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
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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:
1. PLAN OF REORGANIZATION AND TERMINATION OF TARGETS
1.1. At the Effective Time (as defined in paragraph 3.1), each Target
agrees to assign, sell, convey, transfer, and deliver all of its
assets described in paragraph 1.2 ("Assets") to the
corresponding Acquiring Fund. Each Acquiring Fund agrees in
exchange therefor
(a) 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 2.1) by the NAV
(computed as set forth in paragraph 2.2) of the
Acquiring Fund's Shares; and
(b) to assume all of such Target's liabilities described
in paragraph 1.3 ("Liabilities").
1.2. 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.
1.3. 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 7.2 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.
1.4. 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.
1.5. 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 1.1
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
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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.
1.6. As soon as reasonably practicable after distribution of an
Acquiring Fund's Shares pursuant to paragraph 1.5, 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.
1.7. 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.
1.8. 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.
2. VALUATION
2.1. For purposes of paragraph 1.1(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.
2.2. For purposes of paragraph 1.1(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.
2.3. All computations pursuant to paragraphs 2.1 and 2.2 shall be
made by or under the direction of Key Asset Management Inc.
3. CLOSING AND EFFECTIVE TIME
3.1. 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
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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.
3.2. 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.
3.3. 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.
3.4. 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.
4. REPRESENTATIONS AND WARRANTIES
4.1. Each Target represents and warrants as follows:
4.1.1. 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;
4.1.2. 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;
4.1.3. 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
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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;
4.1.4. 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;
4.1.5. 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;
4.1.6. 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;
4.1.7. 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;
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4.1.8. At the Effective Time, the performance of this Agreement shall
have been duly authorized by all necessary action by Target's
shareholders;
4.1.9. 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;
4.1.10. On the effective date of the Registration Statement, at the time
of the shareholders' meeting referred to in paragraph 5.2, 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;
4.2. Each Acquiring Fund represents and warrants as follows:
4.2.1. 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;
4.2.2. 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;
4.2.3. 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;
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4.2.4. 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;
4.2.5. 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;
4.2.6. 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;
4.2.7. 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 4.2.6, and (c) such consents, approvals,
authorizations, and filings as have been made or received or as
may be required subsequent to the Effective Time;
4.2.8. On the effective date of the Registration Statement, at the time
of the shareholders' meeting referred to in paragraph 5.2, 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
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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;
4.3. Victory, on behalf of each Fund, represents and warrants as
follows:
4.3.1. 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;
4.3.2. 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;
4.3.3. Each Fund is a duly established and designated series of
Victory.
5. COVENANTS
5.1. 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.
5.2. 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.
5.3. 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.
5.4. Each Target covenants that it will assist Victory in obtaining
such information as Victory reasonably requests concerning the
beneficial ownership of its Shares.
5.5. 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.
5.6. Each Fund covenants to cooperate in preparing the Proxy
Statement in compliance with applicable federal securities laws.
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5.7. 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.
5.8. 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.
5.9. 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.
5.10. Victory covenants to file an amendment to its registration
statement on Form N-1A to register Class A Shares of Established
Value Fund.
5.11. 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.
6. CONDITIONS PRECEDENT
6.1. 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:
6.1.1. 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.
6.1.2. 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
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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.
6.1.3. 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.
6.1.4. 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.
6.1.5. Each Target shall have received an opinion of Kramer Levin
Naftalis & Frankel LLP, counsel to Victory, substantially to the
effect that:
6.1.5.1. 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;
6.1.5.2. 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;
6.1.5.3. 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);
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6.1.5.4. 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;
6.1.5.5. 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;
6.1.5.6. 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
6.1.5.7. 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.
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6.1.6. Each Acquiring Fund shall have received an opinion of Kramer
Levin Naftalis & Frankel LLP, counsel to Victory,
substantially to the effect that:
6.1.6.1. 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;
6.1.6.2. 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;
6.1.6.3. 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;
6.1.6.4. 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;
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6.1.6.5. 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
6.1.6.6. 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.
6.1.7. 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:
6.1.7.1. 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;
6.1.7.2. 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
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or on the subsequent distribution of those shares to the
Shareholders in liquidation of such Target;
6.1.7.3. 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;
6.1.7.4. 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;
6.1.7.5. 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
6.1.7.6. 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.
6.2. 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.
7. BROKERAGE FEES AND EXPENSES
7.1. 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.
7.2. Each Fund will be responsible for its own expenses incurred in
connection with each Reorganization, as agreed to by the
parties.
8. ENTIRE AGREEMENT; SURVIVAL
8.1. 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.
9. TERMINATION OF AGREEMENT
9.1. 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:
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9.1.1. 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
9.1.2. By the parties' mutual agreement.
9.2. In the event of termination under paragraphs 9.1.1(c) or
9.1.2, 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.
10. AMENDMENT
10.1. 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.
11. MISCELLANEOUS
11.1. 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.
11.2. 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.
11.3. 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.
11.4. 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
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available to the trustees of Victory pursuant to the
provisions of Victory's Trust Instrument and applicable law.
11.5. 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.
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IN WITNESS WHEREOF, each party has caused this Agreement to be
executed by its duly authorized officer.
ATTEST: HE VICTORY PORTFOLIOS, on behalf
f its series:
und for Income
stablished Value Fund
/s/ Robert D. Hingston s/ Lisa M. Hurley
----------------------------- ------------------------------------
Robert D. Hingston Lisa M. Hurley
/s/ ILLEGIBLE By: /s/ Lisa M. Hurley
----------------------------- ---------------------------------
Secretary Vice President
ATTEST: THE VICTORY PORTFOLIOS, on behalf
of its series:
Government Mortgage Fund
Ohio Regional Stock Fund
/s/ Robert D. Hingston /s/ Lisa M. Hurley
----------------------------- ------------------------------------
Robert D. Hingston Lisa M. Hurley
/s/ ILLEGIBLE By: /s/ Lisa M. Hurley
----------------------------- ---------------------------------
Secretary Vice President
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