THE VICTORY PORTFOLIOS
Investment Quality Bond Fund
Intermediate Income Fund
AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION
This AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION ("Agreement") is
made as of May 23, 2001, between The Victory Portfolios, a Delaware business
trust (the "Trust"), on behalf of the Intermediate Income Fund, a series of the
Trust (the "Acquiring Fund"), and the Trust, on behalf of the Investment Quality
Bond Fund, a series of the Trust (the "Target"). (The Acquiring Fund and the
Target are sometimes referred to herein individually as a "Fund" and
collectively as the "Funds," and the Trust is sometimes referred to herein as
the "Investment Company.")
All agreements, representations, and obligations described herein, made
or to be taken or undertaken by either Fund, are made or shall be taken or
undertaken by the Trust on the Fund's behalf.
Shares of the Target are currently divided into two classes, designated
Class A and Class G. Shares of the Acquiring Fund are currently divided into
two classes, designated Class A and Class G.
In accordance with the terms and conditions set forth in this
Agreement, the parties desire that the Target transfer substantially all its
assets to the Acquiring Fund in exchange solely for voting shares of
beneficial interest of each comparable class in the Acquiring Fund
("Acquiring Fund's Shares") and the assumption by the Acquiring Fund of
substantially all of the Target's liabilities, and that the Target distribute
the Acquiring Fund's Shares pro rata to the holders of shares of beneficial
interest in the Target ("Target's Shares") in liquidation of the Target. All
such transactions with respect to the Target and the Acquiring Fund are
referred to herein collectively as the "Reorganization."
It is intended by the parties hereto that the Reorganization constitute
a reorganization within the meaning of Section 368(a)(1) of the Internal
Revenue Code of 1986, as amended (the "Code"). The parties hereto hereby
adopt this Agreement as a "plan of reorganization" within the meaning of
Treasury Regulation Sections 1.368-2(g) and 1.368-3(a).
In consideration of the mutual promises herein, the parties covenant
and agree as follows:
1. PLAN OF REORGANIZATION AND LIQUIDATION OF TARGET
1.1. At the Effective Time (as defined in paragraph 3.1), the Target agrees
to assign, sell, convey, transfer, and deliver all of its assets
described in paragraph 1.2 ("Assets") to the Acquiring Fund. The
Acquiring Fund agrees in exchange therefore:
(a) to issue and deliver to the Target the number of full and fractional
the Acquiring Fund's Shares determined by dividing the net value of
the Target
(computed as set forth in paragraph 2.1) by the "NAV" (computed as
set forth in paragraph 2.2) of the Acquiring Fund's Shares; and
(b) to assume the Target's liabilities described in paragraph 1.3
("Liabilities").
1.2. Assets shall include, without limitation, 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 the Target's books, and other property owned by the Target
at the Effective Time as defined in paragraph 3.1.
1.3. Liabilities shall include (except as otherwise provided herein) all of
the Target's known liabilities, debts and obligations arising in the
ordinary course of business reflected on the books of the Target at the
Effective Time, and any contingent liabilities, if any, as the Board of
Trustees shall reasonably deem exist against the Target at the Effective
Time, for which contingent and other appropriate liability reserves
shall be established on the Target's books. Notwithstanding the
foregoing, the Target agrees to use its best efforts to discharge all of
its known Liabilities prior to the Effective Time.
1.4. At or immediately before the Effective Time, the Target 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 (computed without regard to any deduction for dividends paid) and
substantially all of its realized net capital gain, 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), the Target shall distribute the Acquiring Fund's Shares
received by it pursuant to paragraph 1.1 to the Target's shareholders of
record, determined as of the Effective Time (collectively "Shareholders"
and individually a "Shareholder"), in exchange for the Target's Shares
and in liquidation of the Target. To accomplish this distribution, the
Acquiring Fund's transfer agent ("Transfer Agent") shall open accounts
on the Acquiring Fund's share transfer books in the Shareholders' names
and transfer the Acquiring Fund's Shares thereto. Each Shareholder's
account shall be credited with the pro rata number of full and
fractional (rounded to the third decimal place) the Acquiring Fund's
Shares due that Shareholder. All outstanding Target's Shares, including
any represented by certificates, shall simultaneously be canceled on the
Target's share transfer books. The Acquiring Fund shall not issue
certificates representing the Acquiring Fund's Shares in connection with
the Reorganization. However, certificates representing the Target's
Shares shall represent the Acquiring Fund's Shares after the
Reorganization.
1.6. As soon as reasonably practicable after distribution of the Acquiring
Fund's Shares pursuant to paragraph 1.5, the Target shall be terminated
and any further actions shall be taken in connection therewith as
required by applicable law. The Target shall file
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such instruments and shall take all other steps necessary to effect a
complete liquidation and dissolution of the Target.
1.7. Any reporting responsibility of the Target 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 upon issuance of the Acquiring Fund's Shares
in a name other than that of the registered holder on the Target's books
of the Target's Shares exchanged therefor shall be paid by the person to
whom the Acquiring Fund's Shares are to be issued, as a condition of
such transfer.
2. VALUATION
2.1. For purposes of paragraph 1.1(a), the Target's net value shall be (a)
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 as
defined in paragraph 3.1 ("Valuation Time"), using the valuation
procedures set forth in the Target's then current prospectus and
statement of additional information less (b) the amount of the
Liabilities as of the Valuation Time.
2.2. For purposes of paragraph 1.1(a), the NAV of the Acquiring Fund's
Shares shall be computed as of the Valuation Time, using the valuation
procedures set forth in the Acquiring Fund's then current prospectus and
statement of additional information.
2.3. All computations pursuant to paragraphs 2.1 and 2.2 shall be made by or
under the direction of the Funds' Pricing Committee.
3. CLOSING AND EFFECTIVE TIME
3.1. The Reorganization, together with related acts necessary to consummate
the same ("Closing"), shall occur at the Funds' principal offices,
located at 0000 Xxxxxxx Xxxx, Xxxxxxxx, Xxxx 00000 on October 15, 2001,
or at such other place and/or on such other date upon which the parties
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 upon which the parties 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 the net value of the Target and the NAV for the Acquiring
Fund is impracticable, the Effective Time shall be postponed until the
first business day after the day when such trading shall have been fully
resumed and such reporting shall have been restored.
3.2. The Target shall deliver to the Trust at the Closing a schedule of its
Assets as of the Effective Time, which shall set forth for all portfolio
securities included therein their adjusted tax bases and holding periods
by lot. The Target's custodian shall deliver at the Closing a
certificate of an authorized officer stating that (a) the Assets held by
the custodian will be transferred to the Acquiring Fund at the Effective
Time and (b) all necessary taxes in conjunction with the delivery of the
Assets, including all
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applicable federal and state stock transfer stamps, if any, have been
paid or provision for payment has been made.
3.3. The Transfer Agent shall deliver at the Closing a certificate as to the
opening on the Acquiring Fund's share transfer books of accounts in the
names of the Target's Shareholders. The Trust shall issue and deliver a
confirmation to the Target evidencing the Acquiring Fund's Shares to be
credited to the Target at the Effective Time or provide evidence
satisfactory to the Target that the Acquiring Fund's Shares have been
credited to the Target's account on the Acquiring Fund's books. At the
Closing, each party shall deliver to the other such bills of sale,
checks, assignments, stock certificates, receipts, or other documents as
the other party or its counsel may reasonably request.
3.4. The Trust, on behalf of the Target and the Acquiring Fund,
respectively, shall deliver at the Closing a certificate executed in its
name by its President, a Vice President or its Secretary and dated as of
the Effective Time, to the effect that the representations and
warranties it made in this Agreement are true and correct in all
material respects at the Effective Time, with the same force and effect
as if made at and as of the Effective Time, except as they may be
affected by the transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES
4.1. The Target represents and warrants as follows:
4.1.1. At the Closing, the Target will have good and marketable title to
its Assets and full right, power, and authority to sell, assign,
transfer, and deliver its Assets free of any liens or other
encumbrances; and upon delivery and payment for the Assets, the
Acquiring Fund will acquire good and marketable title thereto;
4.1.2. The Acquiring Fund's Shares are not being acquired for the
purpose of making any distribution thereof, other than in accordance
with the terms hereof;
4.1.3. The Target's current prospectus and statement of additional
information conform in all material respects to the applicable
requirements of the Securities Act of 1933, as amended (the "1933
Act"), and the Investment Company Act of 1940, as amended (the "1940
Act"), and the rules and regulations thereunder, and do not include
any untrue statement of a material fact or omit 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;
4.1.4. The Target is not in violation of, and the execution and delivery
of this Agreement and consummation of the transactions contemplated
hereby will not (a) conflict with or violate Delaware law or any
provision of the Trust's Trust Instrument or By-laws or of any
agreement, instrument, lease, or other undertaking to which the
Target is a party or by which it is bound or (b) result in the
acceleration of any obligation, or the imposition of any penalty,
under any
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agreement, judgment, or decree to which the Target is a party or by
which it is bound, except as previously disclosed in writing to and
accepted by the Trust;
4.1.5. Except as otherwise disclosed in writing to and accepted by the
Trust, all material contracts and other commitments of or applicable
to the Target (other than this Agreement and investment contracts,
including options and futures) will be terminated, or provision for
discharge of any liabilities of the Target thereunder will be made,
at or prior to the Effective Time, without the Target incurring any
liability or penalty with respect thereto and without diminishing or
releasing any rights the Target may have had with respect to actions
taken or not taken by any other party thereto prior to the Closing;
4.1.6. Except as otherwise disclosed in writing to and accepted by the
Trust on behalf of the Acquiring Fund, no litigation, administrative
proceeding, or investigation of or before any court or governmental
body is presently pending or (to the Target's knowledge) threatened
against the Target or any of its properties or assets that, if
adversely determined, would materially and adversely affect the
Target's financial condition or the conduct of its business; the
Target knows of no facts that might form the 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;
4.1.7. The execution, delivery, and performance of this Agreement has
been duly authorized as of the date hereof by all necessary action
on the part of the Trust's Board of Trustees on behalf of the
Target, which has made the determinations required by Rule 17a-8(a)
under the 1940 Act; and, subject to approval by the Target's
shareholders and receipt of any necessary exemptive relief or
no-action assurances requested from the Securities and Exchange
Commission ("SEC") or its staff with respect to Sections 17(a) and
17(d) of the 1940 Act, this Agreement will constitute a valid and
legally binding obligation of the Target, 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;
4.1.8. At the Effective Time, the performance of this Agreement shall
have been duly authorized by all necessary action by the Target's
shareholders;
4.1.9. No governmental consents, approvals, authorizations, or filings
are required under the 1933 Act, the Securities Exchange Act of
1934, as amended ("1934 Act"), or the 1940 Act for the execution or
performance of this Agreement by the Target, except for (a) a proxy
statement ("Proxy Statement"), the information for which is included
in a combined prospectus and proxy statement filed by the Acquiring
Fund with the SEC on Form N-14 ("Registration Statement"), (b)
receipt of the exemptive relief or no-action assurances referenced
in subparagraph 4.1.7, and (c)
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such consents, approvals, authorizations, and filings as have been
made or received or as may be required subsequent to the Effective
Time;
4.1.10. On the effective date of the Registration Statement, at the time
of the shareholders' meeting referred to in paragraph 5.2, and at
the Effective Time, the Proxy Statement will (a) comply in all
material respects with the applicable provisions of the 1933 Act,
the 1934 Act, and the 1940 Act and the rules and regulations
thereunder and (b) not contain any untrue statement of a material
fact or omit any 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.
This provision shall not apply to statements in or omissions from
the Proxy Statement made in reliance on and in conformity with
information furnished by the Trust for use therein.
4.2. The Acquiring Fund represents and warrants as follows:
4.2.1. The Acquiring Fund's Shares to be issued and delivered to the
Target hereunder will, at the Effective Time, have been duly
authorized and, when issued and delivered as provided herein, will
be duly and validly issued and outstanding shares of the Acquiring
Fund, fully paid and nonassessable by the Trust (except as disclosed
in the Trust's then current prospectus and statement of additional
information). Except as contemplated by this Agreement, the
Acquiring Fund does not have outstanding any options, warrants, or
other rights to subscribe for or purchase any of its shares, nor is
there outstanding any security convertible into any of its shares;
4.2.2. The Acquiring Fund's current prospectus and statement of
additional information 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 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;
4.2.3. The Acquiring Fund is not in violation of, and the execution and
delivery of this Agreement and consummation of the transactions
contemplated hereby (a) will not conflict with or violate Delaware
law or any provision of the Trust's Trust Instrument or By-laws or
any provision of any agreement, instrument, lease, or other
undertaking to which the Acquiring Fund is a party or by which it is
bound or (b) result in the acceleration of any obligation, or the
imposition of any penalty, under any agreement, judgment, or decree
to which the Acquiring Fund is a party or by which it is bound,
except as previously disclosed in writing to and accepted by the
Trust;
4.2.4. Except as otherwise disclosed in writing to and accepted by the
Trust on behalf of the Target, no litigation, administrative
proceeding, or investigation of or before any court or governmental
body is presently pending or (to the Acquiring Fund's knowledge)
threatened against the Trust with respect to the Acquiring Fund or
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any of its properties or assets that, if adversely determined, would
materially and adversely affect the Acquiring Fund's financial
condition or the conduct of its business; the Acquiring Fund knows
of no facts that might form the 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;
4.2.5. The execution, delivery, and performance of this Agreement has
been duly authorized as of the date hereof by all necessary action
on the part of the Trust's Board of Trustees on behalf of the
Acquiring Fund, which has made the determinations required by Rule
17a-8(a) under the 1940 Act; and, subject to receipt of any
necessary exemptive relief or no-action assurances requested from
the SEC or its staff with respect to Sections 17(a) and 17(d) of the
1940 Act, this Agreement will constitute a valid and legally binding
obligation of the 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;
4.2.6. No governmental consents, approvals, authorizations, or filings
are required under the 1933 Act, the 1934 Act, or the 1940 Act for
the execution or performance of this Agreement by the Trust, except
for (a) the filing with the SEC of the Registration Statement and
any post-effective amendment thereto, (b) receipt of the exemptive
relief or no-action assurances referenced in subparagraph 4.2.5, and
(c) such consents, approvals, authorizations, and filings as have
been made or received or as may be required subsequent to the
Effective Time;
4.3. The Trust, on behalf of each Fund, represents and warrants to the other
as follows:
4.3.1. The Trust is a business trust that is duly organized, validly
existing, and in good standing under the laws of the State of
Delaware; and a copy of its Certificate of Trust is on file with the
Secretary of the State of Delaware;
4.3.2. The Trust is duly registered as an open-end management investment
company under the 1940 Act, and such registration will be in full
force and effect at the Effective Time;
4.3.3. Each Fund is a duly established and designated series of the
Trust.
5. COVENANTS
5.1. Each Fund covenants to operate its respective 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 the Target shall not dispose of more than an
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insignificant portion of its historic business assets during such period
without the Acquiring Fund's prior consent.
5.2. The Target covenants to call a special meeting of shareholders to
consider and act upon this Agreement and to take all other action
necessary to obtain approval of the transactions contemplated hereby.
5.3. The Target covenants that the Acquiring Fund's 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.
5.4. The Target covenants that it will assist the Trust in obtaining such
information as the Trust reasonably requests concerning the beneficial
ownership of the Target's Shares.
5.5. The Target 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) will be turned over to the Trust at the
Closing.
5.6. Each Fund covenants to cooperate in preparing the Proxy Statement in
compliance with applicable federal securities laws.
5.7. Each Fund covenants that it will, from time to time, as and when
requested by the other Fund, execute and deliver or cause to be executed
and delivered all such assignments and other instruments, and will take
or cause to be taken such further action, as the other Fund may deem
necessary or desirable in order to vest in, and confirm to (a) the
Acquiring Fund, title to and possession of all the Target's Assets, and
(b) the Target, title to and possession of the Acquiring Fund's Shares
to be delivered hereunder, and otherwise to carry out the intent and
purpose hereof.
5.8. The Acquiring Fund 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 as it may deem appropriate in order to
continue its operations after the Effective Time.
5.9. Subject to this Agreement, each Fund 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
6.1. Each Fund's obligations hereunder shall be subject to (a) performance
by the other Fund of all the obligations to be performed hereunder at or
before the Effective Time, (b) all representations and warranties of the
other Fund 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:
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6.1.1. This Agreement and the transactions contemplated hereby shall
have been duly adopted and approved by the Trust's Board of Trustees
on behalf of the Target and the Acquiring Fund and shall have been
approved by the Target's shareholders in accordance with applicable
law.
6.1.2. 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) deemed necessary by either Fund to permit consummation,
in all material respects, of the transactions contemplated hereby
shall have been obtained, except where failure to obtain the same
would not involve a risk of a material adverse effect on the assets
or properties of the Fund.
6.1.3. 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.
6.1.4. The Target shall have received an opinion of Xxxxxx Xxxxx
Xxxxxxxx & Xxxxxxx LLP, counsel to the Trust ("Counsel"),
substantially to the effect that:
6.1.4.1. The Acquiring Fund is a validly existing series of the
Trust, a business trust duly formed and validly existing and in
good standing under the laws of the State of Delaware with the
power under its Trust Instrument to carry on its business and to
own all of its properties and assets;
6.1.4.2. This Agreement (a) has been duly authorized and executed by
the Trust on behalf of the Acquiring Fund and (b) assuming due
authorization, execution, and delivery of this Agreement by the
Target, is a legal, valid and binding obligation of the
Acquiring Fund, enforceable against the Acquiring Fund in
accordance with its terms, except as such enforceability may be
limited by (i) bankruptcy, insolvency, reorganization,
receivership, fraudulent conveyance, moratorium or other laws of
general application relating to or affecting the enforcement of
creditors' rights and remedies, as from time to time in effect,
(ii) application of equitable principles (regardless of whether
such enforceability is considered in a proceeding in equity or
at law) and (iii) principles of course of dealing or course of
performance and standards of good faith, fair dealing,
materiality and reasonableness that may be applied by a court to
the exercise of rights and remedies;
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6.1.4.3. The Acquiring Fund's Shares to be issued and delivered to
the Shareholders under this Agreement, assuming their due
delivery as contemplated by this Agreement, will be duly
authorized and validly issued and outstanding and fully paid and
nonassessable (except as disclosed in the Trust's then current
prospectus and statement of additional information);
6.1.4.4. The execution and delivery of this Agreement did not, and
the consummation of the transactions contemplated hereby will
not (a) materially violate the Trust's Trust Instrument or
By-laws or any provision of any agreement to which the Trust
(with respect to the Acquiring Fund) is a party or by which it
is bound or (b) to the knowledge of Counsel, result in the
acceleration of any obligation, or the imposition of any
penalty, under any agreement, judgment, or decree known to
Counsel to which the Trust (with respect to the Acquiring Fund)
is a party or by which it (with respect to the Acquiring Fund)
is bound, except as set forth in such opinion or as previously
disclosed in writing to and accepted by the Trust;
6.1.4.5. To the knowledge of Counsel, no consent, approval,
authorization or order of any Delaware or Federal Court or
governmental authority of the State of Delaware or the United
States of America is required for the consummation by the Trust
on behalf of the Acquiring Fund, of the transactions
contemplated by the Agreement, except such as may be required
under the 1933 Act, the 1934 Act and the 1940 Act;
6.1.4.6. The Trust is registered with the SEC as an investment
company, and to the knowledge of Counsel no order has been
issued or proceeding instituted to suspend such registration;
and
6.1.4.7. To the knowledge of Counsel, (a) no litigation,
administrative proceeding, or investigation of or before any
court or governmental body is pending or threatened as to the
Trust (with respect to the Acquiring Fund) or any of its
properties or assets attributable or allocable to the Acquiring
Fund and (b) the Trust (with respect to the 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 the Acquiring Fund's business,
except as set forth in such opinion or as otherwise disclosed in
writing to and accepted by the Trust.
In rendering such opinion, Counsel may (i) rely, as to matters
governed by the laws of the State of Delaware, on an opinion of
competent Delaware counsel, (ii) make assumptions regarding the
authenticity, genuineness, and/or conformity of documents and copies
thereof without independent verification thereof, and other
customary assumptions as the parties may agree, (iii) limit such
opinion to applicable federal and state law, (iv) define the word
"knowledge" and related terms to mean the knowledge of attorneys
then with such firm who have devoted
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substantive attention to matters directly related to this Agreement
and the Reorganization; and (v) rely on certificates of officers or
trustees of the Trust, in each case reasonably acceptable to the
Trust.
6.1.5. The Acquiring Fund shall have received an opinion of Counsel,
substantially to the effect that:
6.1.5.1. The Target is a validly existing series of the Trust, a
business trust duly formed and validly existing and in good standing
under the laws of the State of Delaware with the power under its
Trust Instrument to carry on its business and to own all of its
properties and assets;
6.1.5.2. This Agreement (a) has been duly authorized and executed by the
Trust on behalf of the Target and (b) assuming due authorization,
execution, and delivery of this Agreement by the Trust on behalf of
the Acquiring Fund, is a legal, valid and binding obligation of the
Target, enforceable against the Target in accordance with its terms,
except as such enforceability may be limited by (i) bankruptcy,
insolvency, reorganization, receivership, fraudulent conveyance,
moratorium or other laws of general application relating to or
affecting the enforcement of creditors' rights and remedies, as from
time to time in effect, (ii) application of equitable principles
(regardless of whether such enforceability is considered in a
proceeding in equity or at law) and (iii) principles of course of
dealing or course of performance and standards of good faith, fair
dealing, materiality and reasonableness that may be applied by a
court to the exercise of rights and remedies;
6.1.5.3. The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, (a)
materially violate the Trust's Trust Instrument or By-laws or any
provision of any agreement known to Counsel, to which the Trust
(with respect to the Target) is a party or by which it is bound or
(b) to the knowledge of such counsel, result in the acceleration of
any obligation, or the imposition of any penalty, under any
agreement, judgment, or decree known to Counsel to which the Trust
(with respect to the Target) is a party or by which it (with respect
to the Target) is bound, except as set forth in such opinion or as
previously disclosed in writing to and accepted by the Trust;
6.1.5.4. To the knowledge of Counsel, no consent, approval,
authorization or order of any Delaware or Federal Court or
governmental authority of the State of Delaware or the United States
of America is required for the consummation by the Trust on behalf
of the Target, of the transactions contemplated by the Agreement,
except such as may be required under the 1933 Act, the 1934 Act and
the 1940 Act;
6.1.5.5. The Trust is registered with the SEC as an investment company,
and to the knowledge of Counsel no order has been issued or
proceeding instituted to suspend such registration; and
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6.1.5.6. To the knowledge of Counsel, (a) no litigation, administrative
proceeding, or investigation of or before any court or governmental
body is pending or threatened as to the Trust (with respect to the
Target) or any of its properties or assets attributable or allocable
to the Target and (b) the Trust (with respect to the Target) 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 the Target's business, except as set forth in such
opinion or as otherwise disclosed in writing to and accepted by the
Trust.
In rendering such opinion, Counsel may (i) rely, as to matters governed
by the laws of the State of Delaware, on an opinion of competent
Delaware counsel, (ii) make assumptions regarding the authenticity,
genuineness, and/or conformity of documents and copies thereof without
independent verification thereof, and other customary assumptions as the
parties may agree, (iii) limit such opinion to applicable federal and
state law, (iv) define the word "knowledge" and related terms to mean
the knowledge of attorneys then with such firm who have devoted
substantive attention to matters directly related to this Agreement and
the Reorganization, and (v) rely on certificates of officers or trustees
of the Target; in each case reasonably acceptable to the Trust.
6.1.6. The Trust, on behalf of the Target and the Acquiring Fund, shall have
received an opinion of Counsel addressed to and in form and substance
reasonably satisfactory to it, as to the federal income tax consequences
of the Reorganization ("Tax Opinion"). In rendering the Tax Opinion,
Counsel may rely as to factual matters, exclusively and without
independent verification, on the representations made in this Agreement
(and/or in separate letters addressed to Counsel) and each Fund's
separate covenants. Each Fund agrees to make reasonable covenants and
representations as to factual matters as of the Effective Time in
connection with the rendering of such opinion. 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:
6.1.6.1. The Reorganization will constitute a reorganization within the
meaning of section 368(a)(1) of the Code, and each Fund will be "a
party to a reorganization" within the meaning of section 368(b) of
the Code;
6.1.6.2. No gain or loss will be recognized by the Target on the
transfer to the Acquiring Fund of Assets in exchange solely for the
Acquiring Fund's Shares and the Acquiring Fund's assumption of
Liabilities or on the subsequent distribution of those shares to the
Shareholders in liquidation of the Target;
6.1.6.3. No gain or loss will be recognized by the Acquiring Fund on its
receipt of Assets in exchange solely for the Acquiring Fund's Shares
and its assumption of Liabilities;
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6.1.6.4. The Acquiring Fund's adjusted tax basis in the Assets acquired
will be equal to the basis thereof in the Target's hands immediately
before the Reorganization, and the Acquiring Fund's holding period
for the Assets will include the Target's holding period therefor;
6.1.6.5. A Shareholder will recognize no gain or loss on the exchange of
the Target Shares solely for the Acquiring Fund's Shares pursuant to
the Reorganization; and
6.1.6.6. A Shareholder's aggregate tax basis in the Acquiring Fund's
Shares received by it in the Reorganization will equal its aggregate
tax basis in its the Target Shares surrendered in exchange therefor,
and its holding period for the Acquiring Fund Shares will include
its holding period for the Target Shares, provided the Target Shares
are held as capital assets by the Shareholder at the Effective Time.
6.2. At any time before the Closing, either Fund may waive any of the
foregoing conditions if, in the judgment of the Trust's Board of
Trustees, such waiver will not have a material adverse effect on its
shareholders' interests.
7. BROKERAGE FEES AND EXPENSES
7.1. The Trust, on behalf of each Fund, represents and warrants that there
are no brokers or finders entitled to receive any payments in connection
with the transactions provided for herein.
7.2. The Funds will be responsible for paying pro rata one-half of the
expenses incurred in connection with the Reorganization.
8. ENTIRE AGREEMENT; SURVIVAL
8.1. Neither party 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 survive the Closing.
9. TERMINATION OF AGREEMENT
9.1. This Agreement may be terminated at any time at or prior to the
Effective Time, whether before or after approval by the Target's
Shareholders:
9.1.1. By either Fund (a) in the event of a 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 October 15, 2001; or
9.1.2. By the parties' mutual agreement.
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9.2. In the event of termination under paragraphs 9.1.1(a), (b) or (c) or
9.1.2, there shall be no liability for damages on the part of either
Fund affected by the termination, or the trustees or officers of the
Trust, to the other Fund.
10. AMENDMENT
10.1. This Agreement may be amended, modified, or supplemented at any time,
notwithstanding approval thereof by the Target's Shareholders, in such
manner as may be mutually agreed upon in writing by the parties;
provided that following such approval no such amendment shall have a
material adverse effect on such Shareholders' interests.
11. MISCELLANEOUS
11.1. This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Delaware; 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 upon or give any person, firm, trust, or corporation 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 the Trust is a business trust. Notice is
hereby given that this instrument is executed on behalf of the Trust's
Trustees solely in their capacity as trustees, and not individually, and
that the Trust's obligations under this instrument on behalf of each
Fund are not binding on or enforceable against any of its trustees,
officers, or shareholders, but are only binding on and enforceable
against the respective Funds' assets and property. Each Fund agrees
that, in asserting any rights or claims under this Agreement, it shall
look only to the corresponding Fund's assets and property in settlement
of such rights or claims and not to such Trustees or shareholders or to
the assets of any other series of the Trust.
11.4. The Trust agrees to indemnify and hold harmless each Trustee of the
Trust at the time of the execution of this Agreement against expenses,
including reasonable attorneys' fees, judgments, fines and amounts paid
in settlement, actually and reasonably incurred by such Trustee in
connection with any claim that is asserted against such trustee arising
out of such person's service as a Trustee of the Trust, provided that
such indemnification shall be limited to the full extent of the
indemnification that is available to the Trustees of the Trust pursuant
to the provisions of the Trust's Trust Instrument and applicable law.
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11.5 The Trust, on behalf of each Fund, hereby waives any conflict arising
out of the representation of each Fund by Counsel.
IN WITNESS WHEREOF, each party has caused this Agreement to be executed by
its duly authorized officer.
ATTEST: THE VICTORY PORTFOLIOS, on behalf of
the Investment Quality Bond Fund
By: /s/ Xxxxx Xxxxxxxx By: /s/ Xxxx X. Xxxxx
-------------------------------- ----------------------------------
Xxxxx Xxxxxxxx Xxxx X. Xxxxx
Secretary Treasurer
ATTEST: THE VICTORY PORTFOLIOS, on behalf of
the Intermediate Income Fund
By: /s/ Xxxxx Xxxxxxxx By: /s/ Xxxx X. Xxxxx
-------------------------------- ----------------------------------
Xxxxx Xxxxxxxx Xxxx X. Xxxxx
Secretary Treasurer
