Exhibit to Sub - Item 77Q(1)(g) to Form N-SAR
AGREEMENT AND PLAN OF
MERGER AND LIQUIDATION
BY AND BETWEEN
HIGHLAND CREDIT STATEGIES FUND
AND
HIGHLAND DISTRESSED OPPORTUNITES, INC.
DATED April 29, 2009
[PAGE BREAK]
AGREEMENT AND PLAN OF MERGER AND LIQUIDATION
This Agreement and Plan of Merger and Liquidation (the
"Agreement") is made as of April 29, 2009 in Dallas, Texas, by
and among Highland Credit Strategies Fund, a Delaware statutory
trust ("Acquiring Fund"), Highland Distressed Opportunities,
Inc., a Delaware corporation ("Acquired Fund"), and HCF
Acquisition LLC ("Merger Sub"), a Delaware limited liability
company and a wholly owned subsidiary of Acquiring Fund. Each of
the Acquired Fund and Acquiring Fund is sometimes hereinafter
referred to as a "Fund" or, together, the "Funds".
This Agreement is intended to be and is adopted as a plan of
reorganization within the meaning of Sections 362, 368 and 381
of the United States Internal Revenue Code of 1986, as amended
(the "Code"), and the Treasury regulations promulgated
thereunder, and the parties intend, for U.S. federal income tax
purposes, that the Merger and Liquidation (each, as defined
below) together be treated as a reorganization under Section
368(a) of the Code.
The reorganization will consist of the merger (the "Merger") of
Acquired Fund with and into Merger Sub in which Merger Sub will
be the surviving entity and pursuant to which common
stockholders of Acquired Fund will receive full shares of
beneficial interest of Acquiring Fund (the "Merger Shares") (and
cash in lieu of fractional shares) having an aggregate net asset
value equal to the value of the assets of the Acquired Fund on
the Valuation Date (as defined below) less the value of the
liabilities of the Acquired Fund on the Valuation Date. Before
the Closing Date (as defined below), Acquired Fund will declare
and pay to its stockholders a dividend or dividends in an amount
such that it will have distributed (i) the sum of (a) its net
investment income and (b) the excess of its net short-term
capital gains over net long-term capital losses, and (ii) net
capital gains, all as described in Section 8(l) hereof. No
certificates representing the Merger Shares will be issued.
Promptly after the Merger, Merger Sub will distribute all of its
assets to Acquiring Fund, and Acquiring Fund will assume all
liabilities of Merger Sub, in complete liquidation and
dissolution of Merger Sub as provided herein, all upon the terms
and conditions hereinafter set forth in this Agreement (the
"Liquidation").
WHEREAS, Section 18-209 of the Delaware Limited Liability
Company Act, 6 Del.C. ?18-101, et seq. (the "LLC Act"), and
Section 264 of the General Corporation Law of the State of
Delaware, 8 Del. C. ? 101, et seq. (the "DGCL") authorize the
merger of a Delaware corporation with and into a Delaware
limited liability company; and
WHEREAS, the Board of Trustees of Acquiring Fund has determined
that the Merger and the Liquidation of Merger Sub as
contemplated hereby are in the best interests of Acquiring Fund
and its shareholders and that the interests of the existing
shareholders of Acquiring Fund will not be diluted as a result
of this transaction; and
WHEREAS, the Board of Directors of Acquired Fund has determined
that the Merger is in the best interests of Acquired Fund and
its stockholders and that the interests of the existing
stockholders of Acquired Fund will not be diluted as a result of
this transaction;
NOW, THEREFORE, in consideration of the premises and of the
covenants and agreements hereinafter set forth, the parties
hereto covenant and agree as follows:
1. Merger and Liquidation.
(a) Subject to the requisite approval of the stockholders
of Acquired Fund and to the other terms and conditions
contained herein (including Acquired Fund's obligation
to distribute to its stockholders (i) the sum of (a)
its net investment income and (b) the excess of its net
short-term capital gains over net long-term capital
losses, and (ii) net capital gains, all as described in
Section 8(l) hereof), at the Effective Time (as defined
below in Section 3) Acquired Fund shall be merged with
and into Merger Sub and the separate corporate
existence of Acquired Fund shall thereupon cease.
Merger Sub shall be the surviving company in the Merger
(sometimes hereinafter referred to as the "Surviving
Company") in accordance with Section 18-209 of the LLC
Act and Section 264 of the DGCL, and the separate
limited liability company existence of Merger Sub with
all its rights, privileges, immunities, powers and
franchises shall continue unaffected by the Merger. The
Merger shall have the effects specified in the LLC Act
and the DGCL.
(b) At the Effective Time, as a result of the Merger and
without any action on the part of the holder of any
stock of Acquired Fund:
(i) Each share of common stock of Acquired Fund (the
"Acquired Common Stock") issued and outstanding
immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the
part of the holder thereof, be converted into, and
become exchangeable for, the right to receive the
number of Merger Shares (and cash in lieu of
fractional Merger Shares) provided for in
Section 2.
(ii) Certificates representing interests in shares of
Acquired Common Stock will represent the right to
receive a number of Merger Shares (and cash in
lieu of fractional Merger Shares) after the
Effective Time, as determined in accordance with
Section 2. Acquiring Fund shall not issue
certificates representing Merger Shares in
connection with such exchange.
(iii) The membership interests in Merger Sub issued
and outstanding immediately prior to the Effective
Time shall remain unchanged as a result of the
Merger and shall remain as the issued and
outstanding membership interests of the Surviving
Company.
(c) The certificate of formation of Merger Sub as in effect
immediately prior to the Effective Time shall be the
certificate of formation of the Surviving Company (the
"Certificate of Formation"), unless and until amended
in accordance with its terms and applicable law. The
limited liability company agreement of the Merger Sub
in effect immediately prior to the Effective Time shall
be the limited liability company agreement of the
Surviving Company (the "LLC Agreement"), unless and
until amended in accordance with its terms and
applicable law.
(d) At the Effective Time, Merger Sub shall continue in
existence as the Surviving Company, and without further
transfer, succeed to and possess all of the rights,
privileges and powers of Acquired Fund, and all of the
assets and property of whatever kind and character of
Acquired Fund shall vest in Merger Sub without further
act or deed; thereafter, Merger Sub, as the Surviving
Company, shall be liable for all of the liabilities and
obligations of Acquired Fund, and any claim or judgment
against Acquired Fund may be enforced against Merger
Sub, as the Surviving Company, in accordance with
Section 18-209 of the LLC Act and Section 259 of the
DGCL.
(e) All Merger Shares to be issued pursuant to the Merger
shall be deemed issued and outstanding as of the
Effective Time and, whenever a dividend or other
distribution is declared by Acquiring Fund in respect
of the Merger Shares, the record date for which is at
or after the Effective Time, that declaration shall
include dividends or other distributions in respect of
all Merger Shares issuable pursuant to this Agreement.
(f) From and after the Effective Time, there shall be no
transfers on the stock transfer books of the Acquired
Fund of the shares of Acquired Common Stock that were
outstanding immediately prior to the Effective Time.
(g) In accordance with Section 262 of the DGCL, appraisal
rights shall be available to holders of shares of
Acquired Common Stock in connection with the Merger.
(h) As soon as is reasonably practicable after the
Effective Time, Merger Sub shall be dissolved and
Acquiring Fund will assume all of Merger Sub's
liabilities and obligations, known and unknown,
contingent or otherwise, whether or not determinable,
and Merger Sub will distribute to Acquiring Fund, which
will be the sole member of Merger Sub at such time, all
of the assets of Merger Sub in complete liquidation of
its interest in Merger Sub. As soon as reasonably
practicable after such assumption by Acquiring Fund of
Merger Sub's liabilities and obligations and such
distribution of Merger Sub's assets to Acquiring Fund,
and after the taking of all other actions required
under the laws of the State of Delaware and the
Certificate of Formation and LLC Agreement of Merger
Sub in connection with the dissolution and termination
of Merger Sub, Merger Sub shall prepare, execute and
file a Certificate of Cancellation with the Secretary
of State of the State of Delaware, and elsewhere as may
be necessary or appropriate, and such other documents
as may be required to dissolve and terminate Merger
Sub.
(i) As soon as practicable following the requisite
approval
of the stockholders of Acquired Fund, Acquired Fund
will, at its expense, liquidate such of its
portfolio
securities as Acquiring Fund indicates it does not
wish
to acquire. Such liquidation will be substantially
completed before the Closing Date, unless otherwise
agreed by Acquired Fund and Acquiring Fund.
Notwithstanding the foregoing, nothing in this
paragraph (i) will require Acquired Fund to dispose
of
or purchase any assets if, in the reasonable
judgment
of the Acquired Fund, such disposition or purchase
would adversely affect the tax-free nature of the
Merger and Liquidation (collectively, a
reorganization
under the Code) or would violate Acquired Fund's
fiduciary duty to its shareholders.
2. Closing Date; Valuation Date.
(a) The net asset value of the Merger Shares (and cash paid
in lieu of fractional Merger Shares), the value of the
assets of Acquired Fund and the value of the
liabilities of Acquired Fund will in each case be
determined as of the Valuation Date.
(b) The net asset value of the Merger Shares (and cash paid
in lieu of fractional Merger Shares) and the value of
the assets and liabilities of Acquired Fund will be
determined by Acquiring Fund, in cooperation with
Acquired Fund, pursuant to valuation procedures
customarily used by Acquiring Fund in determining the
net asset value of Acquiring Fund's shares of
beneficial interest, and a record of such determination
will be maintained by the Acquired Fund.
(c) The Acquired Common Stock will be converted into, and
become exchangeable for, the right to receive the
number of Merger Shares (as described in Section 1(b)
above) determined by dividing the net assets per share
of Acquired Fund, computed in the manner and as of the
time and date set forth in this Section 2, by the net
asset value of one Merger Share, computed in the manner
and as of the time and date set forth in this Section
2. If based on this calculation, a stockholder of
Acquired Common Stock would be entitled to receive
fractional Merger Shares, that stockholder will instead
receive cash in lieu of those fractional Merger Shares
equal to the product of the number of fractional Merger
Shares (rounded to the nearest ten thousandths) to
which the stockholder is entitled and the net asset
value of one Merger Share as described in the
immediately preceding sentence.
(d) The investment restrictions of Acquired Fund will be
temporarily amended to the extent necessary to effect
the transactions contemplated by this Agreement.
(e) With respect to any Acquired Fund stockholder holding
Acquired Fund share certificates as of the Closing
Date, Acquiring Fund will not permit such stockholder
to receive dividends and other distributions on the
Merger Shares (although such dividends and other
distributions will be credited to the account of such
stockholder), receive certificates representing the
Merger Shares or pledge such Merger Shares until such
stockholder has surrendered his or her outstanding
Acquired Fund certificates or, in the event of lost,
stolen or destroyed certificates, posted adequate bond.
In the event that a stockholder is not permitted to
receive dividends and other distributions on the Merger
Shares as provided in the preceding sentence, Acquiring
Fund will pay any such dividends or distributions in
additional shares, notwithstanding any election that
the stockholder made previously with respect to the
payment, in cash or otherwise, of dividends and
distributions on shares of Acquired Fund. Acquired
Fund will, at its expense, request the stockholders of
Acquired Fund to surrender their outstanding Acquired
Fund certificates, or post adequate bond, as the case
may be.
(f) The Valuation Date will be 4:00 p.m. New York Time on
the Closing Date (the "Valuation Date").
3. Closing and Closing Date.
(a) The Closing Date of the Merger (the "Closing Date")
shall be such date as the parties may agree to in
writing. All acts taking place at the Closing shall be
deemed to take place simultaneously as of the time
immediately after the close of business on the Closing
Date unless otherwise agreed to by the parties. The
close of business on the Closing Date shall be as of
4:00 p.m. New York Time. The Closing shall be held at
the offices of Ropes & Xxxx LLP, located at Xxx
Xxxxxxxxxxxxx Xxxxx, Xxxxxx, XX 00000 or at such other
time and/or place as the parties may agree. As soon as
practicable following the Closing, Acquired Fund and
Acquiring Fund will cause the Certificate of Merger
(the "Certificate of Merger") to be executed,
acknowledged and filed with the Secretary of State of
the State of Delaware as required by the DGCL and the
LLC Act. The Merger shall become effective upon the
filing of the Certificate of Merger with the Secretary
of State of the State of Delaware or such later time as
may be provided for in the Certificate of Merger (the
"Effective Time").
(b) In the event that on the Valuation Date (i) the primary
trading market for portfolio securities of the
Acquiring Fund or Acquired Fund shall be closed to
trading or trading thereupon shall be restricted or
(ii) trading or the reporting of trading shall be
disrupted so that, in the judgment of the Board of
Directors of the Acquired Fund or the Board of Trustees
of the Acquiring Fund, accurate appraisal of the value
of the net assets of the Acquiring Fund or Acquired
Fund is impracticable, the Valuation Date shall be
postponed until the first business day after the day
when trading shall have been fully resumed and
reporting shall have been restored.
4. Expenses, fees, etc.
(a) All fees and expenses, including legal and accounting
expenses, filing fees, proxy materials and proxy
solicitation with respect to Acquired Fund, the costs
of liquidating before the Closing Date portfolio
securities of Acquired Fund to the extent required
under Section 1(i), portfolio transfer taxes (if any)
or other similar expenses incurred in connection with
the consummation by Acquired Fund, Merger Sub and
Acquiring Fund of the transactions contemplated by this
Agreement (collectively, the "Expenses") will be borne
by Acquired Fund and Acquiring Fund (for itself and
Merger Sub) in proportion to their respective net
assets determined at the Valuation Date; provided,
however, that such Expenses will in any event be paid
by the party directly incurring such Expenses if and to
the extent that the payment by the other party of such
Expenses would result in the disqualification of
Acquiring Fund or Acquired Fund, as the case may be, as
a "regulated investment company" within the meaning of
Section 851 of the Code or would prevent the
transactions from qualifying as a tax-free
reorganization under the Code.
(b) In the event the transactions contemplated by this
Agreement are not consummated by reason of
(i) Acquiring Fund's being either unwilling or unable
to go forward (other than by reason of the
nonfulfillment or failure of any condition to Acquiring
Fund's or Merger Sub's obligations referred to in
Section 8 (except subsection 8(a)(ii))) or (ii) the
non-fulfillment or failure of any condition to Acquired
Fund's obligations referred to in Section 9 (except
subsection 9(a)(ii)), Acquiring Fund will pay directly
all reasonable fees and expenses incurred by Acquired
Fund in connection with such transactions, including,
without limitation, legal, accounting and filing fees.
(c) In the event the transactions contemplated by this
Agreement are not consummated by reason of (i) Acquired
Fund's being either unwilling or unable to go forward
(other than by reason of the nonfulfillment or failure
of any condition to Acquired Fund's obligations
referred to in Section 9 (except subsection 9(a)(ii)))
or (ii) the non-fulfillment or failure of any condition
to Acquiring Fund's or Merger Sub's obligations
referred to in Section 8 (except subsection 8(a)(ii)),
Acquired Fund will pay directly all reasonable fees and
expenses incurred by Acquiring Fund and/or Merger Sub
in connection with such transactions, including without
limitation legal, accounting and filing fees.
(d) In the event the transactions contemplated by this
Agreement are not consummated for any reason other than
(i) Acquiring Fund's or Acquired Fund's being either
unwilling or unable to go forward or (ii) the non-
fulfillment or failure of any condition to Acquiring
Fund's, Merger Sub's or Acquired Fund's obligations
referred to in Section 8 (except subsection 8(a)(ii))
or Section 9 (except subsection 9(a)(ii)) of this
Agreement, then each of Acquiring Fund (for itself and
Merger Sub) and Acquired Fund will bear all of its own
expenses incurred in connection with such transactions.
(e) Notwithstanding any other provisions of this Agreement,
if for any reason the transactions contemplated by this
Agreement are not consummated, no party will be liable
to the other party for any damages resulting therefrom,
including without limitation consequential damages,
except as specifically set forth above.
5. Representations and warranties of Acquiring Fund and
Merger
Sub. Acquiring Fund and Merger Sub represent and
warrant to and
agree with Acquired Fund that (except as disclosed to
Acquired Fund):
(a) Acquiring Fund is a statutory trust duly established,
validly existing and in good standing under the laws of
the State of Delaware and has power to own all of its
properties and assets and to carry out its obligations
under this Agreement. Acquiring Fund is duly qualified
or licensed to do business as a foreign association and
is in good standing under the laws of any other
jurisdiction in which the character of the properties
owned, leased or operated by it therein or in which the
transaction of its business makes such qualification or
licensing necessary. Acquiring Fund has all necessary
federal, state and local authorizations to carry on its
business as now being conducted and to carry out this
Agreement.
(b) Merger Sub is a limited liability company duly formed,
validly existing and in good standing under the laws of
the State of Delaware, and has all the requisite power
and authority to own, lease and operate its properties
and assets and to carry on its business as it is now
being conducted.
(c) Acquiring Fund is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as a
closed-end management investment company, and such
registration has not been revoked or rescinded and is
in full force and effect.
(d) Merger Sub will file prior to the Closing Date an
election under the 1940 Act to be regulated as a
business development company, and such election will
not be revoked or rescinded and will be in full force
and effect.
(e) A statement of assets and liabilities, statement of
operations, statement of changes in net assets and
schedule of investments (indicating their market
values) of Acquiring Fund as of and for the fiscal year
ended December 31, 2008, audited by
PricewaterhouseCoopers LLP, the Acquiring Fund's
independent registered public accounting firm, have
been furnished to Acquired Fund. The statements of
assets and liabilities and the schedules of investments
fairly present the financial position of Acquiring Fund
as of their date, and the statements of operations and
changes in net assets fairly reflect the results of its
operations and changes in net assets for the periods
covered thereby in conformity with U.S. generally
accepted accounting principles.
(f) There are no material legal, administrative or other
proceedings pending or, to the knowledge of Acquiring
Fund or Merger Sub, threatened against Acquiring Fund
or Merger Sub which assert liability or which may, if
successfully prosecuted to their conclusion, result in
liability on the part of Acquiring Fund or Merger Sub,
other than as have been disclosed in the Prospectus (as
defined below) or otherwise disclosed in writing to
Acquired Fund.
(g) Acquiring Fund has no known liabilities of a
material
nature, contingent or otherwise, other than those shown
as belonging to it on its statement of assets and
liabilities as of December 31, 2008 and those incurred
in the ordinary course of Acquiring Fund's business as
an investment company since such date. Before the
Closing Date, Acquiring Fund will advise Acquired Fund
of all material liabilities, contingent or otherwise,
incurred by it subsequent to December 31, 2008, whether
or not incurred in the ordinary course of business.
(h) No consent, approval, authorization or order of any
court or governmental authority is required for the
consummation by Acquiring Fund or Merger Sub of the
transactions contemplated by this Agreement, except
such as may be required under the Securities Act of
1933, as amended (the "1933 Act"), the Securities
Exchange Act of 1934, as amended (the "1934 Act"), the
1940 Act, state securities or blue sky laws (which term
as used herein will include the laws of the District of
Columbia and of Puerto Rico) or the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976 (the "H-S-R Act").
(i) The registration statement and any amendment
thereto
(including any post-effective amendment) (the
"Registration Statement") filed with the Securities and
Exchange Commission (the "Commission") by Acquiring
Fund on Form N-14 relating to the Merger Shares
issuable hereunder and the proxy statement of Acquired
Fund included therein (the "Proxy Statement"), on the
effective date of the Registration Statement, (i)
complied 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
contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein
or necessary to make the statements therein not
misleading; and at the time of the stockholders'
meeting referred to in Section 7(a) and at the Closing
Date, the prospectus contained in the Registration
Statement (the "Prospectus"), as amended or
supplemented by any amendments or supplements thereto,
will not contain any untrue statement of a material
fact or omit to state a material fact required to be
stated therein or necessary to make the statements
therein not misleading; provided, however, that none of
the representations and warranties in this subsection
will apply to statements in or omissions from the
Registration Statement, the Prospectus or the Proxy
Statement made in reliance upon and in conformity with
information furnished by Acquired Fund for use in the
Registration Statement, the Prospectus or the Proxy
Statement.
(j) There are no material contracts outstanding to
which
Acquiring Fund or Merger Sub is a party, other than as
will be disclosed in the Registration Statement or
otherwise disclosed in writing to Acquired Fund.
(k) All of the issued and outstanding shares of
beneficial
interest of Acquiring Fund have been offered for sale
and sold in conformity with all applicable federal
securities laws.
(l) For each taxable year of its operation, Acquiring
Fund
has met the requirements of Subchapter M of the Code
for qualification and treatment as a "regulated
investment company", has elected to be treated as such,
and has computed its U.S. federal income tax under
Section 852 of the Code.
(m) As of the Closing Date and the Effective Time,
Acquiring Fund will have filed all federal, state, and
other tax returns and reports which will have been
required to be filed by Acquiring Fund and will have
paid or will pay all federal, state and other taxes
shown to be due on said returns or on any assessments
received by Acquiring Fund, will have adequately
provided for all tax liabilities on its books, and to
the knowledge of Acquiring Fund, will not have had any
tax deficiency or liability asserted against it or
question with respect thereto raised by the Internal
Revenue Service or by any state or local tax authority
for taxes in excess of those already paid. As of the
Closing Date and the Effective Time, Acquiring Fund
will not be under audit by the Internal Revenue Service
or by any state or local tax authority for taxes in
excess of those already paid.
(n) The issuance of the Merger Shares pursuant to this
Agreement will be in compliance with all applicable
federal securities laws.
(o) The Merger Shares 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 by Acquiring Fund (except as set
forth in the Registration Statement), and no
shareholder of Acquiring Fund will have any preemptive
right of subscription or purchase in respect thereof.
(p) All of the issued and outstanding membership
interests
in Merger Sub are, and at the Effective Time will be,
owned by the Acquiring Fund, as sole member (the
"Member"), and there are (i) no other membership
interests or voting securities of Merger Sub, (ii) no
securities of Merger Sub convertible into or
exchangeable for membership interests or voting
securities of Merger Sub, and (iii) no options or other
rights to acquire from Merger Sub, and no obligations
of Merger Sub to issue, any membership interests,
voting securities or securities convertible into or
exchangeable for membership interests or voting
securities of Merger Sub. Merger Sub has not conducted
any business prior to the date hereof and has no, and
prior to the Effective Time will have no, assets,
liabilities or obligations of any nature other than
those incident to its formation and pursuant to this
Agreement and the Merger and the other transactions
contemplated by this Agreement.
6. Representations and warranties of Acquired Fund.
Acquired Fund represents and warrants to and agrees with
Acquiring Fund and Merger Sub that (except as disclosed to
Acquiring Fund and Merger Sub):
(a) Acquired Fund is a corporation duly organized,
validly
existing and in good standing under the laws of the
State of Delaware and has power to own all of its
properties and assets and to carry out its obligations
under this Agreement. Acquired Fund is duly qualified
or licensed to do business as a foreign corporation and
is in good standing under the laws of any other
jurisdiction in which the character of the properties
owned, leased or operated by it therein or in which the
transaction of its business makes such qualification or
licensing necessary. Acquired Fund has all necessary
federal, state and local authorizations to carry on its
business as now being conducted and to carry out this
Agreement.
(b) Acquired Fund is a closed-end company that has
filed an
election under the 1940 Act to be regulated as a
business development company, and such election has not
been revoked or rescinded and is in full force and
effect.
(c) A statement of assets and liabilities, statement of
operations, statement of changes in net assets and
schedule of investments (indicating their market
values) of Acquired Fund as of and for the fiscal year
ended December 31, 2008, audited by
PricewaterhouseCoopers LLP, the Acquired Fund's
independent registered public accounting firm, have
been furnished to Acquiring Fund. The statements of
assets and liabilities and schedules of investments
fairly present the financial position of Acquired Fund
as of their date, and the statements of operations and
changes in net assets fairly reflect the results of its
operations and changes in net assets for the periods
covered thereby in conformity with U.S. generally
accepted accounting principles.
(d) There are no material legal, administrative or
other
proceedings pending or, to the knowledge of Acquired
Fund, threatened against Acquired Fund which assert
liability or which may, if successfully prosecuted to
their conclusion, result in liability on the part of
Acquired Fund, other than as have been disclosed in the
Registration Statement or otherwise disclosed in
writing to the Acquiring Fund.
(e) Acquired Fund has no known liabilities of a
material
nature, contingent or otherwise, other than those shown
as belonging to it on its statement of assets and
liabilities as of December 31, 2008 and those incurred
in the ordinary course of Acquired Fund's business as
an investment company since such date. Before the
Closing Date, Acquired Fund will advise Acquiring Fund
of all material liabilities, contingent or otherwise,
incurred by it subsequent to December 31, 2008, whether
or not incurred in the ordinary course of business.
(f) No consent, approval, authorization or order of any
court or governmental authority is required for the
consummation by Acquired Fund of the transactions
contemplated by this Agreement, except such as may be
required under the 1933 Act, the 1934 Act, the 1940
Act, state securities or blue sky laws or the H-S-R
Act.
(g) The Registration Statement, the Prospectus and the
Proxy Statement, on the Effective Date of the
Registration Statement and insofar as they do not
relate to Acquiring Fund (i) complied 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 contain any untrue
statement of a material fact or omit to state a
material fact required to be stated therein or
necessary to make the statements therein not
misleading; and at the time of the stockholders'
meeting referred to in Section 7(a) below and on the
Closing Date, the Prospectus, as amended or
supplemented by any amendments or supplements thereto,
will not contain any untrue statement of a material
fact or omit to state a material fact required to be
stated therein or necessary to make the statements
therein not misleading; provided, however, that the
representations and warranties in this subsection will
apply only to statements of fact or omissions of
statements of fact relating to Acquired Fund contained
in the Registration Statement, the Prospectus or the
Proxy Statement, as such Registration Statement,
Prospectus and Proxy Statement will be furnished to
Acquired Fund in definitive form as soon as practicable
following effectiveness of the Registration Statement
and before any public distribution of the Prospectus or
Proxy Statement.
(h) There are no material contracts outstanding to
which
Acquired Fund is a party, other than as will be
disclosed in the Registration Statement or otherwise
disclosed in writing to Acquiring Fund.
(i) All of the issued and outstanding shares of
beneficial
interest of Acquired Fund have been offered for sale
and sold in conformity with all applicable federal
securities laws.
(j) For each taxable year of its operation (including
the
taxable year ending on the Effective Date), Acquired
Fund has met the requirements of Subchapter M of the
Code for qualification and treatment as a "regulated
investment company", has elected to be treated as such,
and has computed its U.S. federal income tax under
Section 852 of the Code.
(k) As of the Closing Date and the Effective Time,
Acquired
Fund has filed or will file all federal, state and
other tax returns and reports which will have been
required to be filed by Acquired Fund and will have
paid or will pay all federal, state or other taxes
shown to be due on said returns or on any assessments
received by Acquired Fund, will have adequately
provided for all tax liabilities on its books, and to
the knowledge of Acquired Fund, will not have had any
tax deficiency or liability asserted against it or any
question with respect thereto raised by the Internal
Revenue Service or by any state or local tax authority
for taxes in excess of those already paid. As of the
Closing Date and the Effective Time, Acquired Fund will
not be under audit by the Internal Revenue Service or
by any state or local tax authority for taxes in excess
of those already paid.
(l) On the Closing Date, the Acquired Fund will have
good
and marketable title to all of its Investments (as
defined below) and other assets to be held immediately
prior to the Effective Time and Merger Sub will acquire
good and marketable title thereto, subject to no
encumbrances, liens or security interests whatsoever
and without any restrictions on the full transfer
thereof, including such restrictions as might arise
under the 1933 Act, other than as previously disclosed
to Acquiring Fund. As used in this Agreement, the term
"Investments" means Acquired Fund's investments shown
on the schedule of its investments as of December 31,
2008, as supplemented with such changes as Acquired
Fund makes in connection with its business as a
business development company and changes resulting from
stock dividends, stock splits, mergers and similar
corporate actions.
7. Covenants of the Acquired Fund and Acquiring Fund.
(a) Acquired Fund agrees to call a meeting of its
stockholders as soon as is practicable after the date
hereof for, among other things, the purpose of
considering the matters contemplated by this Agreement.
(b) Acquiring Fund has filed the Registration Statement
with the Commission. Each of Acquired Fund and
Acquiring Fund will cooperate with the other, and each
will furnish to the other the information relating to
itself required by the 1933 Act, the 1934 Act and the
1940 Act and the rules and regulations thereunder to be
set forth in the Registration Statement, including the
Prospectus and the Proxy Statement.
(c) As soon as reasonably practicable after the
Effective
Time, the Acquiring Fund will assume all of Merger
Sub's liabilities and obligations, known and unknown,
contingent or otherwise, whether or not determinable,
and Merger Sub will make a liquidating distribution of
all of its assets to the Acquiring Fund, which will be
Merger Sub's sole member at such time.
(d) Acquired Fund covenants that it will, from time to
time, as and when reasonably requested by the Acquiring
Fund, execute and deliver or cause to be executed and
delivered all such assignments and other instruments,
and will take or cause to be taken such further action
as the Acquiring Fund or Merger Sub may reasonably deem
necessary or desirable in order to ultimately vest and
confirm Merger Sub's and, following the liquidating
distribution referred to in paragraph (c) above, the
Acquiring Fund's title to and possession of all of the
assets of the Acquired Fund and to otherwise carry out
the intent and purpose of this Agreement.
8. Conditions to Acquiring Fund's and Merger Sub's obligations.
The obligations of Acquiring Fund and Merger Sub hereunder
are subject to the following conditions:
(a) That this Agreement will have been adopted and the
transactions contemplated hereby will have been
approved by the affirmative vote of (i) at least a
majority of the Directors of Acquired Fund (including a
majority of those Directors who are not "interested
persons" of Acquired Fund, as defined in
Section 2(a)(19) of the 1940 Act), (ii) holders of a
majority of the outstanding common shares of Acquired
Fund, (iii) a majority of the Trustees of Acquiring
Fund (including a majority of those Trustees who are
not "interested persons" of Acquiring Fund, as defined
in Section 2(a)(19) of the 1940 Act), and (iv)
Acquiring Fund, as the sole Member of Merger Sub.
(b) No demands for appraisal shall have been or none
may
still be made in accordance with DGCL Section 262, or
if such demands for appraisal have been made or may
still be made in accordance with Delaware law, the
Boards of the Acquired Fund and Acquiring Fund have
determined to continue the Reorganization
notwithstanding such appraisals.
(c) That Acquired Fund will have furnished to Acquiring
Fund a statement of Acquired Fund's assets and
liabilities, with values determined as provided in
Section 2 of this Agreement, together with a list of
Investments with their respective tax costs, all as of
the Valuation Date, certified on Acquired Fund's behalf
by Acquired Fund's President (or any Vice President)
and Treasurer (or Assistant Treasurer) and a
certificate of both such officers, dated the Closing
Date, to the effect that as of the Valuation Date and
as of the Closing Date there has been no material
adverse change in the financial position of Acquired
Fund since December 31, 2008 other than changes in the
Investments and other assets and properties since that
date or changes in the market value of the Investments
and other assets of Acquired Fund or changes due to
dividends paid or losses from operations.
(d) That Acquired Fund will have furnished to Acquiring
Fund a statement, dated the Closing Date, signed on
behalf of Acquired Fund by Acquired Fund's President
(or any Vice President) and Treasurer (or Assistant
Treasurer) certifying that as of the Valuation Date and
as of the Closing Date all representations and
warranties of Acquired Fund made in this Agreement are
true and correct in all material respects as if made at
and as of such dates, and that Acquired Fund has
complied with all of the agreements and satisfied all
of the conditions on its part to be performed or
satisfied at or before each of such dates.
(e) That there will not be any material litigation
pending
with respect to the matters contemplated by this
Agreement.
(f) That Acquiring Fund will have received an opinion
of
Ropes & Xxxx LLP and/or Morris, Nichols, Arsht &
Xxxxxxx LLP, dated the Closing Date, in form
satisfactory to Acquiring Fund, to the effect that
(i) Acquired Fund is a corporation duly incorporated,
validly existing and in good standing under the laws of
the State of Delaware, and, to the knowledge of such
counsel, is not required to qualify to do business as a
foreign corporation in any jurisdiction where it is not
so qualified, except as may be required by state
securities or blue sky laws or where the failure to so
qualify would not have a material adverse effect on the
ability of Acquired Fund to consummate the transactions
contemplated hereunder, (ii) this Agreement has been
duly authorized, executed, and delivered by Acquired
Fund and, assuming due authorization, execution and
delivery of this Agreement by Acquiring Fund and Merger
Sub, is a valid and binding obligation of Acquired
Fund, (iii) Acquired Fund has the corporate power and
authority to execute and deliver the Agreement and
perform its obligations thereunder, and (iv) no
consent, approval, authorization or order of any court
or governmental authority is required for the
consummation by Acquired Fund of the transactions
contemplated hereby, except such as have been obtained
under the 1933 Act, the 1934 Act, the 1940 Act and such
as may be required under state securities or blue sky
laws and the H-S-R Act.
(g) That Acquiring Fund will have received an opinion
of
Ropes & Xxxx LLP dated as of the Closing Date (which
opinion will be based upon certain factual
representations and subject to certain qualifications)
reasonably satisfactory to the Acquiring Fund and
substantially to the effect that, on the basis of the
existing provisions of the Code, current administrative
rules and court decisions, generally for federal income
tax purposes: (i) the transactions contemplated by this
Agreement will constitute a reorganization within the
meaning of Section 368(a) of the Code and Acquired Fund
and Acquiring Fund will each be a "party to a
reorganization" within the meaning of the Code; (ii) no
gain or loss will be recognized by the Acquiring Fund
upon the Merger or Liquidation; (iii) the basis of the
Assets (defined as all Investments and other assets of
the Acquired Fund) in the hands of Acquiring Fund will
be the same as the basis of such Assets in the hands of
the Acquired Fund immediately prior to the Merger; (iv)
the holding periods of the Assets in the hands of
Acquiring Fund will include the periods during which
such Assets were held by the Acquired Fund; (v) no gain
or loss will be recognized by the Acquired Fund upon
the Merger or Liquidation; (vi) no gain or loss will be
recognized by Acquired Fund stockholders on the
conversion of shares of Acquired Common Stock into
Merger Shares (except to the extent an Acquired Fund
stockholder receives cash in lieu of fractional Merger
Shares); (vii) the aggregate basis of Merger Shares
received by Acquired Fund stockholders will be the same
as the aggregate basis of shares of Acquired Common
Stock converted into such Merger Shares (except to the
extent reduced by the portion of the adjusted basis in
shares of Acquired Common Stock that is allocable to
any fractional Merger Shares for which cash in lieu of
such fractional Merger Shares is received); (viii) the
holding periods of Merger Shares received by Acquired
Fund stockholders will include the holding periods of
shares of Acquired Common Stock converted into such
Merger Shares, provided that at the time of the Merger,
shares of Acquired Common Stock are held by such
stockholders as capital assets; and (ix) the Acquiring
Fund will succeed to and take into account the items of
the Acquired Fund described in Section 381(c) of the
Code, subject to the conditions and limitations
specified in Sections 381, 382, 383, and 384 of the
Code and the regulations thereunder (the "Tax
Opinion"). The Tax Opinion will not express any view
with respect to the effect of the transactions
contemplated by this Agreement on any transferred asset
as to which any unrealized gain or loss is required to
be recognized under U.S. federal income tax principles
(1) at the end of a taxable year or (ii) on the
termination or transfer thereof without reference to
whether such a termination or transfer would otherwise
be a taxable transaction. The Tax Opinion may state
that it is not a guarantee that the tax consequences of
the transactions contemplated by this Agreement will be
as described in such opinion.
(h) That the assets of Acquired Fund to be acquired by
Acquiring Fund will include no assets which Acquiring
Fund, by reason of charter limitations or of investment
restrictions disclosed in the Registration Statement in
effect on the Closing Date, may not properly acquire.
(i) That the Registration Statement will have become
effective under the 1933 Act, and no stop order
suspending such effectiveness will have been instituted
or, to the knowledge of Acquiring Fund, threatened by
the Commission.
(j) That Acquiring Fund and Merger Sub will have
received
from the Commission, any relevant state securities
administrator, the Federal Trade Commission (the "FTC")
and the Department of Justice (the "Department") such
order or orders as Ropes & Xxxx LLP deems reasonably
necessary or desirable under the 1933 Act, the 1934
Act, the 1940 Act, any applicable state securities or
blue sky laws and the H-S-R Act in connection with the
transactions contemplated hereby and that all such
orders will be in full force and effect.
(k) That all actions taken by or on behalf of Acquired
Fund
and Merger Sub in connection with the transactions
contemplated by this Agreement and all documents
incidental thereto will be satisfactory in form and
substance to Acquiring Fund, Merger Sub and Ropes &
Xxxx LLP.
(l) That, before the Closing Date, Acquired Fund will
have
declared a dividend or dividends which, together with
all previous such dividends, will have the effect of
distributing to the shareholders of Acquired Fund (i)
all of the excess of (X) Acquired Fund's investment
interest excludable from gross income under
Section 103(a) of the Code over (Y) Acquired Fund's
deductions disallowed under Sections 265 and 171(a)(2)
of the Code, (ii) all of Acquired Fund's investment
company taxable income (as defined in Section 852 of
the Code) (computed in each case without regard to any
deduction for dividends paid), and (iii) all of its net
capital gain (as defined in Section 1222 of the Code)
realized (after reduction by any capital loss
carryover), in each case for both the current taxable
year of the Acquired Fund (which will end at the
Effective Time) and immediately preceding taxable year
of the Acquired Fund.
(m) That Acquired Fund's custodian will have delivered
to
Acquiring Fund a certificate identifying all of the
assets of Acquired Fund held by such custodian as of
the Valuation Date.
(n) That Acquired Fund's transfer agent will have
provided
to Acquiring Fund or its transfer agent (i) the
originals or true copies of all of the records of
Acquired Fund in the possession of such transfer agent
as of the Closing Date, (ii) a certificate setting
forth the number of shares of Acquired Fund outstanding
as of the Valuation Date and (iii) the name and address
of each holder of record of any such shares and the
number of shares held of record by each such
stockholder.
(o) If at any time the Acquiring Fund and Merger Sub
shall
consider or be advised that any further assignment,
conveyance or assurance is necessary or advisable to
vest, perfect or confirm of record in the Surviving
Company or Acquiring Fund the title to any property or
right of the Acquired Fund, or otherwise to carry out
the provisions hereof, the proper representatives of
the Acquired Fund as of the Effective Time shall
execute and deliver any and all proper deeds,
assignments and assurances and do all things necessary
or proper to vest, perfect or convey title to such
property or right in the Surviving Company or Acquiring
Fund, as the case may be, and otherwise to carry out
the provisions hereof.
(p) That the Merger Shares shall have been accepted for
listing by the New York Stock Exchange.
(q) The Acquiring Fund and the Acquired Fund will have
received an opinion of Morris, Nichols, Arsht &
Xxxxxxx LLP in such form and addressing such matters
as the Funds may mutually agree.
9. Conditions to Acquired Fund's obligations.
The obligations of Acquired Fund hereunder will be subject
to the following conditions:
(a) That this Agreement will have been adopted and the
transactions contemplated hereby will have been
approved by the affirmative vote of (i) at least a
majority of the Directors of Acquired Fund (including a
majority of those Directors who are not "interested
persons" of Acquired Fund, as defined in
Section 2(a)(19) of the 1940 Act), (ii) holders of a
majority of the outstanding shares of Acquired Fund,
(iii) a majority of the Trustees of Acquiring Fund
(including a majority of those Trustees who are not
"interested persons" of Acquiring Fund, as defined in
Section 2(a)(19) of the 1940 Act), and (iv) Acquiring
Fund, as the sole Member of Merger Sub.
(b) No demands for appraisal shall have been or none
may
still be made in accordance with DGCL Section 262, or
if such demands for appraisal have been made or may
still be made in accordance with Delaware law, the
Boards of the Acquired Fund and Acquiring Fund have
determined to continue the Reorganization
notwithstanding such demands.
(c) That Acquiring Fund will have furnished to Acquired
Fund a statement of Acquiring Fund's assets and
liabilities, together with a list of portfolio holdings
with values determined as provided in Section 2 of this
Agreement, all as of the Valuation Date, certified on
behalf of Acquiring Fund by Acquiring Fund's President
(or any Vice President) and Treasurer (or Assistant
Treasurer) and a certificate of both such officers,
dated the Closing Date, to the effect that as of the
Valuation Date and as of the Closing Date there has
been no material adverse change in the financial
position of Acquiring Fund since December 31, 2008,
other than changes in its portfolio securities since
that date, changes in the market value of its portfolio
securities or changes due to dividends paid or losses
from operations.
(d) That Acquiring Fund will have furnished to Acquired
Fund a statement, dated the Closing Date, signed on
behalf of Acquiring Fund by Acquiring Fund's President
(or any Vice President) and Treasurer (or Assistant
Treasurer) certifying that as of the Valuation Date and
as of the Closing Date all representations and
warranties of Acquiring Fund made in this Agreement are
true and correct in all material respects as if made at
and as of such dates, and that 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.
(e) That there will not be any material litigation
pending
or threatened with respect to the matters contemplated
by this Agreement.
(f) That Acquired Fund will have received an opinion of
Ropes & Xxxx LLP and/or Morris, Nichols, Arsht &
Xxxxxxx LLP, dated the Closing Date, in form
satisfactory to Acquired Fund, to the effect that (i)
Acquiring Fund is a statutory trust duly formed,
validly existing and in good standing in conformity
with the laws of the State of Delaware and, to the
knowledge of such counsel, is not required to qualify
to do business as a foreign association in any
jurisdiction where it is not so qualified, except as
may be required by state securities or blue sky laws or
where the failure to so qualify would not have a
material adverse effect on the ability of Acquiring
Fund to consummate the transactions contemplated
hereunder, (ii) Merger Sub is a limited liability
company duly formed, validly existing and in good
standing in conformity with the laws of the State of
Delaware, and, to the knowledge of such counsel, is not
required to qualify to do business as a foreign
association in any jurisdiction where it is not so
qualified, except as may be required by state
securities or blue sky laws or where the failure to so
qualify would not have a material adverse effect on the
ability of Merger Sub to consummate the transactions
contemplated hereunder, (iii) this Agreement has been
duly authorized, executed and delivered by Acquiring
Fund and Merger Sub, and, assuming due authorization,
execution and delivery of this Agreement by Acquired
Fund, is a valid and binding obligation of Acquiring
Fund and Merger Sub, (iv) the Merger Shares to be
delivered to Acquired Fund as provided for by this
Agreement are duly authorized and upon such delivery
will be validly issued and will be fully paid and
nonassessable by Acquiring Fund (except as set forth in
the Registration Statement) and no shareholder of
Acquiring Fund has any preemptive right to purchase any
such Merger Shares, (v) no consent, approval,
authorization or order of any court or governmental
authority is required for the consummation by Acquiring
Fund or Merger Sub of the transactions contemplated
herein, except such as have been obtained under the
1933 Act, the 1934 Act and the 1940 Act and such as may
be required under state securities or blue sky laws and
the H-S-R Act, and (vi) the Registration Statement has
become effective under the 1933 Act, and, to the best
of the knowledge of such counsel, no stop order
suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that
purpose have been instituted or are pending or
contemplated under the 1933 Act.
(g) That Acquired Fund will have received a Tax Opinion
of
Ropes & Xxxx LLP dated as of the Closing Date (the
substance of which is described above in Section 8(g))
and reasonably satisfactory to the Acquired Fund. The
Tax Opinion will not express any view with respect to
the effect of the transactions contemplated by this
Agreement on any transferred asset as to which any
unrealized gain or loss is required to be recognized
under U.S. federal income tax principles (i) at the end
of a taxable year or (ii) on the termination or
transfer thereof without reference to whether such a
termination or transfer would otherwise be a taxable
transaction. The Tax Opinion may state that it is
based on certain factual representations and subject to
certain qualifications. The Tax Opinion may also state
that it is not a guarantee that the tax consequences of
the transactions contemplated by this Agreement will be
as described in such opinion.
(h) That all proceedings taken by or on behalf of
Acquiring
Fund and Merger Sub in connection with the transactions
contemplated by this Agreement and all documents
incidental thereto will be satisfactory in form and
substance to Acquired Fund and Ropes & Xxxx LLP.
(i) That the Registration Statement will have become
effective under the 1933 Act and no stop order
suspending such effectiveness will have been instituted
or, to the knowledge of Acquiring Fund, threatened by
the Commission.
(j) That Acquired Fund will have received from the
Commission, any relevant state securities
administrator, the FTC and the Department such order or
orders as Ropes & Xxxx LLP deems reasonably necessary
or desirable under the 1933 Act, the 1934 Act, the 1940
Act, any applicable state securities or blue sky laws
and the H-S-R Act in connection with the transactions
contemplated hereby and that all such orders will be in
full force and effect.
(k) That the Merger Shares shall have been accepted for
listing by the New York Stock Exchange.
(l) The Acquired Fund will have received an opinion of
Morris, Nichols, Arsht & Xxxxxxx LLP in such form and
addressing such matters as the Funds may mutually
agree.
10. Indemnification.
(a) Acquired Fund will indemnify and hold harmless, out
of
the assets of Acquired Fund but no other assets,
Acquiring Fund, its trustees and its officers (for
purposes of this subparagraph, the "Indemnified
Parties") against any and all expenses, losses, claims,
damages and liabilities at any time imposed upon or
reasonably incurred by any one or more of the
Indemnified Parties in connection with, arising out of,
or resulting from any claim, action, suit or proceeding
in which any one or more of the Indemnified Parties may
be involved or with which any one or more of the
Indemnified Parties may be threatened by reason of any
breach of any representation or warranty of the
Acquired Fund contained in this Agreement or untrue
statement or alleged untrue statement of a material
fact, to the extent based on or derived from documents
provided by the Acquired Fund, contained in the
Registration Statement, the Prospectus, the Proxy
Statement or any amendment or supplement to any of the
foregoing, or arising out of or based upon the omission
or alleged omission to state in any of the foregoing a
material fact relating to Acquired Fund required to be
stated therein or necessary to make the statements
relating to Acquired Fund therein not misleading,
including, without limitation, any amounts paid by any
one or more of the Indemnified Parties in a reasonable
compromise or settlement of any such claim, action,
suit or proceeding, or threatened claim, action, suit
or proceeding made with the consent of Acquired Fund.
The Indemnified Parties will notify Acquired Fund in
writing within ten days after the receipt by any one or
more of the Indemnified Parties of any notice of legal
process or any suit brought against or claim made
against such Indemnified Party as to any matters
covered by this Section 10(a). Acquired Fund will be
entitled to participate at its own expense in the
defense of any claim, action, suit or proceeding
covered by this Section 10(a) or, if it so elects, to
assume at its expense by counsel satisfactory to the
Indemnified Parties the defense of any such claim,
action, suit or proceeding and, if Acquired Fund elects
to assume such defense, the Indemnified Parties will be
entitled to participate in the defense of any such
claim, action, suit or proceeding at their expense.
Acquired Fund's obligation under this Section 10(a) to
indemnify and hold harmless the Indemnified Parties
will constitute a guarantee of payment so that Acquired
Fund will pay in the first instance any expenses,
losses, claims, damages and liabilities required to be
paid by it under this Section 10(a) without the
necessity of the Indemnified Parties' first paying the
same.
(b) Acquiring Fund will indemnify and hold harmless,
out of
the assets of Acquiring Fund but no other assets,
Acquired Fund, its directors and its officers (for
purposes of this subparagraph, the "Indemnified
Parties") against any and all expenses, losses, claims,
damages and liabilities at any time imposed upon or
reasonably incurred by any one or more of the
Indemnified Parties in connection with, arising out of,
or resulting from any claim, action, suit or proceeding
in which any one or more of the Indemnified Parties may
be involved or with which any one or more of the
Indemnified Parties may be threatened by reason of any
breach of any representation or warranty of the
Acquiring Fund contained in this Agreement or untrue
statement or alleged untrue statement of a material
fact, to the extent based on or derived from documents
provided by the Acquiring Fund, contained in the
Registration Statement, the Prospectuses, the Proxy
Statement, or any amendment or supplement to any
thereof, or arising out of, or based upon, the omission
or alleged omission to state in any of the foregoing a
material fact relating to Acquiring Fund required to be
stated therein or necessary to make the statements
relating to Acquiring Fund therein not misleading,
including without limitation any amounts paid by any
one or more of the Indemnified Parties in a reasonable
compromise or settlement of any such claim, action,
suit or proceeding, or threatened claim, action, suit
or proceeding made with the consent of Acquiring Fund.
The Indemnified Parties will notify Acquiring Fund in
writing within ten days after the receipt by any one or
more of the Indemnified Parties of any notice of legal
process or any suit brought against or claim made
against such Indemnified Party as to any matters
covered by this Section 10(b). Acquiring Fund will be
entitled to participate at its own expense in the
defense of any claim, action, suit or proceeding
covered by this Section 10(b) or, if it so elects, to
assume at its expense by counsel satisfactory to the
Indemnified Parties the defense of any such claim,
action, suit or proceeding and, if Acquiring Fund
elects to assume such defense, the Indemnified Parties
will be entitled to participate in the defense of any
such claim, action, suit or proceeding at their own
expense. Acquiring Fund's obligation under this
Section 10(b) to indemnify and hold harmless the
Indemnified Parties will constitute a guarantee of
payment so that Acquiring Fund will pay in the first
instance any expenses, losses, claims, damages and
liabilities required to be paid by it under this
Section 10(b) without the necessity of the Indemnified
Parties' first paying the same.
11. No broker, etc.
Each of Acquired Fund and Acquiring Fund represents that
there is no person who has dealt with it who by reason of
such dealings is entitled to any broker's or finder's or
other similar fee or commission arising out of the
transactions contemplated by this Agreement.
12. Rule 145.
Pursuant to Rule 145 under the 1933 Act, Acquiring Fund
will, in connection with the issuance of any Merger Shares
to any person who at the time of the transaction
contemplated hereby is deemed to be an affiliate of a party
to the transaction pursuant to Rule 145(c), cause to be
affixed upon any certificates issued to such person a legend
as follows:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED EXCEPT TO HIGHLAND CREDIT STRATEGIES FUND UNLESS
(I) A REGISTRATION STATEMENT WITH RESPECT THERETO IS
EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(II) IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO
HIGHLAND CREDIT STRATEGIES FUND SUCH REGISTRATION IS NOT
REQUIRED."
and, further, Acquiring Fund will issue stop transfer
instructions to Acquiring Fund's transfer agent with respect
to such shares. Acquired Fund will provide Acquiring Fund
on the Closing Date with the name of any Acquired Fund
shareholder who is to the knowledge of Acquired Fund an
affiliate of Acquired Fund on such date.
13. Covenants, etc. deemed material.
All covenants, agreements, representations and warranties
made under this Agreement and any certificates delivered
pursuant to this Agreement will be deemed to have been
material and relied upon by each of the parties,
notwithstanding any investigation made by them or on their
behalf.
14. Sole agreement.
This Agreement supersedes all previous correspondence and
oral communications between the parties regarding the
subject matter hereof, constitutes the only understanding
with respect to such subject matter, and will be construed
in accordance with and governed by the laws of the State of
Delaware.
15. Agreement and declaration of trust of Acquiring Fund.
Notice is hereby given that this instrument is adopted on
behalf of Acquiring Fund's trustees solely in their
capacities as trustees, and not individually, and that
Acquiring Fund's obligations under this instrument are not
binding on or enforceable against any of its trustees,
officers, or shareholders but are only binding on and
enforceable against its property. Acquired Fund, in
asserting any rights or claims under this Agreement, shall
look only to Acquiring Fund's property in settlement of such
rights or claims and not to such trustees, officers, or
shareholders.
16. Amendment.
The Acquired Fund and Acquiring Fund by consent of their
respective Board of Directors/Trustees and the Merger Sub by
consent of its sole Member, the Acquiring Fund, may amend,
modify or supplement this Agreement in such manner as may be
agreed upon by them in writing, at any time prior to the
Effective Time, including after it is approved by
stockholders of the Acquired Fund, to the extent permitted
by applicable law.
17. Waiver.
At any time on or prior to the Exchange Date, the
trustees/directors of the Acquired Fund and the Acquiring
Fund or Acquiring Fund as sole Member of Merger Sub, after
consultation with counsel, may waive any condition to a
Fund's or Merger Sub's respective obligations hereunder if
they have determined such waiver will not have a material
adverse consequence to the stockholders/shareholders of
either Fund or to Merger Sub.
18. Termination.
This Agreement may be terminated and the transactions herein
provided for abandoned at any time, whether before or after
approval of this Agreement by the stockholders of the
Acquired Fund, by action of the Board of Directors/Trustees
of either Fund, if the applicable Board for such Fund
determines for any reason that the consummation of the
transactions provided for herein would for any reason be
inadvisable or not in the best interests of such Fund or its
shareholders or if demands for appraisal have been made or
may still be made in accordance with Delaware law.
19. Miscellaneous.
This Agreement may be executed in counterparts, each of
which when so executed shall be deemed to be an original,
and such counterparts shall together constitute but one and
the same instrument.
[Signature Page Follows]
IN WITNESS WHEREOF, Acquiring Fund and Acquired Fund, pursuant to
approval and authorization duly given by resolutions adopted by
their respective Boards of Trustees and Directors, as applicable,
have each caused this Agreement to be executed as of the date
first written above by a duly authorized officer.
HIGHLAND CREDIT STRATEGIES FUND
By:_/s/_ R. Xxxxxx Xxxxxxxxx
___________________
Name: R. Xxxxxx Xxxxxxxxx
Title: President
HIGHLAND DISTRESSED OPPORTUNITIES, INC.
By: _/s/_ Xxxxx X. Xxxxxxx
____________________
Name: Xxxxx X. Xxxxxxx
Title: President
IN WITNESS WHEREOF, Merger Sub, pursuant to approval and
authorization duly given by its sole Member has caused this
Agreement to be executed by it sole Member as of the date first
written above.
HCF ACQUISITION LLC
By: HIGHLAND CREDIT STRATEGIES FUND, the
sole Member of HCF Acquisition LLC
By:
_______________________________________
_
Name: M. Xxxxx Xxxxxxxxx
Title: Treasurer
