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 2nd day
of May, 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").
This Agreement is intended to be and is adopted as a "plan of
reorganization", within the meaning of Treasury Regulations Section
1.368-2(g), for reorganizations under Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended ("Code"). The reorganizations
("Reorganizations") will consist of the mergers of the Other Funds with and
into the Fund ("Merger") and the issuance by the Fund in each transaction of
shares of beneficial interest of the Fund ("shares") to be distributed
contemporaneously with the Closing Date (as defined in Section 3.1 below), to
the shareholders of the Other Funds as provided herein, all upon the terms
and conditions hereinafter set forth in this Agreement.
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 ten
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 May 2, 1997 ("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.
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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.
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.
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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 5.3 below, for inclusion in the
Registration Statement. The Other Funds 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 the Other Funds
earnings and profits for federal income tax purposes and other tax attributes
that will be carried over to the Fund pursuant to Section 381 of the Code.
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
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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:
(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
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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.
(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.
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(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.
(n) For each of the last three taxable years of its operation, the Fund
has not met the requirements of Subchapter M of the Code for
qualification and treatment as a regulated investment company.
(o) On the Closing Date, the Fund will 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).
(p) 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.
(q) 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.
(r) 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.
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(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.
(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.
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(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 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) For each of the last three taxable years of its operation, each of
the Other Funds has not met the requirements of Subchapter M of the Code
for qualification and treatment as a regulated investment company, except
for Steadman Investment Fund which did meet the requirements for the year
ended June 30, 1995.
(n) On the Closing Date, each of the Other Funds will 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 each of the Other
Funds in accounting methods, principles, or practices, including those
required by generally
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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.
(p) 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.
(q) 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:
(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
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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.
(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.
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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
organized and existing 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
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 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's 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
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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
or 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.
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 1, 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.
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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 7.4 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 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
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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.
9.5 The parties shall have received a favorable 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, substantially to the effect that, for federal income tax
purposes:
(a) The mergers of the Other Funds with and into the Fund will
constitute a "reorganization" within the meaning of Section 368(a)(1) of
the Code in each transaction in the Merger, and the Other Funds and the
Fund will each be a "party to the reorganization" within the meaning of
Section 368(b) of the Code with respect to the particular merger relevant
to such entities;
(b) Pursuant to Section 1032 of the Code, no gain or loss will be
recognized by the Fund upon the receipt of the assets of the Other Funds
solely in exchange for the Fund shares;
(c) Pursuant to Section 361 (a) of the Code, no gain or loss will be
recognized by Other Funds upon the exchange of the Other Funds' assets
for Fund shares;
(d) Pursuant to Section 354(a) of the Code, no gain or loss will be
recognized by the Other Funds' Shareholders upon the exchange of the
Other Funds shares for the Fund shares;
15
(e) Pursuant to Section 358 of the Code, the aggregate tax basis for the
Fund shares received by each of the Other Funds' shareholders pursuant to
the merger will be the same as the aggregate tax basis of the Other Funds
shares held by each such Other Funds' shareholders immediately prior to
the Merger;
(f) Pursuant to Section 1223 of the Code, the holding period of the Fund
shares to be received by each of the Other Funds' shareholders will
include the period during which the Other Funds shares surrendered in
exchange therefor were held by such shareholders (provided such Other
Funds shares were held by such shareholders as capital assets on the date
of the Merger);
(g) Pursuant to Section 362(b) of the Code, the tax basis of the assets
of the Other Funds acquired by the Fund in the Merger will be the same as
the tax basis of such assets in the hands of the Other Funds immediately
prior to the Merger;
(h) Pursuant to Section 1223 of the Code, the holding period of the
assets of the Other Funds in the hands of the Fund will include the
period during which those assets were held by the Other Funds; and
(i) The Fund will succeed to and take into account the items of the Other
Funds described in Section 381(c) of the Code, subject to the conditions
and limitations specified in Sections 381, 382, 383 and 384 of the Code
and applicable regulations thereunder.
Notwithstanding anything herein to the contrary, neither the Fund nor the
Other Funds may waive the material conditions set forth in this paragraph 8.6
although the actual wording of such opinion may differ to the extent agreed
to by the Fund and the Other Funds.
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.
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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.
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 September 30, 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 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.
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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 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
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(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.
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
19
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.
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