AGREEMENT AND PLAN OF REORGANIZATION
MCMORGAN FIXED INCOME FUND AND MAINSTAY INSTITUTIONAL BOND FUND
This Agreement and Plan of Reorganization ("AGREEMENT") is made as of
November 27, 2007, by and between McMorgan Funds, a Delaware statutory trust
("MCMORGAN FUNDS"), on behalf of its investment portfolio, the McMorgan Fixed
Income Fund (the "ACQUIRED FUND"), and The MainStay Funds, a Massachusetts
business trust ("MAINSTAY FUNDS"), on behalf of its investment portfolio, the
MainStay Institutional Bond Fund (the "ACQUIRING FUND" and, together with the
Acquired Fund, the "FUNDS"). New York Life Investment Management LLC, a limited
liability company organized under the laws of the State of New York ("NYLIM"),
joins this Agreement solely for purposes of paragraphs 4.3, 5.11, 5.12 and 8.2.
This Agreement is intended to be and is adopted as a "plan of
reorganization" within the meaning of Section 368(a)(1) of the Internal Revenue
Code of 1986, as amended (the "CODE"). The reorganization will consist of the
transfer of all of the assets of the Acquired Fund to the Acquiring Fund in
exchange solely for Class I shares of beneficial interest of the Acquiring Fund
(the "ACQUIRING FUND SHARES"), the assumption by the Acquiring Fund of the
liabilities of the Acquired Fund specified in paragraph 1.3, and the
distribution of the Acquiring Fund Shares to the shareholders of the Acquired
Fund in complete liquidation of the Acquired Fund, all upon the terms and
conditions hereinafter set forth in this Agreement (the "REORGANIZATION").
The Board of Trustees of McMorgan Funds has determined, with respect to the
Acquired Fund, that (1) participation in the Reorganization is in the best
interests of the Acquired Fund and its shareholders, and (2) the interests of
the existing shareholders of the Acquired Fund would not be diluted as a result
of the Reorganization.
The Board of Trustees of MainStay Funds has determined, with respect to the
Acquiring Fund, that (1) participation in the Reorganization is in the best
interests of the Acquiring Fund and its shareholders, and (2) the interests of
the existing shareholders of the Acquiring Fund would not be diluted as a result
of the Reorganization.
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
THE REORGANIZATION AND FUND TRANSACTIONS
1.1 The Reorganization. Subject to the requisite approval of the Acquired
Fund's shareholders and the other terms and conditions herein set forth and on
the basis of the representations and warranties contained herein, at the
Effective Time (as defined in paragraph 2.5), McMorgan Funds shall assign,
deliver and otherwise transfer the Assets (as defined in paragraph 1.2) of the
Acquired Fund, to MainStay Funds on behalf of the Acquiring Fund, and MainStay
Funds shall assume the Liabilities (as defined in paragraph 1.3) of the Acquired
Fund
on behalf of the Acquiring Fund. In consideration of the foregoing, at the
Effective Time, MainStay Funds shall, on behalf of the Acquiring Fund, deliver
to McMorgan Funds on behalf of the Acquired Fund, full and fractional Class I
Acquiring Fund Shares (to the third decimal place). The number of Class I
Acquiring Fund Shares to be delivered shall be determined as set forth in
paragraph 2.3.
1.2 Assets of the Acquired Fund. The assets of the Acquired Fund to be
acquired by the Acquiring Fund shall consist of all assets and property,
including, without limitation, all cash, cash equivalents, securities,
receivables (including securities, interests and dividends receivable),
commodities and futures interests, rights to register shares under applicable
securities laws, any deferred or prepaid expenses shown as an asset on the books
of the Acquired Fund at the Effective Time, books and records, and any other
property owned by the Acquired Fund at the Effective Time (collectively, the
"ASSETS").
1.3 Liabilities of the Acquired Fund. The Acquired Fund will use its best
efforts to discharge all of its known liabilities and obligations prior to the
Effective Time. The Acquiring Fund shall assume the liabilities of the Acquired
Fund that are set forth on the Acquired Fund's Statement of Assets and
Liabilities as of the Effective Time that is delivered pursuant to paragraph
6.2(b) and included in the calculation of net asset value ("NAV") as of the
Effective Time, or incurred in the ordinary course of business consistent with
past practice (collectively, the "LIABILITIES"). On or as soon as practicable
prior to the Effective Time, the Acquired Fund will declare and pay to its
shareholders of record one or more dividends and/or other distributions, which,
together with all previous dividends, will have the effect of distributing to
the Acquired Fund Shareholders (as defined in paragraph 1.4) substantially all
(and in no event less than 98%) of the Acquired Fund's previously undistributed
investment company taxable income, if any (computed without regard to any
deduction for dividends paid), and net exempt-interest income, if any, if any,
for all taxable years (including the current taxable year) ending on or prior to
the Effective Time, together with all of the Acquired Fund's previously
undistributed net capital gains, if any, through October 31, 2007.
1.4 Distribution of Acquiring Fund Shares. At the Effective Time (or as
soon thereafter as is reasonably practicable), McMorgan Funds, on behalf of the
Acquired Fund, will distribute the Class I Acquiring Fund Shares received from
MainStay Funds pursuant to paragraph 1.1, pro rata to the record holders of the
McMorgan Fund Class and Class Z shares of the Acquired Fund determined as of the
Effective Time (the "ACQUIRED FUND SHAREHOLDERS") in complete liquidation of the
Acquired Fund. Such distribution and liquidation will be accomplished, with
respect to each class of the Acquired Fund's shares, by the transfer of the
Acquiring Fund Shares then credited to the account of the Acquired Fund on the
books of the Acquiring Fund to open accounts on the share records of the
Acquiring Fund in the names of the Acquired Fund Shareholders. The aggregate net
asset value of the Class I Acquiring Fund Shares to be so credited to McMorgan
Fund Class and Class Z Acquired Fund Shareholders shall, with respect to each
class, be equal to the aggregate net asset value of the then outstanding shares
of beneficial interest of the Acquired Fund (the "ACQUIRED FUND SHARES") of the
corresponding class owned by Acquired Fund Shareholders at the Effective Time.
All issued and outstanding shares of the Acquired Fund will simultaneously be
redeemed and canceled on
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the books of the Acquired Fund. The Acquiring Fund shall not issue certificates
representing the Class I Acquiring Fund Shares in connection with such exchange.
1.5 Recorded Ownership of Acquiring Fund Shares. Ownership of Acquiring
Fund Shares will be shown on the books of the Acquiring Fund's Transfer Agent
(as defined in paragraph 3.3).
1.6 Filing Responsibilities of Acquired Fund. Any reporting responsibility
of the Acquired Fund, including, but not limited to, the responsibility for
filing regulatory reports, tax returns, or other documents with the Securities
and Exchange Commission ("COMMISSION"), any state securities commission, and any
Federal, state or local tax authorities or any other relevant regulatory
authority, is and shall remain the responsibility of the Acquired Fund.
ARTICLE II
VALUATION
2.1. Net Asset Value of the Acquired Fund. The net asset value of the
Acquired Fund Shares shall be the net asset value computed as of the Effective
Time, after the declaration and payment of any dividends and/or other
distributions on that date, using the valuation procedures described in the
then-current prospectuses and statement of additional information of the
Acquiring Fund.
2.2. Net Asset Value of the Acquiring Fund. The net asset value of the
Class I Acquiring Fund Shares shall be the same as the net asset value per share
of the McMorgan Intermediate Fixed Income Fund shares as computed in accordance
with paragraph 2.1 of the Agreement and Plan of Reorganization, dated as of the
date hereof, between McMorgan Funds, on behalf of the McMorgan Intermediate
Fixed Income Fund, and MainStay Funds, on behalf of the Acquiring Fund.
2.3. Calculation of Number of Acquiring Fund Shares. The number of Class I
Acquiring Fund Shares to be issued (including fractional shares to the third
decimal place, if any) in connection with the Reorganization shall be determined
by dividing the value of the net assets of the Acquired Fund attributable to
McMorgan Fund Class and Class Z Acquired Fund Shares, determined in accordance
with the valuation procedures referred to in paragraph 2.1, by the net asset
value per Class I Acquiring Fund Share determined in accordance with the
valuation procedures referred to in paragraph 2.2.
2.4. Joint Direction of Calculation. All computations of value with respect
to both the Acquired Fund and the Acquiring Fund shall be made by State Street
Bank and Trust Company ("STATE STREET"), in its capacity as accounting agent for
the Funds. Such computations shall be evaluated by NYLIM, in its capacity as
administrator for the Funds, in consultation with McMorgan & Company LLC, the
investment adviser to the Acquired Fund. Such computations shall be subject to
confirmation by the Acquired Fund's and Acquiring Fund's respective transfer
agents and independent accountants.
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2.5 Effective Time. The Effective Time shall be the time at which the Funds
calculate their net asset values as set forth in their respective prospectuses
(normally the close of regular trading on the New York Stock Exchange ("NYSE"))
on the Closing Date (as defined in paragraph 3.1) (the "EFFECTIVE TIME").
ARTICLE III
CLOSING
3.1 Closing. The Reorganization, together with related acts necessary to
consummate the same ("CLOSING"), shall occur at NYLIM's principal office on or
about November 27, 2007, or at such other place and/or on such other date as to
which the parties may agree (the "CLOSING DATE"). All acts taking place at the
Closing shall be deemed to take place simultaneously as of the Effective Time.
3.2 Transfer and Delivery of Assets. McMorgan Funds shall direct State
Street, as custodian for the Acquired Fund, to deliver, at the Closing, a
certificate of an authorized officer stating that (i) the Assets were delivered
in proper form to the Acquiring Fund at the Effective Time, and (ii) all
necessary taxes in connection with the delivery of the Assets, including all
applicable Federal and state stock transfer stamps, if any, have been paid or
provision for payment has been made. The Acquired Fund's portfolio securities
represented by a certificate or other written instrument shall be presented by
State Street, as custodian for the Acquiring Fund, to those persons at State
Street who have primary responsibility for the safekeeping of the assets of the
Acquiring Fund. Such presentation shall be made for examination no later than
five (5) business days preceding the Effective Time, and shall be transferred
and delivered by the Acquired Fund as of the Effective Time for the account of
the Acquiring Fund duly endorsed in proper form for transfer in such condition
as to constitute good delivery thereof. State Street shall deliver to those
persons at State Street who have primary responsibility for the safekeeping of
the assets of the Acquiring Fund as of the Effective Time by book entry, in
accordance with the customary practices of State Street and of each securities
depository, as defined in Rule 17f-4 under the Investment Company Act of 1940,
as amended (the "1940 ACT"), in which the Acquired Fund's Assets are deposited,
the Acquired Fund's Assets deposited with such depositories. The cash to be
transferred by the Acquired Fund shall be delivered by wire transfer of Federal
funds at the Effective Time.
3.3 Share Records. McMorgan Funds shall direct NYLIM Service Company, LLC,
in its capacity as transfer agent for the Acquired Fund (the "TRANSFER AGENT"),
to deliver at the Closing a certificate of an authorized officer stating that
its records contain the names and addresses of the Acquired Fund Shareholders
and the number and percentage ownership of outstanding McMorgan Fund Class and
Class Z Acquired Fund Shares owned by each such Acquired Fund Shareholder
immediately prior to the Closing. The Acquiring Fund shall issue and deliver to
the Secretary of the Acquired Fund prior to the Effective Time a confirmation
evidencing that the appropriate number of Acquiring Fund Shares will be credited
to the Acquired Fund at the Effective Time, or provide other evidence
satisfactory to the Acquired
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Fund as of the Effective Time that such Acquiring Fund Shares have been credited
to the Acquired Fund's accounts on the books of the Acquiring Fund.
3.4 Postponement of Effective Time. In the event that at the Effective Time
(a) the NYSE or another primary trading market for portfolio securities of the
Acquiring Fund or the Acquired Fund (each, an "EXCHANGE") shall be closed to
trading or trading thereupon 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 the Board of Trustees of McMorgan Funds or the Board of
Trustees of MainStay Funds, accurate appraisal of the value of the net assets of
the Acquired Fund or the Acquiring Fund, respectively, is impracticable, the
Effective Time shall be postponed until the first business day after the day
when trading shall have been fully resumed and reporting shall have been
restored.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of McMorgan Funds. Except as has been
fully disclosed to the Acquiring Fund in a written instrument executed by an
officer of McMorgan Funds, McMorgan Funds, on behalf of the Acquired Fund,
represents and warrants to MainStay Funds, on behalf of the Acquiring Fund, as
follows:
(a) The Acquired Fund is a duly established series of McMorgan Funds,
which is a statutory trust duly organized, validly existing and in
good standing under the laws of the State of Delaware, with power
under McMorgan Funds' Certificate of Trust, Trust Instrument and
By-Laws, each as amended from time to time, to own all of its
properties and assets and to carry on its business as it is presently
conducted.
(b) McMorgan Funds is registered with the Commission as an open-end
management investment company under the 1940 Act, and the registration
of the Acquired Fund Shares under the Securities Act of 1933, as
amended (the "1933 ACT"), is in full force and effect.
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by McMorgan
Funds on behalf of the Acquired Fund of the transactions contemplated
herein, except such as have been obtained under the 1933 Act, the
Securities Exchange Act of 1934, as amended (the "1934 ACT"), and the
1940 Act, and such as may be required under state securities laws.
(d) The current prospectuses, statement of additional information,
shareholder reports, marketing and other related materials of the
Acquired Fund and each prospectus and statement of additional
information of the Acquired Fund used at all times prior to the date
of this Agreement conforms or conformed at the time of
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its use 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 does not or did not at the time of its use
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.
(e) At the Effective Time, McMorgan Funds, on behalf of the Acquired Fund,
will have good and marketable title to the Assets and full right,
power, and authority to sell, assign, transfer and deliver such Assets
hereunder free of any liens or other encumbrances, and upon delivery
and payment for such Assets, MainStay Funds, on behalf of 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 such
liens, encumbrances and restrictions as may be imposed, in the
ordinary course of the Acquired Fund's business, in connection with
the portfolio transactions of the Acquired Fund and in connection with
the services provided by the brokers, dealers, custodians and other
service providers of the Acquired Fund.
(f) McMorgan Funds is not engaged currently, and the execution, delivery
and performance of this Agreement will not result, in (i) a violation
of Delaware Law or a material violation of its Certificate of Trust,
Trust Instrument and By-Laws, or of any agreement, indenture,
instrument, contract, lease or other undertaking to which McMorgan
Funds, on behalf of the Acquired Fund, is a party or by which it is
bound, or (ii) the acceleration of any obligation, or the imposition
of any penalty, under any agreement, indenture, instrument, contract,
lease, judgment or decree to which McMorgan Funds, on behalf of the
Acquired Fund, is a party or by which it is bound.
(g) All material contracts or other commitments of the Acquired Fund
(other than this Agreement and certain investment contracts, including
options, futures, targeted return index securities, forward contracts
and other similar instruments) will terminate without liability or
obligation to the Acquired Fund on or prior to the Effective Time.
(h) Except as otherwise disclosed to and accepted by MainStay Funds, on
behalf of the Acquiring Fund, in writing, 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 Acquired Fund or any of its properties or
assets that, if adversely determined, would materially and adversely
affect its financial condition or the conduct of its business.
McMorgan Funds, on behalf of the Acquired Fund, 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 that materially and
adversely affects its business or its ability to consummate the
transactions herein contemplated.
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(i) The Statement of Assets and Liabilities, Statements of Operations and
Changes in Net Assets, and Schedule of Investments of the Acquired
Fund at June 30, 2007 have been audited by Xxxx, Xxxxxx & Xxxxx LLP
("TWB"), independent registered public accounting firm, and are in
accordance with accounting principles generally accepted in the United
States of America ("GAAP") consistently applied, and such statements
(copies of which have been furnished to the Acquiring Fund) present
fairly, in all material respects, the financial condition of the
Acquired Fund as of such date in accordance with GAAP, and there are
no known contingent liabilities of the Acquired Fund required to be
reflected on a balance sheet (including the notes thereto) in
accordance with GAAP as of such date not disclosed therein.
(j) Since June 30, 2007, there has not been any material adverse change in
the Acquired Fund's financial condition, assets, liabilities or
business, other than changes occurring in the ordinary course of
business, or any incurrence by the Acquired 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 in writing. For the purposes of this subparagraph (j),
a decline in net asset value per share of Acquired Fund Shares due to
declines in market values of securities held by the Acquired Fund, the
discharge of the Acquired Fund's liabilities, or the redemption of the
Acquired Fund's shares by shareholders of the Acquired Fund shall not
constitute a material adverse change.
(k) At the Effective Time, all Federal and other tax returns, dividend
reporting forms, and other tax-related reports of the Acquired Fund
required by law to have been filed by such date (including any
extensions) shall have been filed and are or will be correct in all
material respects, and all Federal and other taxes shown as due or
required to be shown as due on said returns and reports shall have
been paid or provision shall have been made for the payment thereof to
the best of the knowledge of the Acquired Fund, and no such return is
currently under audit and no assessment has been asserted with respect
to such returns.
(l) For each taxable year of its operation (including the taxable year
ending at the Effective Time), the Acquired Fund has met (or will
meet) the requirements of Subchapter M of Chapter 1 of the Code for
qualification as a regulated investment company, has been (or will be)
eligible to and has computed (or will compute) its Federal income tax
under Section 852 of the Code, and will have distributed substantially
all of its investment company taxable income and net capital gain (as
defined in the Code) that has accrued through the Effective Time, and
before the Effective Time will have declared dividends sufficient to
distribute substantially all of its investment company taxable income
and net capital gain for the period ending at the Effective Time.
(m) All of the issued and outstanding shares of the Acquired Fund will, at
the time of Closing, be held by the persons and in the amounts set
forth in the records of the
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Transfer Agent, on behalf of the Acquired Fund, as provided in
paragraph 3.3. The Acquired Fund does not have outstanding any
options, warrants or other rights to subscribe for or purchase any of
the shares of the Acquired Fund, nor is there outstanding any security
convertible into any of the Acquired Fund's shares.
(n) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Effective Time by all necessary
action, if any, on the part of the Trustees of McMorgan Funds, on
behalf of the Acquired Fund, and, subject to the approval of the
shareholders of the Acquired Fund, this Agreement will constitute a
valid and binding obligation of McMorgan Funds on behalf of the
Acquired Fund, enforceable in accordance with its terms, subject, as
to enforcement, to bankruptcy, insolvency, reorganization, moratorium
and other laws relating to or affecting creditors' rights and to
general equity principles.
(o) The information to be furnished by the Acquired Fund for use in
registration statements, proxy materials and other documents filed or
to be filed with any Federal, state or local regulatory authority
(including the National Association of Securities Dealers, Inc. (the
"NASD")), 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.
(p) The combined proxy statement and prospectus (the "PROXY STATEMENT") to
be included in the Registration Statement (as defined in paragraph
5.6), insofar as it relates to the Acquired Fund, will, from the
effective date of the Registration Statement through the date of the
meeting of the Acquired Fund Shareholders contemplated therein and at
the Effective Time (i) 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 materially
misleading, and (ii) comply in all material respects with the
provisions of the 1933 Act, the 1934 Act, and the 1940 Act and the
rules and regulations thereunder; provided, however, that the
representations and warranties of this subparagraph (p) shall not
apply to statements in or omissions from the Proxy Statement and the
Registration Statement made in reliance upon and in conformity with
information that was furnished by the Acquiring Fund for use therein.
4.2 Representations and Warranties of MainStay Funds. Except as has been
fully disclosed to the Acquired Fund in a written instrument executed by an
officer of MainStay Funds, MainStay Funds, on behalf of the Acquiring Fund,
represents and warrants to McMorgan Funds, on behalf of the Acquired Fund, as
follows:
(a) The Acquiring Fund is a duly established series of MainStay Funds,
which is a business trust duly organized, validly existing, and in
good standing under the laws of the Commonwealth of Massachusetts with
power under its Declaration of
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Trust and By-Laws, each as amended from time to time, to own all of
its properties and assets and to carry on its business as it is
presently conducted.
(b) MainStay Funds is registered with the Commission as an open-end
management investment company under the 1940 Act, and the registration
of the Class I Acquiring Fund Shares under the 1933 Act is in full
force and effect.
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by MainStay
Funds on behalf of the Acquiring Fund 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.
(d) The current prospectus, statement of additional information,
shareholder reports, marketing and other related materials of the
Acquiring Fund and each prospectus and statement of additional
information of the Acquiring Fund used at all times prior to the date
of this Agreement conforms or conformed at the time of its use 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 does not or did not at the time of its use 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.
(e) At the Effective Time, MainStay Funds, on behalf of the Acquiring
Fund, will have good and marketable title to the Acquiring Fund's
assets, free of any liens or other encumbrances, other than such liens
and encumbrances as may be imposed, in the ordinary course of the
Acquiring Fund's business, in connection with the portfolio
transactions of the Acquiring Fund and in connection with the services
provided by the brokers, dealers, custodians and other service
providers of the Acquiring Fund.
(f) The Acquiring Fund is not engaged currently, and the execution,
delivery and performance of this Agreement will not result, in (i) a
violation of Massachusetts law or a material violation of MainStay
Funds' Declaration of Trust and By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which
MainStay Funds, on behalf of the Acquiring Fund, is a party or by
which it is bound, or (ii) the acceleration of any obligation, or the
imposition of any penalty, under any agreement, indenture, instrument,
contract, lease, judgment or decree to which MainStay Funds, on behalf
of the Acquiring Fund, is a party or by which it is bound.
(g) Except as otherwise disclosed to and accepted by McMorgan Funds, on
behalf of the Acquired Fund, in writing, no litigation or
administrative proceeding or investigation of or before any court or
governmental body is presently pending or, to the Acquiring Fund's
knowledge, threatened against MainStay Funds, on
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behalf of the Acquiring Fund, or any of the Acquiring Fund's
properties or assets that, if adversely determined, would materially
and adversely affect the Acquiring Fund's financial condition or the
conduct of its business. MainStay Funds, on behalf of the Acquiring
Fund, 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
that materially and adversely affects the Acquiring Fund's business or
its ability to consummate the transactions herein contemplated.
(h) At the Effective Time, the Acquiring Fund will have no assets and no
liabilities.
(i) At the Effective Time, all Federal and other tax returns, dividend
reporting forms, and other tax-related reports of the Acquiring Fund
required by law to have been filed by such date (including any
extensions) shall have been filed and are or will be correct in all
material respects, and all Federal and other taxes shown as due or
required to be shown as due on said returns and reports shall have
been paid or provision shall have been made for the payment thereof to
the best of the knowledge of the Acquiring Fund, and no such return is
currently under audit and no assessment has been asserted with respect
to such returns.
(j) For each taxable year of its operation (including the taxable year
ending at the Effective Time), the Acquiring Fund has met (or will
meet) the requirements of Subchapter M of Chapter 1 of the Code for
qualification as a regulated investment company, has been eligible to
(or will be eligible to) and has computed (or will compute) its
Federal income tax under Section 852 of the Code, and has distributed
all of its investment company taxable income and net capital gain (as
defined in the Code) for periods ending prior to the Effective Time.
(k) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Effective Time by all necessary
action, if any, on the part of the Trustees of MainStay Funds, on
behalf of the Acquiring Fund, and this Agreement will constitute a
valid and binding obligation of the Acquiring Fund, enforceable in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights and to general equity principles.
(l) The Class I Acquiring Fund Shares to be issued and delivered to the
Acquired Fund, for the account of the Acquired Fund Shareholders,
pursuant to the terms of this Agreement, will at the Effective Time
have been duly authorized and, when so issued and delivered, will be
duly and validly issued Acquiring Fund Shares, will be fully paid and
non-assessable by MainStay Funds, and will have been issued in every
jurisdiction in compliance in all material respects with applicable
registration requirements and applicable securities laws. The
Acquiring Fund does not have outstanding any options, warrants or
other rights to subscribe for or purchase any of the shares of the
Acquiring Fund, nor is there outstanding any security convertible into
any of the Acquiring Fund's shares.
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(m) The information to be furnished by the Acquiring Fund for use in the
registration statements, proxy materials and other documents filed or
to be filed with any Federal, state or local regulatory authority
(including the NASD) that 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 Proxy Statement to be included in the Registration Statement (and
any amendment or supplement thereto), insofar as it relates to the
Acquiring Fund and the Acquiring Fund Shares, will, from the effective
date of the Registration Statement through the date of the meeting of
shareholders of the Acquired Fund contemplated therein and at the
Effective Time (i) 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 materially
misleading, and (ii) comply in all material respects with the
provisions of the 1933 Act, the 1934 Act, and the 1940 Act and the
rules and regulations thereunder; provided, however, that the
representations and warranties of this subparagraph (n) shall not
apply to statements in or omissions from the Proxy Statement and the
Registration Statement made in reliance upon and in conformity with
information that was furnished by the Acquired Fund for use therein.
4.3 Representation and Warranty of NYLIM. NYLIM represents and warrants to
McMorgan Funds, on behalf of the Acquired Fund, and MainStay Funds, on behalf of
the Acquiring Fund, that the execution, delivery and performance of this
Agreement will have been duly authorized prior to the Effective Time by all
necessary action, if any, on the part of NYLIM, and this Agreement will
constitute a valid and binding obligation of NYLIM, 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.
ARTICLE V
COVENANTS AND AGREEMENTS
5.1 Conduct of Business. The Acquiring Fund and the Acquired Fund each will
operate its business in the ordinary course consistent with past practice
between the date hereof and the Effective Time, it being understood that such
ordinary course of business will include the declaration and payment of
customary dividends and distributions, and any other distribution that may be
advisable.
5.2 Meeting of Shareholders. McMorgan Funds will call a meeting of the
shareholders of the Acquired Fund to consider and act upon this Agreement and to
take all other action necessary to obtain approval of the transactions
contemplated herein.
11
5.3 No Distribution of Acquiring Fund Shares. The Acquired Fund covenants
that the Class I 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 Information. The Acquired Fund will assist the Acquiring Fund in
obtaining such information as the Acquiring Fund reasonably requests concerning
the beneficial ownership of the Acquired Fund Shares.
5.5. Other Necessary Action. Subject to the provisions of this Agreement,
the Acquiring Fund and the Acquired 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.
5.6. Proxy Statement/Prospectus and Registration Statement. The Acquired
Fund will provide the Acquiring Fund with information regarding the Acquired
Fund, and the Acquiring Fund will provide the Acquired Fund with information
regarding the Acquiring Fund, reasonably necessary for the preparation of the
Proxy Statement to be included in a Registration Statement on Form N-14 (the
"REGISTRATION STATEMENT"), in compliance with the 1933 Act, the 1934 Act and the
1940 Act, in connection with the meeting of the shareholders of the Acquired
Fund to consider approval of this Agreement and the transactions contemplated
herein.
5.7. Liquidating Distribution. As soon as is reasonably practicable after
the Closing, the Acquired Fund will make a liquidating distribution to its
respective shareholders consisting of the Class I Acquiring Fund Shares received
at the Closing.
5.8 Best Efforts. The Acquiring Fund and the Acquired Fund shall each use
their reasonable best efforts to fulfill or obtain the fulfillment of the
conditions precedent set forth in Article VI to effect the transactions
contemplated by this Agreement as promptly as practicable.
5.9 Other Instruments. McMorgan Funds, on behalf of the Acquired Fund, and
MainStay Funds, on behalf of the Acquiring Fund, each covenants that it will,
from time to time, as and when reasonably requested by the other party, execute
and deliver or cause to be executed and delivered all such assignments and other
instruments, and will take or cause to be taken such further action as the other
party may reasonably deem necessary or desirable in order to vest in and confirm
(a) McMorgan Funds', on behalf of the Acquired Fund, title to and possession of
the Acquiring Fund Shares to be delivered hereunder, and (b) MainStay Funds', on
behalf of the Acquiring Fund, title to and possession of all the Assets and
otherwise to carry out the intent and purpose of this Agreement.
5.10 Regulatory Approvals. The Acquiring Fund will use all reasonable
efforts to obtain the approvals and authorizations required by the 1933 Act, the
1940 Act and such of the state blue sky or securities laws as may be necessary
in order to continue its operations after the Effective Time.
12
5.11 Waiver and Reimbursement of Acquiring Fund Fees and Expenses. For a
period of two years after the Closing Date, NYLIM will, by waiving, assuming or
reimbursing expenses, or otherwise, limit the expenses of Class I shares of the
Acquiring Fund so that the total ordinary operating expenses (total operating
expenses excluding underlying fund expenses, taxes, interest, litigation,
extraordinary expenses, brokerage and other transaction expenses related to the
purchase or sale of portfolio investments) of such Class I shares do not exceed
the annual rate of 0.50% of the average daily net assets attributable to such
Class I shares.
5.12 Board Information. NYLIM represents, warrants and covenants to
McMorgan Funds that the information provided by NYLIM to the Board of Trustees
of McMorgan Funds in connection with its review of the Reorganization is
materially accurate and complete and that, to the best of its knowledge, NYLIM
has provided all information concerning McMorgan Funds, MainStay Funds and the
Reorganization it believes is reasonably necessary for the Board of Trustees of
McMorgan Funds to evaluate the Reorganization.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent to Obligations of Acquired Fund. The obligations
of McMorgan Funds, on behalf of the Acquired Fund, to consummate the
transactions provided for herein shall be subject, at McMorgan Funds' election,
to the following conditions:
(a) All representations and warranties of MainStay Funds, on behalf of the
Acquiring Fund, 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 Effective Time, with
the same force and effect as if made on and as of the Effective Time.
(b) MainStay Funds, on behalf of the Acquiring Fund, shall have delivered
to the Acquired Fund a certificate executed in the name of the Acquiring Fund by
its President or Vice President and its Treasurer or Assistant Treasurer, in a
form reasonably satisfactory to McMorgan Funds, and dated as of the Effective
Time, to the effect that the representations and warranties of MainStay Funds,
on behalf of the Acquiring Fund, made in this Agreement are true and correct at
and as of the Effective Time, except as they may be affected by the transactions
contemplated by this Agreement, and as to such other matters as McMorgan Funds
shall reasonably request.
(c) MainStay Funds, on behalf of the Acquiring Fund, shall have performed
all of the covenants and complied with all of the provisions required by this
Agreement to be performed or complied with by MainStay Funds, on behalf of the
Acquiring Fund, on or before the Effective Time.
13
(d) The Acquired Fund and the Acquiring Fund shall have agreed on the
number of full and fractional Class I Acquiring Fund Shares to be issued in
connection with the Reorganization after such number has been calculated in
accordance with paragraph 2.3.
(e) At or before the Effective Time, the Acquired Fund shall have received
the Statement of Assets and Liabilities, Statements of Operations and Changes in
Net Assets, and Schedule of Investments of the Acquired Fund for the fiscal year
ended October 31, 2007 that have been audited by TWB and are substantially
complete (the "AUDITED OCTOBER 31, 2007 FINANCIAL STATEMENTS"). In addition,
before the Effective Time, the Acquired Fund shall have received a
certification, and the Audit Committee of the Board of Trustees of McMorgan
Funds shall have received an oral report, from TWB to the effect that: (1) TWB
had substantially performed a review of subsequent events ("Subsequent Events
Review") from October 31, 2007 through the period ending on the day immediately
before the date when the Effective Time occurs (the "Subsequent Events Review
End Date") in a manner consistent with GAAP and other applicable accounting
principles and standards; (2) the Subsequent Events Review, as of the Subsequent
Events Review End Date, had not revealed any additional information, events or
bases requiring the addition, deletion or other modification to the Audited
October 31, 2007 Financial Statements or notes thereto; and (3) TWB would
complete the audit and the Subsequent Events Review on or before December 17,
2007 and report to the Board of Trustees of McMorgan Funds on December 18, 2007
(or on such later date that the Board of Trustees next meets) any additional
information, events or bases requiring the addition, deletion or other
modification to the Audited October 31, 2007 Financial Statements or notes
thereto. If the Subsequent Events Review requires any such modification, both
parties shall act and cooperate in good faith to address and rectify any adverse
condition arising from such modification.
6.2 Conditions Precedent to Obligations of Acquiring Fund. The obligations
of MainStay Funds, on behalf of the Acquiring Fund, to complete the transactions
provided for herein shall be subject, at MainStay Funds' election, to the
following conditions:
(a) All representations and warranties of McMorgan Funds, on behalf of the
Acquired Fund, 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 Effective Time, with
the same force and effect as if made on and as of the Effective Time.
(b) McMorgan Funds shall have delivered to the Acquiring Fund a statement
of the Acquired Fund's Assets and Liabilities, as of the Effective Time, that is
prepared in accordance with GAAP and certified by the Treasurer of McMorgan
Funds.
(c) McMorgan Funds, on behalf of the Acquired Fund, shall have delivered to
the Acquiring Fund a certificate executed in the name of the Acquired Fund by
its President or Vice President and its Treasurer or Assistant Treasurer, in a
form reasonably satisfactory to the Acquiring Fund and dated as of the Effective
Time, to the effect that the representations and warranties of McMorgan Funds,
on behalf of the Acquired Fund, made in this Agreement are true and correct at
and as of the Effective Time, except as they may be affected by the
14
transactions contemplated by this Agreement, and as to such other matters as
MainStay Funds shall reasonably request.
(d) McMorgan Funds, on behalf of the Acquired Fund, shall have performed
all of the covenants and complied with all of the provisions required by this
Agreement to be performed or complied with by McMorgan Funds, on behalf of the
Acquired Fund, on or before the Effective Time.
(e) The Acquired Fund and the Acquiring Fund shall have agreed on the
number of full and fractional Class I Acquiring Fund Shares to be issued in
connection with the Reorganization after such number has been calculated in
accordance with paragraph 2.3.
(f) The Acquired Fund shall have declared and paid a distribution or
distributions prior to the Effective Time in the manner set forth in Section 1.3
of this Agreement.
6.3 Other Conditions Precedent. If any of the conditions set forth in this
paragraph 6.3 have not been satisfied on or before the Effective Time, McMorgan
Funds, on behalf of the Acquired Fund, or MainStay Funds, on behalf of the
Acquiring Fund, shall, at its option, not be required to consummate the
transactions contemplated by this Agreement.
(a) The Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding shares of the
Acquired Fund in accordance with the provisions of McMorgan Funds' Certificate
of Trust, Trust Instrument and By-Laws, applicable Delaware law and the 1940 Act
and the regulations thereunder, and certified copies of the resolutions
evidencing such approval shall have been delivered to the Acquiring Fund.
Notwithstanding anything herein to the contrary, McMorgan Funds and MainStay
Funds, on behalf of either the Acquired Fund or the Acquiring Fund,
respectively, may not waive the conditions set forth in this paragraph 6.3(a).
(b) At the Effective Time, no action, suit or other proceeding shall be
pending or, to the knowledge of McMorgan Funds or MainStay Funds, threatened
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.
(c) All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities deemed necessary by
McMorgan Funds and MainStay Funds to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties of the
Acquiring Fund or the Acquired Fund, provided that either party hereto may for
itself waive any of such conditions.
(d) 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.
15
(e) McMorgan Funds and MainStay Funds shall have received an opinion of
Xxxxxxxxxx Xxxxxx & Xxxxxxx LLP ("XXXXXXXXXX") as to federal income tax matters
(the "TAX OPINION") substantially to the effect that, based on the facts,
representations, assumptions stated therein and conditioned on consummation of
the Reorganization in accordance with this Agreement, for federal income tax
purposes:
(1) The Reorganization will constitute a "reorganization" within the
meaning of Section 368(a) of the Code, and the Acquired Fund and
the Acquiring Fund each will be a "party to a reorganization"
within the meaning of Section 368(b) of the Code.
(2) No gain or loss will be recognized by the Acquired Fund (a) on
the transfer of its Assets to the Acquiring Fund in exchange
solely for Acquiring Fund Shares and the Acquiring Fund's
assumption of the Liabilities (if any) of the Acquired Fund, and
(b) the subsequent distribution by the Acquired Fund of those
Acquiring Fund shares to the Acquired Fund Shareholders.
(3) No gain or loss will be recognized by the Acquiring Fund on
receipt of the Assets transferred to it by the Acquired Fund in
exchange for Acquiring Fund Shares and the assumption of the
Liabilities (if any) of the Acquired Fund.
(4) The Acquiring Fund's basis in the Assets received from the
Acquired Fund will be the same as the Acquired Fund's basis in
those assets immediately prior to the Reorganization.
(5) The Acquiring Fund's holding period for the transferred Assets
will include the Acquired Fund's holding period therefor.
(6) No gain or loss will be recognized by the Acquired Fund
Shareholders on the exchange of their Acquired Fund Shares solely
for Acquiring Fund Shares.
(7) An Acquired Fund Shareholder's basis in the Acquiring Fund Shares
received in the Reorganization will be the same as the adjusted
basis of the Acquired Fund Shares surrendered in exchange
therefor.
(8) An Acquired Fund Shareholder's holding period in the Acquiring
Fund Shares received in the Reorganization will include the
Acquired Fund Shareholder's holding period for the Acquired Fund
Shares surrendered in exchange therefor, provided such Acquired
Fund Shares were held as capital assets on the Closing Date.
(9) The Acquiring Fund will succeed to and take into account the
items of the Acquired Fund described in Section 381(c), including
any earnings and
16
profits, or deficit therein, of the Acquired Fund as of the date
of the Closing Date, subject to the conditions and limitations
specified in Sections 381, 382, 383 and 384.
Notwithstanding this paragraph 6.3(e), the Tax Opinion may state that no
opinion is expressed as to the effect of the Reorganization on the Acquired Fund
or the Acquiring Funds or any shareholder thereof with respect to (a) any Asset
as to which any unrealized gain or loss is required to be recognized for federal
income tax purposes at the end of a taxable year (or on the termination or
transfer thereof) under a xxxx-to-market system of accounting, or (b) the
payment by any party of transaction expenses incurred in connection with the
Reorganization, except in relation to the qualification of the transfer of the
Acquired Fund's assets to the Acquiring Fund as a reorganization under Section
368(a) of the Code.
Notwithstanding anything herein to the contrary, McMorgan Funds and
MainStay Funds, on behalf of either the Acquired Fund or the Acquiring Fund,
respectively, may not waive the condition set forth in this paragraph 6.3(e).
(f) State Street shall have delivered such certificates or other documents
as set forth in paragraph 3.2.
(g) The Transfer Agent shall have delivered to MainStay Funds a certificate
of its authorized officer as set forth in paragraph 3.3.
(h) The Acquiring Fund shall have issued and delivered to the Secretary of
the Acquired Fund the confirmation as set forth in paragraph 3.3.
(i) Each party shall have delivered to the other such bills of sale,
checks, assignments, receipts or other documents as reasonably requested by such
other party or its counsel.
(j) Shareholders of the McMorgan Intermediate Fixed Income Fund, a separate
investment portfolio of McMorgan Funds, shall have approved the agreement and
plan of reorganization between McMorgan Funds, on behalf of the McMorgan
Intermediate Fixed Income Fund, and MainStay Funds, on behalf of the Acquiring
Fund, described in the Proxy Statement and Registration Statement.
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification by MainStay Funds. MainStay Funds, solely out of the
Acquiring Fund's assets and property, agrees to indemnify and hold harmless
McMorgan Funds, the Acquired Fund, and their trustees, officers, employees and
agents (the "MCMORGAN INDEMNIFIED PARTIES") from and against any and all losses,
claims, damages, liabilities or expenses (including, without limitation, the
payment of reasonable legal fees and reasonable
17
costs of investigation) to which the McMorgan Indemnified Parties may become
subject, insofar as such loss, claim, damage, liability or expense (or actions
with respect thereto) arises out of or is based on any breach by the Acquiring
Fund of any of its representations, warranties, covenants or agreements set
forth in this Agreement, provided that this indemnification shall not apply to
the extent such loss, claim, damage, liability or expense (or actions with
respect thereto) shall be due to any negligent, intentional or fraudulent act,
omission or error of the Acquired Fund, or its respective trustees, officers or
agents.
7.2 Indemnification by McMorgan Funds. McMorgan Funds, solely out of the
Acquired Fund's assets and property, agrees to indemnify and hold harmless
MainStay Funds, the Acquiring Fund, and their trustees, officers, employees and
agents (the "MAINSTAY INDEMNIFIED PARTIES") from and against any and all losses,
claims, damages, liabilities or expenses (including, without limitation, the
payment of reasonable legal fees and reasonable costs of investigation) to which
the MainStay Indemnified Parties may become subject, insofar as such loss,
claim, damage, liability or expense (or actions with respect thereto) arises out
of or is based on any breach by the Acquired Fund of any of its representations,
warranties, covenants or agreements set forth in this Agreement, provided that
this indemnification shall not apply to the extent such loss, claim, damage,
liability or expense (or actions with respect thereto) shall be due to any
negligent, intentional or fraudulent act, omission or error of the Acquiring
Fund, or its respective trustees, officers or agents.
7.3 Liability of McMorgan Funds. MainStay Funds understands and agrees that
the obligations of McMorgan Funds on behalf of the Acquired Fund under this
Agreement shall not be binding upon any trustee, shareholder, nominee, officer,
agent or employee of McMorgan Funds on behalf of McMorgan Funds personally, but
bind only McMorgan Funds on behalf of the Acquired Fund and the Acquired Fund's
property. Moreover, no series of McMorgan Funds other than the Acquired Fund
shall be responsible for the obligations of McMorgan Funds hereunder, and all
persons shall look only to the assets of the Acquired Fund to satisfy the
obligations of the Acquired Fund hereunder. MainStay Funds represents that it
has notice of the provisions of the Trust Instrument of McMorgan Funds
disclaiming shareholder and trustee liability for acts or obligations of the
Acquired Fund.
7.4 Liability of MainStay Funds. McMorgan Funds understands and agrees that
the obligations of MainStay Funds on behalf of the Acquiring Fund under this
Agreement shall not be binding upon any trustee, shareholder, nominee, officer,
agent or employee of MainStay Funds on behalf of MainStay Funds personally, but
bind only MainStay Funds on behalf of the Acquiring Fund and the Acquiring
Fund's property. Moreover, no series of MainStay Funds other than the Acquiring
Fund shall be responsible for the obligations of MainStay Funds hereunder, and
all persons shall look only to the assets of the Acquiring Fund to satisfy the
obligations of the Acquiring Fund hereunder. MainStay Funds represents that it
has notice of the provisions of the Declaration of Trust of MainStay Funds
disclaiming shareholder and trustee liability for acts or obligations of the
Acquiring Fund.
18
ARTICLE VIII
BROKERAGE FEES AND EXPENSES
8.1 No Broker or Finder Fees. The Acquiring Fund and the Acquired Fund,
represent and warrant to each other that there are no brokers or finders
entitled to receive any payments in connection with the transactions provided
for herein.
8.2 Expenses of Reorganization. Except for (1) any commissions, transaction
costs and other direct expenses of liquidating portfolio investments incurred by
the Acquired Fund in connection with the Reorganization and (2) ordinary
operating expenses of the Acquired Fund through the Closing Date, the expenses
relating to the Reorganization will be borne by NYLIM whether or not the
Reorganization is consummated. The expenses of the Reorganization include, but
are not limited to, (i) shareholder meeting and proxy costs such as printing,
mailing, solicitation and tabulation; (ii) costs associated with the preparation
and filing of Form N-14 and N-1A and any amendments or supplements thereto
(including the fees of auditors and financial printers); (iii) costs associated
with the preparation and distribution of shareholder communications (including
all printing and mailing costs); (iv) costs associated with the deregistration
and closing of the Acquired Funds (including all costs associated in the
preparation and filing of Form N-8F and the Funds' final Form N-SAR, as well as
any other required federal or state filings); (v) costs associated with any
additional audits or financial statements necessary as a result of this
transaction and the deregistration and closing of the Acquired Funds (including
the preparation of stub financials (if needed), the conducting of any final
audits and the preparation and filing of the final tax returns); (vi) any fees
of banks, brokers (except as carved out above), custodians and transfer agents;
and (vii) the fees of legal counsel for the Funds and the Independent Trustees.
ARTICLE IX
AMENDMENTS AND TERMINATION
9.1 Amendments. This Agreement may be amended, modified or supplemented in
such manner as may be deemed necessary or advisable by the authorized officers
of McMorgan Funds or MainStay Funds, on behalf of either the Acquired Fund or
the Acquiring Fund, respectively; provided, however, that following the approval
of this Agreement by the shareholders of the Acquired Fund pursuant to paragraph
6.3(a) of this Agreement, no such amendment may have the effect of changing the
provisions for determining the number of Class I Acquiring Fund Shares to be
issued to the Acquired Fund Shareholders under this Agreement to the detriment
of such shareholders without their further approval.
9.2 Termination. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned by resolution of the Board of Trustees of
McMorgan Funds or the Board of Trustees of MainStay Funds, on behalf of the
Acquired Fund or the Acquiring Fund, respectively, at any time prior to the
Effective Time, if circumstances should
19
develop that, in the opinion of such Board of Trustees, make proceeding with the
Agreement inadvisable. The provisions of Article VIII shall survive any
termination of this Agreement.
ARTICLE X
NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by
facsimile, electronic delivery (i.e., e-mail) personal service or prepaid or
certified mail addressed as follows:
If to McMorgan Funds:
McMorgan Funds
Xxx Xxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Email: xxxxxxxxx@xxxxxxxx.xxx
With copies (which shall not constitute notice) to:
New York Life Investment Management LLC
000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxxxxx X. X. Xxxxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Email: xxxxxxxxxx_xxxxxxxx@xxxxx.xxx
Xxxxxxxxxx Xxxxxx & Xxxxxxx LLP
0000 Xxxxxxxxxxxx Xxxxxx, XX
Xxxxxxxxxx, X.X. 00000
Attn: Xxxx X. Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Email: xxxx.xxxxxxx@xxxxxx.xxx
20
Xxxxxx Xxxx Nemerovski Xxxxxx Xxxx & Rabkin, A Professional
Corporation
Three Xxxxxxxxxxx Xxxxxx, Xxxxxxx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Email: xxxxxxxxx@xxxxxxxxxx.xxx
If to MainStay Funds:
The MainStay Funds
00 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxxx X. X. Xxxxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Email: xxxxxxxxxx_xxxxxxxx@xxxxx.xxx
With a copy (which shall not constitute notice) to:
Dechert LLP
0000 X Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attn: Sander M. Bieber, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Email: xxxxxx.xxxxxx@xxxxxxx.xxx
If to NYLIM:
New York Life Investment Management LLC
000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxxxxx X. X. Xxxxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Email: xxxxxxxxxx_xxxxxxxx@xxxxx.xxx
21
With copies (which shall not constitute notice) to:
Dechert LLP
0000 X Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attn: Sander M. Bieber, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Email: xxxxxx.xxxxxx@xxxxxxx.xxx
ARTICLE XI
MISCELLANEOUS
11.1 Entire Agreement. MainStay Funds and McMorgan Funds agree that they
have not made any representation, warranty or covenant, on behalf of either the
Acquiring Fund or the Acquired Fund, respectively, not set forth herein, and
this Agreement, together with the letter agreement dated the date hereof between
NYLIM and the McMorgan Funds regarding certain fee waivers and expense
limitations, constitutes the entire agreement between the parties.
11.2 Survival. The representations, warranties and covenants contained in
this Agreement or in any document delivered pursuant hereto or in connection
herewith, and the obligations with respect to indemnification of the Acquired
Fund and Acquiring Fund contained in paragraphs 7.1 and 7.2, shall survive the
Closing.
11.3 Headings. 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.
11.4 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to its
principles of conflicts of laws.
11.5 Assignment. 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.
11.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all taken together
shall constitute one agreement.
22
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed as of the 27th day of November, 2007.
THE MAINSTAY FUNDS MCMORGAN FUNDS
ON BEHALF OF THE ACQUIRING FUND ON BEHALF OF THE ACQUIRED FUND
By: /s/ XXXXXXX X. XXXXXX By: /s/ XXXX XXXXXX
--------------------------------- ------------------------------------
Name: Name:
Title: PRESIDENT Title: PRESIDENT
Solely for purposes of paragraphs 4.3, 5.11, 5.12 and 8.2:
NEW YORK LIFE INVESTMENT MANAGEMENT LLC
By: /s/ XXXXX X. XXXXXXX
---------------------------------
Name:
Title: PRESIDENT
AGREEMENT AND PLAN OF REORGANIZATION
MCMORGAN INTERMEDIATE FIXED INCOME FUND AND MAINSTAY INSTITUTIONAL BOND FUND
This Agreement and Plan of Reorganization ("AGREEMENT") is made as of
November 27, 2007, by and between McMorgan Funds, a Delaware statutory trust
("MCMORGAN FUNDS"), on behalf of its investment portfolio, the McMorgan
Intermediate Fixed Income Fund (the "ACQUIRED FUND"), and The MainStay Funds, a
Massachusetts business trust ("MAINSTAY FUNDS"), on behalf of its investment
portfolio, the MainStay Institutional Bond Fund (the "ACQUIRING FUND" and,
together with the Acquired Fund, the "FUNDS"). New York Life Investment
Management LLC, a limited liability company organized under the laws of the
State of New York ("NYLIM"), joins this Agreement solely for purposes of
paragraphs 4.3, 5.11, 5.12 and 8.2.
This Agreement is intended to be and is adopted as a "plan of
reorganization" within the meaning of Section 368(a)(1) of the Internal Revenue
Code of 1986, as amended (the "CODE"). The reorganization will consist of the
transfer of all of the assets of the Acquired Fund to the Acquiring Fund in
exchange solely for Class I shares of beneficial interest of the Acquiring Fund
(the "ACQUIRING FUND SHARES"), the assumption by the Acquiring Fund of the
liabilities of the Acquired Fund specified in paragraph 1.3, and the
distribution of the Acquiring Fund Shares to the shareholders of the Acquired
Fund in complete liquidation of the Acquired Fund, all upon the terms and
conditions hereinafter set forth in this Agreement (the "REORGANIZATION").
The Board of Trustees of McMorgan Funds has determined, with respect to the
Acquired Fund, that (1) participation in the Reorganization is in the best
interests of the Acquired Fund and its shareholders, and (2) the interests of
the existing shareholders of the Acquired Fund would not be diluted as a result
of the Reorganization.
The Board of Trustees of MainStay Funds has determined, with respect to the
Acquiring Fund, that (1) participation in the Reorganization is in the best
interests of the Acquiring Fund and its shareholders, and (2) the interests of
the existing shareholders of the Acquiring Fund would not be diluted as a result
of the Reorganization.
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
THE REORGANIZATION AND FUND TRANSACTIONS
1.1 The Reorganization. Subject to the requisite approval of the Acquired
Fund's shareholders and the other terms and conditions herein set forth and on
the basis of the representations and warranties contained herein, at the
Effective Time (as defined in paragraph 2.5), McMorgan Funds shall assign,
deliver and otherwise transfer the Assets (as defined in paragraph 1.2) of the
Acquired Fund, to MainStay Funds on behalf of the Acquiring Fund, and
MainStay Funds shall assume the Liabilities (as defined in paragraph 1.3) of the
Acquired Fund on behalf of the Acquiring Fund. In consideration of the
foregoing, at the Effective Time, MainStay Funds shall, on behalf of the
Acquiring Fund, deliver to McMorgan Funds on behalf of the Acquired Fund, full
and fractional Class I Acquiring Fund Shares (to the third decimal place). The
number of Class I Acquiring Fund Shares to be delivered shall be determined as
set forth in paragraph 2.3.
1.2 Assets of the Acquired Fund. The assets of the Acquired Fund to be
acquired by the Acquiring Fund shall consist of all assets and property,
including, without limitation, all cash, cash equivalents, securities,
receivables (including securities, interests and dividends receivable),
commodities and futures interests, rights to register shares under applicable
securities laws, any deferred or prepaid expenses shown as an asset on the books
of the Acquired Fund at the Effective Time, books and records, and any other
property owned by the Acquired Fund at the Effective Time (collectively, the
"ASSETS").
1.3 Liabilities of the Acquired Fund. The Acquired Fund will use its best
efforts to discharge all of its known liabilities and obligations prior to the
Effective Time. The Acquiring Fund shall assume the liabilities of the Acquired
Fund that are set forth on the Acquired Fund's Statement of Assets and
Liabilities as of the Effective Time that is delivered pursuant to paragraph
6.2(b) and included in the calculation of net asset value ("NAV") as of the
Effective Time, or incurred in the ordinary course of business consistent with
past practice (collectively, the "LIABILITIES"). On or as soon as practicable
prior to the Effective Time, the Acquired Fund will declare and pay to its
shareholders of record one or more dividends and/or other distributions, which,
together with all previous dividends, will have the effect of distributing to
the Acquired Fund Shareholders (as defined in paragraph 1.4) substantially all
(and in no event less than 98%) of the Acquired Fund's previously undistributed
investment company taxable income, if any (computed without regard to any
deduction for dividends paid), and net exempt-interest income, if any, if any,
for all taxable years (including the current taxable year) ending on or prior to
the Effective Time, together with all of the Acquired Fund's previously
undistributed net capital gains, if any, through October 31, 2007.
1.4 Distribution of Acquiring Fund Shares. At the Effective Time (or as
soon thereafter as is reasonably practicable), McMorgan Funds, on behalf of the
Acquired Fund, will distribute the Class I Acquiring Fund Shares received from
MainStay Funds pursuant to paragraph 1.1, pro rata to the record holders of the
shares of the Acquired Fund determined as of the Effective Time (the "ACQUIRED
FUND SHAREHOLDERS") in complete liquidation of the Acquired Fund. Such
distribution and liquidation will be accomplished by the transfer of the
Acquiring Fund Shares then credited to the account of the Acquired Fund on the
books of the Acquiring Fund to open accounts on the share records of the
Acquiring Fund in the names of the Acquired Fund Shareholders. The aggregate net
asset value of the Class I Acquiring Fund Shares to be so credited to Acquired
Fund Shareholders shall be equal to the aggregate net asset value of the then
outstanding shares of beneficial interest of the Acquired Fund (the "ACQUIRED
FUND SHARES") owned by Acquired Fund Shareholders at the Effective Time. All
issued and outstanding shares of the Acquired Fund will simultaneously be
redeemed and canceled on the books of the Acquired Fund. The Acquiring Fund
shall not issue certificates representing the Class I Acquiring Fund Shares in
connection with such exchange.
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1.5 Recorded Ownership of Acquiring Fund Shares. Ownership of Acquiring
Fund Shares will be shown on the books of the Acquiring Fund's Transfer Agent
(as defined in paragraph 3.3).
1.6 Filing Responsibilities of Acquired Fund. Any reporting responsibility
of the Acquired Fund, including, but not limited to, the responsibility for
filing regulatory reports, tax returns, or other documents with the Securities
and Exchange Commission ("COMMISSION"), any state securities commission, and any
Federal, state or local tax authorities or any other relevant regulatory
authority, is and shall remain the responsibility of the Acquired Fund.
ARTICLE II
VALUATION
2.1. Net Asset Value of the Acquired Fund. The net asset value of the
Acquired Fund Shares shall be the net asset value computed as of the Effective
Time, after the declaration and payment of any dividends and/or other
distributions on that date, using the valuation procedures described in the
then-current prospectuses and statement of additional information of the
Acquiring Fund.
2.2. Net Asset Value of the Acquiring Fund. The net asset value of the
Class I Acquiring Fund Shares shall be the same as the net asset value of the
Acquired Fund Shares as computed in paragraph 2.1.
2.3. Calculation of Number of Acquiring Fund Shares. The number of Class I
Acquiring Fund Shares to be issued (including fractional shares to the third
decimal place, if any) in connection with the Reorganization shall be equal to
the number of Acquired Fund Shares owned by Acquired Fund Shareholders at the
Effective Time.
2.4. Joint Direction of Calculation. All computations of value with respect
to both the Acquired Fund and the Acquiring Fund shall be made by State Street
Bank and Trust Company ("STATE STREET"), in its capacity as accounting agent for
the Funds. Such computations shall be evaluated by NYLIM, in its capacity as
administrator for the Funds, in consultation with McMorgan & Company LLC, the
investment adviser to the Acquired Fund. Such computations shall be subject to
confirmation by the Acquired Fund's and Acquiring Fund's respective transfer
agents and independent accountants.
2.5 Effective Time. The Effective Time shall be the time at which the Funds
calculate their net asset values as set forth in their respective prospectuses
(normally the close of regular trading on the New York Stock Exchange ("NYSE"))
on the Closing Date (as defined in paragraph 3.1) (the "EFFECTIVE TIME").
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ARTICLE III
CLOSING
3.1 Closing. The Reorganization, together with related acts necessary to
consummate the same ("CLOSING"), shall occur at NYLIM's principal office on or
about November 27, 2007, or at such other place and/or on such other date as to
which the parties may agree (the "CLOSING DATE"). All acts taking place at the
Closing shall be deemed to take place simultaneously as of the Effective Time.
3.2 Transfer and Delivery of Assets. McMorgan Funds shall direct State
Street, as custodian for the Acquired Fund, to deliver, at the Closing, a
certificate of an authorized officer stating that (i) the Assets were delivered
in proper form to the Acquiring Fund at the Effective Time, and (ii) all
necessary taxes in connection with the delivery of the Assets, including all
applicable Federal and state stock transfer stamps, if any, have been paid or
provision for payment has been made. The Acquired Fund's portfolio securities
represented by a certificate or other written instrument shall be presented by
State Street, as custodian for the Acquiring Fund, to those persons at State
Street who have primary responsibility for the safekeeping of the assets of the
Acquiring Fund. Such presentation shall be made for examination no later than
five (5) business days preceding the Effective Time, and shall be transferred
and delivered by the Acquired Fund as of the Effective Time for the account of
the Acquiring Fund duly endorsed in proper form for transfer in such condition
as to constitute good delivery thereof. State Street shall deliver to those
persons at State Street who have primary responsibility for the safekeeping of
the assets of the Acquiring Fund as of the Effective Time by book entry, in
accordance with the customary practices of State Street and of each securities
depository, as defined in Rule 17f-4 under the Investment Company Act of 1940,
as amended (the "1940 ACT"), in which the Acquired Fund's Assets are deposited,
the Acquired Fund's Assets deposited with such depositories. The cash to be
transferred by the Acquired Fund shall be delivered by wire transfer of Federal
funds at the Effective Time.
3.3 Share Records. McMorgan Funds shall direct NYLIM Service Company, LLC,
in its capacity as transfer agent for the Acquired Fund (the "TRANSFER AGENT"),
to deliver at the Closing a certificate of an authorized officer stating that
its records contain the names and addresses of the Acquired Fund Shareholders
and the number and percentage ownership of outstanding Acquired Fund Shares
owned by each such Acquired Fund Shareholder immediately prior to the Closing.
The Acquiring Fund shall issue and deliver to the Secretary of the Acquired Fund
prior to the Effective Time a confirmation evidencing that the appropriate
number of Acquiring Fund Shares will be credited to the Acquired Fund at the
Effective Time, or provide other evidence satisfactory to the Acquired Fund as
of the Effective Time that such Acquiring Fund Shares have been credited to the
Acquired Fund's accounts on the books of the Acquiring Fund.
3.4 Postponement of Effective Time. In the event that at the Effective Time
(a) the NYSE or another primary trading market for portfolio securities of the
Acquiring Fund or the Acquired Fund (each, an "EXCHANGE") shall be closed to
trading or trading thereupon shall be restricted, or (b) trading or the
reporting of trading on such Exchange or elsewhere shall be
4
disrupted so that, in the judgment of the Board of Trustees of McMorgan Funds or
the Board of Trustees of MainStay Funds, accurate appraisal of the value of the
net assets of the Acquired Fund or the Acquiring Fund, respectively, is
impracticable, the Effective Time shall be postponed until the first business
day after the day when trading shall have been fully resumed and reporting shall
have been restored.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of McMorgan Funds. Except as has been
fully disclosed to the Acquiring Fund in a written instrument executed by an
officer of McMorgan Funds, McMorgan Funds, on behalf of the Acquired Fund,
represents and warrants to MainStay Funds, on behalf of the Acquiring Fund, as
follows:
(a) The Acquired Fund is a duly established series of McMorgan Funds,
which is a statutory trust duly organized, validly existing and in
good standing under the laws of the State of Delaware, with power
under McMorgan Funds' Certificate of Trust, Trust Instrument and
By-Laws, each as amended from time to time, to own all of its
properties and assets and to carry on its business as it is presently
conducted.
(b) McMorgan Funds is registered with the Commission as an open-end
management investment company under the 1940 Act, and the registration
of the Acquired Fund Shares under the Securities Act of 1933, as
amended (the "1933 ACT"), is in full force and effect.
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by McMorgan
Funds on behalf of the Acquired Fund of the transactions contemplated
herein, except such as have been obtained under the 1933 Act, the
Securities Exchange Act of 1934, as amended (the "1934 ACT"), and the
1940 Act, and such as may be required under state securities laws.
(d) The current prospectuses, statement of additional information,
shareholder reports, marketing and other related materials of the
Acquired Fund and each prospectus and statement of additional
information of the Acquired Fund used at all times prior to the date
of this Agreement conforms or conformed at the time of its use 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 does not or did not at the time of its use 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.
5
(e) At the Effective Time, McMorgan Funds, on behalf of the Acquired Fund,
will have good and marketable title to the Assets and full right,
power, and authority to sell, assign, transfer and deliver such Assets
hereunder free of any liens or other encumbrances, and upon delivery
and payment for such Assets, MainStay Funds, on behalf of 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 such
liens, encumbrances and restrictions as may be imposed, in the
ordinary course of the Acquired Fund's business, in connection with
the portfolio transactions of the Acquired Fund and in connection with
the services provided by the brokers, dealers, custodians and other
service providers of the Acquired Fund.
(f) McMorgan Funds is not engaged currently, and the execution, delivery
and performance of this Agreement will not result, in (i) a violation
of Delaware Law or a material violation of its Certificate of Trust,
Trust Instrument and By-Laws, or of any agreement, indenture,
instrument, contract, lease or other undertaking to which McMorgan
Funds, on behalf of the Acquired Fund, is a party or by which it is
bound, or (ii) the acceleration of any obligation, or the imposition
of any penalty, under any agreement, indenture, instrument, contract,
lease, judgment or decree to which McMorgan Funds, on behalf of the
Acquired Fund, is a party or by which it is bound.
(g) All material contracts or other commitments of the Acquired Fund
(other than this Agreement and certain investment contracts, including
options, futures, targeted return index securities, forward contracts
and other similar instruments) will terminate without liability or
obligation to the Acquired Fund on or prior to the Effective Time.
(h) Except as otherwise disclosed to and accepted by MainStay Funds, on
behalf of the Acquiring Fund, in writing, 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 Acquired Fund or any of its properties or
assets that, if adversely determined, would materially and adversely
affect its financial condition or the conduct of its business.
McMorgan Funds, on behalf of the Acquired Fund, 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 that materially and
adversely affects its business or its ability to consummate the
transactions herein contemplated.
(i) The Statement of Assets and Liabilities, Statements of Operations and
Changes in Net Assets, and Schedule of Investments of the Acquired
Fund at June 30, 2007 have been audited by Xxxx, Xxxxxx & Xxxxx LLP
("TWB"), independent registered public accounting firm, and are in
accordance with accounting principles generally accepted in the United
States of America ("GAAP") consistently applied, and such statements
(copies of which have been furnished to the
6
Acquiring Fund) present fairly, in all material respects, the
financial condition of the Acquired Fund as of such date in accordance
with GAAP, and there are no known contingent liabilities of the
Acquired Fund required to be reflected on a balance sheet (including
the notes thereto) in accordance with GAAP as of such date not
disclosed therein.
(j) Since June 30, 2007, there has not been any material adverse change in
the Acquired Fund's financial condition, assets, liabilities or
business, other than changes occurring in the ordinary course of
business, or any incurrence by the Acquired 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 in writing. For the purposes of this subparagraph (j),
a decline in net asset value per share of Acquired Fund Shares due to
declines in market values of securities held by the Acquired Fund, the
discharge of the Acquired Fund's liabilities, or the redemption of the
Acquired Fund's shares by shareholders of the Acquired Fund shall not
constitute a material adverse change.
(k) At the Effective Time, all Federal and other tax returns, dividend
reporting forms, and other tax-related reports of the Acquired Fund
required by law to have been filed by such date (including any
extensions) shall have been filed and are or will be correct in all
material respects, and all Federal and other taxes shown as due or
required to be shown as due on said returns and reports shall have
been paid or provision shall have been made for the payment thereof to
the best of the knowledge of the Acquired Fund, and no such return is
currently under audit and no assessment has been asserted with respect
to such returns.
(l) For each taxable year of its operation (including the taxable year
ending at the Effective Time), the Acquired Fund has met (or will
meet) the requirements of Subchapter M of Chapter 1 of the Code for
qualification as a regulated investment company, has been (or will be)
eligible to and has computed (or will compute) its Federal income tax
under Section 852 of the Code, and will have distributed substantially
all of its investment company taxable income and net capital gain (as
defined in the Code) that has accrued through the Effective Time, and
before the Effective Time will have declared dividends sufficient to
distribute substantially all of its investment company taxable income
and net capital gain for the period ending at the Effective Time.
(m) All of the issued and outstanding shares of the Acquired Fund will, at
the time of Closing, be held by the persons and in the amounts set
forth in the records of the Transfer Agent, on behalf of the Acquired
Fund, as provided in paragraph 3.3. The Acquired Fund does not have
outstanding any options, warrants or other rights to subscribe for or
purchase any of the shares of the Acquired Fund, nor is there
outstanding any security convertible into any of the Acquired Fund's
shares.
(n) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Effective Time by all necessary
action, if any, on the part
7
of the Trustees of McMorgan Funds, on behalf of the Acquired Fund,
and, subject to the approval of the shareholders of the Acquired Fund,
this Agreement will constitute a valid and binding obligation of
McMorgan Funds on behalf of the Acquired Fund, enforceable in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights and to general equity principles.
(o) The information to be furnished by the Acquired Fund for use in
registration statements, proxy materials and other documents filed or
to be filed with any Federal, state or local regulatory authority
(including the National Association of Securities Dealers, Inc. (the
"NASD")), 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.
(p) The combined proxy statement and prospectus (the "PROXY STATEMENT") to
be included in the Registration Statement (as defined in paragraph
5.6), insofar as it relates to the Acquired Fund, will, from the
effective date of the Registration Statement through the date of the
meeting of the Acquired Fund Shareholders contemplated therein and at
the Effective Time (i) 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 materially
misleading, and (ii) comply in all material respects with the
provisions of the 1933 Act, the 1934 Act, and the 1940 Act and the
rules and regulations thereunder; provided, however, that the
representations and warranties of this subparagraph (p) shall not
apply to statements in or omissions from the Proxy Statement and the
Registration Statement made in reliance upon and in conformity with
information that was furnished by the Acquiring Fund for use therein.
4.2 Representations and Warranties of MainStay Funds. Except as has been
fully disclosed to the Acquired Fund in a written instrument executed by an
officer of MainStay Funds, MainStay Funds, on behalf of the Acquiring Fund,
represents and warrants to McMorgan Funds, on behalf of the Acquired Fund, as
follows:
(a) The Acquiring Fund is a duly established series of MainStay Funds,
which is a business trust duly organized, validly existing, and in
good standing under the laws of the Commonwealth of Massachusetts with
power under its Declaration of Trust and By-Laws, each as amended from
time to time, to own all of its properties and assets and to carry on
its business as it is presently conducted.
(b) MainStay Funds is registered with the Commission as an open-end
management investment company under the 1940 Act, and the registration
of the Class I Acquiring Fund Shares under the 1933 Act is in full
force and effect.
8
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by MainStay
Funds on behalf of the Acquiring Fund 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.
(d) The current prospectus, statement of additional information,
shareholder reports, marketing and other related materials of the
Acquiring Fund and each prospectus and statement of additional
information of the Acquiring Fund used at all times prior to the date
of this Agreement conforms or conformed at the time of its use 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 does not or did not at the time of its use 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.
(e) At the Effective Time, MainStay Funds, on behalf of the Acquiring
Fund, will have good and marketable title to the Acquiring Fund's
assets, free of any liens or other encumbrances, other than such liens
and encumbrances as may be imposed, in the ordinary course of the
Acquiring Fund's business, in connection with the portfolio
transactions of the Acquiring Fund and in connection with the services
provided by the brokers, dealers, custodians and other service
providers of the Acquiring Fund.
(f) The Acquiring Fund is not engaged currently, and the execution,
delivery and performance of this Agreement will not result, in (i) a
violation of Massachusetts law or a material violation of MainStay
Funds' Declaration of Trust and By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which
MainStay Funds, on behalf of the Acquiring Fund, is a party or by
which it is bound, or (ii) the acceleration of any obligation, or the
imposition of any penalty, under any agreement, indenture, instrument,
contract, lease, judgment or decree to which MainStay Funds, on behalf
of the Acquiring Fund, is a party or by which it is bound.
(g) Except as otherwise disclosed to and accepted by McMorgan Funds, on
behalf of the Acquired Fund, in writing, no litigation or
administrative proceeding or investigation of or before any court or
governmental body is presently pending or, to the Acquiring Fund's
knowledge, threatened against MainStay Funds, on behalf of the
Acquiring Fund, or any of the Acquiring Fund's properties or assets
that, if adversely determined, would materially and adversely affect
the Acquiring Fund's financial condition or the conduct of its
business. MainStay Funds, on behalf of the Acquiring Fund, 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
9
that materially and adversely affects the Acquiring Fund's business or
its ability to consummate the transactions herein contemplated.
(h) At the Effective Time, the Acquiring Fund will have no assets and no
liabilities.
(i) At the Effective Time, all Federal and other tax returns, dividend
reporting forms, and other tax-related reports of the Acquiring Fund
required by law to have been filed by such date (including any
extensions) shall have been filed and are or will be correct in all
material respects, and all Federal and other taxes shown as due or
required to be shown as due on said returns and reports shall have
been paid or provision shall have been made for the payment thereof to
the best of the knowledge of the Acquiring Fund, and no such return is
currently under audit and no assessment has been asserted with respect
to such returns.
(j) For each taxable year of its operation (including the taxable year
ending at the Effective Time), the Acquiring Fund has met (or will
meet) the requirements of Subchapter M of Chapter 1 of the Code for
qualification as a regulated investment company, has been eligible to
(or will be eligible to) and has computed (or will compute) its
Federal income tax under Section 852 of the Code, and has distributed
all of its investment company taxable income and net capital gain (as
defined in the Code) for periods ending prior to the Effective Time.
(k) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Effective Time by all necessary
action, if any, on the part of the Trustees of MainStay Funds, on
behalf of the Acquiring Fund, and this Agreement will constitute a
valid and binding obligation of the Acquiring Fund, enforceable in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights and to general equity principles.
(l) The Class I Acquiring Fund Shares to be issued and delivered to the
Acquired Fund, for the account of the Acquired Fund Shareholders,
pursuant to the terms of this Agreement, will at the Effective Time
have been duly authorized and, when so issued and delivered, will be
duly and validly issued Acquiring Fund Shares, will be fully paid and
non-assessable by MainStay Funds, and will have been issued in every
jurisdiction in compliance in all material respects with applicable
registration requirements and applicable securities laws. The
Acquiring Fund does not have outstanding any options, warrants or
other rights to subscribe for or purchase any of the shares of the
Acquiring Fund, nor is there outstanding any security convertible into
any of the Acquiring Fund's shares.
(m) The information to be furnished by the Acquiring Fund for use in the
registration statements, proxy materials and other documents filed or
to be filed with any Federal, state or local regulatory authority
(including the NASD) that may be necessary in connection with the
transactions contemplated hereby shall be
10
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 Proxy Statement to be included in the Registration Statement (and
any amendment or supplement thereto), insofar as it relates to the
Acquiring Fund and the Acquiring Fund Shares, will, from the effective
date of the Registration Statement through the date of the meeting of
shareholders of the Acquired Fund contemplated therein and at the
Effective Time (i) 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 materially
misleading, and (ii) comply in all material respects with the
provisions of the 1933 Act, the 1934 Act, and the 1940 Act and the
rules and regulations thereunder; provided, however, that the
representations and warranties of this subparagraph (n) shall not
apply to statements in or omissions from the Proxy Statement and the
Registration Statement made in reliance upon and in conformity with
information that was furnished by the Acquired Fund for use therein.
4.3 Representation and Warranty of NYLIM. NYLIM represents and warrants to
McMorgan Funds, on behalf of the Acquired Fund, and MainStay Funds, on behalf of
the Acquiring Fund, that the execution, delivery and performance of this
Agreement will have been duly authorized prior to the Effective Time by all
necessary action, if any, on the part of NYLIM, and this Agreement will
constitute a valid and binding obligation of NYLIM, 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.
ARTICLE V
COVENANTS AND AGREEMENTS
5.1 Conduct of Business. The Acquiring Fund and the Acquired Fund each will
operate its business in the ordinary course consistent with past practice
between the date hereof and the Effective Time, it being understood that such
ordinary course of business will include the declaration and payment of
customary dividends and distributions, and any other distribution that may be
advisable.
5.2 Meeting of Shareholders. McMorgan Funds will call a meeting of the
shareholders of the Acquired Fund to consider and act upon this Agreement and to
take all other action necessary to obtain approval of the transactions
contemplated herein.
5.3 No Distribution of Acquiring Fund Shares. The Acquired Fund covenants
that the Class I 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.
11
5.4 Information. The Acquired Fund will assist the Acquiring Fund in
obtaining such information as the Acquiring Fund reasonably requests concerning
the beneficial ownership of the Acquired Fund Shares.
5.5. Other Necessary Action. Subject to the provisions of this Agreement,
the Acquiring Fund and the Acquired 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.
5.6. Proxy Statement/Prospectus and Registration Statement. The Acquired
Fund will provide the Acquiring Fund with information regarding the Acquired
Fund, and the Acquiring Fund will provide the Acquired Fund with information
regarding the Acquiring Fund, reasonably necessary for the preparation of the
Proxy Statement to be included in a Registration Statement on Form N-14 (the
"REGISTRATION STATEMENT"), in compliance with the 1933 Act, the 1934 Act and the
1940 Act, in connection with the meeting of the shareholders of the Acquired
Fund to consider approval of this Agreement and the transactions contemplated
herein.
5.7. Liquidating Distribution. As soon as is reasonably practicable after
the Closing, the Acquired Fund will make a liquidating distribution to its
respective shareholders consisting of the Class I Acquiring Fund Shares received
at the Closing.
5.8 Best Efforts. The Acquiring Fund and the Acquired Fund shall each use
their reasonable best efforts to fulfill or obtain the fulfillment of the
conditions precedent set forth in Article VI to effect the transactions
contemplated by this Agreement as promptly as practicable.
5.9 Other Instruments. McMorgan Funds, on behalf of the Acquired Fund, and
MainStay Funds, on behalf of the Acquiring Fund, each covenants that it will,
from time to time, as and when reasonably requested by the other party, execute
and deliver or cause to be executed and delivered all such assignments and other
instruments, and will take or cause to be taken such further action as the other
party may reasonably deem necessary or desirable in order to vest in and confirm
(a) McMorgan Funds', on behalf of the Acquired Fund, title to and possession of
the Acquiring Fund Shares to be delivered hereunder, and (b) MainStay Funds', on
behalf of the Acquiring Fund, title to and possession of all the Assets and
otherwise to carry out the intent and purpose of this Agreement.
5.10 Regulatory Approvals. The Acquiring Fund will use all reasonable
efforts to obtain the approvals and authorizations required by the 1933 Act, the
1940 Act and such of the state blue sky or securities laws as may be necessary
in order to continue its operations after the Effective Time.
5.11 Waiver and Reimbursement of Acquiring Fund Fees and Expenses. For a
period of two years after the Closing Date, NYLIM will, by waiving, assuming or
reimbursing expenses, or otherwise, limit the expenses of Class I shares of the
Acquiring Fund so that the total ordinary operating expenses (total operating
expenses excluding underlying fund expenses, taxes, interest, litigation,
extraordinary expenses, brokerage and other transaction expenses
12
related to the purchase or sale of portfolio investments) of such Class I shares
do not exceed the annual rate of 0.50% of the average daily net assets
attributable to such Class I shares.
5.12 Board Information. NYLIM represents, warrants and covenants to
McMorgan Funds that the information provided by NYLIM to the Board of Trustees
of McMorgan Funds in connection with its review of the Reorganization is
materially accurate and complete and that, to the best of its knowledge, NYLIM
has provided all information concerning McMorgan Funds, MainStay Funds and the
Reorganization it believes is reasonably necessary for the Board of Trustees of
McMorgan Funds to evaluate the Reorganization.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent to Obligations of Acquired Fund. The obligations
of McMorgan Funds, on behalf of the Acquired Fund, to consummate the
transactions provided for herein shall be subject, at McMorgan Funds' election,
to the following conditions:
(a) All representations and warranties of MainStay Funds, on behalf of the
Acquiring Fund, 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 Effective Time, with
the same force and effect as if made on and as of the Effective Time.
(b) MainStay Funds, on behalf of the Acquiring Fund, shall have delivered
to the Acquired Fund a certificate executed in the name of the Acquiring Fund by
its President or Vice President and its Treasurer or Assistant Treasurer, in a
form reasonably satisfactory to McMorgan Funds, and dated as of the Effective
Time, to the effect that the representations and warranties of MainStay Funds,
on behalf of the Acquiring Fund, made in this Agreement are true and correct at
and as of the Effective Time, except as they may be affected by the transactions
contemplated by this Agreement, and as to such other matters as McMorgan Funds
shall reasonably request.
(c) MainStay Funds, on behalf of the Acquiring Fund, shall have performed
all of the covenants and complied with all of the provisions required by this
Agreement to be performed or complied with by MainStay Funds, on behalf of the
Acquiring Fund, on or before the Effective Time.
(d) The Acquired Fund and the Acquiring Fund shall have agreed on the
number of full and fractional Class I Acquiring Fund Shares to be issued in
connection with the Reorganization after such number has been calculated in
accordance with paragraph 2.3.
(e) At or before the Effective Time, the Acquired Fund shall have received
the Statement of Assets and Liabilities, Statements of Operations and Changes in
Net Assets, and Schedule of Investments of the Acquired Fund for the fiscal year
ended October 31, 2007 that
13
have been audited by TWB and are substantially complete (the "AUDITED OCTOBER
31, 2007 FINANCIAL STATEMENTS"). In addition, before the Effective Time, the
Acquired Fund shall have received a certification, and the Audit Committee of
the Board of Trustees of McMorgan Funds shall have received an oral report, from
TWB to the effect that: (1) TWB had substantially performed a review of
subsequent events ("Subsequent Events Review") from October 31, 2007 through the
period ending on the day immediately before the date when the Effective Time
occurs (the "Subsequent Events Review End Date") in a manner consistent with
GAAP and other applicable accounting principles and standards; (2) the
Subsequent Events Review, as of the Subsequent Events Review End Date, had not
revealed any additional information, events or bases requiring the addition,
deletion or other modification to the Audited October 31, 2007 Financial
Statements or notes thereto; and (3) TWB would complete the audit and the
Subsequent Events Review on or before December 17, 2007 and report to the Board
of Trustees of McMorgan Funds on December 18, 2007 (or on such later date that
the Board of Trustees next meets) any additional information, events or bases
requiring the addition, deletion or other modification to the Audited October
31, 2007 Financial Statements or notes thereto. If the Subsequent Events Review
requires any such modification, both parties shall act and cooperate in good
faith to address and rectify any adverse condition arising from such
modification.
6.2 Conditions Precedent to Obligations of Acquiring Fund. The obligations
of MainStay Funds, on behalf of the Acquiring Fund, to complete the transactions
provided for herein shall be subject, at MainStay Funds' election, to the
following conditions:
(a) All representations and warranties of McMorgan Funds, on behalf of the
Acquired Fund, 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 Effective Time, with
the same force and effect as if made on and as of the Effective Time.
(b) McMorgan Funds shall have delivered to the Acquiring Fund a statement
of the Acquired Fund's Assets and Liabilities, as of the Effective Time, that is
prepared in accordance with GAAP and certified by the Treasurer of McMorgan
Funds.
(c) McMorgan Funds, on behalf of the Acquired Fund, shall have delivered to
the Acquiring Fund a certificate executed in the name of the Acquired Fund by
its President or Vice President and its Treasurer or Assistant Treasurer, in a
form reasonably satisfactory to the Acquiring Fund and dated as of the Effective
Time, to the effect that the representations and warranties of McMorgan Funds,
on behalf of the Acquired Fund, made in this Agreement are true and correct at
and as of the Effective Time, except as they may be affected by the transactions
contemplated by this Agreement, and as to such other matters as MainStay Funds
shall reasonably request.
(d) McMorgan Funds, on behalf of the Acquired Fund, shall have performed
all of the covenants and complied with all of the provisions required by this
Agreement to be performed or complied with by McMorgan Funds, on behalf of the
Acquired Fund, on or before the Effective Time.
14
(e) The Acquired Fund and the Acquiring Fund shall have agreed on the
number of full and fractional Class I Acquiring Fund Shares to be issued in
connection with the Reorganization after such number has been calculated in
accordance with paragraph 2.3.
(f) The Acquired Fund shall have declared and paid a distribution or
distributions prior to the Effective Time in the manner set forth in Section 1.3
of this Agreement.
6.3 Other Conditions Precedent. If any of the conditions set forth in this
paragraph 6.3 have not been satisfied on or before the Effective Time, McMorgan
Funds, on behalf of the Acquired Fund, or MainStay Funds, on behalf of the
Acquiring Fund, shall, at its option, not be required to consummate the
transactions contemplated by this Agreement.
(a) The Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding shares of the
Acquired Fund in accordance with the provisions of McMorgan Funds' Certificate
of Trust, Trust Instrument and By-Laws, applicable Delaware law and the 1940 Act
and the regulations thereunder, and certified copies of the resolutions
evidencing such approval shall have been delivered to the Acquiring Fund.
Notwithstanding anything herein to the contrary, McMorgan Funds and MainStay
Funds, on behalf of either the Acquired Fund or the Acquiring Fund,
respectively, may not waive the conditions set forth in this paragraph 6.3(a).
(b) At the Effective Time, no action, suit or other proceeding shall be
pending or, to the knowledge of McMorgan Funds or MainStay Funds, threatened
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.
(c) All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities deemed necessary by
McMorgan Funds and MainStay Funds to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties of the
Acquiring Fund or the Acquired Fund, provided that either party hereto may for
itself waive any of such conditions.
(d) 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.
(e) McMorgan Funds and MainStay Funds shall have received an opinion of
Xxxxxxxxxx Xxxxxx & Xxxxxxx LLP ("XXXXXXXXXX") as to federal income tax matters
(the "TAX OPINION") substantially to the effect that, based on the facts,
representations, assumptions stated therein and conditioned on consummation of
the Reorganization in accordance with this Agreement, for federal income tax
purposes:
(1) The Reorganization will constitute a "reorganization" within the
meaning of Section 368(a) of the Code, and the Acquired Fund and
the Acquiring
15
Fund each will be a "party to a reorganization" within the
meaning of Section 368(b) of the Code.
(2) No gain or loss will be recognized by the Acquired Fund (a) on
the transfer of its Assets to the Acquiring Fund in exchange
solely for Acquiring Fund Shares and the Acquiring Fund's
assumption of the Liabilities (if any) of the Acquired Fund, and
(b) the subsequent distribution by the Acquired Fund of those
Acquiring Fund Shares to the Acquired Fund Shareholders.
(3) No gain or loss will be recognized by the Acquiring Fund on
receipt of the Assets transferred to it by the Acquired Fund in
exchange for Acquiring Fund Shares and the assumption of the
Liabilities (if any) of the Acquired Fund.
(4) The Acquiring Fund's basis in the Assets received from the
Acquired Fund will be the same as the Acquired Fund's basis in
those assets immediately prior to the Reorganization.
(5) The Acquiring Fund's holding period for the transferred Assets
will include the Acquired Fund's holding period therefor.
(6) No gain or loss will be recognized by the Acquired Fund
Shareholders on the exchange of their Acquired Fund Shares solely
for Acquiring Fund Shares.
(7) An Acquired Fund Shareholder's basis in the Acquiring Fund Shares
received in the Reorganization will be the same as the adjusted
basis of the Acquired Fund Shares surrendered in exchange
therefor.
(8) An Acquired Fund Shareholder's holding period in the Acquiring
Fund Shares received in the Reorganization will include the
Acquired Fund Shareholder's holding period for the Acquired Fund
Shares surrendered in exchange therefor, provided such Acquired
Fund Shares were held as capital assets on the Closing Date.
(9) The Acquiring Fund will succeed to and take into account the
items of the Acquired Fund described in Section 381(c), including
any earnings and profits, or deficit therein, of the Acquired
Fund as of the date of the Closing Date, subject to the
conditions and limitations specified in Sections 381, 382, 383
and 384.
Notwithstanding this paragraph 6.3(e), the Tax Opinion may state that no
opinion is expressed as to the effect of the Reorganization on the Acquired Fund
or the Acquiring Funds or any shareholder thereof with respect to (a) any Asset
as to which any unrealized gain or loss is required to be recognized for federal
income tax purposes at the end of a taxable year (or on the
16
termination or transfer thereof) under a xxxx-to-market system of accounting, or
(b) the payment by any party of transaction expenses incurred in connection with
the Reorganization, except in relation to the qualification of the transfer of
the Acquired Fund's assets to the Acquiring Fund as a reorganization under
Section 368(a) of the Code.
Notwithstanding anything herein to the contrary, McMorgan Funds and
MainStay Funds, on behalf of either the Acquired Fund or the Acquiring Fund,
respectively, may not waive the condition set forth in this paragraph 6.3(e).
(f) State Street shall have delivered such certificates or other documents
as set forth in paragraph 3.2.
(g) The Transfer Agent shall have delivered to MainStay Funds a certificate
of its authorized officer as set forth in paragraph 3.3.
(h) The Acquiring Fund shall have issued and delivered to the Secretary of
the Acquired Fund the confirmation as set forth in paragraph 3.3.
(i) Each party shall have delivered to the other such bills of sale,
checks, assignments, receipts or other documents as reasonably requested by such
other party or its counsel.
(j) Shareholders of the McMorgan Fixed Income Fund, a separate investment
portfolio of McMorgan Funds, shall have approved the agreement and plan of
reorganization between McMorgan Funds, on behalf of the McMorgan Fixed Income
Fund, and MainStay Funds, on behalf of the Acquiring Fund, described in the
Proxy Statement and Registration Statement.
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification by MainStay Funds. MainStay Funds, solely out of the
Acquiring Fund's assets and property, agrees to indemnify and hold harmless
McMorgan Funds, the Acquired Fund, and their trustees, officers, employees and
agents (the "MCMORGAN INDEMNIFIED PARTIES") from and against any and all losses,
claims, damages, liabilities or expenses (including, without limitation, the
payment of reasonable legal fees and reasonable costs of investigation) to which
the McMorgan Indemnified Parties may become subject, insofar as such loss,
claim, damage, liability or expense (or actions with respect thereto) arises out
of or is based on any breach by the Acquiring Fund of any of its
representations, warranties, covenants or agreements set forth in this
Agreement, provided that this indemnification shall not apply to the extent such
loss, claim, damage, liability or expense (or actions with respect thereto)
shall be due to any negligent, intentional or fraudulent act, omission or error
of the Acquired Fund, or its respective trustees, officers or agents.
17
7.2 Indemnification by McMorgan Funds. McMorgan Funds, solely out of the
Acquired Fund's assets and property, agrees to indemnify and hold harmless
MainStay Funds, the Acquiring Fund, and their trustees, officers, employees and
agents (the "MAINSTAY INDEMNIFIED PARTIES") from and against any and all losses,
claims, damages, liabilities or expenses (including, without limitation, the
payment of reasonable legal fees and reasonable costs of investigation) to which
the MainStay Indemnified Parties may become subject, insofar as such loss,
claim, damage, liability or expense (or actions with respect thereto) arises out
of or is based on any breach by the Acquired Fund of any of its representations,
warranties, covenants or agreements set forth in this Agreement, provided that
this indemnification shall not apply to the extent such loss, claim, damage,
liability or expense (or actions with respect thereto) shall be due to any
negligent, intentional or fraudulent act, omission or error of the Acquiring
Fund, or its respective trustees, officers or agents.
7.3 Liability of McMorgan Funds. MainStay Funds understands and agrees that
the obligations of McMorgan Funds on behalf of the Acquired Fund under this
Agreement shall not be binding upon any trustee, shareholder, nominee, officer,
agent or employee of McMorgan Funds on behalf of McMorgan Funds personally, but
bind only McMorgan Funds on behalf of the Acquired Fund and the Acquired Fund's
property. Moreover, no series of McMorgan Funds other than the Acquired Fund
shall be responsible for the obligations of McMorgan Funds hereunder, and all
persons shall look only to the assets of the Acquired Fund to satisfy the
obligations of the Acquired Fund hereunder. MainStay Funds represents that it
has notice of the provisions of the Trust Instrument of McMorgan Funds
disclaiming shareholder and trustee liability for acts or obligations of the
Acquired Fund.
7.4 Liability of MainStay Funds. McMorgan Funds understands and agrees that
the obligations of MainStay Funds on behalf of the Acquiring Fund under this
Agreement shall not be binding upon any trustee, shareholder, nominee, officer,
agent or employee of MainStay Funds on behalf of MainStay Funds personally, but
bind only MainStay Funds on behalf of the Acquiring Fund and the Acquiring
Fund's property. Moreover, no series of MainStay Funds other than the Acquiring
Fund shall be responsible for the obligations of MainStay Funds hereunder, and
all persons shall look only to the assets of the Acquiring Fund to satisfy the
obligations of the Acquiring Fund hereunder. MainStay Funds represents that it
has notice of the provisions of the Declaration of Trust of MainStay Funds
disclaiming shareholder and trustee liability for acts or obligations of the
Acquiring Fund.
ARTICLE VIII
BROKERAGE FEES AND EXPENSES
8.1 No Broker or Finder Fees. The Acquiring Fund and the Acquired Fund,
represent and warrant to each other that there are no brokers or finders
entitled to receive any payments in connection with the transactions provided
for herein.
8.2 Expenses of Reorganization. Except for (1) any commissions, transaction
costs and other direct expenses of liquidating portfolio investments incurred by
the Acquired Fund in
18
connection with the Reorganization and (2) ordinary operating expenses of the
Acquired Fund through the Closing Date, the expenses relating to the
Reorganization will be borne by NYLIM whether or not the Reorganization is
consummated. The expenses of the Reorganization include, but are not limited to,
(i) shareholder meeting and proxy costs such as printing, mailing, solicitation
and tabulation; (ii) costs associated with the preparation and filing of Form
N-14 and N-1A and any amendments or supplements thereto (including the fees of
auditors and financial printers); (iii) costs associated with the preparation
and distribution of shareholder communications (including all printing and
mailing costs); (iv) costs associated with the deregistration and closing of the
Acquired Funds (including all costs associated in the preparation and filing of
Form N-8F and the Funds' final Form N-SAR, as well as any other required federal
or state filings); (v) costs associated with any additional audits or financial
statements necessary as a result of this transaction and the deregistration and
closing of the Acquired Funds (including the preparation of stub financials (if
needed), the conducting of any final audits and the preparation and filing of
the final tax returns); (vi) any fees of banks, brokers (except as carved out
above), custodians and transfer agents; and (vii) the fees of legal counsel for
the Funds and the Independent Trustees.
ARTICLE IX
AMENDMENTS AND TERMINATION
9.1 Amendments. This Agreement may be amended, modified or supplemented in
such manner as may be deemed necessary or advisable by the authorized officers
of McMorgan Funds or MainStay Funds, on behalf of either the Acquired Fund or
the Acquiring Fund, respectively; provided, however, that following the approval
of this Agreement by the shareholders of the Acquired Fund pursuant to paragraph
6.3(a) of this Agreement, no such amendment may have the effect of changing the
provisions for determining the number of Class I Acquiring Fund Shares to be
issued to the Acquired Fund Shareholders under this Agreement to the detriment
of such shareholders without their further approval.
9.2 Termination. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned by resolution of the Board of Trustees of
McMorgan Funds or the Board of Trustees of MainStay Funds, on behalf of the
Acquired Fund or the Acquiring Fund, respectively, at any time prior to the
Effective Time, if circumstances should develop that, in the opinion of such
Board of Trustees, make proceeding with the Agreement inadvisable. The
provisions of Article VIII shall survive any termination of this Agreement.
ARTICLE X
NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by
facsimile, electronic delivery (i.e., e-mail) personal service or prepaid or
certified mail addressed as follows:
19
If to McMorgan Funds:
McMorgan Funds
Xxx Xxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Email: xxxxxxxxx@xxxxxxxx.xxx
With copies (which shall not constitute notice) to:
New York Life Investment Management LLC
000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxxxxx X. X. Xxxxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Email: xxxxxxxxxx_xxxxxxxx@xxxxx.xxx
Xxxxxxxxxx Xxxxxx & Xxxxxxx LLP
0000 Xxxxxxxxxxxx Xxxxxx, XX
Xxxxxxxxxx, X.X. 00000
Attn: Xxxx X. Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Email: xxxx.xxxxxxx@xxxxxx.xxx
Xxxxxx Xxxx Nemerovski Xxxxxx Xxxx & Rabkin, A Professional
Corporation
Three Xxxxxxxxxxx Xxxxxx, Xxxxxxx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Email: xxxxxxxxx@xxxxxxxxxx.xxx
20
If to MainStay Funds:
The MainStay Funds
00 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxxx X. X. Xxxxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Email: xxxxxxxxxx_xxxxxxxx@xxxxx.xxx
With a copy (which shall not constitute notice) to:
Dechert LLP
0000 X Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attn: Sander M. Bieber, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Email: xxxxxx.xxxxxx@xxxxxxx.xxx
If to NYLIM:
New York Life Investment Management LLC
000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxxxxx X. X. Xxxxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Email: xxxxxxxxxx_xxxxxxxx@xxxxx.xxx
With copies (which shall not constitute notice) to:
Dechert LLP
0000 X Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attn: Sander M. Bieber, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Email: xxxxxx.xxxxxx@xxxxxxx.xxx
21
ARTICLE XI
MISCELLANEOUS
11.1 Entire Agreement. MainStay Funds and McMorgan Funds agree that they
have not made any representation, warranty or covenant, on behalf of either the
Acquiring Fund or the Acquired Fund, respectively, not set forth herein, and
this Agreement, together with the letter agreement dated the date hereof between
NYLIM and the McMorgan Funds regarding certain fee waivers and expense
limitations, constitutes the entire agreement between the parties.
11.2 Survival. The representations, warranties and covenants contained in
this Agreement or in any document delivered pursuant hereto or in connection
herewith, and the obligations with respect to indemnification of the Acquired
Fund and Acquiring Fund contained in paragraphs 7.1 and 7.2, shall survive the
Closing.
11.3 Headings. 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.
11.4 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to its
principles of conflicts of laws.
11.5 Assignment. 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.
11.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all taken together
shall constitute one agreement.
22
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed as of the 27th day of November, 2007.
THE MAINSTAY FUNDS MCMORGAN FUNDS
ON BEHALF OF THE ACQUIRING FUND ON BEHALF OF THE ACQUIRED FUND
By: /s/ XXXXXXX X. XXXXXX By: /s/ XXXX XXXXXX
--------------------------------- ------------------------------------
Name: Name:
Title: PRESIDENT Title: PRESIDENT
Solely for purposes of paragraphs 4.3, 5.11, 5.12 and 8.2:
NEW YORK LIFE INVESTMENT MANAGEMENT LLC
By: /s/ XXXXX X XXXXXXX
---------------------------------
Name:
Title: PRESIDENT
