AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made this
20th day of November, 2005, by and between ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ Trust, a
Massachusetts business trust (the "Trust") on behalf of its series, ▇▇▇▇ ▇▇▇▇▇▇▇
High Yield Fund (the "Acquiring Fund") and ▇▇▇▇ ▇▇▇▇▇▇▇ Strategic Series, a
Massachusetts business trust ("Strategic Series"), on behalf of its series, ▇▇▇▇
▇▇▇▇▇▇▇ High Income Fund (the "Acquired Fund"), each with their principal place
of business at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The Acquiring
Fund and the Acquired Fund are sometimes referred to collectively herein as the
"Funds" and individually as a "Fund."
This Agreement is intended to be and is adopted as a plan of "reorganization,"
as such term is used in Section 368(a)(1)(C) of the Internal Revenue Code of
1986, as amended (the "Code"). The reorganization will consist of: (1) the
transfer of all of the assets of the Acquired Fund to the Acquiring Fund in
exchange solely for (A) the issuance of Class A shares, Class B shares and Class
C shares of beneficial interest of the Acquiring Fund (the "Acquiring Fund
Shares") to the Acquired Fund and (B) the assumption by the Acquiring Fund of
all of the liabilities of the Acquired Fund, followed by (2) the distribution by
the Acquired Fund, on or promptly after the Closing Date hereinafter referred
to, of the Acquiring Fund Shares to the shareholders of the Acquired Fund in
liquidation and termination of the Acquired Fund as provided herein, all upon
the terms and conditions set forth in this Agreement.
In consideration of the premises of the covenants and agreements hereinafter set
forth, the parties hereto covenant and agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR ASSUMPTION OF
LIABILITIES AND ISSUANCE OF ACQUIRING FUND SHARES; LIQUIDATION OF THE ACQUIRED
FUND
1.1 The Acquired Fund will transfer all of its assets (consisting, without
limitation, of portfolio securities and instruments, dividends and interest
receivables, cash and other assets), as set forth in the statement of
assets and liabilities referred to in Paragraph 7.2 hereof (the "Statement
of Assets and Liabilities"), to the Acquiring Fund free and clear of all
liens and encumbrances, except as otherwise provided herein, in exchange
for (i) the assumption by the Acquiring Fund of the known and unknown
liabilities of the Acquired Fund, including the liabilities set forth in
the Statement of Assets and Liabilities (the "Acquired Fund Liabilities"),
which shall be assigned and transferred to the Acquiring Fund by the
Acquired Fund and assumed by the Acquiring Fund, and (ii) delivery by the
Acquiring Fund to the Acquired Fund, for distribution pro rata by the
Acquired Fund to its shareholders in proportion to their respective
ownership of Class A, Class B, Class C and Class I shares of beneficial
interest of the Acquired Fund (which shall be of the corresponding class of
the Acquiring Fund, except in the case of Class I shares, of which the
Acquiring Fund shares shall be Class A shares), as of the close of business
on December 16, 2005 (the "Closing Date"), of a number of the Acquiring
Fund Shares having an aggregate net asset value equal, in the case of each
class of Acquiring Fund Shares, to the value of the assets, less such
liabilities (herein referred to as the "net value of the assets")
attributable to the applicable class, assumed, assigned and delivered, all
determined as provided in Paragraph 2.1 hereof and as of a date and time as
specified therein. Such transactions shall take place at the Closing, as
defined in Paragraph 3.1 hereof. All computations shall be provided by The
Bank of New York (the "Custodian"), as custodian and pricing agent for the
Acquiring Fund and the Acquired Fund.
1.2 The Acquired Fund has provided the Acquiring Fund with a list of the
current securities holdings of the Acquired Fund as of the date of
execution of this Agreement. The Acquired Fund reserves the right to sell
any of these securities (except to the extent sales may be limited by
representations made in connection with issuance of the tax opinion
provided for in paragraph 8.6 hereof) but will not, without the prior
approval of the Acquiring Fund, acquire any additional securities other
than securities of the type in which the Acquiring Fund is permitted to
invest.
1.3 ▇▇▇▇ ▇▇▇▇▇▇▇ Advisers, LLC, the investment adviser to the Acquiring Fund
and the Acquired Fund, will bear the expenses allocable to each fund in
connection with the transactions contemplated by this Agreement, whether or
not the transactions contemplated hereby are consummated.
1.4 On or as soon after the Closing Date as is conveniently practicable (the
"Liquidation Date"), the Acquired Fund will liquidate and distribute pro
rata to shareholders of record (the "Acquired Fund shareholders"),
determined as of the close of regular trading on the New York Stock
Exchange on the Closing Date, the Acquiring Fund Shares received by the
Acquired Fund pursuant to Paragraph 1.1 hereof. Such liquidation and
distribution 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 and representing the
respective pro rata number and class of Acquiring Fund Shares due such
shareholders. Acquired Fund shareholders who own Class A shares of the
Acquired Fund will receive Class A Acquiring Fund Shares. Acquired Fund
shareholders who own Class B shares of the Acquired Fund will receive Class
B Acquiring Fund Shares. Acquired Fund shareholders who own Class C shares
of the Acquired Fund will receive Class C Acquiring Fund Shares. Acquired
Fund shareholders who own Class I shares of the Acquired Fund will receive
Class A Acquiring Fund Shares. The Acquiring Fund shall not issue
certificates representing Acquiring Fund Shares in connection with such
exchange.
1.5 The Acquired Fund shareholders holding certificates representing their
ownership of shares of beneficial interest of the Acquired Fund shall
surrender such certificates or deliver an affidavit with respect to lost
certificates in such form and accompanied by such surety bonds as the
Acquired Fund may require (collectively, an "Affidavit"), to ▇▇▇▇ ▇▇▇▇▇▇▇
Signature Services, Inc. prior to the Closing Date. Any Acquired Fund share
certificate which remains outstanding on the Closing Date shall be deemed
to be canceled, shall no longer evidence ownership of shares of beneficial
interest of the Acquired Fund and shall evidence ownership of Acquiring
Fund Shares. Unless and until any such certificate shall be so surrendered
or an Affidavit relating thereto shall be delivered, dividends and other
distributions payable by the Acquiring Fund subsequent to the Liquidation
Date with respect to Acquiring Fund Shares shall be paid to the holder of
such certificate(s), but such shareholders may not redeem or transfer
Acquiring Fund Shares received in the reorganization. The Acquiring Fund
will not issue share certificates in the reorganization.
1.6 Any transfer taxes payable upon issuance of Acquiring Fund Shares in a name
other than the registered holder of the Acquired Fund shares on the books
of the Acquired Fund as of that time shall, as a condition of such issuance
and transfer, be paid by the person to whom such Acquiring Fund Shares are
to be issued and transferred.
1.7 The existence of the Acquired Fund shall be terminated as promptly as
practicable following the Liquidation Date.
1.8 Any reporting responsibility of the Acquired Fund, including, but not
limited to, the responsibility for filing of regulatory reports, tax
returns, or other documents with the Securities and Exchange Commission
(the "Commission"), any state securities commissions, and any federal,
state or local tax authorities or any other relevant regulatory authority,
is and shall remain the responsibility of the Acquired Fund.
2. VALUATION
2.1 The net asset values of the Class A, Class B and Class C Acquiring Fund
Shares and the net values of the assets and liabilities of the Acquired
Fund attributable to its Class A, Class B, Class C and Class I shares to be
transferred shall, in each case, be determined as of the close of business
(4:00 p.m. Boston time) on the Closing Date. The net asset values of the
2
Class A, Class B and Class C Acquiring Fund Shares shall be computed by the
Custodian in the manner set forth in the Acquiring Fund's Declaration of
Trust as amended and restated (the "Declaration"), or By-Laws and the
Acquiring Fund's then-current prospectus and statement of additional
information and shall be computed in each case to not fewer than four
decimal places. The net value of the assets of the Acquired Fund
attributable to its Class A, Class B, Class C and Class I shares to be
transferred shall be computed by the Custodian by calculating the value of
the assets of each class transferred by the Acquired Fund and by
subtracting therefrom the amount of the liabilities of each class assigned
and transferred to and assumed by the Acquiring Fund on the Closing Date,
said assets and liabilities to be valued in the manner set forth in the
Acquired Fund's then current prospectus and statement of additional
information and shall be computed in each case to not fewer than four
decimal places.
2.2 The number of shares of each class of Acquiring Fund Shares to be issued
(including fractional shares, if any) in exchange for the Acquired Fund's
assets shall be determined by dividing the value of the Acquired Fund's
assets attributable to that class, less the liabilities attributable to
that class assumed by the Acquiring Fund, by the Acquiring Fund's net asset
value per share of the same class, all as determined in accordance with
Paragraph 2.1 hereof.
2.3 All computations of value shall be made by the Custodian in accordance with
its regular practice as pricing agent for the Funds.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be December 16, 2005 or such other date on or before
March 31, 2006 as the parties may agree. The closing of the reorganization
(the "Closing") shall be held as of 5:00 p.m. at the offices of the Trust
and Strategic Series, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or
at such other time and/or place as the parties may agree.
3.2 Portfolio securities that are not held in book-entry form in the name of
the Custodian as record holder for the Acquired Fund shall be presented by
the Acquired Fund to the Custodian for examination no later than three
business days preceding the Closing Date. Portfolio securities which are
not held in book-entry form shall be delivered by the Acquired Fund to the
Custodian for the account of the Acquiring Fund on the Closing Date, duly
endorsed in proper form for transfer, in such condition as to constitute
good delivery thereof in accordance with the custom of brokers, and shall
be accompanied by all necessary federal and state stock transfer stamps or
a check for the appropriate purchase price thereof. Portfolio securities
held of record by the Custodian in book-entry form on behalf of the
Acquired Fund shall be delivered to the Acquiring Fund by the Custodian by
recording the transfer of beneficial ownership thereof on its records. The
cash delivered shall be in the form of currency or by the Custodian
crediting the Acquiring Fund's account maintained with the Custodian with
immediately available funds.
3.3 In the event that on the Closing Date (a) the New York Stock Exchange shall
be closed to trading or trading thereon shall be restricted or (b) trading
or the reporting of trading on said Exchange or elsewhere shall be
disrupted so that accurate appraisal of the value of the net assets of the
Acquiring Fund or the Acquired Fund is impracticable, the Closing Date
shall be postponed until the first business day after the day when trading
shall have been fully resumed and reporting shall have been restored;
provided that if trading shall not be fully resumed and reporting restored
on or before January 1, 2006, this Agreement may be terminated by the
Acquiring Fund or by the Acquired Fund upon the giving of written notice to
the other party.
3.4 The Acquired Fund shall deliver at the Closing a list of the names,
addresses, federal taxpayer identification numbers and backup withholding
and nonresident alien withholding status of the Acquired Fund shareholders
and the number of outstanding shares of each class of beneficial interest
of the Acquired Fund owned by each such shareholder, all as of the close of
3
business on the Closing Date, certified by its Treasurer, Secretary or
other authorized officer (the "Shareholder List"). The Acquiring Fund shall
issue and deliver to the Acquired Fund a confirmation evidencing the
Acquiring Fund Shares to be credited on the Closing Date, or provide
evidence satisfactory to the Acquired Fund that such Acquiring Fund Shares
have been credited to the Acquired Fund's account on the books of the
Acquiring Fund. At the Closing, each party shall deliver to the other such
bills of sale, checks, assignments, stock certificates, receipts or other
documents as such other party or its counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES
4.1 Strategic Series on behalf of the Acquired Fund represents, warrants and
covenants to the Acquiring Fund as follows:
(a) Strategic Series is a business trust, duly organized, validly existing
and in good standing under the laws of the Commonwealth of Massachusetts
and has the power to own all of its properties and assets and, subject to
approval by the shareholders of the Acquired Fund, to carry out the
transactions contemplated by this Agreement. Neither Strategic Series nor
the Acquired Fund is required to qualify to do business in any jurisdiction
in which it is not so qualified or where failure to qualify would subject
it to any material liability or disability. Strategic Series has all
necessary federal, state and local authorizations to own all of its
properties and assets and to carry on its business as now being conducted;
(b) Strategic Series is a registered investment company classified as a
management company and its registration with the Commission as an
investment company under the Investment Company Act of 1940, as amended
(the "1940 Act"), is in full force and effect. The Acquired Fund is a
diversified series of Strategic Series;
(c) Strategic Series and the Acquired Fund are not, and the execution,
delivery and performance of their obligations under this Agreement will not
result, in violation of any provision of Strategic Series's Declaration of
Trust, as amended and restated (as defined above, the "Declaration") or
By-Laws or of any agreement, indenture, instrument, contract, lease or
other undertaking to which Strategic Series or the Acquired Fund is a party
or by which it is bound;
(d) Except as otherwise disclosed in writing and accepted by the Acquiring
Fund, no material litigation or administrative proceeding or investigation
of or before any court or governmental body is currently pending or
threatened against Strategic Series or the Acquired Fund or any of the
Acquired Fund's properties or assets. Strategic Series knows of no facts
which might form the basis for the institution of such proceedings, and
neither Strategic Series nor the Acquired Fund is a party to or subject to
the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects the Acquired
Fund's business or its ability to consummate the transactions herein
contemplated;
(e) The Acquired Fund has no material contracts or other commitments (other
than this Agreement or agreements for the purchase of securities entered
into in the ordinary course of business and consistent with its obligations
under this Agreement) which will not be terminated without liability to the
Acquired Fund at or prior to the Closing Date;
(f) The audited statement of assets and liabilities, including the schedule
of investments, of the Acquired Fund as of May 31, 2005 and the related
statement of operations (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 May 31, 2005 and the results of its
operations for the period then ended in accordance with generally accepted
accounting principles consistently applied, and there were no known actual
or contingent liabilities of the Acquired Fund as of the respective dates
thereof not disclosed therein;
4
(g) Since May 31, 2005, 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;
(h) At the date hereof and by the Closing Date, all federal, state and
other tax returns and reports, including information returns and payee
statements, of the Acquired Fund required by law to have been filed or
furnished by such dates shall have been filed or furnished, and all
federal, state and other taxes, interest and penalties shall have been paid
so far as due, or provision shall have been made for the payment thereof,
and to the best of the Acquired Fund's knowledge no such return is
currently under audit and no assessment has been asserted with respect to
such returns or reports;
(i) The Acquired Fund has qualified for the favorable tax treatment as a
regulated investment company for each taxable year of its operation and the
Acquired Fund will qualify as such as of the Closing Date with respect to
its taxable year ending on the Closing Date;
(j) The authorized capital of the Acquired Fund consists of an unlimited
number of shares of beneficial interest, no par value. All issued and
outstanding shares of beneficial interest of the Acquired Fund are, and at
the Closing Date will be, duly and validly issued and outstanding, fully
paid and nonassessable by Strategic Series. All of the issued and
outstanding shares of beneficial interest of the Acquired Fund will, at the
time of Closing, be held by the persons and in the amounts and classes set
forth in the Shareholder List submitted to the Acquiring Fund pursuant to
Paragraph 3.4 hereof. The Acquired Fund does not have outstanding any
options, warrants or other rights to subscribe for or purchase any of its
shares of beneficial interest, nor is there outstanding any security
convertible into any of its shares of beneficial interest;
(k) At the Closing Date, the Acquired Fund will have good and marketable
title to the assets to be transferred to the Acquiring Fund pursuant to
Paragraph 1.1 hereof, and full right, power and authority to sell, assign,
transfer and deliver such assets hereunder, and upon delivery and payment
for such assets, the Acquiring Fund will acquire good and marketable title
thereto subject to no restrictions on the full transfer thereof, including
such restrictions as might arise under the Securities Act of 1933, as
amended (the "1933 Act");
(l) The execution, delivery and performance of this Agreement have been
duly authorized by all necessary action on the part of Strategic Series, on
behalf of the Acquired Fund, and this Agreement constitutes a valid and
binding obligation of the Acquired Fund enforceable in accordance with its
terms, subject to the approval of the Acquired Fund's shareholders;
(m) The information to be furnished by the Acquired Fund to the Acquiring
Fund for use in applications for orders, registration statements, proxy
materials and other documents which may be necessary in connection with the
transactions contemplated hereby shall be accurate and complete and shall
comply in all material respects with federal securities and other laws and
regulations thereunder applicable thereto;
(n) The proxy statement of the Acquired Fund (the "Proxy Statement") to be
included in the Registration Statement referred to in Paragraph 5.7 hereof
(other than written information furnished by the Acquiring Fund for
inclusion therein, as covered by the Acquiring Fund's warranty in Paragraph
4.2(m) hereof), on the effective date of the Registration Statement, on the
date of the meeting of the Acquired Fund shareholders and on the Closing
Date, shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which such
statements were made, not misleading;
5
(o) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the Acquired
Fund of the transactions contemplated by this Agreement;
(p) All of the issued and outstanding shares of beneficial interest of the
Acquired Fund have been offered for sale and sold in conformity with all
applicable federal and state securities laws;
(q) The Class A, Class B, and Class C prospectus of the Acquired Fund,
dated September 15, 2005, and any amendments or supplements thereto on or
prior to the Closing Date, and the Class I prospectus of the Acquired Fund,
dated September 15, 2005, and any amendments or supplements on or prior to
the Closing Date (the "Acquired Fund Prospectus"), furnished to the
Acquiring Fund, does not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they
were made, not misleading; and
(r) The Acquired Fund Tax Representation Certificate to be delivered by the
Acquired Fund to the Acquiring Fund at Closing pursuant to Section 7.5 (the
"Acquired Fund Tax Representation Certificate") will not on the Closing
Date contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein not misleading.
4.2 The Trust on behalf of the Acquiring Fund represents, warrants and
covenants to the Acquired Fund as follows:
(a) The Trust is a business trust duly organized, validly existing and in
good standing under the laws of the Commonwealth of Massachusetts and has
the power to own all of its properties and assets and to carry out the
Agreement. Neither the Trust nor the Acquiring Fund is required to qualify
to do business in any jurisdiction in which it is not so qualified or where
failure to qualify would subject it to any material liability or
disability. The Trust has all necessary federal, state and local
authorizations to own all of its properties and assets and to carry on its
business as now being conducted;
(b) The Trust is a registered investment company classified as a management
company and its registration with the Commission as an investment company
under the 1940 Act is in full force and effect. The Acquiring Fund is a
diversified series of the Trust;
(c) The Class A, Class B, and Class C prospectus of the Acquiring Fund
dated September 15, 2005 (the "Acquiring Fund Prospectus") and statement of
additional information for Class A, Class B and Class C shares of the
Acquiring Fund, dated September 15, 2005, and any amendments or supplements
thereto on or prior to the Closing Date, and the Registration Statement on
Form N-14 filed in connection with this Agreement (the "Registration
Statement") (other than written information furnished by the Acquired Fund
for inclusion therein, as covered by the Acquired Fund's warranty in
Paragraph 4.1(m) hereof) will conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder, the Acquiring Fund Prospectus
does not include any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading and the Registration Statement will not include any
untrue statement of material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
(d) At the Closing Date, the Trust, on behalf of the Acquiring Fund, will
have good and marketable title to the assets of the Acquiring Fund;
(e) The Trust and the Acquiring Fund are not, and the execution, delivery
and performance of their obligations under this Agreement will not result
in a violation of any provisions of the Trust's Declaration, or By-Laws or
of any agreement, indenture, instrument, contract, lease or other
6
undertaking to which the Trust or the Acquiring Fund is a party or by which
the Trust or the Acquiring Fund is bound;
(f) Except as otherwise disclosed in writing and accepted by the Acquired
Fund, no material litigation or administrative proceeding or investigation
of or before any court or governmental body is currently pending or
threatened against the Trust or the Acquiring Fund or any of the Acquiring
Fund's properties or assets. The Trust knows of no facts which might form
the basis for the institution of such proceedings, and neither the Trust
nor the Acquiring Fund is a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which
materially and adversely affects the Acquiring Fund's business or its
ability to consummate the transactions herein contemplated;
(g) The audited statement of assets and liabilities, including the schedule
of investments, of the Acquiring Fund as of May 31, 2005 and the related
statement of operations for each such period (copies of which have been
furnished to the Acquired Fund), present fairly in all material respects
the financial condition of the Acquiring Fund as of May 31, 2005, the
results of its operations for the period then ended in accordance with
generally accepted accounting principles consistently applied, and there
were no known actual or contingent liabilities of the Acquiring Fund as of
the respective dates thereof not disclosed therein;
(h) Since May 31, 2005, there has not been any material adverse change in
the Acquiring Fund's financial condition, assets, liabilities or business
other than changes occurring in the ordinary course of business, or any
incurrence by the Trust on behalf of the Acquiring Fund of indebtedness
maturing more than one year from the date such indebtedness was incurred,
except as disclosed to and accepted by the Acquired Fund;
(i) Each of the Acquiring Fund and its predecessors has qualified for the
favorable tax treatment as a regulated investment company for each taxable
year of its operation and the Acquiring Fund will continue to qualify as
such as of the Closing Date and thereafter;
(j) The authorized capital of the Trust consists of an unlimited number of
shares of beneficial interest, no par value per share. All issued and
outstanding shares of beneficial interest of the Acquiring Fund are, and at
the Closing Date will be, duly and validly issued and outstanding, fully
paid and nonassessable by the Trust. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or
purchase any of its shares of beneficial interest, nor is there outstanding
any security convertible into any of its shares of beneficial interest;
(k) The execution, delivery and performance of this Agreement has been duly
authorized by all necessary action on the part of the Trust on behalf of
the Acquiring Fund, and this Agreement constitutes a valid and binding
obligation of the Acquiring Fund enforceable in accordance with its terms;
(l) The Acquiring Fund Shares to be issued and delivered to the Acquired
Fund pursuant to the terms of this Agreement, when so issued and delivered,
will be duly and validly issued shares of beneficial interest of the
Acquiring Fund and will be fully paid and nonassessable by the Trust;
(m) The information to be furnished by the Acquiring Fund for use in
applications for orders, registration statements, proxy materials and other
documents which may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete and shall comply in all
material respects with federal securities and other laws and regulations
applicable thereto;
(n) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the Acquiring
Fund of the transactions contemplated by the Agreement, except for the
registration of the Acquiring Fund Shares under the 1933 Act and the 1940
Act; and
7
(o) The Acquiring Fund Tax Representation Certificate to be delivered by
the Acquiring Fund to the Acquired Fund at Closing pursuant to Section 6.3
(the "Acquiring Fund Tax Representation Certificate") will not on the
Closing Date contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein not
misleading.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1 Except as expressly contemplated herein to the contrary, Strategic Series,
on behalf of the Acquired Fund, and the Trust, on behalf of the Acquiring
Fund, will operate their respective businesses in the ordinary course
between the date hereof and the Closing Date, it being understood that such
ordinary course of business will include customary dividends and
distributions and any other distributions necessary or desirable to avoid
federal income or excise taxes.
5.2 Strategic Series on behalf of the Acquired Fund will call a meeting of the
Acquired Fund shareholders to consider and act upon this Agreement and to
take all other action necessary to obtain approval of the transactions
contemplated herein.
5.3 The Acquired Fund covenants that the Acquiring Fund Shares to be issued
hereunder are not being acquired by the Acquired Fund for the purpose of
making any distribution thereof other than in accordance with the terms of
this Agreement.
5.4 Strategic Series, on behalf of the Acquired Fund, will provide such
information within its possession or reasonably obtainable as the Trust on
behalf of the Acquiring Fund requests concerning the beneficial ownership
of the Acquired Fund's shares of beneficial interest.
5.5 Subject to the provisions of this Agreement, the Acquiring Fund and the
Acquired Fund each shall take, or cause to be taken, all action, and do or
cause to be done, all things reasonably necessary, proper or advisable to
consummate the transactions contemplated by this Agreement.
5.6 Strategic Series, on behalf of the Acquired Fund, shall furnish to the
Trust, on behalf of the Acquiring Fund, on the Closing Date the Statement
of Assets and Liabilities of the Acquired Fund as of the Closing Date,
which statement shall be prepared in accordance with generally accepted
accounting principles consistently applied and shall be certified by the
Acquired Fund's Treasurer or Assistant Treasurer. As promptly as
practicable but in any case within 60 days after the Closing Date, the
Acquired Fund shall furnish to the Acquiring Fund, in such form as is
reasonably satisfactory to the Trust, a statement of the earnings and
profits of the Acquired Fund for federal income tax purposes and of any
capital loss carryovers and other items that will be carried over to the
Acquiring Fund as a result of Section 381 of the Code, and which statement
will be certified by the President of the Acquired Fund.
5.7 The Trust on behalf of the Acquiring Fund will prepare and file with the
Commission the Registration Statement in compliance with the 1933 Act and
the 1940 Act in connection with the issuance of the Acquiring Fund Shares
as contemplated herein.
5.8 Strategic Series on behalf of the Acquired Fund will prepare a Proxy
Statement, to be included in the Registration Statement in compliance with
the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934
Act"), and the 1940 Act and the rules and regulations thereunder
(collectively, the "Acts") in connection with the special meeting of
shareholders of the Acquired Fund to consider approval of this Agreement.
5.9 Neither the Acquired Fund nor the Acquiring Fund shall take any action that
is inconsistent with the representations set forth in, with respect to the
Acquired Fund, the Acquired Fund Tax Representation Certificate, and with
respect to the Acquiring Fund, the Acquiring Fund Tax Representation
Certificate, to the extent such action would prevent the reorganization
from qualifying as a "reorganization" under Section 368(a) of the Code. The
parties hereby adopt this Agreement as a "plan of reorganization" within
8
the meaning of Section 1.368-2(g) and 1.368-3(a) of the income tax
regulations promulgated under the Code. Unless otherwise required pursuant
to a "determination" within the meaning of Section 1313(a) of the Code or
otherwise, the parties hereto shall treat and report the transactions
contemplated hereby as a reorganization within the meaning of Section
368(a)(1)(C) of the Code, and shall not take any position inconsistent with
such treatment.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF STRATEGIC SERIES ON BEHALF OF THE
ACQUIRED FUND
The obligations of Strategic Series on behalf of the Acquired Fund to complete
the transactions provided for herein shall be, at its election, subject to the
performance by the Trust on behalf of the Acquiring Fund of all the obligations
to be performed by it hereunder on or before the Closing Date, and, in addition
thereto, the following further conditions:
6.1 All representations and warranties of the Trust 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 Closing Date with
the same force and effect as if made on and as of the Closing Date;
6.2 The Trust on behalf of the Acquiring Fund shall have delivered to Strategic
Series on behalf of the Acquired Fund a certificate executed in its name by
the Trust's President or Vice President and its Treasurer or Assistant
Treasurer, in form and substance satisfactory to Strategic Series on behalf
of the Acquired Fund and dated as of the Closing Date, to the effect that
the representations and warranties of the Trust on behalf of the Acquiring
Fund made in this Agreement are true and correct at and as of the Closing
Date, except as they may be affected by the transactions contemplated by
this Agreement, and as to such other matters as Strategic Series on behalf
of the Acquired Fund shall reasonably request; and
6.3 The Acquiring Fund shall have delivered to the Acquired Fund an Acquiring
Fund Tax Representation Certificate in a form acceptable to ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇ LLP, the Acquired Fund and the Acquiring Fund
concerning certain tax-related matters with respect to the Acquiring Fund.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TRUST ON BEHALF OF THE ACQUIRING
FUND
The obligations of the Trust on behalf of the Acquiring Fund to complete the
transactions provided for herein shall be, at its election, subject to the
performance by Strategic Series on behalf of the Acquired Fund of all the
obligations to be performed by it hereunder on or before the Closing Date and,
in addition thereto, the following conditions:
7.1 All representations and warranties of Strategic Series 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 Closing Date
with the same force and effect as if made on and as of the Closing Date;
7.2 Strategic Series on behalf of the Acquired Fund shall have delivered to the
Trust on behalf of the Acquiring Fund the Statement of Assets and
Liabilities of the Acquired Fund, together with a list of its portfolio
securities showing the federal income tax bases and holding periods of such
securities, as of the Closing Date, certified by the Treasurer or Assistant
Treasurer of the Acquired Fund;
7.3 Strategic Series on behalf of the Acquired Fund shall have delivered to the
Trust on behalf of the Acquiring Fund on the Closing Date a certificate
executed in the name of the Acquired Fund by a President or Vice President
and a Treasurer or Assistant Treasurer of the Acquired Fund, in form and
9
substance satisfactory to the Trust on behalf of the Acquiring Fund and
dated as of the Closing Date, to the effect that the representations and
warranties of the Acquired Fund in this Agreement are true and correct at
and as of the Closing Date, except as they may be affected by the
transactions contemplated by this Agreement, and as to such other matters
as the Trust on behalf of the Acquiring Fund shall reasonably request;
7.4 At or prior to the Closing Date, the Acquired Fund's investment adviser, or
an affiliate thereof, shall have made all payments, or applied all credits,
to the Acquired Fund required by any applicable contractual or voluntary
expense limitation; and
7.5 The Acquired Fund shall have delivered to the Acquiring Fund an Acquired
Fund Tax Representation Certificate in a form acceptable to ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇ LLP, the Acquired Fund and the Acquiring Fund
concerning certain tax-related matters with respect to the Acquired Fund.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF STRATEGIC SERIES, ON BEHALF OF
THE ACQUIRED FUND, AND THE TRUST, ON BEHALF OF THE ACQUIRING FUND
The obligations hereunder of Strategic Series, on behalf of the Acquired Fund,
and the Trust, on behalf of the Acquiring Fund, are each subject to the further
conditions that on or before the Closing Date:
8.1 The Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding shares of
beneficial interest of the Acquired Fund in accordance with the provisions
of Strategic Series 's Declaration and By-Laws, and certified copies of the
resolutions evidencing such approval by the Acquired Fund's shareholders
shall have been delivered by the Acquired Fund to the Trust on behalf of
the Acquiring Fund;
8.2 On the Closing Date no action, suit or other proceeding shall be pending
before any court or governmental agency in which it is sought to restrain
or prohibit, or obtain changes or other relief in connection with, this
Agreement or the transactions contemplated herein;
8.3 All consents of other parties and all other consents, orders and permits of
federal, state and local regulatory authorities (including those of the
Commission and their "no-action" positions) deemed necessary by the Trust,
on behalf of the Acquiring Fund, and Strategic Series, on behalf of the
Acquired Fund, 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
waive any such conditions for itself;
8.4 The Registration Statement shall have become effective under the 1933 Act
and the 1940 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 or the 1940 Act;
8.5 The Acquired Fund shall have distributed to its shareholders, in a
distribution or distributions qualifying for the deduction for dividends
paid under Section 561 of the Code, all of its investment company taxable
income (as defined in Section 852(b)(2) of the Code determined without
regard to Section 852(b)(2)(D) of the Code) for its taxable year ending on
the Closing Date, all of the excess of (i) its interest income excludable
from gross income under Section 103(a) of the Code over (ii) its deductions
disallowed under Sections 265 and 171(a)(2) of the Code for its taxable
year ending on the Closing Date, and all of its net capital gain (as such
term is used in Sections 852(b)(3)(A) and (C) of the Code), after reduction
by any available capital loss carryforward, for its taxable year ending on
the Closing Date; and
10
8.6 The parties shall have received an opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
and ▇▇▇▇ LLP, satisfactory to Strategic Series, on behalf of the Acquired
Fund, and the Trust, on behalf of the Acquiring Fund, substantially to the
effect that for federal income tax purposes the acquisition by the
Acquiring Fund of all of the assets of the Acquired Fund solely in exchange
for the issuance of Acquiring Fund Shares to the Acquired Fund and the
assumption of all of the Acquired Fund Liabilities by the Acquiring Fund,
followed by the distribution by the Acquired Fund, in liquidation of the
Acquired Fund, of Acquiring Fund Shares to the shareholders of the Acquired
Fund in exchange for their shares of beneficial interest of the Acquired
Fund and the termination of the Acquired Fund, will constitute a
"reorganization" within the meaning of Section 368(a) of the Code.
Notwithstanding anything herein to the contrary, neither the Trust, on
behalf of the Acquiring Fund, nor Strategic Series, on behalf of the
Acquired Fund, may waive the conditions set forth in this Paragraph 8.6.
9. BROKERAGE FEES AND EXPENSES
9.1 The Trust, on behalf of the Acquiring Fund, and Strategic Series, on behalf
of the Acquired Fund, represent and warrants that there are no brokers or
finders entitled to receive any payments in connection with the
transactions provided for herein.
9.2 The Trust and Trust II have been advised that ▇▇▇▇ ▇▇▇▇▇▇▇ Advisers, LLC,
the investment adviser to the Acquiring Fund and the Acquired Fund, will
bear the expenses allocable to each fund in connection with transactions
(i.e., cost of printing and mailing proxy statements and soliciting
shareholders) contemplated by this Agreement, whether or not the
transaction contemplated hereby are consummated.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Trust, on behalf of the Acquiring Fund, and Strategic Series, on behalf
of the Acquired Fund, agree that neither party has made any representation,
warranty or covenant not set forth herein or referred to in Paragraph 4
hereof and that this Agreement constitutes the entire agreement between the
parties.
10.2 The representations, warranties and covenants contained in this Agreement
or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated hereunder.
11. TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of the Trust, on
behalf of the Acquiring Fund, and Strategic Series, on behalf of the
Acquired Fund. In addition, either party may at its option terminate this
Agreement at or prior to the Closing Date:
(a) because of a material breach by the other of any representation,
warranty, covenant or agreement contained herein to be performed at or
prior to the Closing Date;
(b) because of a condition herein expressed to be precedent to the
obligations of the terminating party which has not been met and which
reasonably appears will not or cannot be met;
(c) by resolution of the Trust's Board of Trustees, on behalf of the
Acquiring Fund, if circumstances should develop that, in the good faith
opinion of such Board, make proceeding with the Agreement not in the best
interests of the Acquiring Fund's shareholders; or
(d) by resolution of Strategic Series's Board of Trustees, on behalf of the
Acquired Fund, if circumstances should develop that, in the good faith
opinion of such Board, make proceeding with the Agreement not in the best
interests of the Acquired Fund's shareholders.
11.2 In the event of any such termination, there shall be no liability for
damages on the part of the Trust, the Acquiring Fund, Strategic Series or
the Acquired Fund, or the Trustees or officers of the Trust or Strategic
11
Series, but each party shall bear the expenses incurred by it incidental to
the preparation and carrying out of this Agreement.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as may be
mutually agreed upon by the authorized officers of the Trust. However, following
the meeting of shareholders of the Acquired Fund held pursuant to Paragraph 5.2
of this Agreement, no such amendment may have the effect of changing the
provisions regarding the method for determining the number of Acquiring Fund
Shares to be received by the Acquired Fund shareholders under this Agreement to
the detriment of such shareholders without their further approval; provided that
nothing contained in this Article 12 shall be construed to prohibit the parties
from amending this Agreement to change the Closing Date.
13. NOTICES
Any notice, report, statement or demand required or permitted by any provisions
of this Agreement shall be in writing and shall be given by prepaid telegraph,
telecopy or certified mail addressed to the Acquiring Fund or to the Acquired
Fund, each at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention:
President, and, in either case, with copies to ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ and
▇▇▇▇ LLP, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇.
▇▇▇▇▇▇, Esq.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT
14.1 The article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts.
14.4 This Agreement shall bind and inure to the benefit of the parties hereto
and their respective successors and assigns, but no assignment or transfer
hereof or of any rights or obligations hereunder shall be made by any party
without the prior 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.
14.5 All persons dealing with the Trust or Strategic Series must look solely to
the property of the Trust or Strategic Series, respectively, for the
enforcement of any claims against the Trust or Strategic Series. The
Trustees, officers, agents and shareholders of the Trust or Strategic
Series assume no personal liability for obligations entered into on behalf
of the Trust or Strategic Series, respectively. None of the other series of
the Trust or Strategic Series shall be responsible for any obligations
assumed by or on behalf of the Acquiring Fund or the Acquired Fund under
this Agreement.
12
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed as of the date first set forth above by its President or Vice President
and has caused its corporate seal to be affixed hereto.
▇▇▇▇ ▇▇▇▇▇▇▇ STRATEGIC SERIES on behalf of
▇▇▇▇ ▇▇▇▇▇▇▇ HIGH INCOME FUND
By: /s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ TRUST, on behalf of
▇▇▇▇ ▇▇▇▇▇▇▇ HIGH YIELD FUND
By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Vice President and Treasurer
13