AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the “Agreement”) is made as of this 15th day of May, 2008, by and between Kelmoore Strategy Fund, Kelmoore Strategy Eagle Fund, Kelmoore Strategy Liberty Fund (the “Transferring Funds” and each a "Transferring Fund"), each a series of Kelmoore Strategic Trust (the “Trust”) and the Xxxxxx Monthly Distribution Fund (the "Acquiring Fund"), a series of Xxxxxx Funds (“Xxxxxx”). The Kelmoore Strategic Trust is a Delaware statutory trust, with its principal place of business at 0000 Xxxx Xxxxxxxx Xxxx, Xxxxx 000, Xxxx Xxxx, XX 00000. Xxxxxx is a Delaware statutory trust, with its principal place of business at 00000 Xxxxx Xxxxxxxx Xxxxxxx, Xxxxx 000 Xxx Xxxxx, XX 00000.
The reorganization will consist of (i) the transfer of all of the assets net of liabilities of the Transferring Funds in exchange solely for shares of beneficial interest, without par value per share, of the Acquiring Fund (the “Acquiring Fund Shares”); (ii) the assumption by the Acquiring Fund of all of the liabilities of the Transferring Funds; and (iii) the distribution, after the Closing Date, as that term is defined in paragraph 3.1, of the Acquiring Fund Shares to the shareholders of the Transferring Funds in liquidation of the Transferring Fund as provided herein, all upon the terms and conditions hereinafter set forth in this Agreement (the “Reorganization”).
WHEREAS, the Transferring Funds and the Acquiring Fund are each a separate investment series of an open-end, registered investment company of the management type and the Transferring Funds own securities that generally are assets of the character in which the Acquiring Fund is permitted to invest;
WHEREAS, the Transferring Funds and the Acquiring Fund are authorized to issue their shares of beneficial interest;
WHEREAS, the Board of Trustees of the Trust, including a majority of the Trustees who are not “interested persons” as that term is defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended (the “1940 Act”) (“Independent Trustees”), has determined that the transactions contemplated herein will be in the best interests of each Transferring Fund and has further determined that the interests of the existing shareholders of the Transferring Funds will not be diluted as a result of the transactions contemplated herein;
WHEREAS, the Board of Trustees of Xxxxxx, including a majority of the Independent Trustees, has determined that the transactions contemplated herein will be in the best interests of the Acquiring Fund and has further determined that the interests of the existing shareholders of the Acquiring Fund will not be diluted as a result of the transactions contemplated herein;
NOW, THEREFORE, in consideration of the representations, warranties and agreements hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
TRANSFER OF ASSETS OF EACH TRANSFERRING FUND IN EXCHANGE FOR THE ACQUIRING FUND SHARES AND ASSUMPTION OF TRANSFERRING FUND'S LIABILITIES AND LIQUIDATION OF THE TRANSFERRING FUNDS
1.1
THE EXCHANGE. Subject to the terms and conditions herein set forth and on the basis of the representations and warranties contained herein, each Transferring Fund agrees to transfer all of the Transferring Fund's assets as set forth in paragraph 1.2 to the Acquiring Fund. The Acquiring Fund agrees in exchange for each Transferring Fund's assets (i) to deliver to the Transferring Fund the number of Acquiring Fund Shares, including fractional Acquiring Fund Shares, computed in the manner and as of the time and date set forth in paragraphs 2.2 and 2.3; and (ii) to assume all of the liabilities of the Transferring Fund, as set forth in paragraph 1.3. Such transactions shall take place on the Closing Date provided for in paragraph 3.1.
1.2
ASSETS TO BE ACQUIRED. The assets of each Transferring Fund to be acquired by the Acquiring Fund shall consist of all property, including, without limitation, all cash, securities, commodities, interests in futures and dividends or interest receivables, that is owned by the Transferring Fund and any deferred or prepaid expenses shown as an asset on the books of the Transferring Fund on the Closing Date.
Each Transferring Fund has provided the Acquiring Fund with its most recent audited statement of investments, statement of assets and liabilities, statement of operations and statement of changes in net assets, which contain a list of all of each Transferring Fund's assets as of the date thereof. Each Transferring Fund hereby represents that as of the date of the execution of this Agreement there have been no material changes in its financial position as reflected in said financial statements other than those occurring in the ordinary course of business in connection with the purchase and sale of securities and the payment of normal operating expenses and the payment of dividends, capital gains distributions and redemption proceeds to shareholders. Each Transferring Fund reserves the right to sell any of such securities, but will not, without the prior written approval of the Acquiring Fund, acquire any additional securities other than securities of the type in which the Acquiring Fund is permitted to invest.
The Acquiring Fund will, within a reasonable time prior to the Closing Date, furnish each Transferring Fund with a list of the securities, if any, on the Transferring Fund's list referred to in the second sentence of this paragraph that do not conform to the Acquiring Fund’s investment objective, policies, and restrictions. The Transferring Funds will, within a reasonable period of time (not less than 30 days) prior to the Closing Date, furnish the Acquiring Fund with a list of portfolio securities and other investments. In the event that a Transferring Fund holds any investments that the Acquiring Fund may not hold, the Transferring Fund, if requested by the Acquiring Fund, will dispose of such securities prior to the Closing Date. In addition, if it is determined that the Transferring Funds and the Acquiring Fund portfolios, when aggregated, would contain investments exceeding certain percentage limitations imposed upon the Acquiring Fund with respect to such investments, the Transferring Funds if requested by the Acquiring Fund will dispose of a sufficient amount of such investments as may be necessary to avoid exceeding such limitations as of the Closing Date. Notwithstanding the foregoing, nothing herein will require a Transferring Fund to dispose of any portfolio securities or other investments, if, in the reasonable judgment of the Trust’s Board of Trustees on behalf of the Transferring Fund or investment adviser, such disposition would adversely affect the tax-free nature of the Reorganization for federal income tax purposes or would otherwise not be in the best interests of the Transferring Fund.
1.3
LIABILITIES TO BE ASSUMED. Each Transferring Fund will endeavor to discharge to the extent possible, all of its known liabilities and obligations prior to the Closing Date. The Acquiring Fund shall assume all of the Transferring Funds' liabilities and obligations of any kind whatsoever, whether absolute, accrued, contingent or otherwise in existence on the Closing Date.
1.4
LIQUIDATION AND DISTRIBUTION. On or as soon after the Closing Date as is conveniently practicable, (a) each Transferring Fund will liquidate and distribute pro rata to the Transferring Fund's shareholders (the “Transferring Fund Shareholders”) of record, determined as of the close of business on the New York Stock Exchange on the business day next preceding the Closing Date (such time and date being hereinafter called the “Valuation Date”), the Acquiring Fund Shares received by the Transferring Fund pursuant to paragraph 1.1; and (b) the Transferring Funds will thereupon proceed to termination as set forth in paragraph 1.8 below. Such liquidation and distribution will be accomplished by the transfer of the Acquiring Fund Shares then credited to the account of the Transferring Funds on the books of the Acquiring Fund to open accounts on the share records of the Acquiring Fund in the names of the Transferring Fund Shareholders and representing the respective pro rata number of the Acquiring Fund Shares due such shareholders. Such liquidation and distribution shall be accomplished on a class equivalent basis, i.e., Class A shares of the Transferring Funds shall be exchanged for Class A (or similar type) shares of the Acquiring Fund, Class C shares of the Transferring Funds shall be exchanged for Class C (or similar type) shares of the Acquiring Fund. All issued and outstanding shares of the Transferring Funds will simultaneously be canceled on the books of the Transferring Funds. The Acquiring Fund shall not issue certificates representing the Acquiring Fund Shares in connection with such exchange.
1.5
OWNERSHIP OF SHARES. Ownership of Acquiring Fund Shares will be shown on the books of the Acquiring Fund’s transfer agent. Shares of the Acquiring Fund will be issued in the manner described in the combined registration and proxy statement on Form N-14 (the “Registration/Proxy Statement”) which will have been distributed to shareholders of the Transferring Fund as described in paragraph 4.1(o).
1.6
TRANSFER TAXES. Transferring Fund Shareholders shall pay any transfer taxes payable upon the issuance of Acquiring Fund Shares. Any transfer taxes payable upon issuance of the Acquiring Fund Shares in a name other than the registered holder of the Transferring Funds shares on the books of the Transferring Funds as of that time shall, as a condition of such issuance and transfer, be paid by the person to whom such Acquiring Fund Shares are to be issued and transferred.
1.7
REPORTING RESPONSIBILITY. Any regulatory reporting responsibility of the Transferring Funds is and shall remain the responsibility of the Transferring Funds up to and including the Closing Date and such later date on which the Transferring Funds are terminated.
1.8
TERMINATION. The Trust shall take all necessary and appropriate steps under applicable law to make all distributions pursuant to paragraph 1.4 and terminate the Transferring Funds and the Trust promptly following the Closing Date.
ARTICLE II
VALUATION
2.1
VALUATION OF ASSETS. The value of each Transferring Fund's assets to be acquired by the Acquiring Fund hereunder shall be the value of such assets computed as of the close of business on the Valuation Date (as defined in paragraph 1.4), using the valuation procedures set forth in the Trust’s Agreement and Declaration of Trust and the Transferring Fund's then current prospectus and statement of additional information or such other valuation procedures as may be mutually agreed upon by the parties.
2.2
VALUATION OF SHARES. For purposes of the Reorganization, the net asset value per share of the Acquiring Fund Shares shall be equal to the Transferring Funds' aggregate net asset value per share computed as of the close of business on the New York Stock Exchange on the Valuation Date.
2.3
SHARES TO BE ISSUED. The number of full and fractional Acquiring Fund Shares to be issued in exchange for each Transferring Fund’s assets shall be equal to the number of full and fractional Transferring Fund Shares issued and outstanding on the Valuation Date adjusted by differences in net asset value per share between the Transferring Fund and the Acquiring Fund. Such issuance shall be accomplished on a class equivalent basis, i.e., Class A (or similar type) shares of the Acquiring Fund shall be issued in exchange for Class A shares of each Transferring Fund, Class C (or similar type) shares of the Acquiring Fund shall be issued in exchange for Class C shares of each Transferring Fund.
2.4
DETERMINATION OF VALUE. All computations of value shall be made by PFPC, Inc., the Transferring Funds' accounting agent, in accordance with its regular practice in pricing the shares and assets of the Transferring Fund and confirmed by Gemini Fund Services, LLC, the Acquiring Fund’s accounting agent.
ARTICLE III
CLOSING AND CLOSING DATE
3.1
CLOSING DATE. The Parties shall make respective best efforts to close the Reorganization (the “Closing”) on or before August 29, 2008 (the “Closing Date”), unless the parties agree in writing otherwise. All acts taking place at the Closing shall be deemed to take place simultaneously immediately prior to the opening of business on the Closing Date unless otherwise provided. The Closing shall be held as of 5:00 p.m. Eastern time at the offices of Xxxxxx, or at such other time and/or place as the parties may agree.
3.2
EFFECT OF SUSPENSION IN TRADING. In the event that on the Valuation Date (a) the New York Stock Exchange or another primary trading market for portfolio securities of the Acquiring Fund or the Transferring Funds shall be closed to trading or trading thereon shall be restricted; or (b) trading or the reporting of trading on said Exchange or elsewhere shall be disrupted so that accurate appraisal of the value of the net assets of the Acquiring Fund or the Transferring Funds is impracticable as mutually determined by the parties, the Valuation Date (and the Closing Date) shall be postponed until the first business day after the day when trading shall have been fully resumed and reporting shall have been restored.
3.3
TRANSFER AGENT’S CERTIFICATE. The Trust shall instruct its transfer agent, PFPC, Inc., to deliver at the Closing a certificate of an authorized officer stating that its records contain the names and addresses of each Transferring Fund Shareholder and the number and percentage ownership of outstanding shares owned by each such shareholder immediately prior to the Closing. The Acquiring Fund shall issue and deliver, or cause its transfer agent to issue and deliver, to the Secretary of the Trust a confirmation evidencing the Acquiring Fund Shares to be credited on the Closing Date or provide evidence satisfactory to the Trust that such Acquiring Fund Shares have been credited to the applicable Transferring Fund's account on the books of the Acquiring Fund. At the Closing, each party shall deliver to the other such bills of sale, checks, assignments, share certificates, if any, receipts and other documents as such other party or its counsel may reasonably request.
3.4
CUSTODIAN’S CERTIFICATE. The Trust shall instruct its custodian, PFPC Trust Company, to deliver at the Closing a certificate of an authorized officer stating that: (a) the Transferring Funds' portfolio securities, cash, and any other assets shall have been delivered in proper form to the Acquiring Fund on the Closing Date; and (b) all necessary taxes including all applicable federal and state stock transfer stamps, if any, shall have been paid, or provision for payment shall have been made, in conjunction with the delivery of portfolio securities by the Transferring Funds. The Transferring Fund’s portfolio securities represented by a certificate or other written instrument shall be presented by PFPC Trust Company to the custodian for the Acquiring Fund, Citibank, N.A., for examination no later than five (5) business days preceding the Closing Date and transferred and delivered by the Transferring Fund as of the Closing Date for the account of the Acquiring Fund, duly endorsed in proper form for transfer in such condition as to constitute good delivery thereof free and clear of all liens, encumbrances, and claims whatsoever, in accordance with the custom of brokers. The Transferring Fund’s securities and instruments deposited with a securities depository (as defined in Rule 17f-4 under the 0000 Xxx) or other permitted counterparties or a futures commission merchant (as defined in Rule 17f-6 under the 0000 Xxx) shall be delivered as of the Closing Date by book entry in accordance with the customary practices of such depositories and futures commission merchants. The cash to be transferred by the Transferring Fund shall be transferred and delivered by the Transferring Fund as of the Closing Date for the account of the Acquiring Fund.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1
REPRESENTATIONS OF THE TRANSFERRING FUNDS. Each Transferring Fund represents and warrants to Xxxxxx and the Acquiring Fund as follows:
(a)
The Transferring Fund is a separate investment series of the Trust, a business trust duly organized, validly existing and in good standing under the laws of the State of Delaware.
(b)
The Transferring Fund is a separate investment series of the Trust, which is registered as an investment company classified as a management company of the open-end type, and its registration with the Securities and Exchange Commission (the “Commission”) as an investment company under the 1940 Act, is in full force and effect.
(c)
The current prospectus and Statement of Additional Information of each Transferring Fund, to the extent incorporated by reference in the Registration/Proxy Statement, conforms in all material respects to the applicable requirements of the Securities Act of 1933, as amended (the “1933 Act”), and the 1940 Act and the rules and regulations of the Commission 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.
(d)
Each Transferring Fund is not, and the execution, delivery, and performance of this Agreement (subject to shareholder approval) will not result, in violation of any provision of the Trust’s Agreement and Declaration of Trust or By-Laws or of any material agreement, indenture, instrument, contract, lease, or other undertaking to which a Transferring Fund is a party or by which it is bound.
(e)
Each Transferring Fund has no material contracts or other commitments (other than this Agreement) that will be terminated with liability to it prior to the Closing Date, except for liabilities, if any, to be discharged as provided in paragraph 1.3 hereof.
(f)
Except as otherwise disclosed in writing to and accepted by the Acquiring Fund, no litigation, administrative proceeding, or investigation of or before any court or governmental body is presently pending or to its knowledge threatened against each Transferring Fund or any of its properties or assets, which, if adversely determined, would materially and adversely affect its financial condition, the conduct of business, or the ability of a Transferring Fund to carry out the transactions contemplated by this Agreement. Each Transferring Fund know of no facts that might form the basis for the institution of such proceedings and is not a party to or subject to the provisions of any order, decree, or judgment of any court or governmental body that materially and adversely affects its business or ability to consummate the transactions herein contemplated.
(g)
At the Closing date, all audited financial statements of each Transferring Fund at December 31, 2007 are in accordance with generally accepted accounting principles consistently applied, and such statements (copies of which have been furnished to the Acquiring Fund) fairly reflect the financial condition of each Transferring Fund as of such date, and there are no known contingent liabilities of each Transferring Fund as of such date not disclosed therein.
(h)
Since December 31, 2007, there has not been any material adverse change in each Transferring Fund's financial condition, assets, liabilities, or business other than changes occurring in the ordinary course of business, or any incurrence by each Transferring Fund of indebtedness maturing more than one year from the date such indebtedness was incurred, except as otherwise disclosed to and accepted by the Acquiring Fund. For the purposes of this subparagraph (h), a decline in the net asset value of a Transferring Fund due to declines in the value of Transferring Fund’s assets, the discharge of the Transferring Fund liabilities or the redemption of Transferring Fund shares by the Transferring Fund shareholders shall not constitute a material adverse change.
(i)
At the Closing Date, all federal and other tax returns and reports of each Transferring Fund required by law to have been filed by such date shall have been filed, and all federal and other taxes shown due on said returns and reports shall have been paid, or provision shall have been made for the payment thereof. To the best of each Transferring Fund's knowledge, no such return is currently under audit, and no assessment has been asserted with respect to such returns.
(j)
For each fiscal year of its operation, each Transferring Fund has met the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended, (the "Code") for qualification and treatment as a regulated investment company and has distributed in each such year all investment company taxable income and net capital gains as defined in the Code and before the Closing Date will have declared dividends sufficient to distribute all of its investment company taxable income for the period ending on the Closing Date. Each Transferring Fund will continue to meet the requirements of Subchapter M of the Code for qualification and treatment as a regulated investment company for its current fiscal year.
(k)
All issued and outstanding shares of each Transferring Fund are, and at the Closing Date will be, duly and validly issued and outstanding, fully paid and non-assessable by each Transferring Fund. All of the issued and outstanding shares of each Transferring Fund will, at the time of the Closing Date, be held by the persons and in the amounts set forth in the records of the transfer agent as provided in paragraph 3.3. Each Transferring Fund does not have outstanding any options, warrants, or other rights to subscribe for or purchase any of each Transferring Fund's shares, nor is there outstanding any security convertible into any of each of the Transferring Fund's shares.
(l)
At the Closing Date, each Transferring Fund or its nominee will have good and marketable title to each Transferring Fund's assets to be transferred to the Acquiring Fund pursuant to paragraph 1.2 and full right, power, and authority to sell, assign, transfer, and deliver such assets hereunder, and, upon delivery and payment for such assets, the Acquiring Fund will acquire good and marketable title thereto, subject to no restrictions on the full transfer thereof, including such restrictions as might arise under the 1933 Act, other than as disclosed to the Acquiring Fund and accepted by the Acquiring Fund.
(m)
The execution, delivery, and performance of this Agreement have been duly authorized by all necessary action on the part of each Transferring Fund and, subject to approval by each Transferring Fund's shareholders, this Agreement constitutes a valid and binding obligation of each Transferring Fund, enforceable in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors’ rights and to general equity principles.
(n)
The information furnished by each Transferring Fund for use in no-action letters, applications for orders, registration statements, proxy materials, and other documents that may be necessary in connection with the transactions contemplated hereby is accurate and complete in all material respects and complies in all material respects with federal securities and other laws and regulations thereunder applicable thereto.
(o)
The Registration/Proxy Statement complies in all material respects with the Securities Exchange Act of 1934 (the “1934 Act”) and (only as it relates to each Transferring Fund) does 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.
4.2
REPRESENTATIONS OF THE ACQUIRING FUND. The Acquiring Fund represents and warrants to the Trust and each Transferring Fund as follows:
(a)
The Acquiring Fund is a separate investment series of Xxxxxx, a statutory trust duly organized, validly existing and in good standing under the laws of the State of Delaware.
(b)
The Acquiring Fund is a separate investment series of Xxxxxx, which is registered as an investment company classified as a management company of the open-end type, and its registration with the Commission as an investment company under the 1940 Act, is in full force and effect.
(c)
The prospectus and statement of additional information, as of the Closing Date, of the Acquiring Fund will conform in all material respects to the applicable requirements of the 1933 Act and the 1940 Act and the rules and regulations of the Commission thereunder and will 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.
(d)
The Acquiring Fund is not, and the execution, delivery and performance of this Agreement will not result, in violation of any provision of Dunham's Agreement and Declaration of Trust or By-Laws or of any material agreement, indenture, instrument, contract, lease, or other undertaking to which the Acquiring Fund is a party or by which it is bound.
(e)
Except as otherwise disclosed in writing to each Transferring Fund and accepted by each Transferring Fund, no litigation, administrative proceeding or investigation of or before any court or governmental body is presently pending or to its knowledge threatened against Xxxxxx or any of its properties or assets, which, if adversely determined, would materially and adversely affect its financial condition and the conduct of its business or the ability of the Acquiring Fund to carry out the transactions contemplated by this Agreement. Xxxxxx knows of no facts that might form the basis for the institution of such proceedings and is not a party to or subject to the provisions of any order, decree, or judgment of any court or governmental body that materially and adversely affects its business or its ability to consummate the transactions contemplated herein.
(f)
At the Closing Date, all federal and other tax returns and reports of the Acquiring Fund required by law then to be filed by such date, if any, shall have been filed, and all federal and other taxes shown due on said returns and reports shall have been paid or provision shall have been made for the payment thereof. To the best of the Acquiring Fund’s knowledge, no such return is currently under audit, and no assessment has been asserted with respect to such returns.
(g)
The Acquiring Fund has not commenced operation; however, the Acquiring Fund intends to meet the requirements of Subchapter M of the Code for qualification and treatment as a regulated investment company for the fiscal year in which the Reorganization occurs and intends to continue to meet all the requirements for that qualification and intends to distribute in each fiscal year all investment company taxable income and net capital gains.
(h)
The Acquiring Fund does not have outstanding any options, warrants, or other rights to subscribe for or purchase any Acquiring Fund Shares, nor is there outstanding any security convertible into any Acquiring Fund Shares.
(i)
The execution, delivery, and performance of this Agreement have been duly authorized by all necessary action on the part of Xxxxxx, and this Agreement constitutes a valid and binding obligation of Xxxxxx enforceable in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors’ rights and to general equity principles.
(j)
The Acquiring Fund Shares to be issued and delivered to each Transferring Fund, for the account of each Transferring Fund Shareholders, pursuant to the terms of this Agreement will, at the Closing Date, have been duly authorized and, when so issued and delivered, will be duly and validly issued Acquiring Fund Shares, and will be fully paid and non-assessable.
(k)
The information furnished by Xxxxxx for use in no-action letters, applications for orders, registration statements, proxy materials, and other documents that may be necessary in connection with the transactions contemplated hereby is accurate and complete in all material respects and complies in all material respects with federal securities and other laws and regulations applicable thereto.
(l)
The Acquiring Fund has provided each Transferring Fund with information reasonably necessary for the preparation of a Registration/Proxy Statement in compliance with the 1933 and1934 Acts in connection with the meeting of the shareholders of each Transferring Fund to approve this Agreement and the transactions contemplated hereby. The Registration/Proxy Statement (only insofar as it relates to the Acquiring Fund) does 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.
(m)
The Acquiring Fund agrees to use all reasonable efforts to obtain the approvals and authorizations required by the 1933 Act, the 1940 Act, and such of the state Blue Sky or securities laws as it may deem appropriate in order to continue its operations after the Closing Date.
(n)
Xxxxxx has filed a post-effective amendment to its registration statement on Form N-1 A, with the Commission, for the purpose of registering the Acquiring Fund as a series of Xxxxxx. The post-effective amendment will be effective on or before the Closing Date.
ARTICLE V
COVENANTS OF THE ACQUIRING FUND AND THE TRANSFERRING FUNDS
5.1
OPERATION IN ORDINARY COURSE. The Transferring Funds will operate their business in the ordinary course between the date hereof and the Closing Date, it being understood that such ordinary course of business will include shareholder purchases and the distribution of customary dividends, distributions, and redemptions. The Acquiring Fund will not commence operation until the Closing Date.
5.2
APPROVAL BY SHAREHOLDERS. The Trust will call a meeting of the shareholders of the Transferring Funds to consider and act upon this Agreement and to take all other action necessary to obtain approval of the transactions contemplated herein.
5.3
INVESTMENT REPRESENTATION. The Transferring Funds covenant that the Acquiring Fund Shares to be issued hereunder are not being acquired for the purpose of making any distribution thereof other than in accordance with the terms of this Agreement.
5.4
ADDITIONAL INFORMATION. The Transferring Funds will assist the Acquiring Fund in obtaining such information as the Acquiring Fund reasonably requests concerning the beneficial ownership of the Transferring Funds shares.
5.5
FURTHER ACTION. Subject to the provisions of this Agreement, Xxxxxx and the Transferring Funds will each take, or cause to be taken, all action, and do or cause to be done, all things reasonably necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement, including any actions required to be taken after the Closing Date.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TRANSFERRING FUNDS
The obligations of the Transferring Funds to complete the transactions provided for herein shall be subject, at its election, to the performance by the Acquiring Fund of all the obligations to be performed by it hereunder on or before the Closing Date, and, in addition thereto, the following further conditions:
6.1
All representations and warranties of Xxxxxx contained in this Agreement shall be true and correct in all material respects as of the date hereof and as of the Closing Date with the same force and effect as if made on and as of the Closing Date, and the Acquiring Fund shall have delivered to the Transferring Funds a certificate executed in its name by Dunham’s President or Vice President, in form and substance reasonably satisfactory to the Transferring Funds and dated as of the Closing Date, to such effect and as to such other matters as the Transferring Funds shall reasonably request. The Transferring Fund shall have received certified copies of the resolutions adopted by the Board of Trustees of the Acquiring Fund approving this Agreement and the transactions contemplated herein.
6.2
With respect to the Acquiring Fund, the Trust shall have received on the Closing Date an opinion from Xxxxxxxx Xxxx LLP, counsel to Xxxxxx and the Acquiring Fund, dated as of the Closing Date, in a form reasonably satisfactory to the Transferring Funds, covering the following points:
(a)
The Acquiring Fund is an investment series of a statutory trust duly organized, validly existing and in good standing under the laws of the State of Delaware, and to such counsel’s knowledge, has the trust power to own all of its properties and assets and to carry on its business as presently conducted.
(b)
The Acquiring Fund is a series of a Delaware statutory trust registered as an investment company under the 1940 Act, and, to such counsel’s knowledge, such registration with the Commission as an investment company under the 1940 Act is in full force and effect.
(c)
This Agreement has been duly authorized, executed, and delivered by Xxxxxx on behalf of the Acquiring Fund, and, assuming due authorization, execution and delivery of this Agreement by the Transferring Funds, is a valid and binding obligation of the Acquiring Fund enforceable against the Acquiring Fund in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium, and other laws relating to or affecting creditors’ rights generally and to general equity principles.
(d)
Assuming that a consideration of not less than the net asset value of the Acquiring Fund Shares has been paid, the Acquiring Fund Shares to be issued and delivered to the Transferring Funds on behalf of the Transferring Funds' Shareholders as provided by this Agreement are duly authorized and upon such delivery will be legally issued and outstanding and fully paid and non-assessable, and no shareholder of the Acquiring Fund has any statutory preemptive rights in respect thereof.
(e)
The execution and delivery of this Agreement did not, and the consummation of the transactions contemplated hereby will not, result in a violation of Dunham's Agreement and Declaration of Trust or By-Laws or a material provision of any material agreement, indenture, instrument, contract, lease or other undertaking (in each case known to such counsel) to which Xxxxxx is a party or by which it or any of its properties may be bound, or to the knowledge of its counsel, result in the acceleration of any obligation or the imposition of any penalty under any agreement, judgment, or decree to which Xxxxxx or the Acquiring Fund is a party or by which it is bound.
(f)
Only in so far as they relate to the Acquiring Fund, the descriptions in the Proxy Statement of statutes, legal and governmental proceedings and material contracts, if any, are accurate and fairly present the information required to be shown.
(g)
In the ordinary course of such counsel’s representation of Xxxxxx, and without having made any investigation, such counsel does not know of any legal or governmental proceedings, only insofar as they relate to the Acquiring Fund, existing on or before the effective date of the Proxy Statement or the Closing Date required to be described in the Proxy Statement or to be filed as exhibits to the Proxy Statement which are not described or filed as required.
(h)
In the ordinary course of such counsel’s representation of Xxxxxx, and without having made any investigation, and except as otherwise disclosed, to the knowledge of such counsel, no litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or threatened as to Xxxxxx or any of its properties or assets and Xxxxxx is not a party to or subject to the provisions of any order, decree or judgment of any court or governmental body, which materially and adversely affects its business, other than as previously disclosed in the Proxy Statement.
(i)
To the knowledge of such counsel no consent, approval, authorization or order of any court or governmental authority of the United States or the State of Delaware is required for consummation by Xxxxxx and the Acquiring Fund of the transaction contemplated herein, except as has and as may be obtained under the 1933 Act, the 1934 Act and the 1940 Act, and as may be required under state securities laws.
Such opinion shall contain such assumptions and limitations as shall be in the opinion of Xxxxxxxx Xxxx LLP appropriate to render the opinions expressed therein.
6.3
The post-effective amendment on Form N-1A filed by Xxxxxx with the Commission to register the Acquiring Fund as a series of Xxxxxx is effective and no stop order has been issued by the Commission.
6.4
Subject to paragraph 6.3, as of the Closing Date with respect to the Reorganization of the Transferring Funds, there shall have been no material change in the investment objective, policies and restrictions nor any material change in the investment management fees, fee levels payable pursuant to the 12b-1 plan of distribution, other fees payable for services provided to the Acquiring Fund, fee waiver or expense reimbursement undertakings, or sales loads of the Acquiring Fund from those fee amounts, undertakings and sales load amounts of the Acquiring Fund described in the Proxy Statement.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to complete the transactions provided for herein shall be subject, at its election, to the performance by the Transferring Funds of all the obligations to be performed by them hereunder on or before the Closing Date and, in addition thereto, the following conditions:
7.1
All representations and warranties of the Transferring Funds contained in this Agreement shall be true and correct in all material respects as of the date hereof and as of the Closing Date with the same force and effect as if made on and as of the Closing Date, and the Transferring Funds shall have delivered to the Acquiring Fund on the Closing Date a certificate executed in its name by the Trust’s President or Vice President, in form and substance satisfactory to the Acquiring Fund and dated as of the Closing Date, to such effect and as to such other matters as the Acquiring Fund shall reasonably request. The Acquiring Fund shall have received certified copies of the resolutions adopted by the Board of Trustees of the Transferring Fund approving this Agreement and the transactions contemplated herein.
7.2
The Transferring Funds shall have delivered to the Acquiring Fund a statement of the Transferring Funds' assets and liabilities, together with a list of the Transferring Funds' portfolio securities showing the tax costs of such securities by lot and the holding periods of such securities, as of the Closing Date, certified by the Treasurer or Assistant Treasurer of the Trust.
7.3
With respect to the Transferring Funds, Xxxxxx shall have received on the Closing Date an opinion of Dechert LLP, counsel to the Trust and the Transferring Funds, in a form reasonably satisfactory to the Acquiring Fund, covering the following points:
(a)
The Transferring Funds are each an investment series of the Trust, a statutory trust duly organized, validly existing and in good standing under the laws of the State of Delaware, and to such counsel’s knowledge, has the trust power to own all of its properties and assets and to carry on its business as presently conducted.
(b)
The Transferring Funds are each a series of a Delaware statutory trust registered as an investment company under the 1940 Act, and, to such counsel’s knowledge, such registration with the Commission as an investment company under the 1940 Act is in full force and effect.
(c)
This Agreement has been duly authorized, executed and delivered by the Trust on behalf of the Transferring Funds and, assuming due authorization, execution, and delivery of this Agreement by the Acquiring Funds, is a valid and binding obligation of the Transferring Funds enforceable against the Transferring Funds in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium and other laws relating to or affecting creditors’ rights generally and to general equity principles.
(d)
Assuming that a consideration therefore of not less than the net asset value thereof has been paid, and assuming that such shares were issued in accordance with the terms of the Transferring Funds' registration statement, or any amendment thereto, in effect at the time of such issuance, all issued and outstanding shares of the Transferring Funds are legally issued and fully paid and non-assessable, and no shareholder of the Transferring Funds has any statutory preemptive rights in respect thereof.
(e)
The Proxy Statement, to the knowledge of such counsel, is effective and no stop order under the 1933 Act pertaining thereto has been issued; and to the knowledge of such counsel, no consent, approval, authorization or order of any court or governmental authority of the United States or the State of Delaware is required for consummation by the Trust of the transactions contemplated herein, except such as have been obtained under the 1933 Act and the 1940 Act, and as may be required under state securities laws.
(f)
The execution and delivery of this Agreement did not, and the consummation of the transactions contemplated hereby will not, result in a violation of the Trust’s Agreement and Declaration of Trust or By-laws, or a material provision of any material agreement, indenture, instrument, contract, lease or other undertaking (in each case known to such counsel) to which the Transferring Funds are a party or by which it or any of its properties may be bound or, to the knowledge of such counsel, result in the acceleration of any obligation or the imposition of any penalty, under any agreement, judgment, or decree to which the Trust or the Transferring Funds are a party or by which it or they are bound.
(g)
Only insofar as they relate to the Transferring Funds, the descriptions in the Proxy Statement of statutes, legal and governmental proceedings and material contracts, if any, are accurate and fairly represent the information required to be shown.
(h)
In the ordinary course of such counsel’s representation of the Transferring Funds and without having made any investigation, such counsel does not know of any legal or governmental proceedings, only insofar as they relate to the Transferring Funds existing on or before the effective date of the Proxy Statement or the Closing Date, required to be described in the Proxy Statement or to be filed as exhibits to the Proxy Statement which are not described or filed as required.
(i)
In the ordinary course of such counsel’s representation of the Trust and without having made any investigation, and except as otherwise disclosed, to the knowledge of such counsel, no litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or threatened as to the Trust or any of its respective properties or assets and the Trust is not a party to nor subject to the provisions of any order, decree or judgment of any court or governmental body, which materially and adversely affects its business other than as previously disclosed in the Proxy Statement.
(j)
To the knowledge of such counsel, no consent, approval, authorization or order of any court or governmental authority of the United States or the State of Delaware is required for consummation by the Trust and the Transferring Funds of the transaction contemplated herein, except such as have been obtained under the 1933 Act, 1934 Act and the 1940 Act, and as may be required under state securities laws.
Such opinion shall contain such other assumptions and limitations as shall be in the opinion of Dechert LLP appropriate to render the opinions expressed therein.
7.4
Xxxxxx shall have received from the Trust a paid receipt for liability coverage, for the period beginning at the Closing Date and ending not less than five years thereafter, with coverage at least as comparable to the liability coverage currently applicable to both former and current Trustees and officers of the Trust, covering the actions of such Trustees and officers of the Trust for the period they served as such.
ARTICLE VIII
FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF
THE ACQUIRING FUND AND THE TRANSFERRING FUNDS TO CLOSE
If any of the conditions set forth below do not exist on or before the Closing Date with respect to the Transferring Funds or the Acquiring Fund, as the case may be, the other party to this Agreement shall, at its option, not be required to consummate the transactions contemplated by this Agreement:
8.1
This Agreement and the transactions contemplated herein shall have been approved by the requisite vote of the holders of the outstanding shares of the Transferring Funds in accordance with the provisions of the Trust’s Agreement and Declaration of Trust and By-Laws and certified copies of the resolutions evidencing such approval shall have been delivered to the Acquiring Fund. Notwithstanding anything herein to the contrary, neither the Acquiring Fund nor the Transferring Funds may waive the conditions set forth in this paragraph 8.1.
8.2
On the Closing Date, the Commission shall not have issued an unfavorable report under Section 25(b) of the 1940 Act, nor instituted any proceeding seeking to enjoin the consummation of the transactions contemplated by this Agreement under Section 25(c) of the 1940 Act and no action, suit or other proceeding shall be threatened or pending before any court or governmental agency in which it is sought to restrain or prohibit, or obtain damages or other relief in connection with, this Agreement or the transactions contemplated herein.
8.3
All required consents of other parties and all other consents, orders, and permits of federal, state and local regulatory authorities (including those of the Commission and of state Blue Sky securities authorities, including any necessary “no-action” positions of and exemptive orders from such federal and state authorities) to permit consummation of the transactions contemplated hereby shall have been obtained, except where failure to obtain any such consent,
order, or permit would not involve a risk of a material adverse effect on the assets or properties of the Acquiring Fund or the Transferring Funds, provided that either party hereto may for itself waive any of such conditions.
8.4
The Proxy Statement shall have become effective under the 1934 Act, and no stop orders suspending the effectiveness of the Proxy Statement shall have been issued and, to the best knowledge of the parties hereto, no investigation or proceeding for that purpose shall have been instituted or be pending, threatened or contemplated under the 1934 Act. In addition, the registration statement on Form N-1A for Xxxxxx, including the post effective amendment to register the Acquiring Fund as a series of Xxxxxx, shall be effective.
8.5
The Transferring Funds shall have declared a dividend or dividends which, together with all previous such dividends shall have the effect of distributing to the Transferring Funds' Shareholders all of the Transferring Funds' investment company taxable income for all taxable periods, if any, ending on the Closing Date (computed without regard to any deduction for dividends paid) and all of the net capital gains realized in all taxable periods, if any, ending on the Closing Date (after reduction for any capital loss carryforward).
8.6
The parties shall have received a favorable legal opinion from Dechert LLP addressed to Xxxxxx and the Trust and their respective Trustees, substantially to the effect that, for federal income tax purposes:
(a)
The transfer of all of the Transferring Funds' assets in exchange for the Acquiring Fund Shares and the assumption by the Acquiring Fund of the liabilities of the Transferring Funds followed by the distribution of the Acquiring Fund Shares to the Transferring Funds' Shareholders in dissolution and liquidation of the Transferring Funds will constitute a “reorganization” within the meaning of Section 368(a) of the Code, and the Acquiring Fund and the Transferring Funds will each be a “party to a reorganization” within the meaning of Section 368(b) of the Code.
(b)
No gain or loss will be recognized by the Acquiring Fund upon the receipt of the assets of the Transferring Funds solely in exchange for the Acquiring Fund Shares and the assumption by the Acquiring Fund of the liabilities of the Transferring Funds.
(c)
No gain or loss will be recognized by the Transferring Funds upon the transfer of the Transferring Funds' assets to the Acquiring Fund in exchange for the Acquiring Fund Shares and the assumption by the Acquiring Fund of the liabilities of the Transferring Funds or upon the distribution (whether actual or constructive) of the Acquiring Fund Shares to Transferring Fund Shareholders in exchange for their shares of the Transferring Funds.
(d)
No gain or loss will be recognized by the Transferring Fund Shareholders upon the exchange of their Transferring Fund shares for the Acquiring Fund Shares in liquidation of the Transferring Fund.
(e)
The aggregate tax basis for the Acquiring Fund Shares received by each Transferring Fund Shareholder pursuant to the Reorganization will be the same as the aggregate tax basis of the Transferring Funds shares held by such Shareholder immediately prior to the Closing. The holding period of the Acquiring Fund Shares received by each Transferring Fund Shareholder will include the period during which the Transferring Funds shares exchanged therefore were held by such Shareholder (provided the Transferring Funds shares were held as capital assets on the date of the Closing).
(f)
The tax basis of each Transferring Fund's assets acquired by the Acquiring Fund will be the same as the tax basis of such assets to the Transferring Fund immediately prior to the Closing, and the holding period of the assets of each Transferring Fund in the hands of the Acquiring Fund will include the period during which those assets were held by the Transferring Fund.
Such opinion shall contain such assumptions and limitations as shall be in the opinion of Dechert LLP appropriate to render the opinions expressed therein. The delivery of such opinion is conditioned upon receipt by Dechert LLP of representations it shall request of the Trust and Xxxxxx Funds. Notwithstanding anything herein to the contrary, only the Acquiring Fund may waive the conditions set forth in this paragraph 8.6.
ARTICLE IX
EXPENSES
9.1
The Transferring Funds, the Acquiring Fund and the shareholders of the Transferring Funds and the Acquiring Fund will pay their respective expenses, if any, incurred in connection with the Reorganization.
ARTICLE X
ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1
The Acquiring Fund and the Transferring Funds agree that neither party has made any representation, warranty or covenant not set forth herein and that this Agreement constitutes the entire agreement between the parties.
10.2
The representations, warranties, and covenants contained in this Agreement or in any document delivered pursuant hereto or in connection herewith shall survive the consummation of the transactions contemplated hereunder.
ARTICLE XI
TERMINATION
11.1
This Agreement may be terminated by the mutual agreement of the Acquiring Fund and the Transferring Funds. In addition, either the Acquiring Fund or the Transferring Funds may at its option terminate this Agreement at or prior to the Closing Date because:
(a)
of a breach by the other of any representation, warranty, or agreement contained herein to be performed at or prior to the Closing Date, if not cured within 30 days;
(b)
a condition herein expressed to be precedent to the obligations of the terminating party has not been met and it reasonably appears that it will not or cannot be met; or
(c)
a determination by the Trust’s or Dunham’s Board of Trustees that the consummation of the Transaction contemplated herein is not in the best interests of the Transferring Funds or the Acquiring Fund.
11.2
In the event of any such termination, in the absence of willful default, there shall be no liability for damages on the part of the Trust or Xxxxxx, or their respective Trustees or officers, to the other party, but each shall bear the expenses incurred by it incidental to the preparation and carrying out of this Agreement.
ARTICLE XII
AMENDMENTS
12.1
This Agreement may be amended, modified, or supplemented in such manner as may be mutually agreed upon in writing by the authorized officers of the Trusts; provided, however, that following the meeting of shareholders of the Transferring Funds pursuant to paragraph 5.2 of this Agreement, no such amendment may have the effect of changing the provisions for determining the number of the Acquiring Fund Shares to be issued to the Transferring Funds' Shareholders under this Agreement to the detriment of such Transferring Funds' Shareholders without their further approval.
ARTICLE XIII
HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT;
LIMITATION OF LIABILITY
13.1
The Article and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
13.2
This Agreement may be executed in any number of counterparts, each of which shall be deemed an original.
13.3
This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to the conflicts of laws provisions thereof.
13.4
This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns, but no assignment or transfer hereof or of any rights or obligations hereunder shall be made by any party without the written consent of the other party. Nothing herein expressed or implied is intended or shall be construed to confer upon or give any person, firm, or corporation, other than the parties hereto and their respective successors and permitted assigns, any rights or remedies under or by reason of this Agreement.
13.5
With respect to the Trust and Xxxxxx, the names used herein refer respectively to the trusts created and, as the case may be, the Trustees, as trustees but not individually or personally, acting from time to time under organizational documents of each respective trust filed in Delaware respectively, which are hereby referred to and are also on file at the principal offices of each respective trust. The obligations of each trust entered into in the name or on behalf thereof by any of its Trustees, representatives or agents of the trusts, are made not individually, but in such capacities, and are not binding upon any of the Trustees, shareholders or representatives of that respective trust personally, but bind only the trust property, and all persons dealing with the Transferring Funds and the Acquiring Fund must look solely to the trust property belonging to the Transferring Funds and the Acquiring Fund for the enforcement of any claims against the Transferring Funds and the Acquiring Fund, respectively.
IN WITNESS WHEREOF, the parties have duly executed this Agreement, all as of the date first written above.
XXXXXX FUNDS ON BEHALF OF XXXXXX MONTHLY DISTRIBUTION FUND
By:/s/ Xxxxxxx X. Xxxxxx
Name: Xxxxxxx X. Xxxxxx
Title: President
KELMOORE STRATEGIC TRUST ON BEHALF OF KELMOORE STRATEGY FUND, KELMOORE STRATEGY EAGLE FUND AND KELMOORE STRATEGY LIBERTY FUND
By: /s/ Xxxxx X. Kelmon, Jr.
Name: Xxxxx X. Kelmon, Jr.
Title: Chief Executive Officer, Treasurer
