AGREEMENT AND PLAN OF REORGANIZATION
In order to consummate the Reorganization (as defined in Section 1(b) below) and
in consideration of the promises and the covenants and agreements hereinafter
set forth, and intending to be legally xxxxx, Xxxx Xxxxxxx Patriot Premium
Dividend Fund I, a Massachusetts business trust and a registered closed-end
investment company, File No. 811-06182 (the "Target Fund") and Xxxx Xxxxxxx
Patriot Premium Dividend Fund II (the "Acquiring Fund" and together with the
Target Fund, the "Funds"), a Massachusetts business trust and a registered
closed-end investment company, File No. 811-05908, each hereby agree as follows:
1. Representations and Warranties of the Acquiring Fund
The Acquiring Fund represents and warrants to, and agrees with, the Target Fund
that:
(a) The Acquiring Fund is a Massachusetts business trust, with transferable
shares, duly organized, validly existing under, and in good standing in
conformity with, the laws of The Commonwealth of Massachusetts, and has the
power to own all of its assets and to carry out its obligations under this
Agreement. The Acquiring Fund has all necessary federal, state and local
authorizations to carry on its business as it is now being conducted and to
carry out this Agreement.
(b) The Acquiring Fund is duly registered under the Investment Company Act
of 1940, as amended (the "1940 Act") as a diversified, closed-end
management investment company and such registration has not been revoked or
rescinded and is in full force and effect. The Acquiring Fund has elected
and qualified for the special tax treatment afforded regulated investment
companies ("RICs") under Section 851 of the Internal Revenue Code of 1986,
as amended (the "Code") at all times since its inception and intends to
continue to so qualify until consummation of the reorganization
contemplated hereby (the "Reorganization") and thereafter.
(c) The Acquiring Fund has furnished the Target Fund with the Acquiring
Fund's Annual Report to Shareholders for the fiscal year ended October 31,
2006, and the audited financial statements appearing therein, having been
audited by PricewaterhouseCoopers LLP, independent registered public
accounting firm, fairly present the financial position of the Acquiring
Fund as of the respective dates indicated, in conformity with accounting
principles generally accepted in the United States applied on a consistent
basis.
(d) An unaudited statement of assets, liabilities and capital of the
Acquiring Fund and an unaudited schedule of investments of the Acquiring
Fund, each as of the Valuation Time (as defined in Section 3(e) of this
Agreement), will be furnished to the Target Fund, at or prior to the
Closing Date (as defined in Section 7(a) herein), for the purpose of
determining the number of Acquiring Fund Common Shares and Acquiring Fund
DARTS (each as defined in Section 1(l) herein) to be issued pursuant to
Section 3(a) of this Agreement; each will fairly present the financial
position of the Acquiring Fund as of the Valuation Time in conformity with
generally accepted accounting principles applied on a consistent basis.
(e) The Acquiring Fund has full power and authority to enter into and
perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement has been duly authorized by all necessary
action of its Board of Trustees, and this Agreement constitutes a valid and
binding contract enforceable in accordance with its terms, subject to the
effects of bankruptcy, insolvency, moratorium, fraudulent conveyance and
similar laws relating to or affecting creditors' rights generally and court
decisions with respect thereto.
(f) There are no material legal, administrative or other proceedings
pending or, to the knowledge of the Acquiring Fund, threatened against it
which assert liability on the part of the Acquiring Fund or which
materially affect its financial condition or its ability to consummate the
Reorganization. The Acquiring Fund is not charged with or, to the best of
its knowledge, threatened with any violation or investigation of any
possible violation of any provisions of any federal, state or local law or
regulation or administrative ruling relating to any aspect of its business.
(g) The Acquiring Fund is not obligated under any provision of its
Declaration of Trust dated September 26, 1989, as amended, or its by-laws,
as amended, and is not a party to any contract or other commitment or
obligation, and is not subject to any order or decree, which would be
violated by its execution of or performance under this Agreement, except
insofar as the Funds have mutually agreed to amend such contract or other
commitment or obligation to cure any potential violation as a condition
precedent to the Reorganization.
(h) There are no material contracts outstanding to which the Acquiring Fund
is a party that have not been disclosed in the N-14 Registration Statement
(as defined in subsection (k) below) or that will not otherwise be
disclosed to the Target Fund prior to the Valuation Time.
(i) The Acquiring Fund has no known liabilities of a material amount,
contingent or otherwise, other than those shown on its statements of
assets, liabilities and capital referred to in subsection (c) above, those
incurred in the ordinary course of its business as an investment company,
and those incurred in connection with the Reorganization. As of the
Valuation Time, the Acquiring Fund will advise the Target Fund in writing
of all known liabilities, contingent or otherwise, whether or not incurred
in the ordinary course of business, existing or accrued as of such time,
except to the extent disclosed in the financial statements referred to in
subsection (c) above.
(j) No consent, approval, authorization or order of any court or government
authority or self-regulatory organization is required for the consummation
by the Acquiring Fund of the Reorganization, except such as may be required
under the rules of the New York Stock Exchange ("NYSE"), Securities Act of
1933, as amended (the "1933 Act"), the Securities Exchange Act of 1934, as
amended (the "1934 Act") and the 1940 Act or state securities laws (which
term as used herein shall include the laws of the District of Columbia and
Puerto Rico).
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(k) The registration statement filed by the Acquiring Fund on Form N-14,
which includes the proxy statement of the Target Fund and the Acquiring
Fund with respect to the transactions contemplated herein (the "Joint Proxy
Statement/Prospectus"), and any supplement or amendment thereto or to the
documents therein (as amended or supplemented, the "N-14 Registration
Statement"), on its effective date, at the time of the shareholders'
meetings referred to in Section 8(a) and Section 9(a) of this Agreement and
at the Closing Date, insofar as it relates to the Acquiring Fund, (i)
complied or 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) did not or will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading; and the
Joint Proxy Statement/Prospectus included therein did not or will not
contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that the representations and warranties in this subsection only
shall apply to statements in or omissions from the N-14 Registration
Statement made in reliance upon and in conformity with information
furnished by the Acquiring Fund for use in the N-14 Registration Statement.
(l) The Acquiring Fund is authorized to issue an unlimited number of common
shares of beneficial interest, no par value (the "Acquiring Fund Common
Shares"), and an unlimited number of preferred shares of beneficial
interest, no par value. The Board of Trustees of the Acquiring Fund has
designated 598 preferred shares as Dutch Auction Rate Transferable
Securities, Series A, 598 preferred shares as Dutch Auction Rate
Transferable Securities, Series B, 685 preferred shares as Dutch Auction
Rate Transferable Securities, Series C, 525 preferred shares as Dutch
Auction Rate Transferable Securities, Series E and 600 preferred shares as
Dutch Auction Rate Transferable Securities, Series F (collectively,
"Acquiring Fund DARTS"). Each outstanding Acquiring Fund Common Share and
each Acquiring Fund DARTS share is fully paid and, nonassessable, and has
full voting rights and no shareholder of the Acquiring Fund shall be
entitled to any preemptive or other similar rights. In regard to the
statement that the Acquiring Fund Common Shares and Acquiring Fund DARTS
are non-assessable, it is noted that the Acquiring Fund is an entity of the
type commonly known as a "Massachusetts business trust." Under
Massachusetts law, shareholders could, under certain circumstances, be held
personally liable for the obligations of the Acquiring Fund.
(m) The Acquiring Fund Common Shares and the Acquiring Fund DARTS to be
issued to the Target Fund pursuant to this Agreement will have been duly
authorized and, when issued and delivered pursuant to this Agreement, will
be legally and validly issued and will be fully paid and, nonassessable and
will have full voting rights, and no shareholder of the Acquiring Fund will
have any preemptive right of subscription or purchase in respect thereof.
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(n) At or prior to the Closing Date, the Acquiring Fund Common Shares to be
transferred to the Target Fund for distribution to the shareholders of the
Target Fund on the Closing Date will be duly qualified for offering to the
public in all states of the United States in which the sale of shares of
the Funds presently are qualified, and there will be a sufficient number of
such shares registered under the 1933 Act and, as may be necessary, with
each pertinent state securities commission to permit the transfers
contemplated by this Agreement to be consummated.
(o) At or prior to the Closing Date, the Acquiring Fund DARTS to be
transferred to the Target Fund on the Closing Date will be duly qualified
for offering to the public in all states of the United States in which the
sale of DARTS of the Target Fund presently are qualified, and there are a
sufficient number of Acquiring Fund DARTS registered under the 1933 Act and
with each pertinent state securities commission to permit the transfers
contemplated by this Agreement to be consummated.
(p) At or prior to the Closing Date, the Acquiring Fund will have obtained
any and all regulatory, trustee and shareholder approvals necessary to
issue the Acquiring Fund Common Shares and the Acquiring Fund DARTS to the
Target Fund.
(q) The Acquiring Fund has filed, or intends to file, or has obtained
extensions to file, all federal, state and local tax returns which are
required to be filed by it, and has paid or has obtained extensions to pay,
all federal, state and local taxes shown on said returns to be due and
owing and all assessments received by it, up to and including the taxable
year in which the Closing Date occurs. All tax liabilities of the Acquiring
Fund have been adequately provided for on its books, and no tax deficiency
or liability of the Acquiring 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, up
to and including the taxable year in which the Closing Date occurs.
(r) The Acquiring Fund has elected to qualify and has qualified as a RIC as
of and since its inception; has been a RIC under the Code at all times
since the end of its first taxable year when it so qualified; qualifies and
will continue to qualify as a RIC under the Code; and has satisfied the
distribution requirements imposed by the Code for each of its taxable
years. The Acquiring Fund has not at any time since its inception been
liable for, and is not now liable for, and will not be liable for on the
Closing Date, any material income or excise tax pursuant to Section 852 or
Section 4982 of the Code.
2. Representations and Warranties of the Target Fund.
The Target Fund represents and warrants to, and agrees with, the Acquiring Fund
that:
(a) The Target Fund is a Massachusetts business trust, with transferable
shares, duly organized, validly existing in conformity with the laws of The
Commonwealth of Massachusetts, and has the power to own all of its assets
and to carry out this Agreement. The Target Fund has all necessary federal,
state and local authorizations to carry on its business as it is now being
conducted and to carry out this Agreement.
4
(b) The Target Fund is duly registered under the 1940 Act as a diversified,
closed-end management investment company, and such registration has not
been revoked or rescinded and is in full force and effect. The Target Fund
has elected and qualified for the special tax treatment afforded RICs under
Section 851 of the Code at all times since its inception, and intends to
continue to so qualify through its taxable year ending upon liquidation.
(c) As used in this Agreement, the term "Target Fund Investments" shall
mean: (i) the investments of the Target Fund shown on the schedule of its
investments as of the Valuation Time furnished to the Acquiring Fund; and
(ii) all other assets owned by the Target Fund or liabilities incurred as
of the Valuation Time.
(d) The Target Fund has full power and authority to enter into and perform
its obligations under this Agreement. The execution, delivery and
performance of this Agreement has been duly authorized by all necessary
action of its Board of Trustees and this Agreement constitutes a valid and
binding contract enforceable in accordance with its terms, subject to the
effects of bankruptcy, insolvency, moratorium, fraudulent conveyance and
similar laws relating to or affecting creditors' rights generally and court
decisions with respect thereto.
(e) The Target Fund has furnished the Acquiring Fund with the Target Fund's
Annual Report to Shareholders for the fiscal year ended September 30, 2006,
and the audited financial statements appearing therein, having been audited
by PricewaterhouseCoopers LLP, independent registered public accounting
firm, and the Target Fund's unaudited Semi-Annual Report to Shareholders
dated March 31, 2007 fairly presents the financial position of the Target
Fund as of the respective dates indicated, in conformity with accounting
principles generally accepted in the United States applied on a consistent
basis.
(f) An unaudited statement of assets, liabilities and capital of the Target
Fund and an unaudited schedule of investments of the Target Fund, each as
of the Valuation Time, will be furnished to the Acquiring Fund at or prior
to the Closing Date for the purpose of determining the number of shares of
Acquiring Fund Common Shares and Acquiring Fund DARTS to be issued to the
Target Fund pursuant to Section 3 of this Agreement; each will fairly
present the financial position of the Target Fund as of the Valuation Time
in conformity with generally accepted accounting principles applied on a
consistent basis.
(g) There are no material legal, administrative or other proceedings
pending or, to the knowledge of the Target Fund, threatened against it
which assert liability on the part of the Target Fund or which materially
affect its financial condition or its ability to consummate the
Reorganization. The Target Fund is not charged with or, to the best of its
knowledge, threatened with any violation or investigation of any possible
violation of any provisions of any federal, state or local law or
regulation or administrative ruling relating to any aspect of its business.
5
(h) There are no material contracts outstanding to which the Target Fund is
a party that have not been disclosed in the N-14 Registration Statement or
will not otherwise be disclosed to the Acquiring Fund prior to the
Valuation Time.
(i) The Target Fund is not obligated under any provision of its Declaration
of Trust dated July 18, 1990, or its by-laws, as amended, or a party to any
contract or other commitment or obligation, and is not subject to any order
or decree which would be violated by its execution of or performance under
this Agreement, except insofar as the Funds have mutually agreed to amend
such contract or other commitment or obligation to cure any potential
violation as a condition precedent to the Reorganization.
(j) The Target Fund has no known liabilities of a material amount,
contingent or otherwise, other than those shown on its statements of
assets, liabilities and capital referred to above, those incurred in the
ordinary course of its business as an investment company and those incurred
in connection with the Reorganization. As of the Valuation Time, the Target
Fund will advise the Acquiring Fund in writing of all known liabilities,
contingent or otherwise, whether or not incurred in the ordinary course of
business, existing or accrued as of such time.
(k) The Target Fund has filed, or intends to file, or has obtained
extensions to file, all federal, state and local tax returns which are
required to be filed by it, and has paid or has obtained extensions to pay,
all federal, state and local taxes shown on said returns to be due and
owing and all assessments received by it, up to and including the taxable
year in which the Closing Date occurs. All tax liabilities of the Target
Fund have been adequately provided for on its books, and no tax deficiency
or liability of the Target 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, up
to and including the taxable year in which the Closing Date occurs.
(l) At both the Valuation Time and the Closing Date, the Target Fund will
have full right, power and authority to sell, assign, transfer and deliver
the Target Fund Investments. At the Closing Date, subject only to the
obligation to deliver the Target Fund Investments as contemplated by this
Agreement, the Target Fund will have good and marketable title to all of
the Target Fund Investments, and the Acquiring Fund will acquire all of the
Target Fund Investments free and clear of any encumbrances, liens or
security interests and without any restrictions upon the transfer thereof
(except those imposed by the federal or state securities laws and those
imperfections of title or encumbrances as do not materially detract from
the value or use of the Target Fund Investments or materially affect title
thereto).
(m) No consent, approval, authorization or order of any court or
governmental authority or self-regulatory organization is required for the
consummation by the Target Fund of the Reorganization, except such as may
be required under the 1933 Act, the 1934 Act, the 1940 Act, state
securities laws or the rules of the NYSE.
6
(n) The N-14 Registration Statement, on its effective date, at the time of
the shareholders' meetings called to vote on this Agreement and on the
Closing Date, insofar as it relates to the Target Fund (i) complied or 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) did not or will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein not misleading; and the Joint Proxy
Statement/Prospectus included therein did not or will not contain any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that the
representations and warranties in this subsection shall apply only to
statements in or omissions from the N-14 Registration Statement made in
reliance upon and in conformity with information furnished by the Target
Fund for use in the N-14 Registration Statement.
(o) The Target Fund is authorized to issue full and fractional common
shares of beneficial interest, no par value (the "Target Fund Common
Shares"), and preferred shares of beneficial interest, no par value
("Target Fund Preferred Shares"). Each outstanding Target Fund Common Share
and each outstanding Target Fund Preferred Share is fully paid and
nonassessable, and has full voting rights and no person is entitled to any
preemptive or other similar rights with respect to Target Fund Common
Shares and Target Fund Preferred Shares. In regard to the statement that
Target Fund Common Shares and Target Fund Preferred Shares are
non-assessable, it is noted that the Target Fund is an entity of the type
commonly known as a "Massachusetts business trust." Under Massachusetts
law, shareholders could, under certain circumstances, be held personally
liable for the obligations of the Target Fund.
(p) All of the issued and outstanding Target Fund Common Shares and Target
Fund Preferred Shares were offered for sale and sold in conformity with all
applicable federal and state securities laws.
(q) The books and records of the Target Fund made available to the
Acquiring Fund and/or its counsel are substantially true and correct and
contain no material misstatements or omissions with respect to the
operations of the Target Fund.
(r) The Target Fund will not sell or otherwise dispose of any of the
Acquiring Fund Common Shares or Acquiring Fund DARTS to be received in the
Reorganization, except in distribution to the shareholders of the Target
Fund, as provided in Section 3 of this Agreement.
7
(s) The Target Fund has elected to qualify and has qualified as a "RIC"
under the Code as of and since its inception; has been a RIC under the Code
at all times since the end of its first taxable year when it so qualified;
qualifies and will continue to qualify as a RIC under the Code for its
taxable year ending upon its liquidation; and has satisfied the
distribution requirements imposed by the Code for each of its taxable
years. The Target Fund has not at any time since its inception been liable
for, is not now liable for, and will not be liable for on the Closing Date,
any material income excise tax under Section 852 or Section 4982 of the
Code.
3. The Reorganization.
(a) Subject to receiving the requisite approvals of the shareholders of the
Acquiring Fund and the Target Fund, and to the other terms and conditions
contained herein, the Target Fund agrees to convey, transfer and deliver to
the Acquiring Fund and the Acquiring Fund agrees to acquire from the Target
Fund, on the Closing Date, all of the Target Fund Investments (including
interest accrued as of the Valuation Time on debt instruments), including
the assumption of substantially all of the liabilities of the Target Fund,
in exchange for that number of Acquiring Fund Common Shares and Acquiring
Fund DARTS provided in Section 4 of this Agreement. Pursuant to this
Agreement, as soon as practicable after the Closing Date, the Target Fund
will distribute all Acquiring Fund Common Shares and Acquiring Fund DARTS
received by it to its shareholders constructively in exchange for their
Target Fund Common Shares and Target Fund Preferred Shares. Such
distributions shall be accomplished by the opening of shareholder accounts
on the share ledger records of the Acquiring Fund in the amounts due the
shareholders of the Target Fund based on their respective holdings in the
Target Fund as of the Valuation Time.
(b) If it is determined that the portfolios of the Target Fund and the
Acquiring Fund, when aggregated, would contain investments exceeding
certain percentage limitations imposed upon the Acquiring Fund with respect
to such investments, the Target Fund, if requested by the Acquiring Fund,
will dispose of a sufficient amount of such investments as may be necessary
to avoid violating such limitations as of the Closing Date. Notwithstanding
the foregoing, (a) nothing herein will require the Target Fund to dispose
of any portfolios, securities or other investments, if, in the reasonable
judgment of the Target Fund's trustees or investment adviser, such
disposition would adversely affect the tax-free nature of the
Reorganization for federal income tax purposes or would otherwise not be in
the best interests of the Target Fund, and (b) nothing will permit the
Target Fund to dispose of any portfolio securities or other investments if,
in the reasonable judgment of the Acquiring Fund's trustees or investment
adviser, such disposition would adversely affect the tax-free nature of the
Reorganization for federal income tax purposes or would otherwise not be in
the best interests of the Acquiring Fund.
(c) Prior to the Closing Date, the Target Fund shall declare a dividend or
dividends which, together with all such previous dividends, shall have the
effect of distributing to their respective shareholders all of their
respective net investment company taxable income to and including the
Closing Date, if any (computed without regard to any deduction for
dividends paid), and all of its net capital gain, if any, realized to and
including the Closing Date.
8
(d) The Target Fund will pay or cause to be paid to the Acquiring Fund any
interest the Target Fund receives on or after the Closing Date with respect
to any of the Target Fund Investments transferred to the Acquiring Fund
hereunder.
(e) The Valuation Time shall be 4:00 p.m., Eastern time, on June 25, 2007,
or such earlier or later day and time as may be mutually agreed upon in
writing (the "Valuation Time").
(f) Recourse for liabilities assumed from the Target Fund by the Acquiring
Fund in the Reorganization will be limited to the assets acquired by the
Acquiring Fund. The known liabilities of the Target Fund, as of the
Valuation Time, shall be confirmed to the Acquiring Fund pursuant to
Section 2(j) of this Agreement.
(g) The Target Fund will be terminated following the Closing Date by
terminating its registration under the 1940 Act and its organization under
Massachusetts law and will withdraw its authority to do business in any
state where it is required to do so.
(h) The Acquiring Fund will file with the Secretary of State of The
Commonwealth of Massachusetts, as required, any amendment to its
Declaration of Trust and by-laws establishing the powers, rights and
preferences of the Acquiring Fund DARTS prior to the closing of the
Reorganization.
(i) The Acquiring Fund and the Target Fund each understand and acknowledge
that the Acquiring Fund has or intends to enter into similar Agreements and
Plans of Reorganization ("Other Reorganizations") with the Xxxx Xxxxxxx
Patriot Preferred Dividend Xxxx, Xxxx Xxxxxxx Patriot Select Dividend Trust
and the Xxxx Xxxxxxx Patriot Global Dividend Fund ("Other Target Funds")
pursuant to which the Acquiring Fund (1) would acquire all substantially
all of the assets and assume substantially all of the liabilities of each
of the Other Target Funds, and (2) common and preferred shareholders of the
Other Target Funds will become Common and DARTS shareholders, respectively,
of the Acquiring Fund. The effective dates of such Other Reorganizations
are expected to be in proximity to the Closing Date, however, they are not
expected to occur simultaneously with the Reorganization or with one
another and may occur at any such time as the Acquiring Fund and each Other
Target Fund may agree. The consummation of the Reorganization is not
conditioned upon the consummation of any such Other Reorganization. The
Acquiring Fund and the Target Fund understand, acknowledge and agree that
any or all of such Other Reorganizations may not occur and the status of
any such Other Reorganization will not have a bearing on the consummation
of the Reorganization.
9
4. Issuance and Valuation of Acquiring Fund Common Shares and Acquiring Fund
DARTS in the Reorganization.
(a) Acquiring Fund Common Shares and Acquiring Fund DARTS of an aggregate
net asset value or aggregate liquidation preference, as the case may be,
equal to the value of the Target Fund Investments acquired in the
Reorganization determined as hereinafter provided, shall be issued by the
Acquiring Fund to the Target Fund in exchange for such Target Fund
Investments. The Acquiring Fund will issue to the Target Fund (i) a number
of Acquiring Fund Common Shares, the aggregate net asset value of which
will equal the aggregate net asset value of the Target Fund Common Shares,
determined as set forth below, and (ii) a number of Acquiring Fund DARTS,
the aggregate liquidation preference and value of which will equal the
aggregate liquidation preference and value of the Target Fund Preferred
Shares, determined as set forth below.
(b) The net asset value of the Funds' Common Shares and the liquidation
preference and value of the Target Fund Preferred Shares and the Acquiring
Fund DARTS shall be determined as of the Valuation Time in accordance with
the regular procedures of the investment adviser, and no formula will be
used to adjust the net asset value so determined of any Fund to take into
account differences in realized and unrealized gains and losses. Values in
all cases shall be determined as of the Valuation Time. The value of the
Target Fund Investments to be transferred to the Acquiring Fund shall be
determined pursuant to the regular procedures of the investment adviser.
(c) The net asset value per share of the Acquiring Fund Common Shares and
the liquidation preference and value per share of the Acquiring Fund DARTS
shall be determined in accordance with such procedures and the Acquiring
Fund shall certify the computations involved. For purposes of determining
the net asset value of each Target Fund Common Share and Acquiring Fund
Common Share, the value of the securities held by the applicable Fund, plus
any cash or other assets (including interest accrued but not yet received),
minus all liabilities (including accrued expenses) and the aggregate
liquidation value of the outstanding shares of Target Fund Preferred Shares
or Acquiring Fund DARTS, as the case may be, shall be divided by the total
number of Target Fund Common Shares or Acquiring Fund Common Shares, as the
case may be, outstanding at such time.
(d) The Acquiring Fund shall issue to the Target Fund Acquiring Fund Common
Shares and the Acquiring Fund DARTS, each registered in the name of the
Target Fund. The Target Fund shall then distribute the Acquiring Fund
Common Shares and the Acquiring Fund DARTS to the holders of Target Fund
Common Shares and Target Fund Preferred Shares by establishing open
accounts for each Target Fund shareholder on the share ledger records of
the Acquiring Fund. Certificates representing Acquiring Fund Common Shares
and Acquiring Fund DARTS will not be issued to Target Fund shareholders.
With respect to any Target Fund shareholder holding certificates evidencing
ownership of Target Fund Common Shares as of the Closing Date, and subject
to the Acquiring Fund being informed thereof in writing by the Target Fund,
the Acquiring Fund will not permit such shareholder to receive Acquiring
Fund Common Shares or Acquiring Fund DARTS, exchange Acquiring Fund Common
Shares or Acquiring Fund DARTS credited to such shareholder's account for
shares of other investment companies managed by the Adviser or any of its
affiliates, or pledge or redeem such Acquiring Fund Common Shares or
Acquiring Fund DARTS, in any case, until notified by the Target Fund or its
agent that such shareholder has surrendered his or her outstanding
certificates evidencing ownership of Target Fund Common Shares or Target
Fund Preferred Shares or, in the event of lost certificates, posted
adequate bond. The Target Fund, at its own expense, will request its
shareholders to surrender their outstanding certificates evidencing
ownership of Target Fund Common Shares or Target Fund Preferred Shares, as
the case may be, or post adequate bond therefor.
10
(e) No fractional shares of Acquiring Fund Common Shares will be issued to
holders of Target Fund Common Shares unless such shares are held in a
Dividend Reinvestment Plan account. In lieu thereof, the Acquiring Fund's
transfer agent, Mellon Investor Services, will aggregate all fractional
Acquiring Fund Common Shares to be issued in connection with the
Reorganization (other than those issued to a Dividend Reinvestment Plan
account) and sell the resulting full shares on the New York Stock Exchange
at the current market price for Acquiring Fund Common Shares for the
account of all holders of such fractional interests, and each such holder
will receive such holder's pro rata share of the proceeds of such sale upon
surrender of such holder's certificates representing Acquiring Fund Common
Shares.
5. Payment of Expenses.
(a) Except as otherwise provided in this Section 5, the costs associated
with the Reorganization will be borne by Common Shareholders of the Target
Fund and the Acquiring Fund in proportion to their projected annual expense
savings as a result of the Reorganization. Xxxx Xxxxxxx Advisers, LLC the
adviser to the Acquiring Fund and the Target Fund (the "Adviser"), will
bear the balance of the costs of the Reorganization; provided, however,
that the Acquiring Fund and the Target Fund will each pay any brokerage
commissions, deal xxxx-ups and similar expenses ("Portfolio Expenses").
(b) In the event the transactions contemplated by this Agreement are not
consummated, then the costs associated with the Reorganization (other than
Portfolio Expenses that the Acquiring Fund and Target Fund may incur in
connection with the purchase or sale of portfolio securities) will be borne
by the Acquiring Fund and the Other Target Funds whose shareholders have
approved the Other Reorganizations in proportion to their projected annual
expense savings as a result of the Other Reorganizations. The Adviser will
bear the balance of such costs.
(c) Notwithstanding any other provisions of this Agreement, if for any
reason the transactions contemplated by this Agreement are not consummated,
neither the Acquiring Fund nor the Target Fund shall be liable to the other
for any damages resulting therefrom, including, without limitation,
consequential damages, except as specifically set forth above.
11
(d) Notwithstanding any of the foregoing, costs and expenses will in any
event be paid by the party directly incurring them if and to the extent
that the payment by another party of such costs and expenses would result
in the disqualification of such party as a "regulated investment company"
within the meaning of Subchapter M of the Code.
6. Covenants of the Funds.
(a) Each Fund covenants to operate its business as presently conducted in
the ordinary course of business between the date hereof and the Closing
Date, it being understood that such ordinary course of business will
include regular and customary dividends and distributions.
(b) The Target Fund agrees that following the consummation of the
Reorganization, it will terminate in accordance with the laws of The
Commonwealth of Massachusetts and any other applicable law, it will not
make any distributions of any Acquiring Fund Common Shares or Acquiring
Fund DARTS other than to its respective shareholders and without first
paying or adequately providing for the payment of all of its respective
liabilities not assumed by the Acquiring Fund, if any, and on and after the
Closing Date it shall not conduct any business except in connection with
its termination.
(c) The Target Fund undertakes that if the Reorganization is consummated,
it will file an application pursuant to Section 8(f) of the 1940 Act for an
order declaring that the Target Fund has ceased to be a registered
investment company.
(d) The Acquiring Fund will file the N-14 Registration Statement with the
Securities and Exchange Commission (the "Commission") and will use its best
efforts to provide that the N-14 Registration Statement becomes effective
as promptly as practicable. Each Fund agrees to cooperate fully with the
other, and each will furnish to the other the information relating to
itself to be set forth in the N-14 Registration Statement as required by
the 1933 Act, the 1934 Act the 1940 Act, and the rules and regulations
thereunder and the state securities laws.
(e) The Acquiring Fund has no plan or intention to sell or otherwise
dispose of the Target Fund Investments, except for dispositions made in the
ordinary course of business.
(f) Each of the Funds agrees that by the Closing Date all of its federal
and other tax returns and reports required to be filed on or before such
date shall have been filed and all taxes shown as due on said returns
either have been paid or adequate liability reserves have been provided for
the payment of such taxes.
(g) The intention of the parties is that the transaction contemplated by
this Agreement will qualify as a reorganization within the meaning of
Section 368(a) of the Code. Neither the Acquiring Fund nor the Target Fund
shall take any action or cause any action to be taken (including, without
limitation, the filing of any tax return) that is inconsistent with such
treatment or results in the failure of the transaction to qualify as a
reorganization within the meaning of Section 368(a) of the Code. At or
prior to the Closing Date, the Acquiring Fund and the Target Fund will take
such action, or cause such action to be taken, as is reasonably necessary
to enable Xxxxxxxxxxx & Xxxxxxxx Xxxxxxx Xxxxx Xxxxx LLP ("K&L Gates"),
special counsel to the Funds, to render the tax opinion required herein
(including, without limitation, each party's execution of representations
reasonably requested by and addressed to K&L Gates).
12
(h) In connection with the covenant in subsection (f) above, the Funds
agree to cooperate with each other in filing any tax return, amended return
or claim for refund, determining a liability for taxes or a right to a
refund of taxes or participating in or conducting any audit or other
proceeding in respect of taxes. The Acquiring Fund agrees to retain for a
period of ten (10) years following the Closing Date all returns, schedules
and work papers and all material records or other documents relating to tax
matters of the Target Fund for each of such Fund's taxable period first
ending after the Closing Date and for all prior taxable periods.
(i) After the Closing Date, the Target Fund shall prepare, or cause its
agents to prepare, any federal, state or local tax returns required to be
filed by such fund with respect to its final taxable year ending with its
complete liquidation and for any prior periods or taxable years and further
shall cause such tax returns to be duly filed with the appropriate taxing
authorities. Notwithstanding the aforementioned provisions of this
subsection, any expenses incurred by the Target Fund (other than for
payment of taxes) in connection with the preparation and filing of said tax
returns after the Closing Date shall be borne by such Fund to the extent
such expenses have been accrued by such Fund in the ordinary course without
regard to the Reorganization; any excess expenses shall be borne pursuant
to Section 5 herein.
(j) The Target Fund and the Acquiring Fund each agrees to mail to its
respective shareholders of record entitled to vote at the annual meeting of
shareholders at which action is to be considered regarding this Agreement,
in sufficient time to comply with requirements as to notice thereof, a
combined proxy statement and prospectus which complies in all material
respects with the applicable provisions of Section 14(a) of the 1934 Act
and Section 20(a) of the 1940 Act, and the rules and regulations,
respectively, thereunder.
(k) Following the consummation of the Reorganization, the Acquiring Fund
will continue its business as a diversified, closed-end management
investment company registered under the 1940 Act.
13
7. Closing Date.
(a) Delivery of the Target Fund Investments, and of the Acquiring Fund
Common Shares and Acquiring Fund DARTS to be issued as provided in this
Agreement, shall be made at such place and time as the Funds shall mutually
agree on the next full business day following the Valuation Time, or at
such other time and date agreed to by the Funds, the date and time upon
which such delivery is to take place being referred to herein as the
"Closing Date." To the extent that any Target Fund Investments, for any
reason, are not transferable on the Closing Date, the Target Fund shall
cause such Target Fund Investments to be transferred to the Acquiring
Fund's account with its custodian at the earliest practicable date
thereafter.
(b) The Target Fund will deliver to the Acquiring Fund on the Closing Date
confirmation or other adequate evidence as to the tax basis of the Target
Fund Investments delivered to the Acquiring Fund hereunder.
(c) As soon as practicable after the close of business on the Closing Date,
the Target Fund shall deliver to the Acquiring Fund a list of the names and
addresses of all of the shareholders of record of the Target Fund on the
Closing Date and the number of Target Fund Common Shares and Target Fund
Preferred Shares owned by each such shareholder, certified to the best of
its knowledge and belief by the transfer agent for the Target Fund or by
its President.
8. Conditions of the Target Fund.
The obligations of the Target Fund hereunder shall be subject to the following
conditions:
(a) That this Agreement shall have been adopted, and the Reorganization
shall have been approved, by the Board of Trustees of the Target Fund and
by the affirmative vote of the holders of a majority of the outstanding
Target Fund Common Shares and of the outstanding Target Fund Preferred
Shares, each voting separately as a class; and that the Acquiring Fund
shall have delivered to the Target Fund a copy of the resolution approving
this Agreement adopted by the Board of Trustees of the Acquiring Fund, a
certificate setting forth the vote of holders of Acquiring Fund Common
Shares approving the issuance of additional Acquiring Fund Common Shares,
and a certificate setting for the vote of holders of Acquiring Fund DARTS
approving the issuance of additional Acquiring Fund DARTS, each certified
by its Secretary or Assistant Secretary.
(b) That the Target Fund shall have received from the Acquiring Fund a
statement of assets, liabilities and capital, with values determined as
provided in Section 4 of this Agreement, together with a schedule of such
Fund's investments, all as of the Valuation Time, certified on the
Acquiring Fund's behalf by its President (or any Vice President) and its
Treasurer or Assistant Treasurer, and a certificate signed by the Fund's
President (or any Vice President) and its Treasurer or Assistant Treasurer,
dated as of the Closing Date, certifying that as of the Valuation Time and
as of the Closing Date there has been no material adverse change in the
financial position of the Acquiring Fund since the date of such Fund's most
recent Annual or Semi-Annual Report, as applicable, other than changes in
its portfolio securities since that date or changes in the market value of
its portfolio securities.
14
(c) That the Acquiring Fund shall have furnished to the Target Fund a
certificate signed by the Acquiring Fund's President (or any Vice
President) and its Treasurer or Assistant Treasurer, dated as of the
Closing Date, certifying that, as of the Valuation Time and as of the
Closing Date, all representations and warranties of the Acquiring Fund made
in this Agreement are true and correct in all material respects with the
same effect as if made at and as of such dates, and that the Acquiring 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.
(d) That there shall not be any material litigation pending with respect to
the matters contemplated by this Agreement.
(e) The Target Fund shall have received the opinion(s) of K&L Gates,
counsel for the Acquiring Fund, dated as of the Closing Date, addressed to
the Target Fund substantially in the form and to the effect that:
(i) the Acquiring Fund is duly formed and validly existing under the
laws of its state of organization;
(ii) the Acquiring Fund is registered as a closed-end, management
investment company under the 1940 Act;
(iii) this Agreement and the Reorganization provided for herein and
the execution of this Agreement have been duly authorized and approved
by all requisite action of the Acquiring Fund, and this Agreement has
been duly executed and delivered by the Acquiring Fund and (assuming
this Agreement is a valid and binding obligation of the other party
hereto) is a valid and binding obligation of the Acquiring Fund;
(iv) neither the execution or delivery by the Acquiring Fund of this
Agreement nor the consummation by the Acquiring Fund of the
transactions contemplated hereby violate any provision of any statute
or any published regulation or any judgment or order disclosed to
counsel by the Acquiring Fund as being applicable to the Acquiring
Fund;
(v) the Acquiring Fund Common Shares and Acquiring Fund DARTS have
been duly authorized and, upon issuance thereof in accordance with
this Agreement, will be validly issued, fully paid and nonassessable
and no person is entitled to any preemptive or other similar rights
with respect to Acquiring Fund Common Shares and Acquiring Fund DARTS.
In regard to the statement that Acquiring Fund Common Shares and
Acquiring Fund DARTS are non-assessable, such opinion will note that
the Acquiring Fund is an entity of the type commonly known as a
"Massachusetts business trust." Under Massachusetts's law,
shareholders could, under certain circumstances, be held personally
liable for the obligations of the Acquiring Fund; and
15
(vi) to their knowledge and subject to the qualifications set forth
below, the execution and delivery by the Acquiring Fund of this
Agreement and the consummation of the transactions herein contemplated
do not require, under the laws of its state of organization or any
state in which the Acquiring Fund is qualified to do business or the
federal laws of the United States, the consent, approval,
authorization, registration, qualification or order of, or filing
with, any court or governmental agency or body (except such as have
been obtained). Counsel need express no opinion, however, as to any
such consent, approval, authorization, registration, qualification,
order or filing which may be required as a result of the involvement
of other parties to this Agreement in the transactions herein
contemplated because of their legal or regulatory status or because of
any other facts specifically pertaining to them.
(f) The Target Fund shall have obtained an opinion from K&L Gates dated as
of the Closing Date, addressed to the Target Fund, and based upon such
representations of the parties as K&L Gates may reasonably request, that
the consummation of the transactions set forth in this Agreement comply
with the requirements of a reorganization as described in Section 368(a) of
the Code.
(g) That all proceedings taken by each of the Funds and its counsel in
connection with the Reorganization and all documents incidental thereto
shall be satisfactory in form and substance to the others.
(h) That the N-14 Registration Statement shall have become effective under
the 1933 Act, and no stop order suspending such effectiveness shall have
been instituted or, to the knowledge of the Acquiring Fund, be contemplated
by the SEC.
9. Acquiring Fund Conditions.
The obligations of the Acquiring Fund hereunder shall be subject to the
following conditions:
(a) That this Agreement shall have been adopted, and the Reorganization
shall have been approved, by the Board of Trustees of the Acquiring Fund
and that the issuance of additional Acquiring Fund Common Shares shall have
been approved by the holders of Acquiring Fund Common Shares by an
affirmative vote of a majority of the votes cast, provided that total votes
cast represent over 50% in interest of all securities entitled to vote on
the matter; and that the issuance of additional Acquiring Fund DARTS shall
have been approved by the holders of Acquiring Fund DARTS by an affirmative
vote of at least a majority of the shares of the DARTS then outstanding;
and the Target Fund shall have delivered to the Acquiring Fund a copy of
the resolution approving this Agreement adopted by the Target Fund's Board
of Trustees, and a certificate setting forth the vote of the holders of
Target Fund Common Shares and Target Fund Preferred Shares obtained, each
certified by its Secretary or Assistant Secretary.
16
(b) That the Target Fund shall have furnished to the Acquiring Fund a
statement of its assets, liabilities and capital, with values determined as
provided in Section 4 of this Agreement, together with a schedule of
investments with their respective dates of acquisition and tax costs, all
as of the Valuation Time, certified on the Target Fund's behalf by its
President (or any Vice President) and its Treasurer or Assistant Treasurer,
and a certificate signed by such Fund's President (or any Vice President)
and its Treasurer or Assistant Treasurer, dated as of the Closing Date,
certifying that as of the Valuation Time and as of the Closing Date there
has been no material adverse change in the financial position of the Target
Fund since the date of such Fund's most recent Annual Report or Semi-Annual
Report, as applicable, other than changes in the Target Fund Investments
since that date or changes in the market value of the Target Fund
Investments.
(c) That the Target Fund shall have furnished to the Acquiring Fund a
certificate signed by the Target Fund's President (or any Vice President)
and its Treasurer or Assistant Treasurer, dated the Closing Date,
certifying that as of the Valuation Time and as of the Closing Date all
representations and warranties of the Target Fund made in this Agreement
are true and correct in all material respects with the same effect as if
made at and as of such dates and the Target 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 such dates.
(d) That there shall not be any material litigation pending with respect to
the matters contemplated by this Agreement.
(e) That the Acquiring Fund shall have received the opinion of K&L Gates,
counsel for the Target Fund, dated as of the Closing Date, addressed to the
Acquiring Fund, substantially in the form and to the effect that:
(i) the Target Fund is duly formed and validly existing under the laws
of its state of organization;
(ii) the Target Fund is registered as a closed-end, management
investment company under the 1940 Act;
(iii) this Agreement and the Reorganization provided for herein and
the execution of this Agreement have been duly authorized by all
requisite action of the Target Fund, and this Agreement has been duly
executed and delivered by the Target Fund and (assuming this Agreement
is a valid and binding obligation of the other party hereto) is a
valid and binding obligation of the Target Fund;
17
(iv) neither the execution or delivery by the Target Fund of this
Agreement nor the consummation by the Target Fund of the transactions
contemplated hereby violate any provision of any statute, or any
published regulation or any judgment or order disclosed to them by the
Target Fund as being applicable to the Target Fund; and
(v) to their knowledge and subject to the qualifications set forth
below, the execution and delivery by the Target Fund of the Agreement
and the consummation of the transactions herein contemplated do not
require, under the laws of its state of organization or any state in
which the Target Fund is qualified to do business, or the federal laws
of the United States, the consent, approval, authorization,
registration, qualification or order of, or filing with, any court or
governmental agency or body (except such as have been obtained under
the 1933 Act, 1934 Act, the 1940 Act or the rules and regulations
thereunder). Counsel need express no opinion, however, as to any such
consent, approval, authorization, registration, qualification, order
or filing which may be required as a result of the involvement of
other parties to this Agreement in the transactions herein
contemplated because of their legal or regulatory status or because of
any other facts specifically pertaining to them.
(f) That the Acquiring Fund shall have obtained an opinion from K&L Gates,
counsel for the Target Fund, dated as of the Closing Date, addressed to the
Acquiring Fund, and based upon such representation of the parties as K&L
Gates may reasonably request, that the consummation of the transactions set
forth in this Agreement comply with the requirements of a reorganization as
described in Section 368(a) of the Code.
(g) That the N-14 Registration Statement shall have become effective under
the 1933 Act and no stop order suspending such effectiveness shall have
been instituted or, to the knowledge of the Target Fund, be contemplated by
the SEC.
(h) That all proceedings taken by the Target Fund and its counsel in
connection with the Reorganization and all documents incidental thereto
shall be satisfactory in form and substance to the Acquiring Fund.
(i) That prior to the Closing Date the Target Fund shall have declared a
dividend or dividends which, together with all such previous dividends,
shall have the effect of distributing to its shareholders all of its net
investment company taxable income for the period to and including the
Closing Date, if any (computed without regard to any deduction for
dividends paid), and all of its net capital gain, if any, realized to and
including the Closing Date.
18
(j) The NYSE shall have approved the listing of the additional Acquiring
Fund Common Shares to be issued to common shareholders of the Target Fund
in connection with the reorganization.
(k) The Acquiring Fund shall have obtained written confirmation from
Xxxxx'x Investors Services, Inc. ("Moody's") and Standard and Poor's
Ratings Group ("S&P") that (i) consummation of the Reorganization will not
impair the ratings assigned by such rating agencies to the existing
Acquiring Fund DARTS, and (ii) the Acquiring Fund DARTS to be issued
pursuant to the Reorganization will be rated "aa2" by Moody's and "AA" by
S&P.
10. Termination, Postponement and Waivers.
(a) Notwithstanding anything contained in this Agreement to the contrary,
this Agreement may be terminated and the Reorganization abandoned at any
time (whether before or after adoption thereof by the shareholders of the
Funds) prior to the Closing Date, or the Closing Date may be postponed (i)
by mutual consent of the Boards of Trustees of the Funds, (ii) by the Board
of Trustees of the Target Fund if any condition of the Target Fund's
obligations set forth in Section 8 of this Agreement has not been fulfilled
or waived by such Board, or (iii) by the Board of Trustees of the Acquiring
Fund if any condition of the Acquiring Fund's obligations set forth in
Section 9 of this Agreement have not been fulfilled or waived by such
Board.
(b) If the transactions contemplated by this Agreement have not been
consummated by December 31, 2007, this Agreement automatically shall
terminate on that date, unless a later date is mutually agreed to by the
Boards of Trustees of the Funds.
(c) In the event of termination of this Agreement pursuant to the
provisions hereof, the same shall become void and have no further effect,
and there shall not be any liability on the part of any Fund or persons who
are their directors, trustees, officers, agents or shareholders in respect
of this Agreement.
(d) At any time prior to the Closing Date, any of the terms or conditions
of this Agreement benefiting a Fund may be waived by the Board of Trustees
of such Fund, if, in the judgment of such Board after consultation with its
counsel, such action or waiver will not have a material adverse effect on
the benefits intended under this Agreement to the shareholders of their
respective fund, on behalf of which such action is taken.
(e) The respective representations and warranties contained in Sections 1
and 2 of this Agreement shall expire with, and be terminated by, the
consummation of the Reorganization, and neither Fund nor any of its
officers, trustees, agents or shareholders shall have any liability with
respect to such representations or warranties after the Closing Date. This
provision shall not protect any officer, trustee, agent or shareholder of
either Fund against any liability to the entity for which that officer,
trustee, agent or shareholder so acts or to its shareholders, to which that
officer, trustee, agent or shareholder otherwise would be subject by reason
of willful misfeasance, bad faith, gross negligence, or reckless disregard
of the duties in the conduct of such office.
19
(f) If any order or orders of the Commission with respect to this Agreement
shall be issued prior to the Closing Date and shall impose any terms or
conditions which are determined by action of the Boards of Trustees of the
Funds to be acceptable, such terms and conditions shall be binding as if a
part of this Agreement without further vote or approval of the shareholders
of the Funds unless such terms and conditions shall result in a change in
the method of computing the number of Acquiring Fund Common Shares or
Acquiring Fund DARTS to be issued to the Acquired Fund, in which event,
unless such terms and conditions shall have been included in the proxy
solicitation materials furnished to the shareholders of the Funds prior to
the meetings at which the Reorganization shall have been approved, this
Agreement shall not be consummated and shall terminate unless the Funds
promptly shall call a special meeting of shareholders at which such
conditions so imposed shall be submitted for approval.
11. Indemnification.
(a) Each party (an "Indemnitor") shall indemnify and hold the other and its
officers, trustees, agents and persons controlled by or controlling any of
them (each an "Indemnified Party") harmless from and against any and all
losses, damages, liabilities, claims, demands, judgments, settlements,
deficiencies, taxes, assessments, charges, costs and expenses of any nature
whatsoever (including reasonable attorneys' fees) including amounts paid in
satisfaction of judgments, in compromise or as fines and penalties, and
counsel fees reasonably incurred by such Indemnified Party in connection
with the defense or disposition of any claim, action, suit or other
proceeding, whether civil or criminal, before any court or administrative
or investigative body in which such Indemnified Party may be or may have
been involved as a party or otherwise or with which such Indemnified Party
may be or may have been threatened (collectively, the "Losses") arising out
of or related to any claim of a breach of any representation, warranty or
covenant made herein by the Indemnitor, provided, however, that no
Indemnified Party shall be indemnified hereunder against any Losses arising
directly from such Indemnified Party's willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the
conduct of such Indemnified Party's position.
(b) The Indemnified Party shall use its best efforts to minimize any
liabilities, damages, deficiencies, claims, judgments, assessments, costs
and expenses in respect of which indemnity may be sought hereunder. The
Indemnified Party shall give written notice to Indemnitor within the
earlier of ten (10) days of receipt of written notice to Indemnified Party
or thirty (30) days from discovery by Indemnified Party of any matters
which may give rise to a claim for indemnification or reimbursement under
this Agreement. The failure to give such notice shall not affect the right
of Indemnified Party to indemnity hereunder unless such failure has
materially and adversely affected the rights of the Indemnitor; provided
that in any event such notice shall have been given prior to the expiration
of the Survival Period. At any time after ten (10) days from the giving of
such notice, Indemnified Party may, at its option, resist, settle or
otherwise compromise, or pay such claim unless it shall have received
notice from Indemnitor that Indemnitor intends, at Indemnitor's sole cost
and expense, to assume the defense of any such matter, in which case
Indemnified Party shall have the right, at no cost or expense to
Indemnitor, to participate in such defense. If Indemnitor does not assume
the defense of such matter, and in any event until Indemnitor states in
writing that it will assume the defense, Indemnitor shall pay all costs of
Indemnified Party arising out of the defense until the defense is assumed;
provided, however, that Indemnified Party shall consult with Indemnitor and
obtain Indemnitor's prior written consent to any payment or settlement of
any such claim. Indemnitor shall keep Indemnified Party fully apprised at
all times as to the status of the defense. If Indemnitor does not assume
the defense, Indemnified Party shall keep Indemnitor apprised at all times
as to the status of the defense. Following indemnification as provided for
hereunder, Indemnitor shall be subrogated to all rights of Indemnified
Party with respect to all third parties, firms or corporations relating to
the matter for which indemnification has been made.
20
12. Other Matters.
(a) 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.
(b) All notices hereunder shall be sufficiently given for all purposes
hereunder if in writing and delivered personally or sent by registered mail
or certified mail, postage prepaid. Notice to the Target Fund shall be
addressed to the Target Fund c/o Xxxx Xxxxxxx, 000 Xxxxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000, Attention: General Counsel, or at such other address
as the Target Fund may designate by written notice to the Acquiring Fund.
Notice to the Acquiring Fund shall be addressed to the Acquiring Fund c/o
000 Xxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, Attention: General
Counsel, or at such other address and to the attention of such other person
as the Acquiring Fund may designate by written notice to the Target Fund.
Any notice shall be deemed to have been served or given as of the date such
notice is delivered personally or mailed.
(c) This Agreement supersedes all previous correspondence and oral
communications between the parties regarding the Reorganization,
constitutes the only understanding with respect to the Reorganization, may
not be changed except by a letter of agreement signed by each party and
shall be governed by and construed in accordance with the laws of The
Commonwealth of Massachusetts applicable to agreements made and to be
performed in said state.
(d) It is expressly agreed that the obligations of the Acquiring Fund and
the Target Fund hereunder shall not be binding upon any of their respective
trustees, shareholders, nominees, officers, agents, or employees
personally, but shall bind only the trust property of the respective Fund
as provided in such Fund's Declaration of Trust. A copy of the Declaration
of Trust of each of the Acquiring Fund and the Target Fund is on file with
the Secretary of State of The Commonwealth of Massachusetts. The execution
and delivery of this Agreement has been authorized by the trustees of each
Fund and signed by authorized officers of each Fund, acting as such, and
neither such authorization by such trustees, nor such execution and
delivery by such officers shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but
shall bind only the trust property of each Fund as provided in such Fund's
Declaration of Trust.
21
(e) It is further expressly agreed that this Agreement shall be construed
in accordance with and governed by the laws of The Commonwealth of
Massachusetts.
(f) This Agreement may be executed in any number of counterparts, each of
which, when executed and delivered, shall be deemed to be an original but
all such counterparts together shall constitute but one instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
22
IN WITNESS WHEREOF, the parties have hereunto caused this Agreement to be
executed and delivered by their duly authorized officers as of the 21th day of
June, 2007.
XXXX XXXXXXX PATRIOT PREMIUM DIVIDEND FUND II
By: /s/Xxxxx X. Xxxxxxxxx
Name: Xxxxx X. Xxxxxxxxx
Title: President and Chief Executive Officer
Attest: /s/Xxxxxx X. Xxxxxxxxx
Name: Xxxxxx X. Xxxxxxxxx
Title: Assistant Secretary
XXXX XXXXXXX PATRIOT PREMIUM DIVIDEND FUND I
By: /s/Xxxxxx X. Xxxxx
Name: Xxxxxx X. Xxxxx
Title: Treasurer
Attest: /s/Xxxxxx X. Xxxxxxxxx
Name: Xxxxxx X. Xxxxxxxxx
Title: Assistant Secretary
23
