AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of the 29th day of October, 2004, by and between Pioneer High Yield Fund, a
Delaware statutory trust (the "Acquiring Trust"), on behalf of its sole series
Pioneer High Yield Fund (the "Acquiring Fund"), with its principal place of
business at 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, and Safeco Taxable
Bond Trust, a Delaware statutory trust (the "Safeco Trust"), on behalf of its
series Safeco High-Yield Bond Fund (the "Acquired Fund"), with its principal
place of business at 0000 000xx Xxxxx X.X., Xxxxxxx, Xxxxxxxxxx 00000. The
Acquiring Fund and the Acquired Fund are sometimes referred to collectively
herein as the "Funds" and individually as a "Fund."
This Agreement is intended to be and is adopted as a plan of a
"reorganization" as defined in Section 368(a)(1)(C) of the United States
Internal Revenue Code of 1986, as amended (the "Code") and the Treasury
Regulations thereunder. The reorganization (the "Reorganization") will consist
of (1) the transfer of all of the assets of the Acquired Fund to the Acquiring
Fund in exchange solely for (A) the issuance of Investor Class shares of
beneficial interest of the Acquiring Fund (collectively, the "Acquiring Fund
Shares" and each, an "Acquiring Fund Share") to the Acquired Fund, and (B) the
assumption by the Acquiring Fund of the liabilities of the Acquired Fund that
are included in the calculation of net asset value ("NAV") on the closing date
of the Reorganization (the "Closing Date") (collectively, the "Assumed
Liabilities"), and (2) the distribution by the Acquired Fund, on or promptly
after the Closing Date as provided herein, of the Acquiring Fund Shares to the
shareholders of the Acquired Fund in liquidation and dissolution of the Acquired
Fund, all upon the terms and conditions hereinafter set forth in this Agreement.
WHEREAS, the Acquiring Trust and the Safeco Trust are each registered
investment companies classified as management companies of the open-end type.
WHEREAS, the Acquiring Fund is authorized to issue shares of beneficial
interest.
WHEREAS, the Board of Trustees of the Safeco Trust and the Board of
Trustees of the Acquiring Trust have determined that the Reorganization is in
the best interests of the Acquired Fund shareholders and the Acquiring Fund
shareholders, respectively, and is not dilutive of the interests of those
shareholders.
NOW, THEREFORE, in consideration of the premises of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING
FUND SHARES AND ASSUMPTION OF THE ASSUMED LIABILITIES; LIQUIDATION AND
TERMINATION OF THE ACQUIRED FUND.
1.1 Subject to the terms and conditions herein set forth and on the basis of the
representations and warranties contained herein, the Acquired Fund will transfer
all of its assets as set forth in Paragraph 1.2 (the "Acquired Assets") to the
Acquiring Fund free and clear of all liens and encumbrances (other than those
arising under the Securities Act of 1933, as amended (the "Securities Act"),
liens for taxes not yet due and contractual restrictions on the transfer of the
Acquired Assets) and the Acquiring Fund agrees in exchange therefor: (i) to
issue to the Acquired Fund the number of Acquiring Fund Shares, including
fractional Acquiring Fund Shares, with an aggregate NAV equal to the NAV of the
Acquired Fund, as determined in the manner set forth in Paragraphs 2.1 and 2.2;
and (ii) to assume the Assumed Liabilities. Such transactions shall take place
at the Closing (as defined in Paragraph 3.1 below).
1.2 (a) The Acquired Assets shall consist of all of the Acquired Fund's
property, including, without limitation, all portfolio securities and
instruments, dividends and interest receivables, cash, goodwill, contractual
rights of the Acquired Fund or the Safeco Trust in respect of the Acquired Fund,
all other intangible property owned by the Acquired Fund, originals or copies of
all books and records of the Acquired Fund, and all other assets of the Acquired
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Fund on the Closing Date. The Acquiring Fund shall also be entitled to receive
(or, to the extent agreed upon between the Safeco Trust and the Acquiring Trust,
be provided access to) copies of all records that the Safeco Trust is required
to maintain under the Investment Company Act of 1940, as amended (the
"Investment Company Act"), and the rules of the Securities and Exchange
Commission (the "Commission") thereunder to the extent such records pertain to
the Acquired Fund.
(b) The Acquired Fund has provided the Acquiring Fund with a list of all of the
Acquired Fund's securities and other assets as of the date of execution of this
Agreement, and the Acquiring Fund has provided the Acquired Fund with a copy of
the current fundamental investment policies and restrictions and fair value
procedures applicable to the Acquiring Fund. The Acquired Fund reserves the
right to sell any of such securities or other assets before the Closing Date
(except to the extent sales may be limited by representations of the Acquired
Fund contained herein and made in connection with the issuance of the tax
opinion provided for in Paragraph 8.5 hereof).
1.3 The Acquired Fund will endeavor to discharge all of its known liabilities
and obligations that are or will become due prior to the Closing.
1.4 On or as soon after the Closing Date as is conveniently practicable (the
"Liquidation Date"), the Safeco Trust shall liquidate the Acquired Fund and
distribute pro rata to its shareholders of record, determined as of the close of
regular trading on the New York Stock Exchange on the Closing Date (the
"Acquired Fund Shareholders"), the Acquiring Fund Shares received by the
Acquired Fund pursuant to Paragraph 1.1 hereof. Each Acquired Fund Shareholder
shall receive such number of Acquiring Fund Shares that have an aggregate NAV
equal to the aggregate NAV of the shares of beneficial interest of the Acquired
Fund (the "Acquired Fund Shares") held of record by such Acquired Fund
Shareholder on the Closing Date. Such liquidation and distribution will be
accomplished by the Safeco Trust instructing the Acquiring Trust to transfer the
Acquiring Fund Shares then credited to the account of the Acquired Fund on the
books of the Acquiring Fund to open accounts on the share records of the
Acquiring Fund established and maintained by the Acquiring Fund's transfer agent
in the names of the Acquired Fund Shareholders and representing the respective
pro rata number of the Acquiring Fund Shares due the Acquired Fund Shareholders.
The Safeco Trust shall promptly provide the Acquiring Trust with evidence of
such liquidation and distribution. All issued and outstanding Acquired Fund
Shares will simultaneously be cancelled on the books of the Acquired Fund, and
the Acquired Fund will be dissolved. The Acquiring Fund shall not issue
certificates representing the Acquiring Fund Shares in connection with such
exchange.
1.5 Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund's transfer agent for its Investor Class shares. Any certificates
representing ownership of Acquired Fund Shares that remain outstanding on the
Closing Date shall be deemed to be cancelled and shall no longer evidence
ownership of Acquired Fund Shares.
1.6 Any transfer taxes payable upon issuance of Acquiring Fund Shares in a name
other than the registered holder of the Acquired Fund Shares on the books of the
Acquired Fund as of that time shall, as a condition of such issuance and
transfer, be paid by the person to whom such Acquiring Fund Shares are to be
issued and transferred.
1.7 Any reporting responsibility of the Safeco Trust with respect to the
Acquired Fund for taxable periods ending on or before the Closing Date,
including, but not limited to, the responsibility for filing of regulatory
reports, Tax Returns (as defined in Paragraph 4.1), or other documents with the
Commission, any state securities commissions, and any federal, state or local
tax authorities or any other relevant regulatory authority, is and shall remain
the responsibility of the Safeco Trust.
2. VALUATION
2.1 The NAV of the Acquiring Fund Shares and the NAV of the Acquired Fund shall,
in each case, be determined as of the close of business (4:00 p.m., Boston time)
on the Closing Date (the "Valuation Time"). The NAV of each Acquiring Fund Share
shall be computed by Pioneer Investment Management, Inc. (the "Acquiring Fund
Adviser") in the manner set forth in the Acquiring Fund's Declaration of Trust
(the "Declaration"), or By-Laws, and the Acquiring Fund's then-current
prospectus and statement of additional information. The NAV of the Acquired Fund
shall be computed by Symetra Asset Management Company (the "Acquired Fund
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Administrator") by calculating the value of the Acquired Assets and by
subtracting therefrom the amount of the liabilities of the Acquired Fund on the
Closing Date included on the Statement of Assets and Liabilities of the Acquired
Fund delivered pursuant to Paragraph 5.7 (the "Statement of Assets and
Liabilities"), said assets and liabilities to be valued in the manner set forth
in the Acquired Fund's then current prospectus and statement of additional
information. The Acquiring Fund Adviser shall confirm to the Acquiring Fund the
NAV of the Acquired Fund.
2.2 The number of Acquiring Fund Shares to be issued (including fractional
shares, if any) in exchange for the Acquired Assets and the assumption of the
Assumed Liabilities shall be determined by the Acquiring Fund Adviser by
dividing the NAV of the Acquired Fund, as determined in accordance with
Paragraph 2.1, by the NAV of each Acquiring Fund Share, as determined in
accordance with Paragraph 2.1.
2.3 The Acquiring Fund and the Acquired Fund shall cause the Acquiring Fund
Adviser and the Acquired Fund Administrator, respectively, to deliver a copy of
its valuation report to the other party at Closing. All computations of value
shall be made by the Acquiring Fund Adviser and the Acquired Fund Administrator
in accordance with its regular practice as pricing agent for the Acquiring Fund
and the Acquired Fund, respectively.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be December 10, 2004, or such later date as the
parties may agree to in writing. All acts necessary to consummation the
Reorganization (the "Closing") shall be deemed to take place simultaneously as
of 5:00 p.m. (Eastern time) on the Closing Date unless otherwise provided. The
Closing shall be held at the offices of Xxxxxx Xxxxxx Xxxxxxxxx Xxxx and Xxxx
LLP, 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx, or at such other place as the
parties may agree.
3.2 Portfolio securities that are held other than in book-entry form in the name
of State Street Bank and Trust Company (the "Acquired Fund Custodian") as record
holder for the Acquired Fund shall be presented by the Acquired Fund to Xxxxx
Brothers Xxxxxxxx & Co. (the "Acquiring Fund Custodian") for examination no
later than three business days preceding the Closing Date. Such portfolio
securities shall be delivered by the Acquired Fund to the Acquiring Fund
Custodian for the account of the Acquiring Fund on the Closing Date, duly
endorsed in proper form for transfer, in such condition as to constitute good
delivery thereof in accordance with the custom of brokers, and shall be
accompanied by all necessary federal and state stock transfer stamps or a check
for the appropriate purchase price thereof. Portfolio securities held of record
by the Acquired Fund Custodian in book-entry form on behalf of the Acquired Fund
shall be delivered by the Acquired Fund Custodian through the Depository Trust
Company to the Acquiring Fund Custodian and by the Acquiring Fund Custodian
recording the beneficial ownership thereof by the Acquiring Fund on the
Acquiring Fund Custodian's records. Any cash shall be delivered by the Acquired
Fund Custodian transmitting immediately available funds by wire transfer to the
Acquiring Fund Custodian the cash balances maintained by the Acquired Fund
Custodian and the Acquiring Fund Custodian crediting such amount to the account
of the Acquiring Fund.
3.3 The Acquiring Fund Custodian shall deliver within one business day after the
Closing a certificate of an authorized officer stating that: (a) the Acquired
Assets have been delivered in proper form to the Acquiring Fund on the Closing
Date, and (b) all necessary transfer taxes including all applicable federal and
state stock transfer stamps, if any, have been paid, or provision for payment
has been made in conjunction with the delivery of portfolio securities as part
of the Acquired Assets.
3.4 If on the Closing Date (a) the New York Stock Exchange is closed to trading
or trading thereon shall be restricted or (b) trading or the reporting of
trading on such exchange or elsewhere is disrupted so that accurate appraisal of
the NAV of the Acquiring Fund Shares or the Acquired Fund pursuant to Paragraph
2.1 is impracticable, the Closing 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.
3.5 The Acquired Fund shall deliver at the Closing a list of the names,
addresses, federal taxpayer identification numbers and backup withholding and
nonresident alien withholding status and certificates of the Acquired Fund
Shareholders and the number and percentage ownership of outstanding Acquired
Fund Shares owned by each Acquired Fund Shareholder as of the Valuation Time,
certified by the President or a Secretary of the Safeco Trust and its Treasurer,
Secretary or other authorized officer (the "Shareholder List") as being an
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accurate record of the information (a) provided by the Acquired Fund
Shareholders, (b) provided by the Acquired Fund Custodian, or (c) derived from
the Safeco Trust's records by such officers or one of the Safeco Trust's service
providers. The Acquiring Fund shall issue and deliver to the Acquired Fund a
confirmation evidencing the Acquiring Fund Shares to be credited on the Closing
Date, or provide evidence satisfactory to the Acquired Fund that such Acquiring
Fund Shares have been credited to the Acquired Fund's account on the books of
the Acquiring Fund. At the Closing, each party shall deliver to the other such
bills of sale, checks, assignments, stock certificates, receipts or other
documents as such other party or its counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES
4.1 The Safeco Trust, on behalf of the Acquired Fund, represents, warrants and
covenants to the Acquiring Fund, which representations, warranties and covenants
will be true and correct on the date hereof and on the Closing Date as though
made on and as of the Closing Date, as follows:
(a) The Acquired Fund is a series of the Safeco Trust. The Safeco Trust is a
statutory trust validly existing and in good standing under the laws of the
State of Delaware and has the power to own all of its properties and assets and,
subject to approval by the Acquired Fund's shareholders, to perform its
obligations under this Agreement. The Acquired Fund is not required to qualify
to do business in any jurisdiction in which it is not so qualified or where
failure to qualify would subject it to any material liability or disability.
Each of the Safeco Trust and the Acquired Fund has all necessary federal, state
and local authorizations to own all of its properties and assets and to carry on
its business as now being conducted;
(b) The Safeco Trust is a registered investment company classified as a
management company of the open-end type, and its registration with the
Commission as an investment company under the Investment Company Act is in full
force and effect;
(c) The Safeco Trust is not in violation of, and the execution and delivery of
this Agreement and the performance of its obligations under this Agreement in
respect of the Acquired Fund will not result in a violation of, any provision of
the Safeco Trust's Trust Instrument or By-Laws or any material agreement,
indenture, instrument, contract, lease or other undertaking with respect to the
Acquired Fund to which the Safeco Trust is a party or by which the Acquired Fund
or any of its assets are bound;
(d) No litigation or administrative proceeding or investigation of or before any
court or governmental body is currently pending or to its knowledge threatened
against the Acquired Fund or any of the Acquired Fund's properties or assets.
The Acquired Fund knows of no facts which might form the basis for the
institution of such proceedings. Neither the Safeco Trust nor the Acquired Fund
is a party to or subject to the provisions of any order, decree or judgment of
any court or governmental body which materially adversely affects the Acquired
Fund's business or its ability to consummate the transactions contemplated
herein or would be binding upon the Acquiring Fund as the successor to the
Acquired Fund;
(e) The Acquired Fund has no material contracts or other commitments (other than
this Agreement or agreements for the purchase and sale of securities entered
into in the ordinary course of business and consistent with its obligations
under this Agreement) which will not be terminated at or prior to the Closing
Date and no such termination will result in liability to the Acquired Fund (or
the Acquiring Fund);
(f) The statement of assets and liabilities of the Acquired Fund, and the
related statements of income and changes in NAV, as of and for the fiscal year
ended December 31, 2003, have been audited by Ernst & Young LLP, independent
registered public accounting firm, and are in accordance with generally accepted
accounting principles ("GAAP") consistently applied and fairly reflect, in all
material respects, the financial condition of the Acquired Fund as of such date
and the results of its operations for the period then ended, and all known
liabilities, whether actual or contingent, of the Acquired Fund as of the date
thereof are disclosed therein. The Statement of Assets and Liabilities will be
in accordance with GAAP consistently applied and will fairly reflect, in all
material respects, the financial condition of the Acquired Fund as of such date
and the results of its operations for the period then ended. Except for the
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Assumed Liabilities, the Acquired Fund will not have any known or contingent
liabilities on the Closing Date. No significant deficiency, material weakness,
fraud, significant change or other factor that could significantly affect the
internal controls of the Acquired Fund has been disclosed or is required to be
disclosed in the Acquired Fund's reports on Form N-CSR to enable the chief
executive officer and chief financial officer or other officers of the Acquired
Fund to make the certifications required by the Xxxxxxxx-Xxxxx Act, and no
deficiency, weakness, fraud, change, event or other factor exists that will be
required to be disclosed in the Acquiring Fund's Form N-CSR after the Closing
Date;
(g) Since the most recent fiscal year end, except as specifically disclosed in
the Acquired Fund's prospectus, its statement of additional information as in
effect on the date of this Agreement, or its semi-annual report for the period
ended June 30, 2004, there has not been any material adverse change in the
Acquired Fund's financial condition, assets, liabilities, business or prospects,
or any incurrence by the Acquired Fund of indebtedness, except for normal
contractual obligations incurred in the ordinary course of business or in
connection with the settlement of purchases and sales of portfolio securities.
For the purposes of this subparagraph (g) (but not for any other purpose of this
Agreement), a decline in NAV per Acquired Fund Share arising out of its normal
investment operations or a decline in market values of securities in the
Acquired Fund's portfolio or a decline in net assets of the Acquired Fund as a
result of redemptions shall not constitute a material adverse change;
(h) (A) For each taxable year of its operation since its inception, the Acquired
Fund has met, and for the current taxable year it will meet, the requirements of
Subchapter M of the Code for qualification and treatment as a regulated
investment company. The Acquired Fund will qualify as such as of the Closing
Date and will satisfy the diversification requirements of Section 851(b)(3) of
the Code without regard to the last sentence of Section 851(d) of the Code. The
Acquired Fund has not taken any action, caused any action to be taken or caused
any action to fail to be taken which action or failure could cause the Acquired
Fund to fail to qualify as a regulated investment company under the Code;
(B) Within the times and in the manner prescribed by law, the Acquired Fund has
properly filed on a timely basis all Tax Returns (as defined below) that it was
required to file, and all such Tax Returns were complete and accurate in all
respects. The Acquired Fund has not been informed by any jurisdiction that the
jurisdiction believes that the Acquired Fund was required to file any Tax Return
that was not filed; and the Acquired Fund does not know of any basis upon which
a jurisdiction could assert such a position;
(C) The Acquired Fund has timely paid, in the manner prescribed by law, all
Taxes (as defined below), which were due and payable or which were claimed to be
due;
(D) All Tax Returns filed by the Acquired Fund constitute complete and accurate
reports of the respective Tax liabilities and all attributes of the Acquired
Fund or, in the case of information returns and payee statements, the amounts
required to be reported, and accurately set forth all items required to be
included or reflected in such returns;
(E) The Acquired Fund has not waived or extended any applicable statute of
limitations relating to the assessment or collection of Taxes;
(F) The Acquired Fund has not been notified that any examinations of the Tax
Returns of the Acquired Fund are currently in progress or threatened, and no
deficiencies have been asserted or assessed against the Acquired Fund as a
result of any audit by the Internal Revenue Service or any state, local or
foreign taxing authority, and, to its knowledge, no such deficiency has been
proposed or threatened;
(G) The Acquired Fund has no actual or potential liability for any Tax
obligation of any taxpayer other than itself. The Acquired Fund is not and has
never been a member of a group of corporations with which it has filed (or been
required to file) consolidated, combined or unitary Tax Returns. The Acquired
Fund is not a party to any Tax allocation, sharing, or indemnification
agreement;
(H) The unpaid Taxes of the Acquired Fund for tax periods through the Closing
Date do not exceed the accruals and reserves for Taxes (excluding accruals and
reserves for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the Statement of Assets and Liabilities,
rather than in any notes thereto (the "Tax Reserves"). All Taxes that the
Acquired Fund is or was required by law to withhold or collect have been duly
withheld or collected and, to the extent required, have been timely paid to the
proper governmental agency;
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(I) The Acquired Fund has delivered to the Acquiring Fund or made available to
the Acquiring Fund complete and accurate copies of all Tax Returns of the
Acquired Fund, together with all related examination reports and statements of
deficiency for all periods not closed under the applicable statutes of
limitations and complete and correct copies of all private letter rulings,
revenue agent reports, information document requests, notices of proposed
deficiencies, deficiency notices, protests, petitions, closing agreements,
settlement agreements, pending ruling requests and any similar documents
submitted by, received by or agreed to by or on behalf of the Acquired Fund. The
Acquired Fund has disclosed on its federal income Tax Returns all positions
taken therein that could give rise to a substantial understatement of federal
income Tax within the meaning of Section 6662 of the Code;
(J) The Acquired Fund has not undergone, has not agreed to undergo, and is not
required to undergo (nor will it be required as a result of the transactions
contemplated in this Agreement to undergo) a change in its method of accounting
resulting in an adjustment to its taxable income pursuant to Section 481 of the
Code. The Acquired Fund will not be required to include any item of income in,
or exclude any item of deduction from, taxable income for any taxable period (or
portion thereof) ending after the Closing Date as a result of any (i) change in
method of accounting for a taxable period ending on or prior to the Closing Date
under Section 481(c) of the Code (or any corresponding or similar provision of
state, local or foreign income Tax law); (ii) "closing agreement" as described
in Section 7121 of the Code (or any corresponding or similar provision of state,
local or foreign income Tax law) executed on or prior to the Closing Date; (iii)
installment sale or open transaction disposition made on or prior to the Closing
Date; or (iv) prepaid amount received on or prior to the Closing Date;
(K) The Acquired Fund has not taken or agreed to take any action, and is not
aware of any agreement, plan or other circumstance, that is inconsistent with
the representations set forth in Annex B;
(L) There are (and as of immediately following the Closing there will be) no
liens on the assets of the Acquired Fund relating to or attributable to Taxes,
except for Taxes not yet due and payable;
(M) The Tax bases of the assets of the Acquired Fund are accurately reflected on
the Acquired Fund's Tax books and records;
(N) The Acquired Fund has not incurred (or been allocated) an "overall foreign
loss" as defined in Section 904(f)(2) of the Code which has not been previously
recaptured in full as provided in Sections 904(f)(2) and/or 904(f)(3) of the
Code;
(O) The Acquired Fund is not a party to a gain recognition agreement under
Section 367 of the Code;
(P) The Acquired Fund does not own any interest in an entity that is
characterized as a partnership for income tax purposes;
(Q) The Acquired Fund's Tax attributes are not limited under the Code (including
but not limited to any capital loss carry forward limitations under Sections 382
or 383 of the Code and the Treasury Regulations thereunder) or comparable
provisions of state law; and
(R) For purposes of this Agreement, "Taxes" or "Tax" shall mean all taxes,
charges, fees, levies or other similar assessments or liabilities, including
without limitation income, gross receipts, ad valorem, premium, value-added,
excise, real property, personal property, sales, use, transfer, withholding,
employment, unemployment, insurance, social security, business license, business
organization, environmental, workers compensation, payroll, profits, license,
lease, service, service use, severance, stamp, occupation, windfall profits,
customs, duties, franchise and other taxes imposed by the United States of
America or any state, local or foreign government, or any agency thereof, or
other political subdivision of the United States or any such government, and any
interest, fines, penalties, assessments or additions to tax resulting from,
attributable to or incurred in connection with any tax or any contest or dispute
thereof; and "Tax Returns" shall mean all reports, returns, declarations,
statements or other information required to be supplied to a governmental or
6
regulatory authority or agency, or to any other person, in connection with Taxes
and any associated schedules or work papers produced in connection with such
items;
(i) All issued and outstanding Acquired Fund Shares are, and at the Closing Date
will be, duly and validly issued and outstanding, fully paid and nonassessable
by the Acquired Fund. All of the issued and outstanding Acquired Fund Shares
will, at the time of Closing, be held of record by the persons and in the
amounts set forth in the Shareholder List submitted to the Acquiring Fund
pursuant to Paragraph 3.5 hereof. The Acquired Fund does not have outstanding
any options, warrants or other rights to subscribe for or purchase any Acquired
Fund Shares, nor is there outstanding any security convertible into any Acquired
Fund Shares;
(j) At the Closing Date, the Acquired Fund will have good and marketable title
to the Acquired Assets, and full right, power and authority to sell, assign,
transfer and deliver the Acquired Assets to the Acquiring Fund, and, upon
delivery and payment for the Acquired Assets, the Acquiring Fund will acquire
good and marketable title thereto, subject to no restrictions on the full
transfer thereof, except such restrictions as might arise under the Securities
Act;
(k) The Safeco Trust has the trust power and authority to enter into and perform
its obligations under this Agreement. The execution, delivery and performance of
this Agreement have been duly authorized by all necessary action on the part of
the Safeco Trust's Board of Trustees, and, subject to the approval of the
Acquired Fund's shareholders, assuming due authorization, execution and delivery
by the Acquiring Fund, this Agreement will constitute a valid and binding
obligation of the Acquired Fund, enforceable in accordance with its terms,
subject as to enforcement, to bankruptcy, insolvency, reorganization, moratorium
and other laws relating to or affecting creditors' rights and to general equity
principles;
(l) The information to be furnished by the Acquired Fund to the Acquiring Fund
for use in applications for orders, registration statements, proxy materials and
other documents which may be necessary in connection with the transactions
contemplated hereby and any information necessary to compute the total return of
the Acquired Fund shall be accurate and complete and shall comply in all
material respects with federal securities and other laws and regulations
applicable thereto;
(m) The information included in the proxy statement (the "Proxy Statement")
forming part of the Acquiring Fund's Registration Statement on Form N-14 filed
in connection with this Agreement (the "Registration Statement") that has been
furnished in writing by the Acquired Fund to the Acquiring Fund for inclusion in
the Registration Statement, on the effective date of that Registration Statement
and on the Closing Date, will conform in all material respects to the applicable
requirements of the Securities Act, the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the Investment Company Act and the rules and
regulations of the Commission thereunder and 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;
(n) Upon the effectiveness of the Registration Statement, no consent, approval,
authorization or order of any court or governmental authority is required for
the consummation by the Safeco Trust or the Acquired Fund of the transactions
contemplated by this Agreement;
(o) All of the issued and outstanding Acquired Fund Shares have been offered for
sale and sold in conformity with all applicable federal and state securities
laws, except as may have been previously disclosed in writing to the Acquiring
Fund;
(p) The prospectus and statement of additional information of the Acquired Fund
and any amendments or supplements thereto, furnished to the Acquiring Fund, did
not as of their dates or the dates of their distribution to the public 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 in which such statements were made, not misleading;
(q) The Acquired Fund currently complies in all material respects with, and
since its organization has complied in all material respects with, the
7
requirements of, and the rules and regulations under, the Investment Company
Act, the Securities Act, the Exchange Act, state "Blue Sky" laws and all other
applicable federal and state laws or regulations. The Acquired Fund currently
complies in all material respects with, and since its organization has complied
in all material respects with, all investment objectives, policies, guidelines
and restrictions and any compliance procedures established by the Safeco Trust
with respect to the Acquired Fund. All advertising and sales material used by
the Acquired Fund complies in all material respects with and has complied in all
material respects with the applicable requirements of the Securities Act, the
Investment Company Act, the rules and regulations of the Commission, and, to the
extent applicable, the Conduct Rules of the National Association of Securities
Dealers, Inc. (the "NASD") and any applicable state regulatory authority. All
registration statements, prospectuses, reports, proxy materials or other filings
required to be made or filed with the Commission, the NASD or any state
securities authorities by the Acquired Fund have been duly filed and have been
approved or declared effective, if such approval or declaration of effectiveness
is required by law. Such registration statements, prospectuses, reports, proxy
materials and other filings under the Securities Act, the Exchange Act and the
Investment Company Act (i) are or were in compliance in all material respects
with the requirements of all applicable statutes and the rules and regulations
thereunder and (ii) do not or 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, in light of the circumstances in which they were
made, not false or misleading;
(r) Neither the Acquired Fund nor, to the knowledge of the Acquired Fund, any
"affiliated person" of the Acquired Fund has been convicted of any felony or
misdemeanor, described in Section 9(a)(1) of the Investment Company Act, nor, to
the knowledge of the Acquired Fund, has any affiliated person of the Acquired
Fund been the subject, or presently is the subject, of any proceeding or
investigation with respect to any disqualification that would be a basis for
denial, suspension or revocation of registration as an investment adviser under
Section 203(e) of the Investment Advisers Act of 1940, as amended (the
"Investment Advisers Act"), or Rule 206(4)-4(b) thereunder or of a broker-dealer
under Section 15 of the Exchange Act, or for disqualification as an investment
adviser, employee, officer or director of an investment company under Section 9
of the Investment Company Act; and
(s) The tax representation certificate to be delivered by Safeco Trust on behalf
of the Acquired Fund to the Acquiring Trust and Xxxxxx Xxxxxx Xxxxxxxxx Xxxx and
Xxxx LLP at the Closing pursuant to Paragraph 7.4 (the "Acquired Fund Tax
Representation Certificate") will not on the Closing Date contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein not misleading.
4.2 The Acquiring Trust, on behalf of the Acquiring Fund, represents, warrants
and covenants to the Acquired Fund, which representations, warranties and
covenants will be true and correct on the date hereof and on the Closing Date as
though made on and as of the Closing Date, as follows:
(a) The Acquiring Trust is a statutory trust duly organized, validly existing
and in good standing under the laws of the State of Delaware. The Acquiring
Trust has the power to own all of its properties and assets and to perform the
obligations under this Agreement. The Acquiring Fund is not required to qualify
to do business in any jurisdiction in which it is not so qualified or where
failure to qualify would subject it to any material liability or disability.
Each of the Acquiring Trust and the Acquiring Fund has all necessary federal,
state and local authorizations to own all of its properties and assets and to
carry on its business as now being conducted;
(b) The Acquiring Trust is a registered investment company classified as a
management company of the open-end type, and its registration with the
Commission as an investment company under the Investment Company Act is in full
force and effect;
(c) The Acquiring Fund's registration statement on Form N-1A that will be in
effect on the Closing Date, and the prospectus and statement of additional
information of the Acquiring Fund included therein, will conform in all material
respects with the applicable requirements of the Securities Act and the
Investment Company Act and the rules and regulations of the Commission
thereunder, and did not as of the effective date thereof and will not as of the
Closing Date contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading;
8
(d) The Registration Statement, the Proxy Statement and statement of additional
information with respect to the Acquiring Fund, and any amendments or
supplements thereto in effect on or prior to the Closing Date included in the
Registration Statement (other than written information furnished by the Acquired
Fund for inclusion therein, as covered by the Acquired Fund's warranty in
Paragraph 4.1(m) hereof) will conform in all material respects to the applicable
requirements of the Securities Act and the Investment Company Act and the rules
and regulations of the Commission thereunder. Neither the Registration Statement
nor the Proxy Statement (other than written information furnished by the
Acquired Fund for inclusion therein, as covered by the Acquired Fund's warranty
in Paragraph 4.1(m) hereof) includes or will include any untrue statement of a
material fact or omits 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;
(e) The Acquiring Trust is not in violation of, and the execution and delivery
of this Agreement and performance of its obligations under this Agreement will
not result in a violation of, any provisions of the Declaration of Trust or
by-laws of the Acquiring Trust or any material agreement, indenture, instrument,
contract, lease or other undertaking with respect to the Acquiring Fund to which
the Acquiring Trust is a party or by which the Acquiring Fund or any of its
assets is bound;
(f) No litigation or administrative proceeding or investigation of or before any
court or governmental body is currently pending or threatened against the
Acquiring Fund or any of the Acquiring Fund's properties or assets. The
Acquiring Fund knows of no facts which might form the basis for the institution
of such proceedings. Neither the Acquiring Trust nor the Acquiring Fund is a
party to or subject to the provisions of any order, decree or judgment of any
court or governmental body which materially adversely affects the Acquiring
Fund's business or its ability to consummate the transactions contemplated
herein;
(g) The statement of assets and liabilities of the Acquiring Fund, and the
related statements of income and changes in NAV, as of and for the fiscal year
ended October 31, 2004 have been audited by Ernst & Young LLP, independent
registered public accounting firm, and are in accordance with GAAP consistently
applied and fairly reflect, in all material respects, the financial condition of
the Acquiring Fund as of such date and the results of its operations for the
period then ended, and all known liabilities, whether actual or contingent, of
the Acquiring Fund as of the date thereof are disclosed therein;
(h) Since the most recent fiscal year end, except as specifically disclosed in
the Acquiring Fund's prospectus, its statement of additional information as in
effect on the date of this Agreement, there has not been any material adverse
change in the Acquiring Fund's financial condition, assets, liabilities,
business or prospects, or any incurrence by the Acquiring Fund of indebtedness,
except for normal contractual obligations incurred in the ordinary course of
business or in connection with the settlement of purchases and sales of
portfolio securities. For the purposes of this subparagraph (h) (but not for any
other purpose of this Agreement), a decline in NAV per Acquiring Fund Share
arising out of its normal investment operations or a decline in market values of
securities in the Acquiring Fund's portfolio or a decline in net assets of the
Acquiring Fund as a result of redemptions shall not constitute a material
adverse change;
(i) (A) For each taxable year of its operation since its inception, the
Acquiring Fund has met, and for the current taxable year it will meet, the
requirements of Subchapter M of the Code for qualification and treatment as a
regulated investment company and will qualify as such as of the Closing Date and
will satisfy the diversification requirements of Section 851(b)(3) of the Code
without regard to the last sentence of Section 851(d) of the Code. The Acquiring
Fund has not taken any action, caused any action to be taken or caused any
action to fail to be taken which action or failure could cause the Acquiring
Fund to fail to qualify as a regulated investment company under the Code;
(B) Within the times and in the manner prescribed by law, the Acquiring Fund has
properly filed on a timely basis all Tax Returns that it was required to file,
and all such Tax Returns were complete and accurate in all respects. The
Acquiring Fund has not been informed by any jurisdiction that the jurisdiction
believes that the Acquiring Fund was required to file any Tax Return that was
not filed; and the Acquiring Fund does not know of any basis upon which a
jurisdiction could assert such a position;
9
(C) The Acquiring Fund has timely paid, in the manner prescribed by law, all
Taxes that were due and payable or that were claimed to be due;
(D) All Tax Returns filed by the Acquiring Fund constitute complete and accurate
reports of the respective liabilities for Taxes and all attributes of the
Acquiring Fund or, in the case of information returns and payee statements, the
amounts required to be reported, and accurately set forth all items required to
be included or reflected in such returns;
(E) The Acquiring Fund has not waived or extended any applicable statute of
limitations relating to the assessment or collection of Taxes;
(F) The Acquiring Fund has not been notified that any examinations of the Tax
Returns of the Acquiring Fund are currently in progress or threatened, and no
deficiencies have been asserted or assessed against the Acquiring Fund as a
result of any audit by the Internal Revenue Service or any state, local or
foreign taxing authority, and, to its knowledge, no such deficiency has been
proposed or threatened;
(G) The Acquiring Fund has no actual or potential liability for any Tax
obligation of any taxpayer other than itself. The Acquiring Fund is not and has
never been a member of a group of corporations with which it has filed (or been
required to file) consolidated, combined or unitary Tax Returns. The Acquiring
Fund is not a party to any Tax allocation, sharing, or indemnification
agreement;
(H) The Acquiring Trust has delivered to Safeco Trust or made available to
Safeco Trust complete and accurate copies of all Tax Returns of the Acquiring
Fund, together with all related examination reports and statements of deficiency
for all periods not closed under the applicable statutes of limitations and
complete and correct copies of all private letter rulings, revenue agent
reports, information document requests, notices of proposed deficiencies,
deficiency notices, protests, petitions, closing agreements, settlement
agreements, pending ruling requests and any similar documents submitted by,
received by or agreed to by or on behalf of the Acquiring Fund. The Acquiring
Fund has disclosed on its federal income Tax Returns all positions taken therein
that could give rise to a substantial understatement of federal income Tax
within the meaning of Section 6662 of the Code;
(I) The Acquiring Fund has not undergone, has not agreed to undergo, and is not
required to undergo (nor will it be required as a result of the transactions
contemplated in this Agreement to undergo) a change in its method of accounting
resulting in an adjustment to its taxable income pursuant to Section 481 of the
Code. The Acquiring Fund will not be required to include any item of income in,
or exclude any item of deduction from, taxable income for any taxable period (or
portion thereof) ending after the Closing Date as a result of any (i) change in
method of accounting for a taxable period ending on or prior to the Closing Date
under Section 481(c) of the Code (or any corresponding or similar provision of
state, local or foreign income Tax law); (ii) "closing agreement" as described
in Section 7121 of the Code (or any corresponding or similar provision of state,
local or foreign income Tax law) executed on or prior to the Closing Date; (iii)
installment sale or open transaction disposition made on or prior to the Closing
Date; or (iv) prepaid amount received on or prior to the Closing Date;
(J) The Acquiring Fund has not taken or agreed to take any action, and is not
aware of any agreement, plan or other circumstance, that is inconsistent with
the representations set forth in Annex A;
(K) The Acquiring Fund has not incurred (or been allocated) an "overall foreign
loss" as defined in Section 904(f)(2) of the Code which has not been previously
recaptured in full as provided in Sections 904(f)(2) and/or 904(f)(3) of the
Code;
(L) The Acquiring Fund is not a party to a gain recognition agreement under
Section 367 of the Code;
(M) The Acquiring Fund's Tax attributes are not limited under the Code
(including but not limited to any capital loss carry forward limitations under
Sections 382 or 383 of the Code and the Treasury Regulations thereunder) or
comparable provisions of state law, except as set forth on Schedule 4.2;
10
(j) The Acquiring Fund currently complies, and at all times since its
organization has complied, in all material respects with the requirements of,
and the rules and regulations under, the Investment Company Act, the Securities
Act, the Exchange Act, state "Blue Sky" laws and all other applicable federal
and state laws or regulations. The Acquiring Fund currently complies in all
material respects with, and since its organization has complied in all material
respects with, all investment objectives, policies, guidelines and restrictions
and any compliance procedures established by the Acquiring Trust with respect to
the Acquiring Fund. All advertising and sales material used by the Acquiring
Fund complies in all material respects with and has complied in all material
respects with the applicable requirements of the Securities Act, the Investment
Company Act, the rules and regulations of the Commission, and, to the extent
applicable, the Conduct Rules of the NASD and any applicable state regulatory
authority. All registration statements, prospectuses, reports, proxy materials
or other filings required to be made or filed with the Commission, the NASD or
any state securities authorities by the Acquiring Fund have been duly filed and
have been approved or declared effective, if such approval or declaration of
effectiveness is required by law. Such registration statements, prospectuses,
reports, proxy materials and other filings under the Securities Act, the
Exchange Act and the Investment Company Act (i) are or were in compliance in all
material respects with the requirements of all applicable statutes and the rules
and regulations thereunder and (ii) do not or 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, in light of the
circumstances in which they were made, not false or misleading;
(k) The authorized capital of the Acquiring Fund consists of an unlimited number
of shares of beneficial interest, no par value per share. As of the Closing
Date, the Acquiring Fund will be authorized to issue an unlimited number of
shares of beneficial interest, no par value per share. The Acquiring Fund Shares
to be issued and delivered to the Acquired Fund for the account of the Acquired
Fund Shareholders pursuant to the terms of this Agreement will have been duly
authorized on the Closing Date and, when so issued and delivered, will be duly
and validly issued, fully paid and non-assessable. The Acquiring Fund does not
have outstanding any options, warrants or other rights to subscribe for or
purchase any Acquiring Fund shares, nor is there outstanding any security
convertible into any Acquiring Fund shares;
(l) The Acquiring Trust has the trust power and authority to enter into and
perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement have been duly authorized by all necessary action
on the part of the Acquiring Trust's Board of Trustees, and, assuming due
authorization, execution and delivery by the Acquired Fund, this Agreement will
constitute a valid and binding obligation of the Acquiring Fund, enforceable in
accordance with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights and to general equity principles;
(m) The information to be furnished in writing by the Acquiring Fund or the
Acquiring Fund Adviser for use in applications for orders, registration
statements, proxy materials and other documents which may be necessary in
connection with the transactions contemplated hereby shall be accurate and
complete in all material respects and shall comply in all material respects with
federal securities and other laws and regulations applicable thereto or the
requirements of any form for which its use is intended, and shall not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the information provided not misleading;
(n) No consent, approval, authorization or order of or filing with any court or
governmental authority is required for the execution of this Agreement or the
consummation of the transactions contemplated by the Agreement by the Acquiring
Fund, except for the registration of the Acquiring Fund Shares under the
Securities Act and the Investment Company Act;
(o) All of the issued and outstanding Acquiring Fund Shares have been offered
for sale and sold in conformity with all applicable federal and state securities
laws, except as may have been previously disclosed in writing to the Acquired
Fund;
(p) The prospectus and statement of additional information of the Acquiring Fund
and any amendments or supplements thereto, furnished to the Acquired Fund, did
not as of their dates or the dates of their distribution to the public contain
11
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 in which such statements were made, not misleading;
(q) Neither the Acquiring Fund nor, to the knowledge of the Acquiring Fund, any
"affiliated person" of the Acquiring Fund has been convicted of any felony or
misdemeanor, described in Section 9(a)(1) of the Investment Company Act, nor, to
the knowledge of the Acquiring Fund, has any affiliated person of the Acquiring
Fund been the subject, or presently is the subject, of any proceeding or
investigation with respect to any disqualification that would be a basis for
denial, suspension or revocation of registration as an investment adviser under
Section 203(e) of the Investment Advisers Act or Rule 206(4)-4(b) thereunder or
of a broker-dealer under Section 15 of the Exchange Act, or for disqualification
as an investment adviser, employee, officer or director of an investment company
under Section 9 of the Investment Company Act; and
(r) The tax representation certificate to be delivered by the Acquiring Trust on
behalf of the Acquiring Fund to the Safeco Trust and Xxxxxx Xxxxxx Xxxxxxxxx
Xxxx and Xxxx LLP at Closing pursuant to Section 6.3 (the "Acquiring Fund Tax
Representation Certificate") will not on the Closing Date contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein not misleading.
5. COVENANTS OF THE FUNDS
5.1 The Acquired Fund will operate the Acquired Fund's business in the ordinary
course of business between the date hereof and the Closing Date. It is
understood that such ordinary course of business will include the declaration
and payment of customary dividends and other distributions and any other
dividends and other distributions necessary or advisable (except to the extent
dividends or other distributions that are not customary may be limited by
representations made in connection with the issuance of the tax opinion
described in Paragraph 8.5 hereof), in each case payable either in cash or in
additional shares.
5.2 The Safeco Trust will call a special meeting of the Acquired Fund's
shareholders to consider approval of this Agreement and act upon the matters set
forth in the Proxy Statement.
5.3 The Acquiring Fund will prepare the notice of meeting, form of proxy and
Proxy Statement (collectively, "Proxy Materials") to be used in connection with
such meeting, and will promptly prepare and file with the Commission the
Registration Statement. The Safeco Trust will provide the Acquiring Fund with
information reasonably requested for the preparation of the Registration
Statement in compliance with the Securities Act, the Exchange Act, and the
Investment Company Act.
5.4 The Acquired Fund covenants that the Acquiring Fund Shares to be issued
hereunder are not being acquired by the Acquired Fund for the purpose of making
any distribution thereof other than in accordance with the terms of this
Agreement.
5.5 The Acquired Fund will assist the Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requires concerning the beneficial
ownership of the Acquired Fund Shares.
5.6 Subject to the provisions of this Agreement, each Fund will take, or cause
to be taken, all actions, and do or cause to be done, all things reasonably
necessary, proper or advisable to consummate the transactions contemplated by
this Agreement.
5.7 The Acquired Fund shall furnish to the Acquiring Fund on the Closing Date a
Statement of Assets and Liabilities of the Acquired Fund as of the Closing Date
setting forth the NAV (as computed pursuant to Paragraph 2.1) of the Acquired
Fund as of the Valuation Time, which statement shall be prepared in accordance
with GAAP consistently applied and certified by the Safeco Trust's Treasurer or
Assistant Treasurer. As promptly as practicable, but in any case within 30 days
after the Closing Date, the Safeco Trust shall furnish to the Acquiring Trust,
in such form as is reasonably satisfactory to the Acquiring Trust, a statement
of the earnings and profits of the Acquired Fund for federal income tax
purposes, and of any capital loss carryovers and other items that will be
carried over to the Acquiring Fund under the Code, and which statement will be
certified by the Treasurer of the Safeco Trust.
12
5.8 Neither Fund shall take any action that is inconsistent with the
representations set forth in, with respect to the Acquired Fund, the Acquired
Fund Tax Representation Certificate and, with respect to the Acquiring Fund, the
Acquiring Fund Tax Representation Certificate.
5.9 From and after the date of this Agreement and until the Closing Date, each
of the Funds and the Safeco Trust and the Acquiring Trust shall use its
commercially reasonable efforts to cause the Reorganization to qualify, and will
not knowingly take any action, cause any action to be taken, fail to take any
action or cause any action to fail to be taken, which action or failure to act
could prevent the Reorganization from qualifying, as a reorganization under the
provisions of Section 368(a) of the Code. The parties hereby adopt this
Agreement as a "plan of reorganization" within the meaning of Sections
1.368-2(g) and 1.368-3(a) of the income tax regulations promulgated under the
Code. Unless otherwise required pursuant to a "determination" within the meaning
of Section 1313(a) of the Code, the parties hereto shall treat and report the
transactions contemplated hereby as a reorganization within the meaning of
Section 368(a)(1)(C) of the Code and shall not take any position inconsistent
with such treatment.
5.10 From and after the date of this Agreement and through the time of the
Closing, each Fund shall use its commercially reasonable efforts to cause it to
qualify, and will not knowingly take any action, cause any action to be taken,
fail to take any action or cause any action to fail to be taken, which action or
failure to act could prevent it from qualifying as a regulated investment
company under the provisions of Subchapter M of the Code.
5.11 Each Fund shall prepare, or cause to be prepared, all of its Tax Returns
for taxable periods that end on or before the Closing Date and shall timely
file, or cause to be timely filed, all such Tax Returns. Each Fund shall make
any payments of Taxes required to be made by it with respect to any such Tax
Returns.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to complete the transactions
provided for herein shall be, at its election, subject to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date, and, in addition thereto, the following further
conditions, unless waived by the Acquired Fund in writing:
6.1 All representations and warranties by the Acquiring Trust on behalf of the
Acquiring Fund contained in this Agreement shall be true and correct as of the
date hereof and, except as they may be affected by the transactions contemplated
by this Agreement, as of the Closing Date with the same force and effect as if
made on and as of the Closing Date;
6.2 The Acquiring Trust shall have delivered to the Safeco Trust on the Closing
Date a certificate of the Acquiring Trust on behalf of the Acquiring Fund
executed in its name by its President or Vice President and its Treasurer or
Assistant Treasurer, in form and substance satisfactory to the Safeco Trust and
dated as of the Closing Date, to the effect that the representations and
warranties of the Acquiring Trust made in this Agreement are true and correct at
and as of the Closing Date, except as they may be affected by the transactions
contemplated by this Agreement, that each of the conditions to Closing in this
Article 6 have been met, and as to such other matters as the Safeco Trust shall
reasonably request;
6.3 The Acquiring Trust on behalf of the Acquiring Fund shall have delivered to
the Safeco Trust and Xxxxxx Xxxxxx Xxxxxxxxx Xxxx and Xxxx LLP an Acquiring Fund
Tax Representation Certificate, satisfactory to the Safeco Trust and Xxxxxx
Xxxxxx Xxxxxxxxx Xxxx and Xxxx LLP, substantially in the form attached to this
Agreement as Annex A, concerning certain tax-related matters with respect to the
Acquiring Fund;
6.4 With respect to the Acquiring Fund, the Board of Trustees of the Acquiring
Trust shall have determined that the Reorganization is in the best interests of
the Acquiring Fund and, based upon such determination, shall have approved this
Agreement and the transactions contemplated hereby; and
13
6.5 The Safeco Trust shall have received at the Closing a favorable opinion as
to the due authorization of this Agreement by the Acquiring Trust and related
matters of Xxxxxx Xxxxxx Xxxxxxxxx Xxxx and Xxxx LLP, dated as of the Closing
Date, in a form reasonably satisfactory to the Safeco Trust.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be, at its election, subject to the performance by the
Acquired Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following further
conditions, unless waived by the Acquiring Fund in writing:
7.1 All representations and warranties of the Safeco Trust on behalf of the
Acquired Fund contained in this Agreement shall be true and correct as of the
date hereof and, except as they may be affected by the transactions contemplated
by this Agreement, as of the Closing Date with the same force and effect as if
made on and as of the Closing Date;
7.2 The Safeco Trust shall have delivered to the Acquiring Fund the Statement of
Assets and Liabilities of the Acquired Fund pursuant to Paragraph 5.7, together
with a list of its portfolio securities showing the federal income tax bases and
holding periods of such securities, as of the Closing Date, certified by the
Safeco Trust's Treasurer or Assistant Treasurer;
7.3 The Safeco Trust shall have delivered to the Acquiring Trust on the Closing
Date a certificate of the Safeco Trust on behalf of the Acquired Fund executed
in its name by its President or Vice President and a Treasurer or Assistant
Treasurer, in form and substance reasonably satisfactory to the Acquiring Trust
and dated as of the Closing Date, to the effect that the representations and
warranties of the Safeco Trust contained in this Agreement are true and correct
at and as of the Closing Date, except as they may be affected by the
transactions contemplated by this Agreement, that each of the conditions to
Closing in this Article 7 have been met, and as to such other matters as the
Acquiring Trust shall reasonably request;
7.4 The Safeco Trust on behalf of the Acquired Fund shall have delivered to the
Acquiring Trust and Xxxxxx Xxxxxx Xxxxxxxxx Xxxx and Xxxx LLP an Acquired Fund
Tax Representation Certificate, satisfactory to the Acquiring Trust and Xxxxxx
Xxxxxx Xxxxxxxxx Xxxx and Xxxx LLP, substantially in the form attached to this
Agreement as Annex B, concerning certain tax-related matters with respect to the
Acquired Fund;
7.5 The Acquiring Trust shall have received at the Closing a favorable opinion
as to the due authorization of this Agreement by the Safeco Trust and related
matters of Xxxxxxxxxxx & Xxxxxxxx LLP, dated as of the Closing Date, in a form
reasonably satisfactory to Acquiring Trust; and
7.6 With respect to the Acquired Fund, the Board of Trustees of the Safeco Trust
shall have determined that the Reorganization is in the best interests of the
Acquired Fund and, based upon such determination, shall have approved this
Agreement and the transactions contemplated hereby.
8. FURTHER CONDITIONS PRECEDENT
If any of the conditions set forth below does not exist on or before
the Closing Date with respect to either party hereto, the other party to this
Agreement shall, at its option, not be required to consummate the transactions
contemplated by this Agreement:
8.1 This Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the Acquired Fund's shareholders in accordance
with the provisions of the Safeco Trust's Trust Instrument and By-Laws, and
certified copies of the resolutions evidencing such approval by the Acquired
Fund's shareholders shall have been delivered by the Acquired Fund to the
Acquiring Fund. Notwithstanding anything herein to the contrary, neither party
hereto may waive the conditions set forth in this Paragraph 8.1;
14
8.2 On the Closing Date, 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 obtain damages or other relief in connection with, this Agreement
or the transactions contemplated herein;
8.3 All consents of other parties and all other consents, orders and permits of
federal, state and local regulatory authorities (including those of the
Commission and of state Blue Sky and securities authorities) deemed necessary by
either party hereto to permit consummation, in all material respects, of the
transactions contemplated hereby shall have been obtained, except where failure
to obtain any such consent, order or permit would not involve a risk of a
material adverse effect on the assets or properties of either party hereto,
provided that either party may waive any such conditions for itself;
8.4 The Acquiring Trust's Registration Statement on Form N-14 shall have become
effective under the Securities Act and no stop orders suspending the
effectiveness of such Registration Statement shall have been issued and, to the
best knowledge of the parties hereto, no investigation or proceeding for that
purpose shall have been instituted or be pending, threatened or contemplated
under the Securities Act;
8.5 The parties shall have received an opinion of Xxxxxx Xxxxxx Xxxxxxxxx Xxxx
and Xxxx LLP, satisfactory to the Safeco Trust and the Acquiring Trust and
subject to customary assumptions and qualifications, substantially to the effect
that for federal income tax purposes the acquisition by the Acquiring Fund of
the Acquired Assets solely in exchange for the issuance of Acquiring Fund Shares
to the Acquired Fund and the assumption of the Assumed Liabilities by the
Acquiring Fund, followed by the distribution by the Acquired Fund, in
liquidation of the Acquired Fund, of Acquiring Fund Shares to the Acquired Fund
Shareholders in exchange for their Acquired Fund Shares and the termination of
the Acquired Fund, will constitute a "reorganization" within the meaning of
Section 368(a) of the Code;
8.6 The Acquired Fund shall have distributed to its shareholders, in a
distribution or distributions qualifying for the deduction for dividends paid
under Section 561 of the Code, all of its investment company taxable income (as
defined in Section 852(b)(2) of the Code determined without regard to Section
852(b)(2)(D) of the Code) for its taxable year ending on the Closing Date, all
of the excess of (i) its interest income excludable from gross income under
Section 103(a) of the Code over (ii) its deductions disallowed under Sections
265 and 171(a)(2) of the Code for its taxable year ending on the Closing Date,
and all of its net capital gain (as such term is used in Sections 852(b)(3)(A)
and (C) of the Code), after reduction by any available capital loss
carryforward, for its taxable year ending on the Closing Date; and
8.7 The Acquiring Fund shall have made a distribution of capital gains to its
shareholders in November 2004 in accordance with its normal practices and,
unless the Acquiring Fund distributes income monthly, the dividend distribution
that the Acquiring Fund normally would make in December of 2004 shall have been
made to shareholders of record prior to the Closing.
9. BROKERAGE FEES AND EXPENSES
9.1 Each party hereto represents and warrants to the other party hereto that
there are no brokers or finders entitled to receive any payments in connection
with the transactions provided for herein.
9.2 The parties have been informed by Symetra Financial Corporation and the
Acquiring Fund Adviser -- and the parties have entered into this Agreement in
reliance on such information -- that such non-parties will pay (with each of
Symetra Financial Corporation and the Acquiring Fund Adviser being responsible
for 50% of such amounts) all expenses of the Funds associated with the
Reorganization including, but not limited to, the expenses associated with the
preparation, printing and mailing of any and all shareholder notices,
communications, proxy statements, and necessary filings with the SEC or any
other governmental authority in connection with the transactions contemplated by
this Agreement, the fees and expenses of any proxy solicitation firm retained in
connection with the Reorganization, the fees and expenses of counsel to the
independent trustees of the Safeco Trust in connection with the Reorganization,
and the trustees' fees and expenses as a result of the Reorganization. Except
for the foregoing, the Acquiring Fund and the Acquired Fund shall each bear its
own expenses in connection with the transactions contemplated by this Agreement.
15
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Acquiring Trust and the Safeco Trust each agrees that neither party has
made any representation, warranty or covenant not set forth herein or referred
to in Paragraphs 4.1 or 4.2 hereof and that this Agreement constitutes the
entire agreement between the parties.
10.2 The representations and warranties contained in this Agreement or in any
document delivered pursuant hereto or in connection herewith shall not survive
the consummation of the transactions contemplated hereunder.
11. TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of the Acquiring
Trust and Safeco Trust. In addition, either party may at its option terminate
this Agreement at or prior to the Closing Date:
(a) because of a material breach by the other of any representation, warranty,
covenant or agreement contained herein to be performed at or prior to the
Closing Date;
(b) because of a condition herein expressed to be precedent to the obligations
of the terminating party which has not been met and which reasonably appears
will not or cannot be met;
(c) by resolution of the Acquiring Trust's Board of Trustees if circumstances
should develop that, in the good faith opinion of such Board, make proceeding
with the Agreement not in the best interests of the Acquiring Fund's
shareholders;
(d) by resolution of the Safeco Trust's Board of Trustees if circumstances
should develop that, in the good faith opinion of such Board, make proceeding
with the Agreement not in the best interests of the Acquired Fund's
shareholders; or
(e) if the transactions contemplated by this Agreement shall not have occurred
on or prior to December 31, 2004 or such other date as the parties may mutually
agree upon in writing.
11.2 In the event of any such termination, there shall be no liability for
damages on the part of the Acquiring Fund, the Acquiring Trust, the Safeco Trust
or the Acquired Fund, or the trustees or officers of the Safeco Trust, or the
Acquiring Trust, but, subject to Paragraph 9.2, each party shall bear the
expenses incurred by it incidental to the preparation and carrying out of this
Agreement.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner
as may be mutually agreed upon in writing by the authorized officers of the
Safeco Trust and the Acquiring Trust; provided, however, that following the
meeting of the Acquired Fund's shareholders called by the Safeco Trust pursuant
to Paragraph 5.2 of this Agreement, no such amendment may have the effect of
changing the provisions regarding the method for determining the number of
Acquiring Fund Shares to be received by the Acquired Fund Shareholders under
this Agreement to their detriment without their further approval; provided that
nothing contained in this Section 12 shall be construed to prohibit the parties
from amending this Agreement to change the Closing Date.
13. NOTICES
Any notice, report, statement or demand required or permitted by
any provisions of this Agreement shall be in writing and shall be given by
prepaid telegraph, telecopy or certified mail addressed to the Acquired Fund,
c/o Symetra Financial Corporation, 0000 000xx Xxxxx, X.X., Xxxxxxx,
Xxxxxxxxxx 00000, Attention: Xxxxx X. Xxxxxx, with copies to R. Xxxxxxx Xxxxxx,
Xxxxxxxxxxx & Xxxxxxxx LLP, 0000 Xxxxxxxxxxxxx Xxxxxx, X.X., Xxxxxx Xxxxx,
Xxxxxxxxxx, XX 00000-0000, and to the Acquiring Fund, c/o Pioneer Investment
Management, Inc., 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, Attention:
00
Xxxxxxx X. Xxxxxxxx, Xxx., with copies to Xxxxxx Xxxxxx Xxxxxxxxx Xxxx
and Xxxx LLP, 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, Attention: Xxxxx X.
Xxxxxx.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT
14.1 The article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance with the
internal laws of the State of Delaware, without giving effect to conflict of
laws principles (other than Delaware Code Title 6 ss. 2708); provided that, in
the case of any conflict between those laws and the federal securities laws, the
latter shall govern.
14.4 This Agreement shall bind and inure to the benefit of the parties hereto
and their respective successors and assigns, but no assignment or transfer
hereof or of any rights or obligations hereunder shall be made by either party
without the prior written consent of the other party hereto. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm or corporation, or other entity, other than the parties hereto
and their respective successors and assigns, any rights or remedies under or by
reason of this Agreement.
14.5 It is expressly agreed that the obligations of the Acquiring Trust and the
Safeco Trust shall not be binding upon any of their respective trustees,
shareholders, nominees, officers, agents or employees personally, but bind only
to the property of the Acquiring Fund or the Acquired Fund, as the case may be,
as provided in the trust instruments of the Acquiring Trust and the Instrument
of Trust of the Safeco Trust, respectively. The execution and delivery of this
Agreement have been authorized by the trustees of the Acquiring Trust and of the
Safeco Trust and this Agreement has been executed by authorized officers of the
Acquiring Trust and the Safeco Trust, acting as such, and neither such
authorization by such trustees nor such execution and delivery by such officers
shall be deemed to have been made by any of them individually or to imposed any
liability on any of them personally, but shall bind only the property of the
Acquiring Fund and the Acquired Fund, as the case may be, as provided in the
trust instruments of the Acquiring Trust and the Instrument of Trust of the
Safeco Trust, respectively.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed as of the date first set forth above by its President
or Vice President and attested by its Secretary or Assistant Secretary.
Attest: SAFECO TAXABLE BOND TRUST
on behalf of SAFECO HIGH-YIELD BOND FUND
By: /s/Xxxxxxx X. Xxxxxxxx By: /s/ Xxxxx X. Xxxxxx
---------------------- -------------------
Name: Xxxxxxx X. Xxxxxxxx Name: Xxxxx X. Xxxxxx
Title: Secretary Title: President
Attest:
PIONEER HIGH YIELD FUND
on behalf of PIONEER HIGH YIELD FUND
By: /s/ Xxxxxxxxxxx X. Xxxxxx By: /s/ Xxxxxx X. Xxxx
------------------------- ------------------
Name: Xxxxxxxxxxx X. Xxxxxx Name: Xxxxxx X. Xxxx
Title: Assistant Secretary Title: Executive Vice President
17
Annex A
TAX REPRESENTATION CERTIFICATE OF
PIONEER HIGH YIELD FUND
ON BEHALF OF PIONEER HIGH YIELD FUND
This certificate is being delivered in connection with the transactions
to be effected pursuant to the Agreement and Plan of Reorganization made as of
October 29, 2004 between Pioneer High Yield Fund, a Delaware statutory trust
("Acquiring Trust"), on behalf of its sole series Pioneer High Yield Fund
("Acquiring Fund"), and Safeco Taxable Bond Trust, a Delaware statutory trust,
on behalf of its series Safeco High-Yield Bond Fund ("Acquired Fund") (the
"Agreement"). Pursuant to the Agreement, Acquiring Fund will acquire all of the
assets of Acquired Fund in exchange solely for (i) the assumption by Acquiring
Fund of the Assumed Liabilities of Acquired Fund and (ii) the issuance of
Investor Class shares of beneficial interest of Acquiring Fund (the "Acquiring
Fund Shares") to Acquired Fund, followed by the distribution by Acquired Fund,
in liquidation of Acquired Fund, of the Acquiring Fund Shares to the
shareholders of Acquired Fund and the termination of Acquired Fund (the
foregoing together constituting the "transaction").
The undersigned officer of Acquiring Trust, after consulting with its
counsel, auditors and tax advisers regarding the meaning of and factual support
for the following representations on behalf of Acquiring Fund, hereby certifies
and represents that the following statements are true, complete and correct and
will be true, complete and correct on the date of the transaction and thereafter
as relevant. Unless otherwise indicated, all capitalized terms used but not
defined herein shall have the meanings ascribed to them in the Agreement.
1. Acquiring Fund is a series of Acquiring Trust, a statutory trust organized
under the laws of the State of Delaware, and Acquiring Fund is, and has been at
all times, treated as a corporation for federal tax purposes.
2. Neither Acquiring Fund nor any person "related" to Acquiring Fund (as defined
in Treasury Regulation Section 1.368-1(e)(3)), nor any partnership of which
Acquiring Fund or any such related person is a partner, has any plan or
intention to redeem or otherwise acquire any of the Acquiring Fund Shares
received by shareholders of Acquired Fund in the transaction except in the
ordinary course of Acquiring Fund's business in connection with its legal
obligation under Section 22(e) of the Investment Company Act of 1940, as amended
(the "1940 Act"), as a series of a registered open-end investment company to
redeem its own shares.
3. After the transaction, Acquiring Fund will continue the historic business (as
defined in Treasury Regulation Section 1.368-1(d)(2)) of Acquired Fund or will
use a significant portion of the historic business assets (as defined in
Treasury Regulation Section 1.368-1(d)(3)) acquired from Acquired Fund in a
business.
4. Acquiring Fund has no plan or intention to sell or otherwise dispose of any
assets of Acquired Fund acquired in the transaction, except for dispositions
made in the ordinary course of its business or to maintain its qualification as
a regulated investment company under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code").
5. Any expenses of Acquired Fund incurred in connection with the transaction
which are paid or assumed by Acquiring Fund will be expenses of Acquired Fund
solely and directly related to the transaction in accordance with Rev. Rul.
73-54, 1973-1 C.B. 187. Acquiring Fund will not pay or assume the expenses, if
any, incurred by any Acquired Fund Shareholders in connection with the
transaction.
6. There is no, and never has been any, indebtedness between Acquiring Fund and
Acquired Fund.
7. Acquiring Fund has properly elected to be a regulated investment company
under Subchapter M of the Code, has qualified for the special tax treatment
afforded regulated investment companies under the Code for each taxable year
since inception and qualifies for such treatment as of the time of the Closing.
A-1
8. Acquiring Fund meets the requirements of an "investment company" in Section
368(a)(2)(F) of the Code.
9. Acquiring Fund is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
10. Acquiring Fund does not now own and has never owned, directly or indirectly,
any shares of Acquired Fund.
11. As of the date of the transaction, the fair market value of the Acquiring
Fund Shares issued to Acquired Fund will be approximately equal to the fair
market value of the Acquired Assets minus the Assumed Liabilities. Acquiring
Fund will not furnish any consideration in connection with the acquisition of
the Acquired Assets other than the assumption of the Assumed Liabilities and the
issuance of such Acquiring Fund Shares.
12. Acquired Fund Shareholders will not be in control (within the meaning of
Sections 368(a)(2)(H)(i) and 304(c)(1) of the Code) of Acquiring Fund after the
transaction.
13. The transaction is being undertaken for valid and substantial business
purposes, including facilitating Acquired Fund's becoming a member of the
Pioneer family of mutual funds, which, in the long term, is intended to result
in lower expenses and increased assets.
14. No Acquired Fund shareholder is acting as agent for Acquiring Fund in
connection with the transaction or approval thereof. Acquiring Fund will not
reimburse any Acquired Fund shareholder for Acquired Fund Shares such
shareholder may have purchased or for other obligations such shareholder may
have incurred.
15. Acquiring Fund has no outstanding warrants, options, convertible securities
or any other type of right pursuant to which any person could acquire stock in
Acquiring Fund.
* * * * *
The undersigned officer of Acquiring Trust is authorized to make all of
the representations set forth herein, and the undersigned is authorized to
execute this certificate on behalf of Acquiring Fund. The undersigned recognizes
that Xxxxxx Xxxxxx Xxxxxxxxx Xxxx and Xxxx LLP will rely upon the foregoing
representations in evaluating the United States federal income tax consequences
of the transaction and rendering its opinion pursuant to Section 8.5 of the
Agreement. If, prior to the date of the transaction, any of the representations
set forth herein ceases to be accurate, the undersigned agrees to deliver
immediately to Xxxxxx Xxxxxx Xxxxxxxxx Xxxx and Xxxx LLP a written notice to
that effect.
PIONEER HIGH YIELD BOND FUND
on behalf of PIONEER HIGH YIELD FUND
By: /s/ Xxxxxxx Xxxx
Name: Xxxxxxx Xxxx
Title: Treasurer
Dated: December 10, 2004
A-2
Annex B
TAX REPRESENTATION CERTIFICATE OF
SAFECO TAXABLE BOND TRUST
ON BEHALF OF SAFECO HIGH-YIELD BOND FUND
This certificate is being delivered in connection with the transactions
to be effected pursuant to the Agreement and Plan of Reorganization made as of
October 29, 2004 between Pioneer High Yield Fund, a Delaware statutory trust, on
behalf of its sole series Pioneer High Yield Fund ("Acquiring Fund"), and Safeco
Taxable Bond Trust, a Delaware statutory trust ("Safeco Trust"), on behalf of
its series Safeco High-Yield Bond Fund ("Acquired Fund") (the "Agreement").
Pursuant to the Agreement, Acquiring Fund will acquire all of the assets of
Acquired Fund in exchange solely for (i) the assumption by Acquiring Fund of the
Assumed Liabilities of Acquired Fund and (ii) the issuance of Investor Class
shares of beneficial interest of Acquiring Fund (the "Acquiring Fund Shares") to
Acquired Fund, followed by the distribution by Acquired Fund, in liquidation of
Acquired Fund, of the Acquiring Fund Shares to the shareholders of Acquired Fund
and the termination of Acquired Fund (the foregoing together constituting the
"transaction").
The undersigned officer of Safeco Trust, after consulting with its
counsel, auditors and tax advisers regarding the meaning of and factual support
for the following representations, on behalf of Acquired Fund, hereby certifies
and represents that the following statements are true, complete and correct and
will be true, complete and correct on the date of the transaction and thereafter
as relevant. Unless otherwise indicated, all capitalized terms used but not
defined herein shall have the meanings ascribed to them in the Agreement.
1. Acquired Fund is a series of Safeco Trust, a statutory trust organized under
the laws of the State of Delaware, and Acquired Fund is, and has been at all
times, treated as a separate corporation for federal tax purposes.
2. As of the date of the transaction, the fair market value of the Acquiring
Fund Shares received by each shareholder that holds shares of Acquired Fund (the
"Acquired Fund Shares") will be approximately equal to the fair market value of
the Acquired Fund Shares with respect to which such Acquiring Fund Shares are
received, and the aggregate consideration received by Acquired Fund shareholders
in exchange for their Acquired Fund Shares will be approximately equal to the
fair market value of all of the outstanding Acquired Fund Shares immediately
prior to the transaction. No property other than Acquiring Fund Shares will be
distributed to shareholders of Acquired Fund in exchange for their Acquired Fund
Shares, nor will any such shareholder receive cash or other property as part of
the transaction.
3. Neither Acquired Fund nor any person "related" to Acquired Fund (as defined
in Treasury Regulation Section 1.368-1(e)(3)), nor any partnership in which
Acquired Fund or any such related person is a partner, has redeemed, acquired or
otherwise made any distributions with respect to any shares of Acquired Fund as
part of the transaction, or otherwise pursuant to a plan of which the
transaction is a part, other than redemptions and distributions made in the
ordinary course of Acquired Fund's business as a series of an open-end
investment company. To the best knowledge of management of Acquired Fund, there
is no plan or intention on the part of the shareholders of Acquired Fund to
engage in any transaction with Acquired Fund, Acquiring Fund, or any person
treated as related to Acquired Fund or Acquiring Fund under Treasury Regulation
Section 1.368-1(e)(3) or any partnership in which Acquired Fund, Acquiring Fund,
or any person treated as related to Acquired Fund or Acquiring Fund under
Treasury Regulation Section 1.368-1(e)(3) is a partner involving the sale,
redemption or exchange of any of the Acquired Fund Shares or any of the
Acquiring Fund Shares to be received in the transaction, as the case may be,
other than in the ordinary course of Acquired Fund's business as a series of an
open-end investment company.
4. Pursuant to the transaction, 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 transaction. For the purposes of the
foregoing, any amounts Acquired Fund uses to pay its transaction expenses and to
make redemptions and distributions immediately before the transaction (except
(a) redemptions in the ordinary course of its business required by section 22(e)
of the Investment Company 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
B-1
excise tax under Section 4982 of the Code) will be included as assets it held
immediately before the transaction.
5. As of the date of the transaction, the fair market value of the Acquiring
Fund Shares issued to Acquired Fund will be approximately equal to the fair
market value of the Acquired Assets minus the Assumed Liabilities. Acquired Fund
will not receive any consideration from Acquiring Fund in connection with the
acquisition of the Acquired Assets other than the assumption of the Assumed
Liabilities and the issuance of such Acquiring Fund Shares.
6. The Assumed Liabilities assumed by Acquiring Fund plus the Assumed
Liabilities, if any, to which the transferred assets are subject were incurred
by Acquired Fund in the ordinary course of its business. Acquired Fund is not
aware of any liabilities of any kind other than the Assumed Liabilities.
7. As of the Closing Date, the adjusted basis and fair market value of the
Acquired Assets will equal or exceed the Assumed Liabilities assumed for
purposes of Section 357(d) of the Code.
8. Acquired Fund currently conducts its historic business within the meaning of
Treasury Regulation Section 1.368-1(d)(2), which provides that, in general, a
corporation's historic business is the business it has conducted most recently,
but does not include a business that the corporation enters into as part of a
plan of reorganization. All of the assets held by Acquired Fund as of the
opening of business on August 2, 2004 (the date the Acquiring Fund Adviser
became investment adviser to Acquired Fund) were Acquired Fund's historic
business assets within the meaning of Treasury Regulation Section 1.368-1(d)(3)
(which provides that a corporation's historic business assets are the assets
used in its historic business).
9. Acquired Fund will distribute to its shareholders the Acquiring Fund Shares
it receives pursuant to the transaction, and its other properties, if any, and
will be liquidated promptly thereafter.
10. The expenses of Acquired Fund incurred by it in connection with the
transaction will be only such expenses that are solely and directly related to
the transaction in accordance with Rev. Rul. 73-54, 1973-1 C.B. 187. Acquired
Fund will not pay any expenses incurred by its shareholders in connection with
the transaction.
11. There is no, and never has been any, indebtedness between Acquiring Fund and
Acquired Fund.
12. Acquired Fund has properly elected to be a regulated investment company
under Subchapter M of the Code, has qualified for the special tax treatment
afforded regulated investment companies under Subchapter M of the Code for each
taxable year since inception, and qualifies for such treatment as of the time of
the Closing.
13. Acquired Fund meets the requirements of an "investment company" in Section
368(a)(2)(F) of the Code.
14. Acquired Fund is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
15. Acquired Fund does not pay compensation to any shareholder-employee.
16. Acquired Fund shareholders will not have dissenters' or appraisal rights in
the transaction.
17. The transaction is being undertaken for valid and substantial business
purposes, including facilitating Acquired Fund's becoming a member of the
Pioneer family of material funds, which, in the long term, is intended to result
in lower expenses and increased assets.
18. Acquired Fund has no outstanding warrants, options, convertible securities
or any other type of right pursuant to which any person could acquire stock in
Acquired Fund.
* * * * *
B-2
The undersigned officer of Safeco Trust is authorized to make all of
the representations set forth herein, and the undersigned is authorized to
execute this certificate on behalf of Acquired Fund. The undersigned recognizes
that Xxxxxx Xxxxxx Xxxxxxxxx Xxxx and Xxxx LLP will rely upon the foregoing
representations in evaluating the United States federal income tax consequences
of the transaction and rendering its opinion pursuant to Section 8.5 of the
Agreement. If, prior to the date of the transaction, any of the representations
set forth herein ceases to be accurate, the undersigned agrees to deliver
immediately to Xxxxxx Xxxxxx Xxxxxxxxx Xxxx and Xxxx LLP a written notice to
that effect.
SAFECO TAXABLE BOND TRUST
on behalf of SAFECO HIGH-YIELD BOND FUND
By: /s/ Xxxxx X. Xxxxx
Name: Xxxxx X. Xxxxx
Title: Treasurer
Dated: December 10, 2004
B-3
