunder. Pegasus, on behalf of each Pegasus Fund, will transfer to the
corresponding One Group Fund any rights, stock dividends or other securities
received by Pegasus or any Pegasus Fund after the Exchange Date as stock
dividends or other distributions on or with respect to the Investments
transferred, which rights, stock dividends and other securities shall be deemed
included in the assets transferred to each One Group Fund at the Exchange Date
and shall not be separately valued, in which case any such distribution that
remains unpaid as of the Exchange Date shall be included in the determination of
the value of the assets of the Pegasus Fund acquired by the corresponding One
Group Fund.
4. EXCHANGE DATE; VALUATION TIME. On the Exchange Date, One Group will
deliver to Pegasus a number of Shares having an aggregate net asset value equal
to the value of the assets of the corresponding Pegasus Fund acquired by each
One Group Fund, less the value of the liabilities of such Pegasus Fund assumed,
determined as hereafter provided in this Section 4.
(a) Subject to Section 4(d) hereof, the value of each Pegasus Fund's net
assets will be computed as of the Valuation Time using the valuation procedures
for the corresponding One Group Fund as set forth in the One Group Prospectus
for the particular One Group Fund.
(b) Subject to Section 4(d) hereof, the net asset value of a share of
each One Group Fund will be determined to the nearest full cent as of the
Valuation Time, using the valuation procedures set forth in the One Group
Prospectus for the particular One Group Fund.
(c) Subject to Section 4(d), the Valuation Time shall be 4:00 p.m.
Eastern Standard time on FRIDAY, MARCH 19, 1999, for all Pegasus and One Group
Funds other than, Pegasus Cash Management, Pegasus Treasury Prime Cash, Pegasus
Government Cash, Pegasus Municipal Cash, Pegasus Treasury Cash, One Group Cash
Management, One Group Treasury Prime Cash,
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One Group Government Cash, One Group Municipal Cash, One Group Treasury Cash,
and Friday MARCH 26, 1999, for Pegasus Cash Management, Pegasus Treasury Prime
Cash, Pegasus Government Cash, Pegasus Municipal Cash, Pegasus Treasury Cash,
One Group Cash Management, One Group Treasury Prime Cash, One Group Government
Cash, One Group Municipal Cash, and One Group Treasury Cash or such earlier or
later day as may be mutually agreed upon in writing by the parties hereto (the
"Valuation Time").
(d) No formula will be used to adjust the net asset value of any Pegasus
Fund or One Group Fund to take into account differences in realized and
unrealized gains and losses.
(e) Each One Group Fund shall issue its Shares to the corresponding
Pegasus Fund on one share deposit receipt per class registered in the name of
the corresponding Pegasus Fund. Each Pegasus Fund shall distribute in
liquidation the Shares received by it hereunder pro rata to its shareholders of
each class of shares by redelivering such share deposit receipt to One Group's
transfer agent which will as soon as practicable set up open accounts for each
Pegasus Fund shareholder in accordance with written instructions furnished by
Pegasus.
(f) Each One Group Fund shall assume all liabilities of the corresponding
Pegasus Fund, whether accrued or contingent, in connection with the acquisition
of assets and subsequent dissolution of the corresponding Pegasus Fund or
otherwise, except that recourse for assumed liabilities relating to a particular
Pegasus Fund will be limited to the corresponding One Group Fund.
5. EXPENSES, FEES, ETC. (a) Subject to subsections 5(b) through 5 (e),
all fees and expenses, including accounting expenses, portfolio transfer taxes
(if any) or other similar expenses incurred in connection with the consummation
by One Group and Pegasus of the transactions contemplated by this Agreement will
be paid by the party directly incurring such
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fees and expenses, except that the costs of proxy materials and proxy
solicitation will be borne by Banc One Investment Advisors Corporation;
provided, however, that such 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 any One
Group Fund or any Pegasus Fund, as the case may be, as a "regulated investment
company" within the meaning of Section 851 of the Code.
(b) In the event the transactions contemplated by this Agreement are not
consummated by reason of Pegasus being either unwilling or unable to go forward
(other than by reason of the nonfulfillment or failure of any condition to
Pegasus's obligations referred to in Section 8(a) or Section 10) Pegasus shall
pay directly all reasonable fees and expenses incurred by One Group in
connection with such transactions, including, without limitation, legal,
accounting and filing fees.
(c) In the event the transactions contemplated by this Agreement are not
consummated by reason of One Group being either unwilling or unable to go
forward (other than by reason of the nonfulfillment or failure of any condition
to One Group's obligations referred to in Section 8(a) or Section 9), One Group
shall pay directly all reasonable fees and expenses incurred by Pegasus in
connection with such transactions, including without limitation legal,
accounting and filing fees.
(d) In the event the transactions contemplated by this Agreement are not
consummated for any reason other than (i) One Group or Pegasus being either
unwilling or unable to go forward or (ii) the nonfulfillment or failure of any
condition to Pegasus or One Group's obligations referred to in Section 8(a),
Section 9 or Section 10 of this Agreement, then each of
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Pegasus and One Group shall bear the expenses it has actually incurred in
connection with such transactions as specified in Section 5 of this Agreement.
(e) Notwithstanding any other provisions of this Agreement, if for any
reason the transactions contemplated by this Agreement are not consummated, no
party shall be liable to the other party for any damages resulting therefrom,
including without limitation consequential damages, except as specifically set
forth above.
6. PERMITTED ASSETS. One Group agrees to advise Pegasus promptly if at
any time prior to the Exchange Date the assets of any Pegasus Fund include any
assets that the corresponding One Group Fund is not permitted, or reasonably
believes to be unsuitable for it, to acquire, including without limitation any
security that, prior to its acquisition by any Pegasus Fund, One Group has
informed Pegasus is unsuitable for the corresponding One Group Fund to acquire.
7. EXCHANGE DATE. Delivery of the assets of the Pegasus Funds to be
transferred, assumption of the liabilities of the Pegasus Funds to be assumed,
and the delivery of Shares to be issued shall be made at the offices of Banc One
Investment Advisors Corporation at 9:00 am. on MONDAY, MARCH 22, 1999, for all
Pegasus and One Group Funds other than, Pegasus Cash Management, Pegasus
Treasury Prime Cash, Pegasus Government Cash, Pegasus Municipal Cash, Pegasus
Treasury Cash, One Group Cash Management, One Group Treasury Prime Cash, One
Group Government Cash, One Group Municipal Cash, One Group Treasury Cash, and
Monday, MARCH 29 1999, for Pegasus Cash Management, Pegasus Treasury Prime Cash,
Pegasus Government Cash, Pegasus Municipal Cash, Pegasus Treasury Cash, One
Group Cash Management, One Group Treasury Prime Cash, One Group Government Cash,
One Group Municipal Cash, and One Group Treasury Cash or at such other time and
date agreed to by
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Pegasus and One Group, the date and time upon which such delivery is to take
place being referred to herein as the "Exchange Date."
8. SPECIAL MEETING OF SHAREHOLDERS; DISSOLUTION. (a) Pegasus agrees to
call a special meeting of the shareholders of each Pegasus Fund as soon as is
practicable after the effective date of the Registration Statement for the
purpose of considering the sale of all of the assets of each Pegasus Fund to and
the assumption of all of the liabilities of each Pegasus Fund by the
corresponding One Group Fund as herein provided, adopting this Agreement, and
authorizing the liquidation and dissolution of any Pegasus Fund, and, except as
set forth in Section 13, it shall be a condition to the obligations of each of
the parties hereto that the holders of the shares of beneficial interest of each
Pegasus Fund, and each class of shares of each Pegasus Fund if such is required
under the 1940 Act, shall have approved this Agreement and the transactions
contemplated herein in the manner required by law and Pegasus's Declaration of
Trust at such a meeting on or before the Valuation Time.
(b) Pegasus and each Pegasus Fund agree that the liquidation and
dissolution of each Pegasus Fund will be effected in the manner provided in
Pegasus's Declaration of Trust in accordance with applicable law, and that it
will not make any distributions of any Shares to the shareholders of a Pegasus
Fund without first paying or adequately providing for the payment of all of such
Pegasus Fund's known debts, obligations and liabilities.
(c) Each of One Group and Pegasus will cooperate with the other, and each
will furnish to the other the information relating to itself required by the
1933 Act, the 1934 Act and the 1940 Act and the rules and regulations thereunder
to be set forth in the Registration Statement, including the Prospectus and the
Proxy Statement.
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9. CONDITIONS TO ONE GROUP'S OBLIGATIONS. The obligations of One Group
and each One Group Fund hereunder shall be subject to the following conditions:
(a) That this Agreement shall have been adopted and the transactions
contemplated hereby, including the liquidation and dissolution of the Pegasus
Funds, shall have been approved as set forth in Section 8(a).
(b) Pegasus shall have furnished to One Group a statement of each Pegasus
Fund's assets and liabilities, with values determined as provided in Section 4
of this Agreement, together with a list of Investments with their respective tax
costs, all as of the Valuation Time, certified on Pegasus's behalf by its
President (or any Vice President) and Treasurer, and a certificate of both such
officers, dated the Exchange Date, to the effect that as of the Valuation Time
and as of the Exchange Date there has been no material adverse change in the
financial position of any Pegasus Fund since June 30, 1998, other than changes
in the Investments since that date or changes in the market value of the
Investments, or changes due to net redemptions of shares of the Pegasus Funds,
dividends paid or losses from operations.
(c) As of the Valuation Time and as of the Exchange Date, all
representations and warranties of Pegasus and each Pegasus Fund made in this
Agreement are true and correct in all material respects as if made at and as of
such dates, Pegasus and each Pegasus Fund has complied with this Agreement and
satisfied all the conditions on its part to be performed or satisfied at or
prior to each of such dates, and Pegasus shall have furnished to One Group a
statement, dated the Exchange Date, signed by Pegasus's President (or any Vice
President) and Treasurer certifying those facts as of such dates.
(d) Pegasus shall have delivered to One Group a letter from Xxxxxx
Xxxxxxxx, LLP dated the Exchange Date stating that such firm prepared the
federal and state income tax returns of
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each Pegasus Fund for the year ended December 31, 1997, and will prepare the
Federal and state income tax returns of each Pegasus Fund for the year ended
December 31, 1998.
(e) There shall not be any material litigation pending with respect to
the matters contemplated by this Agreement.
(f) One Group shall have received an opinion of Drinker Xxxxxx & Xxxxx
LLP, in form reasonably satisfactory to One Group and dated the Exchange Date,
to the effect that (i) Pegasus is a business trust duly established and validly
existing under the laws of the Commonwealth of Massachusetts, and neither
Pegasus nor any Pegasus Fund is, to the knowledge of such counsel, required to
qualify to do business as a foreign association in any jurisdiction, (ii) this
Agreement has been duly authorized, executed, and delivered by Pegasus and,
assuming that the Registration Statement, the Prospectus and the Proxy Statement
comply with the 1933 Act, the 1934 Act and the 1940 Act and assuming due
authorization, execution and delivery of this Agreement by One Group, is a valid
and binding obligation of Pegasus subject to applicable bankruptcy, insolvency,
fraudulent conveyance and similar laws or court decisions regarding enforcement
of creditors' rights generally, (iii) Pegasus and each Pegasus Fund has power to
sell, assign, convey, transfer and deliver the Investments and other assets
contemplated hereby and, upon consummation of the transactions contemplated
hereby in accordance with the terms of this Agreement, Pegasus and each Pegasus
Fund will have duly sold, assigned, conveyed, transferred and delivered such
Investments and other assets to One Group, (iv) the execution and delivery of
this Agreement did not, and the consummation of the transactions contemplated
hereby will not, violate Pegasus's Declaration of Trust, or Bylaws, as amended,
the current Pegasus Prospectus and Statement of Additional Information, or any
provision of any agreement known to such counsel to which Pegasus or any Pegasus
Fund is a party or by which it is bound, it being understood that with
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respect to investment restrictions as contained in Pegasus's Declaration of
Trust, or Bylaws, or then-current prospectus or statement of additional
information of each Pegasus Fund, such counsel may rely upon a certificate of an
officer of Pegasus whose responsibility it is to advise Pegasus with respect to
such matters and (v) no consent, approval, authorization or order of any court
or governmental authority is required for the consummation by Pegasus or any
Pegasus 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 under state securities or blue sky laws and the H-S-R Act, and it being
understood that such opinion shall not be deemed to apply to One Group's
compliance obligations under the 1933 Act, 1934 Act, 1940 Act, state securities
or blue sky laws and H-S-R Act. For purposes of analysis regarding the 1940 Act,
Drinker Xxxxxx & Xxxxx LLP may assume as fact that the Pegasus Funds and the One
Group Funds may be considered affiliated persons or affiliated persons of an
affiliated person solely by reason of having a common investment adviser.
(g) One Group shall have received an opinion of Ropes & Xxxx, counsel to
One Group addressed to The One Group and each One Group Fund, in form reasonably
satisfactory to One Group and dated the Exchange Date, to the effect that for
Federal income tax purposes (i) no gain or loss will be recognized by any
Pegasus Fund upon the transfer of the assets to the corresponding One Group Fund
in exchange for Shares and the assumption by such One Group Fund of the
liabilities of the Pegasus Fund; (ii) no gain or loss will be recognized by the
shareholders of any Pegasus Fund upon the exchange of their shares for Shares;
(iii) the basis of the Shares a Pegasus shareholder receives in connection with
the transaction will be the same as the basis of his or her Pegasus Fund shares
exchanged therefor; (iv) a Pegasus shareholder's holding period for his or her
Shares will be determined by including the period for which he or
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she held the Pegasus Fund shares exchanged therefor, provided that he or she
held such Pegasus Fund shares as capital assets; (v) no gain or loss will be
recognized by any One Group Fund upon the receipt of the assets of the
corresponding Pegasus Fund in exchange for Shares and the assumption by the One
Group Fund of the liabilities of the corresponding Pegasus Fund; (vi) the basis
in the hands of the One Group Fund of the assets of the corresponding Pegasus
Fund transferred to the One Group Fund in the transaction will be the same as
the basis of the assets in the hands of the corresponding Pegasus Fund
immediately prior to the transfer; and (vii) the holding periods of the assets
of the corresponding Pegasus Fund in the hands of the One Group Fund will
include the periods for which such assets were held by the corresponding Pegasus
Fund provided, that with respect to Pegasus Money Market, Pegasus Treasury,
Pegasus Municipal, Pegasus Michigan Municipal, Pegasus Cash Management, Pegasus
Treasury Prime Cash, Pegasus Government Cash, Pegasus Municipal Cash, Pegasus
Treasury Cash, One Group Prime, One Group Treasury Securities, One Group
Municipal, One Group Michigan Money Market, One Group Cash Management, One Group
Treasury Prime Cash, One Group Government Cash, One Group Municipal Cash, and
One Group Treasury Cash (the "Money Market Funds"), One Group shall seek an
opinion from Ropes & Xxxx with respect to Federal income tax matters enumerated
in this Section 9(g), but receipt of such opinion with respect to the Money
Market Funds shall not be a condition to the transaction.
(h) The assets of each Pegasus Fund to be acquired by the corresponding
One Group Fund will include no assets which the corresponding One Group Fund, by
reason of limitations contained in its Declaration of Trust or of investment
restrictions disclosed in the One Group Prospectuses in effect on the Exchange
Date, may not properly acquire.
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(i) The Registration Statement shall have become effective under the 1933
Act and applicable blue sky provisions, and no stop order suspending such
effectiveness shall have been instituted or, to the knowledge of One Group
contemplated by the Commission and or any state regulatory authority.
(j) All proceedings taken by Pegasus in connection with the transactions
contemplated by this Agreement and all documents incidental thereto reasonably
shall be satisfactory in form and substance to One Group.
(k) Prior to the Exchange Date, each Pegasus Fund shall have declared a
dividend or dividends which, together with all previous such dividends, shall
have the effect of distributing to its shareholders all of its investment
company taxable income for its taxable year ended December 31, 1998 and the
short taxable year beginning on January 1, 1999 and ending on the Exchange Date
(computed without regard to any deduction for dividends paid), and all of its
net capital gain realized in its taxable year ended December 31, 1998 and the
short taxable year beginning on January 1, 1999 and ending on the Exchange Date
(after reduction for any capital loss carryover).
(l) Pegasus shall have furnished to One Group a certificate, signed by
the President (or any Vice President) and the Treasurer of Pegasus, as to the
tax cost to One Group of the securities delivered to One Group pursuant to this
Agreement, together with any such other evidence as to such tax cost as One
Group may reasonably request.
(m) Pegasus's custodian shall have delivered to One Group a certificate
identifying all of the assets of each Pegasus Fund held by such custodian as of
the Valuation Time.
(n) Pegasus's transfer agent shall have provided to One Group (i) the
originals or true copies of all of the records of each Pegasus Fund in the
possession of such transfer agent as of
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the Exchange Date, (ii) a certificate setting forth the number of shares of each
class of Pegasus Fund outstanding as of the Valuation Time and (iii) the name
and address of each holder of record of any such shares of each Pegasus Fund and
the number of shares of each class held of record by each such shareholder.
(o) All of the issued and outstanding shares of beneficial interest of
each Pegasus Fund shall have been offered for sale and sold in conformity with
all applicable federal or state securities or blue sky laws and, to the extent
that any audit of the records of Pegasus or any Pegasus Fund or its transfer
agent by One Group or its agents shall have revealed otherwise, either (i)
Pegasus and each Pegasus Fund shall have taken all actions that in the
reasonable opinion of One Group, are necessary to remedy any prior failure on
the part of Pegasus to have offered for sale and sold such shares in conformity
with such laws or (ii) Pegasus shall have furnished (or caused to be furnished)
surety, or deposited (or caused to be deposited) assets in escrow, for the
benefit of One Group in amounts sufficient and upon terms satisfactory, in the
opinion of One Group, to indemnify One Group against any expense, loss, claim,
damage or liability whatsoever that may be asserted or threatened by reason of
such failure on the part of Pegasus to have offered and sold such shares in
conformity with such laws.
(p) Pegasus shall have duly executed and delivered to One Group bills of
sale, assignments, certificates and other instruments of transfer ("Transfer
Documents") as One Group may deem necessary or desirable to transfer all of
Pegasus's and each Pegasus Fund's entire right, title and interest in and to the
Investments and all other assets of each Pegasus Fund.
10. CONDITIONS TO PEGASUS'S OBLIGATIONS. The obligations of Pegasus and
each Pegasus Fund hereunder shall be subject to the following conditions:
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(a) This Agreement shall have been adopted and the transactions
contemplated hereby, including the liquidation and dissolution of the Pegasus
Funds, shall have been approved as described in Section 8(a).
(b) One Group shall have furnished to Pegasus a Statement of each One
Group Fund's net assets, together with a list of portfolio holdings with values
determined as provided in Section 4, all as of the Valuation Time, certified on
One Group's behalf by its President (or any Vice President) and Treasurer (or
any Assistant Treasurer), and a certificate of both such officers, dated the
Exchange Date, to the effect that as of the Valuation Time and as of the
Exchange Date there has been no material adverse change in the financial
position of any One Group Fund since June 30, 1998, other than changes in its
portfolio securities since that date, changes in the market value of its
portfolio securities, changes due to net redemptions, dividends paid or losses
from operations.
(c) One Group shall have executed and delivered to Pegasus an Assumption
of Liabilities Certificate and other instruments as Pegasus may deem necessary
and desirable dated as of the Exchange Date pursuant to which each One Group
Fund will assume all of the liabilities of the corresponding Pegasus Fund
existing at the Valuation Time in connection with the transactions contemplated
by this Agreement.
(d) As of the Valuation Time and as of the Exchange Date, all
representations and warranties of One Group and each One Group Fund made in this
Agreement are true and correct in all material respects as if made at and as of
such dates, One Group and each One Group Fund has complied with all of the
agreements and satisfied all of the conditions on its part to be performed or
satisfied at or prior to each of such dates, and One Group shall have furnished
to
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Pegasus a statement, dated the Exchange Date, signed by One Group's President
(or any Vice President) and Treasurer certifying those facts as of such dates.
(e) There shall not be any material litigation pending with respect to
the matters contemplated by this Agreement.
(f) Pegasus shall have received an opinion of Ropes & Xxxx, in form
reasonably satisfactory to Pegasus and dated the Exchange Date, to the effect
that (i) One Group is a business trust and validly existing in conformity with
the laws of the Commonwealth of Massachusetts, and, (to the knowledge of such
counsel), neither One Group nor any One Group Fund is required to qualify to do
business as a foreign association in any jurisdiction, (ii) the Shares to be
delivered to Pegasus as provided for by this Agreement are duly authorized and
upon such delivery will be validly issued and will be fully paid and
nonassessable by One Group and no shareholder of One Group has any preemptive
right to subscription or purchase in respect thereof, (iii) this Agreement has
been duly authorized, executed and delivered by One Group and, assuming that the
Prospectus, the Registration Statement and the Proxy Statement comply with the
1933 Act, the 1934 Act and the 1940 Act and assuming due authorization,
execution and delivery of this Agreement by Pegasus, is a valid and binding
obligation of One Group, (iv) One Group and each One Group Fund has the power to
acquire and assume all of the liabilities of Pegasus and the Pegasus Funds and,
upon consummation of the transactions contemplated hereby in accordance with the
terms of this Agreement, One Group and each respective One Group Fund shall have
duly acquired and assumed such liabilities, (v) the execution and delivery of
this Agreement did not, and the consummation of the transactions contemplated
hereby will not, violate One Group's Declaration of Trust, as amended, or Code
of Regulations, One Group's current Prospectus and Statement of Additional
Information, or any provision of any agreement
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known to such counsel to which One Group or any One Group Fund is a party or by
which it is bound, it being understood that with respect to investment
restrictions as contained in One Group's Declaration of Trust, as amended, Code
of Regulations or then-current prospectus or statement of additional information
of each One Group Fund, such counsel may rely upon a certificate of an officer
of One Group whose responsibility it is to advise One Group with respect to such
matters, (vi) no consent, approval, authorization or order of any court or
governmental authority is required for the consummation by One Group or any One
Group 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 under state securities or blue sky laws and the H-S-R Act and it being
understood that such opinion shall not be deemed to apply to Pegasus's
compliance obligations under the 1933 Act, 1934 Act, 1940 Act, state securities
or blue sky laws and the H-S-R Act; and (vii) the Registration Statement has
become effective under the 1933 Act, and to the best of the knowledge of such
counsel, no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or contemplated under the 0000 Xxx.
(g) Pegasus shall have received an opinion of Ropes & Xxxx addressed to
Pegasus and each Pegasus Fund, and in a form reasonably satisfactory to Pegasus
and dated the Exchange Date, with respect to the matters specified in Section
9(g) of this Agreement, subject to the provision in such Section 9(g).
(h) All proceedings taken by One Group in connection with the
transactions contemplated by this Agreement and all documents incidental thereto
reasonably shall be satisfactory in form and substance to Pegasus.
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(i) The Registration Statement shall have become effective under the 1933
Act and applicable blue sky provisions, and no stop order suspending such
effectiveness shall have been instituted or, to the knowledge of Pegasus,
contemplated by the Commission or any state regulatory authority.
11. INDEMNIFICATION. (a) The Pegasus Funds will indemnify and hold
harmless One Group, its trustees and its officers (for purposes of this
subsection, the "Indemnified Parties") against any and all expenses, losses,
claims, damages and liabilities at any time imposed upon or reasonably incurred
by any one or more of the Indemnified Parties in connection with, arising out
of, or resulting from any claim, action, suit or proceeding in which any one or
more of the Indemnified Parties may be involved or with which any one or more of
the Indemnified Parties may be threatened by reason of any untrue statement or
alleged untrue statement of a material fact relating to Pegasus or any Pegasus
Fund contained in the Registration Statement, the Prospectus or the Proxy
Statement or any amendment or supplement to any of the foregoing, or arising out
of or based upon the omission or alleged omission to state in any of the
foregoing a material fact relating to Pegasus or any Pegasus Fund required to be
stated therein or necessary to make the statements relating to Pegasus or any
Pegasus Fund therein not misleading, including, without limitation, any amounts
paid by any one or more of the Indemnified Parties in a reasonable compromise or
settlement of any such claim, action, suit or proceeding or threatened claim,
action, suit or proceeding made with the prior consent of Pegasus. The
Indemnified Parties will notify Pegasus in writing within ten days after the
receipt by any one or more of the Indemnified Parties of any notice of legal
process or any suit brought against or claim made against any Indemnified Party
as to any matters covered by this Section 11(a). Pegasus shall be entitled to
participate at its own expense in the defense of any claim, action, suit
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31
or proceeding covered by this Section 11(a), or, if it so elects, to assume at
its expense by counsel satisfactory to the Indemnified Parties the defense of
any such claim, action, suit or proceeding, and if Pegasus elects to assume such
defense, the Indemnified Parties shall be entitled to participate in the defense
of any such claim, action, suit or proceeding at their expense. The Pegasus
Funds' obligation under this Section 11(a) to indemnify and hold harmless the
Indemnified Parties shall constitute a guarantee of payment so that the Pegasus
Funds will pay in the first instance any expenses, losses, claims, damages and
liabilities required to be paid by it under this Section 11(a) without the
necessity of the Indemnified Parties first paying the same.
(b) The One Group Funds will indemnify and hold harmless Pegasus, its
trustees and its officers (for purposes of this subsection, the "Indemnified
Parties") against any and all expenses, losses, claims, damages and liabilities
at any time imposed upon or reasonably incurred by any one or more of the
Indemnified Parties in connection with, arising out of, or resulting from any
claim, action, suit or proceeding in which any one or more of the Indemnified
Parties may be involved or with which any one or more of the Indemnified Parties
may be threatened by reason of any untrue statement or alleged untrue statement
of a material fact relating to One Group or any One Group Fund contained in the
Registration Statement, the Prospectus or the Proxy Statement, or any amendment
or supplement to any of the foregoing, or arising out of or based upon the
omission or alleged omission to state in any of the foregoing a material fact
relating to One Group or any One Group Fund required to be stated therein or
necessary to make the statements relating to One Group or any One Group Fund
therein not misleading, including, without limitation, any amounts paid by any
one or more of the Indemnified Parties in a reasonable compromise or settlement
of any such claim, action, suit or proceeding, or threatened
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claim, action, suit or proceeding made with the prior consent of One Group. The
Indemnified Parties will notify One Group in writing within ten days after the
receipt by any one or more of the Indemnified Parties of any notice of legal
process or any suit brought against or claim made against any Indemnified Party
as to any matters covered by this Section 11(b). One Group shall be entitled to
participate at its own expense in the defense of any claim, action, suit or
proceeding covered by this Section 11(b), or, if it so elects, to assume at its
expense by counsel satisfactory to the Indemnified Parties the defense of any
such claim, action, suit or proceeding, and, if One Group elects to assume such
defense, the Indemnified Parties shall be entitled to participate in the defense
of any such claim, action, suit or proceeding at their own expense. The One
Group Funds' obligation under this Section 11(b) to indemnify and hold harmless
the Indemnified Parties shall constitute a guarantee of payment so that the One
Group Funds will pay in the first instance any expenses, losses, claims, damages
and liabilities required to be paid by it under this Section 11(b) without the
necessity of the Indemnified Parties first paying the same.
12. NO BROKER, ETC. Each of One Group and Pegasus represents that there
is no person who has dealt with it who by reason of such dealings is entitled to
any broker's or finder's or other similar fee or commission arising out of the
transactions contemplated by this Agreement.
13. TERMINATION. One Group and Pegasus may, by mutual consent of their
respective trustees, terminate this Agreement, and One Group or Pegasus, after
consultation with counsel and by consent of their respective trustees or an
officer authorized by such trustees, may waive any condition to their respective
obligations hereunder. If the transactions contemplated by this Agreement have
not been substantially completed by August 30, 1999, this Agreement shall
automatically terminate on that date unless a later date is agreed to by One
Group and Pegasus.
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Notwithstanding any other provision in this Agreement, in the event
shareholder approval of this Agreement and the transactions contemplated by this
Agreement is obtained with respect to only one or more Pegasus Funds but not all
of the Pegasus Funds, One Group and Pegasus agree to consummate those
transactions with respect to those Pegasus Funds whose shareholders have
approved this Agreement and those transactions.
In the event that shareholder approval of this Agreement and the
transactions contemplated by this Agreement is required, but is obtained with
respect to only one class of shares of a Pegasus Fund, the transaction with
respect to that Pegasus Fund will not be consummated unless and until
shareholder approval is obtained with respect to both classes.
14. RULE 145. Pursuant to Rule 145 under the 1933 Act, One Group will, in
connection with the issuance of any Shares to any person who at the time of the
transaction contemplated hereby is deemed to be an affiliate of a party to the
transaction pursuant to Rule 145 (c), cause to be affixed upon the certificates
issued to such person (if any) a legend as follows:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT TO THE ONE
GROUP OR ITS PRINCIPAL UNDERWRITER UNLESS (i) A REGISTRATION STATEMENT
WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR (ii) IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
ONE GROUP SUCH REGISTRATION IS NOT REQUIRED."
and, further, One Group will issue stop transfer instructions to One Group's
transfer agent with respect to such shares. Pegasus will provide One Group on
the Exchange Date with the name of
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any shareholder of the Pegasus Funds who is to the knowledge of Pegasus an
affiliate of Pegasus on such date.
15. COVENANTS, ETC. DEEMED MATERIAL. All covenants, agreements,
representations and warranties made under this Agreement and any certificates
delivered pursuant to this Agreement shall be deemed to have been material and
relied upon by each of the parties, notwithstanding any investigation made by
them or on their behalf.
16. SOLE AGREEMENT; AMENDMENTS This Agreement supersedes all previous
correspondence and oral communications between the parties regarding the subject
matter hereof, constitutes the only understanding with respect to such subject
matter, may not be changed except by a letter of agreement signed by each party
hereto, and shall be construed in accordance with and governed by the laws of
the Commonwealth of Massachusetts provided, however, that no such amendment may
have the effect of changing the provisions for determining the number or value
of shares to be paid to the Pegasus Fund's shareholders under Sections I(b) and
II(4)(b) this Agreement to the material detriment of such shareholder's without
their further approval.
17. AGREEMENT AND DECLARATION OF TRUST The names "Pegasus Funds" and
"Trustees of Pegasus Funds" refer respectively to Pegasus and the Trustees, as
trustees but not individually or personally, acting from time to time under a
Declaration of Trust, to which reference is hereby made and a copy of which is
on file at the office of the Secretary of the Commonwealth of Massachusetts and
elsewhere as required by law, and to any and all amendments thereto so filed or
hereafter filed. The obligations of "Pegasus Funds" entered into in the name or
on behalf thereof by any of the Trustees, officers, employees or agents are made
not individually, but in such capacities, and are not binding upon any of the
Trustees, officers, employees, agents or
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shareholders of Pegasus personally, but bind only the assets of Pegasus, and all
persons dealing with any of the series or funds of Pegasus, such as Pegasus
Funds, must look solely to the assets of Pegasus belonging to such series or
funds for the enforcement of any claims against Pegasus.
The names "The One Group" and "Trustees of The One Group" refer
respectively to One Group and the Trustees, as trustees but not individually or
personally, acting from time to time under a Declaration of Trust dated May 23,
1985 to which reference is hereby made and a copy of which is on file at the
office of the Secretary of The Commonwealth of Massachusetts and elsewhere as
required by law, and to any and all amendments thereto so filed or hereafter
filed. The obligations of "The One Group" entered into in the name or on behalf
thereof by any of the Trustees, representatives or agents are made not
individually, but in such capacities, and are not binding upon any of the
Trustees, Shareholders or representatives of One Group personally, but bind only
the assets of One Group, and all persons dealing with any series or fund of One
Group, such as the One Group Funds, must look solely to the assets of One Group
belonging to such series for the enforcement of any claims against One Group.
This Agreement may be executed in any number of counterparts, each of
which, when executed and delivered, shall be deemed to be an original.
PEGASUS FUNDS
By:
-------------------------------
THE ONE GROUP
By:
-------------------------------
35
