EXHIBIT 4 UNDER FORM N-14
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of this
6th day of November, by and between Federated Income Securities Trust, a
Massachusetts business trust, with its principal place of business at 0000
Xxxxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxxxxxxxxx 00000 (the "Federated Trust"), with
respect to Federated Short-Term Income Fund, a series of the Federated Trust,
(the "Acquiring Fund"), and MDT Funds, a Delaware statutory trust, with its
principal place of business at 000 Xxxxxxxxx Xxxx Xxxxx, Xxxxxxxxx,
Xxxxxxxxxxxxx 00000 (the "Trust"), with respect to MDT Short-Term Bond Fund, a
series of the Trust ("Acquired Fund" and, collectively with the Acquiring Fund,
the "Funds").
RECITALS
This Agreement is intended to be, and is adopted as, a plan of reorganization
within the meaning of Xxxxxxx 000 xx xxx Xxxxxx Xxxxxx Internal Revenue Code of
1986, as amended and the Treasury Regulations promulgated thereunder (the
"Code"). The reorganization will consist of: (i) the transfer of all of the
assets of the Acquired Fund in exchange for Class A Shares and Institutional
Shares, no par value per share, of the Acquiring Fund ("Acquiring Fund Shares");
and (ii) the distribution of Class A Shares of the Acquiring Fund to the holders
of Class A and C Shares of the Acquired Fund and the distribution of
Institutional Shares of the Acquiring Fund to the holders of Institutional
Shares of the Acquired Fund and the liquidation of the Acquired Fund as provided
herein, all upon the terms and conditions set forth in this Agreement (the
"Reorganization").
WHEREAS, each of the Acquiring Fund and the Acquired Fund is a separate series
of the Federated Trust and the Trust, respectively, and the Federated Trust and
the Trust are open-end, registered management investment companies and the
Acquired Fund owns securities that generally are assets of the character in
which the Acquiring Fund is permitted to invest;
WHEREAS, each of the Acquiring Fund and the Acquired Fund is authorized to issue
its respective shares of beneficial interest;
WHEREAS, the Trustees of the Federated Trust have determined that the
Reorganization, with respect to the Acquiring Fund, is in the best interests of
the Acquiring Fund and that the interests of the existing shareholders of the
Acquiring Fund will not be diluted as a result of the Reorganization; and
WHEREAS, the Trustees of the Trust have determined that the Reorganization, with
respect to the Acquired Fund, is in the best interests of the Acquired Fund and
that the interests of the existing shareholders of the Acquired Fund will not be
diluted as a result of the Reorganization;
AGREEMENT
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
ARTICLE I
TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR ACQUIRING FUND SHARES
AND LIQUIDATION OF THE ACQUIRED FUND
1.0 SALES LOAD ON ACQUIRING FUND SHARES. Holders of Institutional Shares of
the Acquired Fund as of the Closing Date shall not be subject to the sales load
on any future purchases on the Class A Shares of the Acquiring Fund or on any
other Federated Fund.
1.1 THE EXCHANGE. Subject to the terms and conditions contained herein and on
the basis of the representations and warranties contained herein, the Acquired
Fund agrees to transfer all of its assets, as set forth in paragraph 1.2, to the
Acquiring Fund. In exchange, the Acquiring Fund agrees: (i) to deliver to the
Acquired Fund the number of full and fractional Acquiring Fund Shares,
determined by multiplying the shares outstanding of the Acquired Fund by the
ratio computed by dividing (x) the net asset value per share of the Acquired
Fund by (y) the net asset value per share of the Acquiring Fund Shares computed
in the manner and as of the time and date set forth in paragraph 2.2. The
Acquiring Fund will distribute its Institutional Shares to holders of
Institutional Shares of the Acquired Fund and its Class A Shares will be
distributed to the holders of Class A and C Shares of the Acquired Fund. Such
transactions shall take place at the closing on the Closing Date provided for in
paragraph 3.1.
1.2 ASSETS TO BE ACQUIRED. The assets of the Acquired Fund to be acquired by
the Acquiring Fund shall consist of property having a value equal to the total
net assets of the Acquired Fund, including, without limitation, cash, secu-
rities, commodities, interests in futures and dividends or interest receivable,
owned by the Acquired Fund and any deferred or prepaid expenses shown as an
asset on the books of the Acquired Fund on the Closing Date.
The Acquired Fund has provided the Acquiring Fund with its most recent audited
financial statements, which contain a list of all of the Acquired Fund's assets
as of the date of such statements. The Acquired Fund hereby represents that as
of the date of the execution of this Agreement, there have been no changes in
its financial position as reflected in such financial statements other than as
the result of changes in the market values of securities or otherwise occurring
in the ordinary course of business in connection with the purchase and sale of
securities, the issuance and redemption of Acquired Fund shares and the payment
of normal operating expenses, dividends and capital gains distributions.
1.3 LIABILITIES TO BE DISCHARGED. The Acquired Fund will discharge all of its
liabilities and obligations prior to the Closing Date.
1.4 LIQUIDATION AND DISTRIBUTION. On or as soon after the Closing Date as is
conveniently practicable: (a) the Acquired Fund will distribute in complete
liquidation of the Acquired Fund, pro rata to its shareholders of record,
determined as of the close of business on the Closing Date (the "Acquired Fund
Shareholders"), all of the Acquiring Fund Shares received by the Acquired Fund
pursuant to paragraph 1.1; and (b) the Acquired Fund will thereupon proceed to
dissolve and terminate as set forth in paragraph 1.8 below. Such distribution
will be accomplished by the transfer of Acquiring Fund Shares credited to the
account of the Acquired Fund on the books of the Acquiring Fund to open accounts
on the share records of the Acquiring Fund in the name of the Acquired Fund
Shareholders, and representing the respective pro rata number of Acquiring Fund
Shares due such shareholders. All issued and outstanding shares of the Acquired
Fund (the "Acquired Fund Shares") will simultaneously be canceled on the books
of the Acquired Fund. The Acquiring Fund shall not issue certificates
representing Acquiring Fund Shares in connection with such transfer. After the
Closing Date, the Acquired Fund shall not conduct any business except in
connection with its termination.
1.5 OWNERSHIP OF SHARES. Ownership of Acquiring Fund Shares will be shown on
the books of the Acquiring Fund's transfer agent. Acquiring Fund Shares will be
issued simultaneously to the Acquired Fund, in an amount equal in value to the
aggregate net asset value of the Acquired Fund Shares, to be distributed to
Acquired Fund Shareholders.
1.6 TRANSFER TAXES. Any transfer taxes payable upon the issuance of Acquiring
Fund Shares in a name other than the registered holder of the Acquired Fund
Shares on the books of the Acquired Fund as of that time shall, as a condition
of such issuance and transfer, be paid by the person to whom such Acquiring Fund
Shares are to be issued and transferred.
1.7 REPORTING RESPONSIBILITY. Any reporting responsibility of the Acquired
Fund is and shall remain the responsibility of the Acquired Fund.
1.8 TERMINATION. The Acquired Fund shall be terminated reasonably promptly
following the Closing Date and the making of all distributions pursuant to
paragraph 1.4.
1.9 BOOKS AND RECORDS. All books and records of the Acquired Fund, including
all books and records required to be maintained under the Investment Company Act
of 1940 and the rules and regulations thereunder (the "1940 Act"), shall be
available to the Acquiring Fund from and after the Closing Date and shall be
turned over to the Acquiring Fund as soon as reasonably practicable following
the Closing Date.
ARTICLE II
VALUATION
2.1 VALUATION OF ASSETS. The value of the Acquired Fund's assets to be
acquired by the Acquiring Fund hereunder shall be the value of such assets as of
the closing on the Closing Date, using the valuation procedures set forth in the
Federated Trust's Declaration of Trust and the Acquiring Fund's then current
prospectus and statement of additional information or such other valuation
procedures as shall be mutually agreed upon by the parties.
2.2 VALUATION OF SHARES. The net asset value per share of Acquiring Fund
Shares shall be the net asset value per share computed as of the Closing Date,
using the valuation procedures set forth in the Federated Trust's Declaration of
Trust and the Acquiring Fund's then current prospectus and statement of
additional information, or such other valuation procedures as shall be mutually
agreed upon by the parties.
2.3 SHARES TO BE ISSUED. The number of Acquiring Fund Shares to be issued
(including fractional shares, if any) in exchange for the Acquired Fund's
assets, shall be determined by multiplying the shares outstanding of the
Acquired Fund by the ratio computed by (x) dividing the net asset value per
share of the Acquired Fund by (y) the net asset value per share of the Acquiring
Fund Shares determined in accordance with paragraph 2.2.
2.4 DETERMINATION OF VALUE. All computations of value shall be made by State
Street Bank & Trust Company, on behalf of the Acquiring Fund and the Acquired
Fund.
ARTICLE III
CLOSING AND CLOSING DATE
3.1 CLOSING DATE. The closing shall occur on November 17, 2006, or such other
date(s) as the parties may agree to in writing (the "Closing Date"). All acts
taking place at the closing shall be deemed to take place at 4:00 p.m. Eastern
Time on the Closing Date unless otherwise provided herein. The closing shall be
held at the offices of Federated Services Company, 0000 Xxxxxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxxxxxx 00000-0000, or at such other time and/or place as the
parties may agree.
3.2 CUSTODIAN'S CERTIFICATE. Acquired Fund shall cause the custodian for the
Acquired Fund (the "Custodian"), to deliver at the Closing a certificate of an
authorized officer stating that: (a) the Acquired Fund's portfolio securities,
cash, and any other assets have been delivered in proper form to the Acquiring
Fund on the Closing Date; and (b) all necessary taxes including all applicable
federal and state stock transfer stamps, if any, shall have been paid, or
provision for payment shall have been made, in conjunction with the delivery of
portfolio securities by the Acquired Fund.
3.3 EFFECT OF SUSPENSION IN TRADING. In the event that on the scheduled
Closing Date, either: (a) the NYSE or another primary exchange on which the
portfolio securities of the Acquiring Fund or the Acquired Fund are purchased or
sold, shall be closed to trading or trading on such exchange shall be
restricted; or (b) trading or the reporting of trading on the NYSE or elsewhere
shall be disrupted so that accurate appraisal of the value of the net assets of
the Acquiring Fund or the Acquired Fund is impracticable, the Closing Date shall
be postponed until the first business day after the day when trading is fully
resumed and reporting is restored.
3.4 TRANSFER AGENT'S CERTIFICATE. Acquired Fund shall cause the transfer agent
for the Acquired Fund as of the Closing Date, to deliver at the Closing a
certificate of an authorized officer stating that its records contain the names
and addresses of Acquired Fund Shareholders, and the number and percentage
ownership of outstanding shares owned by each such shareholder immediately prior
to the Closing. The Acquiring Fund shall issue and deliver or cause State Street
Bank & Trust Company, its transfer agent, to issue and deliver a confirmation
evidencing Acquiring Fund Shares to be credited on the Closing Date to the
Secretary of the Trust or provide evidence satisfactory to the Acquired Fund
that the Acquiring Fund Shares have been credited to the Acquired Fund's account
on the books of the Acquiring Fund. At the Closing, each party shall deliver to
the other such bills of sale, checks, assignments, share certificates, receipts
and other documents, if any, as such other party or its counsel may reasonably
request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS OF THE ACQUIRED FUND. The Trust, on behalf of the Acquired
Fund, represents and warrants to the Federated Trust, on behalf of the Acquiring
Fund, as follows:
a)The Acquired Fund is a legally designated, separate series of a statutory
trust duly organized and validly existing, and the Trust is in good
standing under the laws of the state of Delaware.
b)The Trust is registered as an open-end management investment company under
the 1940 Act, and the Trust's registration with the Securities and
Exchange Commission (the "Commission") as an investment company under the
1940 Act is in full force and effect.
c)The current prospectus and statement of additional information of the
Acquired Fund conform in all material respects to the applicable
requirements of the Securities Act of 1933 (the "1933 Act") and the 1940
Act, and the rules and regulations thereunder, and do not include any
untrue statement of a material fact or omit to state any material fact
required to be stated or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
d)The Acquired Fund is not, and the execution, delivery, and performance of
this Agreement (subject to shareholder approval) will not, result in the
violation of any provision of the Trust's Declaration of Trust or By-Laws
or of any material agreement, indenture, instrument, contract, lease, or
other undertaking to which the Acquired Fund is a party or by which it is
bound.
e)The Acquired Fund has no material contracts or other commitments (other
than this Agreement) that will be terminated with liability to it before
the Closing Date, except for liabilities, if any, to be discharged as
provided in paragraph 1.3 hereof.
f)Except as otherwise disclosed in writing to and accepted by the Acquiring
Fund, no litigation, administrative proceeding, or investigation of or
before any court or governmental body is presently pending or to its
knowledge threatened against the Acquired Fund or any of its properties or
assets, which, if adversely determined, would materially and adversely
affect its financial condition, the conduct of its business, or the
ability of the Acquired Fund to carry out the transactions contemplated by
this Agreement. The Acquired Fund 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 that materially and adversely affects its business or
its ability to consummate the transactions contemplated herein.
g)The financial statements of the Acquired Fund as of July 31, 2005, and for
the fiscal year then ended have been prepared in accordance with generally
accepted accounting principles, and audited by PricewaterhouseCoopers LLP,
independent registered public accountants, and such statements (copies of
which have been furnished to the Acquiring Fund) fairly reflect the
financial condition of the Acquired Fund as of such date, and there are no
known contingent liabilities of the Acquired Fund as of such date that are
not disclosed in such statements.
h)The unaudited financial statements of the Acquired Fund as of January 31,
2006, and for the six months then ended have been prepared in accordance
with generally accepted accounting principles, and such statements (copies
of which have been furnished to the Acquiring Fund) fairly reflect the
financial condition of the Acquired Fund as of such date, and there are no
known contingent liabilities of the Acquired Fund as of such date that are
not disclosed in such statements.
i)Since the date of the financial statements referred to in paragraph (h)
above, there have been no material adverse changes in the Acquired Fund's
financial condition, assets, liabilities or business (other than changes
occurring in the ordinary course of business), or any incurrence by the
Acquired Fund of indebtedness maturing more than one year from the date
such indebtedness was incurred, except as otherwise disclosed to and
accepted by the Acquiring Fund. For the purposes of this paragraph (i), a
decline in the net asset value of the Acquired Fund shall not constitute a
material adverse change.
j)All federal and other tax returns and reports of the Acquired Fund required
by law to be filed, have been filed, and all federal and other taxes shown
due on such returns and reports have been paid, or provision shall have
been made for the payment thereof. To the best of the Acquired Fund's
knowledge, no such return is currently under audit, and no assessment has
been asserted with respect to such returns.
k)All issued and outstanding shares of the Acquired Fund are duly and validly
issued and outstanding, fully paid and non-assessable by the Acquired
Fund. All of the Acquired Fund Shares will, at the time of the Closing
Date, be held by the persons and in the amounts set forth in the records
of the Acquired Fund's transfer agent as provided in paragraph 3.4. The
Acquired Fund has no outstanding options, warrants, or other rights to
subscribe for or purchase any of the Acquired Fund Shares, and has no
outstanding securities convertible into any of the Acquired Fund Shares.
l)At the Closing Date, the Acquired Fund will have good and marketable title
to the Acquired Fund's assets to be transferred to the Acquiring Fund
pursuant to paragraph 1.2, and full right, power, and authority to sell,
assign, transfer, and deliver such assets hereunder, free of any lien or
other encumbrance, except those liens or encumbrances to which the
Acquiring Fund has received notice, and, upon delivery and payment for
such assets, and the filing of any articles, certificates or other
documents under the laws of the state of Delaware, the Acquiring Fund will
acquire good and marketable title, subject to no restrictions on the full
transfer of such assets, other than such restrictions as might arise under
the 1933 Act, and other than as disclosed to and accepted by the Acquiring
Fund.
m)The execution, delivery and performance of this Agreement have been duly
authorized by all necessary action on the part of the Acquired Fund.
Subject to approval by the Acquired Fund Shareholders, this Agreement
constitutes a valid and binding obligation of the Acquired Fund,
enforceable in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium, and other laws
relating to or affecting creditors' rights and to general equity
principles.
n)The information to be furnished by the Acquired Fund for use in no-action
letters, applications for orders, registration statements, proxy
materials, and other documents that may be necessary in connection with
the transactions contemplated herein shall comply in all material respects
with federal securities and other laws and regulations and will not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated or necessary to make the statements,
in light of the circumstances under which such statements were made, not
misleading.
o)The Acquired Fund has elected to qualify and has qualified as a "regulated
investment company" under the Code (a "RIC"), as of and since its first
taxable year; has been a RIC under the Code at all times since the end of
its first taxable year when it so qualified; and qualifies and will
continue to qualify as a RIC under the Code for its taxable year ending
upon its liquidation.
p)No governmental consents, approvals, authorizations or filings are required
under the 1933 Act, the Securities Exchange Act of 1934 (the "1934 Act"),
the 1940 Act or Delaware law for the execution of this Agreement by the
Trust, for itself and on behalf of the Acquired Fund, except for the
effectiveness of the Registration Statement, and the filing of any
articles, certificates or other documents that may be required under
Delaware law, and except for such other consents, approvals,
authorizations and filings as have been made or received, and such con-
sents, approvals, authorizations and filings as may be required subsequent
to the Closing Date, it being understood, however, that this Agreement and
the transactions contemplated herein must be approved by the shareholders
of the Acquired Fund as described in paragraph 5.2.
4.2 REPRESENTATIONS OF THE ACQUIRING FUND. The Federated Trust, on behalf of
the Acquiring Fund, represents and warrants to the Trust, on behalf of the
Acquired Fund, as follows:
a)The Acquiring Fund is a legally designated, separate series of a business
trust, duly organized and validly existing and the Federated Trust is in
good standing under the laws of the Commonwealth of Massachusetts.
b)The Federated Trust is registered as an open-end management investment
company under the 1940 Act, and the Federated Trust's registration with
the Commission as an investment company under the 1940 Act is in full
force and effect.
c)The current prospectus and statement of additional information of the
Acquiring Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and
regulations thereunder, and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated or
necessary to make such statements therein, in light of the circumstances
under which they were made, not misleading.
d)The Acquiring Fund is not, and the execution, delivery and performance of
this Agreement will not, result in a violation of the Federated Trust's
Declaration of Trust or By-Laws or of any material agreement, indenture,
instrument, contract, lease, or other undertaking to which the Acquiring
Fund is a party or by which it is bound.
e)Except as otherwise disclosed in writing to and accepted by the Acquired
Fund, no litigation, 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, the conduct of its business or the ability
of the Acquiring Fund to carry out the transactions contemplated by this
Agreement. The Acquiring Fund knows of no facts that might form the basis
for the institution of such proceedings and it is not a party to or
subject to the provisions of any order, decree, or judgment of any court
or governmental body that materially and adversely affects its business or
its ability to consummate the transaction contemplated herein.
f)The financial statements of the Acquiring Fund as of April 30, 2006 and for
the fiscal year then ended have been prepared in accordance with generally
accepted accounting principles, and audited by Ernst & Young LLP, inde-
pendent registered public accountants, and such statements (copies of
which have been furnished to the Acquired Fund) fairly reflect the
financial condition of the Acquiring Fund as of such date, and there are
no known contingent liabilities of the Acquiring Fund as of such date that
are not disclosed in such statements.
g)Since the date of the financial statements referred to in paragraph (f)
above, there have been no material adverse changes in the Acquiring Fund's
financial condition, assets, liabilities or business (other than changes
occurring in the ordinary course of business), or any incurrence by the
Acquiring Fund of indebtedness maturing more than one year from the date
such indebtedness was incurred, except as otherwise disclosed to and
accepted by the Acquired Fund. For the purposes of this paragraph (g), a
decline in the net asset value of the Acquiring Fund shall not constitute
a material adverse change.
h)All federal and other tax returns and reports of the Acquiring Fund
required by law to be filed, have been filed. All federal and other taxes
shown due on such returns and reports have been paid or provision shall
have been made for their payment. To the best of the Acquiring Fund's
knowledge, no such return is currently under audit, and no assessment has
been asserted with respect to such returns.
i)All issued and outstanding Acquiring Fund shares are duly and validly
issued and outstanding, fully paid and non- assessable by the Acquiring
Fund. The Acquiring Fund has no outstanding options, warrants, or other
rights to subscribe for or purchase any Acquiring Fund shares, and there
are no outstanding securities convertible into any Acquiring Fund shares.
j)The execution, delivery and performance of this Agreement have been duly
authorized by all necessary action on the part of the Acquiring Fund, and
this Agreement constitutes a valid and binding obligation of the Acquiring
Fund, enforceable in accordance with its terms, subject as to enforcement,
to bankruptcy, insolvency, reorganization, moratorium, and other laws
relating to or affecting creditors' rights and to general equity
principles.
k)Acquiring Fund Shares to be issued and delivered to the Acquired Fund for
the account of the Acquired Fund Shareholders pursuant to the terms of
this Agreement will, at the Closing Date, have been duly authorized. When
so issued and delivered, such shares will be duly and validly issued
Acquiring Fund Shares, and will be fully paid and non-assessable.
l)The information to be furnished by the Acquiring Fund for use in no-action
letters, applications for orders, registration statements, proxy
materials, and other documents that may be necessary in connection with
the transactions contemplated herein shall comply in all material respects
with federal securities and other laws and regulations and will not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated or necessary to make the statements,
in light of the circumstances under which such statements were made, not
misleading.
m)The Acquiring Fund has elected to qualify and has qualified as a RIC under
the Code as of and since its first taxable year; has been a RIC under the
Code at all times since the end of its first taxable year when it so
qualified; and qualifies and shall continue to qualify as a RIC under the
Code for its current taxable year.
n)No governmental consents, approvals, authorizations or filings are required
under the 1933 Act, the 1934 Act, the 1940 Act or Massachusetts law for
the execution of this Agreement by the Federated Trust, for itself and on
behalf of the Acquiring Fund, or the performance of the Agreement by the
Federated Trust, for itself and on behalf of the Acquiring Fund, except
for the effectiveness of the Registration Statement, and the filing of any
articles, certificates or other documents that may be required under
Massachusetts law, and such other consents, approvals, authorizations and
filings as have been made or received, and except for such consents,
approvals, authorizations and filings as may be required subsequent to the
Closing Date.
o)The Acquiring Fund agrees to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act, and
any state Blue Sky or securities laws as it may deem appropriate in order
to continue its operations after the Closing Date.
ARTICLE V
COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1 OPERATION IN ORDINARY COURSE. The Acquiring Fund and the Acquired Fund
will each operate its respective business in the ordinary course between the
date of this Agreement and the Closing Date, it being understood that such
ordinary course of business will include customary dividends and shareholder
purchases and redemptions.
5.2 APPROVAL OF SHAREHOLDERS. The Trust will call a special meeting of the
Acquired Fund Shareholders to consider and act upon this Agreement and to take
all other appropriate action necessary to obtain approval of the transactions
contemplated herein.
5.3 INVESTMENT REPRESENTATION. The Acquired Fund covenants that the Acquiring
Fund Shares to be issued pursuant to this Agreement are not being acquired for
the purpose of making any distribution, other than in connection with the
Reorganization and in accordance with the terms of this Agreement.
5.4 ADDITIONAL INFORMATION. The Acquired Fund will assist the Acquiring Fund
in obtaining such information as the Acquiring Fund reasonably requests
concerning the beneficial ownership of the Acquired Fund Shares.
5.5 FURTHER ACTION. Subject to the provisions of this Agreement, the Acquiring
Fund and the Acquired Fund will each take or cause to be taken, all action, and
do or cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement,
including any actions required to be taken after the Closing Date.
5.6 STATEMENT OF EARNINGS AND PROFITS. As promptly as reasonably practicable,
but in any case within sixty days after the Closing Date, the Acquired Fund
shall furnish the Acquiring Fund, in such form as is reasonably satisfactory to
the Acquiring Fund, a statement of the earnings and profits of the Acquired Fund
for federal income tax purposes that will be carried over by the Acquiring Fund
as a result of Section 381 of the Code, and which will be certified by the
Trust's Treasurer.
5.7 PREPARATION OF REGISTRATION STATEMENT AND SCHEDULE 14A PROXY STATEMENT.
The Federated Trust will prepare and file with the Commission a registration
statement on Form N-14 relating to the Acquiring Fund Shares to be issued to
shareholders of the Acquired Fund (the "Registration Statement"). The Registra-
tion Statement on Form N-14 shall include a proxy statement and a prospectus of
the Acquiring Fund relating to the transaction contemplated by this Agreement.
The Registration Statement shall be in compliance with the 1933 Act, the 1934
Act and the 1940 Act, as applicable. Each party will provide the other party
with the materials and information necessary to prepare the registration
statement on Form N-14 (the "Proxy Materials"), for inclusion therein, in
connection with the meeting of the Acquired Fund's Shareholders to consider the
approval of this Agreement and the transactions contemplated herein.
5.8 DISTRIBUTION OF INVESTMENT COMPANY TAXABLE INCOME. On or before the
Closing Date, the Acquired Fund shall have declared and paid a dividend or
dividends which, together with all previous such dividends, shall have the
effect of distributing to its shareholders all of the Acquired Fund's investment
company taxable income (computed without regard to any deduction for dividends
paid), if any, plus the excess, if any, of its interest income excludible from
gross income under Section 103(a) of the Code over its deductions disallowed
under Sections 265 and 171(a)(2) of the Code for all taxable periods or years
ending on or before the Closing Date, and all of its net capital gains realized
(after reduction for any capital loss carry forward), if any, in all taxable
periods or years ending on or before the Closing Date.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to consummate the transactions provided for
herein shall be subject, at its election, to the performance by the Acquiring
Fund of all the obligations to be performed by the Acquiring Fund pursuant to
this Agreement on or before the Closing Date, and, in addition, subject to the
following conditions:
6.1 All representations, covenants, and warranties of the Acquiring Fund
contained in this Agreement shall be true and correct in all material respects
as of the date hereof and as of the Closing Date, with the same force and effect
as if made on and as of the Closing Date. The Acquiring Fund shall have
delivered to the Acquired Fund a certificate executed in the Acquiring Fund's
name by the Federated Trust's President or Vice President and its Treasurer or
Assistant Treasurer, in form and substance satisfactory to the Acquired Fund and
dated as of the Closing Date, to such effect and as to such other matters as the
Acquired Fund shall reasonably request.
6.2 The Acquired Fund shall receive an opinion of Xxxx Xxxxx LLP, counsel to
the Acquiring Fund, in form and substance reasonably acceptable to the Acquired
Fund, covering such matters as may be reasonably requested by the Acquired Fund
and its counsel.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to consummate the transactions provided
for herein shall be subject, at its election, to the performance by the Acquired
Fund of all the obligations to be performed by the Acquired Fund pursuant to
this Agreement, on or before the Closing Date and, in addition, shall be subject
to the following conditions:
7.1 All representations, covenants, and warranties of the Acquired Fund
contained in this Agreement shall be true and correct in all material respects
as of the date hereof and as of the Closing Date, with the same force and effect
as if made on and as of such Closing Date. The Acquired Fund shall have
delivered to the Acquiring Fund on such Closing Date a certificate executed in
the Acquired Fund's name by the Trust's President or Vice President and the
Treasurer or Assistant Treasurer, in form and substance satisfactory to the
Acquiring Fund and dated as of such Closing Date, to such effect and as to such
other matters as the Acquiring Fund shall reasonably request.
7.2 The Acquired Fund shall have delivered to the Acquiring Fund a statement
of the Acquired Fund's assets and liabilities, together with a list of the
Acquired Fund's portfolio securities showing the tax costs of such securities by
lot and the holding periods of such securities, as of the Closing Date,
certified by the Treasurer of the Trust.
7.3 The Acquiring Fund shall receive an opinion of counsel to the Acquired
Fund, in form and substance reasonably acceptable to the Acquiring Fund,
covering such matters as may be reasonably requested by the Acquiring Fund and
its counsel.
ARTICLE VIII
FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE
ACQUIRING FUND AND ACQUIRED FUND
If any of the conditions set forth below do not exist on or before the Closing
Date with respect to the Acquired Fund or the Acquiring Fund, the other party to
this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement:
8.1 This Agreement and the transactions contemplated herein, with respect to
the Acquired Fund, shall have been approved by the requisite vote of the holders
of the outstanding shares of the Acquired Fund in accordance with applicable law
and the provisions of the Trust's Declaration of Trust and By-Laws. Certified
copies of the resolutions evidencing such approval shall have been delivered to
the Acquiring Fund. Notwithstanding anything herein to the contrary, neither the
Acquiring Fund nor the Acquired Fund may waive the conditions set forth in this
paragraph 8.1.
8.2 On the Closing Date, the Commission shall not have issued an unfavorable
report under Section 25(b) of the 1940 Act, or instituted any proceeding seeking
to enjoin the consummation of the transactions contemplated by this Agreement
under Section 25(c) of the 1940 Act. Furthermore, no action, suit or other
proceeding shall be threatened or 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 required 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 securities authorities, including any necessary
"no-action" positions and exemptive orders from such federal and state
authorities) to permit consummation of the transactions contemplated herein
shall have been obtained, except where failure to obtain any such consent,
order, or permit would not involve a risk of a material adverse effect on the
assets or properties of the Acquiring Fund or the Acquired Fund, provided that
either party hereto may waive any such conditions for itself.
8.4 The Registration Statement shall have become effective under the 1933 Act,
and no stop orders suspending the effectiveness thereof shall have been issued.
To the best knowledge of the parties to this Agreement, no investigation or
proceeding for that purpose shall have been instituted or be pending, threatened
or contemplated under the 0000 Xxx.
8.5 The parties shall have received an opinion of Xxxx Xxxxx LLP substantially
to the effect that for federal income tax purposes:
a)The transfer of all of the Acquired Fund's assets to the Acquiring Fund
solely in exchange for Acquiring Fund Shares (followed by the distribution
of Acquiring Fund Shares to the Acquired Fund Shareholders in dissolution
and liquidation of the Acquired Fund) will constitute a "reorganization"
within the meaning of Section 368(a) of the Code, and the Acquiring Fund
and the Acquired Fund 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 Acquired Fund solely in exchange for Acquiring Fund
Shares.
c)No gain or loss will be recognized by the Acquired Fund upon the transfer
of the Acquired Fund's assets to the Acquiring Fund solely in exchange for
Acquiring Fund Shares or upon the distribution (whether actual or con-
structive) of Acquiring Fund Shares to Acquired Fund Shareholders in
exchange for their Selling Fund Shares.
d)No gain or loss will be recognized by any Acquired Fund Shareholder upon
the exchange of its Acquired Fund Shares for Acquiring Fund Shares.
e)The aggregate tax basis of the Acquiring Fund Shares received by each
Acquired Fund Shareholder pursuant to the Reorganization will be the same
as the aggregate tax basis of the Acquired Fund Shares held by it
immediately prior to the Reorganization. The holding period of Acquiring
Fund Shares received by each Acquired Fund Shareholder will include the
period during which the Acquired Fund Shares exchanged therefor were held
by such shareholder, provided the Acquired Fund Shares are held as capital
assets at the time of the Reorganization.
f)The tax basis of the Acquired Fund's assets acquired by the Acquiring Fund
will be the same as the tax basis of such assets to the Acquired Fund
immediately prior to the Reorganization. The holding period of the assets
of the Acquired Fund in the hands of the Acquiring Fund will include the
period during which those assets were held by the Acquired Fund.
Such opinion shall be based on customary assumptions and such representations
Xxxx Xxxxx LLP may reasonably request, and the Acquired Fund and Acquiring
Fund will cooperate to make and certify the accuracy of such rep-
resentations. The foregoing opinion may state that no opinion is expressed
as to the effect of the Reorganization on the Acquiring Fund, the Acquired
Fund or any Acquired Fund Shareholder with respect to any asset as to
which unrealized gain or loss is required to be recognized for federal
income tax purposes at the end of a taxable year (or on the termination or
transfer thereof) under a xxxx-to-market system of accounting.
Notwithstanding anything herein to the contrary, neither the Acquiring
Fund nor the Acquired Fund may waive the conditions set forth in this
paragraph 8.5.
ARTICLE IX
EXPENSES
On or before the Closing, Federated Investment Management Company or its
affiliates will pay all expenses associated with Acquiring Fund's and Acquired
Fund's participation in the Reorganization, provided, however, that Acquiring
Fund shall bear expenses associated with the qualification of Acquiring Fund
Shares for sale in the various states. Reorganization expenses include, without
limitation: (a) expenses associated with the preparation and filing of the Proxy
Materials; (b) postage; (c) printing; (d) accounting fees; (e) legal fees
incurred by each Fund (including fees of counsel to the Trust's independent
Trustees; (f) solicitation costs of the transaction; and (g) other related
administrative or operational costs.
ARTICLE X
ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Federated Trust, on behalf of the Acquiring Fund, and the Trust, on
behalf of the Acquired Fund, agree that neither party has made to the other
party any representation, warranty and/or covenant not set forth herein, and
that this Agreement constitutes the entire agreement between the parties.
10.2 Except as specified in the next sentence set forth in this paragraph 10.2,
the representations, warranties, and covenants contained in this Agreement or in
any document delivered pursuant to or in connection with this Agreement, shall
not survive the consummation of the transactions contemplated hereunder. The
covenants to be performed after the Closing Date, shall continue in effect
beyond the consummation of the transactions contemplated hereunder.
ARTICLE XI
TERMINATION
This Agreement may be terminated by the mutual agreement of the Federated Trust
and the Trust. In addition, either the Federated Trust or the Trust may at its
option terminate this Agreement at or before the Closing Date due to:
a)a breach by the other of any representation, warranty, or agreement
contained herein to be performed at or before the Closing Date, if not
cured within 30 days;
b)a condition herein expressed to be precedent to the obligations of the
terminating party that has not been met and it reasonably appears that it
will not or cannot be met; or
c)a determination by a party's Board of Trustees that the consummation of the
transactions contemplated herein is not in the best interests of the Trust
or the Federated Trust, respectively, and notice given to the other
party hereto.
In the event of any such termination, in the absence of willful default, there
shall be no liability for damages on the part of either the Acquiring Fund, the
Acquired Fund, the Federated Trust, the Trust, or their respective Trustees or
officers, to the other party or its Trustees or officers.
ARTICLE XII
AMENDMENTS
This Agreement may be amended, modified, or supplemented in such manner as may
be mutually agreed upon in writing by the officers of the Trust and the
Federated Trust as specifically authorized by their respective Board of
Trustees; provided, however, that following the meeting of the Acquired Fund
Shareholders called by the Acquired Fund pursuant to paragraph 5.2 of this
Agreement, no such amendment may have the effect of changing the provisions for
determining the number of Acquiring Fund Shares to be issued to the Acquired
Fund Shareholders under this Agreement to the detriment of such shareholders
without their further approval.
ARTICLE XIII
HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT;
LIMITATION OF LIABILITY
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 the Commonwealth of Pennsylvania, without regard to the conflict of laws
rules of that or any other jurisdiction.
13.4 This Agreement shall bind and inure to the benefit of the parties hereto
and their respective successors and assigns, but, except as provided in this
paragraph, 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 It is expressly agreed that the obligations of the Acquiring Fund
hereunder shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents, or employees of the Federated Trust personally, but shall bind
only the Trust property of the Acquiring Fund, as provided in the Declaration of
Trust of the Federated Trust. The execution and delivery of this Agreement have
been authorized by the Trustees of the Federated Trust on behalf of the
Acquiring Fund and signed by authorized officers of the Federated Trust, acting
as such. Neither the authorization by such Trustees nor the 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, but shall
bind only the Trust property of the Acquiring Fund as provided in the Federated
Trust's Declaration of Trust.
IN WITNESS WHEREOF, the parties have duly executed this Agreement, all as of the
date first written above.
FEDERATED INCOME SECURITIES TRUST
ON BEHALF OF ITS PORTFOLIO,
Federated Short-Term Income Fund
By: /s/ J. Xxxxxxxxxxx Xxxxxxx
Name: J. Xxxxxxxxxxx Xxxxxxx
Title: President
MDT FUNDS
ON BEHALF OF ITS PORTFOLIO,
MDT Short-Term Bond Fund
By: /s/ Xxxx Xxxxxxx
Name: Xxxx Xxxxxxx
Title: Secretary
