Exhibit 4
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this 31st day of May 2007, by and between FEDERATED MUNICIPAL SECURITIES FUND,
INC., a Maryland Corporation, with its principal place of business at 0000
Xxxxxxxxx Xxxxx, Xxxxxxxxxx, XX, 00000 (the "Corporation" or "the "Acquiring
Fund"), and FEDERATED MUNICIPAL SECURITIES INCOME TRUST, a Massachusetts
business trust, with its principal place of business at 0000 Xxxxxxxxx Xxxxx,
Xxxxxxxxxx, XX, 00000 (the "Trust"), with respect to Federated Vermont Municipal
Income Fund, a series of the Trust ("Acquired Fund" and, collectively with the
Acquiring Fund, the "Funds").
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 (the "Code") and the Treasury Regulations
promulgated thereunder. The reorganization will consist of: (i) the transfer
of all of the assets of the Acquired Fund in exchange for Class A Shares, $.01
per shares par value, of the Acquiring Fund ("Acquiring Fund Shares"); and
(ii) the distribution of Class A Shares of the Acquiring Fund to the holders of
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, the Acquired Fund is a separate series of the Trust, and the
Corporation 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, the Acquiring Fund and the Acquired Fund are authorized to issue
their shares of beneficial interests;
WHEREAS, the Directors of the Corporation 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;
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;
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
1.1 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 (a) multiplying the shares outstanding of the
Acquired Fund by (b) 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. Holders of the Acquired Fund will receive Class A Shares of the
Acquiring Fund. Such transactions shall take place at the closing on the
Closing Date provided for in paragraph 3.1.
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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,
securities, 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 those 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 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 (the "1940 Act"), and the rules and regulations thereunder,
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 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 at
the closing on the Closing Date, using the valuation procedures set forth in the
Corporation's Articles of Incorporation 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 at the closing on
the Closing Date, using the valuation procedures set forth in the Corporation's
Articles of Incorporation 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 the Acquiring Fund's shares to
be issued (including fractional shares, if any) in exchange for the Acquired
Fund's assets, shall be determined by (a) multiplying the shares outstanding of
the Acquired Fund by (b) 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 and 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 or about August 17, 2007,
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. State Street Bank and Trust Company, as
custodian for the Acquired Fund (the "Custodian"), shall 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.
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3.4 TRANSFER AGENT'S CERTIFICATE. State Street Bank and Trust Company,
as transfer agent for the Acquired Fund as of the Closing Date, shall 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 and 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 Acquiring Fund, as follows:
a) The Acquired Fund is a legally designated, separate series of a statutory
trust duly organized, validly existing, and in good standing under the
laws of the Commonwealth of Massachusetts.
b) The Trust is registered as an open-end management investment company
under the 1940 Act, and the Trust 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.
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g) The audited financial statements of the Acquired Fund as of August 31,
2006, and for the fiscal year 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.
h) The unaudited financial statements of the Acquired Fund as of February
28, 2007, 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 (h),
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 issued and outstanding shares of the Acquired
Fund 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 Commonwealth of Massachusetts, 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.
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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 be accurate and complete in
all material respects and shall comply in all material respects with
federal securities and other laws and regulations.
o) From the effective date of the Registration Statement (as defined in
paragraph 5.7), through the time of the meeting of the Acquired Fund
Shareholders and on the Closing Date, any written information furnished
by the Trust with respect to the Acquired Fund for use in the Proxy
Materials (as defined in paragraph 5.7), or any other materials provided
in connection with the Reorganization, does not 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.
p) 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.
q) 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 Massachusetts 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 Massachusetts law, and except for such other consents,
approvals, authorizations and filings as have been made or received, and
such consents, 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 Acquiring Fund,
represents and warrants to the Trust, on behalf of the Acquired Fund, as
follows:
a) The Corporation is registered as an open-end management investment
company under the 1940 Act, and the Corporation's registration with the
Commission as an investment company under the 1940 Act is in full force
and effect, and the Corporation is duly incorporated, validly existing in
good standing under the laws of the State of Maryland.
b) 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.
c) The Acquiring Fund is not, and the execution, delivery and performance of
this Agreement will not, result in a violation of the Corporation's
Articles of Incorporation 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.
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d) 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.
e) The financial statements of the Acquiring Fund as of March 31, 2007 and
for the fiscal year then ended have been prepared in accordance with
generally accepted accounting principles, and such statements (copies of
which have been furnished to the Acquired Funds) 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.
f) Since the date of the financial statements referred to in paragraph (e)
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 (e), a decline in the net asset value of the Acquiring Fund
shall not constitute a material adverse change.
g) 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.
h) 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.
i) 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.
j) 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.
k) The information to be furnished by the Acquiring Fund for use in
no-action letters, registration statements, proxy materials, and other
documents that may be necessary in connection with the transactions
contemplated herein shall be accurate and complete in all material
respects and shall comply in all material respects with federal
securities and other laws and regulations.
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l) From the effective date of the Registration Statement (as defined in
paragraph 5.7), through the time of the meeting of the Acquired Fund
Shareholders and on the Closing Date, any written information furnished
by the Acquiring Fund for use in the Proxy Materials (as defined in
paragraph 5.7), or any other materials provided in connection with the
Reorganization, does not 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 Maryland law
for the execution of this Agreement by the Acquiring Fund, or the
performance of the Agreement by 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
Maryland 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's 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.
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5.6 STATEMENT OF EARNINGS AND PROFITS. As promptly as 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 Corporation 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
Registration 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 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:
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 Corporation'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.
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:
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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.
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.
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:
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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
constructive) 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 representations. 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
reorganized 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
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; (f) solicitation costs of the transaction; and (g) other related
administrative or operational costs.
ARTICLE*X
ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 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
Corporation and the Trust. In addition, either the Corporation 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 or Directors, as
appropriate, that the consummation of the transactions contemplated
herein is not in the best interest of the Trust, or the Acquired Fund, or
the Corporation, 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 or the Trust, or their respective directors, trustees or
officers, to the other party or its directors, 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
Corporation as specifically authorized by their respective Board of Trustees or
Directors; 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
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.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Pennsylvania.
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.
It is expressly agreed that the obligations of the Acquired Fund
hereunder shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents, or employees of the Trust personally, but shall bind only the
Trust property of the Acquired Fund, as provided in the Declaration of Trust of
the Trust. The execution and delivery of this Agreement have been authorized by
the Trustees of the Trust on behalf of the Acquired Fund and signed by
authorized officers of the 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 Acquired Fund as
provided in the Trust's Declaration of Trust.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have duly executed this Agreement, all as
of the date first written above.
FEDERATED MUNICIPAL SECURITIES INCOME
TRUST
on behalf of its portfolio,
Federated Vermont Municipal Income Fund
/s/Xxxx X. XxXxxxxxx
Xxxx X. XxXxxxxxx, Secretary
FEDERATED MUNICIPAL SECURITIES FUND,
INC.
/s/Xxxx X. XxXxxxxxx
Xxxx X. XxXxxxxxx, Secretary
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