EXHIBIT 4
Agreement and Plan of Merger
EXHIBIT 4
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("Agreement") is made as of the 28th day
of January, 1997, by and among Steadman Associated Fund, a common law trust
organized under the laws of the District of Columbia ("Fund") and Steadman
Investment Fund, Steadman American Industry Fund and Steadman Technology and
Growth Fund, each of which is a common law trust organized under the laws of the
District of Columbia (collectively, the "Other Funds"). Upon completion of the
transactions set forth in this Agreement, the Steadman Associated Fund will
change its name to the Steadman Security Trust ("Fund").
In consideration of the premises and of the covenants and agreements
hereinafter set forth, the parties hereto covenant and agree as follows:
I. THE REORGANIZATIONS OF THE OTHER FUNDS
1.1 Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein, on the Closing Date,
each of the Other Funds will merge with and into the Fund, and the Fund, as the
survivor of the Merger, will in exchange therefor on the Closing Date as set
forth in paragraph 3.1 issue to the shareholders of the Other Funds the number
of shares of the Fund, including fractional Fund shares, determined by dividing
the value of each of the Other Funds shares computed in the manner and as of the
time and date set forth in paragraph 2.1, by the net asset value per share of
the Fund, computed in the manner and as of the time and date set forth in
paragraph 2.2. Such transactions shall take place at the closing provided for in
paragraph 3.1 ("Closing").
1.2 Copies of all books and records of or pertaining to the Other Funds,
including those in connection with its obligations under the "Investment Company
Act of 1940", as amended, (the "1940 Act"), the Code, State blue sky laws or
otherwise in connection with this Agreement, will promptly after the Closing be
delivered to officers of the Fund or their designee. The Fund and its advisor,
Steadman Security Corporation ("Steadman") shall have access to such books and
records upon reasonable request during normal business hours.
2. THE CALCULATION
2.1 The net asset value of each of the Other Fund's shares shall be the
net asset value per share computed at the close of trading on the New York Stock
Exchange on the business day preceding the Closing Date (such time and date
being hereinafter called the "Valuation Date"), using the valuation procedures
set forth in each of the Other Fund's Trust Indenture.
2.2 The net asset value of each share of the Fund shall be the net asset
value per share computed on the Valuation Date, using the valuation procedures
set forth in the Fund's Trust Indenture.
2.3 The Fund shall effectuate a reverse split of each share of the Fund
which is issued and outstanding on the Valuation Date so that for each five Fund
shares issued and outstanding there shall be issued one Fund share.
2.4 All computations of value shall be made by Steadman in accordance with
its regular practice in pricing the Fund and the Other Funds. The Fund shall
cause Steadman to deliver to the Fund and the Other Funds a copy of its
valuation reports at the Closing.
2.5 The number of Fund shares (including fractional shares, if any) to be
issued hereunder shall be determined by dividing the net asset value of each of
the shares of the Other Funds determined in accordance with paragraph 2.1 by the
net asset value of a Fund share determined in accordance with paragraph 2.2 as
effected by the reverse stock split of the Fund shares effectuated pursuant to
paragraph 2.3. Fractional shares shall not be issued and the net asset value of
any Fund fractional shares required to be issued pursuant to paragraphs 2.3 and
2.5 shall be paid in cash to each Fund shareholder and Other Funds shareholders.
3. THE MERGER
3.1 Upon the effectiveness of the Merger, the Other Funds shall be merged
with and into the Fund, pursuant to the laws of the District of Columbia, which
shall be the survivor from and after the effective time of the Merger, and which
is sometimes hereinafter referred to as the "surviving fund," and which shall
continue to exist as said surviving fund under the name Steadman Security Trust.
The separate existence of each of the Other Funds, which are hereinafter
sometimes referred to as the "terminating funds," shall cease at the Closing
Date in accordance with the provisions of Section 4.1.
3.2 The Amended and Restated Trust Indenture of the Fund and Declaration
of Trust with amendments through November 1, 1996 ("Fund Trust Indenture") as
now in force and effect, and as the same may be amended and restated, shall
continue to be the Trust Indenture of the surviving fund, and shall continue in
full force and effect until further amended and changed in the manner prescribed
therein.
3.3 The Trustees in office of the Fund at the Closing Date shall be the
Trustees of the surviving fund.
3.4 Each issued share of a terminating fund shall, at the Closing Date, be
converted into shares of the surviving fund. The issued shares of the Fund
shall not be converted or exchanged in any manner, but each such share which is
issued and outstanding as of Closing Date shall continue to represent one issued
share of the surviving Fund.
2
4. CLOSING AND CLOSING DATE
4.1 The Closing Date hereunder (the "Closing Date") shall be ten days
after all shareholder and regulatory approvals to effectuate the Merger have
been received by the Fund and the Other Funds (or such other day and time as may
be mutually agreed upon in writing). The Closing shall be held in a location
mutually agreeable to all the parties hereto. All acts taking place at the
Closing shall be deemed to take place simultaneously as of 9:00 a.m. Eastern
time on the Closing Date unless otherwise agreed by the parties.
4.2 In the event that on the Valuation Date (a) the New York Stock
Exchange shall be closed to trading or trading thereon shall be restricted or
(b) trading or the reporting of trading on such Exchange or elsewhere shall be
disrupted so that in the judgment of both the Fund and the Other Funds, accurate
appraisal of the value of the net assets of the Fund or the Other Funds is
impracticable, the Valuation Date shall be postponed until the first business
day after the day when trading shall have been fully resumed without restriction
or disruption and reporting shall have been restored.
4.3 The Other Funds shall deliver to the Fund or its designee (a) at the
Closing a list, certified by its Secretary, of the names, addresses and taxpayer
identification number, of the Other Funds Shareholders (the "Other Funds
Shareholders") and the number of outstanding Other Funds shares owned by each
such shareholder, all as of the Valuation Date, and (b) as soon as practicable
after the Closing all original documentation (including Internal Revenue Service
forms, certificates, certifications and correspondence) relating to the Other
Funds Shareholders taxpayer identification numbers and their liability for or
exemption from back-up withholding. The Fund shall issue and deliver a
confirmation evidencing delivery of Fund shares to be credited on the Closing
Date to the Other Funds Shareholders or provide evidence reasonably satisfactory
to the Other Funds Shareholders that such Fund shares have been credited to
Other Funds Shareholders account on the books of the Fund. At the Closing each
party shall deliver to the other such other documents or instruments as such
other party or its counsel may reasonably request to effect the consummation of
the transactions contemplated by the Agreement.
5. COVENANTS OF THE FUND AND THE OTHER FUNDS.
5.1 The Fund will operate its business in the ordinary course between the
date hereof and the Closing Date.
5.2 The Fund has prepared and filed with the Securities and Exchange
Commission ("Commission") a registration statement on Form N-14 under the
Securities Act of 1933, as amended ("1933 Act"), and will prepare and file with
the Commission any amendments thereto, relating to the Fund shares to be issued
to the Other Funds Shareholders pursuant to the Merger ("Registration
Statement"). The Other Funds will provide the Fund with the Proxy Materials as
described in paragraph 4.3 below, for inclusion in the Registration Statement.
The Other Funds
3
will further provide the Fund with such other information and documents
relating to the Other Funds as are reasonably necessary for the preparation of
the Registration Statement.
5.3 The Fund and the Other Funds will call a meeting of their shareholders
to consider and act upon the Merger, including this Agreement, and take all
other action necessary to obtain approval of the transactions contemplated
herein. The Fund and the Other Funds will prepare, with such assistance from
each other as may be mutually agreed to, the notice of meeting, form of proxy
and proxy statement and prospectus (collectively "Proxy Materials") to be used
in connection with such meetings provided that the Fund will furnish the Other
Funds with a current effective prospectus relating to the Fund shares for
inclusion in the Proxy Materials and with such other information relating to the
Fund as is reasonably necessary for the preparation of the Proxy Materials. The
Fund will include in its Proxy Materials for approval by its shareholders the
change in the classification of the Fund from an open-end investment company to
a closed-end investment company, including the elimination by the Fund of the
right to issue and have outstanding redeemable Fund shares.
5.4 Prior to the Closing Date, the Other Funds will assist the Fund in
obtaining such information as the Fund reasonably requests concerning the
beneficial ownership of the shares of the Other Funds.
5.5 Subject to the provisions of this Agreement, the Fund and the Other
Funds will each take, or cause to be taken, all action, and do or cause to be
done, all things reasonably necessary, proper or advisable to consummate and
make effective the transactions contemplated by this Agreement.
5.6 As promptly as practicable after the Closing Date, the Other Funds
shall furnish or cause to be furnished to the Fund, such information as the
Fund reasonably requests to enable the Fund to determine any net gain or loss
recognized by the Other Funds as a result of the Merger and any tax loss
carryovers of the Other Funds available to offset any net gain recognized by the
Other Funds as a result of the Merger.
5.7 As promptly as practicable after the Closing Date, the Other Funds
shall prepare and file all federal and other tax returns and reports of the
Other Funds required by law to be filed with respect to all periods ending
through and after the Closing Date but not theretofore filed.
5.8 The Fund agrees to use all reasonable efforts to obtain the approvals
and authorizations required by the 1933 Act, the 1940 Act and such of the state
Blue Sky and securities laws as it may deem appropriate in order to continue its
operations after the Closing Date.
6. REPRESENTATIONS AND WARRANTIES
6.1 The Fund represents and warrants to the Other Funds as follows:
4
(a) The Fund is a common law trust, established under the Fund Trust
Indenture, a copy of which has been furnished to the Other Funds, and is
validly existing and in good standing under the laws of the District of
Columbia, and has the power and authority to own its properties and to
carry on its business as it is now conducted.
(b) The Fund is a duly registered, open-end, management investment
company, and its registration with the Commission as an investment company
under the 1940 Act and the registration of its shares under the 1933 Act
are in full force and effect.
(c) All of the issued and outstanding shares of each class of the Fund
have been offered and sold in compliance in all material respects with
applicable registration requirements of the 1933 Act and state securities
laws. Shares of each class of the Fund are registered in all jurisdictions
in which they are required to be registered under state securities laws and
other laws, and said registrations, including any periodic reports or
supplemental filings, are complete and current, all fees required to be
paid have been paid, and the Fund is not subject to any stop order and is
fully qualified to sell its shares in each state in which its shares have
been registered.
(d) The current prospectus and statement of additional information of the
Fund conform in all material respects to the applicable requirements of the
1933 Act and the 1940 Act and the regulations thereunder and do not include
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(e) At the Closing Date, the Fund will have title to the Fund's assets,
subject to no liens, security interests or other encumbrances except those
incurred in the ordinary course of business.
(f) The Fund is not, and the execution, delivery and performance of this
Agreement will not result, in a material violation of any provision of the
Fund Trust Indenture or of any material agreement, indenture, instrument,
contract, lease or other undertakings to which the Fund is a party or by
which it is bound.
(g) No material litigation or administrative proceeding or investigation
of or before any court or governmental body is presently pending or, to its
knowledge, threatened against the Fund or any of its properties or assets,
except as previously disclosed in writing to the Other Funds. The Fund
knows of no facts that might form the basis for the institution of such
proceedings and is not a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which
materially and adversely affects, or is reasonably likely to materially and
adversely affect, its business or its ability to consummate the
transactions contemplated herein.
5
(h) The Statement of Assets and Liabilities, Statement of Operations and
Statement of Changes in Net Assets as of June 30, 1996 (audited) of the
Fund examined by Coopers & Lybrand L.L.P. (a copy of which has been
furnished to the Other Funds), fairly present, in all material respects,
the financial condition of the Fund as of such date in conformity with
generally accepted accounting principles consistently applied, and as of
such date there were no known liabilities of the Fund (contingent or
otherwise) not disclosed therein that would be required in conformity with
generally accepted accounting principles to be disclosed therein.
(i) All issued and outstanding Fund shares are, and at the Closing Date
will be, duly and validly issued and outstanding, fully paid and non-
assessable with no personal liability attaching to the ownership thereof.
(j) The Fund has the power to enter into this Agreement and carry out its
obligations hereunder. The execution, delivery and performance of this
Agreement have been duly authorized by all necessary action of the Fund
Trustees on the part of the Fund, subject only to shareholder approval, and
this Agreement constitutes a valid and binding obligation of the Fund
enforceable in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium and other laws relating
to or affecting creditors rights and to general equity principles.
(k) The Fund shares to be issued and delivered to the Other Funds, for the
account of the Other Funds Shareholders, pursuant to the terms of this
Agreement will at the Closing Date have been duly authorized and, when so
issued and delivered, will be duly and validly issued Fund shares, and will
be fully paid and non-assessable with no personal liability attaching to
the ownership thereof and no shareholder of the Fund will have any
preemptive right or right of subscription or purchase in respect thereof.
(l) Since June 30, 1996, there has not been (i) any material adverse
change in the Fund's financial condition, assets, liabilities or business
other than changes occurring in the ordinary course of business, or that
have been approved by shareholders of the Fund or (ii) any incurrence by
the Fund of any indebtedness except indebtedness incurred in the ordinary
course of business. For the purposes of this subparagraph, neither a
decline in net asset value per share of the Fund nor the redemption of Fund
shares by Fund shareholders, shall constitute a material adverse change.
(m) All material Federal and other tax returns and reports of the Fund
required by law to have been filed, have been filed, and all Federal and
other taxes shown as due or required to be shown as due on said returns and
reports have been paid or provision has been made for the payment thereof,
and to the best of the Fund's knowledge no such return is currently under
audit and no assessment has been asserted with respect to such returns.
6
(n) On the Closing Date, the Fund will not be a diversified investment
company within the meaning of Code Section 368(a)(2)(F)(ii) and proposed
Treasury Regulations Section 1.368-4(c)(3).
(o) Since June 30, 1996, there has been no change by the Fund in
accounting methods, principles, or practices, including those required by
generally accepted accounting principles, except as disclosed in writing to
the Other Funds or as set forth in the financial statements of the Fund
covering such period.
(p) The information furnished or to be furnished by the Fund for use in
registration statements, proxy materials and other documents which may be
necessary in connection with the transactions contemplated hereby shall be
accurate and complete in all material respects and shall comply in all
material respects with Federal securities and other laws and regulations
applicable thereto.
(q) The Proxy Statement and Prospectus to be included in the Registration
Statement (only insofar as it relates to the Fund) will, on the effective
date of the Registration Statement and on the Closing Date, not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which such statements were made, not
materially misleading.
6.2 Each of the Other Funds represents and warrants to the Fund with
respect to the specific transaction in the Merger relevant to such Other Fund as
follows:
(a) The Other Funds are common law trusts, validly existing and in good
standing under the laws of the District of Columbia, and each of the Other
Funds has the power and authority to own its properties and to carry on its
business as it is now conducted. Copies of the respective Restated Trust
Indentures and Declarations of Trust of the Other Funds have been furnished
to the Fund.
(b) Each of the Other Funds is a duly registered, open-end, management
investment company, and its registration with the Commission as an
investment company under the 1940 Act and the registration of its shares
under the 1933 Act are in full force and effect.
(c) All of the issued and outstanding shares of each of the Other Funds
have been offered and sold in compliance in all material respects with
applicable registration requirements of the 1933 Act and state securities
laws. However, shares of the Other Funds are not currently offered for
sale to the public, and there is no current prospectus available for any of
the Other Funds.
7
(d) At the Closing Date, each of the Other Funds will have title to their
assets, subject to no liens, security interests or other encumbrances
except those incurred in the ordinary course of business.
(e) Each of the Other Funds is not, and the execution, delivery and
performance of this Agreement will not result, in a material violation of
any provision of each of the Other Funds Declaration of Trust or of any
material agreement, indenture, instrument, contract, lease or other
undertakings to which each of the Other Funds is a party or by which it is
bound.
(f) No material litigation or administrative proceeding or investigation
of or before any court or governmental body is presently pending or, to its
knowledge, threatened against each of the Other Funds or any of its
properties or assets, except as previously disclosed in writing to the
Fund. Each of the Other Funds knows of no facts that might form the basis
for the institution of such proceedings and is not a party to or subject to
the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects, or is reasonably
likely to materially and adversely affect, its business or its ability to
consummate the transactions contemplated herein.
(g) The Statements of Assets and Liabilities, Statements of Operations and
Statements of Changes in Net Assets as of June 30, 1996 (audited) of each
of the Other Funds examined by Coopers & Lybrand L.L.P. (copies of which
has been furnished to the Fund), fairly present, in all material respects,
the financial condition of each of the Other Funds as of such date in
conformity with generally accepted accounting principles consistently
applied, and as of such date there were no known liabilities of each of the
Other Funds (contingent or otherwise) not disclosed therein that would be
required in conformity with generally accepted accounting principles to be
disclosed therein.
(h) All issued and outstanding shares of each of Other Funds are, and at
the Closing Date will be, duly and validly issued and outstanding, fully
paid and non-assessable with no personal liability attaching to the
ownership thereof.
(i) Each of the Other Funds has the power to enter into this Agreement
and carry out its obligations hereunder. The execution, delivery and
performance of this Agreement have been duly authorized by all necessary
action of the Trustees on the part of each of the Other Funds, subject to
shareholder approval, and this Agreement constitutes a valid and binding
obligation of each of the Other Funds enforceable in accordance with its
terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting
creditors rights and to general equity principles.
(j) The Other Funds shares to be issued and delivered to the Fund, for the
account of the Other Funds Shareholders, pursuant to the terms of this
Agreement will at the Closing Date have been duly authorized and, when so
issued and delivered, will be duly and validly
8
issued Other Funds shares, and will be fully paid and non-assessable with
no personal liability attaching to the ownership thereof and no shareholder
of the Other Funds will have any preemptive right or right of subscription
or purchase in respect thereof.
(k) Since June 30, 1996, there has not been (i) any material adverse
change in each of the Other Funds' financial condition, assets, liabilities
or business other than changes occurring in the ordinary course of
business, or that have been approved by shareholders of each of the Other
Funds or (ii) any incurrence by each of the Other Funds of any indebtedness
except indebtedness incurred in the ordinary course of business. For the
purposes of this subparagraph, neither a decline in net asset value per
share of each of the Other Funds nor the redemption of Other Funds shares
by Other Funds Shareholders, shall constitute a material adverse change.
(l) All material Federal and other tax returns and reports of each of the
Other Funds required by law to have been filed, have been filed, and all
Federal and other taxes shown as due or required to be shown as due on said
returns and reports have been paid or provision has been made for the
payment thereof, and to the best of each of the Other Funds' knowledge no
such return is currently under audit and no assessment has been asserted
with respect to such returns.
(m) On the Closing Date, each of the Other Funds will not be a
diversified investment company within the meaning of Code Section
368(a)(2)(F)(ii) and proposed Treasury Regulations Section 1.368-4(c)(3).
(n) Since June 30, 1996, there has been no change by each of the Other
Funds in accounting methods, principles, or practices, including those
required by generally accepted accounting principles, except as disclosed
in writing to the Fund or as set forth in the financial statements of each
of the Other Funds covering such period.
(o) The information furnished or to be furnished by each of the Other
Funds for use in registration statements, proxy materials and other
documents which may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete in all material respects
and shall comply in all material respects with Federal securities and other
laws and regulations applicable thereto.
(p) The Proxy Statement and Prospectus to be included in the Registration
Statement (only insofar as it relates to each of the Other Funds) will, on
the effective date of the Registration Statement and on the Closing Date,
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such
statements were made, not materially misleading.
6.3 Steadman represents and warrants to the Fund and the Other Funds as
follows:
9
(a) To the best knowledge of Steadman after due inquiry, as of the Closing
Date no violation of applicable federal, state and local statute, law or
regulation, exists that individually, or in the aggregate, would have a
material adverse effect on the business or operations of the Fund or the
Other Funds.
(b) To the best knowledge of Steadman after due inquiry, assuming
fulfillment of the conditions precedent to the consummation of the Merger,
the Fund and the Other Funds have the right, power, legal capacity and
authority to enter into the Reorganizations contemplated by this Agreement.
(c) To the best knowledge of Steadman after due inquiry, as of the Closing
Date, the Fund and the Other Funds are in compliance with their investment
objectives, policies and restrictions as described in the current
prospectus and statement of additional information of the Fund or in their
most recent Forms N-1A, filed under the 1940 Act by the Other Funds.
(d) To the best knowledge of Steadman after due inquiry, as of the Closing
Date there are no outstanding breaches by the Fund or the Other Funds of
any agreement, indenture, instrument contract lease or other undertaking to
which they are a party, or by which they are bound (other than any breaches
that individually or in the aggregate would not have a material adverse
effect on the Fund or the Other Funds).
(e) To the best knowledge of Steadman upon due inquiry, there are no
unresolved or outstanding shareholder claims or inquiries related to the
Fund or the Other Funds and there will be no such claims or inquiries as of
the Closing Date other than as disclosed by Steadman in writing to Fund or
the Other Funds prior to the Closing Date.
(f) Steadman is not aware of any threatened or pending litigation,
administrative proceeding, investigation, examination or inquiry of or
before any court or governmental body relating to the Fund or the Other
Funds or any of their properties or assets which, if adversely determined,
would materially and adversely affect the Fund or the Other Funds business
or ability to consummate the transactions herein contemplated.
(g) Steadman is not aware of any outstanding or threatened private claims
or litigation relating to the Fund or the Other Funds. Steadman knows of
no facts that might form the basis for such proceedings.
(h) Except as previously disclosed to the Fund or the Other Funds in
writing, and except as have been fully corrected, there have been no
miscalculations of the net asset value of the Fund or the Other Funds
during the twelve-month period preceding the Closing Date and all such
calculations have been done in accordance with the provisions of Rule 2a4
under the 1940 Act.
10
(i) There are no claims, levies or liabilities for corporate, excise,
income or other federal, state or local taxes outstanding or threatened
against the Fund or the Other Funds, other than those reflected in its most
recent audited financial statements. Steadman knows of no facts that might
form the basis for such proceedings.
(j) To the best knowledge of Steadman after due inquiry, there have been
no material adverse changes in the Fund or the Other Funds financial
condition, assets, liabilities or business, other than those reflected in
their most recent audited financial statements and all liabilities of the
Fund or the Other Funds (contingent and otherwise) known to Steadman have
been reported in writing to the Fund or the Other Funds prior to the date
of this Agreement and prior to the Closing Date. A reduction in net assets
due to shareowner redemptions will not be deemed to be a material adverse
change.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE OTHER FUNDS
The obligations of Other Funds to consummate the transactions provided for
herein shall be subject, at its election, to the performance by Fund of all the
obligations to be performed by it hereunder on or before the Closing Date and,
in addition thereto, the following conditions:
7.1 All representations and warranties of the Fund contained in this
Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date with the same force and effect as if made
on and as of the Closing Date.
7.2 The Fund shall have delivered to Other Funds a certificate executed in
Fund's name by Fund's President or Vice President and Treasurer or Secretary,
in a form reasonably satisfactory to Other Funds and dated as of the Closing
Date, to the effect that the representations and warranties of the Fund made in
this Agreement are true and correct at and as of the Closing Date, except as
they may be affected by the transactions contemplated by this Agreement, and as
to such other matters as Other Funds shall reasonably request;
7.3 The Fund Shareholders shall have voted to change the Fund from an
open-end investment company to a closed-end investment company.
7.4 Each of the Fund and Other Funds shall have received a favorable
opinion from Manatt, Phelps & Phillips, LLP, counsel to the Fund and the Other
Funds, dated as of the Closing Date, covering the following points:
That (a) Fund and each of the Other Funds are common law trusts duly
organized, validly existing and in good standing under the laws of the
District of Columbia, and each has the power to own all of its properties
and assets and to carry on its business as presently conducted; (b) The
Fund is a duly registered, closed-end, management investment company and,
to the knowledge of such counsel, its registration with the Commission as
an
11
investment company under the 1940 Act is in full force and effect; (c) this
Agreement has been duly authorized, executed and delivered by the Fund and
the Other Funds, and has been assuming due authorization, execution and
delivery of this Agreement by the Fund and the Other Funds, including
approval by the shareholders of the Fund and the Other Funds Shareholders,
is a valid and binding obligation of the Fund and the Other Funds
enforceable against the Fund and the Other Funds in accordance with its
terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting
creditors rights and to general equity principles; (d) the Fund's shares to
be issued to the Other Funds Shareholders as provided by this Agreement are
duly authorized and upon delivery of such shares to the Other Funds
Shareholders will be validly issued and outstanding and fully paid and non-
assessable and no shareholder of Fund has any preemptive rights to
subscription or purchase in respect thereof; (e) the execution and delivery
of this Agreement did not, and the consummation of the transactions
contemplated hereby will not, violate the Fund or the Other Funds
Declaration of Trust or any provision of any material agreement (known to
such counsel) to which the Fund or the Other Funds are a party or by which
they are bound or, to the knowledge of such counsel, result in the
acceleration of any material obligation or the imposition of any material
penalty under any agreement, judgment or decree to which the Fund or the
Other Funds are a party or by which they are bound; (f) to the knowledge of
such counsel, no consent, approval, authorization or order of any court or
governmental authority of the United States or any state is required for
the consummation by the Fund or the Other Funds of the transactions
contemplated herein, except such as have been obtained under the 1933 Act ,
the Securities Exchange Act of 1934, as amended (the "1934 Act") and the
1940 Act and such as may be required under state securities laws; (g) as
they relate to the Fund or the Other Funds, as they case may be, the
descriptions in the Proxy Materials of statutes, legal and governmental
proceedings and contracts and other documents, if any, are accurate in all
material respects and fairly present the information required to be shown;
(h) such counsel does not know of any legal or governmental proceedings, as
they relate to the Fund of the Other Funds, existing on or before the date
of mailing of the Proxy Materials or the Closing Date that are required to
be described in the Registration Statement or in any documents that are
required to be filed as exhibits to the Registration Statement that are not
described as required; and (i) to the best knowledge of such counsel, no
material litigation or administrative proceedings or investigation of or
before any court or governmental body is presently pending or overtly
threatened as to the Fund or the Other Funds or any of their properties or
assets and neither the Fund nor the Other Funds are a party to or subject
to the provisions of any order, decree or judgment of any court or
governmental body that materially and adversely affects its business, other
than as previously disclosed in the Registration Statement.
7.5 All actions taken by the Fund and the Other Funds in connection with
the transactions contemplated by this Agreement and all documents incidental
thereto shall be satisfactory in form and substance to counsel for the Fund and
the Other Funds.
12
7.6 As of the Closing Date, there shall be no material change in the
investment objective, policies and restrictions nor any increase in the
investment management fees or sales loads of the Fund from those described in
the Prospectus and Statement of Additional Information of the Fund dated
January 31, 1996, except as may have been approved by shareholders of the Fund
and, except for the changes contemplated by this Agreement, including, without
limitation, the change of the Fund from an open-end management investment
company to a closed-end management investment company in accordance with the
requirements of the 1940 Act.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE FUND
The obligations of the Fund to complete the transactions provided for
herein shall be subject, at its election, to the performance by Other Funds of
all the obligations to be performed by it hereunder on or before the Closing
Date and, in addition thereto, the following conditions:
8.1 All representations and warranties of the Other Funds, and Steadman
contained in this Agreement shall be true and correct in all material respects
as of the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date.
8.2 The Other Funds shall have delivered to the Fund a statement of Other
Funds Assets and its liabilities, together with a list of Other Funds'
securities and other assets showing the respective adjusted bases and holding
periods thereof for income tax purposes, as of the Closing Date, certified by
the President of each of the Other Funds.
8.3 The Other Funds shall have delivered to the Fund at the Closing a
certificate executed in Other Funds' name by the President or Vice President and
the Treasurer or Secretary of Other Funds, in form and substance satisfactory to
the Fund and dated as of the Closing Date, to the effect that the
representations and warranties of the Other Funds, on behalf of the Other Funds,
made in this Agreement are true and correct at and as of the Closing Date,
except as they may be affected by the transactions contemplated by this
Agreement, and as to such other matters as Fund shall reasonably request. Such
a certificate shall also be delivered to Fund as executed by Steadman with
respect to its representations and warranties made in paragraph 6.3.
8.4 The Fund shall have received at the Closing a favorable opinion dated
as of the Closing Date set forth in Section 7.3 of this Agreement.
8.5 Between the date hereof and the Closing Date, the Other Funds shall
provide the Fund and its representatives reasonable access during regular
business hours and upon reasonable notice to the books and records relating to
the Other Funds, including without limitation the books and records of the Other
Funds, as the Fund may reasonably request. All such information obtained by
the Fund and its representatives shall be held in confidence and may not be used
for any purpose other than in connection with the transaction contemplated
hereby. In the event that the transaction contemplated by this Agreement is not
consummated, Fund and its representatives
13
will promptly return to the Other Funds all documents and copies thereof with
respect to the Other Funds obtained from the Other Funds during the course of
such investigation.
8.6 The Other Funds shall have delivered to Fund, pursuant to paragraph
6.2(g), copies of the most recent financial statements of the Other Funds
certified by Coopers & Lybrand, L.L.P.
8.7 On the Closing Date, the Other Funds Assets shall include no assets
that the Fund, by reason of charter limitations or otherwise, may not properly
acquire.
8.8 All actions taken by the Other Funds in connection with the
transactions contemplated by the Agreement and all documents incidental thereto
shall be reasonably satisfactory in form and substance to the Fund and its
counsel.
8.9 The filing of the Registration Statement shall have been approved by
the Trustees of the Fund.
9 FURTHER CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE
FUND AND THE OTHER FUNDS.
The obligations of the Other Funds and the Fund hereunder are each subject
to the further conditions that on or before the Closing Date.
9.1 This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
the Fund and the Other Funds and certified copies of the resolutions evidencing
such approval shall have been delivered to the Fund and the Other Funds.
9.2 On the Closing Date, no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein.
9.3 All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky and securities authorities, including "no-
action" positions or any exemptive orders from such federal and state
authorities) deemed necessary by the Fund or the Other Funds to permit
consummation, in all material respects, of the transactions contemplated herein
shall have been obtained, except where failure to obtain any such consent, order
or permit would not involve risk of a material adverse effect on the assets or
properties of the Fund or the Other Funds.
9.4 The Registration Statement on Form N-14 shall have become effective
under the 1933 Act, no stop orders suspending the effectiveness thereof shall
have been issued and, to the best knowledge of the parties hereto, no
investigation or proceeding for that purpose shall have been instituted or be
pending, threatened or contemplated under the 1933 Act.
14
9.5 The parties shall have received an opinion from Manatt, Phelps &
Phillips (based on such representations as such firm shall reasonably request),
addressed to the Fund and the Other Funds, which opinion may be relied upon by
the shareholders of the Fund and the Other Funds Shareholders concerning the
anticipated material federal income tax consequences of the transactions
provided for herein to the Fund, the Other Funds, and their respective
shareholders.
10. BROKERAGE FEES AND EXPENSES
10.1 The Fund and the Other Funds each represents and warrants to the
other that there are no brokers or finders entitled to receive any payments in
connection with the transactions provided for herein.
10.2 The Fund and each of the Other Funds shall bear the expenses incurred
in connection with entering into and carrying out the provisions of this
Agreement, on a pro-rata basis based upon net asset value at the Valuation Date
(all of which expenses shall be deducted from the respective funds net assets
values as of such date) including legal, accounting and Commission registration
fees and Blue Sky expenses.
11. ENTIRE AGREEMENT: SURVIVAL OF WARRANTIES
11.1 The Fund and the Other Funds agree that no party has made any
representation, warranty or covenant not set forth herein and that this
Agreement constitutes the entire agreement between the parties.
11.2 The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall not survive the consummation of the transactions contemplated herein.
15
12. TERMINATION
12.1 This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Closing:
(a) by the mutual written consent of the Fund and the Other Funds, by
notice to the other, without liability to the terminating party on account
of such termination (providing the termination party is not otherwise in
default or in breach of this Agreement) if the Closing shall not have
occurred on or before February 29, 1997; or
(b) by either the Fund or the Other Funds, in writing without liability of
the terminating party on account of such termination (provided the
terminating party is not otherwise in material default or breach of the
Agreement), if (i) the other party shall fail to perform in any material
respect its agreements contained herein required to be performed on or
prior to the Closing Date, (ii) the Fund or the Other Funds, respectively,
materially breaches or shall have breached any of its representations,
warranties or covenants contained herein, (iii) the Fund shareholders or
the Other Funds Shareholders fail to approve the Agreement, or (iv) any
other condition herein expressed to be precedent to the obligations of the
terminating party has not been met and it reasonably appears that it will
not or cannot be met.
12.2 (a) Termination of this Agreement pursuant to paragraphs 12.1(a)
shall terminate all obligations of the parties hereunder and there shall be
no liability for damages on the part of the Fund or the Other Funds or the
trustees, directors or officers of the Fund or the Other Funds to any other
party or its trustees, directors or officers.
(b) Termination of this Agreement pursuant to paragraph 12.1(b) shall
terminate all obligations of the parties hereunder and there shall be no
liability for damages on the part of the Fund, the Other Funds or Steadman
to any other party or its trustees, directors or officers, except that any
party in breach of this Agreement (or, as to a termination pursuant to
paragraph 12.1 (c) (v), in breach of the Acquisition Agreement) shall, upon
demand, reimburse the non-breaching party or parties for all reasonable
out-of-pocket fees and expenses incurred in connection with the
transactions contemplated by this Agreement, including legal, accounting
and filing fees. For the purposes of this paragraph 12.2(b), the non-
fulfillment of the condition set forth in paragraph 9.1 shall not be deemed
a breach entitling a party to reimbursement of expenses and fees.
13. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the authorized trustees of the Fund
and the Other Funds; provided, however, that following the meeting of the Fund
and the Other Funds Shareholders
16
pursuant to paragraph 5.3, no such amendment may have the effect of changing the
provisions for determining the number of Fund shares to be issued to the Other
Funds Shareholders under this Agreement to the detriment of such Shareholders
without their further approval.
14. INDEMNIFICATION
14.1 The Fund will indemnify and hold harmless, the Other Funds and their
respective trustees, directors, officers and shareholders against any and all
claims to the extent such claims are based upon, arise out of or relate to any
untruthful or inaccurate representations made by the Fund in this Agreement or
any breach by the Fund of any warranty or any failure to perform or comply with
any of its obligations, covenants, conditions or agreements set forth in this
Agreement.
14.2 Steadman will indemnify and hold harmless the Fund and the Other
Funds and their respective trustees, officers and shareholders against any and
all claims to the extent such claims are based upon, arise out of or relate to
any untruthful or inaccurate representation made by the Other Funds in this
Agreement or any breach by the Other Funds of any warranty or any failure by
Other Funds to perform or comply with any of its obligations, covenants,
conditions or agreements set forth in this Agreement.
14.3 As used in this section 14, the word "claim" means any and all
liabilities, obligations, losses, damages, deficiencies, demands, claims,
penalties, assessments, judgments, actions, proceedings and suits of whatever
kind and nature and all costs and expenses (including, without limitation,
reasonable attorneys' fees).
14.4 Promptly after the receipt by any party (the "Indemnified Party"), of
notice of any claim by a third party which may give rise to indemnification
hereunder, the Indemnified Party shall notify the party against whom a claim for
indemnification may be made hereunder (the "Indemnifying Party"), in reasonable
detail of the nature and amount of the claim. The Indemnifying Party shall be
entitled to assume, at its sole cost and expense (unless it is subsequently
determined that the Indemnifying Party did not have the obligation to indemnify
the Indemnified Party under such circumstances), and shall have sole control of
the defense and settlement of such action or claim; provided, however, that:
(a) the Indemnified Party shall be entitled to participate in the defense
of such claim and, in connection therewith, to employ counsel at its own
expense; and
(b) without the prior written consent of the Indemnified Party which shall
not be unreasonably withheld, the Indemnifying Party shall not consent to
the entry of any judgment or enter into any settlement that requires any
action other than the payment of money.
17
In the event the Indemnifying Party elects to assume control of the defense
of any such action in accordance with the foregoing provisions, (i) the
Indemnifying Party shall not be liable to Indemnified Party for any legal fees,
costs and expenses incurred by the Indemnified Party in connection with the
defense thereof arising after the date the Indemnifying Party elects to assume
control of such defense and (ii)Indemnified Party shall fully cooperate with the
Indemnifying Party in such defense. If the Indemnifying Party does not assume
control of the defense of such claim in accordance with the foregoing
provisions, the Indemnified Party shall have the right to defend such claim, in
which case the Indemnifying Party shall pay all reasonable costs and expenses of
such defense plus interest on the cost of defense from the date paid at a rate
equal to the prime commercial rate of interest as in effect from time to time at
Crestar Bank. The Indemnified Party shall conduct such defense in good faith
and shall have the right to settle the matter with the prior written consent of
the Indemnifying Party which shall not be reasonably withheld.
15. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy, certified mail or overnight express courier addressed to
the Fund or the Other Funds at 1730 K Street, N.W., Suite 904 Washington, D.C.,
with a copy to Steadman at 1730 K Street, N.W., Suite 904, Washington, D.C. and
to Manatt, Phelps & Phillips at 1501 M Street, N.W., Suite 700, Washington, D.C.
20005.
16. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY
16.1 The article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
16.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
16.3 This Agreement shall be governed by and construed in accordance with
the laws of the District of Columbia.
16.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other parties. Except as provided in
the following sentence, nothing herein expressed or implied is intended or shall
be construed to confer upon or give any person, firm or corporation, other than
the parties hereto and their respective successors and assigns, any rights or
remedies under or by reason of this Agreement. A shareholder of the Other Funds
who becomes a shareholder of the Fund on the Closing Date and continues to be a
shareholder of the Fund, shall be entitled to the benefits and may enforce the
provisions of paragraph 4.9 hereof except insofar as paragraph 4.9 relates to
18
the election of trustees; and the persons designated in paragraphs 13.1 and 13.2
hereof shall be entitled to the benefits and may enforce the provisions of
section 13 hereof.
19
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by its duly authorized officer.
STEADMAN SECURITY TRUST
(formerly Steadman Associated Fund)
By: /s/ Charles W. Steadman
------------------------------
Charles W. Steadman
Chairman and President
STEADMAN SECURITY CORPORATION
By: /s/ Charles W. Steadman
------------------------------
Charles W. Steadman
Chairman and President
STEADMAN INVESTMENT FUND
By: /s/ Charles W. Steadman
------------------------------
Charles W. Steadman
Chairman and President
STEADMAN AMERICAN INDUSTRY FUND
By: /s/ Charles W. Steadman
------------------------------
Charles W. Steadman
Chairman and President
STEADMAN TECHNOLOGY AND
GROWTH FUND
By: /s/ Charles W. Steadman
------------------------------
Charles W. Steadman
Chairman and President
20