AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION
THIS AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION ("Agreement") is
made as of February 20, 1996, between Bull & Bear Funds I, Inc. ("Corporation"),
on behalf of Bull & Bear U.S. and Overseas Fund, a segregated portfolio of
assets ("series") thereof ("Acquiring Fund"), and the Corporation, on behalf of
Bull & Bear Quality Growth Fund, another series thereof ("Target"). (Acquiring
Fund and Target are sometimes referred to herein individually as a "Fund" and
collectively as the "Funds.")
This Agreement is intended to be, and is adopted as, a plan of a
reorganization described in section 368(a)(1)(C) of the Internal Revenue Code of
1986, as amended ("Code"). The reorganization will involve the transfer to
Acquiring Fund of Target's assets in exchange solely for voting shares of common
stock in Acquiring Fund ("Acquiring Fund Shares") and the assumption by
Acquiring Fund of Target's liabilities, followed by the constructive
distribution of the Acquiring Fund Shares to the holders of shares of common
stock in Target ("Target Shares") in exchange therefor, all upon the terms and
conditions set forth herein. The foregoing transactions are referred to herein
as the "Reorganization." All agreements, representations, actions, and
obligations described herein made or to be taken or undertaken by either Fund
are made and shall be taken or undertaken by the Corporation on its behalf.
In consideration of the mutual promises herein, the parties covenant and
agree as follows:
1. PLAN OF REORGANIZATION AND TERMINATION OF TARGET
1.1. Target agrees to assign, sell, convey, transfer, and deliver all of
its assets described in paragraph 1.2 ("Assets") to Acquiring Fund. Acquiring
Fund agrees in exchange therefor --
(a) to issue and deliver to Target the number of full and fractional
Acquiring Fund Shares determined by dividing the net value of Target
(computed as set forth in paragraph 2.1) by the net asset value (computed
as set forth in paragraph 2.2) ("NAV") of an Acquiring Fund Share; and
(b) to assume all of Target's liabilities described in paragraph 1.3
("Liabilities").
Such transactions shall take place at the Closing (as defined in paragraph 3.1).
1.2. The Assets shall include, without limitation, all cash, cash
equivalents, securities, receivables (including interest and dividends
receivable), claims and rights of action, rights to register shares under
applicable securities laws, books and records, deferred and prepaid expenses
shown as assets on Target's books, and other property owned by Target at the
Effective Time (as defined in paragraph 3.1).
1.3. The Liabilities shall include (except as otherwise provided herein)
all of Target's liabilities, debts, obligations, and duties of whatever kind or
nature, whether absolute, accrued, contingent, or otherwise, whether or not
arising in the ordinary course of business, whether or not determinable at the
Effective Time, and whether or not specifically referred to in this Agreement,
including without limitation Target's share of the expenses described in
paragraph 7.2. Notwithstanding the foregoing, Target agrees to use its best
efforts to discharge all of its known Liabilities prior to the Effective Time.
1.4. Before the Effective Time, Target shall declare and pay to its
shareholders a dividend and/or other distribution in an amount large enough so
that it will have distributed substantially all (and in any event not less than
90%) of its investment company taxable income (computed without regard to any
deduction for dividends paid) and realized net capital gain, if any, for the
current taxable year through the Effective Time.
1.5. At the Effective Time (or as soon thereafter as is reasonably
practicable), Target shall constructively distribute the Acquiring Fund Shares
received by it pursuant to paragraph 1.1 to Target's shareholders of record,
determined as of the Effective Time (collectively "Shareholders" and
individually a "Shareholder"), in exchange for their Target Shares. Such
distribution shall be accomplished by the Funds' transfer agent ("Transfer
Agent") opening accounts on Acquiring Fund's share transfer books in the
Shareholders' names and transferring such Acquiring Fund Shares thereto. Each
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Shareholder's account shall be credited with the respective pro rata number of
full and fractional (rounded to the third decimal place) Acquiring Fund Shares
due that Shareholder. All outstanding Target Shares, including any represented
by certificates, shall simultaneously be canceled on Target's share transfer
records. Acquiring Fund will issue certificates representing the Acquiring Fund
Shares issued in connection with the Reorganization only for full Acquiring Fund
Shares when requested in writing.
1.6. As soon as reasonably practicable after distribution of the Acquiring
Fund Shares pursuant to paragraph 1.5, Target shall be terminated as a series of
the Corporation and any further actions shall be taken in connection therewith
as required by applicable law.
1.7. Any reporting responsibility of Target to a public authority is and
shall remain its responsibility up to and including the date on which it is
terminated.
1.8. Any transfer taxes payable upon issuance of Acquiring Fund Shares in a
name other than that of the registered holder on Target's books of the Target
Shares constructively exchanged therefor shall be paid by the person to whom
such Acquiring Fund Shares are to be issued, as a condition of such transfer.
2. VALUATION
2.1. For purposes of paragraph 1.1(a), Target's net value shall be (a) the
value of the Assets computed as of 4:00 p.m. on the date of the Closing
("Valuation Time"), using the valuation procedures set forth in Target's
then-current prospectus and statement of additional information less (b) the
amount of the Liabilities as of the Valuation Time.
2.2. For purposes of paragraph 1.1(a), the NAV of an Acquiring Fund Share
shall be computed as of the Valuation Time, using the valuation procedures set
forth in Acquiring Fund's then-current prospectus and statement of additional
information.
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2.3. All computations pursuant to paragraphs 2.1 and 2.2 shall be made by
or under the direction of the Corporation's Board of Directors.
3. CLOSING AND EFFECTIVE TIME
3.1. The Reorganization, together with related acts necessary to consummate
the same ("Closing"), shall occur at the Funds' principal office on April 26,
1996, or at such other place and/or on such other date as the parties may agree.
All acts taking place at the Closing shall be deemed to take place
simultaneously as of 4:00 p.m. on the date thereof or at such other time as the
parties may agree ("Effective Time"). If, immediately before the Valuation Time,
(a) the New York Stock Exchange, Inc. ("NYSE") is closed to trading or trading
thereon is restricted or (b) trading or the reporting of trading on the NYSE or
elsewhere is disrupted, so that accurate appraisal of the net value of Target
and the NAV per Acquiring Fund Share is impracticable, the Effective Time shall
be postponed until the first business day after the day when such trading shall
have been fully resumed and such reporting shall have been restored.
3.2. The Corporation shall deliver at the Closing a schedule of the Assets
as of the Effective Time, which shall set forth for all portfolio securities
included therein their adjusted tax basis and holding period by lot. Target's
custodian shall deliver at the Closing a certificate of an authorized officer
stating that (a) the Assets held by the custodian will be transferred to
Acquiring Fund at the Effective Time and (b) all necessary taxes in conjunction
with the delivery of the Assets, including all applicable federal and state
stock transfer stamps, if any, have been paid or provision for payment has been
made.
3.3. The Corporation shall deliver at the Closing a list of the names and
addresses of the Shareholders and the number of outstanding Target Shares owned
by each Shareholder, all as of the Effective Time, certified by the
Corporation's Secretary or Assistant Secretary. The Transfer Agent shall deliver
at the Closing a certificate as to the opening on Acquiring Fund's share
transfer books of accounts in the Shareholders' names. The Corporation shall
issue and deliver a confirmation evidencing the Acquiring Fund Shares to be
credited to Target at the Effective Time or provide evidence that such Acquiring
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Fund Shares have been credited to Target's account on Acquiring Fund's books.
The Corporation shall deliver at the Closing such bills of sale, checks,
assignments, stock certificates, receipts, or other documents as may reasonably
be required.
3.4. The Corporation shall deliver at the Closing a certificate executed in
its name by a Co-President or a Vice President dated the Effective Time, to the
effect that the representations and warranties it made in this Agreement are
true and correct at the Effective Time except as they may be affected by the
transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES
4.1. Target represents and warrants as follows:
4.1.1. The Corporation is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Maryland, and
a copy of its Articles of Incorporation is on file with the Department of
Assessments and Taxation of Maryland ("Department");
4.1.2. The Corporation is duly registered as an open-end management
investment company under the Investment Company Act of 1940 ("1940 Act"),
and such registration will be in full force and effect at the Effective
Time;
4.1.3. Target is a duly established and designated series of the
Corporation;
4.1.4. At the Closing, Target will have good and marketable title to
the Assets and full right, power, and authority to sell, assign, transfer,
and deliver the Assets free of any liens or other encumbrances; and upon
delivery and payment for the Assets, Acquiring Fund will acquire good and
marketable title thereto;
4.1.5. Target's current prospectus and statement of additional
information conform in all material respects to the applicable requirements
of the Securities Act of 1933 ("1933 Act") and the 1940 Act and the rules
and regulations thereunder and do not include any untrue statement of a
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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;
4.1.6. Target is not in violation of, and the execution and delivery
of this Agreement and consummation of the transactions contemplated hereby
by Target will not conflict with or violate, Maryland law or any provision
of the Corporation's Articles of Incorporation or By-Laws or of any
agreement, instrument, lease, or other undertaking to which Target is a
party or by which it is bound or result in the acceleration of any
obligation, or the imposition of any penalty, under any agreement,
judgment, or decree to which Target is a party or by which it is bound,
except as previously disclosed in writing to and accepted by the
Corporation on behalf of Acquiring Fund;
4.1.7. Except as disclosed in writing to and accepted by the
Corporation on behalf of Acquiring Fund, all material contracts and other
commitments of or applicable to Target (other than this Agreement and
investment contracts, including options, futures and forward contracts)
will be terminated, or provision for discharge of any liabilities of Target
thereunder will be made, at or prior to the Effective Time, without either
Fund's incurring any liability or penalty with respect thereto and without
diminishing or releasing any rights Target may have had with respect to
actions taken or omitted to be taken by any other party thereto prior to
the Closing;
4.1.8. Except as disclosed in writing to and accepted by the
Corporation on behalf of Acquiring Fund, no litigation, administrative
proceeding, or investigation of or before any court or governmental body is
presently pending or (to Target's knowledge) threatened against the
Corporation with respect to Target or any of its properties or assets that,
if adversely determined, would materially and adversely affect Target's
financial condition or the conduct of its business; Target knows of no
facts that might form the basis for the institution of any such litigation,
proceeding, or investigation and is not a party to or subject to the
provisions of any order, decree, or judgment of any court or governmental
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body that materially or adversely affects its business or its ability to
consummate the transactions contemplated hereby;
4.1.9. The execution, delivery, and performance of this Agreement by
Target have been duly authorized as of the date hereof by all necessary
action on the part of the Corporation's board of directors, which has made
the determinations required by Rule 17a-8(a) under the 1940 Act; and,
subject to approval by Target's shareholders and receipt of any necessary
exemptive relief or no-action assurances requested from the Securities and
Exchange Commission ("SEC") or its staff with respect to sections 17(a) and
17(d) of the 1940 Act, this Agreement will constitute a valid and legally
binding obligation of Target, enforceable in accordance with its terms,
except as the same may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium, and similar laws relating to or
affecting creditors' rights and by general principles of equity;
4.1.10. At the Effective Time, the performance of this Agreement shall
have been duly authorized by all necessary action by Target's shareholders;
4.1.11. No governmental consents, approvals, authorizations, or
filings are required under the 1933 Act, the Securities Exchange Act of
1934 ("1934 Act"), or the 1940 Act for the execution or performance of this
Agreement by Target, except for (a) the filing with the SEC of a
registration statement by the Corporation on Form N-14 relating to the
Acquiring Fund Shares issuable hereunder, and any supplement or amendment
thereto ("Registration Statement"), including therein a prospectus/proxy
statement ("Proxy Statement"), (b) receipt of any necessary exemptive
relief referenced in subparagraph 4.1.9, and (c) such consents, approvals,
authorizations, and filings as have been made or received or as may be
required subsequent to the Effective Time;
4.1.12. On the effective date of the Registration Statement, at the
time of the shareholders' meeting referred to in paragraph 5.2, and at the
Effective Time, the Proxy Statement will (a) comply in all material
respects with the applicable provisions of the 1933 Act, the 1934 Act, and
the 1940 Act and the regulations thereunder and (b) not contain any untrue
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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 misleading;
provided that the foregoing shall not apply to statements in or omissions
from the Proxy Statement made in reliance on and in conformity with
information furnished by the Corporation with respect to Acquiring Fund for
use therein;
4.1.13. The Liabilities were incurred by Target in the ordinary course
of its business;
4.1.14. Target is a "fund" as defined in section 851(h)(2) of the
Code; it qualified for treatment as a regulated investment company under
Subchapter M of the Code ("RIC") for each past taxable year since it
commenced operations and will continue to meet all the requirements for
such qualification for its current taxable year; and it has no earnings and
profits accumulated in any taxable year in which the provisions of
Subchapter M did not apply to it. The Assets shall be invested at all times
through the Effective Time in a manner that ensures compliance with the
foregoing;
4.1.15. Target is not under the jurisdiction of a court in a
proceeding under Title 11 of the United States Code or similar case within
the meaning of section 368(a)(3)(A) of the Code;
4.1.16. Not more than 25% of the value of Target's total assets
(excluding cash, cash items, and U.S. government securities) is invested in
the stock and securities of any one issuer, and not more than 50% of the
value of such assets is invested in the stock and securities of five or
fewer issuers; and
4.1.17. Target will be terminated as soon as reasonably practicable
after the Reorganization, but in all events within six months after the
Effective Time.
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4.2. Acquiring Fund represents and warrants as follows:
4.2.1. The Corporation is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Maryland, and
a copy of its Articles of Incorporation is on file with the Department;
4.2.2. The Corporation is duly registered as an open-end management
investment company under the 1940 Act, and such registration will be in
full force and effect at the Effective Time;
4.2.3. Acquiring Fund is a duly established and designated series of
the Corporation;
4.2.4. No consideration other than Acquiring Fund Shares (and
Acquiring Fund's assumption of the Liabilities) will be issued in exchange
for the Assets in the Reorganization;
4.2.5. The Acquiring Fund Shares to be issued and delivered to Target
hereunder will, at the Effective Time, have been duly authorized and, when
issued and delivered as provided herein, will be duly and validly issued
and outstanding shares of Acquiring Fund, fully paid and non-assessable.
Except as contemplated by this Agreement, Acquiring Fund does not have
outstanding any options, warrants, or other rights to subscribe for or
purchase any of its shares, nor is there outstanding any security
convertible into any of its shares;
4.2.6. Acquiring Fund's current prospectus and statement of additional
information conform in all material respects to the applicable requirements
of the 1933 Act and the 1940 Act and the rules and regulations thereunder
and do not include any untrue statement of a material fact or omit 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;
4.2.7. Acquiring Fund is not in violation of, and the execution and
delivery of this Agreement and consummation of the transactions
contemplated hereby by Acquiring Fund will not conflict with or violate,
Maryland law or any provision of the Corporation's Articles of
Incorporation or By-Laws or of any provision of any agreement, instrument,
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lease, or other undertaking to which Acquiring Fund is a party or by which
it is bound or result in the acceleration of any obligation, or the
imposition of any penalty, under any agreement, judgment, or decree to
which Acquiring Fund is a party or by which it is bound, except as
previously disclosed in writing to and accepted by the Corporation on
behalf of Target;
4.2.8. Except as otherwise disclosed in writing to and accepted by the
Corporation on behalf of Target, no litigation, administrative proceeding,
or investigation of or before any court or governmental body is presently
pending or (to Acquiring Fund's knowledge) threatened against the
Corporation with respect to Acquiring Fund or any of its properties or
assets that, if adversely determined, would materially and adversely affect
Acquiring Fund's financial condition or the conduct of its business;
Acquiring Fund knows of no facts that might form the basis for the
institution of any such litigation, proceeding, or investigation and is not
a party to or subject to the provisions of any order, decree, or judgment
of any court or governmental body that materially or adversely affects its
business or its ability to consummate the transactions contemplated hereby;
4.2.9. The execution, delivery, and performance of this Agreement by
Acquiring Fund have been duly authorized as of the date hereof by all
necessary action on the part of the Corporation's board of directors, which
has made the determinations required by Rule 17a-8(a) under the 1940 Act;
and, subject to receipt of any necessary exemptive relief or no-action
assurances requested from the SEC or its staff with respect to sections
17(a) and 17(d) of the 1940 Act, this Agreement will constitute a valid and
legally binding obligation of Acquiring Fund, enforceable in accordance
with its terms, except as the same may be limited by bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium, and similar
laws relating to or affecting creditors' rights and by general principles
of equity;
4.2.10. No governmental consents, approvals, authorizations, or
filings are required under the 1933 Act, the 1934 Act, or the 1940 Act for
the execution or performance of this Agreement by Target, except for (a)
the filing with the SEC of the Registration Statement, (b) receipt of any
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necessary exemptive relief referenced in subparagraph 4.2.9, and (c) such
consents, approvals, authorizations, and filings as have been made or
received or as may be required subsequent to the Effective Time;
4.2.11. On the effective date of the Registration Statement, at the
time of the shareholders' meeting referred to in paragraph 5.2, and at the
Effective Time, the Proxy Statement will (a) comply in all material
respects with the applicable provisions of the 1933 Act, the 1934 Act, and
the 1940 Act and the regulations thereunder and (b) 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 misleading;
provided that the foregoing shall not apply to statements in or omissions
from the Proxy Statement made in reliance on and in conformity with
information furnished by the Corporation with respect to Target for use
therein;
4.2.12. Acquiring Fund is a "fund" as defined in section 851(h)(2) of
the Code; it qualified for treatment as a RIC for each past taxable year
since it commenced operations and will continue to meet all the
requirements for such qualification for its current taxable year; Acquiring
Fund intends to continue to meet all such requirements for the next taxable
year; and it has no earnings and profits accumulated in any taxable year in
which the provisions of Subchapter M of the Code did not apply to it;
4.2.13. Acquiring Fund has no plan or intention to issue additional
Acquiring Fund Shares following the Reorganization except for shares issued
in the ordinary course of its business as a series of an open-end
investment company; nor does Acquiring Fund have any plan or intention to
redeem or otherwise reacquire any Acquiring Fund Shares issued to the
Shareholders pursuant to the Reorganization, other than through redemptions
arising in the ordinary course of that business;
4.2.14. Acquiring Fund (a) will actively continue Target's business in
substantially the same manner that Target conducted that business
immediately before the Reorganization, (b) has no plan or intention to sell
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or otherwise dispose of any of the Assets, except for dispositions made in
the ordinary course of that business and dispositions necessary to maintain
its status as a RIC, and (c) expects to retain substantially all the Assets
in the same form as it receives them in the Reorganization, unless and
until subsequent investment circumstances suggest the desirability of
change or it becomes necessary to make dispositions thereof to maintain
such status;
4.2.15. There is no plan or intention for Acquiring Fund to be
dissolved or merged into another corporation or business trust or any
"fund" thereof (within the meaning of section 851(h)(2) of the Code)
following the Reorganization;
4.2.16. Immediately after the Reorganization, (a) not more than 25% of
the value of Acquiring Fund's total assets (excluding cash, cash items, and
U.S. government securities) will be invested in the stock and securities of
any one issuer and (b) not more than 50% of the value of such assets will
be invested in the stock and securities of five or fewer issuers; and
4.2.17. Acquiring Fund does not own, directly or indirectly, nor at
the Effective Time will it own, directly or indirectly, nor has it owned,
directly or indirectly, at any time during the past five years, any shares
of Target.
4.3. Each Fund represents and warrants as follows:
4.3.1. The fair market value of the Acquiring Fund Shares, when
received by the Shareholders, will be approximately equal to the fair
market value of their Target Shares constructively surrendered in exchange
therefor;
4.3.2. Its management (a) is unaware of any plan or intention of
Shareholders to redeem or otherwise dispose of any portion of the Acquiring
Fund Shares to be received by them in the Reorganization and (b) does not
anticipate dispositions of those Acquiring Fund Shares at the time of or
soon after the Reorganization to exceed the usual rate and frequency of
dispositions of shares of Target as a series of an open-end investment
company. Consequently, its management expects that the percentage of
Shareholder interests, if any, that will be disposed of as a result of or
at the time of the Reorganization will be de minimis. Nor does its
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management anticipate that there will be extraordinary redemptions of
Acquiring Fund Shares immediately following the Reorganization;
4.3.3. The Shareholders will pay their own expenses, if any, incurred
in connection with the Reorganization;
4.3.4. Immediately following consummation of the Reorganization,
Acquiring Fund will hold substantially the same assets and be subject to
substantially the same liabilities that Target held or was subject to
immediately prior thereto, plus any liabilities and expenses of the parties
incurred in connection with the Reorganization;
4.3.5. The fair market value on a going concern basis of the Assets
will equal or exceed the Liabilities to be assumed by Acquiring Fund and
those to which the Assets are subject;
4.3.6. There is no intercompany indebtedness between the Funds that
was issued or acquired, or will be settled, at a discount;
4.3.7. Pursuant to the Reorganization, Target will transfer to
Acquiring Fund, and Acquiring Fund will acquire, at least 90% of the fair
market value of the net assets, and at least 70% of the fair market value
of the gross assets, held by Target immediately before the Reorganization.
For the purposes of this representation, any amounts used by Target to pay
its Reorganization expenses and redemptions and distributions made by it
immediately before the Reorganization (except for (a) distributions made to
conform to its policy of distributing all or substantially all of its
income and gains to avoid the obligation to pay federal income tax and/or
the excise tax under section 4982 of the Code and (b) redemptions not made
as part of the Reorganization) will be included as assets thereof held
immediately before the Reorganization;
4.3.8. None of the compensation received by any Shareholder who is an
employee of Target will be separate consideration for, or allocable to, any
of the Target Shares held by such Shareholder-employee; none of the
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Acquiring Fund Shares received by any such Shareholder-employee will be
separate consideration for, or allocable to, any employment agreement; and
the consideration paid to any such Shareholder-employee will be for
services actually rendered and will be commensurate with amounts paid to
third parties bargaining at arm's-length for similar services; and
4.3.9. Immediately after the Reorganization, the Shareholders will not
own shares constituting "control" of Acquiring Fund within the meaning of
section 304(c) of the Code.
5. COVENANTS
5.1. Each Fund covenants to operate its respective business in the ordinary
course between the date hereof and the Closing, it being understood that (a)
such ordinary course will include declaring and paying customary dividends and
other distributions and such changes in operations as are contemplated by each
Fund's normal business activities and (b) each Fund will retain exclusive
control of the composition of its portfolio until the Closing; provided that
Target shall not dispose of more than an insignificant portion of its historic
business assets during such period without Acquiring Fund's prior consent.
5.2. Target covenants to call a shareholders' meeting to consider and act
upon this Agreement and to take all other action necessary to obtain approval of
the transactions contemplated hereby.
5.3. Target covenants that the Acquiring Fund Shares to be delivered
hereunder are not being acquired for the purpose of making any distribution
thereof, other than in accordance with the terms hereof.
5.4. The Corporation covenants to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act, and such
state securities laws it may deem appropriate in order to continue its
operations after the Effective Time.
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5.5. Subject to this Agreement, each Fund covenants to take or cause to be
taken all actions, and to do or cause to be done all things, reasonably
necessary, proper, or advisable to consummate and effectuate the transactions
contemplated hereby.
6. CONDITIONS PRECEDENT
Each Fund's obligations hereunder shall be subject to (a) performance by
the other Fund of all the obligations to be performed hereunder at or before the
Effective Time, (b) all representations and warranties of the other Fund
contained herein being true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated
hereby, as of the Effective Time, with the same force and effect as if made at
and as of the Effective Time, and (c) the following further conditions that, at
or before the Effective Time:
6.1. This Agreement and the transactions contemplated hereby shall have
been duly adopted and approved by the Corporation's board of directors and shall
have been approved by Target's shareholders in accordance with applicable law.
6.2. All necessary filings shall have been made with the SEC and state
securities authorities, and no order or directive shall have been received that
any other or further action is required to permit the parties to carry out the
transactions contemplated hereby. The Registration Statement shall have become
effective under the 1933 Act, no stop orders suspending the effectiveness
thereof shall have been issued, and the SEC shall not have issued an unfavorable
report with respect to the Reorganization under section 25(b) of the 1940 Act
nor instituted any proceedings seeking to enjoin consummation of the
transactions contemplated hereby under section 25(c) of the 1940 Act. All
consents, orders, and permits of federal, state, and local regulatory
authorities (including the SEC and state securities authorities) deemed
necessary by either Fund to permit consummation, in all material respects, of
the transactions contemplated hereby shall have been obtained, except where
failure to obtain same would not involve a risk of a material adverse effect on
the assets or properties of either Fund, provided that either Fund may for
itself waive any of such conditions.
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6.3. At the Effective Time, no action, suit, or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or to obtain damages or other relief in connection with,
the transactions contemplated hereby.
6.4. The Corporation (on behalf of Target) shall have received an opinion
of Xxxxxxxxxxx & Xxxxxxxx LLP, its counsel, substantially to the effect that:
6.4.1. Acquiring Fund is a duly established series of the Corporation,
a corporation duly organized and validly existing under the laws of the
State of Maryland with power under its Articles of Incorporation to own all
of its properties and assets and, to the knowledge of such counsel, to
carry on its business as presently conducted;
6.4.2. This Agreement (a) has been duly authorized, executed, and
delivered by the Corporation on behalf of Acquiring Fund and (b) assuming
due authorization, execution, and delivery of this Agreement by the
Corporation on behalf of Target, is a valid and legally binding obligation
of the Corporation with respect to Acquiring Fund, enforceable in
accordance with its terms, except as the same may be limited by bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium, and similar
laws relating to or affecting creditors' rights and by general principles
of equity;
6.4.3. The Acquiring Fund Shares to be issued and distributed to the
Shareholders under this Agreement, assuming their due delivery as
contemplated by this Agreement, will be duly authorized and validly issued
and outstanding and fully paid and non-assessable, and no shareholder of
Acquiring Fund has any preemptive right to subscribe for or purchase such
shares;
6.4.4. Acquiring Fund's execution and delivery of this Agreement did
not, and the consummation of the transactions contemplated hereby will not,
materially violate the Corporation's Articles of Incorporation or By-Laws
or any provision of any agreement (known to such counsel, without any
independent inquiry or investigation) to which the Corporation (with
respect to Acquiring Fund) is a party or by which it is bound or (to the
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knowledge of such counsel, without any independent inquiry or
investigation) result in the acceleration of any obligation, or the
imposition of any penalty, under any agreement, judgment, or decree to
which the Corporation (with respect to Acquiring Fund) is a party or by
which it is bound, except as set forth in such opinion or as previously
disclosed in writing to and accepted by the Corporation on behalf of
Target;
6.4.5. To the knowledge of such counsel (without any independent
inquiry or investigation), no consent, approval, authorization, or order of
any court or governmental authority is required for the consummation by the
Corporation on behalf of Acquiring Fund of the transactions contemplated
herein, except such as have been obtained under the 1933 Act, the 1934 Act,
and the 1940 Act and such as may be required under state securities laws;
6.4.6. The Corporation is registered with the SEC as an investment
company, and to the knowledge of such counsel no order has been issued or
proceeding instituted to suspend such registration; and
6.4.7. To the knowledge of such counsel (without any independent
inquiry or investigation), (a) no litigation, administrative proceeding, or
investigation of or before any court or governmental body is pending or
threatened as to the Corporation (with respect to Acquiring Fund) or any of
its properties or assets attributable or allocable to Acquiring Fund and
(b) the Corporation (with respect to Acquiring Fund) is not a party to or
subject to the provisions of any order, decree, or judgment of any court or
governmental body that materially and adversely affects Acquiring Fund's
business, except as set forth in such opinion or as otherwise disclosed in
writing to and accepted by the Corporation on behalf of Target.
In rendering such opinion, such counsel may (i) rely, as to matters governed by
the laws of the State of Maryland, on an opinion of competent Maryland counsel,
(ii) make assumptions regarding the authenticity, genuineness, and/or conformity
of documents and copies thereof without independent verification thereof, (iii)
limit such opinion to applicable federal and state law, and (iv) define the word
"knowledge" and related terms to mean the knowledge of attorneys then with such
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firm who have devoted substantive attention to matters directly related to this
Agreement and the Reorganization.
6.5. The Corporation (on behalf of Acquiring Fund) shall have received an
opinion of Xxxxxxxxxxx & Xxxxxxxx LLP, its counsel, substantially to the effect
that:
6.5.1. Target is a duly established series of the Corporation, a
corporation duly organized and validly existing under the laws of the State
of Maryland with power under its Articles of Incorporation to own all of
its properties and assets and, to the knowledge of such counsel, to carry
on its business as presently conducted;
6.5.2. This Agreement (a) has been duly authorized, executed, and
delivered by the Corporation on behalf of Target and (b) assuming due
authorization, execution, and delivery of this Agreement by the Corporation
on behalf of Acquiring Fund, is a valid and legally binding obligation of
the Corporation with respect to Target, enforceable in accordance with its
terms, except as the same may be limited by bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium, and similar laws relating
to or affecting creditors' rights and by general principles of equity;
6.5.3. Target's execution and delivery of this Agreement did not, and
the consummation of the transactions contemplated hereby will not,
materially violate the Corporation's Articles of Incorporation or By-Laws
or any provision of any agreement (known to such counsel, without any
independent inquiry or investigation) to which the Corporation (with
respect to Target) is a party or by which it is bound or (to the knowledge
of such counsel, without any independent inquiry or investigation) result
in the acceleration of any obligation, or the imposition of any penalty,
under any agreement, judgment, or decree to which the Corporation (with
respect to Target) is a party or by which it is bound, except as set forth
in such opinion or as previously disclosed in writing to and accepted by
the Corporation on behalf of Acquiring Fund;
6.5.4. To the knowledge of such counsel (without any independent
inquiry or investigation), no consent, approval, authorization, or order of
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any court or governmental authority is required for the consummation by the
Corporation on behalf of Target of the transactions contemplated herein,
except such as have been obtained under the 1933 Act, the 1934 Act, and the
1940 Act and such as may be required under state securities laws;
6.5.5. The Corporation is registered with the SEC as an investment
company, and to the knowledge of such counsel no order has been issued or
proceeding instituted to suspend such registration; and
6.5.6. To the knowledge of such counsel (without any independent
inquiry or investigation), (a) no litigation, administrative proceeding, or
investigation of or before any court or governmental body is pending or
threatened as to the Corporation (with respect to Target) or any of its
properties or assets attributable or allocable to Target and (b) the
Corporation (with respect to Target) is not a party to or subject to the
provisions of any order, decree, or judgment of any court or governmental
body that materially and adversely affects its business, except as set
forth in such opinion or as otherwise disclosed in writing to and accepted
by the Corporation on behalf of Acquiring Fund.
In rendering such opinion, such counsel may (i) rely, as to matters governed by
the laws of the State of Maryland, on an opinion of competent Maryland counsel,
(ii) make assumptions regarding the authenticity, genuineness, and/or conformity
of documents and copies thereof without independent verification thereof, (iii)
limit such opinion to applicable federal and state law, and (iv) define the word
"knowledge" and related terms to mean the knowledge of attorneys then with such
firm who have devoted substantive attention to matters directly related to this
Agreement and the Reorganization.
6.6. The Corporation shall have received an opinion of Xxxxxxxxxxx &
Xxxxxxxx LLP, its counsel, as to the federal income tax consequences mentioned
below ("Tax Opinion"). In rendering the Tax Opinion, such counsel may rely as to
factual matters, exclusively and without independent verification, on the
representations made in this Agreement (or in a separate letter or certificate
addressed to such counsel) and the certificates delivered pursuant to paragraph
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3.4. The Tax Opinion shall be substantially to the effect that, based on the
facts and assumptions stated therein, for federal income tax purposes:
6.6.1. Acquiring Fund's acquisition of the Assets in exchange solely
for Acquiring Fund Shares and Acquiring Fund's assumption of the
Liabilities, followed by Target's distribution of those shares to the
Shareholders constructively in exchange for the Shareholders' Target
Shares, will constitute a reorganization within the meaning of section
368(a)(1)(C) of the Code, and each Fund will be "a party to a
reorganization" within the meaning of section 368(b) of the Code;
6.6.2. No gain or loss will be recognized to Target on the transfer to
Acquiring Fund of the Assets in exchange solely for Acquiring Fund Shares
and Acquiring Fund's assumption of the Liabilities or on the subsequent
distribution of those shares to the Shareholders in constructive exchange
for their Target Shares;
6.6.3. No gain or loss will be recognized to Acquiring Fund on its
receipt of the Assets in exchange solely for Acquiring Fund Shares and its
assumption of the Liabilities;
6.6.4. Acquiring Fund's basis for the Assets will be the same as the
basis thereof in Target's hands immediately before the Reorganization, and
Acquiring Fund's holding period for the Assets will include Target's
holding period therefor;
6.6.5. A Shareholder will recognize no gain or loss on the
constructive exchange of all its Target Shares solely for Acquiring Fund
Shares pursuant to the Reorganization; and
6.6.6. A Shareholder's basis for the Acquiring Fund Shares to be
received by it in the Reorganization will be the same as the basis for its
Target Shares to be constructively surrendered in exchange for those
Acquiring Fund Shares, and its holding period for those Acquiring Fund
Shares will include its holding period for those Target Shares, provided
they are held as capital assets by the Shareholder at the Effective Time.
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Notwithstanding subparagraphs 6.6.2 and 6.6.4, the Tax Opinion may state that no
opinion is expressed as to the effect of the Reorganization on the Funds or any
Shareholder with respect to any asset (including certain options, futures, and
forward contracts included in the Assets) as to which any unrealized gain or
loss is required to be recognized for federal income tax purposes at the end of
a taxable year (or on the termination or transfer thereof) under a
xxxx-to-market system of accounting.
At any time before the Closing, either Fund may waive any of the foregoing
conditions if, in the judgment of the Corporation's board of directors, such
waiver will not have a material adverse effect on its shareholders' interests.
7. BROKERAGE FEES AND EXPENSES
7.1. Each Fund 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.
7.2. Except as otherwise provided herein, all expenses incurred in
connection with the transactions contemplated by this Agreement (whether or not
they are consummated) will be borne by Bull & Bear Advisers, Inc. Such expenses
include: (a) expenses incurred in connection with entering into and carrying out
the provisions of this Agreement; (b) expenses associated with the preparation
and filing of the Registration Statement; (c) registration or qualification fees
and expenses of preparing and filing such forms as are necessary under
applicable state securities laws to qualify the Acquiring Fund Shares to be
issued in connection herewith in each state in which Target's shareholders are
resident as of the date of the mailing of the Proxy Statement to such
shareholders; (d) printing and postage expenses; (e) legal and accounting fees;
and (f) solicitation costs.
8. ENTIRE AGREEMENT; SURVIVAL
Neither party has made any representation, warranty, or covenant not set
forth herein, and this Agreement constitutes the entire agreement between the
parties. The representations, warranties, and covenants contained herein or in
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any document delivered pursuant hereto or in connection herewith shall survive
the Closing.
9. TERMINATION OF AGREEMENT
This Agreement may be terminated at any time at or prior to the Effective
Time, whether before or after approval by Target's shareholders:
9.1. By either Fund (a) in the event of the other Fund's material breach of
any representation, warranty, or covenant contained herein to be performed at or
prior to the Effective Time, (b) if a condition to its obligations has not been
met and it reasonably appears that such condition will not or cannot be met, or
(c) if the Closing has not occurred on or before August 20, 1996; or
9.2. By the parties' mutual agreement.
In the event of termination under paragraphs 9.1.(c) or 9.2, there shall be no
liability for damages on the part of either Fund, or the directors or officers
of the Corporation, to the other Fund.
10. AMENDMENT
This Agreement may be amended, modified, or supplemented at any time,
notwithstanding approval thereof by Target's shareholders, in such manner as may
be mutually agreed upon in writing by the parties; provided that following such
approval no such amendment shall have a material adverse effect on the
Shareholders' interests.
11. MISCELLANEOUS
11.1. This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Maryland; provided that, in the case of any
conflict between such laws and the federal securities laws, the latter shall
govern.
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11.2. Nothing expressed or implied herein is intended or shall be construed
to confer upon or give any person, firm, trust, or corporation other than the
parties and their respective successors and assigns any rights or remedies under
or by reason of this Agreement.
IN WITNESS WHEREOF, each party has caused this Agreement to be executed by
its duly authorized officer.
ATTEST: BULL & BEAR FUNDS I, INC.
on behalf of its series,
BULL & BEAR U.S. AND OVERSEAS
FUND
By: /s/ Xxxxxxx X. Xxxxxxx /s/ Xxxxxx X. Xxxxxxx
---------------------- ---------------------
Secretary Co-President
ATTEST: BULL & BEAR FUNDS I, INC.
on behalf of its series,
BULL & BEAR QUALITY GROWTH FUND
By: /s/ Xxxxxxx X. Xxxxxxx /s/ Xxxxxx X. Xxxxxxx
---------------------- ---------------------
Secretary Co-President
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