MGF TENDER AND STANDSTILL AGREEMENT
EXHIBIT
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This
Agreement (“Agreement”) is made and entered into effective as of the 4th day of
October 2007 by and between Massachusetts Financial Services Company (“MFS”), a
Delaware corporation, having its principal place of business at 000 Xxxxxxxx
Xxxxxx, Xxxxxx, XX 00000, and Bulldog Investors General Partnership, a New
York
general partnership, having a place of business at Park 00 Xxxx, Xxxxx Xxx,
Xxxxx 000, Xxxxxx Xxxxx, XX 00000, and its officers, directors, partners,
employees, and “affiliated persons” (as that term is defined in the Investment
Company Act of 1940) (collectively “Bulldog”).
WHEREAS,
MFS is a registered investment
adviser that acts as adviser to MFS Government Markets Income Trust (“MGF,” or
the “Trust”);
WHEREAS,
on March 7, 2007, Bulldog
submitted a precatory shareholder proposal for inclusion in the proxy statement
of the Trust relating to the Trust’s 2007 annual meeting of shareholders,
requesting that the Trust’s Board of Trustees “promptly take the steps necessary
to open end the Trust or otherwise enable shareholders to realize net asset
value (‘NAV’) for their shares,” as subsequently revised on May 12, 2007 (the
“Bulldog Proposal”);
WHEREAS,
the Bulldog Proposal was
included in the Trust’s definitive proxy statement filed with the SEC on
September 14, 2007 (“Proxy Statement”), as amended from time to
time;
WHEREAS,
the
Proxy Statement also included as Item 1 a proposal to elect Xxxxxx X. Xxxxxxx,
Xxxxxxxx X. Xxxx, M.D., Xxxxxxxx X. Xxxxxx, and Xxxxxx X. Xxxxxxx (the
“Incumbent Trustees”) as Trustees of the Trust and as Item 2
a “proposal to amend the Trust’s fundamental investment policy
concerning borrowing” to permit the Trust to use leverage (the “Leverage
Proposal”);
WHEREAS,
on
September 12, 2007, Bulldog filed a preliminary proxy statement with the SEC
(“Bulldog Proxy Statement”) and included as Proposal 1 a proposal to elect each
of Xxxxxx Xxxxx, Xxxxxxx Xxxxxxxxx, Xxxxxx Xxxxxxxxx, and Xxxxxx Xxx (the
“Bulldog Nominees”) as a Trustee of the Trust;
WHEREAS,
on
September 12 and 28, 2007, Bulldog made SEC filings relating to a tender offer
for 5,000,000 common shares of the Trust at 96.25% of NAV on November 9, 2007,
subject to certain conditions including the absence of a competing tender offer
(the “Bulldog Offer”);
WHEREAS,
the
parties to this Agreement wish to resolve disputed matters concerning the
Bulldog Proposal, the Bulldog Offer, the Bulldog Nominees, and the Leverage
Proposal;
NOW,
THEREFORE, in consideration of the mutual promises and covenants contained
in
this Agreement, and other good and valuable consideration, the parties agree
as
follows:
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1. Recommendation
to Trustees. MFS agrees to recommend that the
Board of Trustees of the Trust approve a tender offer by the Trust
for
37.5% of its issued and outstanding common shares at a price equal
to 99%
of net asset value (“NAV”) to expire as of market close on November 14,
2007, subject to substantially the same the conditions as are set
forth in
Appendix A hereto (the “MGF
Tender”);
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2.
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Bulldog
Obligations. Upon public announcement by the
Trust of its intention to commence the MGF Tender (the
“Announcement”):
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(a)
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Bulldog
shall take all necessary steps to withdraw the Bulldog Proposal within
1
business day of the Announcement;
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(b)
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Bulldog
shall take all necessary steps to terminate the Bulldog Offer within
1
business day of the Announcement;
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(c)
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Bulldog
shall take all necessary steps to withdraw the Bulldog Nominees as
nominees for Trustee of the Trust within 1 business day of the
Announcement;
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(d)
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Bulldog
shall agree to vote at the Trust’s November 1 annual meeting FOR the
Leverage Proposal and, at MFS’s election, shall advocate in a manner not
unacceptable to MFS that other shareholders vote FOR the Leverage
Proposal;
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(e)
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Bulldog
shall, for a period of five years from the time that the MGF Tender
is
consummated, (i) refrain from directly or indirectly making or
supporting any shareholder proposals concerning the Trust, (ii)
vote in accordance with MFS’s recommendations on any matters affecting the
Trust, (iii) refrain from directly or indirectly soliciting or
encouraging others to vote against MFS’s recommendations on any matters
affecting the Trust; and (iv) refrain from directly or indirectly
proposing, or making any filing with respect to, any form of business
combination, restructuring, recapitalization, dissolution or similar
transaction involving the Trust, including, without limitation, a
merger,
tender or exchange offer, open-ending, share repurchase or liquidation
of
the Trust’s assets.
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(f)
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Bulldog
shall, for a period of 18 months from the time that the MGF Tender
is
consummated, (i) refrain from directly or indirectly making or
supporting any shareholder proposals concerning any other existing
or
future MFS-advised closed-end funds (“Other MFS Funds”), (ii)
vote in accordance with MFS’s recommendations on any matters affecting the
Other MFS Funds, (iii) refrain from directly or indirectly
soliciting or encouraging others to vote against MFS’s recommendations on
any matters affecting the Other MFS Funds; and (iv) refrain from
directly or indirectly proposing, or making any filing with respect
to,
any form of business combination, restructuring, recapitalization,
dissolution or similar transaction involving the Other MFS Funds,
including, without limitation, a merger, tender or exchange offer,
open-ending, share repurchase or liquidation of the Other MFS Funds’
assets.
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3. No
Disparagement. For a period of 18 months from the date
of this Agreement, each party hereto shall refrain from directly or indirectly
disparaging, impugning, or taking any action reasonably likely to damage the
reputation of the other party or the Trustees of the Trust with respect to
the
MGF Tender and the matters that are the subject of the Proxy Statement, the
Bulldog Offer, and the Bulldog Proposal. The foregoing shall not
apply to any compelled testimony or production of information, either by legal
process, subpoena, or as part of a response to a request for information from
any governmental authority with jurisdiction over the party from whom
information is sought.
4. No
Assignment. This Agreement shall be binding upon the
parties and their respective legal successors and permitted
assigns. Neither party may assign this Agreement without the prior
written consent of the other party and any such attempted assignment shall
be
void.
5. Applicable
Law. The validity of this Agreement, the construction
and enforcement of its terms, and the interpretations of the rights and duties
of the parties shall be governed by the laws of the State of New York, without
regard to conflicts of law rules. The parties hereto agree that the
state and federal courts of the State of New York shall be the proper forums
for
any legal controversy arising in connection with this Agreement, and the parties
hereby irrevocably and unconditionally consent to the exclusive jurisdiction
of
such courts for such purposes.
6. Injunctive
Relief: Each party acknowledges that a breach of its
obligations under this Agreement may result in irreparable harm to the other
party for which monetary damages will not be sufficient. Each party
hereto agrees that, in the event of a breach or threatened breach by the
other party of its obligations under this Agreement, the non-breaching
party shall be entitled, in addition to its other rights and remedies
hereunder or at law, to injunctive or other equitable relief, and such further
relief as may be proper from a court of competent jurisdiction, including
specific performance of the obligations set forth in Paragraph 2(e) and 2(f)
of
this Agreement.
7. Modification. No
modification, amendment, supplement to or waiver of this Agreement of any of
its
provisions shall be binding upon the parties hereto unless made in writing
and
duly signed by all parties.
8. Invalidity. In
the event that any one or more of the provisions of this Agreement shall for
any
reason be held to be invalid, illegal, or unenforceable, the remaining
provisions of this Agreement shall be unimpaired, and the invalid, illegal
or
unenforceable provision shall be replaced by a mutually acceptable provision,
which being valid, legal and enforceable, comes closest to the economic effect
and intent of the parties underlying the invalid, illegal or unenforceable
provision.
9. No
Waiver. A waiver of a breach or default under this
Agreement shall not be a waiver of any other or subsequent breach or
default. The failure or delay in enforcing compliance with any term
or condition of this Agreement shall not constitute a waiver of such term or
condition unless such term or condition is expressly waived in
writing.
10. Counterparts. This
Agreement may be executed in counterparts transmitted by facsimile or other
electronic means, and each counterpart shall have the effect of an
original.
11. Entire
Agreement. This Agreement and any other written
agreement entered into by the parties on or after the date of this Agreement
shall constitute the entire Agreement among the parties and shall supersede
all
previous agreements, promises, proposals, representations, understandings and
negotiations, whether written or oral, among the parties respecting the subject
matter hereof.
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement of the day,
month, and year first above written.
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BULLDOG
INVESTORS
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MASSACHUSETTS
FINANCIAL SERVICES
COMPANY
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By:
/s/ Xxxxxxx Xxxxxxxxx
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By:
/s/ Xxxx Xxxxxxxx
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Name:
Xxxxxxx Xxxxxxxxx
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Name:
Xxxx Xxxxxxxx
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Title:
Principal
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Title:
General Counsel
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APPENDIX
A
MGF
Tender Conditions:
The
Trust
will not accept tenders during any period when (a) such transactions, if
consummated, would (i) result in the delisting of the Trust’s shares from the
New York Stock Exchange or (ii) impair the Trust’s status as a regulated
investment company under the Code (which would make the Trust a taxable entity,
causing the Trust’s income to be taxed at the Trust level in addition to the
taxation of shareholders who receive distributions from the Trust); (b) there
is
any (i) legal or regulatory action or proceeding instituted or threatened
challenging such transaction, (ii) suspension of or limitation on prices for
trading securities generally on the New York Stock Exchange or other national
securities exchanges, (iii) declaration of a banking moratorium by federal
or
state authorities or any suspension of payment by banks in the United States
or
New York State, (iv) limitation affecting the Trust imposed by federal or state
authorities on the extension of credit by lending institutions, or (v) outbreak
or escalation of hostilities, declaration by the United States of a national
emergency or war, or other calamity or crisis the effect of which on financial
markets is such as to make it, in the good faith judgment of the board of
trustees of the Trust, impractical or inadvisable to proceed with the offer;
(c)
the board of trustees of the Trust determines in good faith that effecting
any
such transaction would constitute a breach of its fiduciary duty owed to the
Trust or its shareholders, or (d) that the Leverage Proposal fails to receive
the requisite votes at the Trust’s November 1 annual meeting.
