Agreement and Plan of Merger
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made as of the 19th
day of April, 1999, by and between the High Yield Fund series of Mosaic Income
Trust, a Massachusetts business trust (the "Trust"), with its principal place
of business at 0000 Xx. Xxxx Xxxxx, Xxxxxxxxx, Xxxxxxxx 00000 (the "Acquiring
Fund"), and the Mosaic Bond Fund series of the Trust (the "Selling Fund").
This Agreement is intended to be and is adopted as a plan of reorganization and
liquidation within the meaning of Section 368 (a)(1)(C) of the United States
Internal Revenue Code of 1986 (the "Code"). The reorganization (the "Merger")
will consist of the transfer of substantially all of the assets of the Selling
Fund in exchange solely for shares of beneficial interest, no par value per
share, of the Acquiring Fund (the "Acquiring Fund Shares") and the assumption
by the Acquiring Fund of certain stated liabilities of the Selling Fund and the
distribution, after the Merger Date hereinafter referred to, of the Acquiring
Fund Shares to the shareholders of the Selling Fund in liquidation of the
Selling Fund as provided herein, all upon the terms and conditions hereinafter
set forth in this Agreement.
WHEREAS, both Funds are separate investment series of an open-end,
registered investment company of the management type, and the Selling
Fund owns securities that generally are assets of the character in
which the Acquiring Fund is permitted to invest;
WHEREAS, both Funds are authorized to issue their shares of beneficial
interest;
WHEREAS, the Trustees of the Trust have determined that the exchange of
substantially all of the assets of the Selling Fund for Acquiring Fund
Shares and the assumption of certain stated liabilities by the
Acquiring Fund on the terms and conditions hereinafter set forth is in
the best interests of the Acquiring Fund shareholders and that the
interests of the existing shareholders of the Acquiring Fund will not
be diluted as a result of the transactions contemplated herein;
WHEREAS, the Trustees of the Trust have also determined that the
Selling Fund should transfer substantially all of its assets to the
Acquiring Fund in exchange for the Acquiring Fund Shares and the
assumption of certain liabilities by the Acquiring Fund, on the terms
and conditions hereinafter set forth, that such transfer is in the best
interests of the Selling Fund's shareholders, and that the interests of
the existing shareholders of the Selling Fund will not be diluted as a
result of the transactions contemplated herein:
NOW, THEREFORE, in consideration of the premises and of the
covenants and agreements hereinafter set forth, the parties
hereto covenant and agree as follows:
ARTICLE I
Transfer of Assets of the Selling Fund in Exchange for the Acquiring
Fund Shares and Assumption of Selling Fund Liabilities and Liquidation
of the Selling Fund
1.1 The Exchange. Subject to the terms and conditions herein set forth
and on the basis of the representations and warranties contained
herein, the Selling Fund agrees to transfer the Selling Fund's assets
as set forth in paragraph 1.2 to the Acquiring Fund, and the Acquiring
Fund agrees in exchange therefore
(i) to deliver to the Selling Fund the number of Acquiring Fund Shares,
including fractional Acquiring Fund Shares, determined by dividing the
value of the Selling Fund's net assets computed in the manner and as of
the time and date set forth in paragraph 2.1 by the net asset value of
one Acquiring Fund Share computed in the manner and as of the time and
date set forth in paragraph 2.2; and
(ii) to assume certain liabilities of the Selling Fund, as set forth in
paragraph 1.3. Such transactions shall take place at the closing
provided for in paragraph 3.1 (the "Merger Date").
1.2 Assets to be Acquired. The assets of the Selling Fund to be
acquired by the Acquiring Fund shall consist of all property, including
without limitation all cash, securities, commodities and futures
interests and dividends or interest receivable, which is owned by the
Selling Fund and any deferred or prepaid expenses shown as an asset on
the books of the Selling Fund on the Merger Date. There have been no
changes in either Fund's financial position as reflected in the Trust's
December 31, 1998 audited financial statements other than those
occurring in the ordinary course of their business in connection with
the purchase and sale of securities and the payment of normal operating
expenses. The Selling Fund reserves the right to sell any of such
securities but will not, without the prior written approval of the
Acquiring Fund, acquire any additional securities other than securities
of the type in which the Acquiring Fund is permitted to invest. In the
event that the Selling Fund holds any investments which the Acquiring
Fund may not hold, the Selling Fund will dispose of such securities
prior to the Merger Date. In addition, if it is determined that the
Selling Fund and the Acquiring Fund portfolios, when aggregated, would
contain investments exceeding certain percentage limitations imposed
upon the Acquiring Fund with respect to such investments, the Selling
Fund will dispose of a sufficient amount of such investments as may be
necessary to avoid violating such limitations as of the Merger Date.
1.3 Liabilities to be Assumed. The Selling Fund will endeavor to discharge all
of its known liabilities and obligations prior to the Merger Date. The
Acquiring Fund shall assume only those liabilities, expenses, costs,
charges and reserves reflected on a Statement of Assets and Liabilities of the
Selling Fund prepared by Madison Mosaic, LLC, the investment advisor and
administrator of the Trust, as of the Valuation Date (as defined in paragraph
2.1), in accordance with generally accepted accounting principles consistently
applied from the prior audited period.
1.4 Liquidation and Distribution. As soon after the Merger Date as is
conveniently practicable (the "Liquidation Date"), (a) the Selling Fund will
liquidate and distribute pro rata to the Selling Fund's shareholders of record,
determined as of the close of business on the Merger Date (the "Selling Fund
Shareholders"), the Acquiring Fund Shares received by the Selling Fund pursuant
to paragraph 1.1. and (b) the Selling Fund will thereupon proceed to dissolve
as set forth in paragraph 1.8 below. Such liquidation and distribution will be
accomplished by the transfer of the Acquiring Fund Shares then credited to the
account of the Selling Fund on the books of the Acquiring Fund, to open
accounts on the share records of the Acquiring Fund in the names of the Selling
Fund Shareholders and representing the respective pro rata number of the
Acquiring Fund Shares due such shareholders. All issued and outstanding shares
of the Selling Fund will simultaneously be canceled on the books of the Selling
Fund. The Trust does not issue certificates representing its shares.
1.5 Ownership of Shares. Ownership of Acquiring Fund Shares will be shown on
the books of the Trust. Whole or fractional shares of the Acquiring Fund will
be issued in the manner described in the Prospectus on Form N-14 to be
distributed to shareholders of the Selling Fund as described in Section 5.
1.6 Transfer Taxes. Any transfer taxes payable upon issuance of the Acquiring
Fund Shares in a name other than the registered holder of the Selling Fund
shares on the books of the Trust as of that time shall, as a condition of such
issuance and transfer, be paid by the person to whom such Acquiring Fund Shares
are to be issued and transferred.
1.7 Reporting Responsibility. Any reporting responsibility of the Selling Fund
is and shall remain the responsibility of the Selling Fund up to and including
the Merger Date and such later date on which the Selling Fund is terminated.
1.8 Termination. The business of the Selling Fund shall be wound up and the
Selling Fund series of the Trust shall be terminated following the Merger Date
and the making of all distributions pursuant to paragraph 1.4.
ARTICLE II
Valuation
2.1 Valuation of Assets. The value of the Selling Fund's assets to be acquired
by the Acquiring Fund hereunder shall be the value of such assets computed as
of the close of business on the New York Stock Exchange on the business day
immediately preceding the Merger Date (such time and date being hereinafter
called the "Valuation Date"), using the valuation procedures set forth in the
Trust's Declaration of Trust and its current prospectus and statement of
additional information.
2.2 Valuation of Shares. The net asset value of an Acquiring Fund Share shall
be the net asset value per share computed as of the close of business on the
New York Stock Exchange on the Valuation Date, using the valuation procedures
set forth in the Trust's Declaration of Trust and current prospectus and
statement of additional information, as applicable.
2.3 Shares to be Issued. The number of the Acquiring Fund Shares to be issued
(including fractional shares, if any) in exchange for the Selling Fund's assets
shall be determined by dividing the value of the assets of the Selling Fund
determined using the same valuation procedures referred to in paragraph 2.1 by
the net asset value of an Acquiring Fund Share determined in accordance with
paragraph 2.2.
2.4 Determination of Value. All computations of value shall be made by Madison
Mosaic, LLC in accordance with its regular practice and procedures in pricing
the shares and assets of the Trust.
ARTICLE III
Closing and Merger Date
3.1 Merger Date. The Merger Date shall be June 30, 1999 or such later date as
the parties may agree to in writing. All acts taking place at the Closing shall
be deemed to take place simultaneously as of the close of business on the
Merger Date unless otherwise provided. The Closing shall be held as of 4:00
o'clock p.m. at the offices of Madison Mosaic, LLC, 0000 Xx. Xxxx Xxxxx,
Xxxxxxxxx, Xxxxxxxx 00000, or at such other time and/or place as the parties
may agree.
3.2 Custodian's Certificate. Firstar Bank, NA, as custodian for the
Trust (the "Custodian"), shall deliver at the Closing a certificate of an
authorized officer stating that: (a) the Selling Fund's portfolio securities,
cash, and any other assets shall have been delivered in proper form to the
Acquiring Fund on the Merger Date and (b) all necessary taxes including all
applicable Federal and state stock transfer stamps, if any, shall have been
paid, or provision for payment shall have been made, in conjunction with the
delivery of portfolio securities.
3.3 Effect of Suspension in Trading. In the event that on the Valuation Date
(a) any primary trading market for portfolio securities of the Acquiring Fund
or the Selling Fund shall be closed to trading or trading thereon shall be
restricted, or (b) trading or the reporting of trading on the New York Stock
Exchange or elsewhere shall be disrupted so that accurate appraisal of the
value of the net assets of the Acquiring Fund or the Selling Fund is
impracticable, the Merger Date shall be postponed until the first business day
after the day when trading shall have been fully resumed and reporting shall
have been restored.
3.4 Transfer Agent's Certificate. The Trust, as transfer agent
for each Fund, shall produce at the Closing a certificate of an
authorized officer stating that their records contain the names and
addresses of the Selling Fund Shareholders and the number
and percentage ownership of outstanding shares owned by each such shareholder
immediately prior to the Merger. The Trust shall issue a confirmation
evidencing the Acquiring Fund Shares to be credited on the Merger Date to the
Secretary of the Company.
ARTICLE IV
Representations and Warranties
4.1 Representations to Acquiring Fund. The Trust represents and warrants on
behalf of the Selling Fund as follows:
(a) The Selling Fund is a separate investment series of a Massachusetts
business trust duly organized, validly existing and in good standing under the
laws of The Commonwealth of Massachusetts.
(b) The Acquiring Fund is a separate investment series of a Massachusetts
business trust that is registered as an investment company classified as a
management company of the open-end type and its registration with the
Securities and Exchange Commission (the "Commission") as an investment
company under the Investment Company Act of 1940 (the "1940 Act") now is in
effect and shall be in full force and effect as of the Merger Date;
(c) The current prospectus and statement of additional information of the
Trust conform in all material respects to the applicable requirements of the
Securities Act of 1933, as amended, (the "1933 Act") and the 1940 Act and the
rules and regulations of the Commission thereunder and do not include any
untrue statement of 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 materially misleading;
(d) The Selling Fund is not, and the execution, delivery and performance of
this Agreement (subject to shareholder approval) will not result, in 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 Selling Fund is a party or by which it is bound;
(e) The Selling Fund has no material contracts or other commitments (other than
this Agreement) which will be terminated with liability to it prior to the
Merger Date;
(f) Except as otherwise disclosed in writing, no litigation, administrative
proceeding or investigation of or before any court or governmental body is
presently pending or to its knowledge threatened against the Selling Fund or
any of its properties or assets which, if adversely determined, would
materially and adversely affect its financial condition, the conduct of its
business or the ability of the Selling Fund to carry out the transactions
contemplated by this Agreement. The Trust knows of no facts which 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 its business
or its ability to consummate the transactions herein contemplated;
(g) The financial statements of the Trust at December 31, 1998 have been
audited by Deloitte & Touche, LLP, certified public accountants, and
are in accordance with generally accepted accounting , principles consistently
applied, and such statements fairly reflect the financial condition of the
Selling Fund as of such date, and there are no known contingent liabilities of
the Selling Fund as of such date not disclosed therein;
(h) Since December 31, 1998, there has not been any material adverse change in
the Selling Fund's financial condition, assets, liabilities or business other
than changes occurring in the ordinary course of business, or any incurrence by
the Selling Fund of indebtedness maturing more than one year from the date such
indebtedness was incurred, except as otherwise disclosed to and accepted by the
Acquiring Fund. For the purposes of this subparagraph (h), a decline in the net
asset value of the Selling Fund shall not constitute a material adverse change;
(i) At the Merger Date, all Federal and other tax returns and reports of the
Selling Fund required by law to have been filed by such dates shall have been
filed, and all Federal and other taxes shall have been paid so far as due, or
provision shall have 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 such returns;
(j) For each of the preceding six fiscal years of its operation the Selling
Fund has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and has distributed in each such
year all net investment income and realized capital gains;
(k) All issued and outstanding shares of the Selling Fund are, and at the
Merger Date will be, duly and validly issued and outstanding, fully paid and
non-assessable by the Trust. All of the issued and outstanding shares of the
Selling Fund will, at the time of the orger Date, be held by the persons and
in the amounts set forth in the records of the Trust as provided in paragraph
3.4. The Selling Fund does not have outstanding any options, warrants or other
rights to subscribe for or purchase any of the Selling Fund shares, nor is
there outstanding any security convertible into any of the Selling Fund shares;
(l) At the Merger Date, the Selling Fund will have good and marketable title to
the Selling Fund's assets to be transferred to the Acquiring Fund pursuant to
paragraph 1.2 and full right, power, and authority to sell, assign, transfer
and deliver 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 such
restrictions as might arise under the 1933 Act, other than as disclosed to the
Acquiring Fund and accepted by the Acquiring Fund;
(m) The execution, delivery and performance of this Agreement have been duly
authorized by all necessary action on the part of the Selling Fund and, subject
to approval by the Selling Fund's shareholders, this Agreement constitutes a
valid and binding obligation of the Selling Fund, enforceable in accordance
with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights and to general equity principles;
(n) The information to be furnished by the Selling Fund for use in no-action
letters, applications for orders, registration statements, proxy materials and
other documents which may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete in all material respects and
shall comply in all material respects with Federal securities and other laws
and regulations thereunder applicable thereto;
(o) The proxy statement of the Trust to be included in the Registration
Statement referred to in paragraph 5.7 (other than information therein that
relates to the Acquiring Fund) will, on the effective date of the Registration
Statement and on the Merger Date, not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which such statements were made, not misleading.
4.2 Representations to Selling Fund. The Trust represents and warrants on
behalf of the Acquiring Fund as follows:
(a) The Acquiring Fund is a separate investment series of a Massachusetts
business trust duly organized, validly existing and in good standing under the
laws of The Commonwealth of Massachusetts.
(b) The Acquiring Fund is a separate investment series of a Massachusetts
business trust that is registered as an investment company classified as a
management company of the open-end type and its registration with the
Commission as an investment company under the 1940 Act now is in effect and
shall be in full force and effect as of the Merger Date;
(c) The current prospectus and statement of additional information of the
Acquiring Fund, to be effective as of the Merger Date, shall conform in all
material respects to the applicable requirements of the 1933 Act and the
1940 Act and the rules and regulations of the Commission 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 materially misleading;
(d) The Acquiring Fund is not, and the execution, delivery and performance of
this Agreement will not, result in violation of the Trust's Declaration of
Trust or By-Laws or of any agreement, indenture, instrument, contract, lease or
other undertaking to which the Acquiring Fund is a party or by which it is
bound;
(e) No material litigation, 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 and the conduct of its business or the ability of the
Acquiring Fund to carry out the transactions contemplated by this Agreement.
The Trust knows of no facts which 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 its business or its ability to consummate the
transactions contemplated herein;
(f) The financial statements of the Acquiring Fund at December 31, 1998 have
been audited by Deloitte & Touche LLP, certified public accountants, and are in
accordance with generally accepted accounting principles consistently applied,
and such statements fairly reflect the financial condition of the Trust as of
such dates, and there are no known contingent liabilities of the Acquiring Fund
as of such dates not disclosed therein;
(g) Since December 31, 1998, there has not been any material adverse change in
the Acquiring Fund's financial condition, assets, liabilities or business other
than changes occurring in the ordinary course of business, or any incurrence by
the Acquiring Fund of indebtedness maturing more than one year from the date
such indebtedness was incurred, except as otherwise disclosed to and accepted
by the Selling Fund. For the purposes of this subparagraph (g), a decline in
the net asset value of the Acquiring Fund shall not constitute a material
adverse change;
(h) At the Merger Date, all Federal and other tax returns and reports of the
Acquiring Fund required by law then to be filed shall have been filed, and all
Federal and other taxes shown due on said returns and reports shall have been
paid or provision shall have been made for the payment thereof and to the best
of the Acquiring Fund's knowledge, no such return is currently under audit and
no assessment has been asserted with respect to such returns;
(i) For each fiscal year of its operation the Acquiring Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as a
regulated investment company;
(j) All issued and outstanding Acquiring Fund Shares are, and at the Merger
Date will be, duly and validly issued and outstanding, fully paid and
non-assessable (except that, under Massachusetts law, shareholders of the
Acquiring Fund could, under certain circumstances, be held personally liable
for obligations of the Acquiring Fund). The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or purchase
any Acquiring Fund Shares, nor is there outstanding any security convertible
into any Acquiring Fund Shares;
(k) The execution, delivery and performance of this Agreement have been duly
authorized by all necessary action on the part of the Acquiring Fund, and this
Agreement constitutes a valid and binding obligation of the Acquiring Fund
enforceable in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium and other laws relating to
or affecting creditors' rights and to general equity principles;
(l) The Acquiring Fund Shares to be issued and delivered to the Selling Fund,
for the account of the Selling Fund Shareholders, pursuant to the terms of this
Agreement will at the Merger 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 (except that, under Massachusetts law,
shareholders of the Acquiring Fund could, under certain circumstances, be held
personally liable for obligations of the Acquiring Fund);
(m) The information to be furnished by the Acquiring Fund for use in no-action
letters, applications for orders, registration statements, proxy materials and
other documents which may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete in all material respects and
shall comply in all material respects with Federal securities and other laws
and regulations applicable thereto;
(n) The Prospectus to be included in the Registration Statement under Form N-14
(only insofar as it relates to the Acquiring Fund ) shall not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which such statements were made, not misleading; and
(o) The Acquiring Fund agrees to use all reasonable efforts to give the
notices or obtain the approvals and authorizations required by the 1933 Act,
the 1940 Act and such of the state Blue Sky or securities laws as it may deem
appropriate in order to continue its operations after the Merger Date.
ARTICLE V
Covenants of the Trust
5.1 Operation in Ordinary Course. The Funds each will operate its business in
the ordinary course between the date hereof and the Merger Date, it being
understood that such ordinary course of business will include customary
dividends and distributions.
5.2 Approval of Shareholders. The Trust will call a meeting of the
Selling Fund Shareholders to consider and act upon this Agreement and to
take all other action necessary to obtain approval of the transactions
contemplated herein.
5.3 Investment Representation. The Selling Fund covenants that the Acquiring
Fund Shares to be issued hereunder are not being acquired for the purpose of
making any distribution thereof other than in accordance with the terms of this
Agreement.
5.4 Further Action. Subject to the provisions of this Agreement, the Trust will
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, including any actions required to
be taken after the Merger Date.
5.5 Statement of Earnings and Profits. As promptly as practicable, but in any
case within sixty days after the Merger Date, the Selling Fund shall furnish
the Acquiring Fund, in such form as is reasonably satisfactory to the Acquiring
Fund, a statement of the earnings and profits of the Selling Fund for Federal
income tax purposes which will be carried over by the Acquiring Fund as a
result of Section 381 of the Code, and which will be certified by the Selling
Fund's officers.
5.6 Preparation of Form N-14 Registration Statement. The Trust will prepare a
Registration Statement on Form N-14 (the "Registration Statement"), in
compliance with the 1933 Act, the Securities Exchange Act of 1934, as amended,
(the "1934 Act") and the 1940 Act in connection with the meeting of the Selling
Fund Shareholders to consider approval of this Agreement and the transactions
contemplated herein.
ARTICLE VI
Article VI is intentionally omitted.
ARTICLE VII
Conditions Precedent
If any of the conditions set forth below do not exist on or before the
Merger Date with respect to the Selling Fund or the Acquiring Fund, the
other party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement:
7.1 The Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding shares of the
Selling Fund in accordance with the provisions of the Trust's Declaration of
Trust and By-Laws as evidenced by certified copies of the resolutions of such
approval maintained in the Minutes of the Trust.
7.2 On the Merger Date the Commission shall not have issued an unfavorable
report under Section 25(b) of the 1940 Act, nor instituted any proceeding
seeking to enjoin the consummation of the transactions contemplated by this
Agreement under Section 25(c) of the 1940 Act and no action, suit or other
proceeding shall be threatened or 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;
7.3 All required 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 any
necessary "no-action" positions of and exemptive orders from such Federal and
state authorities) to permit consummation of the transactions contemplated
hereby shall have been obtained, except where failure to obtain any such
consent, order or permit would not involve a risk of a material adverse effect
on the assets or properties of the Acquiring Fund or the Selling Fund, provided
that the Trust may waive any of such conditions;
7.4 The Registration Statement shall have become effective under the 1933 Act
and 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;
7.5 The Selling Fund shall have declared a dividend or dividends which,
together with all previous such dividends, shall have the effect of
distributing to the Selling Fund Shareholders all of the Selling Fund's
investment company taxable income for all taxable years ending on or prior to
the Merger Date (computed without regard to any deduction for dividends paid)
and all of its net capital gain realized in all taxable years ending on or
prior to the Merger Date (after reduction for any capital loss carryforward);
7.6 The Trust shall have received a favorable opinion of XxXxxx, Xxxx &
Xxxxxxx, S.C. substantially to the effect that for Federal income tax purposes:
(a) The transfer of substantially all of the Selling Fund assets in exchange
for the Acquiring Fund Shares and the assumption by the Acquiring Fund of
certain identified liabilities of the Selling Fund followed by the distribution
of the Acquiring Fund's shares to the Selling Fund in dissolution and
liquidation of the Selling Fund, will constitute a "reorganization" within the
meaning of Section 368(a)(1)(C) of the Code and the Acquiring Fund and the
Selling Fund 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 Selling Fund solely in exchange for the
Acquiring Fund Shares and the assumption by the Acquiring Fund of certain
identified liabilities of the Selling Fund;
(c) no gain or loss will be recognized by the Selling Fund upon the transfer of
the Selling Fund assets to the Acquiring Fund in exchange for the Acquiring
Fund Shares and the assumption by the Acquiring Fund of certain identified
liabilities of the Selling Fund or upon the distribution (whether actual or
constructive) of the Acquiring Fund Shares to Selling Fund Shareholders in
exchange for their shares of the Selling Fund;
(d) no gain or loss will be recognized by Selling Fund Shareholders upon
the exchange of their Selling Fund shares for the Acquiring Fund Shares in
liquidation of the Selling Fund;
(e) the aggregate tax basis for the Acquiring Fund Shares received by each
Selling Fund Shareholder pursuant to the Merger will be the same as the
aggregate tax basis of the Selling Fund shares held by such shareholder
immediately prior to the Merger, and the holding period of the Acquiring Fund
Shares to be received by each Selling Fund Shareholder will include the period
during which the Selling Fund shares exchanged therefore were held by such
shareholder (provided the Selling Fund shares were held as capital assets on
the date of the Merger); and
(f) the tax basis of the Selling Fund assets acquired by the Acquiring Fund
will be the same as the tax basis of such assets to the Selling Fund
immediately prior to the Merger, and the holding period of the assets of the
Selling Fund in the hands of the Acquiring Fund will include the period during
which those assets were held by the Selling Fund. Notwithstanding anything
herein to the contrary, neither the Acquiring Fund nor the Selling Fund may
waive the conditions set forth in this paragraph 7.6.
ARTICLE VIII
Brokerage Fees and Expenses
8.1 The Trust represents and warrants that there are no brokers or finders
entitled to receive any payments in connection with the transactions provided
for herein.
8.2 Except as otherwise provided for herein, all expenses of the
transactions contemplated by this Agreement incurred by either Fund will
be borne by Madison Mosaic, LLC ("Madison"). Such expenses include, without
limitation, (i) expenses incurred in connection with the entering into and
the carrying out of the provisions of this Agreement; (ii) expenses
associated with the preparation and filing of the Registration Statement
under the 1933 Act covering the Acquiring Fund Shares to be issued pursuant
to the provisions of this Agreement; (iii) registration or qualification
fees and expenses of preparing and filing such forms as are necessary
under applicable state securities laws to qualify the Acquiring Fund
Shares to be issued in connection herewith in each state in which the Selling
Fund Shareholders are resident as of the date of the mailing
of the Prospectus and Proxy Statement to such shareholders; (iv) postage; (v)
printing; (vi) accounting fees; (vii) legal fees; and (viii) solicitation cost
of the transactions.
ARTICLE IX
Entire Agreement; Survival of Warranties
9.1 The Trust represents that it has made no representation, warranty or
covenant not set forth herein and that the Agreement constitutes the entire
agreement between the parties.
9.2 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 hereunder.
ARTICLE X
Termination
10.1 This Agreement may be terminated by the Trust at or prior to the Merger
Date because:
(a) of a breach of any representation, warranty or agreement
contained herein to be performed at or prior to the Merger Date, if not cured
within 30 days; or
(b) a condition herein expressed to be precedent to the obligations of any
party has not been met and it reasonably appears that it will not or
cannot be met.
10.2 In the event of any such termination, in the absence of willful default,
there shall be no liability for damages on the part of either the Acquiring
Fund or the Selling Fund, the Trust, or their respective Trustees or officers,
to any other party or Trustees or officers.
ARTICLE XI
Amendments
This Agreement may be amended, modified or supplemented in such manner
as may necessary or appropriate prior to the Merger; provided, however, that
following the meeting of the Selling Fund Shareholders called by the Selling
Fund pursuant to paragraph 5.2 of this Agreement, no such amendment may have
the effect of changing the provisions for determining the number of the
Acquiring Fund Shares to be issued to the Selling Fund Shareholders under this
Agreement to the detriment of such shareholders without their further approval.
ARTICLE XII
Miscellaneous
12.1 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.
12.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
12.3 This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts.
12.4 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.
12.5 It is expressly agreed to that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents, or employees of the Trust, personally, but bind only the
trust property of the Trust, as provided in the Declaration of Trust. The
execution and delivery of this Agreement has been authorized by the Trustees of
the Trust on behalf of each Fund 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,
but shall bind only Trust property as provided in the Trust's Declaration of
Trust.
IN WITNESS WHEREOF, the parties have duly executed and sealed this Agreement,
all as of the date first written above.
Mosaic Income Trust
By:/s/
Name: Xxxxxxxxx X. Xxxxx
Title: President
By: /s/
Name: W. Xxxxxxx Xxxxx
Title: Secretary
