ITEM 77M. Mergers
On March 27, 2000, the shareholders of the Victory Government Mortgage Fund
and the Victory Ohio Regional Stock Fund approved the reorganization of
each Fund into a specific existing portfolio of The Victory Portfolios.
On May 5, 2000, Victory Government Mortgage Fund and Victory Ohio Regional
Stock Fund merged into Victory Fund for Income and Victory Established
Value Fund, respectively.
VICTORY ESTABLISHED VALUE FUND
VICTORY FUND FOR INCOME
VICTORY GOVERNMENT MORTGAGE FUND
VICTORY OHIO REGIONAL STOCK FUND
AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION
THIS AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION ("Agreement") is
made as of May 5, 2000, between The Victory Portfolios, a Delaware business
trust ("Victory"), on behalf of Fund for Income and Established Value Fund,
segregated portfolios of assets ("series") thereof (each, an "Acquiring
Fund"), and Victory, on behalf of Government Mortgage Fund and Ohio Regional
Stock Fund, segregated portfolios of assets ("series") thereof (each, a
"Target"). (Each Acquiring Fund and Target are sometimes referred to herein
individually as a "Fund" and collectively as the "Funds," and Victory is
sometimes referred to herein as the "Investment Company.")
All agreements, representations, and obligations described herein made or
to be taken or undertaken by any Fund are made or shall be taken or
undertaken by Victory on the Fund's behalf.
Government Mortgage Fund and Fund for Income are corresponding Target and
Acquiring Funds, respectively, with respect to each other and Ohio Regional
Stock Fund and Established Value Fund are corresponding Target and Acquiring
Funds, respectively, with respect to each other.
In accordance with the terms and conditions set forth in this Agreement,
the parties desire that each Target transfer its assets to the Class A
Shares of the corresponding Acquiring Fund in exchange solely for voting
shares of beneficial interest of each comparable Class in the corresponding
Acquiring Fund, ("Acquiring Fund's Shares") and the assumption by the Class
A Shares of the corresponding Acquiring Fund of the Target's liabilities,
and that each Target distribute the corresponding Acquiring Fund's Shares
pro rata to the holders of shares of beneficial interest in Target
("Target's Shares") in liquidation of Target. All such transactions
with respect to a Target and its corresponding Acquiring Fund are referred
to herein collectively as a "Reorganization."
It is intended by the parties hereto that each Reorganization constitute
a reorganization within the meaning of Section 368(a)(1) of the Internal
Revenue Code of 1986, as amended (the "Code"). The parties hereto hereby
adopt this Agreement as a "plan of reorganization" within the meaning of
Treasury Regulation Sections 1.368-2(g) and 1.368-3(a).
Shares of Fund for Income are currently divided into two classes,
designated Class A Shares and Class G Shares. Government Mortgage Fund
currently has only one class of shares, designated Class A Shares. Shares
of Established Value Fund are currently divided into two classes,
designated Class A Shares and Class G Shares. Shares of Ohio Regional
Stock Fund are currently divided into two classes, designated Class A Shares
and Class B Shares. Class A Shares of Fund for Income will be distributed
to holder of Class A Shares of Government Mortgage Fund in the Reorganization
of that Fund. Class A Shares of Established Value Fund will be distributed
to holders of Class A and Class B Shares of Ohio Regional Stock Fund in
the Reorganization of those Funds.
In consideration of the mutual promises herein, the parties covenant and
agree as follows:
PLAN OF REORGANIZATION AND TERMINATION OF TARGETS
At the Effective Time (as defined in paragraph 0), each Target agrees to
assign, sell, convey, transfer, and deliver all of its assets described in
paragraph 0 ("Assets") to the corresponding Acquiring Fund. Each Acquiring
Fund agrees in exchange therefore
to issue and deliver to its corresponding Target the number of full and
fractional Acquiring Fund's Shares determined by dividing the net value
of such Target (computed as set forth in paragraph 0) by the NAV (computed
as set forth in paragraph 0) of the Acquiring Fund's Shares; and
to assume all of such Target's liabilities described in paragraph 0
("Liabilities").
Assets shall include, without limitation, all cash, cash equivalents,
securities, receivables (including interest and dividends receivable),
claims and rights of action, rights to register shares under applicable
securities laws, books and records, deferred and prepaid expenses shown
as assets on Target's books, and other property owned by Target at the
Effective Time.
Liabilities shall include (except as otherwise provided herein) all of
Target's liabilities, debts, obligations, and duties of whatever kind or
nature, whether absolute, accrued, contingent, or otherwise, whether or
not arising in the ordinary course of business, whether or not determinable
at the Effective Time, and whether or not specifically referred to in this
Agreement, including without limitation Target's share of the expenses
described in paragraph 0 and the liabilities to which the transferred
Assets are subject. Notwithstanding the foregoing, each Target agrees
to use its best efforts to discharge all of its known Liabilities prior
to the Effective Time.
At or immediately before the Effective Time, each Target shall declare and
pay to its shareholders a dividend and/or other distribution in an amount
large enough so that it will have distributed substantially all (and in any
event not less than 90%) of its investment company taxable income (computed
without regard to any deduction for dividends paid) and substantially
all of its realized net capital gain, if any, for the current taxable
year through the Effective Time.
At the Effective Time (or as soon thereafter as is reasonably practicable),
each Target shall distribute the corresponding Acquiring Fund's Shares
received by it pursuant to paragraph 0 to such Target's shareholders of
record, determined as of the Effective Time (collectively "Shareholders"
and individually a "Shareholder"), in exchange for such Target's Shares
and in liquidation of such Target. To accomplish this distribution,
the corresponding Acquiring Fund's transfer agent ("Transfer Agent")
shall open accounts on such Acquiring Fund's share transfer books in
the Shareholders' names and transfer such Acquiring Fund's Shares
thereto. Each Shareholder's account shall be credited with the pro
rata number of full and fractional (rounded to the third decimal place)
Acquiring Fund's Shares due that Shareholder. All outstanding Shares
of such Target, including any represented by certificates, shall
simultaneously be canceled on such Target's share transfer books. An
Acquiring Fund shall not issue certificates representing such Acquiring
Fund's Shares in connection with its Reorganization. However, certificates
representing each Target's Shares shall represent the corresponding
Acquiring Fund's Shares after each Reorganization.
As soon as reasonably practicable after distribution of an Acquiring Fund's
Shares pursuant to paragraph 0, the corresponding Target shall be
terminated and any further actions shall be taken in connection therewith
as required by applicable law. Each Target shall file such instruments and
shall take all other steps necessary to effect a complete liquidation
and dissolution of such Target.
Any reporting responsibility of a Target to a public authority is and
shall remain its responsibility up to and including the date on which it
is terminated.
Any transfer taxes payable upon issuance of an Acquiring Fund's Shares in
a name other than that of the registered holder on the corresponding Target's
books of such Target's Shares exchanged therefor shall be paid by the person
to whom such Acquiring Fund's Shares are to be issued, as a condition of such
transfer.
VALUATION
For purposes of paragraph 0(a), each Target's net value shall be (a) the
value of the Assets computed as of the close of regular trading on the New
York Stock Exchange ("NYSE") on the date of the Closing ("Valuation Time"),
using the valuation procedures set forth in such Target's then current
prospectus and statement of additional information less (b) the amount of
the Liabilities as of the Valuation Time.
For purposes of paragraph 0(a), the NAV of each Acquiring Fund's Shares
shall be computed as of the Valuation Time, using the valuation procedures
set forth in Acquiring Fund's then current prospectus and statement of
additional information.
All computations pursuant to paragraphs 0 and 0 shall be made by or under
the direction of Key Asset Management Inc.
CLOSING AND EFFECTIVE TIME
Each Reorganization, together with related acts necessary to consummate the
same ("Closing"), shall occur at the Funds' principal offices on May 5,
2000, or at such other place and/or on such other date upon which the
parties may agree. All acts taking place at the Closing shall be deemed
to take place simultaneously as of the close of business on the date
thereof or at such other time upon which the parties may agree ("Effective
Time"). If, immediately before the Valuation Time, (a) the NYSE is
closed to trading or trading thereon is restricted or (b) trading or the
reporting of trading on the NYSE or elsewhere is disrupted, so that
accurate appraisal of the net value of each Target and the NAV per share
for each Acquiring Fund is impracticable, the Effective Time shall be
postponed until the first business day after the day when such trading
shall have been fully resumed and such reporting shall have been restored.
Each Target shall deliver to Victory at the Closing a schedule of its
Assets as of the Effective Time, which shall set forth for all portfolio
securities included therein their adjusted tax bases and holding periods
by lot. Each Target's custodian shall deliver at the Closing a
certificate of an authorized officer stating that (a) the Assets held
by the custodian will be transferred to the corresponding Acquiring Fund
at the Effective Time and (b) all necessary taxes in conjunction with the
delivery of the Assets, including all applicable federal and state stock
transfer stamps, if any, have been paid or provision for payment has been
made.
The Transfer Agent shall deliver at the Closing a certificate as to the
opening on each Acquiring Fund's share transfer books of accounts in the
names of the corresponding Target's Shareholders. Victory shall issue
and deliver a confirmation to each Target evidencing the Acquiring Fund's
Shares to be credited to such Target at the Effective Time or provide
evidence satisfactory to such Target that the corresponding Acquiring
Fund's Shares have been credited to such Target's account on such
Acquiring Fund's books. At the Closing, each party shall deliver to
the other such bills of sale, checks, assignments, stock certificates,
receipts, or other documents as the other party or its counsel may
reasonably request.
Victory, on behalf of each Target and Acquiring Fund, respectively,
shall deliver at the Closing a certificate executed in its name by
its President or a Vice President and dated as of the Effective Time,
to the effect that the representations and warranties it made in this
Agreement are true and correct in all material respects at the Effective
Time, with the same force and effect as if made at and as of the Effective
Time, except as they may be affected by the transactions contemplated
by this Agreement.
REPRESENTATIONS AND WARRANTIES
Each Target represents and warrants as follows:
At the Closing, Target will have good and marketable title to its Assets
and full right, power, and authority to sell, assign, transfer, and deliver
its Assets free of any liens or other encumbrances; and upon delivery and
payment for the Assets, the corresponding Acquiring Fund will acquire good
and marketable title thereto;
The corresponding Acquiring Fund's Shares are not being acquired for the
purpose of making any distribution thereof, other than in accordance with
the terms hereof;
Target's current prospectus and statement of additional information conform
in all material respects to the applicable requirements of the Securities
Act of 1933, as amended ("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 any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading;
Target is not in violation of, and the execution and delivery of this
Agreement and consummation of the transactions contemplated hereby will
not (a) conflict with or violate, Delaware law or any provision of
Victory's Certificate of Declaration of Trust or Trust Instrument or
By-laws or of any agreement, instrument, lease, or other undertaking to
which Target is a party or by which it is bound or (b) result in the
acceleration of any obligation, or the imposition of any penalty, under
any agreement, judgment, or decree to which Target is a party or by which
it is bound, except as previously disclosed in writing to and accepted
by Victory;
Except as otherwise disclosed in writing to and accepted by Victory, all
material contracts and other commitments of or applicable to Target
(other than this Agreement and investment contracts, including options
and futures) will be terminated, or provision for discharge of any
liabilities of Target thereunder will be made, at or prior to the Effective
Time, without Target incurring any liability or penalty with respect
thereto and without diminishing or releasing any rights Target may have
had with respect to actions taken or not taken by any other party thereto
prior to the Closing;
Except as otherwise disclosed in writing to and accepted by Victory on
behalf of the corresponding Acquiring Fund, no litigation, administrative
proceeding, or investigation of or before any court or governmental body
is presently pending or (to Target's knowledge) threatened against Target
or any of its properties or assets that, if adversely determined, would
materially and adversely affect Target's financial condition or the conduct
of its business; Target knows of no facts that might form the basis for
the institution of any such litigation, proceeding, or investigation 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 or adversely
affects its business or its ability to consummate the transactions
contemplated hereby;
The execution, delivery, and performance of this Agreement has been duly
authorized as of the date hereof by all necessary action on the part of
Victory's board of trustees on behalf of Target, which has made the
determinations required by Rule 17a-8(a) under the 1940 Act; and,
subject to approval by Target's shareholders and receipt of any necessary
exemptive relief or no-action assurances requested from the Securities
and Exchange Commission ("SEC") or its staff with respect to Sections
17(a) and 17(d) of the 1940 Act, this Agreement will constitute a valid
and legally binding obligation of Target, enforceable in accordance with
its terms, except as the same may be limited by bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium, and similar laws relating
to or affecting creditors' rights and by general principles of equity;
At the Effective Time, the performance of this Agreement shall have been
duly authorized by all necessary action by Target's shareholders;
No governmental consents, approvals, authorizations, or filings are
required under the 1933 Act, the Securities Exchange Act of 1934, as
amended ("1934 Act"), or the 1940 Act for the execution or performance of
this Agreement by Target, except for (a) the filing with the SEC of a
registration statement by Victory on Form N-14 relating to the corresponding
Acquiring Fund's Shares issuable hereunder, and any supplement or
amendment thereto ("Registration Statement"), including therein a
prospectus/proxy statement ("Proxy Statement"), (b) receipt of the
exemptive relief or no-action assurances referenced in subparagraph 4.1.7,
and (c) such consents, approvals, authorizations, and filings as have been
made or received or as may be required subsequent to the Effective Time;
On the effective date of the Registration Statement, at the time of the
shareholders' meeting referred to in paragraph 0, and at the Effective
Time, the Proxy Statement will (a) comply in all material respects with
the applicable provisions of the 1933 Act, the 1934 Act, and the 1940 Act
and the rules and regulations thereunder and (b) not contain any untrue
statement of a material fact or omit any material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances under which such statements were made, not misleading.
This provision shall not apply to statements in or omissions from the
Proxy Statement made in reliance on and in conformity with information
furnished by Victory for use therein;
Each Acquiring Fund represents and warrants as follows:
No consideration other than Acquiring Fund's Shares (and Acquiring Fund's
assumption of the Liabilities) will be issued in exchange for the
corresponding Target's Assets in the Reorganization;
Acquiring Fund's Shares to be issued and delivered to the corresponding
Target hereunder will, at the Effective Time, have been duly authorized
and, when issued and delivered as provided herein, will be duly and validly
issued and outstanding shares of Acquiring Fund, fully paid and
nonassessable by Victory (except as disclosed in Victory's then current
prospectus and statement of additional information). Except as contemplated
by this Agreement, Acquiring Fund does not have outstanding any options,
warrants, or other rights to subscribe for or purchase any of its shares,
nor is there outstanding any security convertible into any of its shares;
Acquiring Fund's current prospectus and statement of additional information
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 any material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading;
Acquiring Fund is not in violation of, and the execution and delivery of
this Agreement and consummation of the transactions contemplated hereby
(a) will not conflict with or violate, Delaware law or any provision of
Victory's Certificate of Trust or Trust Instrument or By-laws or any
provision of any agreement, instrument, lease, or other undertaking to
which Acquiring Fund is a party or by which it is bound or (b) result in
the acceleration of any obligation, or the imposition of any penalty,
under any agreement, judgment, or decree to which Acquiring Fund is a
party or by which it is bound, except as previously disclosed in writing
to and accepted by Victory;
Except as otherwise disclosed in writing to and accepted by Victory on
behalf of its corresponding Target, no litigation, administrative proceeding,
or investigation of or before any court or governmental body is presently
pending or (to Acquiring Fund's knowledge) threatened against Victory with
respect to Acquiring Fund or any of its properties or assets that, if
adversely determined, would materially and adversely affect Acquiring
Fund's financial condition or the conduct of its business; Acquiring Fund
knows of no facts that might form the basis for the institution of any such
litigation, proceeding, or investigation 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 or adversely affects its business or
its ability to consummate the transactions contemplated hereby;
The execution, delivery, and performance of this Agreement has been duly
authorized as of the date hereof by all necessary action on the part of
Victory's board of trustees on behalf of Acquiring Fund, which has made
the determinations required by Rule 17a-8(a) under the 1940 Act; and,
subject to receipt of any necessary exemptive relief or no-action
assurances requested from the SEC or its staff with respect to Sections
17(a) and 17(d) of the 1940 Act, this Agreement will constitute a valid
and legally binding obligation of Acquiring Fund, enforceable in
accordance with its terms, except as the same may be limited by bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium, and similar
laws relating to or affecting creditors' rights and by general principles
of equity;
No governmental consents, approvals, authorizations, or filings are required
under the 1933 Act, the 1934 Act, or the 1940 Act for the execution or
performance of this Agreement by Victory, except for (a) the filing with
the SEC of the Registration Statement and a post-effective amendment to
Victory's registration statement on Form N-1A, (b) receipt of the exemptive
relief or no-action assurances referenced in subparagraph 0, and (c) such
consents, approvals, authorizations, and filings as have been made or
received or as may be required subsequent to the Effective Time;
On the effective date of the Registration Statement, at the time of the
shareholders' meeting referred to in paragraph 0, and at the Effective
Time, the Proxy Statement will (a) comply in all material respects with
the applicable provisions of the 1933 Act, the 1934 Act, and the 1940
Act and the rules and regulations thereunder and (b) not contain any
untrue statement of a material fact or omit any material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which such statements were made, not
misleading; provided that the foregoing shall not apply to statements in
or omissions from the Proxy Statement made in reliance on and in conformity
with information furnished by the corresponding Target for use therein;
Victory, on behalf of each Fund, represents and warrants as follows:
Victory is a business trust that is duly organized, validly existing, and
in good standing under the laws of the State of Delaware; and a copy of
its Certificate of Trust is on file with the Secretary of the State of
Delaware;
Victory is duly registered as an open-end management investment company
under the 1940 Act, and such registration will be in full force and effect
at the Effective Time;
Each Fund is a duly established and designated series of Victory.
COVENANTS
Each Fund covenants to operate its respective business in the ordinary
course between the date hereof and the Closing, it being understood that
(a) such ordinary course will include declaring and paying customary
dividends and other distributions and such changes in operations as are
contemplated by each Fund's normal business activities and (b) each Fund
will retain exclusive control of the composition of its portfolio until
the Closing; provided that no Target shall dispose of more than an
insignificant portion of its historic business assets during such period
without the corresponding Acquiring Fund's prior consent.
Each Target covenants to call a special meeting of shareholders to consider
and act upon this Agreement and to take all other action necessary to obtain
approval of the transactions contemplated hereby.
Each Target covenants that its corresponding Acquiring Fund's Shares to be
delivered hereunder are not being acquired for the purpose of making any
distribution thereof, other than in accordance with the terms hereof.
Each Target covenants that it will assist Victory in obtaining such
information as Victory reasonably requests concerning the beneficial
ownership of its Shares.
Each Target covenants that its books and records (including all books and
records required to be maintained under the 1940 Act and the rules and
regulations thereunder) will be turned over to Victory at the Closing.
Each Fund covenants to cooperate in preparing the Proxy Statement in
compliance with applicable federal securities laws.
Each Fund covenants that it will, from time to time, as and when requested
by the corresponding Fund, execute and deliver or cause to be executed and
delivered all such assignments and other instruments, and will take or
cause to be taken such further action, as the corresponding Fund may deem
necessary or desirable in order to vest in, and confirm to, (a) each
Acquiring Fund, title to and possession of all corresponding Target's
Assets, and (b) each Target, title to, and possession of the corresponding
Acquiring Fund's Shares to be delivered hereunder, and otherwise to carry
out the intent and purpose hereof.
Each Acquiring Fund covenants to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act, and
such state securities laws as it may deem appropriate in order to continue
its operations after the Effective Time.
Subject to this Agreement, each Fund covenants to take or cause to be taken
all actions, and to do or cause to be done all things, reasonably
necessary, proper, or advisable to consummate and effectuate the
transactions contemplated hereby.
Victory covenants to file an amendment to its registration statement on
Form N-1A to register Class A Shares of Established Value Fund.
Victory, on behalf of Ohio Regional Stock Fund, covenants that it will
take all reasonable action to ensure that comparable classes of shares
exist between it and Established Value Fund.
CONDITIONS PRECEDENT
Each Fund's obligations hereunder shall be subject to (a) performance by
its corresponding Fund of all the obligations to be performed hereunder
at or before the Effective Time, (b) all representations and warranties
of the corresponding Fund contained herein being true and correct in all
material respects as of the date hereof and, except as they may be affected
by the transactions contemplated hereby, as of the Effective Time, with
the same force and effect as if made at and as of the Effective Time, and
(c) the following further conditions that, at or before the Effective Time:
This Agreement and the transactions contemplated hereby shall have been
duly adopted and approved by Victory's board of trustees on behalf of
Target and Acquiring Fund and shall have been approved by each Target's
shareholders in accordance with applicable law.
All necessary filings shall have been made with the SEC and state securities
authorities, and no order or directive shall have been received that any
other or further action is required to permit the parties to carry out the
transactions contemplated hereby. The Registration Statement shall have
become effective under the 1933 Act, no stop orders suspending the
effectiveness thereof shall have been issued, and the SEC shall not have
issued an unfavorable report with respect to the Reorganization under
section 25(b) of the 1940 Act nor instituted any proceedings seeking to
enjoin consummation of the transactions contemplated hereby under section
25(c) of the 1940 Act. All consents, orders, and permits of federal,
state, and local regulatory authorities (including the SEC and state
securities authorities) deemed necessary by any Fund to permit consummation,
in all material respects, of the transactions contemplated hereby shall
have been obtained, except where failure to obtain the same would not
involve a risk of a material adverse effect on the assets or properties
of any Fund, provided that any Fund may for itself waive any of such
conditions.
At the Effective Time, no action, suit, or other proceeding shall be
pending before any court or governmental agency in which it is sought
to restrain or prohibit, or to obtain damages or other relief in connection
with, the transactions contemplated hereby.
The amendment to the Fund's registration statement on Form N-1A filed by
Victory on behalf of Established Value Fund registering Class A Shares
shall have become effective.
Each Target shall have received an opinion of Kramer Levin Naftalis &
Frankel LLP, counsel to Victory, substantially to the effect that:
Its corresponding acquiring Fund is a validly existing series of Victory,
a business trust duly formed and validly existing and in good standing
under the laws of the State of Delaware with the power under its Trust
Instrument to carry on its business and to own all of its properties and
assets;
This Agreement (a) has been duly authorized and executed by Victory on
behalf of the Acquiring Fund and (b) assuming due authorization, execution,
and delivery of this Agreement by Target, is a legal, valid and binding
obligation of each Acquiring Fund, enforceable against each Acquiring Fund
in accordance with its terms, except as such enforceability may be limited
by (i) bankruptcy, insolvency, reorganization, receivership, fraudulent
conveyance, moratorium or other laws of general application relating to
or affecting the enforcement of creditors' rights and remedies, as from
time to time in effect, (ii) application of equitable principles
(regardless of whether such enforceability is considered in a proceeding
in equity or at law) and (iii) principles of course of dealing or course
of performance and standards of good faith, fair dealing, materiality
and reasonableness that may be applied by a court to the exercise of rights
and remedies;
Each Acquiring Fund's Shares to be issued and delivered to the Shareholders
under this Agreement, assuming their due delivery as contemplated by this
Agreement, will be duly authorized and validly issued and outstanding and
fully paid and nonassessable (except as disclosed in Victory's then current
prospectus and statement of additional information);
The execution and delivery of this Agreement did not, and the consummation
of the transactions contemplated hereby will not (a) materially violate
Victory's Trust Instrument or By-laws or any provision of any agreement to
which Victory (with respect to the corresponding Acquiring Fund) is a party
or by which it is bound or (b) to the knowledge of such counsel, result in
the acceleration of any obligation, or the imposition of any penalty, under
any agreement, judgment, or decree known to such counsel to which Victory
(with respect to the corresponding Acquiring Fund) is a party or by which
it (with respect to the corresponding Acquiring Fund) is bound, except as
set forth in such opinion or as previously disclosed in writing to and
accepted by Victory;
To the knowledge of such counsel, no consent, approval, authorization or
order of any Delaware or New York or Federal Court or governmental authority
of the State of Delaware, the State of New York or the United States of
America is required for the consummation by the Trust on behalf of the
Acquiring Funds of the transactions contemplated by the Agreement and Plan,
except such as may be required under the 1933 Act, the 1934 Act and the
1940 Act and under securities laws of states other than the State of
Delaware;
Victory is registered with the SEC as an investment company, and to the
knowledge of such counsel no order has been issued or proceeding instituted
to suspend such registration; and
To the knowledge of such counsel, (a) no litigation, administrative
proceeding, or investigation of or before any court or governmental body is
pending or threatened as to Victory (with respect to the corresponding
Acquiring Fund) or any of its properties or assets attributable or allocable
to the corresponding Acquiring Fund and (b) Victory (with respect to the
corresponding Acquiring Fund) is not a party to or subject to the provisions
of any order, decree, or judgment of any court or governmental body that
materially and adversely affects the corresponding Acquiring Fund's
business, except as set forth in such opinion or as otherwise disclosed in
writing to and accepted by Victory.
In rendering such opinion, such counsel may (i) rely, as to matters governed
by the laws of the State of Delaware, on an opinion of competent Delaware
counsel, (ii) make assumptions regarding the authenticity, genuineness,
and/or conformity of documents and copies thereof without independent
verification thereof, (iii) limit such opinion to applicable federal and
state law, (iv) define the word "knowledge" and related terms to mean the
knowledge of attorneys then with such firm who have devoted substantive
attention to matters directly related to this Agreement and each
Reorganization; and (v) rely on certificates of officers or trustees of
Victory, in each case reasonably acceptable to Victory.
Each Acquiring Fund shall have received an opinion of Kramer Levin
Naftalis & Frankel LLP, counsel to Victory, substantially to the effect
that:
Its corresponding Target is a validly existing series of Victory, a
business trust duly organized and validly existing and in good standing
under the laws of the State of Delaware with power under its Trust Instrument
to own all of its properties and assets and, to the knowledge of such
counsel, to carry on its business as presently conducted;
This Agreement (a) has been duly authorized and executed by Victory on
behalf of its corresponding Target and (b) assuming due authorization,
execution, and delivery of this Agreement by Victory on behalf of the
Acquiring Fund, is a legal, valid and binding obligation of each Target,
enforceable against each Target in accordance with its terms, except as
such enforceability may be limited by (i) bankruptcy, insolvency,
reorganization, receivership, fraudulent conveyance, moratorium or other
laws of general application relating to or affecting the enforcement of
creditors' rights and remedies, as from time to time in effect, (ii)
application of equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law) and
(iii) principles of course of dealing or course of performance and
standards of good faith, fair dealing, materiality and reasonableness that
may be applied by a court to the exercise of rights and remedies;
The execution and delivery of this Agreement did not, and the consummation
of the transactions contemplated hereby will not, (a) materially violate
Victory's Trust Instrument or By-laws or any provision of any agreement
known to such counsel, to which Victory (with respect to the corresponding
Target) is a party or by which it is bound or (b) to the knowledge of such
counsel, result in the acceleration of any obligation, or the imposition of
any penalty, under any agreement, judgment, or decree known to such counsel
to which Victory (with respect to the corresponding Target) is a party or
by which it (with respect to the corresponding Target) is bound, except as
set forth in such opinion or as previously disclosed in writing to and
accepted by Victory;
To the knowledge of such counsel, no consent, approval, authorization or
order of any Delaware or New York or Federal Court or governmental authority
of the State of Delaware, the State of New York or the United States of
America is required for the consummation by the Trust on behalf of the
Targets of the transactions contemplated by the Agreement and Plan, except
such as may be required under the 1933 Act, the 1934 Act and the 1940 Act
and under securities laws of states other than the State of Delaware;
Victory is registered with the SEC as an investment company, and to the
knowledge of such counsel no order has been issued or proceeding instituted
to suspend such registration; and
To the knowledge of such counsel, (a) no litigation, administrative
proceeding, or investigation of or before any court or governmental body
is pending or threatened as to Victory (with respect to the corresponding
Target) or any of its properties or assets attributable or allocable to
the corresponding Target and (b) Victory (with respect to the corresponding
Target) is not a party to or subject to the provisions of any order, decree,
or judgment of any court or governmental body that materially and adversely
affects the corresponding Target's business, except as set forth in such
opinion or as otherwise disclosed in writing to and accepted by Victory.
In rendering such opinion, such counsel may (i) rely, as to matters governed
by the laws of the State of Delaware, on an opinion of competent Delaware
counsel, (ii) make assumptions regarding the authenticity, genuineness,
and/or conformity of documents and copies thereof without independent
verification thereof, (iii) limit such opinion to applicable federal and
state law, (iv) define the word "knowledge" and related terms to mean the
knowledge of attorneys then with such firm who have devoted substantive
attention to matters directly related to this Agreement and each
Reorganization, and (v) rely on certificates of officers or trustees of
Target; in each case reasonably acceptable to Victory.
Victory, on behalf of each Target and its corresponding Acquiring Fund,
shall have received an opinion of Kramer Levin Naftalis & Frankel LLP
addressed to and in form and substance reasonably satisfactory to it, as
to the federal income tax consequences of each Reorganization
("Tax Opinion"). In rendering the Tax Opinion, such counsel may rely as
to factual matters, exclusively and without independent verification, on
the representations made in this Agreement (and/or in separate letters
addressed to such counsel) and each Fund's separate covenants. Each party
agrees to make reasonable covenants and representations as to factual
matters as of the Effective Time in connection with the rendering of such
opinion. The Tax Opinion shall be substantially to the effect that, based
on the facts and assumptions stated therein and conditioned on consummation
of each Reorganization in accordance with this Agreement, for federal income
tax purposes:
Each Reorganization will constitute a reorganization within the meaning of
section 368(a)(1) of the Code, and each Fund will be "a party to a
reorganization" within the meaning of section 368(b) of the Code;
No gain or loss will be recognized by Target on the transfer to the
corresponding Acquiring Fund of Assets in exchange solely for the
Acquiring Fund's Shares and Acquiring Fund's assumption of Liabilities or
on the subsequent distribution of those shares to the Shareholders in
liquidation of such Target;
No gain or loss will be recognized by the Acquiring Fund on its receipt of
Assets in exchange solely for Acquiring Fund's Shares and its assumption
of Liabilities;
Each Acquiring Fund's adjusted tax basis in the Assets acquired will be
equal to the basis thereof in the corresponding Target's hands immediately
before such Reorganization, and each Acquiring Fund's holding period for
the Assets will include the corresponding Target's holding period therefor;
A Shareholder will recognize no gain or loss on the exchange of its Target
Shares solely for the corresponding Acquiring Fund's Shares pursuant to a
Reorganization; and
A Shareholder's aggregate tax basis in any Acquiring Fund's Shares received
by it in a Reorganization will equal its aggregate tax basis in its Target
Shares surrendered in exchange therefor, and its holding period for such
Acquiring Fund Shares will include its holding period for such Target
Shares, provided such Target Shares are held as capital assets by the
Shareholder at the Effective Time.
At any time before the Closing, each Fund may waive any of the foregoing
conditions if, in the judgment of Victory's board of trustees, such waiver
will not have a material adverse effect on its shareholders' interests.
BROKERAGE FEES AND EXPENSES
Victory, on behalf of each Fund, represents and warrants that there are no
brokers or finders entitled to receive any payments in connection with the
transactions provided for herein.
Each Fund will be responsible for its own expenses incurred in connection
with each Reorganization, as agreed to by the parties.
ENTIRE AGREEMENT; SURVIVAL
Neither party has made any representation, warranty, or covenant not set
forth herein, and this Agreement constitutes the entire agreement between
the parties. The representations, warranties, and covenants contained
herein or in any document delivered pursuant hereto or in connection
herewith shall survive the Closing.
TERMINATION OF AGREEMENT
This Agreement may be terminated at any time at or prior to the Effective
Time, whether before or after approval by each Target's Shareholders:
By any Fund (a) in the event of a material breach of any representation,
warranty, or covenant contained herein to be performed at or prior to the
Effective Time, (b) if a condition to its obligations has not been met and
it reasonably appears that such condition will not or cannot be met, or (c)
if the Closing has not occurred on or before May 30, 2000; or
By the parties' mutual agreement.
In the event of termination under paragraphs 0(c) or 0, there shall be no
liability for damages on the part of either Fund affected by the termination,
or the trustees or officers of Victory, to its corresponding Fund.
AMENDMENT
This Agreement may be amended, modified, or supplemented at any time,
notwithstanding approval thereof by each Target's Shareholders, in such
manner as may be mutually agreed upon in writing by the parties; provided
that following such approval no such amendment shall have a material adverse
effect on such Shareholders' interests.
MISCELLANEOUS
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of Delaware; provided that, in the case of any
conflict between such laws and the federal securities laws, the latter
shall govern.
Nothing expressed or implied herein is intended or shall be construed to
confer upon or give any person, firm, trust, or corporation other than the
parties and their respective successors and assigns any rights or remedies
under or by reason of this Agreement.
The parties acknowledge that Victory is a business trust. Notice is hereby
given that this instrument is executed on behalf of Victory's trustees
solely in their capacity as trustees, and not individually, and that
Victory's obligations under this instrument on behalf of each Fund are not
binding on or enforceable against any of its trustees, officers, or
shareholders, but are only binding on and enforceable against the respective
Funds' assets and property. Each Fund agrees that, in asserting any rights
or claims under this Agreement, it shall look only to the corresponding
Fund's assets and property in settlement of such rights or claims and not
to such trustees or shareholders.
Victory agrees to indemnify and hold harmless each trustee of Victory at
the time of the execution of this Agreement against expenses, including
reasonable attorneys' fees, judgments, fines and amounts paid in settlement,
actually and reasonably incurred by such trustee in connection with any
claim that is asserted against such trustee arising out of such person's
service as a trustee of Victory, provided that such indemnification shall
be limited to the full extent of the indemnification that is available to
the trustees of Victory pursuant to the provisions of Victory's Trust
Instrument and applicable law.
For the period beginning at the time of the Reorganization and ending not
less than three years thereafter, Victory shall provide for liability
coverage for the actions of each trustee of Victory on behalf of each Target
at the time of the execution of this Agreement for the period they served
as such.
IN WITNESS WHEREOF, each party has caused this Agreement to be executed by
its duly authorized officer.
ATTEST:
THE VICTORY PORTFOLIOS, on behalf of its series:
Fund for Income
Established Value Fund
___________________________________
_____________________________________
___________________________________
By: ________________________________
Secretary
Vice President
ATTEST:
THE VICTORY PORTFOLIOS, on behalf of its series:
Government Mortgage Fund
Ohio Regional Stock Fund
___________________________________
_____________________________________
___________________________________
By: _________________________________
Secretary
Vice President
