Exhibit 23H(4)
Execution Copy
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of August 15, 2000 (the
"Agreement"), is made by and between AVALON TRUST COMPANY ("Avalon"), a
regulated trust company operating under the laws of the State of New Mexico with
its principal business office located at 000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxx
Xx, Xxx Xxxxxx 00000-0000, and XXXXXX INVESTMENT ADVISORS, LLC ("Xxxxxx"), a
limited liability company organized under the laws of the State of New Jersey
with its principal business office located at 000 Xxx Xxxx, Xxxxxxxxxx, XX
00000.
WITNESSETH:
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WHEREAS, Xxxxxx is a registered investment adviser under the Investment
Advisers Act of 1940, as amended ("Advisers Act") and Avalon is otherwise
qualified as an investment adviser under federal law; and
WHEREAS, Avalon desires to purchase from Xxxxxx the assets listed on
Schedule 2.3 hereof (collectively, "Assets") that relate to the management of
Xxxxxx Funds, Inc. ("Fund"), upon the terms and conditions described in this
Agreement; and
WHEREAS, Xxxxxx desires to sell to Avalon the Assets, upon the terms and
conditions described in this Agreement; and
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, Avalon desires to become the investment adviser to the Fund upon
the terms and conditions of this Agreement and the Agreement and Plan of
Succession ("Plan of Succession"), with which terms and conditions Avalon agrees
to make a good faith effort to comply, a copy of which is attached hereto as
Exhibit 1; and
WHEREAS, Xxxxxx desires that Avalon become the investment adviser to the
Fund and its affiliate in accordance with the terms and conditions of this
Agreement and the Plan of Succession.
NOW, THEREFORE, in consideration of the respective representations,
warranties and covenants contained in this Agreement, Avalon and Xxxxxx agree as
follows:
SECTION 1. PURCHASE AND SALE OF ASSETS; COMMENCEMENT OF MANAGEMENT SERVICES
Subject only to satisfying the conditions set forth in Section 6 of this
Agreement:
1.2 Assets.
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Xxxxxx will sell, transfer, assign and deliver on the Closing Date (as
hereinafter defined) to Avalon, and Avalon will purchase from Xxxxxx, the
Assets free and clear of all liens, mortgages, pledges, security interests,
and like charges and encumbrances.
1.2 New Contracts.
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On the Closing Date:
(1) Avalon and the Fund will enter into an Investment Advisory Agreement
(the form of which is attached hereto as Exhibit 3);
(2) The Fund will enter into a Plan of Distribution (the form of which is
attached hereto as Exhibit 4);
(3) the Fund will enter into an Underwriting Agreement (the form of which
is attached hereto as Exhibit 5);
(4) The Fund will enter into an Administration Agreement (the form of
which is attached hereto as Exhibit 6);
(5) The Fund will enter into a Transfer Agency Agreement (the form of
which is attached hereto as Exhibit 7); and
(6) The Fund will enter into a Custodian Agreement (the form of which is
attached hereto as Exhibit 8, collectively, "New Contracts").
The New Contracts shall be executed with such parties and/or agents as
agreed to by Avalon, Xxxxxx and the Fund, all in a form and with the
parties contemplated by Section 6 hereof and the Plan of Succession.
1.3 Purchase Price.
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Provided that Avalon or an affiliate of Avalon is approved to serve as the
investment adviser to the Fund and that all other conditions precedent to
the Closing of the Transactions (below defined) have been satisfied, Avalon
shall make payment in immediately available funds to Xxxxxx, on the Closing
Date, the sum of FIVE THOUSAND DOLLARS AND NO CENTS ($5,000).
1.4 Closing Date.
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The closing ("Closing") on the transactions contemplated by this Agreement
and the Plan of Succession ("Transactions") shall take place beginning at
3:00 p.m. Eastern Time, on a date specified by Avalon that is within three
business days of the date upon which the last of the Requisite Approvals
(as hereinafter defined) is obtained ("Closing Date") at the offices of
Avalon, 000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxx Xx, Xxx Xxxxxx 00000-0000 or
such other place, date and time as Avalon and Xxxxxx may mutually agree.
1.5. No Assumption of Liabilities.
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It is understood and agreed that except for liabilities expressly assumed
pursuant to this Agreement or the Plan of Succession, neither Avalon nor
any of its affiliates, nor any officer or director thereof, is assuming, or
shall otherwise be liable for, any claim, debt, expense, liability, or
obligation of Xxxxxx, its affiliates, or the Fund, or any officer or
director thereof, incurred or arising out of any fact, circumstance, or
event prior to the Closing.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF XXXXXX
Xxxxxx represents and warrants to Avalon as follows:
2.1 Organization and Qualification.
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Xxxxxx is a limited liability company duly organized, validly existing, and
in good standing under the laws of the State of New Jersey, with the
requisite corporate power and authority to conduct its business as it is
now being conducted and to own, lease and operate the properties and assets
used in connection therewith. Xxxxxx is duly qualified or licensed to do
business as a foreign corporation, and is in good standing in every
jurisdiction in which the conduct of its business or activities requires
any such qualification under applicable law, except where the failure to be
so qualified or licensed would not impair its ability to consummate the
Transactions.
2.2 Authority.
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Xxxxxx has full power and authority to enter into this Agreement and to
perform its obligations hereunder. Xxxxxx has taken all action necessary to
be taken by it to authorize the execution, delivery, and performance of
this Agreement and no further member, managing member, or other action or
proceeding on the part of Xxxxxx is necessary to authorize this Agreement
and the consummation of the Transactions. This Agreement has been duly
executed and delivered by Xxxxxx and is a valid and legally binding
obligation of Xxxxxx, enforceable against it in accordance with its terms,
except as may be limited by or subject to any bankruptcy, insolvency,
reorganization, moratorium, or other similar laws affecting the enforcement
of creditors' rights generally and subject to general principles of equity.
2.3 Ownership of Assets.
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Xxxxxx is the owner of the Assets listed on Schedule 2.3 hereto and has
full legal right, power, and authority to sell, assign, transfer, and
deliver such Assets free and clear of any lien, charge, pledge, security
interest, or other like claim or encumbrance, subject to applicable
provisions of the 1940 Act and any rules and regulations thereunder.
2.4 No Violations.
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Xxxxxx is not subject to or obligated under its articles of incorporation
or by-laws, or any material agreement, order, writ, injunction, or decree
or any law, rule, or regulation of any governmental authority that would be
violated by its execution, delivery, or performance of this Agreement or
the consummation of the Transactions, other than breaches or violations
that do not and will not affect the validity or enforceability of this
Agreement.
2.5 Governmental Regulatory Authorities; Shareholder Approval.
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Other than as shown on Schedule 2.5, Xxxxxx is not required to submit any
notice, report, or other filing with, or obtain any authorization, consent,
or approval from, any governmental authority or self-regulatory
organization or the shareholders of the Fund in connection with the
execution, delivery and performance by it of this Agreement or the
consummation of the Transactions ("Requisite Approvals").
2.6 Litigation or Proceedings.
-------------------------------
Except as set forth on Schedule 2.6 hereof (which shall disclose the
parties to, nature of and relief sought for, each matter to be disclosed on
Schedule 2.6), no litigation, investigation, inquiry, or governmental
proceeding is pending or, to the knowledge of Xxxxxx, threatened against
Xxxxxx or the Assets before any court, arbitrator or federal, state, local,
or foreign governmental or regulatory agency or authority or
self-regulatory authority.
2.7 Regulatory Compliance.
--------------------------
Xxxxxx has complied in all material respects with all federal, state, and
local laws and regulations applicable to management of the Fund and the
ownership and use of the Assets, and with the provisions of applicable
contracts, agreements, investment policies, and restrictions of the Fund;
and Xxxxxx possesses all requisite business permits required under any
applicable law, rule, or regulation to manage the Fund or own and use the
Assets, and is in compliance with all such permits and all applicable laws,
rules, and regulations, except for any non-compliance therewith or
non-possession thereof as is disclosed in Schedule 2.7.
2.8 The Fund.
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2.8.1 Registration and Regulation of the Fund.
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The Fund is duly registered with the Securities and Exchange Commission
("Commission") as an open-end management investment company under the 0000
Xxx. All shares of the Fund that have been and are being offered for sale
are legally and validly issued, fully paid, and non-assessable and have
been duly registered under the Securities Act of 1933, as amended ("1933
Act"), and have been duly registered or qualified or are exempt from
registration or qualification under the securities laws of each state or
other jurisdiction in which such shares have been or are being offered for
sale as specified in Schedule 2.8 hereof, and no action has been taken by
the Fund or any state or federal regulatory authority to revoke, withdraw,
or rescind any such registration or qualification. The Fund is in
compliance in all material respects with all applicable federal laws,
rules, and regulations, including, without limitation, the 1940 Act, the
Advisers Act, the 1933 Act, the Securities Exchange Act of 1934, as amended
("1934 Act"), the Internal Revenue Code of 1986, as amended (the "Code"),
and all applicable state securities laws and rules, except for any
noncompliance therewith as is disclosed in Schedule 2.8.
2.8.2 Compliance.
------------------
The Fund is in compliance in all material respects with the investment
policies and restrictions set forth in the Fund's most recent registration
statement, and the value of the Fund's net assets has been determined and
is being determined using portfolio valuation methods that comply in all
material respects with the methods described in the Fund's registration
statement and the requirements of the 1940 Act. There are no legal or
governmental actions, investigations, inquiries, or proceedings pending or,
to the knowledge of Xxxxxx, threatened against the Fund that would question
the right, power, or capacity of (i) Xxxxxx to act as or investment adviser
to the Fund; or (ii) Xxxxxx to enter into this Agreement or to consummate
the Transactions.
2.8.3 Fund Organization.
-------------------------
The Fund is a corporation that is duly incorporated, validly existing, and
in good standing under the laws of the State of Maryland. The Fund has the
requisite corporate power and authority to own all of its properties and
assets and to carry on its business as it is now being conducted.
2.8.4 Articles and By-Laws.
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True and complete copies of the Fund's Articles of Incorporation and
By-Laws and all amendments thereof to date are attached hereto on Exhibit
9. Schedule 2.8 includes a true and complete list of all of the officers
and directors of the Fund.
2.8.5 Tax Qualification.
-------------------------
The Fund is qualified, and has been qualified for all taxable years during
which it has conducted business, as a "regulated investment company" under
Subchapter M of the Code.
2.8.6 Taxes.
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The Fund has (i) timely filed in accordance with applicable laws all tax
returns required to be filed on or before the Closing Date, (ii) paid all
taxes shown to have become due pursuant to such tax returns, and (iii) paid
all taxes for which a notice of, or assessment or demand for, payment has
been received or which are otherwise due or payable, other than taxes that
are being contested in good faith, which contests are set forth in Schedule
2.8. Except as set forth in Schedule 2.8, in respect of the Fund (A) there
is no action, suit, proceeding, investigation, audit, claim, or assessment
pending or proposed with respect to taxes or with respect to any tax
return; (B) all amounts required to be collected or withheld by the Fund
with respect to taxes have been duly collected or withheld and any such
amounts that are required to be remitted to any taxing authority have been
duly remitted; (C) no extension of time within which to file any tax return
has been requested which tax return has not since been filed; (D) there are
no security interests for taxes upon the Assets; and (E) there are no
waivers or extensions of any applicable statute of limitations for the
assessment or collection of taxes with respect to any tax return that
remain in effect. All tax returns and other tax reports or documents,
including, without limitation, reports on Form 1099 required by the Code or
other applicable statutes, rules, or regulations were prepared and filed or
distributed in accordance with the requirements of the Code or the
applicable statutes, rules, or regulations.
2.8.7 Financial Statements.
----------------------------
Xxxxxx has furnished Avalon with copies of the audited financial statements
of the Fund for the most recent fiscal year, accompanied by the report of
independent public accountants for the Fund ("Financial Statements"). Such
Financial Statements of the Fund have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
(except as may be indicated therein or in the notes thereto) and fairly
reflect the financial position of the Fund as of the dates thereof and the
results of its operations and changes in its financial position for the
periods included therein. Except as reflected on Schedule 2.8, as of the
date hereof and as of the Closing Date, the Fund does not have any material
debts, liabilities, or obligations of any nature (whether accrued,
absolute, contingent, direct, indirect, perfected, inchoate, unliquidated,
or otherwise), except (i) to the extent clearly and accurately reflected
and accrued for or fully reserved against in the Financial Statements, (ii)
for liabilities specifically delineated as to nature and amount on the
Schedules to this Agreement, or (iii) for liabilities and obligations which
have arisen after June 30, 2000 in the ordinary course of business
substantially consistent with past custom and practice (none of which is a
liability resulting from breach of contract, securities enforcement, breach
of warranty, tort, infringement claim, or lawsuit).
2.8.8 Contracts.
-----------------
Except for the contracts and agreements disclosed on Schedule 2.8, full and
complete copies of which have been delivered to Avalon, the Fund is not a
party to or subject to any contract with Xxxxxx or any affiliate thereof or
any other material contract, debt instrument, plan, lease, franchise,
license, or permit (other than permits issued under the state securities
law) of any kind or nature whatsoever. Except as disclosed in Schedule 2.8,
no material default exists under any of the contracts and agreements listed
on Schedule 2.8. All investment advisory-related services were rendered to
the Fund pursuant to an agreement that was approved by the Fund's board of
directors and shareholders in accordance with all applicable laws and
regulations.
2.8.9 Books.
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The books and records of the Fund reflecting, among other things, the
purchase and sale of shares of the Fund by shareholders, the number of
issued and outstanding shares owned by each shareholder and the state or
other jurisdiction in which such shares were offered and sold, are,
complete and accurate in all material respects. The authorized capital
stock of the Fund as of the date of this Agreement and the issued and
outstanding number of shares of the Fund as of June 30, 2000 are disclosed
on Schedule 2.8 hereof.
2.8.10 Minute Book.
-------------------
The minute book of the Fund contains true and correct copies of (i) the
minutes of each meeting of and (ii) all written consents of the board of
directors and stockholders of the Fund.
2.8.11 Prospectus, Statement of Additional Information, Reports and
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Shareholder Communications.
---------------------------
The current prospectus and statement of additional information ("SAI") for
the Fund, copies of which have previously been furnished to Avalon, as of
the date of each prospectus and SAI, do not contain, and as supplemented by
any supplement thereto, as of the date of such supplement, do 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
not misleading. Any other reports filed with regulatory authorities and
shareholder communications, including, without limitation, the Fund's most
recent annual and semi-annual reports, as of the date of such
communication, do 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 not misleading.
2.8.12 Ability to Conduct the Business.
----------------------------------------
The Fund is not subject to or bound by any judgment, order, writ,
injunction, or decree of any court or of any governmental body, including
the Commission, or of any arbitrator, that, now or after the Closing Date
would prevent the conduct of the business material to the Fund in
accordance with its current practices.
2.8.13 Litigation or Proceedings.
---------------------------------
No litigation, investigation, inquiry, or governmental proceeding is
pending, threatened against or affecting the Fund or the properties, assets
or business of the Fund before any court, arbitrator or federal, state,
local, or foreign governmental or regulatory agency or authority or
self-regulatory authority that would be material to the Fund or delay,
hinder, or prohibit the execution and delivery of the Plan of Succession,
the solicitation of proxies from shareholders of the Fund in the manner
contemplated herein, the execution or delivery of the New Contracts by the
Fund or the consummation of the Transactions.
2.8.14 Remaining Amount.
------------------------
The calculation by the Fund of the "remaining amount" for purposes of
Section 2830(b) and (d) of the Conduct Rules of the National Association of
Securities Dealers, Inc. ("NASD"), since the beginning of the imposition of
asset based sales charges for the Fund through the last quarter-end for the
Fund, and contained in Schedule 2.8 hereof, is accurate and complete in all
material respects.
2.9 Employee Benefit Plans.
------------------------------
Neither Xxxxxx nor the Fund has established or intends to establish a
bonus, pension, profit-sharing, retirement, or any other employee benefit
plan for the benefit of its officers, directors, or employees, nor do
Xxxxxx and the Fund have any existing or potential obligations or liability
under any such plan.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF AVALON
Avalon represents and warrants to Xxxxxx as follows:
3.1 Incorporation and Qualification.
---------------------------------------
Avalon is a regulated trust company duly organized, validly existing, and
in good standing under the laws of the State of New Mexico, with the
requisite corporate power and authority to conduct an investment management
business and to own, lease, and operate properties and assets used in
connection therewith. Avalon is duly qualified or licensed to do business
as a foreign corporation, and is in good standing in every jurisdiction
necessary to provide the management services to the Fund as contemplated by
the New Contracts.
3.2 Liquidity.
-----------------
Avalon has sufficient funds available to it to pay all payments due under
this Agreement or due under any applicable New Contract on the Closing
Date.
3.3 Authority.
-----------------
Avalon has full corporate power and authority to enter into this Agreement
and the applicable New Contracts, and to carry out the transactions
contemplated herein and therein. Avalon has taken all corporate or other
action necessary to be taken by it to authorize the execution, delivery,
and performance of this Agreement and the applicable New Contracts and no
further corporate, stockholder, or other action or proceeding on the part
of Avalon is necessary to authorize this Agreement and the consummation of
the Transactions. This Agreement, when duly executed and delivered by
Avalon, will constitute a valid and binding agreement of Avalon,
enforceable against it in accordance with its terms, except as may be
limited by or subject to any bankruptcy, insolvency, reorganization,
moratorium, or other similar laws affecting the enforcement of creditors'
rights generally, and subject to general principles of equity.
3.4 No Violations.
---------------------
Avalon is not subject to or obligated under its articles of incorporation
or by-laws, or any material agreement, order, writ, injunction, or decree
or any law, rule, or regulation of any governmental authority that would be
breached or violated by its execution, delivery, or performance of this
Agreement or the New Contracts or the consummation of the Transactions.
3.5 Governmental/Regulatory Authorities.
-------------------------------------------
Except as described in Schedule 3.5 hereof, Avalon is not required to
submit any notice, report, or other filing with, or obtain any
authorization, consent, or approval from, any governmental authority or
self-.regulatory organization in connection with the execution, delivery,
and performance of this Agreement or the New Contracts or the consummation
of the Transactions.
3.6 Litigation or Proceedings.
---------------------------------
No litigation, investigation, inquiry, or governmental proceeding is
pending or threatened against Avalon before any court, arbitrator, or
federal, state, local, or foreign governmental or regulatory agency or
authority or self-regulatory authority that seeks to delay, hinder, or
prohibit execution of this Agreement, or the execution, delivery or
performance of the New Contracts or the consummation of the Transactions.
3.7 Registration or Permits.
-------------------------------
Avalon either has or will have prior to Closing full power and authority
and all necessary registrations, permits, and licenses under all applicable
state and federal statutes and regulations necessary to provide the
services contemplated by the Supervisory Contracts and the Management
Agreement.
SECTION 4. BROKERAGE
Avalon and Xxxxxx represent and warrant to each other that no person is
entitled to any broker's, finder's, or financial adviser's fee in
connection with, or on account of, this Agreement or the consummation of
the Transactions.
SECTION 5. COVENANTS AND AGREEMENTS
5.1 Covenants with Respect to the Assets.
--------------------------------------------
From the date of this Agreement through the Closing Date or termination of
this Agreement, Xxxxxx shall: (i) use the Assets and conduct and manage the
business of the Fund only in the ordinary course and in a manner
substantially consistent with its past practices, except to the extent
otherwise specifically provided in this Agreement or in accordance with its
applicable fiduciary duties; (ii) use reasonable efforts not to implement
any change in the investment policies and practices of the Fund without
prior consultation with Avalon; (iii) promptly notify Avalon of any change
in the personnel responsible for the day-to-day management of the Fund's
portfolio; (iv) not sell, transfer, lease, pledge, or otherwise dispose of
any of the Assets; and (v) not allow any of the Assets to become subject to
any material lien, security interest, or encumbrance of any nature that
will not be discharged in full prior to the Closing Date. With regard to
the foregoing, Xxxxxx represents to Avalon that no series of the Fund is
currently offered to the public; that the Fund has no plans to begin
offering shares to the public prior to the Closing, and; that Xxxxxx will
take no actions to alter the current "dormant" status of the Fund.
5.2 Covenants with Respect to the Fund.
------------------------------------------
5.2.1 Termination of Existing Advisory, Distribution and other Agreements.
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Xxxxxx will take, as applicable, all action necessary and appropriate (1)
to terminate the advisory and all other agreements between it and the Fund
or to which it and the Fund are parties, and (2) to cause the Fund to
terminate all agreements between the Fund and other parties, such
terminations to be effective as of the Closing Date.
5.2.2 Shareholder Approvals; Prospectus and Statement of Additional
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Information Supplements; Information in Proxy Materials of the Fund
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and Post-Effective Amendments to the Fund's Registration Statement.
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Promptly after the date hereof, Avalon shall file with the Commission
supplements to the Fund's prospectus and SAI, copies of which supplements
are attached hereto as Exhibit 10, reflecting the execution of this
Agreement and other related matters. Xxxxxx shall promptly and fully
cooperate with Avalon in the filing of any such prospectus and SAI
supplements.
Xxxxxx and Avalon will cooperate with each other and Avalon shall, on
behalf of the Fund, file with the Commission a post-effective amendment to
the Fund's registration statement on Form N-lA prior to the Closing Date to
reflect all changes in the Fund's affairs as a consequence of the Closing
under this Agreement. Avalon also shall, on behalf of the Fund, promptly
cause the Fund to make any other filings necessary to satisfy applicable
disclosure requirements under federal and state securities laws to enable
the public distribution of the shares of the Fund to commence after the
Closing and promptly respond to comments or inquiries by any federal and
state regulatory organizations regarding such filings. In addition, Avalon
shall, on behalf of the Fund, promptly file a post-effective amendment to
the Fund's registration statement on or immediately after the Closing Date
to reflect the consummation of the Transactions.
Avalon covenants that any information or data provided by it that describes
Avalon or the Fund or their affiliates or any of their business operations
or plans in any prospectus or SAI supplements or post-effective amendments
to the Fund's registration statement on Form N-lA filed with the Commission
after the date of this Agreement (which shall include all information with
respect to changes in the Fund's affairs as a consequence of the
Transactions), and in any proxy solicitation materials as may be required
for any shareholders meeting which may be called for the purpose of
obtaining the Requisite Approvals, and in any other document filed with the
Commission or the NASD or any other regulatory body, will not contain, at
the time any such supplements or amendments become effective, or at the
times such proxy solicitation materials are furnished, or at the time of
such meeting, or at the time such document is furnished to the Commission
or the NASD or any other regulatory body, any untrue statement of material
fact or omit to state any material fact required to be stated therein, or
necessary in order to make the statements made therein not misleading in
the light of the circumstances under which they are made.
Xxxxxx covenants that any information or data provided by it for inclusion
in any prospectus or SAI supplements or post-effective amendments to the
Fund's registration statement on Form N-lA filed with the Commission after
the date of this Agreement or for inclusion in any proxy solicitation
materials that may be required for any shareholders' meeting called for the
purpose of obtaining the Requisite Approvals, will not contain, at the time
any such supplements or amendments become effective, or at the time such
proxy solicitation materials are furnished or at the time of such meeting,
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
made therein not misleading in the light of the circumstances under which
they were made.
5.2.3 Operations of the Fund.
------------------------------
Xxxxxx agrees during the period from the date of this Agreement through the
Closing Date, and subject to its fiduciary duties, to use its best efforts
to cause the Fund to conduct its business in the ordinary course and in a
manner substantially consistent with past practices.
5.2.4 Compliance with Section 15(f).
-------------------------------------
Avalon shall take all action necessary to comply with Section 15(f) of the
1940 Act as it relates to the New Contracts.
5.2.5 Fund Taxes.
------------------
Xxxxxx agrees that it shall file, or cause to be filed, any and all tax
returns and reports (including Internal Revenue Service Forms 1 120-RIC and
1099 and comparable returns and reports required by any states) required to
be filed by the Fund with respect to any annual, semi-annual, or quarterly
period ending prior to the Closing Date and to ensure that all taxes, fees,
assessments, or charges of any kind whatsoever, if any, together with any
interest, penalties, additions to tax, or additional amounts imposed by any
taxing authority shall have been paid so far as due or provision has been
made for the payment thereof. Avalon agrees that it shall file, or cause to
be filed, any and all tax returns and reports (also including Internal
Revenue Service Forms 1 120-RIC and 1099 and comparable returns and reports
required by any states) required to be filed by the Fund with respect to
any period ending after the Closing Date and to ensure (i) that all taxes
shown as payable on such tax returns are timely paid by the Fund and (ii)
that the Fund continues to qualify as a regulated investment company under
the Code after the Closing Date.
Xxxxxx agrees that all federal and other tax returns and reports of the
Fund required by law to have been filed by the Closing Date shall have been
so filed and all required or reasonably necessary records relating to taxes
with respect to or covering the Fund have been maintained. All such reports
and returns correctly reflect the facts regarding the income, business,
assets, operations, activities, and filing status of the Fund and any other
information required to be shown thereon, and to the best of Xxxxxx'x
knowledge no such tax return is currently under audit and no assessment has
been proposed or asserted with respect to such tax returns.
5.3 Covenants with Respect to Requisite Approvals and Other Matters.
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From the date of this Agreement through the Closing Date or termination of
this Agreement, Xxxxxx shall take all reasonable steps necessary or
appropriate, and shall use its best efforts, to obtain as promptly as
practicable all Requisite Approvals and the satisfaction of all conditions
to Closing.
5.4 Covenants with Respect to Expenses.
-----------------------------------------
The parties hereto shall bear their respective expenses incurred in
connection with the preparation, execution, and performance of this
Agreement and the consummation of the Transactions, including, without
limitation, all fees and expenses of agents, representatives, and counsel,
except as provided elsewhere in this Agreement or as follows:
5.4.1 Avalon shall pay the costs and expenses of preparing all necessary
supplements for the Fund's prospectus or SAI, and post-effective
amendments to the Fund's registration statement, to be filed after
the date of this Agreement and prior to the Closing Date, and of the
Fund's proxy solicitation materials to obtain the Requisite
Approvals, if required.
5.4.2 Avalon shall pay the cost of the Fund's shareholder meeting and
adjournment, if any, called to obtain the Requisite Approvals,
including all of the expenses incurred in the printing, postage, and
mailing of any proxy solicitation materials to the Fund's
shareholders and of any proxy solicitation firm engaged to solicit
shareholder votes.
5.4.3 Xxxxxx shall pay its expenses and those of its counsel incurred in
reviewing such supplements, post-effective amendments, and proxy
solicitation materials.
5.5 Covenants with Respect to Litigation and Changes in Condition.
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5.5.1 Litigation, Proceedings, Etc.
------------------------------------
(a) From the date of this Agreement through the Closing Date or
termination of this Agreement, Xxxxxx shall notify Avalon
promptly of any material actions, proceedings, or investigations
that from the date of this Agreement are commenced against Xxxxxx
or the Fund.
(b) From the date of this Agreement through the Closing Date or
termination of this Agreement, Xxxxxx shall notify Avalon, and
Avalon shall notify Xxxxxx, promptly of any actions, proceedings,
or investigations that are commenced against either of them or
the Fund that would have a material adverse effect on any of the
Fund, the Assets, the Transactions, or this Agreement or that
would delay, restrain, or enjoin the consummation of, or declare
unlawful, the Transactions, or cause the Transactions to be
rescinded or that would delay, restrain, or enjoin the
performance of this Agreement, the Plan of Succession, or the New
Contracts.
5.5.2 Change in Condition.
---------------------------
(a) From the date of this Agreement through the Closing Date or
termination of this Agreement, Xxxxxx agrees to advise Avalon
promptly in writing of any material change in the financial
condition, operations, properties, or business of the Fund.
5.6 Covenants with Respect to Publicity.
-------------------------------------------
Xxxxxx and Avalon agree that all public announcements prior to the Closing
Date shall only be made after each party has submitted, reasonably in
advance, the text of such announcement to the other party at the address
set forth in Section 10 and each party has had a reasonable opportunity to
comment thereon and has consented to the release of such public
announcement (which consent shall not be unreasonably withheld); provided,
however, that any party may make such disclosures as are required by law
after making reasonable efforts under the circumstances to consult in
advance with the other party.
5.7 Covenants with Respect to Requisite Approvals and the Effectiveness of
---------------------------------------------------------------------------
New Contracts.
--------------
Xxxxxx and Avalon covenant and agree that each will take any and all
actions necessary and appropriate to ensure that the Requisite Approvals
have been obtained and each of the New Contracts with respect to the Fund
are duly executed and delivered by the parties thereto, and are in full
force and effect in accordance with their respective terms as of the
Closing Date.
5.8 Covenants with Respect to Name.
--------------------------------------
Avalon shall change the name of the Fund to "Avalon Socially Responsible
Funds, Inc.," or such other name or names to be specified by Avalon, to be
effective as of the Closing Date. Xxxxxx hereby assigns to Avalon all of
its right, title, and interest in and to such name(s) and all derivatives
thereof.
5.9 Covenant Not to Compete.
-------------------------------
For a period of three years subsequent to the Closing Date, neither Xxxxxx
nor any of its affiliates shall act as an investment adviser to nor create,
distribute, manage, sell, administer, or otherwise promote or assist in the
establishment of any investment company registered under the 0000 Xxx.
5.10 Covenants with Respect to Further Actions.
-------------------------------------------------
At the reasonable request of the Avalon or Xxxxxx after the Closing Date,
and without further consideration, either party, as applicable, shall from
time to time execute and deliver or cause their affiliates to execute and
deliver, as applicable, such further instruments of transfer, assignment,
or consent or other document as may be reasonably necessary or appropriate
to carry out the purposes hereof.
5.11 Covenant with Respect to Allocation of Purchase Price.
-----------------------------------------------------------
For financial reporting and all federal, state, and local income tax
purposes, Avalon and Xxxxxx hereby agree to allocate the Purchase Price as
reflected in Schedule 5.11 hereof.
SECTION 6. CONDITIONS PRECEDENT TO CLOSING
Consummation by the parties of the Transactions is subject to the
fulfillment of the following conditions on or before the Closing Date.
6.1 Requisite Approvals.
---------------------------
All Requisite Approvals with respect to the Fund shall have been obtained
prior to the Closing Date.
6.2 Execution and Delivery of the Service Contracts.
------------------------------------------------------
The Fund shall have delivered to Avalon executed copies of the New
Contracts, and the Fund shall have taken such other steps to fully and
completely deliver the Fund's shares and transfer agency records to
[Transfer Agent] and the Fund's assets and custodial records to [Custodian
Bank] and to execute and deliver all such other assets, records, documents
and agreements as is appropriate to permit the Fund to have the benefit of
the services currently provided by Mutual Shareholder Services, LLC and UMB
Bank and their affiliates to the funds managed by Avalon and its
affiliates.
6.3 Conditions Precedent to Obligations of Avalon.
--------------------------------------------------
In addition to the conditions set forth in Sections 6.1 and 6.2, the
obligations of Avalon under this Agreement to consummate the Transactions
are subject to the satisfaction, at or prior to the Closing of all of the
following conditions, any one or more of which may be waived at the option
of Avalon.
6.3.1 No Breach of Covenants; True and Correct Representations and
---------------------------------------------------------------------------
Warranties.
-----------
There shall have been no material breach by Xxxxxx in the performance of
any of its covenants herein to be performed by it in whole or in part prior
to the Closing, and the representations and warranties of Xxxxxx contained
in this Agreement shall be true and correct in all material respects as of
the Closing, except for representations or warranties that are made by
their terms as of a specified date, which shall be true and correct in all
material respects as of the specified date. Avalon shall receive at the
Closing, a certificate dated and validly executed on behalf of Xxxxxx by an
executive officer certifying, in such detail as Avalon may reasonably
require, the fulfillment of the foregoing conditions, and restating and
reconfirming as of the Closing, all of the representations and warranties
of Xxxxxx contained in this Agreement.
6.3.2 Delivery of Documents.
-----------------------------
Avalon shall have received from Xxxxxx, at the sole cost and expense of
Xxxxxx:
(a) Certificates of Good Standing, dated not more than three (3) days
prior to the Closing, with respect to Xxxxxx and the Fund by the
offices of the Secretary of the States of New Jersey and
Maryland, respectively, and by the Secretary of State of each
jurisdiction in which Xxxxxx or the Fund is qualified to do
business as a foreign corporation;
(b) Evidence that the Requisite Approvals have been obtained;
(c) The opinion of counsel for Xxxxxx, dated as of the Closing Date
in form and substance reasonably satisfactory to Avalon and its
counsel;
(d) Certified copies of the Limited Liability Company Operating
Agreement of Xxxxxx and of the Articles of Incorporation and
By-Laws of the Fund, each as in effect at the Closing Date;
(e) Certificate from an Officer of Xxxxxx, dated the Closing Date,
containing the information required pursuant to Section 6.3.1
hereof;
(f) Copies of resolutions of the unit holders and Board of Directors
of Xxxxxx certified by the Secretary thereof as having been duly
and validly adopted and in full force and effect authorizing the
sale of the Assets, execution and delivery of this Agreement, and
performance of the Transactions;
(g) Executed copies of the Supervisory Contracts.
6.3.3 Conditions to Closing.
-----------------------------
All conditions to Closing under the Plan of Succession shall have been
satisfied, including execution and delivery of the New Contracts, election
of the new Board of Directors (the names and backgrounds of which are set
forth on Schedule 6.3) and Officers of the Fund and the delivery to Avalon
of all other documents required to be delivered thereunder.
6.3.4 No Legal Obstruction.
----------------------------
No suit, action or proceeding by any person or governmental authority shall
be pending or threatened in writing, which if determined adversely could
have a material effect upon (i) Avalon, (ii) the Assets or (iii) the Fund.
No injunction, restraining order or order of any nature shall have been
issued by or be pending before any court of competent jurisdiction or any
governmental authority challenging the validity or legality of the
Transactions or restraining or prohibiting the consummation of the
Transactions.
6.4 Conditions Precedent to Obligations of Xxxxxx.
--------------------------------------------------
In addition to the conditions set forth in Section 6.1, the obligations of
Xxxxxx under this Agreement to consummate the Transactions will be subject
to the satisfaction, at or prior to the Closing, of all of the following
conditions, any one or more of which may be waived at the option of Xxxxxx:
6.4.1 Payment of Purchase Price.
---------------------------------
Avalon shall have paid to Xxxxxx at the Closing all expenses to be paid by
Avalon in accordance with the terms of this Agreement.
6.4.2 No Breach of Covenants; True and Correct Representations and
---------------------------------------------------------------------------
Warranties.
-----------
There shall have been no material breach by Avalon in the performance of
any of its covenants herein to be performed by it in whole or in part prior
to the Closing and the representations and warranties of Avalon contained
in this Agreement shall be true and correct in all material respects as of
the Closing, except for representations or warranties that are made by
their terms as of a specified date, which shall be true and correct in all
material respects as of the specified date. Xxxxxx shall receive at the
Closing a certificate dated and validly executed on behalf of Avalon by an
executive officer certifying in such detail as Xxxxxx may reasonably
require, the fulfillment of the foregoing conditions, and restating and
reconfirming as of the Closing, all of the representations and warranties
of Avalon contained in this Agreement.
6.4.3 No Legal Obstruction.
----------------------------
No injunction, restraining order or order of any nature shall have been
issued by or be pending before any court of competent jurisdiction or any
governmental authority challenging the validity or legality of the
Transactions or restraining or prohibiting the consummation of the
Transactions.
SECTION 7. SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS, AND AGREEMENTS
The representations, warranties, covenants, and agreements of the parties
contained in this Agreement shall be true and correct in all material
respects at and as of the Closing Date, except to the extent of changes
expressly contemplated by this Agreement and agreed to in writing by all of
the parties hereto. Such representations, warranties, covenants, and
agreements shall survive the Closing Date.
SECTION 8. TERMINATION
This Agreement will terminate automatically if all Requisite Approvals are
not obtained by September 15, 2000, unless extended by the mutual consent
of the parties hereto, and all other conditions to Closing are not then
satisfied. Such termination shall be without liability of one party to the
other, except as provided below. This Agreement may be terminated prior to
the Closing Date by the written consent of the parties hereto or by any
party if the other party is in material breach of any representation,
warranty, covenant, or agreement set forth herein or in the Plan of
Succession and such breach is not cured within 30 days of receipt of notice
identifying such breach. Any such termination shall be without prejudice to
the non-breaching parties' rights to seek damages for such breach.
SECTION 9. INDEMNIFICATION
9.1 Indemnification of Avalon by Xxxxxx.
-----------------------------------------
From and after the Closing Date, Xxxxxx shall, indemnify, defend, and hold
harmless Avalon and its affiliates against any loss, damage, liability,
claim, or expense, including reasonable attorneys' fees ("Losses"), that
any of them may become subject to, or shall incur or suffer, that arise out
of, result from, or relate to: (1) any breach of, or failure by Xxxxxx to
perform, any of its representations, warranties, covenants, or agreements
in this Agreement or any instrument furnished or to be furnished to Avalon
by Xxxxxx under this Agreement; or (2) any untrue or allegedly untrue
statement of a material fact, or any omission to state a material fact
required to be stated or necessary to make the statements therein not
misleading, contained in any prospectus or SAI supplement or post-effective
amendment to the Fund's registration statement on Form N-lA filed with the
Commission after the date of this Agreement and before the Closing Date, or
in any proxy solicitation materials furnished by the Board of Directors of
the Fund to its shareholders in connection with obtaining any Requisite
Approvals; provided, however, that such indemnification shall not cover any
statement or fact provided by Avalon to Xxxxxx for inclusion in any such
prospectus or SAI supplement, post-effective amendment, or proxy
solicitation materials. The amount of all indemnification provided pursuant
to this Section 9.1 shall not exceed the Purchase Price, nor shall the
amount of any indemnification, when aggregated with the amounts of any
prior indemnification paid, exceed the amount of the Purchase Price that
has been paid by Avalon to Xxxxxx as of the date of the payment of such
indemnification, provided, however, that Avalon shall have the right to
offset any future and unpaid amounts of the Purchase Price by the amount
which any indemnification to be paid exceeds the amount of Purchase Price
that has been paid, and further provided that, notwithstanding any
limitation on indemnification provided by this Section 9.1, Avalon shall be
entitled to indemnification for any liability arising from any failure of
the Fund to have complied with relevant provisions of Maryland and federal
law with respect to the Fund's issuance of shares or establishment of
classes.
9.2 Indemnification of Xxxxxx by Avalon.
-----------------------------------------
From and after the Closing Date, Avalon shall indemnify, defend, and hold
harmless Xxxxxx and its affiliates, against any Losses that any of them may
become subject to, or shall incur or suffer, that arise out of, result
from, or relate to; (1) breach of, or failure by Avalon to perform, any of
its representations, warranties, covenants or any agreements contained in
this Agreement or in any Schedule, Exhibit, certificate, or other agreement
or instrument furnished or to be furnished to Xxxxxx under this Agreement;
(2) any untrue or allegedly untrue statement of a material fact, or any
omission to state a material fact required to be stated or necessary to
make the statement not misleading, contained in any prospectus or SAI
supplement or post-effective amendment to the Fund's registration statement
on Form N-lA filed with the Commission after the date of this Agreement or
in any proxy solicitation materials soliciting Fund shareholders on behalf
of the Board of Directors for the Requisite Approvals; provided, however,
that such indemnification shall relate only to any statement or fact
provided by Avalon for inclusion in any such prospectus or SAI supplement,
post-effective amendment, or proxy solicitation materials.
SECTION 10. NOTICES
All notices and other communications under this Agreement must be in
writing and will be deemed to have been duly given or delivered when
delivered by hand (including by Federal Express or similar express courier)
or three days after being mailed by prepaid registered or certified mail,
return receipt requested:
To Xxxxxx To Avalon
--------- ---------
Xxxxxxx X. Xxxxxx Xxxxx Xxxxxx
Xxxxxx Investment Advisors, LLC Avalon Trust Company
000 Xxx Xxxx 000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000 Xxxxx Xx, XX 00000-0000
With a copy to:
---------------
Xxxxx Xxxxx, Esq.
Xxxxx Xxxxx & Assoc., P.C.
4747 Research Forest Drive,
Suite 180, # 303
The Woodlands, TX 77381
or to any other address that a party to this Agreement shall have last
designated by notice given in accordance with this Section.
SECTION 11. ENTIRE AGREEMENT; MODIFICATION
This Agreement, together with its Exhibits and Schedules and the Plan of
Succession, contains the entire agreement and all understandings of the
parties and supersedes all prior agreements and understandings, both
written and oral, between the parties with respect to the Transactions.
This Agreement shall not be modified, supplemented, changed, or amended
except by an instrument in writing signed by, or on behalf of, all parties
to this Agreement making specific reference to this Agreement.
SECTION 12. LAW TO GOVERN
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New Mexico applicable to contracts
entered into and to be performed solely in the State of New Mexico,
provided that nothing herein shall be construed in a manner inconsistent
with the 1940 Act or the Advisers Act or the rules, orders, or regulations
of such governmental agencies having authority with respect to such Acts.
SECTION 13. ASSIGNMENT; SUCCESSORS
No party shall delegate its obligations hereunder without the prior written
consent of all parties, which consent may be withheld at the sole
discretion of the granting party. This Agreement shall bind and inure to
the benefit of the parties hereto and their legal representatives and
respective successors and permitted assigns.
SECTION 14. WAIVER
No waiver by any party to this Agreement of its rights under any provisions
of this Agreement shall be effective unless it shall be made in writing. No
failure by any party to this Agreement to take any action with regard to
any breach of this Agreement or default by the other parties to this
Agreement shall constitute a waiver of such party's right to enforce any
provision of this Agreement or to take action with regard to the breach or
default or any subsequent breach or default by the other parties.
SECTION 15. FURTHER ASSURANCES
Each party shall cooperate and take such actions as may be reasonably
requested by the other parties hereto in order to carry out the provisions
and purposes of this Agreement and to complete the Transactions.
SECTION 16. COUNTERPARTS
This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the
same instrument. Once each party to this Agreement has executed a copy of
this Agreement, this Agreement shall be considered fully executed and
effective, notwithstanding that all parties have not executed the same
copy.
SECTION 17. SEVERABILITY
In the event that any one or more of the provisions contained in this
Agreement, or the application thereof in any circumstances, is held
invalid, illegal, or unenforceable in any respect for any reason, the
validity, legality, and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in
any way impaired thereby, it being intended that all of the rights and
privileges of the parties hereto shall be enforceable to the fullest extent
permitted by law.
SECTION 13. PARAGRAPH HEADINGS
The paragraph headings in this Agreement are for convenience of reference
only and shall not be deemed to alter or affect any provision of this
Agreement.
SECTION 19. THIRD PARTIES.
Nothing in this Agreement, whether express or implied, except as provided
in Section 10 hereof, is intended to confer any rights or remedies under or
by reason of this Agreement on the Fund, the shareholders of the Fund or
any persons, other than the parties hereto and their respective legal
representatives, successors, or permitted assigns, nor is anything in this
Agreement, except as provided in Section 9 hereto intended to relieve or
discharge the obligation or liability of any third persons to any party to
this Agreement, nor shall any provision give any third persons any right of
subrogation or action over or against any party to this Agreement.
IN WITNESS WHEREOF, the parties to this Agreement have executed this
Agreement as of the date first written above.
XXXXXX INVESTMENT AVALON TRUST COMPANY
ADVISORS, LLC
---------------------------- ---------------------------
By: Xxxxxxx X. Xxxxxx By: Xxxxx Xxxxxx
Its: President Its: President and Chief
Executive Officer
ATTEST ATTEST
--------------------------- ------------------------------
By: _______________________ By: __________________________
Secretary to Xxxxxx Investment Secretary to Avalon Trust Company
Advisors, LLC
SCHEDULE 2.3
ASSETS OF XXXXXX INVESTMENT ADVISORS, LLC
Investment Advisory Agreement between Xxxxxx and the Fund for each series of the
Fund.
1. Fund Shareholder Files;
2. Computer Generated Reports relating to the Fund and each series thereof;
3. NAV Calculations for the Fund and each series thereof that are or have been
offered to the public;
4. Corporate Records relating to the Fund;
5. Accounting Files relating to the Fund;
6. Auditors' Opinions relating to the Fund;
7. Selling Agent Agreements relating to the Fund;
8. State Blue Sky Records relating to the Fund;
9. Federal and State Compliance Records relating to the Fund;
10. General Business Records relating to the Fund; and
11. Information relating to the Fund's Security Holdings.
SPECIFIC EXCLUSIONS:
--------------------
The Assets of Xxxxxx shall not include the amount of cash or cash equivalents
held by Xxxxxx at the time of the Closing or any assets of Xxxxxx not
specifically relating to or required for the use of the Fund.
SCHEDULE 2.5
REQUISITE APPROVALS
Consummation of this Agreement is specifically made contingent upon the
obtaining of the following approvals prior to or at the Closing Date:
1. Investment Advisory Agreement (in the form of Exhibit 3);
2. the Plan of Distribution (in the form of Exhibit 4); and
3. the Fund's Amended and Restated Articles of Incorporation (in the form of
Exhibit 5).
The election of new directors (the names and backgrounds of which are set forth
on Schedule 6.3).
Schedule 2.6
[Pending or Threatened Litigation or Proceedings]
Schedule 2.7
[Regulatory Compliance]
Schedule 2.8
[Regulatory Compliance of the Fund-- Blue Sky]
[Fund's Officers and Directors]
[Fund's Tax Liabilities]
[Fund's Financial Statements]
[Material Defaults under Fund's Contracts]
[Fund's Authorized Capital Stock]
[Fund's Remaining Amount Calculation]
SCHEDULE 3.5
[Consents or Approvals from Governmental/Regulatory Authorities of Avalon]
SCHEDULE 5.11
[Allocation of Purchase Price]
Schedule 6.3
[New Board of Directors and Officers of Fund]
--------------------------------------------------------------------------------
