FORM OF AGREEMENT AND PLAN OF REORGANIZATION (Diversified Small Cap Value Fund)
Exhibit
4.1
(Diversified
Small Cap Value Fund)
THIS AGREEMENT AND PLAN OF
REORGANIZATION (the “Agreement”) is made as of this ____ day of , 2009, by and
between Federated Equity Funds, a Massachusetts business trust, with its
principal place of business at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
(the “Federated Trust”), with respect to its Federated Clover Small Value Fund
(the “Acquiring Fund”), a series of the Federated Trust, and Touchstone Funds
Group Trust, a Delaware statutory trust, with its principal place of business at
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ (the “Trust”), with
respect to its Touchstone Diversified Small Cap Value Fund, a series of the
Trust (“Acquired Fund” and, collectively with the Acquiring Fund, the
“Funds”).
This
Agreement is intended to be, and is adopted as, a plan of reorganization within
the meaning of Section 368(a) of the United States Internal Revenue Code of
1986, as amended (the “Code”) and the Treasury Regulations promulgated
thereunder. The reorganization will consist
of: (i) the transfer of all of the assets of the Acquired Fund
(which offers Class A Shares, Class C Shares and Class Z Shares) in exchange for
shares (Class A Shares, Class C Shares and Class A Shares, respectively), no par
value per share, of the Acquiring Fund (“Acquiring Fund Shares”); and
(ii) the distribution of the Acquiring Fund Shares (Class A Shares, Class C
Shares and Class A Shares) to the holders of shares of the Acquired Fund (Class
A Shares, Class C Shares and Class Z Shares, respectively) and the liquidation
of the Acquired Fund as provided herein, all upon the terms and conditions set
forth in this Agreement (the “Reorganization”).
WHEREAS,
the Acquiring Fund and the Acquired Fund are separate series of the Federated
Trust and the Trust, respectively, and the Federated Trust and the Trust are
open-end, registered management investment companies, and the Acquired Fund owns
securities that generally are assets of the character in which the Acquiring
Fund is permitted to invest;
WHEREAS,
the Acquiring Fund and the Acquired Fund are authorized to issue their shares of
beneficial interests;
WHEREAS,
the Trustees of the Federated Trust have determined that the Reorganization,
with respect to the Acquiring Fund, is in the best interests of the Acquiring
Fund and that the interests of the existing shareholders of the Acquiring Fund
will not be diluted as a result of the Reorganization;
WHEREAS,
the Trustees of the Trust have determined that the Reorganization, with respect
to the Acquired Fund, is in the best interests of the Acquired Fund and that the
interests of the existing shareholders of the Acquired Fund will 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
TRANSFER
OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR ACQUIRING FUND SHARES AND
LIQUIDATION OF THE ACQUIRED FUND
1.1 THE
EXCHANGE. Subject to the terms and conditions contained herein and on
the basis of the representations and warranties contained herein, the Acquired
Fund agrees to transfer all of its assets, as set forth in paragraph 1.2 to
the Acquiring Fund. In exchange, the Acquiring Fund agrees to
deliver to the Acquired Fund the number of each class of full and fractional
Acquiring Fund Shares, determined by multiplying (a) the shares outstanding of
each class of the Acquired Fund (the “Acquired Fund Shares”) by (b) the
ratio computed by dividing (x) the net asset value per share of such class
of the Acquired Fund Shares by (y) the net asset value per share of the
corresponding class of Acquiring Fund Shares computed in the manner and as of
the time and date set forth in paragraph 2.2. Holders of the
Class A Shares, Class C Shares and Class Z Shares of the Acquired Fund will
receive Class A Shares, Class C Shares and Class A Shares, respectively, of the
Acquiring Fund. Such transactions shall take place at the closing on
the Closing Date provided for in paragraph 3.1.
1.2 ASSETS
TO BE ACQUIRED. The assets of the Acquired Fund to be acquired by the
Acquiring Fund shall consist of property having a value equal to the total net
assets of the Acquired Fund, including, without limitation, cash, securities,
commodities, interests in futures and dividends or interest receivable, owned by
the Acquired Fund. The assets to be acquired by the Acquiring Fund
shall not include any deferred or prepaid expenses shown as an asset on the
books of the Acquired Fund on the Closing Date, and shall be excluded from the
Valuation of Assets under paragraph 2.1 and the corresponding calculation of net
asset value per share of each class of the Acquired Fund Shares under this
Agreement.
The
Acquired Fund has provided the Acquiring Fund with its most recent audited
financial statements, which contain a list of all of the Acquired Fund’s assets
as of the date of such statements. The Acquired Fund hereby
represents that as of the date of the execution of this Agreement, there have
been no changes in its financial position as reflected in such financial
statements other than those occurring in the ordinary course of business in
connection with the purchase and sale of securities, the issuance and redemption
of Acquired Fund Shares and the payment of normal operating expenses, dividends
and capital gains distributions.
1.3 LIABILITIES
TO BE DISCHARGED. The Acquired Fund will discharge all of its
liabilities and obligations prior to the Closing Date.
1.4 LIQUIDATION
AND DISTRIBUTION. On or as soon after the Closing Date as is
conveniently practicable: (a) the Acquired Fund will distribute
in complete liquidation of the Acquired Fund, pro rata to its shareholders
of record, determined as of the close of business on the Closing Date (the
“Acquired Fund Shareholders”), all of the Acquiring Fund Shares received by the
Acquired Fund pursuant to paragraph 1.1; and (b) the Acquired Fund
will thereupon proceed to dissolve and terminate as set forth in
paragraph 1.8 below. Such distribution will be accomplished by
the transfer of Acquiring Fund Shares 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 name of the Acquired Fund Shareholders, and
representing the respective pro rata number of Acquiring Fund Shares due
such shareholders. All issued and outstanding Acquired Fund Shares
will simultaneously be canceled on the books of the Acquired
Fund. The Acquiring Fund shall not issue certificates representing
Acquiring Fund Shares in connection with such transfer. After the
Closing Date, the Acquired Fund shall not conduct any business except in
connection with its termination.
1.5 OWNERSHIP
OF SHARES. Ownership of Acquiring Fund Shares will be shown on the
books of the Acquiring Fund’s transfer agent. Acquiring Fund Shares will be
issued simultaneously to the Acquired Fund, in an amount equal in value to the
aggregate net asset value of the Acquired Fund Shares, to be distributed to
Acquired Fund Shareholders.
1.6 TRANSFER
TAXES. Any transfer taxes payable upon the 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 REPORTING
RESPONSIBILITY. Any reporting responsibility of the Acquired Fund is
and shall remain the responsibility of the Acquired Fund.
1.8 TERMINATION. The
Acquired Fund shall be terminated promptly following the Closing Date and the
making of all distributions pursuant to paragraph 1.4.
1.9 BOOKS
AND RECORDS. All books and records of the Acquired Fund, including
all books and records required to be maintained under the Investment Company Act
of 1940 (the “1940 Act”), and the rules and regulations thereunder, shall be
available to the Acquiring Fund from and after the Closing Date and shall be
turned over to the Acquiring Fund as soon as practicable following the Closing
Date.
ARTICLE II
VALUATION
2.1 VALUATION
OF ASSETS. The value of the Acquired Fund’s assets to be acquired by
the Acquiring Fund hereunder shall be the value of such assets at the closing on
the Closing Date, using the valuation procedures set forth in the Federated
Trust’s Declaration of Trust and the Acquiring Fund’s then current prospectus
and statement of additional information or such other valuation procedures as
shall be mutually agreed upon by the parties.
2.2 VALUATION
OF SHARES. The net asset value per share of each class of Acquiring
Fund Shares shall be the net asset value per share of such class of Acquiring
Fund Shares computed at the closing on the Closing Date, using the valuation
procedures set forth in the Federated Trust’s Declaration of Trust and the
Acquiring Fund’s then current prospectus and statement of additional
information, or such other valuation procedures as shall be mutually agreed upon
by the parties.
2.3 SHARES
TO BE ISSUED. The number of each class of the Acquiring Fund Shares
to be issued (including fractional shares, if any) in exchange for the Acquired
Fund’s assets, shall be determined in accordance with paragraph
1.1.
2.4 DETERMINATION
OF VALUE. All computations of value shall be made by State Street
Bank and Trust Company, on behalf of the Acquiring Fund and the Acquired
Fund.
ARTICLE III
CLOSING
AND CLOSING DATE
3.1 CLOSING
DATE. The closing shall occur on or about ____________, 2009, or such
other date(s) as the parties may agree to in writing (the “Closing
Date”). All acts taking place at the closing shall be deemed to take
place at 4:00 p.m. Eastern Time on the Closing Date unless otherwise provided
herein. The closing shall be held at the offices of Federated
Services Company, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, or
at such other time and/or place as the parties may agree.
3.2 CUSTODIAN’S
CERTIFICATE. ▇▇▇▇▇ Brothers ▇▇▇▇▇▇▇▇ & Co., as custodian for the Acquired
Fund (the “Custodian”), shall deliver at the Closing a certificate of an
authorized officer stating that: (a) the Acquired Fund’s
portfolio securities, cash, and any other assets have been delivered in proper
form to the Acquiring Fund on the Closing Date; and (b) all necessary taxes
including all applicable federal and state stock transfer stamps, if any, shall
have been paid, or provision for payment shall have been made, in conjunction
with the delivery of portfolio securities by the Acquired Fund.
3.3 EFFECT
OF SUSPENSION IN TRADING. In the event that on the scheduled Closing
Date, either: (a) the NYSE or another primary exchange on which
the portfolio securities of the Acquiring Fund or the Acquired Fund are
purchased or sold, shall be closed to trading or trading on such exchange shall
be restricted; or (b) trading or the reporting of trading on the NYSE 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 Friday that is a business day after the
day when trading is fully resumed and reporting is restored.
3.4 TRANSFER
AGENT’S CERTIFICATE. JPMorgan Chase Bank, N.A., as transfer agent for the
Acquired Fund as of the Closing Date, shall deliver at the Closing a certificate
of an authorized officer stating that its records contain the names and
addresses of Acquired Fund Shareholders, and the number and percentage ownership
of outstanding shares owned by each such shareholder immediately prior to the
Closing. The Acquiring Fund shall issue and deliver or cause, State
Street Bank and Trust Company, its transfer agent, to issue and deliver a
confirmation evidencing Acquiring Fund Shares to be credited on the Closing Date
to the Secretary of the Trust or provide evidence satisfactory to the Acquired
Fund that the 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, share
certificates, treasurer, chief financial officer, president/vice president or
other officer certificates, custodian and/or transfer agent instructions and
certificates, legal opinions, receipts and other documents, if any, as such
other party or its counsel may reasonably request.
ARTICLE IV
REPRESENTATIONS
AND WARRANTIES
4.1 REPRESENTATIONS
OF THE ACQUIRED FUND. The Trust, on behalf of the Acquired Fund,
represents and warrants to the Federated Trust, on behalf of the Acquiring Fund,
as follows:
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a)
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The
Acquired Fund is a , separate series of a statutory trust duly organized,
validly existing, and in good standing under the laws of the State of
Delaware.
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b)
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The
Trust is registered as an open-end management investment company under the
1940 Act, and the Trust’s registration with the Securities and Exchange
Commission (the “Commission”) as an investment company under the 1940 Act
is in full force and effect.
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c)
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The
current prospectus and statement of additional information of the Acquired
Fund conform in all material respects to the applicable requirements of
the Securities Act of 1933 (the “1933 Act”) and the 1940 Act, and the
rules and regulations thereunder, and do not include any untrue statement
of a material fact or omit to state any material fact required to be
stated or necessary to make the statements therein, in light of the
circumstances under which they were made, not
misleading.
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d)
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The
Acquired Fund is not, and the execution, delivery, and performance of this
Agreement (subject to shareholder approval) will not, result in the
violation of any provision of the Trust’s Declaration of Trust or By-Laws
or of any material agreement, indenture, instrument, contract, lease, or
other undertaking to which the Acquired Fund is a party or by which it is
bound.
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e)
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The
Acquired Fund has no material contracts or other commitments (other than
this Agreement) that will be terminated with liability to it before the
Closing Date, except for liabilities, if any, to be discharged as provided
in paragraph 1.3 hereof.
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f)
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Except
as otherwise disclosed in writing to and accepted by the Acquiring Fund,
no litigation, 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,
which, if adversely determined, would materially and adversely affect its
financial condition, the conduct of its business, or the ability of the
Acquired Fund to carry out the transactions contemplated by this
Agreement. The Acquired Fund knows of no facts that might form
the basis for the institution of such proceedings and is not a party to or
subject to the provisions of any order, decree, or judgment of any court
or governmental body that materially and adversely affects its business or
its ability to consummate the transactions contemplated
herein.
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g)
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The
audited financial statements of the Acquired Fund as of September 30,
2008, and for the fiscal year then ended, have been prepared in accordance
with generally accepted accounting principles, and such statements (copies
of which have been furnished to the Acquiring Fund) fairly reflect the
financial condition of the Acquired Fund as of such date, and there are no
known contingent liabilities of the Acquired Fund as of such date that are
not disclosed in such statements.
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h)
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The
unaudited financial statements of the Acquired Fund as of March 31, 2009,
and for the six months then ended, have been prepared in accordance with
generally accepted accounting principles, and such statements (copies of
which have been furnished to the Acquiring Fund) fairly reflect the
financial condition of the Acquired Fund as of such date, and there are no
known contingent liabilities of the Acquired Fund as of such date that are
not disclosed in such statements.
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i)
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Since
the date of the financial statements referred to in paragraph (h)
above, there have been no material adverse changes 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. For the purposes of this
paragraph (i), a decline in the net asset value of the Acquired Fund
shall not constitute a material adverse
change.
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j)
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As
of the date hereof, except as previously disclosed to the Acquiring Fund
in writing, and except as have been corrected as required by applicable
law, and to the best of the Acquired Fund’s knowledge, there have been no
material miscalculations of the net asset value of the Acquired Fund or
the net asset value per share of any class or series of shares during the
twelve-month period preceding the date hereof and preceding the Closing
Date, and all such calculations have been made in accordance with the
applicable provisions of the ▇▇▇▇
▇▇▇.
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k)
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The
minute books and other similar records of the Acquired Fund as made
available to the Acquiring Fund prior to the execution of this Agreement
contain a true and complete record of all action taken at all meetings and
by all written consents in lieu of meetings of the shareholders of the
Acquired Fund and of the Acquired Fund, the Acquired Fund’s Board of
Trustees and committees of the Acquired Fund’s Board of
Trustees. The stock transfer ledgers and other similar records
of the Acquired Fund as made available to the Acquiring Fund prior to the
execution of this Agreement, and as existing on the Closing Date,
accurately reflect all record transfers prior to the execution of this
Agreement, or the Closing Date, as applicable, in the Acquired Fund
Shares.
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l)
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The
Acquired Fund has maintained, or caused to be maintained on its behalf,
all books and records required of a registered investment company in
compliance with the requirements of Section 31 of the 1940 Act and rules
thereunder.
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m)
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All
federal and material other tax returns and reports of the Acquired Fund
required by law to be filed, have been filed, and all federal and other
taxes shown due on such returns and reports have been paid, or provision
shall have been made for the payment thereof. 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.
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n)
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All
issued and outstanding Acquired Fund Shares are duly and validly issued
and outstanding, fully paid and non-assessable by the Acquired
Fund. All of the issued and outstanding Acquired Fund Shares
will, at the time of the Closing Date, be held by the persons and in the
amounts set forth in the records of the Acquired Fund’s transfer agent as
provided in paragraph 3.4. The Acquired Fund has no
outstanding options, warrants, or other rights to subscribe for or
purchase any of the Acquired Fund Shares, and has no outstanding
securities convertible into any of the Acquired Fund
Shares.
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o)
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At
the Closing Date, the Acquired Fund will have good and marketable title to
the Acquired Fund’s assets to be transferred to the Acquiring Fund
pursuant to paragraph 1.2, and full right, power, and authority to
sell, assign, transfer, and deliver such assets hereunder, free of any
lien or other encumbrance, except those liens or encumbrances to which the
Acquiring Fund has received notice, and, upon delivery and payment for
such assets, and the filing of any articles, certificates or other
documents under the laws of the State of Delaware, the Acquiring Fund will
acquire good and marketable title, subject to no restrictions on the full
transfer of such assets, other than such restrictions as might arise under
the 1933 Act, and other than as disclosed to and accepted by the Acquiring
Fund.
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p)
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The
execution, delivery and performance of this Agreement have been duly
authorized by all necessary action on the part of the Acquired
Fund. Subject to approval by the Acquired Fund Shareholders,
this Agreement constitutes a valid and binding obligation 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.
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q)
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The
information to be furnished by the Acquired Fund for use in no-action
letters, applications for orders, registration statements, proxy
materials, and other documents that may be necessary in connection with
the transactions contemplated herein shall be accurate and complete in all
material respects and shall comply in all material respects with federal
securities and other laws and
regulations.
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r)
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From
the effective date of the Registration Statement (as defined in
paragraph 5.7) through the time of the meeting of the Acquired Fund
Shareholders and on the Closing Date, any written information furnished by
the Trust with respect to the Acquired Fund for use in the Proxy Materials
(as defined in paragraph 5.7), or any other materials provided in
connection with the Reorganization, does not and will not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated or necessary to make the statements, in light of the
circumstances under which such statements were made, not
misleading.
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s)
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The
Acquired Fund has qualified and elected to be treated as a “regulated
investment company” under the Code (a “RIC”), as of and since its first
taxable year; and qualifies and will continue to qualify as a RIC under
the Code for its taxable year ending upon its liquidation as
contemplated herein in paragraph
1.4.
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t)
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No
governmental consents, approvals, authorizations or filings are required
under the 1933 Act, the Securities Exchange Act of 1934 (the “1934 Act”),
the 1940 Act or Delaware law for the execution of this Agreement by the
Trust, for itself and on behalf of the Acquired Fund, except for the
effectiveness of the Registration Statement, and the filing of any
articles, certificates or other documents that may be required under
Delaware law, and except for such other consents, approvals,
authorizations and filings as have been made or received, and such
consents, approvals, authorizations and filings as may be required
subsequent to the Closing Date, it being understood, however, that this
Agreement and the transactions contemplated herein must be approved by the
shareholders of the Acquired Fund as described in
paragraph 5.2.
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4.2 REPRESENTATIONS
OF THE ACQUIRING FUND. The Federated Trust, on behalf of the
Acquiring Fund, represents and warrants to the Trust, on behalf of the Acquired
Fund, as follows:
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a)
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The
Acquiring Fund is a separate series of a business trust, duly organized,
validly existing and in good standing under the laws of the Commonwealth
of Massachusetts.
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b)
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The
Federated Trust is registered as an open-end management investment company
under the 1940 Act, and the Federated Trust’s registration with the
Commission as an investment company under the 1940 Act is in full force
and effect.
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c)
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The
current prospectus and statement of additional information of the
Acquiring Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and
regulations thereunder, and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated or
necessary to make such statements therein, in light of the circumstances
under which they were made, not
misleading.
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d)
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The
Acquiring Fund is not, and the execution, delivery and performance of this
Agreement will not, result in a violation of the Federated Trust’s
Declaration of Trust or By-Laws or of any material agreement, indenture,
instrument, contract, lease, or other undertaking to which the Acquiring
Fund is a party or by which it is
bound.
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e)
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Except
as otherwise disclosed in writing to and accepted by the Acquired Fund, no
litigation, administrative proceeding or investigation of or before any
court or governmental body is presently pending or to its knowledge
threatened against the Acquiring Fund or any of its properties or assets,
which, if adversely determined, would materially and adversely affect its
financial condition, the conduct of its business or the ability of the
Acquiring Fund to carry out the transactions contemplated by this
Agreement. The Acquiring Fund knows of no facts that might form
the basis for the institution of such proceedings and it 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 transaction contemplated
herein.
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f)
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Since
the Acquiring Fund is a recently created and organized portfolio of the
Federated Trust, audited financial statements of the Acquiring Fund are
not yet available.
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g)
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The
unaudited financial statements of the Acquiring Fund as of March 31, 2009,
and for the relevant period since fund inception then ended, have been
prepared in accordance with generally accepted accounting principles, and
such statements (copies of which have been furnished to the Acquired Fund)
fairly reflect the financial condition of the Acquiring Fund as of such
date, and there are no known contingent liabilities of the Acquiring Fund
as of such date that are not disclosed in such
statements.
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h)
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Since
the date of the financial statements referred to in paragraph (g)
above, there have been no material adverse changes in the Acquiring Fund’s
financial condition, assets, liabilities or business (other than changes
occurring in the ordinary course of business), or any incurrence by the
Acquiring Fund of indebtedness maturing more than one year from the date
such indebtedness was incurred, except as otherwise disclosed to and
accepted by the Acquired Fund. For the purposes of this
paragraph (h), a decline in the net asset value of the Acquiring Fund
shall not constitute a material adverse
change.
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i)
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All
federal and material other tax returns and reports of the Acquiring Fund
required by law to be filed, have been filed, and all federal and other
taxes shown due on such returns and reports have been paid, or provision
shall have been made for the payment therof. To the best of the
Acquiring Fund’s knowledge, no such return is currently under audit, and
no assessment has been asserted with respect to such
returns.
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j)
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All
issued and outstanding Acquiring Fund Shares are duly and validly issued
and outstanding, fully paid and non-assessable by the Acquiring
Fund. The Acquiring Fund has no outstanding options, warrants,
or other rights to subscribe for or purchase any Acquiring Fund Shares,
and there are no outstanding securities convertible into any Acquiring
Fund Shares.
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k)
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The
execution, delivery and performance of this Agreement have been duly
authorized by all necessary action on the part of the Acquiring Fund, and
this Agreement constitutes a valid and binding obligation of the Acquiring
Fund, enforceable in accordance with its terms, subject as to enforcement,
to bankruptcy, insolvency, reorganization, moratorium, and other laws
relating to or affecting creditors’ rights and to general equity
principles.
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l)
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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 Closing Date, have been duly
authorized. When so issued and delivered, such shares will be
duly and validly issued Acquiring Fund Shares, and will be fully paid and
non-assessable.
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m)
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The
information to be furnished by the Acquiring Fund for use in no-action
letters, registration statements, proxy materials, and other documents
that may be necessary in connection with the transactions contemplated
herein shall be accurate and complete in all material respects and shall
comply in all material respects with federal securities and other laws and
regulations.
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n)
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From
the effective date of the Registration Statement (as defined in
paragraph 5.7), through the time of the meeting of the Acquired Fund
Shareholders and on the Closing Date, any written information furnished by
the Federated Trust with respect to the Acquiring Fund for use in the
Proxy Materials (as defined in paragraph 5.7), or any other materials
provided in connection with the Reorganization, does not and will not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated or necessary to make the statements,
in light of the circumstances under which such statements were made, not
misleading.
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o)
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The
Acquiring Fund intends to qualify and elect to be treated as a RIC under
the Code for its first taxable
year.
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p)
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No
governmental consents, approvals, authorizations or filings are required
under the 1933 Act, the 1934 Act, the 1940 Act or Massachusetts law for
the execution of this Agreement by the Federated Trust, for itself and on
behalf of the Acquiring Fund, or the performance of the Agreement by the
Federated Trust, for itself and on behalf of the Acquiring Fund, except
for the effectiveness of the Registration Statement, and the filing of any
articles, certificates or other documents that may be required under
Massachusetts law, and such other consents, approvals, authorizations and
filings as have been made or received, and except for such consents,
approvals, authorizations and filings as may be required subsequent to the
Closing Date.
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q)
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The
Acquiring Fund agrees to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act, and
any state Blue Sky or securities laws as it may deem appropriate in order
to continue its operations after the Closing
Date.
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ARTICLE V
COVENANTS
OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1 OPERATION
IN ORDINARY COURSE. The Acquiring Fund and the Acquired Fund will
each operate its respective business in the ordinary course between the date of
this Agreement and the Closing Date, it being understood that such ordinary
course of business will include customary dividends and shareholder purchases
and redemptions.
5.2 APPROVAL
OF SHAREHOLDERS. The Trust will call a special meeting of the
Acquired Fund Shareholders to consider and act upon this Agreement and to take
all other appropriate action necessary to obtain approval of the transactions
contemplated herein.
5.3 INVESTMENT
REPRESENTATION. The Acquired Fund covenants that the Acquiring Fund
Shares to be issued pursuant to this Agreement are not being acquired for the
purpose of making any distribution, other than in connection with the
Reorganization and in accordance with the terms of this Agreement.
5.4 ADDITIONAL
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’s shares.
5.5 FURTHER
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,
including any actions required to be taken after the Closing Date.
5.6 STATEMENT
OF EARNINGS AND PROFITS. As promptly as practicable, but in any case
within sixty days after the Closing Date, the Acquired Fund shall furnish the
Acquiring Fund, in such form as is reasonably satisfactory to the Acquiring
Fund, a statement of the earnings and profits of the Acquired Fund for federal
income tax purposes that will be carried over by the Acquiring Fund as a result
of Section 381 of the Code, and which will be certified by the Trust’s
Treasurer.
5.7 PREPARATION
OF REGISTRATION STATEMENT AND SCHEDULE 14A PROXY STATEMENT. The
Federated Trust will prepare and file with the Commission a registration
statement on Form N-14 relating to the Acquiring Fund Shares to be issued
to shareholders of the Acquired Fund (the “Registration
Statement”). The Registration Statement on Form N-14 shall
include a proxy statement and a prospectus of the Acquiring Fund relating to the
transaction contemplated by this Agreement. The Registration
Statement shall be in compliance with the 1933 Act, the 1934 Act and the 1940
Act, as applicable. Each party will provide the other party with the
materials and information necessary to prepare the registration statement on
Form N-14 (the “Proxy Materials”), for inclusion therein, in connection
with the meeting of the Acquired Fund’s Shareholders to consider the approval of
this Agreement and the transactions contemplated herein.
5.8 On
or before the Closing Date, the Acquired Fund shall have declared and paid a
dividend or dividends which, together with all previous such dividends, shall
have the effect of distributing to its shareholders all of the Acquired Fund’s
investment company taxable income (computed without regard to any deduction for
dividends paid), if any, plus the excess, if any, of its interest income
excludible from gross income under Section 103(a) of the Code over its
deductions disallowed under Sections 265 and 171(a)(2) of the Code for all
taxable periods or years ending on or before the Closing Date, and all of its
net capital gains realized (after reduction for any capital loss carry forward),
if any, in all taxable periods or years ending on or before the Closing
Date.
5.9 The
Federated Trust agrees that, for the minimum time periods specified in Section
15(f) of the 1940 Act it shall take (or refrain from taking, as the case may be)
such actions as are necessary to ensure that: (i) at least seventy-five percent
(75%) of the trustees of each Acquiring Fund shall not be “interested persons”
(as that term is defined in the 19▇▇ ▇▇▇) of such Acquiring Fund’s investment
adviser or the Acquired Fund’s investment adviser, or any “interested person”
(as that term is defined in the 19▇▇ ▇▇▇) thereof; (ii) no “unfair burden” (as
that term is defined in Section 15(f)(2)(B) of the 19▇▇ ▇▇▇) shall be imposed;
and (iii) each vacancy among the trustees of an Acquiring Fund which must be
filled by a person who is an interested person neither of such Acquiring Fund’s
investment adviser nor of the Acquired Fund’s investment adviser so as to comply
with Section 15(f) of the 1940 Act, as if such Section were applicable,
shall be filled by a person who (A) is not an interested person of such
Acquiring Funds’ investment adviser or of the Acquired Fund’s investment adviser
and (B) has been selected and proposed for election by a majority of the
trustees of such Acquiring Fund who are not such interested
persons. the Federated Trust may elect, in lieu of the covenants set
forth in the preceding sentence, to apply for and obtain an exemptive order
under Section 6(c) of the 1940 Act from the provisions of Section 15(f)(1)(A) of
the 1940 Act, in form and substance reasonably acceptable to the Acquired Fund’s
investment adviser.
ARTICLE VI
CONDITIONS
PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The
obligations of the Acquired Fund to consummate the transactions provided for
herein shall be subject, at its election, to the performance by the Acquiring
Fund of all the obligations to be performed by the Acquiring Fund pursuant to
this Agreement on or before the Closing Date, and, in addition, subject to the
following conditions:
All
representations, covenants, and warranties of the Acquiring Fund contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and as of the Closing Date, with the same force and effect as if made on
and as of the Closing Date. The Acquiring Fund shall have delivered
to the Acquired Fund a certificate executed in the Acquiring Fund’s name by the
Federated Trust’s President or Vice President and its Treasurer or Assistant
Treasurer, in form and substance satisfactory to the Acquired Fund and dated as
of the Closing Date, to such effect and as to such other matters as the Acquired
Fund shall reasonably request.
ARTICLE VII
CONDITIONS
PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The
obligations of the Acquiring Fund to consummate the transactions provided for
herein shall be subject, at its election, to the performance by the Acquired
Fund of all the obligations to be performed by the Acquired Fund pursuant to
this Agreement, on or before the Closing Date and, in addition, shall be subject
to the following conditions:
The
Acquiring Fund (through its service providers, including Federated (as defined
in Article IX below) shall have completed to its reasonable satisfaction such
financial, business, legal and regulatory due diligence regarding the Trust, the
Acquired Fund, and Touchstone (as defined in Article IX below), and such other
matters relating to the transactions contemplated by this Agreement, as the
Acquiring Fund (through its service providers, including Federated) reasonably
deems necessary or appropriate. Any due diligence by the Acquiring
Fund shall be completed by June 28, 2009 (or, if due diligence is delayed for
reasons beyond the reasonable control of the Acquiring Fund (or its service
providers, including Federated) such later date on which the Parties may
mutually agree (which agreement would not be unreasonably withheld or delayed,
and which would not extend beyond July 28, 2009). The Acquiring Fund
shall provide (directly or through Federated) the Acquired Fund with prompt
notice after the completion of the applicable due diligence period of the
Acquiring Fund's completion of due diligence and whether or not it was completed
to the Acquiring Fund's reasonable satisfaction (it being understood and agreed
that an inadvertent failure of the Acquiring Fund to provide such notice in a
prompt manner shall not constitute a waiver of this paragraph). For
purposes of this paragraph, (a) any determination by the Acquiring Fund as to
whether or not due diligence has been completed to the Acquiring Fund's
reasonable satisfaction shall be made by the Acquiring Fund (and its service
providers, including Federated) in good faith, and (b) any determination by the
Acquiring Fund that due diligence has not been completed to the Acquiring Fund's
reasonable satisfaction (i) shall be based on actions, omissions, facts, events
or other circumstances or findings that are reasonably believed by the Acquiring
Fund's (or its service providers, including Federated) to be, individually or in
the aggregate, adverse or detrimental, and material, and (ii) shall not be based
on any one action, omission, fact, event or other circumstance or finding that
is not material (although it is acknowledged that a series of related,
non-material acts, omissions, facts, events or other circumstances or findings
may rise to the level of being material such that the Acquiring Fund (or its
service providers, including Federated) could reasonably conclude that such
series of related, non-material acts, omissions, facts, events or other
circumstances or findings are adverse or detrimental, and
material).
Any
comments from the Commission’s staff on or in connection with the preliminary or
final Proxy/Registration Statement on Form N-14 filed with the Commission shall
have been resolved to the satisfaction of the Acquiring Fund and its investment
adviser, and such Proxy/Registration Statement shall have been declared
effective and mailed to the shareholders of the Acquired Fund as of the record
date set forth therein.
All
representations, covenants, and warranties of the Acquired Fund contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and as of the Closing Date, with the same force and effect as if made on
and as of such Closing Date. The Acquired Fund shall have delivered
to the Acquiring Fund on such Closing Date a certificate executed in the
Acquired Fund’s name by the Trust’s President or Vice President and the
Treasurer or Assistant Treasurer, in form and substance satisfactory to the
Acquiring Fund and dated as of such Closing Date, to such effect and as to such
other matters as the Acquiring Fund shall reasonably request.
The
Acquired Fund shall have delivered to the Acquiring Fund a statement of the
Acquired Fund’s assets and liabilities, together with a list of the Acquired
Fund’s portfolio securities showing the tax costs of such securities by lot and
the holding periods of such securities, as of the Closing Date, certified by the
Treasurer of the Trust.
ARTICLE VIII
FURTHER
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE
ACQUIRING
FUND AND ACQUIRED FUND
If any of
the conditions set forth below do not exist on or before the Closing Date with
respect to the Acquired Fund or the Acquiring Fund, the other party to this
Agreement shall, at its option, not be required to consummate the transactions
contemplated by this Agreement:
8.1 This
Agreement and the transactions contemplated herein, with respect to the Acquired
Fund, shall have been approved by the requisite vote of the holders of the
outstanding shares of the Acquired Fund in accordance with applicable law and
the provisions of the Trust’s Declaration of Trust and
By-Laws. Certified copies of the resolutions evidencing such approval
shall have been delivered to the Acquiring Fund. Notwithstanding
anything herein to the contrary, neither the Acquiring Fund nor the Acquired
Fund may waive the conditions set forth in this paragraph 8.1.
8.2 On
the Closing Date, the Commission shall not have issued an unfavorable report
under Section 25(b) of the 1940 Act, or instituted any proceeding seeking
to enjoin the consummation of the transactions contemplated by this Agreement
under Section 25(c) of the 1940 Act. Furthermore, no action, suit or
other proceeding shall be threatened or pending before any court or governmental
agency in which it is sought to restrain or prohibit, or obtain damages or other
relief in connection with this Agreement or the transactions contemplated
herein.
8.3 All
required consents of other parties and all other consents, orders, and permits
of federal, state and local regulatory authorities (including those of the
Commission and of State securities authorities, including any necessary
“no-action” positions and exemptive orders from such federal and state
authorities) to permit consummation of the transactions contemplated herein
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 no
stop orders suspending the effectiveness thereof shall have been
issued. To the best knowledge of the parties to this Agreement, no
investigation or proceeding for that purpose shall have been instituted or be
pending, threatened or contemplated under the 19▇▇ ▇▇▇.
8.5 The
parties shall have received an opinion of ▇▇▇▇ ▇▇▇▇▇ LLP substantially to the
effect that for federal income tax purposes:
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a)
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The
transfer of all of the Acquired Fund’s assets to the Acquiring Fund solely
in exchange for Acquiring Fund Shares (followed by the distribution of
Acquiring Fund Shares to the Acquired Fund Shareholders in dissolution and
liquidation of the Acquired Fund) will constitute a “reorganization”
within the meaning of Section 368(a) of the Code, and the Acquiring
Fund and the Acquired Fund will each be a “party to a reorganization”
within the meaning of Section 368(b) of the
Code.
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b)
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No
gain or loss will be recognized by the Acquiring Fund upon the receipt of
the assets of the Acquired Fund solely in exchange for Acquiring Fund
Shares.
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c)
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No
gain or loss will be recognized by the Acquired Fund upon the transfer of
the Acquired Fund’s assets to the Acquiring Fund solely in exchange for
Acquiring Fund Shares or upon the distribution (whether actual or
constructive) of Acquiring Fund Shares to Acquired Fund Shareholders in
exchange for their Acquired Fund
Shares.
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d)
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No
gain or loss will be recognized by any Acquired Fund Shareholder upon the
exchange of its Acquired Fund Shares for Acquiring Fund
Shares.
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e)
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The
aggregate tax basis of the Acquiring Fund Shares received by each Acquired
Fund Shareholder pursuant to the Reorganization will be the same as the
aggregate tax basis of the Acquired Fund Shares held by it immediately
prior to the Reorganization. The holding period of Acquiring
Fund Shares received by each Acquired Fund Shareholder will include the
period during which the Acquired Fund Shares exchanged therefor were held
by such shareholder, provided the Acquired Fund Shares are held as capital
assets at the time of the
Reorganization.
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f)
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The
tax basis of the Acquired Fund’s assets acquired by the Acquiring Fund
will be the same as the tax basis of such assets to the Acquired Fund
immediately prior to the Reorganization. The holding period of
the assets of the Acquired Fund in the hands of the Acquiring Fund will
include the period during which those assets were held by the Acquired
Fund.
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Such
opinion shall be based on customary assumptions and such representations ▇▇▇▇
▇▇▇▇▇ LLP may reasonably request, and the Acquired Fund and Acquiring Fund will
cooperate to make and certify the accuracy of such
representations. The foregoing opinion may state that no opinion is
expressed as to the effect of the Reorganization on the Acquiring Fund, the
Acquired Fund or any Acquired Fund Shareholder with respect to any asset as to
which 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 ▇▇▇▇-to-market system of accounting. Notwithstanding
anything herein to the contrary, neither the Acquiring Fund nor the Acquired
Fund may waive the conditions set forth in this paragraph 8.5.
ARTICLE IX
EXPENSES
The
Acquired Fund and the Acquiring Fund will not bear any expenses associated with
their participation in the Reorganization, except as contemplated in this
Article IX. Federated Global Investment Management Corp., or its affiliates
(collectively, “Federated”), and/or Touchstone Advisors, Inc., or its affiliates
(collectively, “Touchstone”), will bear certain expenses associated with
Acquiring Fund’s and Acquired Fund’s participation in the
Reorganization. Such reorganization expenses
include: (a) expenses associated with the preparation and filing
of the Proxy Materials; (b) postage; (c) printing; (d) accounting
fees; (e) legal and accounting fees incurred in connection with the
preparation of the Proxy Materials; (f) solicitation costs of the
transaction; and (g) other related administrative or operational
costs. The Acquiring Fund shall bear expenses associated with the
qualification of Acquiring Fund Shares for sale in the various
states. In addition, to the extent that any transition of portfolio
securities is required in connection with the Reorganization, the Funds may
incur transaction expenses associated with the purchase and sale of portfolio
securities.
ARTICLE X
ENTIRE
AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The
Federated Trust, on behalf of the Acquiring Fund, and the Trust, on behalf of
the Acquired Fund, agree that neither party has made to the other party any
representation, warranty and/or covenant not set forth herein, and that this
Agreement constitutes the entire agreement between the parties.
10.2 Except
as specified in the next sentence set forth in this paragraph 10.2, the
representations, warranties, and covenants contained in this Agreement or in any
document delivered pursuant to or in connection with this Agreement, shall not
survive the consummation of the transactions contemplated
hereunder. The covenants to be performed after the Closing Date,
shall continue in effect beyond the consummation of the transactions
contemplated hereunder.
ARTICLE XI
TERMINATION
This
Agreement may be terminated by the mutual agreement of the Federated Trust and
the Trust. In addition, either the Federated Trust or the Trust may
at its option terminate this Agreement at or before the Closing Date due
to:
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a)
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a
breach by the other of any representation, warranty, or agreement
contained herein to be performed at or before the Closing Date, if not
cured within 30 days;
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b)
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a
condition herein expressed to be precedent to the obligations of the
terminating party that has not been met and it reasonably appears that it
will not or cannot be met; or
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c)
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a
determination by a party’s Board of Trustees, as appropriate, that the
consummation of the transactions contemplated herein is not in the best
interest of the Trust or the Federated Trust respectively, and notice
given to the other party hereto.
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In the
event of any such termination, in the absence of willful default, there shall be
no liability for damages on the part of any of the Acquiring Fund, the Acquired
Fund, the Federated Trust, the Trust, or their respective Trustees or officers,
to the other party or its Trustees or officers.
ARTICLE XII
AMENDMENTS
This
Agreement may be amended, modified, or supplemented in such manner as may be
mutually agreed upon in writing by the officers of the Trust and the Federated
Trust as specifically authorized by their respective Board of Trustees;
provided, however, that following the meeting of the Acquired Fund Shareholders
called by the Acquired Fund pursuant to paragraph 5.2 of this Agreement, no
such amendment may have the effect of changing the provisions for determining
the number of Acquiring Fund Shares to be issued to the Acquired Fund
Shareholders under this Agreement to the detriment of such shareholders without
their further approval.
ARTICLE XIII
HEADINGS;
COUNTERPARTS; GOVERNING LAW; ASSIGNMENT;
LIMITATION
OF LIABILITY
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.
This
Agreement may be executed in any number of counterparts, each of which shall be
deemed an original.
This
Agreement shall be governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania.
This
Agreement shall bind and inure to the benefit of the parties hereto and their
respective successors and assigns, but, except as provided in this paragraph, 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, corporation, trust, or other
entity other than the parties hereto and their respective successors and
assigns, any rights or remedies under or by reason of this
Agreement.
It is
expressly agreed that the obligations of the Acquiring Fund hereunder shall not
be binding upon any of the Trustees, shareholders, nominees, officers, agents,
or employees of the Federated Trust personally, but shall bind only the Trust
property of the Acquiring Fund, as provided in the Declaration of Trust of the
Federated Trust. The execution and delivery of this Agreement have
been authorized by the Trustees of the Federated Trust on behalf of the
Acquiring Fund and signed by authorized officers of the Federated Trust, acting
as such. Neither the authorization by such Trustees nor the execution
and delivery by such officers shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but shall
bind only the Trust property of the Acquiring Fund as provided in the Federated
Trust’s Declaration of Trust.
It is
expressly agreed that the obligations of the Acquired Fund hereunder shall not
be binding upon any of the Trustees, shareholders, nominees, officers, agents,
or employees of the Trust personally, but shall bind only the Trust property of
the Acquired Fund, as provided in the Declaration of Trust of the
Trust. The execution and delivery of this Agreement have been
authorized by the Trustees of the Trust on behalf of the Acquired Fund and
signed by authorized officers of the Trust, acting as such. Neither
the authorization by such Trustees nor the execution and delivery by such
officers shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the Trust
property of the Acquired Fund as provided in the Trust’s Declaration of
Trust.
[Signature Page Follows]
IN
WITNESS WHEREOF, the parties have duly executed this Agreement, all as of the
date first written above.
TOUCHSTONE FUNDS GROUP
TRUST,
on behalf
of its portfolio,
Touchstone
Diversified Small Cap Value Fund
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By:
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Name:
Title:
on behalf
of its portfolio,
Federated
Clover Small Value Fund
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By:
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Name: ▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇
Title: Secretary