EXHIBIT A
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
THIS FORM OF AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made as
of this 5th day of June, 2003, by and between XXXXXX XXXXXXX INSTITUTIONAL
FUND, Inc., a Maryland corporation (the "Company"), on behalf of its Small
Company Growth Portfolio (the "Acquiring Fund") and XXXXXX XXXXXXX INSTITUTIONAL
FUND TRUST (the "Trust"), a Pennsylvania business trust, on behalf of its Small
Cap Growth Portfolio (the "Target Fund").
Where appropriate, references to the Acquiring Fund mean to the Company, on
behalf of the Acquiring Fund and references to the Target Fund mean the Trust,
on behalf of the Target Fund.
This Agreement is intended to be and is adopted as a "plan of
reorganization" within the meaning of Treasury Regulations Section 1.368-2(g),
for a reorganization under Section 368(a)(1) of the Internal Revenue Code of
1986, as amended (the "Code"). The reorganization ("Reorganization") will
consist of the transfer to the Acquiring Fund of substantially all of the assets
of the of the Target Fund in exchange for the assumption by the Acquiring Fund
of all stated liabilities of the Target Fund and the issuance by the Acquiring
Fund of shares of common stock, par value $0.001 per share (the "Acquiring Fund
Shares"), to be distributed, after the Closing Date hereinafter referred to, to
the shareholders of the Target Fund in liquidation of the Target Fund as
provided herein, all upon the terms and conditions hereinafter set forth in this
Agreement.
In consideration of the premises and of the covenants and agreements
hereinafter set forth, the parties hereto covenant and agree as follows:
1. THE REORGANIZATION AND LIQUIDATION OF THE TARGET FUND
1.1 Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein, the Target Fund agrees
to assign, deliver and otherwise transfer the Target Fund Assets (as defined in
paragraph 1.2) to the Acquiring Fund and the Acquiring Fund agrees in exchange
therefor to assume all of the Target Fund stated liabilities on the Closing Date
as set forth in paragraph 1.3(a) and to deliver to the Target Fund the number of
Acquiring Fund Shares, including fractional shares, determined in the manner set
forth in paragraph 2.3. Such transactions shall take place at the closing
provided for in paragraph 3.1 ("Closing").
1.2 (a) The "Target Fund Assets" shall consist of all property, including
without limitation, all cash (other than the "Cash Reserve" (as defined in
paragraph 1.3(b)), cash equivalents, securities and dividend and interest
receivables owned by the Target Fund, and any deferred or prepaid expenses shown
as an asset on the Target Funds' books on the Valuation Date.
(b) On or prior to the Valuation Date, the Target Fund will provide the
Acquiring Fund with a list of all of the assets to be assigned, delivered and
otherwise transferred to the Acquiring Fund and of the stated liabilities to be
assumed by the Acquiring Fund pursuant to this Agreement. The Target Fund
reserves the right to sell any of the securities on such list but will not,
without the prior approval of the Acquiring Fund, acquire any additional
securities other than securities of the type in which the Acquiring Fund is
permitted to invest and in amounts agreed to in writing by the Acquiring Fund.
The Acquiring Fund will, within a reasonable time prior to the Valuation Date,
furnish the Target Fund with a statement of its investment objectives, policies
and restrictions and a list of the securities, if any, on the list referred to
in the first sentence of this paragraph that do not conform to the Acquiring
Fund's investment objective, policies and restrictions. In the event that the
Target Fund holds any investments that the Acquiring Fund is not permitted to
hold, the Target Fund will dispose of such securities on or prior to the
Valuation Date. In addition, if it is determined that the portfolios of the
Target Fund and the Acquiring Fund, when aggregated, would contain investments
exceeding certain percentage limitations imposed upon the Acquiring Fund with
respect to such investments, the Target Fund, if requested by the Acquiring Fund
will, on or
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prior to the Valuation Date, dispose of and/or reinvest a sufficient amount of
such investments as may be necessary to avoid violating such limitations as of
the Closing Date (as defined in paragraph 3.1).
1.3 (a) The Target Fund will endeavor to discharge all of its liabilities
and obligations on or prior to the Valuation Date. The Acquiring Fund will
assume all stated liabilities, which include, without limitation, all expenses,
costs, charges and reserves reflected on an unaudited Statement of Assets and
Liabilities of the Target Fund prepared by the Treasurer of the Company, on
behalf of the Target Fund, as of the Valuation Date in accordance with generally
accepted accounting principles consistently applied from the prior audited
period.
(b) On the Valuation Date, the Target Fund may establish a cash reserve,
which shall not exceed 5% of the Target Funds' net assets as of the close of
business on the Valuation Date ("Cash Reserve") to be retained by the Target
Fund and used for the payment of its liabilities not discharged prior to the
Valuation Date and for the expenses of dissolution.
1.4 In order for the Target Fund to comply with Section 852(a)(1) of the
Code and to avoid having any investment company taxable income or net capital
gain (as defined in Sections 852(b)(2) and 1222(11) of the Code, respectively)
in the short taxable year ending with its dissolution, the Target Fund will on
or before the Valuation Date (a) declare a dividend in an amount large enough so
that it will have declared dividends of all of its investment company taxable
income and net capital gain, if any, for such taxable year (determined without
regard to any deduction for dividends paid) and (b) distribute such dividend.
1.5 On the Closing Date or as soon as practicable thereafter, the Target
Fund will distribute the Acquiring Fund Shares received by the Target Fund
pursuant to paragraph 1.1 pro rata to its shareholders of record determined as
of the close of business on the Valuation Date ("Target Fund Shareholders").
Institutional Class Shareholders of the Target Fund will receive Class A Shares
of Acquiring Fund. Adviser Class Shareholders will receive Class B Shares of
Acquiring Fund. Such distribution will be accomplished by an instruction, signed
by the Secretary of the Trust, to transfer Acquiring Fund Shares then credited
to the Target Funds' account on the books of the Acquiring Fund, to open
accounts on the books of the Acquiring Fund in the names of the Target Fund
Shareholders and representing the respective pro rata number of Acquiring Fund
Shares due to such Target Fund Shareholders. All issued and outstanding shares
of the Target Fund simultaneously will be canceled on the Target Funds' books;
however, share certificates representing interests in the Target Fund will
represent a number of Acquiring Fund Shares after the Closing Date as determined
in accordance with paragraph 2.3. The Acquiring Fund will issue certificates
representing the Acquiring Fund Shares in connection with such exchange only
upon the written request of a Target Fund Shareholder.
1.6 Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund's transfer agent. The Acquiring Fund Shares will be issued in the
manner described in the Company's current Prospectus and Statement of Additional
Information.
1.7 Any transfer taxes payable upon issuance of the Acquiring Fund Shares
in a name other than the registered holder of the Acquiring Fund Shares on the
Target Fund's books as of the close of business on the Valuation Date shall, as
a condition of such issuance and transfer, be paid by the person to whom the
Acquiring Fund Shares are to be issued and transferred.
1.8 Any reporting responsibility of the Target Fund, is and shall remain
the responsibility of the Target Fund up to and including the date on which the
Target Fund is dissolved pursuant to paragraph 1.9.
1.9 Within one year after the Closing Date, the Target Fund shall pay or
make provision for the payment of all its liabilities and taxes, and distribute
to the shareholders of the Target Fund as of the close of business on the
Valuation Date any remaining amount of the Cash Reserve (as reduced by the
estimated cost of distributing it to shareholders). If and to the extent that
any trust, escrow account, or other similar entity continues after the close of
such one-year period in connection either with making provision for payment of
liabilities or taxes or with distributions to shareholders of the Target Fund,
such entity shall
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either (i) qualify as a liquidating trust under Section 7701 of the Code (and
applicable Treasury Regulations thereunder) or other entity which does not
constitute a continuation of the Target Fund for federal income tax purposes, or
(ii) be subject to a waiver under Section 368(a)(2)(G)(ii) of the complete
distribution requirement of Section 368(a)(2)(G)(i) of the Code. The Target Fund
shall be dissolved as a portfolio of the Company promptly following the making
of all distributions pursuant to paragraph 1.5 (and, in any event, within one
year after the Closing Date).
1.10 Copies of all books and records maintained on behalf of the Target
Fund in connection with its obligations under the Investment Company Act of
1940, as amended (the "1940 Act"), the Code, state Blue Sky laws or otherwise in
connection with this Agreement will promptly after the Closing be delivered to
officers of the Acquiring Fund or their designee and the Acquiring Fund or its
designee shall comply with applicable record retention requirements to which the
Target Fund is subject under the 1940 Act.
2. VALUATION
2.1 The value of the Target Fund Assets shall be the value of such assets
computed as of 4:00 p.m. on the New York Stock Exchange on the third business
day following the receipt of the requisite approval by shareholders of the
Target Fund of this Agreement or at such time on such earlier or later date
after such approval as may be mutually agreed upon in writing (such time and
date being hereinafter called the "Valuation Date"), using the valuation
procedures set forth in the Trust's then current Prospectus and Statement of
Additional Information.
2.2 The net asset value of an Acquiring Fund Share shall be the net asset
value per share computed on the Valuation Date, using the valuation procedures
set forth in the Company's then current Prospectus and Statement of Additional
Information.
2.3 The number of Acquiring Fund Shares (including fractional shares, if
any) to be issued hereunder shall be determined, with respect to each class, by
dividing the aggregate net asset value of the applicable class of Target Fund
shares (calculated in accordance with paragraph 2.1) by the net asset value per
share of the applicable class of shares of the Acquiring Fund. For purposes of
this paragraph, the aggregate net asset value of the shares of the Target Fund
shall not include the amount of the Cash Reserve.
2.4 All computations of value shall be made by X.X. Xxxxxx Investor
Services Company in accordance with its regular practice in pricing the
Acquiring Fund. The Acquiring Fund shall cause X.X. Xxxxxx Investor Services
Company to deliver a copy of its valuation report at the Closing.
3. CLOSING AND CLOSING DATE
3.1 The Closing shall take place on the Valuation Date or in no event later
than the next business day following the Valuation Date (the "Closing Date").
The Closing shall be held as of 5:00 p.m. Eastern time, or at such other time as
the parties may agree. The Closing shall be held in a location mutually
agreeable to the parties hereto. All acts taking place at the Closing shall be
deemed to take place simultaneously as of 5:00 p.m. Eastern time on the Closing
Date unless otherwise provided.
3.2 Portfolio securities held by the Target Fund and represented by a
certificate or other written instrument shall be presented by it or on its
behalf to X.X. Xxxxxx Chase & Co. (the "Custodian"), as custodian for the
Acquiring Fund, for examination no later than five business days preceding the
Valuation Date. Such portfolio securities (together with any cash or other
assets) shall be delivered by the Target Fund to the Custodian for the account
of the Acquiring Fund on or before the Closing Date in conformity with
applicable custody provisions under the 1940 Act and duly endorsed in proper
form for transfer in such condition as to constitute good delivery thereof in
accordance with the custom of brokers. The portfolio securities shall be
accompanied by all necessary Federal and state stock transfer stamps or a check
for the appropriate purchase price of such stamps. Portfolio securities and
instruments deposited with a securities depository (as defined in Rule 17f-4
under the 0000 Xxx) shall be delivered on or before
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the Closing Date by book-entry in accordance with customary practices of such
depository and the Custodian. The cash delivered shall be in the form of a
Federal Funds wire, payable to the order of "X.X. Xxxxxx Xxxxx & Co., Custodian
for the Acquiring Fund."
3.3 In the event that on the Valuation Date, (a) the New York Stock
Exchange shall be closed to trading or trading thereon shall be restricted or
(b) trading or the reporting of trading on such Exchange or elsewhere shall be
disrupted so that, in the judgment of both the Target Fund and Acquiring Fund,
accurate appraisal of the value of the net assets of the Acquiring Fund or the
Target Fund Assets is impracticable, the Valuation Date shall be postponed until
the first business day after the day when trading shall have been fully resumed
without restriction or disruption and reporting shall have been restored.
3.4 If requested, the Target Fund shall deliver to the Acquiring Fund or
its designee (a) at the Closing, a list, certified by the Secretary of the Trust
of the names, addresses and taxpayer identification numbers of the Target Fund
Shareholders and the number and percentage ownership of outstanding Target Fund
shares owned by each such Target Fund Shareholder, all as of the Valuation Date,
and (b) as soon as practicable after the Closing, all original documentation
(including Internal Revenue Service forms, certificates, certifications and
correspondence) relating to the Target Funds' taxpayer identification numbers
and their liability for or exemption from back-up withholding. The Acquiring
Fund shall issue and deliver to such Secretary a confirmation evidencing
delivery of Acquiring Fund Shares to be credited on the Closing Date to the
Target Fund or provide evidence satisfactory to the Target Fund that such
Acquiring Fund Shares have been credited to the Target Funds' account on the
books of the Acquiring Fund. At the Closing, each party shall deliver to the
other such bills of sale, checks, assignments, share certificates, if any,
receipts or other documents as such other party or its counsel may reasonably
request.
4. COVENANTS OF THE TARGET FUND AND ACQUIRING FUND
4.1 Except as otherwise expressly provided herein with respect to the
Target Fund, the Acquiring Fund and the Target Fund each will operate its
business in the ordinary course between the date hereof and the Closing Date, it
being understood that such ordinary course of business will include customary
dividends and other distributions.
4.2 The Company, will prepare and file with the Securities and Exchange
Commission ("Commission") a registration statement on Form N-14 under the
Securities Act of 1933, as amended ("1933 Act"), relating to the Acquiring
Shares ("Registration Statement"). The Target Fund will provide the Company with
the Proxy Materials as described in paragraph 4.3 below, for inclusion in the
Registration Statement. The Target Fund will further provide the Company with
such other information and documents relating to the Target Fund as are
reasonably necessary for the preparation of the Registration Statement.
4.3 The Target Fund will call a meeting of the Target Fund shareholders to
consider and act upon this Agreement and to take all other action necessary to
obtain approval of the transactions contemplated herein. The Target Fund will
prepare the notice of meeting, form of proxy and proxy statement (collectively,
"Proxy Materials") to be used in connection with such meeting; provided that the
Company will furnish the Target Fund with its currently effective prospectus for
inclusion in the Proxy Materials and with such other information relating to the
Acquiring Fund as is reasonably necessary for the preparation of the Proxy
Materials.
4.4 The Target Fund will assist the Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requests concerning the beneficial
ownership of Target Fund Shares.
4.5 Subject to the provisions of this Agreement, the Target Fund and the
Acquiring Fund will each take, or cause to be taken, all action, and do or cause
to be done, all things reasonably necessary, proper or advisable to consummate
and make effective the transactions contemplated by this Agreement.
4.6 The Target Fund shall furnish or cause to be furnished to the Acquiring
Fund within 30 days after the Closing Date a statement of the Target Funds'
assets and liabilities as of the Closing Date, which
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statement shall be certified by the Treasurer of the Trust and shall be in
accordance with generally accepted accounting principles consistently applied.
As promptly as practicable, but in any case within 60 days after the Closing
Date, the Target Fund shall furnish the Acquiring Fund, in such form as is
reasonably satisfactory to the Acquiring Fund, a statement certified by the
Treasurer of the Trust of earnings and profits of the Target Fund for Federal
income tax purposes that will be carried over to the Acquiring Fund pursuant to
Section 381 of the Code.
4.7 As soon after the Closing Date as is reasonably practicable, the Target
Fund (a) shall prepare and file all Federal and other tax returns and reports of
the Target Fund required by law to be filed with respect to all periods ending
on or before the Closing Date but not theretofore filed and (b) shall pay all
Federal and other taxes shown as due thereon and/or all Federal and other taxes
that were unpaid as of the Closing Date, including without limitation, all taxes
for which the provision for payment was made as of the Closing Date (as
represented in paragraph 5.2(k)).
4.8 The Company agrees to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act and the 1940 Act and to
make such filings required by the state Blue Sky and securities laws as it may
deem appropriate in order to continue its operations after the Closing Date.
5. REPRESENTATIONS AND WARRANTIES
5.1 The Company represents and warrants to the Target Fund, on behalf of
the Acquiring Fund, as follows:
(a) The Company is a validly existing Maryland corporation with full power
to carry on its business as presently conducted;
(b) The Company is a duly registered, open-end, management investment
company, and its registration with the Commission as an investment company under
the 1940 Act and the registration of its shares under the 1933 Act are in full
force and effect;
(c) All of the issued and outstanding shares of the Acquiring Fund have
been offered and sold in compliance in all material respects with applicable
registration requirements of the 1933 Act and state securities laws. Shares of
the Acquiring Fund are registered in all jurisdictions in which they are
required to be registered under state securities laws and other laws, and said
registrations, including any periodic reports or supplemental filings, are
complete and current, all fees required to be paid have been paid, and the
Acquiring Fund is not subject to any stop order and is fully qualified to sell
its shares in each state in which its shares have been registered;
(d) The current Prospectus and Statement of Additional Information of the
Company conforms in all material respects to the applicable requirements of the
1933 Act and the 1940 Act and the regulations thereunder and do not include any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading;
(e) The Company is not in, and the execution, delivery and performance of
this Agreement will not result in, a material violation of any provision of the
Company's Articles of Incorporation or By-Laws or of any agreement, indenture,
instrument, contract, lease or other undertaking to which the Company is a party
or by which it is bound;
(f) No litigation or administrative proceeding or investigation of or
before any court or governmental body is presently pending or, to its knowledge,
threatened against the Acquiring Fund or any of its properties or assets which,
if adversely determined, would materially and adversely affect its financial
condition or the conduct of its business; and the Company knows of no facts that
might form the basis for the institution of such proceedings and is not a party
to or subject to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects, or is reasonably
likely
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to materially and adversely effect, its business or its ability to consummate
the transactions herein contemplated;
(g) The Statement of Assets and Liabilities, Statement of Operations,
Statement of Changes in Net Assets and Financial Highlights for the year ended
December 31, 2002, of the Company audited by Ernst & Young LLP (copies of which
have been furnished to the Target Fund) fairly present, in all material
respects, the Acquiring Fund's financial condition as of such date in accordance
with generally accepted accounting principles, and its results of such
operations, changes in its net assets and financial highlights for such period,
and as of such date there were no known liabilities of the Acquiring Fund
(contingent or otherwise) not disclosed therein that would be required in
accordance with generally accepted accounting principles to be disclosed
therein;
(h) All issued and outstanding Acquiring Fund Shares are, and at the
Closing Date will be, duly and validly issued and outstanding, fully paid and
nonassessable with no personal liability attaching to the ownership thereof,
except as set forth in the Trust's current Prospectus incorporated by reference
in the Registration Statement. The Acquiring Fund does not have outstanding any
options, warrants or other rights to subscribe for or purchase any of its
shares;
(i) The execution, delivery and performance of this Agreement have been
duly authorized by all necessary action on the part of the Company, and this
Agreement constitutes a valid and binding obligation of the Company 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. No other consents,
authorizations or approvals are necessary in connection with the Company's
performance of this Agreement;
(j) The Acquiring Fund Shares to be issued and delivered to the Target
Fund, for the account of the Target Fund Shareholders, pursuant to the terms of
this Agreement will at the Closing Date have been duly authorized and, when so
issued and delivered, will be duly and validly issued Acquiring Fund Shares, and
will be fully paid and non-assessable with no personal liability attaching to
the ownership thereof, except as set forth in the Company's current Statement of
Additional Information incorporated by reference in the Statement of Additional
Information to this Registration Statement;
(k) All material Federal and other tax returns and reports of the Company
required by law to be filed on or before the Closing Date have been filed and
are correct, and all Federal and other taxes shown as due or required to be
shown as due on said returns and reports have been paid or provision has been
made for the payment thereof, and to the best of the Company's knowledge, no
such return is currently under audit and no assessment has been asserted with
respect to any such return;
(l) For each taxable year since its inception, the Company has met the
requirements of Subchapter M of the Code for qualification and treatment as a
"regulated investment company" and neither the execution or delivery of nor the
performance of its obligations under this Agreement will adversely affect, and
no other events are foreseen, or reasonably likely to occur, which will
adversely affect the ability of the Company to continue to meet the requirements
of Subchapter M of the Code;
(m) Since December 31, 2002 there has been no change by the Company in
accounting methods, principles, or practices, including those required by
generally accepted accounting principles;
(n) The information furnished or to be furnished by the Company for use in
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; and
(o) The Proxy Materials to be included in the Registration Statement (only
insofar as they relate to the Acquiring Fund) will, on the effective date of the
Registration Statement and on the Closing Date, not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein
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or necessary to make the statements therein, in light of the circumstances under
which such statements were made, not materially misleading.
5.2 The Trust, on behalf of the Target Fund represents and warrants to the
Acquiring Fund, as follows:
(a) The Trust is a validly existing Pennsylvania business trust with full
power to carry on its business as presently conducted;
(b) The Trust is a duly registered, open-end, management investment
company, and its registration with the Commission as an investment company under
the 1940 Act and the registration of its shares under the 1933 Act are in full
force and effect;
(c) All of the issued and outstanding shares of beneficial interest of the
Target Fund have been offered and sold in compliance in all material respects
with applicable requirements of the 1933 Act and state securities laws. Shares
of the Target Fund are registered in all jurisdictions in which they are
required to be registered and said registrations, including any periodic reports
or supplemental filings, are complete and current, all fees required to be paid
have been paid, and the Target Fund is not subject to any stop order and is
fully qualified to sell its shares in each state in which its shares have been
registered;
(d) The current Prospectus and Statement of Additional Information of the
Trust conform in all material respects to the applicable requirements of the
1933 Act and the 1940 Act and the regulations thereunder and do not include any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading;
(e) The Trust is not, and the execution, delivery and performance of this
Agreement will not result, in a material violation of any provision of the
Trust's Declaration of Trust or By-Laws or of any agreement, indenture,
instrument, contract, lease or other undertaking to which the Trust is a party
or by which it is bound;
(f) No litigation or administrative proceeding or investigation of or
before any court or governmental body is presently pending or, to its knowledge,
threatened against the Target Fund or any of its properties or assets which, if
adversely determined, would materially and adversely affect its financial
condition or the conduct of its business; and the Trust knows of no facts that
might form the basis for the institution of such proceedings and is not a party
to or subject to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects, or is reasonably
likely to materially and adversely effect, its business or its ability to
consummate the transactions herein contemplated;
(g) The Statement of Assets and Liabilities, Statement of Operations,
Statement of Changes in Net Assets and Financial Highlights of the Trust for the
year ended September 30, 2002 audited by Ernst & Young LLP (copies of which have
been or will be furnished to the Company) fairly present, in all material
respects, the Target Funds' financial condition as of such date, and its results
of operations, changes in its net assets and financial highlights for such
period in accordance with generally accepted accounting principles, and as of
such date there were no known liabilities of the Target Fund (contingent or
otherwise) not disclosed therein that would be required in accordance with
generally accepted accounting principles to be disclosed therein;
(h) The Trust has no material contracts or other commitments (other than
this Agreement) that will be terminated with liability to it prior to the
Closing Date;
(i) All issued and outstanding shares of the Target Fund are, and at the
Closing Date will be, duly and validly issued and outstanding, fully paid and
nonassessable with no personal liability attaching to the ownership thereof. The
Target 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 to any of its
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shares. All such shares will, at the time of Closing, be held by the persons and
in the amounts set forth in the list of shareholders submitted to the Acquiring
Fund pursuant to paragraph 3.4;
(j) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Closing Date by all necessary action on the
part of the Trust, and subject to the approval of the Target Funds'
shareholders, this Agreement constitutes a valid and binding obligation of the
Company, 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. No other consents,
authorizations or approvals are necessary in connection with the Trust's
performance of this Agreement;
(k) All material Federal and other tax returns and reports of the Trust
required by law to be filed on or before the Closing Date shall have been filed
and are correct and all Federal and other taxes shown as due or required to be
shown as due on said returns and reports have been paid or provision has been
made for the payment thereof, and to the best of the Trust's knowledge, no such
return is currently under audit and no assessment has been asserted with respect
to any such return;
(l) For each taxable year since its inception, the Trust, has met all the
requirements of Subchapter M of the Code for qualification and treatment as a
"regulated investment company" and neither the execution or delivery of nor the
performance of its obligations under this Agreement will adversely affect, and
no other events are foreseen, or reasonably likely to occur, which will
adversely affect, the ability of the Trust to continue to meet the requirements
of Subchapter M of the Code;
(m) At the Closing Date, the Trust will have good and valid title to the
Target Fund Assets, subject to no liens (other than the obligation, if any, to
pay the purchase price of portfolio securities purchased by the Target Fund
which have not settled prior to the Closing Date), security interests or other
encumbrances, and full right, power and authority to assign, deliver and
otherwise transfer such assets hereunder, and upon delivery and payment for such
assets, the Acquiring Fund will acquire good and marketable title thereto,
subject to no restrictions on the full transfer thereof, including any
restrictions as might arise under the 1933 Act;
(n) On the effective date of the Registration Statement, at the time of the
meeting of the Target Funds' shareholders and on the Closing Date, the Proxy
Materials (exclusive of the currently effective Company Prospectus contained
therein) will (i) comply in all material respects with the provisions of the
1933 Act, the Securities Exchange Act of 1934, as amended ("1934 Act") and the
0000 Xxx and the regulations thereunder and (ii) 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. Any
other information furnished by the Trust for use in the Registration Statement
or in any other manner that may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete and shall comply in all
material respects with applicable Federal securities and other laws and
regulations thereunder;
(o) The Target Fund will, on or prior to the Valuation Date, declare one or
more dividends or other distributions to shareholders that, together with all
previous dividends and other distributions to shareholders, shall have the
effect of distributing to the shareholders all of its investment company taxable
income and net capital gain, if any, through the Valuation Date (computed
without regard to any deduction for dividends paid);
(p) The Trust has maintained or has caused to be maintained on its behalf
all books and accounts as required of a registered investment company in
compliance with the requirements of Section 31 of the 1940 Act and the Rules
thereunder; and
(q) The Target Fund is not acquiring the Acquiring Fund Shares to be issued
hereunder for the purpose of making any distribution thereof other than in
accordance with the terms of this Agreement.
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6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TARGET FUND
The obligations of the Target Fund to consummate the transactions provided
for herein shall be subject, at its election, to the performance by the Company
on behalf of 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
conditions:
6.1 All representations and warranties of the Company contained in this
Agreement shall be true and correct in all material respects 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 Company shall have delivered to the Target Fund, a certificate of
its President and Treasurer, in a form reasonably satisfactory to the Target
Fund and dated as of the Closing Date, to the effect that the representations
and warranties of the Company 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, and as to such other matters as the Target Fund
shall reasonably request;
6.3 The Target Fund, shall have received a favorable opinion from Mayer,
Brown, Xxxx & Maw LLP, counsel to the Company, dated as of the Closing Date, to
the effect that:
(a) The Company is a validly existing Maryland corporation, and has the
power to own all of its properties and assets and to carry on its business as
presently conducted (Maryland counsel may be relied upon in delivering such
opinion);
(b) the Company is a duly registered, open-end, management investment
company, and its registration with the Commission as an investment company under
the 1940 Act is in full force and effect;
(c) this Agreement has been duly authorized, executed and delivered by the
Company and, assuming that the Registration Statement complies with the 1933
Act, the 1934 Act and the 1940 Act and regulations thereunder and assuming due
authorization, execution and delivery of this Agreement by the Company, is a
valid and binding obligation of the Company enforceable against the Company 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;
(d) the Acquiring Fund Shares to be issued to the Target Fund Shareholders
as provided by this Agreement are duly authorized and upon such delivery will be
validly issued, fully paid and non-assessable (except as set forth in the
Trust's Statement of Additional Information), and no shareholder of the Company
has any preemptive rights to subscription or purchase in respect thereof
(Maryland counsel may be relied upon in delivering such opinion);
(e) the execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, violate the
Company's Articles of Incorporation or By-Laws (Maryland counsel may be relied
upon in delivering such opinion);
(f) to the knowledge of such counsel, no consent, approval, authorization
or order of any court or governmental authority of the United States or any
state is required for the consummation by the Trust of the transactions
contemplated herein, except such as have been obtained under the 1933 Act, the
1934 Act and the 1940 Act and such as may be required under state securities
laws; and
6.4 As of the Closing Date, there shall have been no material change in the
Acquiring Fund's investment objective, policies and restrictions nor any
increase in the investment management fees from those described in the Company's
Prospectus dated May 1, 2003 and Statement of Additional Information dated
May 1, 2003.
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7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to complete the transactions provided
for herein shall be subject, at its election, to the performance by the Trust,
on behalf of the Target Fund, of all the obligations to be performed by it
hereunder on or before the Closing Date and, in addition thereto, the following
conditions:
7.1 All representations and warranties of the Trust contained in this
Agreement shall be true and correct in all material respects 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 Trust shall have delivered to the Acquiring Fund at the Closing a
certificate of its President and its Treasurer, in form and substance
satisfactory to the Acquiring Fund and dated as of the Closing Date, to the
effect that the representations and warranties of the Company 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, and as to such
other matters as the Company shall reasonably request;
7.3 The Target Fund shall have delivered to the Acquiring Fund, a statement
of the Target Fund Assets and its liabilities, together with a list of the
Target Funds' portfolio securities and other assets showing the respective
adjusted bases and holding periods thereof for income tax purposes, as of the
Closing Date, certified by the Treasurer of the Trust;
7.4 The Target Fund shall have delivered to the Company within three
business days after the Closing a letter from Ernst & Young LLP dated as of the
Closing Date stating that (a) such firm has performed a limited review of the
Federal and state income tax returns of Company for each of the last three
taxable years and, based on such limited review, nothing came to their attention
that caused them to believe that such returns did not properly reflect, in all
material respects, the Federal and state income tax liabilities of the Target
Fund for the periods covered thereby, (b) for the period from October 1, 2002 to
and including the Closing Date, such firm has performed a limited review (based
on unaudited financial data) to ascertain the amount of applicable Federal,
state and local taxes and has determined that same either have been paid or
reserves have been established for payment of such taxes, and, based on such
limited review, nothing came to their attention that caused them to believe that
the taxes paid or reserves set aside for payment of such taxes were not adequate
in all material respects for the satisfaction of all Federal, state and local
tax liabilities for the period from October 1, 2002 to and including the Closing
Date and (c) based on such limited reviews, nothing came to their attention that
caused them to believe that the Trust would not qualify as a regulated
investment company for Federal income tax purposes for any such year or period;
7.5 The Company shall have received at the Closing a favorable opinion from
Mayer, Brown, Xxxx & Maw LLP, counsel to the Trust, dated as of the Closing Date
to the effect that:
(a) The Trust is a validly existing Pennsylvania business trust and has the
power to own all of its properties and assets and to carry on its business as
presently conducted (Pennsylvania counsel may be relied upon in delivering such
opinion);
(b) the Trust is a duly registered, open-end, management investment company
under the 1940 Act, and its registration with the Commission as an investment
company under the 1940 Act is in full force and effect;
(c) this Agreement has been duly authorized, executed and delivered by the
Trust, and, assuming that the Registration Statement complies with the 1933 Act,
the 1934 Act and the 1940 Act and the regulations thereunder and assuming due
authorization, execution and delivery of this Agreement by the Trust, is a valid
and binding obligation of the Trust enforceable against the Trust in accordance
with its
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terms, subject as to enforcement, to bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors' rights and to
general equity principles;
(d) the execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, violate the
Trust's Declaration of Trust or By-Laws (Pennsylvania counsel may be relied upon
in delivering such opinion);
(e) to the knowledge of such counsel, no consent, approval, authorization
or order of any court or governmental authority of the United States or any
state is required for the consummation by the Trust of the transactions
contemplated herein, except such as have been obtained under the 1933 Act, the
1934 Act and the 1940 Act and such as may be required under state securities
laws; and
7.6 On the Closing Date, the Target Fund Assets shall include no assets
that the Acquiring Fund, by reason of limitations of the Acquiring Fund's
Articles of Incorporation or otherwise, may not properly acquire.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TARGET FUND AND THE
ACQUIRING FUND
The obligations of the Trust, on behalf of a Target Fund, and the Company on
behalf of the Acquiring Fund, hereunder are each subject to the further
conditions that on or before the Closing Date:
8.1 This Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding shares of the
Target Fund in accordance with the provisions of the Trust's Declaration of
Trust, and certified copies of the resolutions evidencing such approval shall
have been delivered to the Company;
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, including
"no-action" positions of and exemptive orders from such Federal and state
authorities) deemed necessary by Target Fund or Acquiring Fund to permit
consummation, in all material respects, of the transactions contemplated herein
shall have been obtained, except where failure to obtain any such consent, order
or permit would not involve risk of a material adverse effect on the assets or
properties of the Trust or the Target Fund or Acquiring Fund;
8.4 The Registration Statement shall have become effective under the 1933
Act, no stop orders suspending the effectiveness thereof 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 1933 Act;
8.5 The Target Fund shall have declared and paid a dividend or dividends
and/or other distribution or distributions that, together with all previous such
dividends or distributions, shall have the effect of distributing to the Target
Fund Shareholders all of the Target Funds' investment company taxable income
(computed without regard to any deduction for dividends paid) and all of its net
capital gain (after reduction for any capital loss carry-forward and computed
without regard to any deduction for dividends paid) for all taxable years ending
on or before the Closing Date; and
8.6 The parties shall have received the opinion of the law firm of Mayer,
Brown, Xxxx & Maw LLP (based on such representations as such law firm shall
reasonably request), addressed to the Company on behalf of the Acquiring Fund
and the Trust, on behalf of the Target Fund, which opinion may be relied
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upon by the shareholders of the Target Fund, substantially to the effect that,
for Federal income tax purposes:
(a) The transfer of the Target Fund's assets in exchange for the Acquiring
Fund Shares and the assumption by the Acquiring Fund of certain stated
liabilities of the Target Fund followed by the distribution by the Target Fund
of Acquiring Fund Shares to the Target Fund Shareholders in exchange for their
Target Fund Shares pursuant to and in accordance with the terms of the
Reorganization Agreement will constitute a "reorganization" within the meaning
of Section 368(a)(1)(C) of the Code, and the Trust and the Company will each be
a "party to a reorganization" within the meaning of Section 368(b) of the Code;
(b) No gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of the Target Fund solely in exchange for the Acquiring
Fund Shares and the assumption by the Acquiring Fund of the stated liabilities
of the Target Fund;
(c) No gain or loss will be recognized by the Target Fund upon the transfer
of the assets of the Target Fund to the Acquiring Fund in exchange for the
Acquiring Fund Shares and the assumption by the Acquiring Fund of the stated
liabilities or upon the distribution of the Acquiring Fund Shares to the Target
Fund Shareholders in exchange for their Target Fund Shares;
(d) No gain or loss will be recognized by the Target Fund Shareholders upon
the exchange of the Target Fund Shares for Acquiring Fund Shares;
(e) The aggregate tax basis for Acquiring Fund Shares received by each
Target Fund Shareholder pursuant to the reorganization will be the same as the
aggregate tax basis of the Target Fund Shares held by each such Target Fund
Shareholder immediately prior to the Reorganization;
(f) The holding period of Acquiring Fund Shares to be received by each
Target Fund Shareholder will include the period during which the Target Fund
Shares surrendered in exchange therefor were held (provided such Target Fund
Shares were held as capital assets on the date of the Reorganization);
(g) The tax basis of the assets of Target Fund acquired by the Acquiring
Fund will be the same as the tax basis of such assets to the Target Fund
immediately prior to the Reorganization; and
(h) The holding period of the assets of the Target Fund in the hands of the
Acquiring Fund will include the period during which those assets were held by
the Acquiring Fund.
(i) Notwithstanding anything herein to the contrary, neither the Acquiring
Fund nor the Target Fund may waive the conditions set forth in this paragraph
8.6.
9. FEES AND EXPENSES
9.1 (a) The Target Fund shall equally bear all of the expenses of proxy
solicitation including the cost of preparing and mailing the Proxy Statement and
Prospectus. The Target Fund and the Acquiring Fund will each bear all of their
respective expenses incurred in connection with the entering into, and carrying
out of, the provisions of this Agreement, including legal, accounting,
Commission registration fees and Blue Sky expenses, legal and accounting fees,
filing and portfolio transfer taxes (if any) incurred in connection with the
consummation of the transactions contemplated herein.
(b) In the event the transactions contemplated herein are not consummated
by reason of the Target Fund being either unwilling or unable to go forward
(other than by reason of the nonfulfillment or failure of any condition to the
Target Fund's obligations specified in this Agreement), the Target Fund's only
obligation hereunder shall be to reimburse the Acquiring Fund for all reasonable
out-of-pocket fees and expenses incurred by the Acquiring Fund in connection
with those transactions.
(c) In the event the transactions contemplated herein are not consummated
by reason of the Acquiring Fund being either unwilling or unable to go forward
(other than by reason of the nonfulfillment
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or failure of any condition to the Acquiring Fund's obligations specified in
this Agreement), the Acquiring Fund's only obligation hereunder shall be to
reimburse the Target Fund for all reasonable out-of-pocket fees and expenses
incurred by the Target Fund in connection with those transactions.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTS
10.1 This Agreement constitutes the entire agreement between the parties.
10.2 The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated herein, except
that the representations, warranties and covenants of the Trust hereunder shall
not survive the dissolution and complete liquidation of the Target Fund in
accordance with Section 1.9.
11. TERMINATION
11.1 This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Closing:
(a) by the mutual written consent of the Target Fund, and the Acquiring
Fund;
(b) by either, the Target Fund, or the Acquiring Fund, by notice to the
other, without liability to the terminating party on account of such termination
(providing the terminating party is not otherwise in material default or breach
of this Agreement) if the Closing shall not have occurred on or before
March 31, 2004; or
(c) by either the Target Fund, or the Acquiring Fund, in writing without
liability to the terminating party on account of such termination (provided the
terminating party is not otherwise in material default or breach of this
Agreement), if (i) the other party shall fail to perform in any material respect
its agreements contained herein required to be performed on or prior to the
Closing Date, (ii) the other party materially breaches any of its
representations, warranties or covenants contained herein, (iii) the Target Fund
shareholders fail to approve this Agreement at any meeting called for such
purpose at which a quorum was present or (iv) any other condition herein
expressed to be precedent to the obligations of the terminating party has not
been met and it reasonably appears that it will not or cannot be met.
11.2 (a) Termination of this Agreement pursuant to paragraphs 11.1(a) or
(b) shall terminate all obligations of the parties hereunder and there shall be
no liability for damages on the part of the Trust on behalf of the Target Fund
or the Company on behalf of the Acquiring Fund, or the trustees or officers of
the Trust on behalf of the Target Fund or the Company on behalf of the Acquiring
Fund, to any other party or its trustees or officers.
(b) Termination of this Agreement pursuant to paragraph 11.1(c) shall
terminate all obligations of the parties hereunder and there shall be no
liability for damages on the part of the Trust on behalf of the Target Fund or
the Company on behalf of the Acquiring Fund, or the trustees or officers of the
Trust on behalf of the Target Fund or the Company on behalf of the Acquiring
Fund, except that any party in breach of this Agreement shall, upon demand,
reimburse the non-breaching party for all reasonable out-of-pocket fees and
expenses incurred in connection with the transactions contemplated by this
Agreement, including legal, accounting and filing fees.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the parties.
13. MISCELLANEOUS
13.1 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.
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13.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
13.3 This Agreement shall be governed by and construed in accordance with
the laws of Maryland.
13.4 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 any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
13.5 The obligations and liabilities of the Company hereunder are solely
those of the Company. It is expressly agreed that no shareholder, nominee,
director, officer, agent, or employee of the Company shall be personally liable
hereunder. The execution and delivery of this Agreement have been authorized by
the directors of the Company and signed by authorized officers of the Company
acting as such, and neither such authorization by such directors nor such
execution and delivery by such officers shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally.
13.6 The obligations and liabilities of the Trust hereunder are solely
those of the Trust. It is expressly agreed that no shareholder, nominee,
trustee, officer, agent, or employee of the Trust shall be personally liable
hereunder. The execution and delivery of this Agreement have been authorized by
the directors of the Trust and signed by authorized officers of the 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 impose any liability on any of them personally.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by a duly authorized officer.
XXXXXX XXXXXXX INSTITUTIONAL FUND,
INC. ON BEHALF OF THE SMALL COMPANY
GROWTH PORTFOLIO
By:
XXXXXX XXXXXXX INSTITUTIONAL FUND
TRUST ON BEHALF OF SMALL CAP GROWTH
PORTFOLIO
By:
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