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Exhibit (4)
Agreement and Plan of Reorganization
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AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") is made as of
October 18, 2000 by and between One Group(R) Mutual Funds ("One Group"), a
Massachusetts business trust, on behalf of its series, One Group Income Bond
Fund ("One Group Income"), and Circle Income Shares, Inc., a diversified
closed-end investment company incorporated under the laws of the State of
Indiana ("Circle Income"). The capitalized terms used herein shall have the
meaning ascribed to them in this Agreement.
I. PLAN OF REORGANIZATION
(a) Circle Income will sell, assign, convey, transfer and deliver to One
Group, and One Group will acquire, on the Exchange Date (as defined herein) all
of the properties and assets existing at the Valuation Time (as defined herein)
in Circle Income, such acquisition to be made on behalf of One Group Income. In
consideration therefor, One Group, on behalf of One Group Income, shall on the
Exchange Date, assume all of the liabilities of Circle Income in exchange for a
number of full and fractional Class A shares of One Group Income (the "Shares")
having an aggregate net asset value equal to the value of all of the assets of
Circle Income transferred to One Group on such date less the value of all of the
liabilities of Circle Income assumed by One Group on that date. It is intended
that the reorganization described in this Agreement shall be a tax-free
reorganization under the Internal Revenue Code of 1986, as amended (the "Code").
(b) Upon consummation of the transactions described in paragraph (a) of
this Agreement, Circle Income shall distribute in complete liquidation to its
respective shareholders of record as of the Exchange Date the Shares received by
it, each shareholder being entitled to receive that number of Shares equal to
the proportion which the number of shares of beneficial interest of Circle
Income held by such shareholder bears to the number of such shares of Circle
Income outstanding on such date.
II. AGREEMENT
One Group and Circle Income represent, warrant and agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF CIRCLE INCOME. Circle Income
represents and warrants to and agrees with One Group that:
(a) Circle Income is a corporation duly established and validly
existing under the laws of Indiana and has power to own all of its
properties and assets and to carry out its obligations under this
Agreement. Circle Income is not required to qualify as a foreign
association in any jurisdiction. Circle Income has all necessary federal,
state and local authorizations to carry on its business as now being
conducted and to fulfill the terms of this Agreement, except as set forth
in Section l(l).
(b) Circle Income is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as a diversified closed-end investment
company, and such registration has not been revoked or rescinded and is in
full force and effect. Circle Income has elected to qualify and has
qualified as a regulated investment company under Part I of Subchapter M of
the Code, as of and since its first taxable year, and qualifies and intends
to continue to qualify as a regulated investment company for its taxable
year ending upon its liquidation. Circle Income has been a regulated
investment company under such sections of the Code at all times since its
inception.
(c) The statements of assets and liabilities, statements of
operations, statements of changes in net assets and schedules of portfolio
investments (indicating their market values) for Circle Income at and for
the year ended June 30, 2000, such statements and schedules having been
audited by Arthur Andersen, LLP, independent accountants to Circle Income,
have been furnished to One Group.
(d) The Policy Manual of Circle Income, as revised in March, 1995,
which has been previously furnished to One Group, did not as of March,
1995, and does not as of the date hereof, contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
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(e) There are no material legal, administrative or other proceedings
pending or, to the knowledge of Circle Income, threatened against Circle
Income which assert liability on the part of Circle Income.
(f) There are no material contracts outstanding to which Circle Income
is a party, other than as disclosed in the Circle Income prospectus, or in
the Registration Statement and the Proxy Statement as defined herein.
(g) Circle Income has no known liabilities of a material nature,
contingent or otherwise, other than those shown as belonging to it on its
statement of assets and liabilities as of June 30, 2000, and those incurred
in the ordinary course of Circle Income's business as an investment company
since that date. Prior to the Exchange Date, Circle Income will advise One
Group of all known material liabilities, contingent or otherwise, incurred
by it subsequent to June 30, 2000, whether or not incurred in the ordinary
course of business.
(h) As used in this Agreement, the term "Investments" shall mean
Circle Income's investments shown on the schedule of its portfolio
investments as of June 30, 2000 referred to in Section l(c) hereof, as
supplemented with such changes as Circle Income shall make after June 30,
2000, which changes have been disclosed to One Group, and changes resulting
from stock dividends, stock split-ups, mergers and similar corporate
actions.
(i) Circle Income has filed or will file all federal and state tax
returns which, to the knowledge of Circle Income's officers, are required
to be filed by Circle Income and has paid or will pay all federal and state
taxes shown to be due on said returns or on any assessments received by
Circle Income. All tax liabilities of Circle Income have been adequately
provided for on its books, and no tax deficiency or liability of Circle
Income has been asserted, and no question with respect thereto has been
raised, by the Internal Revenue Service or by any state or local tax
authority for taxes in excess of those already paid.
(j) As of both the Valuation Time and the Exchange Date and except for
shareholder approval as described in Section 8(a) and otherwise as
described in Section l(l), Circle Income will have full right, power and
authority to sell, assign, transfer and deliver the Investments and any
other assets and liabilities of Circle Income to be transferred to One
Group Income pursuant to this Agreement. At the Exchange Date, subject only
to the delivery of the Investments and any such other assets and
liabilities as contemplated by this Agreement, One Group will, on behalf of
One Group Income, acquire the Investments and any such other assets subject
to no encumbrances, liens or security interests in favor of any third party
creditor of Circle Income and, except as described in Section l(k), without
any restrictions upon the transfer thereof.
(k) No registration under the Securities Act of 1933, as amended (the
"1933 Act"), of any of the Investments would be required if they were, as
of the time of such transfer, the subject of a public distribution by
either of Circle Income or One Group, except as previously disclosed to One
Group by Circle Income.
(1) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by Circle Income of
the transactions contemplated by this Agreement, except such as may be
required under the 1933 Act, the Securities Exchange Act of 1934, as
amended (the "1934 Act"), the 1940 Act, state securities or blue sky laws
(which term as used herein shall include the laws of the District of
Columbia and of Puerto Rico) or the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "H-S-R Act").
(m) The registration statement (the "Registration Statement") filed
with the United States Securities and Exchange Commission (the
"Commission") by One Group on Form N-14 relating to the Shares issuable
hereunder, and the proxy statement of Circle Income included therein (the
"Proxy Statement"), on the effective date of the Registration Statement and
insofar as they relate to Circle Income, (i) will comply in all material
respects with the provisions of the 1933 Act, the 1934 Act and the 1940 Act
and the rules and regulations thereunder and (ii) will not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading; and at the time of the shareholders' meeting referred to in
Section 8(a) below and on the Exchange Date, the prospectus contained in
the Registration Statement of which the Proxy Statement is a part (the
"Prospec-
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tus"), as amended or supplemented by any amendments or supplements filed
with the Commission by One Group, insofar as it relates to Circle Income,
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that the
representations and warranties in this subsection shall apply only to
statements of fact relating to Circle Income contained in the Registration
Statement, the Prospectus or the Proxy Statement, or omissions to state in
any thereof a material fact relating to Circle Income, made in reliance
upon and in conformity with information furnished by Circle Income for use
in the Registration Statement, the Prospectus or the Proxy Statement, as
such Registration Statement, Prospectus and Proxy Statement shall be
furnished to Circle Income in definitive form as soon as practicable
following effectiveness of the Registration Statement and before any public
distribution of the Prospectus or Proxy Statement. None of the
representations and warranties in this subsection shall apply to statements
of fact relating to One Group or One Group Income contained in the
Registration Statement, the Prospectus or the Proxy Statement, or omissions
to state in any thereof a material fact relating to One Group or One Group
Income.
(n) All of the issued and outstanding shares of beneficial interest of
Circle Income have been offered for sale and sold in conformity with all
applicable federal and state securities laws.
(o) Circle Income is qualified, and will at all times through the
Exchange Date qualify for taxation as a "regulated investment company"
under Sections 851 and 852 of the Code.
(p) At the Exchange Date, Circle Income will have sold such of its
assets, if any, as necessary to assure that, after giving effect to the
acquisition of the assets pursuant to this Agreement, One Group Income will
remain a "diversified company" within the meaning of Section 5(b) (1) of
the 1940 Act and in compliance with such other mandatory investment
restrictions as are set forth in the One Group Prospectus previously
furnished to Circle Income. One Group agrees to advise Circle Income prior
to the Exchange Date of any assets that, after giving effect to the
acquisition of the assets pursuant to this Agreement, would cause One Group
Income not to be in compliance with Section 5(b)(1) of the 1940 Act and
with such other mandatory investment restrictions as are set forth in the
One Group Prospectus.
2. REPRESENTATIONS AND WARRANTIES OF ONE GROUP. One Group, for itself and
on behalf of One Group Income, represents and warrants to and agrees with Circle
Income that:
(a) One Group is a business trust duly established and validly
existing under the laws of The Commonwealth of Massachusetts and has power
to carry on its business as it is now being conducted and to carry out this
Agreement. Neither One Group nor One Group Income is required to qualify as
a foreign association in any jurisdiction. One Group and One Group Income
have all necessary federal, state and local authorizations to own all of
their properties and assets and to carry on their business as now being
conducted and to fulfill the terms of this Agreement, except as set forth
in Section 2(i).
(b) One Group is registered under the 1940 Act as an open-end
management investment company, and such registration has not been revoked
or rescinded and is in full force and effect. One Group Income has elected
to qualify and has qualified as a regulated investment company under Part I
of Subchapter M of the Code, as of and since its first taxable year, and
qualifies and intends to continue to qualify as a regulated investment
company. One Group Income has been a regulated investment company under
such sections of the Code at all times since its inception.
(c) The statements of assets and liabilities, statements of
operations, statements of changes in net assets and schedules of portfolio
investments (indicating their market values) for One Group for the year
ended June 30, 2000, such statements and schedules having been audited by
PricewaterhouseCoopers LLP, independent accountants to One Group, have been
furnished to Circle Income. Such statements of assets and liabilities and
schedules fairly present the financial position of One Group as of their
respective dates, and said statements of operations and changes in net
assets fairly reflect the results of its operations and changes in
financial position for the periods covered thereby in conformity with
generally accepted accounting principles.
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(d) The prospectus of One Group Income dated November 1, 1999, (the
"One Group Prospectus") and the Statement of Additional Information for the
One Group Funds, dated November 1, 1999, and on file with the Commission,
which have been previously furnished to Circle Income, did not as of their
dates and do not as of the date hereof contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
(e) There are no material legal, administrative or other proceedings
pending or, to the knowledge of One Group or One Group Income, threatened
against One Group or One Group Income which assert liability on the part of
One Group or One Group Income.
(f) There are no material contracts outstanding to which One Group or
One Group Income is a party, other than as disclosed in the One Group
Prospectus and the corresponding Statement of Additional Information or in
the Registration Statement.
(g) Neither One Group nor One Group Income has any known liabilities
of a material nature, contingent or otherwise, other than those shown on
its statement of assets and liabilities as of June 30, 2000 referred to
above and those incurred in the ordinary course of the business of One
Group as an investment company or One Group Income since such date. Prior
to the Exchange Date, One Group will advise Circle Income of all known
material liabilities, contingent or otherwise, incurred by it and One Group
Income subsequent to June 30, 2000, whether or not incurred in the ordinary
course of business.
(h) One Group Income has filed or will file all federal and state tax
returns which, to the knowledge of One Group's officers, are required to be
filed by One Group Income and has paid or will pay all federal and state
taxes shown to be due on said returns or on any assessments received by One
Group Income. All tax liabilities of One Group Income have been adequately
provided for on its books, and no tax deficiency or liability of One Group
Income has been asserted, and no question with respect thereto has been
raised, by the Internal Revenue Service or by any state or local tax
authority for taxes in excess of those already paid.
(i) No consent, approval, authorization or order of any governmental
authority is required for the consummation by One Group or One Group Income
of the transactions contemplated by this Agreement, except such as may be
required under the 1933 Act, the 1934 Act, the 1940 Act, state securities
or Blue Sky laws or the H-S-R Act.
(j) As of both the Valuation Time and the Exchange Date and otherwise
as described in Section 2 (i), One Group on behalf of One Group Income will
have full right, power and authority to purchase the Investments and any
other assets and assume the liabilities of Circle Income to be transferred
to One Group Income pursuant to this Agreement.
(k) The Registration Statement, the Prospectus and the Proxy
Statement, on the effective date of the Registration Statement and insofar
as they relate to One Group and One Group Income: (i) will comply in all
material respects with the provisions of the 1933 Act, the 1934 Act and the
1940 Act and the rules and regulations thereunder and (ii) will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading; and at the time of the shareholders' meeting referred to in
Section 8(a) and at the Exchange Date, the Prospectus, as amended or
supplemented by any amendments or supplements filed with the Commission by
One Group or One Group Income, will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that the representations and warranties in this
subsection shall apply only to statements of fact relating to One Group or
One Group Income contained in the Registration Statement, the Prospectus or
the Proxy Statement, or omissions to state in any thereof a material fact
relating to One Group or One Group Income. None of the representations and
warranties in this subsection shall apply to statements in or omissions
from the Registration Statement, the Prospectus or the Proxy Statement made
in reliance upon and in conformity with information furnished by Circle
Income for use in the Registration Statement, the Prospectus or the Proxy
Statement.
(1) Shares to be issued to Circle Income have been duly authorized
and, when issued and delivered pursuant to this Agreement and the
Prospectus, will be legally and validly issued and will be fully paid and
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nonassessable by One Group and no shareholder of One Group will have any
preemptive right of subscription or purchase in respect thereof.
(m) The issuance of Shares pursuant to this Agreement will be in
compliance with all applicable federal and state securities laws.
(n) One Group Income is qualified and will at all times through the
Exchange Date qualify for taxation as a "regulated investment company"
under Sections 851 and 852 of the Code.
3. REORGANIZATION. (a) Subject to the requisite shareholder approval as
described in Section 8(a) and to the other terms and conditions contained herein
(including Circle Income's obligation to distribute to its respective
shareholders all of its investment company taxable income and net capital gain
as described in Section 9(k) hereof), Circle Income agrees to sell, assign,
convey, transfer and deliver to One Group, on behalf of One Group Income, and
One Group, on behalf of One Group Income, agrees to acquire from Circle Income,
on the Exchange Date all of the Investments and all of the cash and other assets
of Circle Income in exchange for that number of Shares of One Group Income
provided for in Section 4 and the assumption by One Group Income of all the
liabilities of Circle Income. Pursuant to this Agreement, Circle Income will, as
soon as practicable after the Exchange Date, distribute in liquidation all of
the Shares received by it to its shareholders in exchange for their shares of
beneficial interest of Circle Income.
(b) Circle Income will pay or cause to be paid to One Group Income any
interest and cash dividends received by it on or after the Exchange Date
with respect to the Investments transferred to One Group Income hereunder.
Circle Income will transfer to One Group Income any rights, stock dividends
or other securities received by Circle Income after the Exchange Date as
stock dividends or other distributions on or with respect to the
Investments transferred, which rights, stock dividends and other securities
shall be deemed included in the assets transferred to One Group Income at
the Exchange Date and shall not be separately valued, in which case any
such distribution that remains unpaid as of the Exchange Date shall be
included in the determination of the value of the assets of Circle Income
acquired by One Group, on behalf of One Group Income.
4. EXCHANGE DATE VALUATION TIME. On the Exchange Date, One Group will
deliver to Circle Income a number of Shares having an aggregate net asset value
equal to the value of the assets of Circle Income acquired by One Group, on
behalf of One Group Income, less the value of the liabilities of Circle Income
assumed, determined as hereafter provided in this Section 4.
(a) Subject to Section 4(d) hereof, the value of Circle Income's net
assets will be computed as of the Valuation Time using the valuation
procedures for One Group Income as set forth in the One Group Prospectus
for One Group Income.
(b) Subject to Section 4(d) hereof, the net asset value of a share of
One Group Income will be determined to the nearest full cent as of the
Valuation Time, using the valuation procedures set forth in the One Group
Prospectus for One Group Income.
(c) Subject to Section 4(d), the Valuation Time shall be 4:00 p.m.
Eastern Standard time on January 19, 2001 or such earlier or later day as
may be mutually agreed upon in writing by the parties hereto (the
"Valuation Time").
(d) No formula will be used to adjust the net asset value of Circle
Income or One Group Income to take into account differences in realized and
unrealized gains and losses.
(e) One Group shall issue One Group Income Shares to Circle Income on
one share deposit receipt registered in the name of Circle Income. Circle
Income shall distribute in liquidation the Shares received by it hereunder
pro rata to its shareholders of each class of shares by redelivering such
share deposit receipt to One Group's transfer agent which will as soon as
practicable set up open accounts for each Circle Income shareholder in
accordance with written instructions furnished by Circle Income.
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(f) One Group, on behalf of One Group Income, shall assume all
liabilities of Circle Income, whether accrued or contingent, in connection
with the acquisition of assets and subsequent dissolution of Circle Income
or otherwise.
5. EXPENSES, FEES, ETC. (a) Subject to subsections 5(b) through 5 (e), all
fees and expenses, including, without limitation, accounting expenses, the costs
of proxy materials and proxy solicitation, legal expenses, portfolio transfer
taxes (if any) or other similar expenses, incurred in connection with the
transactions will be paid directly by Banc One Investment Advisors Corporation;
provided however, that such expenses will in any event be paid by the party
directly incurring such expenses if and to the extent that the payment by Banc
One Investment Advisors Corporation of such expenses would result in the
disqualification of either Circle Income or One Group Income as a regulated
investment company under the Code. Circle Income shareholders will pay their
respective expenses, if any, incurred in connection with the transactions.
(b) In the event the transactions contemplated by this Agreement are
not consummated by reason of Circle Income being either unwilling or unable
to go forward (other than by reason of the nonfulfillment or failure of any
condition to Circle Income's obligations referred to in Section 8(a) or
Section 10) Circle Income shall pay directly all reasonable fees and
expenses incurred by One Group in connection with such transactions,
including, without limitation, legal, accounting and filing fees.
(c) In the event the transactions contemplated by this Agreement are
not consummated by reason of One Group being either unwilling or unable to
go forward (other than by reason of the nonfulfillment or failure of any
condition to One Group's obligations referred to in Section 8(a) or Section
9), One Group shall pay directly all reasonable fees and expenses incurred
by Circle Income in connection with such transactions, including without
limitation legal, accounting and filing fees.
(d) In the event the transactions contemplated by this Agreement are
not consummated for any reason other than (i) One Group or Circle Income
being either unwilling or unable to go forward or (ii) the nonfulfillment
or failure of any condition to Circle Income or One Group's obligations
referred to in Section 8(a), Section 9 or Section 10 of this Agreement,
then each of Circle Income and One Group shall bear the expenses it
actually incurred in connection with such transactions.
(e) Notwithstanding any other provisions of this Agreement, if for any
reason the transactions contemplated by this Agreement are not consummated,
no party shall be liable to the other party for any damages resulting
therefrom, including without limitation consequential damages, except as
specifically set forth above.
6. PERMITTED ASSETS. One Group agrees to advise Circle Income promptly if
at any time prior to the Exchange Date the assets of Circle Income include any
assets that One Group Income is not permitted, or reasonably believes to be
unsuitable for it, to acquire, including without limitation any security that,
prior to its acquisition by Circle Income, One Group has informed Circle Income
is unsuitable for One Group Income to acquire.
7. EXCHANGE DATE. Delivery of the assets of Circle Income to be
transferred, assumption of the liabilities of Circle Income to be assumed, and
the delivery of Shares to be issued shall be made at the offices of Banc One
Investment Advisors Corporation at 9:00 a.m. on January 22, 2001, or at such
other time and date agreed to by Circle Income and One Group, the date and time
upon which such delivery is to take place being referred to herein as the
"Exchange Date."
8. SPECIAL MEETING OF SHAREHOLDERS: DISSOLUTION. (a) Circle Income agrees
to call a special meeting of the shareholders of Circle Income as soon as is
practicable after the effective date of the Registration Statement for the
purpose of considering the sale of all of the assets of Circle Income to and the
assumption of all of the liabilities of Circle Income by One Group Income as
herein provided, adopting this Agreement, and authorizing the liquidation and
dissolution of Circle Income, and, except as set forth in Section 13, it shall
be a condition to the obligations of each of the parties hereto that the holders
of the shares of beneficial interest of Circle Income shall have approved this
Agreement and the transactions contemplated herein in the manner required by law
and Circle Income's Articles of Incorporation at such a meeting on or before the
Valuation Time.
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(b) Circle Income agrees that the liquidation and dissolution of
Circle Income will be effected in the manner provided in Circle Income's
Articles of Incorporation in accordance with applicable law, and that it
will not make any distributions of any Shares to the shareholders of Circle
Income without first paying or adequately providing for the payment of all
of Circle Income's known debts, obligations and liabilities.
(c) Each of One Group and Circle Income will cooperate with the other,
and each will furnish to the other the information relating to itself
required by the 1933 Act, the 1934 Act and the 1940 Act and the rules and
regulations thereunder to be set forth in the Registration Statement,
including the Prospectus and the Proxy Statement.
9. CONDITIONS TO ONE GROUP OBLIGATIONS. The obligations of One Group, on
behalf of One Group Income, hereunder shall be subject to the following
conditions:
(a) That this Agreement shall have been adopted and the transactions
contemplated hereby, including the liquidation and dissolution of Circle
Income, shall have been approved as set forth in Section 8(a). (b) Circle
Income shall have furnished to One Group a statement of Circle Income's
assets and liabilities, with values determined as provided in Section 4 of
this Agreement, together with a list of Investments with their respective
tax costs, all as of the Valuation Time, certified on Circle Income's
behalf by its President (or any Vice President) and Treasurer, and a
certificate of both such officers, dated the Exchange Date, to the effect
that as of the Valuation Time and as of the Exchange Date there has been no
material adverse change in the financial position of Circle Income since
June 30, 2000, other than changes in the Investments since that date or
changes in the market value of the Investments, or changes due to net
redemptions of shares of Circle Income, dividends paid or losses from
operations.
(c) As of the Valuation Time and as of the Exchange Date, all
representations and warranties of Circle Income made in this Agreement are
true and correct in all material respects as if made at and as of such
dates, Circle Income has complied with all the agreements and satisfied all
the conditions on its part to be performed or satisfied at or prior to each
of such dates, and Circle Income shall have furnished to One Group a
statement, dated the Exchange Date, signed by Circle Income's President (or
any Vice President) and Treasurer certifying those facts as of such dates.
(d) Circle Income shall have delivered to One Group a letter from
Arthur Andersen LLP dated the Exchange Date stating that such firm reviewed
the federal and state income tax returns of Circle Income for the year
ended June 30, 2000 and that, in the course of such review, nothing came to
their attention which caused them to believe that such returns did not
properly reflect, in all material respects, the federal and state income
taxes of Circle Income for the periods covered hereby, or that Circle
Income would not qualify as a regulated investment company for federal
income tax purposes.
(e) There shall not be any material litigation pending with respect to
the matters contemplated by this Agreement.
(f) One Group shall have received an opinion of Baker & Daniels, in
form reasonably satisfactory to One Group and dated the Exchange Date, to
the effect that (i) Circle Income is a corporation duly and validly
existing under the laws of Indiana, (ii) this Agreement has been duly
authorized, executed, and delivered by Circle Income and, assuming that the
Registration Statement, the Prospectus and the Proxy Statement comply with
the 1933 Act, the 1934 Act and the 1940 Act and assuming due authorization,
execution and delivery of this Agreement by One Group, is a valid and
binding obligation of Circle Income, (iii) Circle Income has power to sell,
assign, convey, transfer and deliver the Investments and other assets
contemplated hereby, (iv) the execution and delivery of this Agreement did
not, and the consummation of the transactions contemplated hereby will not,
violate Circle Income's Articles of Incorporation, or By-laws , as amended,
or any provision of any agreement known to such counsel to which Circle
Income is a party or by which it is bound, it being understood that with
respect to investment restrictions as contained in Circle Income's Policy
Manual, such counsel may rely upon a certificate of an officer of Circle
Income whose responsibility it is to advise Circle Income with respect to
such matters and (v) no consent, approval, authorization or order of any
court or governmental authority is required for the consummation by Circle
Income of the transactions contemplated hereby, except such as have been
obtained under the 1933 Act, the
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1934 Act and the 1940 Act and such as may be required under state
securities or blue sky laws and the H-S-R Act, and it being understood that
such opinion shall not be deemed to apply to One Group's compliance
obligations under the 1933 Act, 1934 Act, 1940 Act, state securities or
blue sky laws and H-S-R Act.
(g) One Group shall have received an opinion of Ropes & Gray, counsel
to One Group addressed to One Group, in form reasonably satisfactory to One
Group and dated the Exchange Date, to the effect that for Federal income
tax purposes (i) no gain or loss will be recognized by Circle Income upon
the transfer of the assets to One Group, on behalf of One Group Income, in
exchange for Shares and the assumption by One Group, on behalf of One Group
Income, of the liabilities of Circle Income or upon the distribution of
Shares by Circle Income to its shareholders in liquidation; (ii) no gain or
loss will be recognized by the shareholders of Circle Income upon the
exchange of their shares for Shares; (iii) the aggregate basis of the
Shares a Circle Income shareholder receives in connection with the
transaction will be the same as the aggregate basis of his or her Circle
Income shares exchanged therefor; (iv) a Circle Income shareholder's
holding period for his or her Shares will be determined by including the
period for which he or she held the Circle Income shares exchanged
therefor, provided that he or she held such Circle Income shares as capital
assets; (v) no gain or loss will be recognized by One Group Income upon the
receipt of the assets of Circle Income in exchange for Shares and the
assumption by One Group Income of the liabilities of Circle Income; (vi)
the basis in the hands of One Group Income of the assets of Circle Income
transferred to One Group Income in the transaction will be the same as the
basis of the assets in the hands of Circle Income immediately prior to the
transfer; and (vii) the holding periods of the assets of Circle Income in
the hands of One Group Income will include the periods for which such
assets were held by Circle Income.
(h) The assets of Circle Income to be acquired by One Group, on behalf
of One Group Income, will include no assets which One Group Income, by
reason of limitations contained in its Declaration of Trust or of
investment restrictions disclosed in the One Group Prospectus in effect on
the Exchange Date, may not properly acquire.
(i) The Registration Statement shall have become effective under the
1933 Act and applicable blue sky provisions, and no stop order suspending
such effectiveness shall have been instituted or, to the knowledge of One
Group, contemplated by the Commission and or any state regulatory
authority.
(j) All proceedings taken by Circle Income in connection with the
transactions contemplated by this Agreement and all documents incidental
thereto reasonably shall be satisfactory in form and substance to One Group
and Ropes & Gray.
(k) Prior to the Exchange Date, Circle Income shall have declared a
dividend or dividends which, together with all previous such dividends,
shall have the effect of distributing to its shareholders all of its
investment company taxable income for its taxable year ended June 30, 2000
and the short taxable year beginning on July 1, 2000 and ending on the
Exchange Date (computed without regard to any deduction for dividends
paid), and all of its net capital gain realized in its taxable year ended
June 30, 2000 and the short taxable year beginning on July 1, 2000 and
ending on the Exchange Date (after reduction for any capital loss
carryover).
(l) Circle Income shall have furnished to One Group a certificate,
signed by the President (or any Vice President) and the Treasurer of Circle
Income, as to the tax cost and acquisition date to One Group of the
securities delivered to One Group pursuant to this Agreement, together with
any such other evidence as to such tax cost as One Group may reasonably
request.
(m) Circle Income's custodian shall have delivered to One Group a
certificate identifying all of the assets of Circle Income held by such
custodian as of the Valuation Time.
(n) Circle Income's transfer agent shall have provided to One Group
(i) the originals or true copies of all of the records of Circle Income in
the possession of such transfer agent as of the Exchange Date, (ii) a
certificate setting forth the number of shares of Circle Income outstanding
as of the Valuation Time and (iii) the name, address and tax identification
number of each holder of record of any such shares of Circle Income and the
number of shares held of record by each such shareholder.
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<PAGE> 10
(o) All of the issued and outstanding shares of beneficial interest of
Circle Income shall have been offered for sale and sold in conformity with
all applicable federal or state securities or blue sky laws and, to the
extent that any audit of the records of Circle Income or its transfer agent
by One Group or its agents shall have revealed otherwise, either (i) Circle
Income shall have taken all actions that in the reasonable opinion of One
Group or Ropes & Gray are necessary to remedy any prior failure on the part
of Circle Income to have offered for sale and sold such shares in
conformity with such laws or (ii) Circle Income shall have furnished (or
caused to be furnished) surety, or deposited (or caused to be deposited)
assets in escrow, for the benefit of One Group in amounts sufficient and
upon terms satisfactory, in the opinion of One Group or its counsel, to
indemnify One Group against any expense, loss, claim, damage or liability
whatsoever that may be asserted or threatened by reason of such failure on
the part of Circle Income to have offered and sold such shares in
conformity with such laws.
(p) Circle Income shall have duly executed and delivered to One Group
bills of sale, assignments, certificates and other instruments of transfer
("Transfer Documents") as One Group may deem necessary or desirable to
transfer all of Circle Income's entire right, title and interest in and to
the Investments and all other assets of Circle Income.
10. CONDITIONS TO CIRCLE INCOME'S OBLIGATIONS. The obligations of Circle
Income hereunder shall be subject to the following conditions:
(a) This Agreement shall have been adopted and the transactions
contemplated hereby, including the liquidation and dissolution of Circle
Income, shall have been approved as described in Section 8(a).
(b) One Group shall have furnished to Circle Income a statement of One
Group Income's net assets, together with a list of portfolio holdings with
values determined as provided in Section 4, all as of the Valuation Time,
certified on One Group's behalf by its President (or any Vice President)
and Treasurer (or any Assistant Treasurer), and a certificate of both such
officers, dated the Exchange Date, to the effect that as of the Valuation
Time and as of the Exchange Date there has been no material adverse change
in the financial position of One Group Income since June 30, 2000, other
than changes in its portfolio securities since that date, changes in the
market value of its portfolio securities, changes due to net redemptions,
dividends paid or losses from operations.
(c) One Group shall have executed and delivered to Circle Income an
agreement dated as of the Exchange Date pursuant to which One Group, on
behalf of One Group Income, will assume all of the liabilities of Circle
Income existing at the Valuation Time in connection with the transactions
contemplated by this Agreement (an "Assumption of Liabilities").
(d) As of the Valuation Time and as of the Exchange Date, all
representations and warranties of One Group, for itself and on behalf of
One Group Income, made in this Agreement are true and correct in all
material respects as if made at and as of such dates, One Group and One
Group Income have complied with all of the agreements and satisfied all of
the conditions on their part to be performed or satisfied at or prior to
each of such dates, and One Group shall have furnished to Circle Income a
statement, dated the Exchange Date, signed by One Group's President (or any
Vice President) and Treasurer certifying those facts as of such dates.
(e) There shall not be any material litigation pending with respect to
the matters contemplated by this Agreement.
(f) Circle Income shall have received an opinion of Ropes & Gray, in
form reasonably satisfactory to Circle Income and dated the Exchange Date,
to the effect that (i) One Group is a business trust and validly existing
in conformity with the laws of The Commonwealth of Massachusetts, and, (to
the knowledge of such counsel), neither One Group nor One Group Income is
required to qualify to do business as a foreign association in any
jurisdiction, (ii) the Shares to be delivered to Circle Income as provided
for by this Agreement are duly authorized and upon such delivery will be
validly issued and will be fully paid and nonassessable by One Group and no
shareholder of One Group has any preemptive right to subscription or
purchase in respect thereof, (iii) this Agreement has been duly authorized,
executed and delivered by One Group and, assuming that the Prospectus, the
Registration Statement and the Proxy Statement comply with
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<PAGE> 11
the 1933 Act, the 1934 Act and the 1940 Act and assuming due authorization,
execution and delivery of this Agreement by Circle Income, is a valid and
binding obligation of One Group, (iv) the execution and delivery of this
Agreement did not, and the consummation of the transactions contemplated
hereby will not, violate One Group's Declaration of Trust, as amended, or
Code of Regulations, or any provision of any agreement known to such
counsel to which One Group or One Group Income is a party or by which it is
bound, it being understood that with respect to investment restrictions as
contained in One Group's Declaration of Trust, as amended, Code of
Regulations or then-current prospectus or statement of additional
information of One Group , such counsel may rely upon a certificate of an
officer of One Group whose responsibility it is to advise One Group with
respect to such matters, (v) no consent, approval, authorization or order
of any court or governmental authority is required for the consummation by
One Group, on behalf of One Group Income, of the transactions contemplated
herein, except such as have been obtained under the 1933 Act, the 1934 Act
and the 1940 Act and such as may be required under state securities or blue
sky laws and the H-S-R Act and it being understood that such opinion shall
not be deemed to apply to Circle Income's compliance obligations under the
1933 Act, 1934 Act, 1940 Act, state securities or blue sky laws and the
H-S-R Act; and (vi) the Registration Statement has become effective under
the 1933 Act, and to the best of the knowledge of such counsel, no stop
order suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or are
pending or contemplated under the 1933 Act.
(g) Circle Income shall have received an opinion of Ropes & Gray
addressed to Circle Income, and in a form reasonably satisfactory to Circle
Income and dated the Exchange Date, with respect to the matters specified
in Section 9(g) of this Agreement.
(h) All proceedings taken by One Group in connection with the
transactions contemplated by this Agreement and all documents incidental
thereto reasonably shall be satisfactory in form and substance to Circle
Income and Baker & Daniels.
(i) The Registration Statement shall have become effective under the
1933 Act and applicable blue sky provisions, and no stop order suspending
such effectiveness shall have been instituted or, to the knowledge of
Circle Income, contemplated by the Commission or any state regulatory
authority.
(j) Circle Income shall have received evidence, in form and substance
satisfactory to Circle Income, of (1) the liability coverage for the
directors of Circle Income and (2) One Group's agreement to indemnify the
directors of Circle Income, in each case, pursuant to the covenants set
forth in paragraph 11(c) hereof.
11. INDEMNIFICATION. (a) Circle Income will indemnify and hold harmless One
Group, its trustees and its officers (for purposes of this subparagraph, the
"Indemnified Parties") against any and all expenses, losses, claims, damages and
liabilities at any time imposed upon or reasonably incurred by any one or more
of the Indemnified Parties in connection with, arising out of, or resulting from
any claim, action, suit or proceeding in which any one or more of the
Indemnified Parties may be involved or with which any one or more of the
Indemnified Parties may be threatened by reason of any untrue statement or
alleged untrue statement of a material fact relating to Circle Income contained
in the Registration Statement, the Prospectus or the Proxy Statement or any
amendment or supplement to any of the foregoing, or arising out of or based upon
the omission or alleged omission to state in any of the foregoing a material
fact relating to Circle Income required to be stated therein or necessary to
make the statements relating to Circle Income therein not misleading, including,
without limitation, any amounts paid by any one or more of the Indemnified
Parties in a reasonable compromise or settlement of any such claim, action, suit
or proceeding or threatened claim, action, suit or proceeding made with the
prior consent of Circle Income. The Indemnified Parties will notify Circle
Income in writing within ten days after the receipt by any one or more of the
Indemnified Parties of any notice of legal process or any suit brought against
or claim made against such Indemnified Party as to any matters covered by this
Section 11(a). Circle Income shall be entitled to participate at its own expense
in the defense of any claim, action, suit or proceeding covered by this Section
11(a), or, if it so elects, to assume at its expense by counsel satisfactory to
the Indemnified Parties the defense of any such claim, action, suit or
proceeding, and if Circle Income elects to assume such defense, the Indemnified
Parties shall be entitled to participate in the defense of any such claim,
action, suit or proceeding at their expense. Circle Income's obligation under
this Section 11(a) to indemnify and hold harmless the Indemnified Parties shall
constitute a guarantee of payment so that Circle Income will pay in the first
instance any
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<PAGE> 12
expenses, losses, claims, damages and liabilities required to be paid by it
under this Section 11(a) without the necessity of the Indemnified Parties first
paying the same.
(b) One Group, on behalf of One Group Income, will indemnify and hold
harmless Circle Income, its directors and its officers (for purposes of
this subparagraph, the "Indemnified Parties") against any and all expenses,
losses, claims, damages and liabilities at any time imposed upon or
reasonably incurred by any one or more of the Indemnified Parties in
connection with, arising out of, or resulting from any claim, action, suit
or proceeding in which any one or more of the Indemnified Parties may be
involved or with which any one or more of the Indemnified Parties may be
threatened by reason of any untrue statement or alleged untrue statement of
a material fact relating to One Group or One Group Income contained in the
Registration Statement, the Prospectus or the Proxy Statement, or any
amendment or supplement to any of the foregoing, or arising out of or based
upon the omission or alleged omission to state in any of the foregoing a
material fact relating to One Group or One Group Income required to be
stated therein or necessary to make the statements relating to One Group or
One Group Income therein not misleading, including, without limitation, any
amounts paid by any one or more of the Indemnified Parties in a reasonable
compromise or settlement of any such claim, action, suit or proceeding, or
threatened claim, action, suit or proceeding made with the prior consent of
One Group. The Indemnified Parties will notify One Group in writing within
ten days after the receipt by any one or more of the Indemnified Parties of
any notice of legal process or any suit brought against or claim made
against any Indemnified Party as to any matters covered by this Section
11(b). One Group shall be entitled to participate at its own expense in the
defense of any claim, action, suit or proceeding covered by this Section
11(b), or, if it so elects, to assume at its expense by counsel
satisfactory to the Indemnified Parties the defense of any such claim,
action, suit or proceeding, and, if One Group elects to assume such
defense, the Indemnified Parties shall be entitled to participate in the
defense of any such claim, action, suit or proceeding at their own expense.
One Group's obligation under this Section 11(b) to indemnify and hold
harmless the Indemnified Parties shall constitute a guarantee of payment so
that One Group will pay in the first instance any expenses, losses, claims,
damages and liabilities required to be paid by it under this Section 11(b)
without the necessity of the Indemnified Parties first paying the same.
(c)(i) Effective upon the Closing Date, One Group shall assume and be
responsible for all obligations of Circle Income to indemnify the present
and former directors of Circle Income (the "Indemnified Directors") to the
fullest extent permitted by law under the Articles of Incorporation of
Circle Income as in effect on the date hereof; provided, however, that any
determination required to be made with respect to whether a director's
conduct complies with the standards set forth under Indiana law and the
Articles of Incorporation shall be made by independent counsel selected by
One Group. One Group agrees that all rights to indemnification existing in
favor of the Indemnified Directors, acting in their capacities as directors
of Circle Income, under Circle Income's Articles of Incorporation as in
effect as of the date of this Agreement shall survive the Reorganization as
obligations of One Group, shall continue in full force and effect without
any amendment thereto, and shall constitute rights which may be asserted
against One Group.
(c)(ii) To the extent subparagraph (c)(i) shall not serve to indemnify
and hold harmless an Indemnified Director, after the Closing Date, One
Group shall, subject to the terms set forth herein, indemnify and hold
harmless, to the fullest extent permitted under applicable law (and shall
also advance expenses as incurred to the fullest extent permitted under
applicable law provided the person to whom expenses are advanced provides
an undertaking to repay such advances if it is ultimately determined that
such person is not entitled to indemnification), each Indemnified Director
against any costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages, liabilities and amounts paid in
settlement in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative,
arising out of or pertaining to the Transactions contemplated by this
Agreement; provided that, in the event any claim or claims are asserted or
made, all rights to indemnification in respect of any such claim or claims
shall continue until final disposition of any and all such claims. Any
Indemnified Director wishing to claim indemnification under this
subparagraph (c)(ii), upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify One Group thereof, but
the failure to so notify shall not relieve One Group of any liability it
may have to such Indemnified Director if such failure does not materially
prejudice One Group. In the event of any such claim, action, suit,
proceeding or investigation
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<PAGE> 13
(whether arising before or after the Closing Date), (i) One Group shall
have the right to assume the defense thereof and One Group shall not be
liable to such Indemnified Director for any legal expenses of other counsel
or any other expenses subsequently incurred by such Indemnified Director in
connection with the defense thereof, except that if One Group elects not to
assume such defense or counsel for the Indemnified Directors advises that
there are issues which raise conflicts of interest between One Group and
the Indemnified Directors, the Indemnified Directors may retain counsel
satisfactory to them, and One Group shall pay all reasonable fees and
expenses of such counsel for the Indemnified Directors promptly as
statements therefor are received; provided, however, that One Group shall
be obligated pursuant to this subparagraph (c)(ii) to pay for only one firm
of counsel for all Indemnified Directors in any jurisdiction (unless the
use of one counsel for such Indemnified Directors would present such
counsel with a conflict of interest), (ii) the Indemnified Directors will
cooperate in the defense of any such matter and (iii) One Group shall not
be liable for any settlement effected without its prior written consent;
and provided further, that One Group shall not have any obligation
hereunder to any Indemnified Director when and if a court of competent
jurisdiction shall ultimately determine, and such determination shall have
become final, that the indemnification of such Indemnified Director in the
manner contemplated hereby is prohibited by applicable law.
(c)(iii) For the period beginning at the effective time of the
Reorganization and ending not less than three years thereafter, One Group
shall provide or cause to be provided, liability coverage for the
Indemnified Directors which covers the actions of the Indemnified Directors
for the period they served as such.
(c)(iv) The Indemnified Directors shall be deemed third party
beneficiaries of this subparagraph 11(c), and the rights provided to each
Indemnified Director by this subparagraph 11(c) shall be enforceable
against One Group by each Indemnified Director (and each director of Circle
Income shall be presumed to have relied upon this subparagraph 11(c)(iv) in
continuing to serve as a director of Circle Income after the date hereof).
(c)(v) One Group Income's obligation under this Section 11(c) to
indemnify and hold harmless the Indemnified Directors shall constitute a
guarantee of payment so that One Group Income will pay in the first
instance any expenses, losses, claims, damages and liabilities required to
be paid by it under this Section 11(c) without the necessity of the
Indemnified Directors first paying the same.
(d) All provisions of this Section 11 shall survive the termination or
expiration of this Agreement, and the closing of the transactions
contemplated hereby.
12. NO BROKER, ETC. Each of One Group and Circle Income represents that
there is no person who has dealt with it who by reason of such dealings is
entitled to any broker's or finder's or other similar fee or commission arising
out of the transactions contemplated by this Agreement.
13. TERMINATION. One Group and Circle Income may, by mutual consent of
their respective trustees and directors, terminate this Agreement, and One Group
or Circle Income, after consultation with counsel and by consent of their
respective trustees and directors, or an officer authorized by such trustees and
directors, may waive any condition to their respective obligations hereunder. If
the transactions contemplated by this Agreement have not been substantially
completed by March 13, 2001, this Agreement shall automatically terminate on
that date unless a later date is agreed to by One Group and Circle Income.
14. RULE 145. Pursuant to Rule 145 under the 1933 Act, One Group will, in
connection with the issuance of any Shares to any person who at the time of the
transaction contemplated hereby is deemed to be an affiliate of a party to the
transaction pursuant to Rule 145 (c), cause to be affixed upon the certificates
issued to such person (if any) a legend as follows:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT TO ONE
GROUP OR ITS PRINCIPAL UNDERWRITER UNLESS (i) A REGISTRATION STATEMENT
WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS
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<PAGE> 14
AMENDED, OR (ii) IN THE OPINION OF COUNSEL, REASONABLY SATISFACTORY TO
ONE GROUP, SUCH REGISTRATION IS NOT REQUIRED."
and, further, One Group will issue stop transfer instructions to One Group's
transfer agent with respect to such shares. Circle Income will provide One Group
on the Exchange Date with the name of any shareholder of Circle Income who is to
the knowledge of Circle Income an affiliate of Circle Income on such date.
15. COVENANT, ETC. DEEMED MATERIAL. All covenants, agreements,
representations and warranties made under this Agreement and any certificates
delivered pursuant to this Agreement shall be deemed to have been material and
relied upon by each of the parties, notwithstanding any investigation made by
them or on their behalf
16. SOLE AGREEMENT: AMENDMENTS. This Agreement supersedes all previous
correspondence and oral communications between the parties regarding the subject
matter hereof, constitutes the only understanding with respect to such subject
matter, may not be changed except by a letter of agreement signed by each party
hereto, and shall be construed in accordance with and governed by the laws of
The Commonwealth of Massachusetts.
17. AGREEMENT AND DECLARATION OF TRUST. Circle Income Shares, Inc. is a
corporation organized under Indiana law and under its Articles of Incorporation,
to which reference is hereby made and a copy of which is on file at the office
of the Secretary of the State of Indiana and elsewhere as required by law, and
to any and all amendments thereto so filed or hereafter filed. The obligations
of "Circle Income Shares, Inc." entered into in the name or on behalf thereof by
any of the directors, officers, employees or agents are made not individually,
but in such capacities, and are not binding upon any of the directors, officers,
employees, agents or shareholders of Circle Income personally, but bind only the
assets of Circle Income, and all persons dealing with Circle Income must look
solely to the assets of Circle Income for the enforcement of any claims against
Circle Income. The names "One Group Mutual Funds" and "Trustees of One Group"
refer respectively to One Group and the Trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated May 23, 1985, to which reference is hereby made and a copy of which
is on file at the office of the Secretary of The Commonwealth of Massachusetts
and elsewhere as required by law, and to any and all amendments thereto so filed
or hereafter filed. The obligations of "One Group Mutual Funds" entered into in
the name or on behalf thereof by any of the Trustees, representatives or agents
are made not individually, but in such capacities, and are not binding upon any
of the Trustees, shareholders or representatives of One Group personally, but
bind only the assets of One Group, and all persons dealing with any series of
One Group, and all persons dealing with One Group Income must look solely to the
assets of One Group belonging to such series for the enforcement of any claims
against One Group.
This Agreement may be executed in any number of counterparts, each of
which, when executed and delivered, shall be deemed to be an original.
CIRCLE INCOME SHARES, INC.
By:
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ONE GROUP MUTUAL FUNDS
By:
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