Exhibit 4 under Form N-14
NORTH TRACK TAX-EXEMPT FUND
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made
as of February 2, 2005, between NORTH TRACK FUNDS, INC., a Maryland
corporation ("North Track"), on behalf of NORTH TRACK TAX-EXEMPT FUND
("Acquired Fund"), and FEDERATED MUNICIPAL SECURITIES FUND, INC. a
Maryland corporation ("Federated" or "Acquiring Fund"). (Acquired Fund
and Acquiring Fund are sometimes referred to herein individually as a
"Fund" and collectively as the "Funds," and North Track and Federated
are sometimes referred to herein individually as an "Investment
Company" and collectively as the "Investment Companies.")
The Investment Companies wish to effect a reorganization
described in Section 368(a)(1)(C) of the Internal Revenue Code of 1986,
as amended ("Code"), and intend this Agreement to be, and adopt it as,
a "plan of reorganization" within the meaning of the regulations under
the Code ("Regulations"). The reorganization will consist of (1) the
transfer of the assets (net of cash sufficient to satisfy those
liabilities described in Section 1.2 hereof) of the Acquired Fund to
the Acquiring Fund in exchange solely for the Acquiring Fund's issuance
to the Acquired Fund of "Class A" shares of common stock of the
Acquiring Fund, (2) the distribution of those shares to the Acquired
Fund's shareholders in liquidation of the Acquired Fund, and (3) the
termination of the Acquired Fund, all on the terms and conditions
hereinafter set forth in this Agreement. (All such transactions are
referred to herein as the "Reorganization.")
All agreements, representations, actions, obligations, and
covenants described herein made or to be taken or undertaken by the
Funds are made and shall be taken or undertaken by North Track on
Acquired Fund's behalf and by Federated on Acquiring Fund's behalf.
Acquired Fund's shares have only one Class of shares, designated
"Class A" shares ("Acquired Fund Shares"). Acquiring Fund's shares are
divided into three classes, designated "Class A," "Class B" and "Class
C" shares. Under the terms of this Reorganization the Acquired Fund
Shares will be exchanged for Class A shares of the Acquiring Fund
("Acquiring Fund Shares").
In consideration of the mutual promises contained herein, the
parties agree as follows:
1. PLAN OF REORGANIZATION AND TERMINATION
1.1. Acquired Fund agrees to assign, sell, convey, transfer, and
deliver all of its assets described in paragraph 1.2 ("Assets") to
Acquiring Fund. Acquiring Fund agrees in exchange therefor, to issue
and deliver to Acquired Fund the number of full and fractional (rounded
to the third decimal place) Acquiring Fund Shares determined by
dividing Acquired Fund's net value (computed as set forth in paragraph
2.1) ("Acquired Fund Value") by the net asset value ("NAV") of an
Acquiring Fund Share (computed as set forth in paragraph 2.2). Such
transactions shall take place at the Closing (as defined in paragraph
3.1).
1.2. The Assets shall include all cash, cash equivalents,
securities, receivables (including interest and dividends receivable),
claims and rights of action, rights to register shares under applicable
securities laws, books and records, deferred and prepaid expenses shown
as assets on Acquired Fund's books, and other property Acquired Fund
owns at the Effective Time (as defined in paragraph 3.1), less any cash
sufficient to satisfy any Liabilities (as defined in Section 1.3
hereof) that have not been paid by the Effective Time as shown on a
balance sheet as of the Effective Time.
1.3. Acquired Fund agrees to use all reasonable efforts to
discharge all its Liabilities before the Effective Time and shall, in
any event, discharge them promptly following the Effective Time. The
"Liabilities" shall include all of Acquired Fund's liabilities, debts,
obligations, and duties of whatever kind or nature, whether absolute,
accrued, contingent, or otherwise, whether or not arising in the
ordinary course of business, whether or not determinable at the
Effective Time, and whether or not specifically referred to in this
Agreement. Acquiring Fund shall not assume any of the Liabilities.
1.4. At or immediately before the Effective Time, Acquired Fund
shall declare and pay to its shareholders a dividend and/or other
distribution in an amount large enough so that it will have distributed
substantially all (and in any event not less than 90%) of its
investment company taxable income (as defined in Section 852(b)(2) of
the Code, computed without regard to any deduction for dividends paid)
and substantially all of its realized net capital gain (as defined in
Section 1222(11)), if any, for the current taxable year through the
Effective Time.
1.5. At the Effective Time (or as soon thereafter as is
reasonably practicable), Acquired Fund shall distribute the Acquiring
Fund Shares it receives pursuant to paragraph 1.1 to its shareholders
of record, determined as of the Effective Time (each a "Shareholder"
and collectively "Shareholders"), in constructive exchange for their
Acquired Fund Shares. Such distribution shall be accomplished by
Federated's transfer agent's opening accounts on Acquiring Fund's share
transfer books in the Shareholders' names and transferring such
Acquiring Fund Shares thereto. Each Shareholder's account shall be
credited with the respective pro rata number of full and fractional
(rounded to the third decimal place) Acquiring Fund Shares due that
Shareholder, based on the value of the Acquired Fund Shares owned by
that Shareholder immediately prior to the Effective Time. All
outstanding Acquired Fund Shares, including any represented by
certificates, shall simultaneously be canceled on Acquired Fund's share
transfer books. Acquiring Fund shall not issue certificates
representing the Acquiring Fund Shares issued in connection with the
Reorganization.
1.6. As soon as reasonably practicable after distribution of the
Acquiring Fund Shares pursuant to paragraph 1.5, but in all events
within six months after the Effective Time, Acquired Fund shall be
terminated as a series of North Track and any further actions shall be
taken in connection therewith as required by applicable law.
1.7. Any reporting responsibility of Acquired Fund to a public
authority is and shall remain its responsibility up to and including
the date on which it is terminated.
1.8. Any transfer taxes payable on issuance of Acquiring Fund
Shares in a name other than that of the registered holder on Acquired
Fund's share transfer books of the Acquired Fund Shares constructively
exchanged therefor shall be paid by the person to whom such Acquiring
Fund Shares are to be issued, as a condition of such transfer.
2. VALUATION
2.1. For purposes of paragraph 1.1, Acquired Fund's net value
shall be the value of the Assets computed as of the close of regular
trading on the New York Stock Exchange ("NYSE") on the date of the
Closing ("Valuation Time"), using the valuation procedures set forth in
its then-current prospectus and statement of additional information
("SAI").
2.2. For purposes of paragraph 1.1, the NAV per share of the
Acquiring Fund Shares shall be computed as of the Valuation Time, using
the valuation procedures set forth in Acquiring Fund's then-current
prospectus and SAI.
2.3. All computations pursuant to paragraphs 2.1 and 2.2 shall
be made by or under the direction of the custodians and transfer agents
of the Funds.
3. CLOSING AND EFFECTIVE TIME
3.1. The Reorganization, together with related acts necessary to
consummate it ("Closing"), shall occur at the Investment Companies'
principal offices on or about April 29, 2005, or at such other place
and/or on such other date as to which they may agree. All acts taking
place at the Closing shall be deemed to take place simultaneously as of
the close of business on the date thereof or at such other time as to
which the Investment Companies may agree ("Effective Time"). If,
immediately before the Valuation Time, (a) the NYSE is closed to
trading or trading thereon is restricted or (b) trading or the
reporting of trading on the NYSE or elsewhere is disrupted, so that
accurate appraisal of Acquired Fund's net value and/or the NAV of the
Acquiring Fund Share of any Class is impracticable, the Effective Time
shall be postponed until the first business day after the day when such
trading has been fully resumed and such reporting has been restored.
3.2. North Track shall deliver at the Closing a certificate of
its Chief Financial Officer verifying that the information (including
adjusted basis and holding period, by lot) concerning the Assets,
including all portfolio securities, transferred by Acquired Fund to
Acquiring Fund, as reflected on Acquiring Fund's books immediately
after the Closing, does or will conform to such information on Acquired
Fund's books immediately before the Closing. North Track's custodian
shall deliver at the Closing a certificate of an authorized officer
stating that (a) the Assets it holds will be transferred to Acquiring
Fund at the Effective Time and (b) all necessary taxes in conjunction
with the delivery of the Assets, including all applicable federal and
state stock transfer stamps, if any, have been paid or provision for
payment has been made.
3.3. North Track shall deliver to Federated at the Closing a
list of the names and addresses of the Shareholders and the number of
outstanding Acquired Fund Shares owned by each Shareholder, all as of
the Effective Time, certified by North Track's Secretary. Federated's
transfer agent shall deliver at the Closing a certificate as to the
opening of accounts in the Shareholders' names on Acquiring Fund's
share transfer books. Federated shall issue and deliver a confirmation
to North Track evidencing the Acquiring Fund Shares to be credited to
Acquired Fund and subsequently to the Shareholders at the Effective
Time or provide evidence satisfactory to North Track that such
Acquiring Fund Shares have been credited to Acquired Fund's account and
subsequently to the Shareholders' accounts on Acquiring Fund's share
transfer books. At the Closing, each party shall deliver to the other
bills of sale, checks, assignments, stock certificates, receipts, or
other documents the other party or its counsel reasonably requests.
3.4. Each Investment Company shall deliver to the other at the
Closing a certificate executed in its name by its President or a Vice
President in form and substance satisfactory to the recipient and dated
the Effective Time, to the effect that the representations and
warranties it made in this Agreement are true and correct at the
Effective Time except as they may be affected by the transactions
contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES
4.1. North Track, on behalf of the Acquired Fund, represents and
warrants to Federated as follows:
4.1.1. North Track is a corporation that is duly organized,
validly existing, and in good standing under the laws of the State of
Maryland; and its Articles of Incorporation, as amended and
supplemented ("Articles"), are on file with that state's Department of
Assessments and Taxation;
4.1.2. North Track is duly registered as an open-end
management investment company under the Investment Company Act of 1940,
as amended ("1940 Act"), and such registration is in full force and
effect;
4.1.3. Acquired Fund is a duly established and designated
series of North Track;
4.1.4. At the Closing, Acquired Fund will have good and
marketable title to the Assets and full right, power, and authority to
sell, assign, transfer, and deliver the Assets free of any liens or
other encumbrances (except securities that are subject to "securities
loans" as referred to in Section 851(b)(2) of the Code and except
securities with contractual or legal restrictions on transfer); and on
delivery and payment for the Assets, Acquiring Fund will acquire good
and marketable title thereto;
4.1.5. Acquired Fund's current prospectus and SAI conform in
all material respects to the applicable requirements of the Securities
Act of 1933, as amended ("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
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
4.1.6. Acquired Fund is not in violation of, and the
execution and delivery of this Agreement and consummation of the
transactions contemplated hereby will not conflict with or violate,
Maryland law or any provision of its Articles or North Track's By-Laws
or of any agreement, instrument, lease, or other undertaking to which
North Track (with respect to Acquired Fund) is a party or by which it
(with respect to Acquired Fund) is bound or result in the acceleration
of any obligation, or the imposition of any penalty, under any
agreement, judgment, or decree to which North Track (with respect to
Acquired Fund) is a party or by which it (with respect to Acquired
Fund) is bound, except as otherwise disclosed in writing to and
accepted by Federated;
4.1.7. Except as otherwise disclosed in writing to and
accepted by Federated, all material contracts and other commitments of
or applicable to Acquired Fund (other than this Agreement and
investment contracts, including options, futures, and forward contracts
included on the Acquired Fund's books) will be terminated in accordance
with the provisions of Section 1.3 at or before the Effective Time,
without either Fund's incurring any liability or penalty with respect
thereto;
4.1.8. Except as otherwise disclosed in writing to and
accepted by Federated, (a) no litigation, administrative proceeding, or
investigation of or before any court or governmental body is presently
pending or (to North Track's knowledge) threatened against North Track
(with respect to Acquired Fund) or any of its properties or assets
attributable or allocable to Acquired Fund that, if adversely
determined, would materially and adversely affect Acquired Fund's
financial condition or the conduct of its business and (b) North Track
knows of no facts that might form a reasonable basis for the
institution of any such litigation, proceeding, or investigation 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 or adversely
affects its business or its ability to consummate the transactions
contemplated hereby;
4.1.9. The execution, delivery, and performance of this
Agreement have been duly authorized as of the date hereof by all
necessary action on the part of North Track's board of directors.
Subject to the approval of the shareholders of Acquired Fund, and
assuming the due authorization, execution and delivery of this
Agreement by Federated, this Agreement will constitute the valid and
legally binding obligation of North Track (with respect to Acquired
Fund), enforceable in accordance with its terms, except as the same may
be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium, and similar laws relating to or affecting
creditors' rights and by general principles of equity and the
discretion of the court (regardless of whether the enforceability is
considered in a proceeding in equity or at law);
4.1.10. No governmental consents, approvals, authorizations, or
filings are required under the 1933 Act, the Securities Exchange Act of
1934, as amended, or the 1940 Act (collectively, "Federal Securities
Laws") for North Track's execution or performance of this Agreement,
except for (a) the filing with the Securities and Exchange Commission
("SEC") of a registration statement by Federated on Form N-14 relating
to the Acquiring Fund Shares issuable hereunder, and any supplement or
amendment thereto ("Registration Statement"), including therein a
prospectus and proxy statement and any supplements or amendments
thereto ("Prospectus/Statement"), (b) the filing of one or more
supplements to the then-current prospectus or SAI of Acquired Fund, and
(c) such consents, approvals, authorizations, and filings as have been
made or received or as may be required subsequent to the Effective Time;
4.1.11. On the effective date of the Registration Statement, the
date of the special meeting of Acquired Fund shareholders to approve
this Agreement and the Reorganization, and at the Effective Time, the
Registration Statement, including the Prospectus/Statement, only
insofar as it related to North Track or Acquired Fund, will (a) comply
in all material respects with the applicable provisions of the Federal
Securities Laws and the regulations thereunder and (b) 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, in light of the circumstances under which such statements were
made, not misleading; provided that the foregoing shall not apply to
statements in or omissions from the Registration Statement or the
Prospectus/Statement made in reliance on and in conformity with
information furnished by Federated for use therein;
4.1.12. Acquired Fund incurred the Liabilities in the ordinary
course of its business; and there are no Liabilities other than
Liabilities disclosed or provided for in the Acquired Fund's financial
statements referred to in paragraph 4.1.18 and Liabilities incurred by
Acquired Fund in the ordinary course of business subsequent to October
31, 2004, or otherwise disclosed to Federated, none of which has been
materially adverse to the business, assets or results of Acquired
Fund's operations;
4.1.13. Acquired Fund is a "fund" as defined in
Section 851(g)(2) of the Code; it qualified for treatment as a regulated
investment company under Subchapter M of the Code ("RIC") for each past
taxable year since it commenced operations and will continue to meet
all the requirements for such qualification for its current taxable
year; the Assets will be invested at all times through the Effective
Time in a manner that ensures compliance with the foregoing; and
Acquired Fund has no earnings and profits accumulated in any taxable
year in which the provisions of Subchapter M did not apply to it;
4.1.14. Acquired Fund is not under the jurisdiction of a court
in a "title 11 or similar case" (as defined in Section 368(a)(3)(A) of
the Code);
4.1.15. Not more than 25% of the value of Acquired Fund's total
assets (excluding cash, cash items, and U.S. government securities) is
invested in the stock and securities of any one issuer, and not more
than 50% of the value of such assets is invested in the stock and
securities of five or fewer issuers;
4.1.16. During the five-year period ending at the Effective
Time, (a) neither Acquired Fund nor any person "related" (as defined in
Section 1.368-1(e)(3) of the Regulations) to it will have acquired
Acquired Fund Shares, either directly or through any transaction,
agreement, or arrangement with any other person, with consideration
other than the Acquiring Fund Shares or Acquired Fund Shares, except
for shares redeemed in the ordinary course of Acquired Fund's business
as a series of an open-end investment company as required by
Section 22(e) of the 1940 Act, and (b) no distributions will have been
made with respect to Acquired Fund Shares, other than normal, regular
dividend distributions made pursuant to Acquired Fund's historic
dividend-paying practice and other distributions that qualify for the
deduction for dividends paid (within the meaning of Section 561 of the
Code) referred to in sections 852(a)(1) and 4982(c)(1)(A) of the Code;
4.1.17. Acquired Fund's federal income tax returns, and all
applicable state and local tax returns, for all taxable years through
and including the taxable year ended October 31, 2003, have been timely
filed and all taxes payable pursuant to those returns have been timely
paid, and Acquired Fund has been granted an extension until September
15, 2005 with respect to the filing of its federal and state income tax
returns for the taxable year ended October 31, 2004; and
4.1.18. North Track's audited financial statements for the year
ended October 31, 2004 fairly represent Acquired Fund's financial
position as of such date and the results of its operations and changes
in its net assets for the period then ended.
4.2. Federated, on behalf of Acquiring Fund, represents and
warrants to North Track as follows:
4.2.1. Federated is a corporation that is duly organized,
validly existing, and in good standing under the laws of the State of
Maryland; and its Articles are on file with that state's Department of
Assessments and Taxation;
4.2.2. Federated is duly registered as an open-end
management investment company under the 1940 Act, and such registration
is in full force and effect;
4.2.3. Acquiring Fund is a duly established and designated
series of Federated, and Federated currently has no other series;
4.2.4. No consideration other than the Acquiring Fund Shares
will be issued to Acquired Fund shareholders in exchange for the Assets
in the Reorganization;
4.2.5. The Acquiring Fund Shares to be issued and delivered
to Acquired Fund hereunder will, at the Effective Time, have been duly
authorized and, when issued and delivered as provided herein (including
the receipt of consideration in exchange therefor exceeding their par
value), will be duly and validly issued and outstanding shares of
Acquiring Fund, fully paid and non-assessable by Federated;
4.2.6. Acquiring Fund's current prospectus and SAI 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 therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading;
4.2.7. Acquiring Fund is not in violation of, and the
execution and delivery of this Agreement and consummation of the
transactions contemplated hereby will not conflict with or violate,
Maryland law or any provision of any provision of its Articles or
Federated's By-Laws or of any agreement, instrument, lease, or other
undertaking to which Federated (with respect to Acquiring Fund) is a
party or by which it (with respect to Acquiring Fund) is bound or
result in the acceleration of any obligation, or the imposition of any
penalty, under any agreement, judgment, or decree to which Federated
(with respect to Acquiring Fund) is a party or by which it (with
respect to Acquiring Fund) is bound, except as otherwise disclosed in
writing to and accepted by North Track;
4.2.8. Except as otherwise disclosed in writing to and
accepted by North Track, (a) no litigation, administrative proceeding,
or investigation of or before any court or governmental body is
presently pending or (to Federated's knowledge) threatened against
Federated (with respect to Acquiring Fund) or any of its properties or
assets North Track (with respect to Acquired Fund) or any of its
properties or assets attributable or allocable to Acquired Fund that,
if adversely determined, would materially and adversely affect
Acquiring Fund's financial condition or the conduct of its business and
(b) Federated knows of no facts that might form a reasonable basis for
the institution of any such litigation, proceeding, or investigation
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
or adversely affects its business or its ability to consummate the
transactions contemplated hereby;
4.2.9. The execution, delivery, and performance of this
Agreement have been duly authorized as of the date hereof by all
necessary action on the part of Federated's board of directors
(together with North Track's board of directors, "Boards"). Subject to
approval of the shareholders of Acquired Fund, and assuming the due
authorization, execution and delivery of this Agreement by North Track,
this Agreement constitutes the valid and legally binding obligation of
Federated (with respect to Acquiring Fund), enforceable in accordance
with its terms, except as the same may be limited by bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium, and
similar laws relating to or affecting creditors' rights and by general
principles of equity and the discretion of the court (regardless of
whether the enforceability is considered in a proceeding in equity or
at law);
4.2.10. No governmental consents, approvals, authorizations, or
filings are required under the Federal Securities Laws for Federated's
execution or performance of this Agreement, except for (a) the filing
with the SEC of the Registration Statement, (b) the filing of one or
more supplements to the then-current prospectus or SAI of Acquiring
Fund as may be required, and (c) such consents, approvals,
authorizations, and filings as have been made or received or as may be
required subsequent to the Effective Time;
4.2.11. On the effective date of the Registration Statement, the
date of the special meeting of Acquired Fund shareholders to approve
this Agreement and the Reorganization, and at the Effective Time, the
Registration Statement, including the Prospectus/Statement, only
insofar as it relates to Federated or Acquiring Fund, will (a) comply
in all material respects with the applicable provisions of the Federal
Securities Laws and the regulations thereunder and (b) 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, in light of the circumstances under which such statements were
made, not misleading; provided that the foregoing shall not apply to
statements in or omissions from the Registration Statement or the
Prospectus/Statement made in reliance on and in conformity with
information furnished by North Track for use therein;
4.2.12. Acquiring Fund is a "fund" as defined in
Section 851(g)(2) of the Code; it qualified for treatment as a RIC for
each past taxable year since it commenced operations and will continue
to meet all the requirements for such qualification for its current
taxable year; it intends to continue to meet all such requirements for
the next taxable year; and it has no earnings and profits accumulated
in any taxable year in which the provisions of Subchapter M of the Code
did not apply to it;
4.2.13. Following the Reorganization, Acquiring Fund (a) will
continue Acquired Fund's "historic business" (within the meaning of
Section 1.368-1(d)(2) of the Regulations) and (b) will use a
significant portion of Acquired Fund's "historic business assets"
(within the meaning of Section 1.368-1(d)(3) of the Regulations) in a
business; moreover, Acquiring Fund (c) has no plan or intention to sell
or otherwise dispose of any of the Assets, except for dispositions made
in the ordinary course of that business and dispositions necessary to
maintain its status as a RIC, and (d) expects to retain substantially
all the Assets in the same form as it receives them in the
Reorganization, unless and until subsequent investment circumstances
suggest the desirability of change or it becomes necessary to make
dispositions thereof to maintain such status;
4.2.14. There is no plan or intention for Acquiring Fund to be
dissolved or merged into another business or statutory trust or North
Track or any "fund" thereof (as defined in Section 851(g)(2) of the
Code) following the Reorganization, and Acquiring Fund is not under the
jurisdiction of a court in a "title 11 or similar case" (as defined in
Section 368(a)(3)(A) of the Code);
4.2.15. Immediately after the Reorganization, (a) not more than
25% of the value of Acquiring Fund's total assets (excluding cash, cash
items, and U.S. government securities) will be invested in the stock
and securities of any one issuer and (b) not more than 50% of the value
of such assets will be invested in the stock and securities of five or
fewer issuers;
4.2.16. Acquiring Fund does not directly or indirectly own, nor
at the Effective Time will it directly or indirectly own, nor has it
directly or indirectly owned at any time during the past five years,
any Acquired Fund Shares;
4.2.17. Acquiring Fund has no plan or intention to issue
additional Acquiring Fund Shares following the Reorganization except
for shares issued in the ordinary course of its business as a series of
an open-end investment company; nor does Acquiring Fund, or any person
"related" (within the meaning of Section 1.368-1(e)(3) of the
Regulations) to it, have any plan or intention to acquire -- during the
five-year period beginning at the Effective Time, either directly or
through any transaction, agreement, or arrangement with any other
person -- with consideration other than the Acquiring Fund Shares, any
Acquiring Fund Shares issued to the Shareholders pursuant to the
Reorganization, except for redemptions in the ordinary course of such
business as required by Section 22(e) of the 1940 Act;
4.2.18. During the five-year period ending at the Effective
Time, neither Acquiring Fund nor any person "related" (as defined in
Section 1.368-1(e)(3) of the Regulations) to it will have acquired any
Acquired Fund Shares with consideration other than the Acquiring Fund
Shares;
4.2.19. Acquiring Fund's federal income tax returns, and all
applicable state and local tax returns, for all taxable years through
and including the most recent taxable year ended March 31, 2004, have
been timely filed and all taxes payable pursuant to such returns have
been timely paid;
4.2.20. Federated's audited financial statements for the
year ended March 31, 2004, and unaudited financial statements for the
six months ended September 30, 2004, fairly represent Acquiring Fund's
financial position as of each such date and the results of its
operations and changes in its net assets for the periods then ended; and
4.2.21. If the Reorganization is consummated, Acquiring Fund
will treat each Shareholder that receives Acquiring Fund Shares in
connection with the Reorganization as having made a minimum initial
purchase of such shares for the purpose of making additional
investments therein, regardless of the value of the shares so received
and as having paid the maximum sales charge applicable to purchases of
Class A shares of Acquiring Fund.
4.3. Each Investment Company represents and warrants to the
other Investment Company (and (1)to Xxxx Xxxxx LLP for purposes of the
opinion described in Section 6.4 and to (2)Xxxxxxx & Xxxxx LLP for
purposes of the opinion described in Section 6.6 hereof) as follows:
4.3.1. The fair market value of the Acquiring Fund Shares
each Shareholder receives will be approximately equal to the fair
market value of its Acquired Fund Shares it constructively surrenders
in exchange therefor;
4.3.2. Its management (a) is unaware of any plan or
intention of Shareholders to redeem, sell, or otherwise dispose of
(1) any portion of their Acquired Fund Shares before the Reorganization
to any person "related" (within the meaning of Section 1.368-1(e)(3) of
the Regulations) to either Fund or (2) any portion of the Acquiring
Fund Shares they receive in the Reorganization to any person "related"
(within such meaning) to Acquiring Fund, (b) does not anticipate
dispositions of those Acquiring Fund Shares at the time of or soon
after the Reorganization to exceed the usual rate and frequency of
dispositions of shares of Acquired Fund as a series of an open-end
investment company, (c) expects that the percentage of Shareholder
interests, if any, that will be disposed of as a result of or at the
time of the Reorganization will be de minimis, and (d) does not
anticipate that there will be extraordinary redemptions of Acquiring
Fund Shares immediately following the Reorganization;
4.3.3. The Shareholders will pay their own expenses, if any,
incurred in connection with the Reorganization;
4.3.4. There is no intercompany indebtedness between the
Funds that was issued or acquired, or will be settled, at a discount;
4.3.5. Pursuant to the Reorganization, Acquired Fund will
transfer to Acquiring Fund, and Acquiring Fund will acquire, at least
90% of the fair market value of the net assets, and at least 70% of the
fair market value of the gross assets, Acquired Fund held immediately
before the Reorganization. For the purposes of this representation,
any amounts Acquired Fund uses to pay its Reorganization expenses and
to make redemptions and distributions immediately before the
Reorganization (except (a) redemptions in the ordinary course of its
business required by Section 22(e) of the 1940 Act and (b) regular,
normal dividend distributions made to conform to its policy of
distributing all or substantially all of its income and gains to avoid
the obligation to pay federal income tax and/or the excise tax under
Section 4982 of the Code) will be included as assets it held
immediately before the Reorganization;
4.3.6. None of the compensation received by any Shareholder
who is an employee of or service provider to Acquired Fund will be
separate consideration for, or allocable to, any of the Acquired Fund
Shares such Shareholder held; none of the Acquiring Fund Shares any
such Shareholder receives will be separate consideration for, or
allocable to, any employment agreement, investment advisory agreement,
or other service agreement; and the compensation paid to any such
Shareholder will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at
arm's-length for similar services;
4.3.7. Immediately after the Reorganization, the
Shareholders will not own shares constituting "control" (as defined in
Section 304(c) of the Code) of Acquiring Fund;
4.3.8. Neither Fund will be reimbursed for any expenses
incurred by it or on its behalf in connection with the Reorganization
unless those expenses are solely and directly related to the
Reorganization (determined in accordance with the guidelines set forth
in Rev. Rul. 73-54, 1973-1 C.B. 187) ("Reorganization Expenses"); and
4.3.9. The aggregate value of the acquisitions, redemptions, and
distributions limited by paragraphs 4.1.16, 4.2.17, and 4.2.18 will not
exceed 50% of the value (without giving effect to such acquisitions,
redemptions, and distributions) of the proprietary interest in Acquired
Fund at the Effective Time.
5. COVENANTS
5.1. Each Investment Company covenants to operate its respective
Fund's business in the ordinary course between the date hereof and the
Closing, it being understood that:
(a) such ordinary course will include declaring and paying
customary dividends and other distributions and such changes in
operations as are contemplated by each Fund's normal business
activities and
(b) each Fund will retain exclusive control of the composition
of its portfolio until the Closing; provided that Acquired Fund shall
not dispose of more than an insignificant portion of its historic
business assets (as defined above) during such period, other than
dispositions in the ordinary course of business, without Acquiring
Fund's prior consent; and, subject to their fiduciary duties to their
respective shareholders and the Funds' respective investment
objectives, strategies, policies and limitations, the Investment
Companies shall coordinate the Funds' respective portfolios so that the
transfer of the Assets to Acquiring Fund will not cause it to fail to
be in compliance with all of its investment policies and restrictions
immediately after the Closing.
5.2. North Track covenants that the Acquiring Fund Shares to be
delivered hereunder are not being acquired for the purpose of making
any distribution thereof, other than in accordance with the terms
hereof.
5.3. North Track covenants that it will assist Federated in
seeking to obtain information Federated reasonably requests concerning
the beneficial ownership of Acquired Fund Shares.
5.4. North Track covenants that its books and records (including
all books and records required to be maintained under the 1940 Act and
the rules and regulations thereunder) regarding Acquired Fund will be
turned over to Federated at the Closing.
5.5. Each Investment Company covenants to cooperate in preparing
the Registration Statement and the Prospectus/Statement in compliance
with applicable Federal Securities Laws.
5.6. Each Investment Company covenants that it will, from time
to time, as and when requested by the other Investment Company, execute
and deliver or cause to be executed and delivered all assignments and
other instruments, and will take or cause to be taken all further
action, the other Investment Company may deem necessary or desirable in
order to vest in, and confirm to, (a) Federated, on Acquiring Fund's
behalf, title to and possession of all the Assets, and (b) North Track,
on Acquired Fund's behalf, title to and possession of the Acquiring
Fund Shares to be delivered hereunder, and otherwise to carry out the
intent and purpose hereof.
5.7. Federated covenants to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940
Act, and such state securities laws it may deem appropriate in order to
continue Acquiring Fund's operations after the Effective Time.
5.8. Subject to this Agreement, each Investment Company
covenants to take or cause to be taken all actions, and to do or cause
to be done all things, reasonably necessary, proper, or advisable to
consummate and effectuate the transactions contemplated hereby.
6. CONDITIONS PRECEDENT
Each Investment Company's obligations hereunder shall be subject
to (a) performance by the other Investment Company of all its
obligations to be performed hereunder at or before the Effective Time,
(b) all representations and warranties of the other Investment Company
contained herein being true and correct in all material respects as of
the date hereof and, except as they may be affected by the transactions
contemplated hereby, as of the Effective Time, with the same force and
effect as if made at and as of the Effective Time, and (c) the
following further conditions that, at or before the Effective Time:
6.1. This Agreement and the transactions contemplated hereby
shall have been duly adopted and approved by both Boards, and by the
shareholders of Acquired Fund.
6.2. All necessary filings shall have been made with the SEC and
state securities authorities, and no order or directive shall have been
received that any other or further action is required to permit the
parties to carry out the transactions contemplated hereby. The
Registration Statement shall have become effective under the 1933 Act,
no stop orders suspending the effectiveness thereof shall have been
issued, and the SEC shall not have issued an unfavorable report with
respect to the Reorganization under Section 25(b) of the 1940 Act nor
instituted any proceedings seeking to enjoin consummation of the
transactions contemplated hereby under Section 25(c) of the 1940 Act.
All consents, orders, and permits of federal, state, and local
regulatory authorities (including the SEC and state securities
authorities) either Investment Company deems necessary to permit
consummation, in all material respects, of the transactions
contemplated hereby shall have been obtained, except where failure to
obtain same would not involve a risk of a material adverse effect on
the assets or properties of either Fund, provided that either
Investment Company may for itself waive any of such conditions.
6.3. At the Effective Time, no action, suit, or other proceeding
shall be pending before any court or governmental agency in which it is
sought to restrain or prohibit, or to obtain damages or other relief in
connection with, the transactions contemplated hereby.
6.4. North Track shall have received an opinion of Xxxx Xxxxx
LLP substantially to the effect that:
6.4.1. Acquiring Fund is a duly established series of
Federated, a Maryland corporation duly organized and validly existing
under the laws of the State of Maryland with power under its Articles
and Bylaws to own all its properties and assets and to carry on its
business as presently conducted;
6.4.2. This Agreement (a) has been duly authorized,
executed, and delivered by Federated on Acquiring Fund's behalf and
(b) assuming due authorization, execution, and delivery of this
Agreement by North Track on Acquired Fund's behalf, is a valid and
legally binding obligation of Federated with respect to Acquiring Fund,
enforceable in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, and similar laws relating to or affecting creditors' rights
and by general principles of equity and the discretion of the court
(regardless of whether the enforceability is considered in a proceeding
in equity or at law);
6.4.3. The Acquiring Fund Shares to be issued and
distributed to the Shareholders under this Agreement, assuming their
due delivery as contemplated by this Agreement and the receipt of
consideration in exchange therefor exceeding their par value, will be
duly authorized and validly issued and outstanding and fully paid and
non-assessable by Federated;
6.4.4. The execution and delivery of this Agreement did not,
and the consummation of the transactions contemplated hereby will not,
materially violate any provision of Federated's Articles or By-Laws or
of any agreement (known to Xxxx Xxxxx LLP, without any independent
inquiry or investigation) to which Federated (with respect to Acquiring
Fund) is a party or by which it (with respect to Acquiring Fund) is
bound or (to Xxxx Xxxxx LLP knowledge, without any independent inquiry
or investigation) result in the acceleration of any obligation, or the
imposition of any penalty, under any agreement, judgment, or decree to
which Federated (with respect to Acquiring Fund) is a party or by which
it (with respect to Acquiring Fund) is bound, except as set forth in
such opinion or as otherwise disclosed in writing to and accepted by
North Track;
6.4.5. To Xxxx Xxxxx LLP's knowledge (without any
independent inquiry or investigation), no consent, approval,
authorization, or order of any court or governmental authority is
required for the consummation by Federated on Acquiring Fund's behalf
of the transactions contemplated herein, except such as have been
obtained under the Federal Securities Laws and such as may be required
under state securities laws;
6.4.6. Federated is registered with the SEC as an investment
company, and to Xxxx Xxxxx LLP's knowledge no order has been issued or
proceeding instituted to suspend such registration; and
6.4.7. To Xxxx Xxxxx LLP's knowledge (without any
independent inquiry or investigation), (a) no litigation,
administrative proceeding, or investigation of or before any court or
governmental body is pending or threatened as to Federated (with
respect to Acquiring Fund) or any of its properties or assets
attributable or allocable to Acquiring Fund and (b) Federated (with
respect to Acquiring Fund) 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 or is
reasonably likely to materially and adversely affect Acquiring Fund's
business, except as set forth in such opinion or as otherwise disclosed
in writing to and accepted by North Track.
In rendering such opinion, Xxxx Xxxxx LLP may (1) rely, as to
matters governed by the laws of the State of Maryland, on an opinion of
competent Maryland counsel, and assume for purposes of the
enforceability opinion that the laws of Maryland are identical to the
laws of Pennsylvania, (1) make assumptions regarding the authenticity,
genuineness, and/or conformity of documents and copies thereof without
independent verification thereof, (2) limit such opinion to applicable
federal and state law, and (3) define the word "knowledge" and related
terms to mean the knowledge of attorneys then with Xxxx Xxxxx LLP who
have devoted substantive attention to matters directly related to this
Agreement and the Reorganization.
6.5. Federated shall have received an opinion of Xxxxxxx & Xxxxx
LLP substantially to the effect that:
6.5.1. Acquired Fund is a duly established series of North
Track, a corporation that is duly organized, validly existing, and in
good standing under the laws of the State of Maryland with power under
the Articles to own all its properties and assets and, to Xxxxxxx &
Xxxxx LLP's knowledge, to carry on its business as presently conducted;
6.5.2. This Agreement (a) has been duly authorized,
executed, and delivered by North Track on Acquired Fund's behalf and
(b) assuming due authorization, execution, and delivery of this
Agreement by Federated on Acquiring Fund's behalf, is a valid and
legally binding obligation of North Track with respect to Acquired
Fund, enforceable in accordance with its terms, except as the same may
be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium, and similar laws relating to or affecting
creditors' rights and by general principles of equity and the
discretion of the court (regardless of whether the enforceability is
considered in a proceeding in equity or at law);
6.5.3. The execution and delivery of this Agreement did not,
and the consummation of the transactions contemplated hereby will not,
materially violate any provision of North Track's Articles or By-Laws
or of any agreement (known to Xxxxxxx & Xxxxx LLP, without any
independent inquiry or investigation) to which North Track (with
respect to Acquired Fund) is a party or by which it (with respect to
Acquired Fund) is bound or (to Xxxxxxx & Xxxxx LLP's knowledge, without
any independent inquiry or investigation) result in the acceleration of
any obligation, or the imposition of any penalty, under any agreement,
judgment, or decree to which North Track (with respect to Acquired
Fund) is a party or by which it (with respect to Acquired Fund) is
bound, except as set forth in such opinion or as otherwise disclosed in
writing to and accepted by Federated;
6.5.4. To Xxxxxxx & Xxxxx LLP's knowledge (without any
independent inquiry or investigation), no consent, approval,
authorization, or order of any court or governmental authority is
required for the consummation by North Track on Acquired Fund's behalf
of the transactions contemplated herein, except such as have been
obtained under the Federal Securities Laws and such as may be required
under state securities laws;
6.5.5. North Track is registered with the SEC as an
investment company, and to Xxxxxxx & Xxxxx LLP's knowledge no order has
been issued or proceeding instituted to suspend such registration; and
6.5.6. To Xxxxxxx & Xxxxx LLP's knowledge (without any
independent inquiry or investigation), (a) no litigation,
administrative proceeding, or investigation of or before any court or
governmental body is pending or threatened as to North Track (with
respect to Acquired Fund) or any of its properties or assets
attributable or allocable to Acquired Fund and (b) North Track (with
respect to Acquired Fund) 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 or is
reasonably likely to materially and adversely affect Acquired Fund's
business, except as set forth in such opinion or as otherwise disclosed
in writing to and accepted by Federated.
In rendering such opinion, Xxxxxxx & Xxxxx LLP may (1) rely, as
to matters governed by the laws of the State of Maryland, on an opinion
of competent Maryland counsel, and assume for purposes of the
enforceability opinion that the laws of Maryland are identical to the
laws of Wisconsin, (2) make assumptions regarding the authenticity,
genuineness, and/or conformity of documents and copies thereof without
independent verification thereof, (3) limit such opinion to applicable
federal and state law, and (4) define the word "knowledge" and related
terms to mean the knowledge of attorneys then with Xxxxxxx & Xxxxx LLP
who have devoted substantive attention to matters directly related to
this Agreement and the Reorganization.
6.6. Each Investment Company shall have received an opinion of
Xxxxxxx & Xxxxx LLP, addressed to and in form and substance reasonably
satisfactory to it, as to the federal income tax consequences mentioned
below ("Tax Opinion"). In rendering the Tax Opinion, Xxxxxxx & Xxxxx
LLP may rely as to factual matters, exclusively and without independent
verification, on the representations and warranties made in this
Agreement, which Xxxxxxx & Xxxxx LLP may treat as representations and
warranties made to it, and in separate letters addressed to Xxxxxxx &
Xxxxx LLP and the certificates delivered pursuant to paragraph 3.4.
The Tax Opinion shall be substantially to the effect that, based on the
facts and assumptions stated therein and conditioned on consummation of
the Reorganization in accordance with this Agreement, for federal
income tax purposes:
6.6.1. Acquiring Fund's acquisition of the Assets in
exchange solely for Acquiring Fund Shares, followed by Acquired Fund's
distribution of those shares pro rata to the Shareholders
constructively in exchange for their Acquired Fund Shares, will qualify
as a "reorganization" (as defined in Section 368(a)(1)(C) of the Code),
and each Fund will be "a party to a reorganization" within the meaning
of Section 368(b) of the Code;
6.6.2. Acquired Fund will recognize no gain or loss on the
transfer of the Assets to Acquiring Fund in exchange solely for
Acquiring Fund Shares or on the subsequent distribution of those shares
to the Shareholders in constructive exchange for their Acquired Fund
Shares in liquidation of Acquired Fund pursuant to the Reorganization;
6.6.3. Acquiring Fund will recognize no gain or loss on its
receipt of the Assets in exchange solely for Acquiring Fund Shares
pursuant to the Reorganization;
6.6.4. The tax basis of each Asset acquired by Acquiring
Fund pursuant to the Reorganization's basis in each Asset will be the
same as the tax basis of such Assets to Acquired Fund immediately prior
to the Reorganization, and the holding period of each Asset in the
hands of Acquiring Fund will include the period during which such Asset
was held by Acquired Fund;
6.6.5. The Shareholders will recognize no gain or loss on
the constructive exchange of their Acquired Fund Shares for Acquiring
Fund Shares pursuant to the Reorganization; and
6.6.6. The aggregate tax basis of the Acquiring Fund Shares
received by each Shareholder in the Reorganization will be the same as
the aggregate tax basis of the Acquired Fund Shares held by such
Shareholder immediately prior to the Reorganization, and the holding
period of the Acquiring Fund Shares to be received by each such
Shareholder will include the period during which the Acquired Fund
Shares exchanged therefore were held by such Shareholder (provided the
Acquired Fund Shares were held as capital assets at the Effective Time).
Notwithstanding subparagraphs 6.6.2 and 6.6.4, the Tax Opinion
may state that no opinion is expressed as to the effect of the
Reorganization on the Funds or any Shareholder with respect to any
Asset as to which any unrealized gain or loss is required to be
recognized for federal income tax purposes at the end of a taxable year
(or on the termination or transfer thereof) under a xxxx-to-market
system of accounting.
At any time before the Closing, either Investment Company may
waive any of the foregoing conditions (except that set forth in
paragraph 6.1) if, in the judgment of its Board, such waiver will not
have a material adverse effect on its Fund's shareholders' interests.
7. BROKERAGE FEES AND EXPENSES
7.1. Each Investment Company represents and warrants to the
other that there are no brokers or finders entitled to receive any
payments in connection with the transactions provided for herein.
7.2. Federated Investors, Inc., the parent of the investment
adviser to Acquiring Fund, and X.X. Xxxxxxx and Company, the investment
adviser to Acquired Fund, or their respective affiliates will bear the
total Reorganization Expenses in accordance with a separate Agreement
among X.X. Xxxxxxx and Company, The Xxxxxxx Companies, Inc. and
Federated Investors, Inc. dated as of February 2, 2005.
8. ENTIRE AGREEMENT; NO SURVIVAL
Neither Investment Company has made any representation, warranty,
or covenant not set forth herein, and this Agreement constitutes the
entire agreement between the parties. The representations, warranties,
and covenants contained herein or in any document delivered pursuant
hereto or in connection herewith shall not survive the Closing.
9. TERMINATION OF AGREEMENT
This Agreement may be terminated at any time at or before the
Effective Time:
9.1. By either Investment Company (a) in the event of the other
Investment Company's material breach of any representation, warranty,
or covenant contained herein to be performed at or prior to the
Effective Time, (b) if a condition to its obligations has not been met
and it reasonably appears that such condition will not or cannot be
met, or (c) if the Closing has not occurred on or before May 30, 2005;
or
9.2. By the Investment Companies' mutual agreement.
In the event of termination under paragraphs 9.1(c) or 9.2, there
shall be no liability for damages on the part of either Investment
Company, or the directors or officers thereof, to the other Investment
Company.
10. AMENDMENT
This Agreement may be amended, modified, or supplemented at any
time in any manner mutually agreed on in writing by the Investment
Companies; provided that no such amendment, modification, or supplement
shall have a material adverse effect on the Shareholders' interests.
11. MISCELLANEOUS
11.1. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Maryland; provided
that, in the case of any conflict between such laws and the federal
securities laws, the latter shall govern.
11.2. Nothing expressed or implied herein is intended or shall be
construed to confer on or give any person, firm, trust, or North Track
other than the parties and their respective successors and assigns any
rights or remedies under or by reason of this Agreement.
11.3 The parties acknowledge that each Investment Company is a
Maryland corporation. Notice is hereby given that this instrument is
executed by each Investment Company's officer's and directors solely in
their capacities as officers and directors, and not individually, and
solely on behalf of its respective Fund, and that neither Investment
Company's obligations under this instrument is binding on or
enforceable against any of its respective officers, directors or
shareholders or any series of such Investment Company other than
Acquiring Fund in the case of Federated and Acquired Fund in the case
of North Track but are only binding on and enforceable against the
property of its respective Fund. Each Investment Company agrees that,
in asserting any rights or claims under this Agreement, it shall look
only to the property of the respective Fund of the other Investment
Company in settlement of such rights or claims and not to the other
Investment Company's directors, officers, or shareholders.
11.4. This Agreement may be executed in one or more counterparts,
all of which shall be considered one and the same agreement, and shall
become effective when one or more counterparts have been executed by
each Investment Company and delivered to the other Investment Company.
The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of
this Agreement.
IN WITNESS WHEREOF, each party has caused this Agreement to be
executed and delivered by its duly authorized officers as of the date
first written above.
NORTH TRACK FUNDS, INC.
By:/s/ Xxxxx X. Xxxxxxxx
Name: Xxxxx X. Xxxxxxxx
Title: President
FEDERATED MUNICIPAL
SECURITIES FUND, INC.
By: /s/ Xxxx X. XxXxxxxxx
-----
Name: Xxxx X. XxXxxxxxx
Title: Executive Vice
President and Secretary
