AGREEMENT AND PLAN OF REORGANIZATION AND REDOMICILIATION
THIS AGREEMENT AND PLAN OF REORGANIZATION AND REDOMICILIATION
("AGREEMENT") is made as of the 1st day of November, 2006, by and among the
E*TRADE Funds, a Delaware statutory trust ("ACQUIRING TRUST"), on behalf of its
series, E*TRADE Delphi Value Fund ("ACQUIRING FUND"), with its principal place
of business at 000 X. Xxxxx Xxxx, 00xx Xxxxx, Xxxxxxxxx, Xxxxxxxx 00000, Kobren
Insight Funds, a Massachusetts business trust ("ACQUIRED TRUST"), on behalf of
its series, Delphi Value Fund ("ACQUIRED FUND"), with its principal place of
business at 00 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx Xxxxx, Xxxxxxxxxxxxx 00000
and, solely for purposes of Section 10.2 hereof, E*TRADE FINANCIAL Corporation.
The Acquiring Fund and the Acquired Fund are sometimes referred to collectively
herein as "FUNDS" and individually as "FUND."
This Agreement is intended to be and is adopted as a plan of a
"reorganization" as defined in Section 368(a)(1)(F) of the United States
Internal Revenue Code of 1986, as amended ("CODE") and the Treasury Regulations
thereunder. The reorganization ("REORGANIZATION") will consist of (1) the
transfer of all of the assets of the Acquired Fund to the Acquiring Fund solely
in exchange for (A) the issuance of shares of beneficial interest of the
Acquiring Fund (collectively, "ACQUIRING FUND SHARES" and each, an "ACQUIRING
FUND SHARE") to the Acquired Fund, and (B) the assumption by the Acquiring Fund
of all of the liabilities of the Acquired Fund on the closing date of the
Reorganization ("CLOSING DATE"), and (2) the distribution by the Acquired Fund,
on or promptly after the Closing Date as provided herein, of the Acquiring Fund
Shares to the shareholders of the Acquired Fund in liquidation and dissolution
of the Acquired Fund, all upon the terms and conditions hereinafter set forth in
this Agreement.
WHEREAS, the Acquiring Trust and the Acquired Trust are each registered
investment companies classified as management companies of the open-end type.
WHEREAS, the Acquiring Fund has been organized in order to continue the
business and operations of the Acquired Fund.
WHEREAS, the Acquiring Fund has no assets and has carried on no
business activities prior to the date first shown above and will have had no
assets and will have carried on no business activities prior to the consummation
of the transaction described herein.
WHEREAS, the Acquiring Fund is authorized to issue shares of beneficial
interest.
WHEREAS, following the closing of the Reorganization, the Acquired
Trust will deregister as an investment company in accordance with the rules and
regulations of the Securities and Exchange Commission.
WHEREAS, following the effective date of its deregistration the
Acquired Trust shall voluntarily dissolve in accordance with Massachusetts law.
WHEREAS, the Board of Trustees of the Acquiring Trust has determined
that the Reorganization is in the best interests of the Acquiring Fund and its
shareholders and that the interests of the existing shareholders will not be
diluted as a result of this transaction.
WHEREAS, the Board of Trustees of the Acquired Trust, has determined
that the Reorganization is in the best interests of the Acquired Fund and its
shareholders and that the interests of the existing shareholders will not be
diluted as a result of this transaction.
NOW, THEREFORE, in consideration of the premises of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING
FUND SHARES AND ASSUMPTION OF THE ASSUMED LIABILITIES; LIQUIDATION AND
TERMINATION OF THE ACQUIRED FUND.
1.1 Subject to the requisite approvals, including the approval of the
Acquired Fund's shareholders, terms and conditions herein set forth and on the
basis of the representations and warranties contained herein, the Acquired Fund
will sell, assign, convey, transfer and deliver all of its property and assets
as set forth in Section 1.2 ("ACQUIRED ASSETS") to the Acquiring Fund free and
clear of all liens and encumbrances, liens for taxes not yet due and contractual
restrictions, if any, on the transfer of the Acquired Assets and the Acquiring
Fund agrees in exchange therefor: (i) to issue to the Acquired Fund the number
of Acquiring Fund Shares, including fractional Acquiring Fund Shares, of each
class with an aggregate net asset value ("NAV") equal to the NAV of the Acquired
Fund attributable to the corresponding class of the Acquired Fund's shares, as
determined in the manner set forth in Article 2; and (ii) to assume all of the
liabilities (whether absolute or contingent, known or unknown) of the Acquired
Fund ("ASSUMED LIABILITIES"). Such transactions shall take place at the Closing
(as defined in Section 3.1 below).
1.2 (a) The Acquired Assets shall consist of all of the Acquired Fund's
assets and property, including, without limitation, all portfolio securities and
instruments, dividends, receivables (including dividends, interest and other
receivables), cash, cash equivalents, deferred or prepaid expenses, goodwill,
rights and choses in action (whether absolute or contingent, known or unknown)
of the Acquired Fund or the Acquired Trust in respect of the Acquired Fund, all
other intangible property owned by the Acquired Fund, originals or copies of all
books and records of the Acquired Fund, and all other assets of the Acquired
Fund on the Closing Date. The Acquiring Fund shall also be entitled to receive
copies of all records that the Acquired Fund is required to maintain under the
Investment Company Act of 1940, as amended ("INVESTMENT COMPANY ACT"), and the
rules of the Securities and Exchange Commission ("COMMISSION") thereunder to the
extent such records pertain to the Acquired Fund.
(b) The Acquired Fund has provided the Acquiring Fund with a list of
the Acquired Assets as of the date of execution of this Agreement. The Acquired
Fund reserves the right to sell any of such securities or other assets before
the Closing Date (except to the extent sales may be limited by representations
of the Acquired Fund contained herein and made in connection with the issuance
of the tax opinion provided for in Section 8.5 hereof). For avoidance of doubt,
reference is hereby made to Section 5.1 of this Agreement pursuant to which the
Acquired Fund agrees to operate its business in the ordinary course and to
comply in all material respects with all applicable laws, rules and regulations
between the date hereof and the Closing Date.
1.3 Immediately upon delivery to the Acquired Fund of the Acquiring
Fund Shares, the Acquired Fund, as the then sole shareholder of the
corresponding Acquiring Fund, shall (i) elect Trustees of the Acquiring Trust
already approved by the Acquired Fund Shareholders (as defined in Section 1.5)
at the meeting described in Section 5.2; (ii) approve the advisory and
sub-advisory agreements previously approved by the Acquired Fund Shareholders
(as defined in Section 1.5) at the meeting described in Section 5.2; (iii)
approve the distribution and service plan pursuant to Rule 12b-1 under the 1940
Act for the retail class of the Acquiring Fund previously approved by the
Acquired Fund Shareholders (as defined in Section 1.5) at the meeting described
in Section 5.2; (iv) ratify the selection of Xxxx, Xxxxxx & Xxxxx LLP; and (v)
approve any other procedures, agreements and other matters requiring shareholder
approval to commence operations for the Acquiring Fund.
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1.4 The Acquired Fund will endeavor to discharge all of its known
liabilities and obligations that are or will become due prior to the Closing.
1.5 Immediately following the action contemplated by Section 1.3, the
Acquired Fund shall distribute pro rata to its shareholders of record,
determined as of the close of regular trading on the New York Stock Exchange on
the Closing Date ("ACQUIRED FUND SHAREHOLDERS"), the Acquiring Fund Shares
received by the Acquired Fund pursuant to Section 1.1 hereof. Each Acquired Fund
Shareholder shall receive the number of Acquiring Fund Shares of the class
corresponding to the class of shares of beneficial interest in the Acquired Fund
("ACQUIRED FUND SHARES") held by such Acquired Fund Shareholder that have an
aggregate NAV equal to the aggregate NAV of the Acquired Fund Shares held of
record by such Acquired Fund Shareholder on the Closing Date. Such distribution
will be accomplished by the Acquired Trust instructing the Acquiring Trust to
transfer the Acquiring Fund Shares then credited to the account of the Acquired
Fund on the books of the Acquiring Fund to open accounts on the share records of
the Acquiring Fund established and maintained by the Acquiring Fund's transfer
agent in the names of the Acquired Fund Shareholders and representing the
respective pro rata number of the Acquiring Fund Shares due the Acquired Fund
Shareholders. The Acquired Trust shall promptly provide the Acquiring Trust with
evidence of such distribution and completely liquidate. Subsequently, the
Acquired Trust will take all necessary action to reflect its deregistration as
an investment company in accordance with the rules and regulations of the
Commission. All issued and outstanding Acquired Fund Shares will simultaneously
be cancelled on the books of the Acquired Fund, and the Acquired Fund will be
dissolved. The Acquiring Fund shall not issue certificates representing the
Acquiring Fund Shares in connection with such exchange.
1.6 Ownership of Acquiring Fund Shares will be shown on the books of
the Acquiring Fund's transfer agent. Any certificates representing ownership of
Acquired Fund Shares that remain outstanding on the Closing Date shall be deemed
to be cancelled and shall no longer evidence ownership of Acquired Fund Shares.
1.7 Any transfer taxes payable upon issuance of Acquiring Fund Shares
in a name other than the registered holder of the Acquired Fund Shares on the
books of the Acquired Fund 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.
1.8 Any reporting responsibility of the Acquired Trust with respect to
the Acquired Fund for taxable periods ending on or before the Closing Date,
including, but not limited to, the responsibility for filing of regulatory
reports, Tax Returns (as defined in Section 4.1(j)(O)), or other documents with
the Commission, any state securities commissions, and any federal, state or
local tax authorities or any other relevant regulatory authority, is and shall
remain the responsibility of the Acquired Trust.
2. VALUATION
2.1 The value of the Acquired Assets shall be determined as of the time
for calculation of the Acquired Fund's net asset value as set forth in the
then-current prospectus for the Acquired Fund, and after the declaration of any
dividends by the Acquired Fund, on the Closing Date (such time and date being
hereinafter called the "VALUATION TIME"), computed using the valuation
procedures agreed upon by the Boards of Trustees of the Acquired Trust and the
Acquiring Trust. All computations of value shall be made by the fund accountant
for the Acquired Fund, and shall be subject to confirmation by the fund
accountant for the Acquiring Fund. The Acquired Fund shall cause the Acquired
Fund Administrator to deliver a copy of its valuation report to the Acquiring
Fund at the Closing (as defined in Section 3.1).
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3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be November 17, 2006, or such later date as
the parties may agree to in writing. All acts necessary to consummate the
Reorganization ("CLOSING") shall be deemed to take place simultaneously as of
the close of business on the Closing Date for the Reorganization, unless
otherwise agreed to by the parties. The close of business on the Closing Date
shall be as of 4:00 p.m. (Eastern time) or such later time on that date as the
Acquired Fund's net asset value is calculated in accordance with Section 2 and
after the declaration of any dividends. The Closing shall be held at the offices
of the Acquired Fund, or at such other place as the parties may agree.
3.2 Portfolio securities that are held other than in book-entry form in
the name of Mellon Trust of New England, N.A. ("ACQUIRED FUND CUSTODIAN") as
record holder for the Acquired Fund shall be presented by the Acquired Fund to
PFPC Trust Company ("ACQUIRING FUND CUSTODIAN") for examination no later than
five (5) business days preceding the Closing Date. Such portfolio securities
shall be delivered by the Acquired Fund to the Acquiring Fund Custodian for the
account of the Acquiring Fund on the Closing Date, duly endorsed in proper form
for transfer, in such condition as to constitute good delivery thereof in
accordance with the custom of brokers, and shall be accompanied by all necessary
federal and state stock transfer stamps or a check for the appropriate purchase
price thereof. Portfolio securities held of record by the Acquired Fund
Custodian in book-entry form on behalf of the Acquired Fund shall be delivered
by the Acquired Fund Custodian through the Depository Trust Company to the
Acquiring Fund Custodian and by the Acquiring Fund Custodian recording the
beneficial ownership thereof by the Acquiring Fund on the Acquiring Fund
Custodian's records in accordance with the customary practices of the Acquiring
Fund Custodian and of each securities depository, as defined by Rule 17f-4 under
the 1940 Act. Any cash shall be delivered by the Acquired Fund Custodian
transmitting immediately available funds by wire transfer to the Acquiring Fund
Custodian the cash balances maintained by the Acquired Fund Custodian and the
Acquiring Fund Custodian crediting such amount to the account of the Acquiring
Fund.
3.3 The Acquiring Fund Custodian shall deliver at the Closing a
certificate of an authorized officer stating that: (a) the Acquired Assets have
been delivered in proper form to the Acquiring Fund on the Closing Date, and (b)
all necessary transfer taxes including all applicable federal and state stock
transfer stamps, if any, have been paid, or provision for payment has been made
in conjunction with the delivery of portfolio securities as part of the Acquired
Assets.
3.4 If on the Closing Date (a) the New York Stock Exchange is closed to
trading or trading thereon shall be restricted or (b) trading or the reporting
of trading on such exchange or elsewhere is disrupted so that, in the judgment
of the Board of Trustees of either the Acquired Trust or the Acquiring Trust,
accurate appraisal of the NAV of the Acquiring Fund Shares or the Acquired Fund
pursuant to Article 2 is impracticable, 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.
3.5 The Acquired Fund shall deliver at the Closing a list of the names,
addresses, federal taxpayer identification numbers and backup withholding and
nonresident alien withholding status and certificates of the Acquired Fund
Shareholders and the number and percentage ownership of outstanding Acquired
Fund Shares owned by each Acquired Fund Shareholder as of the Valuation Time,
certified by the President or a Secretary of the Acquired Trust and its
Treasurer, Secretary or other authorized officer ("SHAREHOLDER LIST") as being
an accurate record of the information (a) provided by the Acquired Fund
Shareholders, (b) provided by the Acquired Fund's Transfer Agent, or (c) derived
from the Acquired Trust's records by such officers or one of the Acquired
Trust's service providers. The Acquiring Fund shall issue and deliver to the
Acquired Fund a confirmation evidencing the Acquiring Fund Shares to be credited
on the Closing Date, or provide evidence satisfactory to the Acquired Fund that
such Acquiring
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Fund Shares have been credited to the Acquired 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, stock certificates, receipts or other
documents as such other party or its counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES
4.1 Except as set forth on Schedule 4.1 hereto, the Acquired Trust, on
behalf of the Acquired Fund, represents, warrants and covenants to the Acquiring
Fund, which representations, warranties and covenants will be true and correct
on the date hereof and on the Closing Date as though made on and as of the
Closing Date, as follows:
(a) The Acquired Fund is a series of the Acquired Trust. The Acquired
Trust is a business trust validly existing and in good standing under the laws
of the Commonwealth of Massachusetts and has the power to own all of its
properties and assets and, subject to approval by the Acquired Fund's
shareholders, to perform its obligations under this Agreement. The Acquired Fund
is not required to qualify to do business in any jurisdiction in which it is not
so qualified or where failure to qualify would subject it to any material
liability or disability. Each of the Acquired Trust and the Acquired Fund has
all necessary federal, state and local authorizations to own all of its
properties and assets and to carry on its business as now being conducted;
(b) The Acquired Trust is a registered investment company classified as
a management company of the open-end type, and its registration with the
Commission as an investment company under the Investment Company Act is in full
force and effect;
(c) The Acquired Trust is not in violation of, and the execution and
delivery of this Agreement and the performance of its obligations under this
Agreement in respect of the Acquired Fund will not result in a violation of, any
provision of the Acquired Trust's Declaration of Trust or By-Laws or any
material agreement, indenture, instrument, contract, lease or other undertaking
with respect to the Acquired Fund to which the Acquired Trust is a party or by
which the Acquired Fund or any of its assets are bound. The execution, delivery
and performance of this Agreement will not result in the acceleration of any
obligation, or the imposition of any penalty under any agreement, indenture,
instrument, contract, lease, judgment or decree to which the Acquired Trust, on
behalf of the Acquired Fund, is a party or by which it is bound;
(d) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquired Fund of
the transactions contemplated herein, except such as may be required under the
Securities Act of 1933, as amended ("SECURITIES ACT"), the Securities Exchange
Act of 1934, as amended ("EXCHANGE ACT"), the Investment Company Act, and state
securities laws;
(e) No litigation or administrative proceeding or investigation of or
before any court or governmental body is currently pending or to its knowledge
threatened against the Acquired Fund or any of the Acquired Fund's properties or
assets, that, if adversely determined, would materially and adversely affect its
financial condition or the conduct of its business. The Acquired Fund knows of
no facts that might form the basis for the institution of such proceedings.
Neither the Acquired Trust nor the Acquired Fund is 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 the Acquired Fund's business or its
ability to consummate the transactions contemplated herein or would be binding
upon the Acquiring Fund as the successor to the Acquired Fund;
5
(f) All material contracts or other commitments of the Acquired Fund
(other than this Agreement, contracts listed in SCHEDULE 4.1 and certain
investment contracts, including options, futures and forward contracts) will
terminate without liability to the Acquired Fund on or prior to the Closing
Date. Each contract listed in Schedule 4.1 is a valid, binding and enforceable
obligation of the Acquired Fund and to the Acquired Fund's knowledge, the other
parties thereto (assuming due authorization, execution and delivery by the other
parties thereto) and the assignment by the Acquired Fund to the Acquiring Fund
of each such contract will not result in the termination of such contract, any
breach or default thereunder by the Acquired Fund or the imposition of any
penalty thereunder;
(g) The Statement of Assets and Liabilities of the Acquired Fund, and
the related Statements of Operations and Changes in Net Assets and Schedule of
Investments, as of and for the fiscal year ended December 31, 2005, have been
audited by Xxxx, Xxxxxx & Xxxxx LLP, independent registered public accounting
firm, and are in accordance with generally accepted accounting principles
("GAAP") consistently applied and fairly reflect, in all material respects, the
financial condition of the Acquired Fund as of such date and the results of its
operations for the period then ended, and all known liabilities, whether actual
or contingent, of the Acquired Fund as of the date thereof required to be
reflected on a balance sheet (including the notes thereto) in accordance with
GAAP are disclosed therein. The Statement of Assets and Liabilities, Statements
of Operations and Changes in Net Assets and Schedule of Investments will be in
accordance with GAAP consistently applied and will fairly reflect, in all
material respects, the financial condition of the Acquired Fund as of such date
and the results of its operations for the period then ended. The Statement of
Assets and Liabilities, Statements of Operations and Changes in Net Assets and
Schedule of Investments (unaudited) of the Acquired Fund as of and for the six
months ended June 30, 2006 are in accordance with GAAP consistently applied, and
such statements fairly reflect, in all material respects, the financial
condition of the Acquired Fund as of such date, and all liabilities, whether
actual or contingent, of the Acquired Fund as of such date required to be
reflected on a balance sheet (including the notes thereto) in accordance with
GAAP are disclosed therein. Except for the Assumed Liabilities, the Acquired
Fund will not have any known or contingent liabilities on the Closing Date. No
significant deficiency, material weakness, fraud, significant change or other
factor that could significantly affect the internal controls of the Acquired
Fund has been disclosed or is required to be disclosed in the Acquired Fund's
reports on Form N-CSR to enable the chief executive officer and chief financial
officer or other officers of the Acquired Fund to make the certifications
required by the Xxxxxxxx-Xxxxx Act, and no deficiency, weakness, fraud, change,
event or other factor exists that will be required to be disclosed in the
Acquiring Fund's Form N-CSR after the Closing Date;
(h) The current prospectus and statement of additional information of
the Acquired Fund (true and correct copies of which have been delivered to the
Acquiring Fund) and each prospectus and statement of additional information of
the Acquired Fund used at all times prior to the date of this Agreement conforms
or conformed at the time of its use in all material respects to the applicable
requirements of the Securities Act and the Investment Company Act and the rules
and regulations of the Commission thereunder and does not or did not at the time
of its use 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
materially misleading;
(i) Since the most recent fiscal year end, except as specifically
disclosed in the Acquired Fund's prospectus, its statement of additional
information as in effect on the date of this Agreement, or its semi-annual
report for the six-month period ended June 30, 2006, there has not been any
material adverse change in the Acquired Fund's financial condition, assets,
liabilities, business or prospects, or any incurrence by the Acquired Fund of
indebtedness, except for normal contractual obligations incurred in the ordinary
course of business or in connection with the settlement of purchases and sales
of portfolio securities. For the purposes of this subparagraph (i) (but not for
any other purpose of this Agreement), a decline in NAV per Acquired Fund Share
arising out of its normal investment
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operations or a decline in market values of securities in the Acquired Fund's
portfolio or a decline in net assets of the Acquired Fund as a result of
redemptions shall not constitute a material adverse change;
(j) (A) For each taxable year of its operation, the Acquired Fund has
satisfied, and for the current taxable year the Acquired Fund shall have met the
requirements of Subchapter M of the Code for qualification and treatment as a
"regulated investment company" and shall have elected to be treated as such. The
Acquired Fund shall have been eligible to compute its federal income tax under
Section 852 of the Code and shall have computed its federal income tax under
Section 852 of the Code. The Acquired Fund will qualify as a regulated
investment company as of the Closing Date and will satisfy the diversification
requirements of Section 851(b)(3) of the Code without regard to the last
sentence of Section 851(d) of the Code. For any taxable year not yet completed
as of the end of the day on the Closing Date, the Acquired Trust reasonably
expects that the Acquiring Fund, as successor to the Acquired Fund, will be able
to meet the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and will be eligible to compute its
federal income tax under Section 852 of the Code. The Acquired Fund has not
taken any action, caused any action to be taken or caused any action to fail to
be taken which action or failure could cause the Acquired Fund to fail to
qualify as a regulated investment company under the Code. The Acquired Fund is a
separate fund of the Acquired Trust within the meaning of Section 851(g) of the
Code;
(B) Within the times and in the manner prescribed by law, the Acquired
Fund has properly filed on a timely basis all Tax Returns (as defined below)
that it was required to file, and all such Tax Returns were complete and
accurate in all material respects. The Acquired Fund has not been informed by
any jurisdiction that the jurisdiction believes that the Acquired Fund was
required to file any Tax Return that was not filed; and the Acquired Fund does
not know of any basis upon which a jurisdiction could assert such a position;
(C) The Acquired Fund has timely paid, in the manner prescribed by law,
all Taxes (as defined below), which were due and payable or which were claimed
to be due;
(D) All Tax Returns filed by the Acquired Fund constitute complete and
accurate reports of the respective Tax liabilities and all attributes of the
Acquired Fund or, in the case of information returns and payee statements, the
amounts required to be reported, and accurately set forth all items required to
be included or reflected in such returns;
(E) The Acquired Fund has not waived or extended any applicable statute
of limitations relating to the assessment or collection of Taxes;
(F) The Acquired Fund has not been notified that any examinations of
the Tax Returns of the Acquired Fund are currently in progress or threatened,
and no deficiencies have been asserted or assessed against the Acquired Fund as
a result of any audit by the Internal Revenue Service or any state, local or
foreign taxing authority, and, to its knowledge, no such deficiency has been
proposed or threatened;
(G) The Acquired Fund has no actual or potential liability for any Tax
obligation of any taxpayer other than itself. The Acquired Fund is not and has
never been a member of a group of corporations with which it has filed (or been
required to file) consolidated, combined or unitary Tax Returns. The Acquired
Fund is not a party to any Tax allocation, sharing, or indemnification
agreement;
(H) The unpaid Taxes of the Acquired Fund for tax periods through the
Closing Date do not exceed the accruals and reserves for Taxes (excluding
accruals and reserves for
7
deferred Taxes established to reflect timing differences between book and
Tax income) set forth on the Statement of Assets and Liabilities, as defined
in Section 5.7, rather than in any notes thereto ("TAX RESERVES"). All Taxes
that the Acquired Fund is or was required by law to withhold or collect have
been duly withheld or collected and, to the extent required, have been timely
paid to the proper governmental agency;
(I) The Acquired Fund has delivered to the Acquiring Fund or made
available to the Acquiring Fund complete and accurate copies of all Tax Returns
of the Acquired Fund, together with all related examination reports and
statements of deficiency for all periods not closed under the applicable
statutes of limitations and complete and correct copies of all private letter
rulings, revenue agent reports, information document requests, notices of
proposed deficiencies, deficiency notices, protests, petitions, closing
agreements, settlement agreements, pending ruling requests and any similar
documents submitted by, received by or agreed to by or on behalf of the Acquired
Fund. The Acquired Fund has disclosed on its federal income Tax Returns all
positions taken therein that could give rise to a substantial understatement of
federal income Tax within the meaning of Section 6662 of the Code;
(J) The Acquired Fund has not undergone, has not agreed to undergo, and
is not required to undergo (nor will it be required as a result of the
transactions contemplated in this Agreement to undergo) a change in its method
of accounting resulting in an adjustment to its taxable income pursuant to
Section 481 of the Code. The Acquired Fund will not be required to include any
item of income in, or exclude any item of deduction from, taxable income for any
taxable period (or portion thereof) ending after the Closing Date as a result of
any (i) change in method of accounting for a taxable period ending on or prior
to the Closing Date under Section 481(c) of the Code (or any corresponding or
similar provision of state, local or foreign income Tax law); (ii) "closing
agreement" as described in Section 7121 of the Code (or any corresponding or
similar provision of state, local or foreign income Tax law) executed on or
prior to the Closing Date; (iii) installment sale or open transaction
disposition made on or prior to the Closing Date; or (iv) prepaid amount
received on or prior to the Closing Date;
(K) The Acquired Fund will not have taken or agreed to take any action,
and will not be aware of any agreement, plan or other circumstance, that is
inconsistent with the representations set forth in the Acquired Fund Tax
Representation Certificate to be delivered pursuant to Section 7.4;
(L) There are (and as of immediately following the Closing there will
be) no liens on the assets of the Acquired Fund relating to or attributable to
Taxes, except for Taxes not yet due and payable;
(M) The Tax bases of the assets of the Acquired Fund are accurately
reflected on the Acquired Fund's Tax books and records;
(N) The Acquired Fund's Tax attributes are not limited under the Code
(including but not limited to any capital loss carry forward limitations under
Sections 382 or 383 of the Code and the Treasury Regulations thereunder) or
comparable provisions of state law; and
(O) For purposes of this Agreement, "TAXES" or "TAX" shall mean all
taxes, charges, fees, levies or other similar assessments or liabilities,
including without limitation income, gross receipts, ad valorem, premium,
value-added, excise, real property, personal property, sales, use, transfer,
withholding, employment, unemployment, insurance, social security, business
license, business organization, environmental, workers compensation, payroll,
profits, license, lease, service, service use, severance, stamp, occupation,
windfall profits, customs, duties, franchise and other taxes imposed by the
United States of America or any state, local or foreign government, or any
agency thereof, or other
8
political subdivision of the United States or any such government, and any
interest, fines, penalties, assessments or additions to tax resulting from,
attributable to or incurred in connection with any tax or any contest or dispute
thereof; and "TAX RETURNS" shall mean all reports, returns, declarations,
statements or other information required to be supplied to a governmental or
regulatory authority or agency, or to any other person, in connection with Taxes
and any associated schedules or work papers produced in connection with such
items;
(k) All issued and outstanding Acquired Fund Shares are, and at the
Closing Date will be, duly authorized, legally issued and outstanding, fully
paid and nonassessable by the Acquired Fund. All of the issued and outstanding
Acquired Fund Shares will, at the time of Closing, be held of record by the
persons and in the amounts set forth in the Shareholder List submitted to the
Acquiring Fund pursuant to Section 3.5 hereof. The Acquired Fund does not have
outstanding any options, warrants or other rights to subscribe for or purchase
any Acquired Fund Shares, nor is there outstanding any security convertible into
any Acquired Fund Shares;
(l) At the Closing Date, the Acquired Fund will have good and
marketable title to the Acquired Assets, and full right, power and authority to
sell, assign, transfer and deliver the Acquired Assets to the Acquiring Fund,
and, upon delivery and payment for the Acquired Assets, the Acquiring Fund will
acquire good and marketable title thereto, subject to no restrictions on the
full transfer thereof, except such restrictions as might arise under the
Securities Act;
(m) The Acquired Trust has the trust power and authority to enter into
and perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement have been duly authorized by all necessary action
on the part of the Acquired Trust's Board of Trustees, and, subject to the
approval of the Acquired Fund's shareholders, assuming due authorization,
execution and delivery by the Acquiring Fund, this Agreement will constitute a
valid and binding obligation of the Acquired 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 to be furnished by the Acquired Fund to the
Acquiring Fund for use in applications for orders, registration statements,
proxy materials and other documents which may be necessary in connection with
the transactions contemplated hereby and any information necessary to compute
the total return of the Acquired Fund shall be accurate and complete in all
material respects and shall comply in all material respects with federal
securities and other laws and regulations applicable thereto;
(o) The information included in the proxy statement ("PROXY STATEMENT")
forming part of the Acquiring Trust's Registration Statement on Form N-14 filed
in connection with this Agreement ("REGISTRATION STATEMENT") that has been
furnished in writing by the Acquired Fund to the Acquiring Fund for inclusion in
the Registration Statement, on the date thereof and at all times prior to the
conclusion of the shareholder meeting with respect to the Acquired Fund to which
the Proxy Statement relates, will (i) not contain any statement which, at the
time and in the light of the circumstances under which it is made, is false or
misleading with respect to any material fact, or which omits to state any
material fact necessary in order to make the statements therein not false or
misleading, and (ii) comply in all material respects with the provisions of the
Securities Act, the Exchange Act and the Investment Company Act and the rules
and regulations thereunder;
(p) All of the issued and outstanding Acquired Fund Shares have been
offered for sale and sold in compliance in all material respects with all
applicable federal and state securities laws, except as may have been previously
disclosed in writing to the Acquiring Fund;
9
(q) The Acquired Fund currently complies in all material respects with,
and since its organization has complied in all material respects with, the
requirements of, and the rules and regulations under, the Investment Company
Act, the Securities Act, the Exchange Act, state "Blue Sky" laws and all other
applicable federal and state laws or regulations. The Acquired Fund currently
complies in all material respects with, and since its organization has complied
in all material respects with, all investment objectives, policies, guidelines
and restrictions and any compliance procedures established by the Acquired Fund
with respect to the Acquired Fund. All advertising and sales material used by
the Acquired Fund complies in all material respects with and has complied in all
material respects with the applicable requirements of the Securities Act, the
Investment Company Act, the rules and regulations of the Commission, and, to the
extent applicable, the Conduct Rules of the National Association of Securities
Dealers, Inc. ("NASD") and any applicable state regulatory authority. All
registration statements, prospectuses, reports, proxy materials or other filings
required to be made or filed with the Commission, the NASD or any state
securities authorities by the Acquired Fund have been duly filed and have been
approved or declared effective, if such approval or declaration of effectiveness
is required by law. Such registration statements, prospectuses, reports, proxy
materials and other filings under the Securities Act, the Exchange Act and the
Investment Company Act (i) are or were in compliance in all material respects
with the requirements of all applicable statutes and the rules and regulations
thereunder and (ii) do not or did 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 in which they were
made, not false or misleading;
(r) Neither the Acquired Fund nor, to the knowledge of the Acquired
Fund, any "affiliated person" of the Acquired Fund has been convicted of any
felony or misdemeanor, described in Section 9(a)(1) of the Investment Company
Act, nor, to the knowledge of the Acquired Fund, has any affiliated person of
the Acquired Fund been the subject, or presently is the subject, of any
proceeding or investigation with respect to any disqualification that would be a
basis for denial, suspension or revocation of registration as an investment
adviser under Section 203(e) of the Investment Advisers Act of 1940, as amended
("INVESTMENT ADVISERS ACT"), or Rule 206(4)-4(b) thereunder or of a
broker-dealer under Section 15 of the Exchange Act, or for disqualification as
an investment adviser, employee, officer or director of an investment company
under Section 9 of the Investment Company Act; and
(s) The Acquired Fund Tax Representation Certificate to be delivered by
Acquired Trust, on behalf of the Acquired Fund, to the Acquiring Fund and Xxxxxx
Xxxxxx Xxxxxxxxx Xxxx and Xxxx LLP at the Closing pursuant to Section 7.4
("ACQUIRED FUND TAX REPRESENTATION CERTIFICATE") will not on the Closing Date
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein not misleading.
4.2 Except as set forth in Schedule 4.2 hereto, the Acquiring Trust, on
behalf of the Acquiring Fund, represents, warrants and covenants to the Acquired
Fund, which representations, warranties and covenants will be true and correct
on the date hereof and on the Closing Date as though made on and as of the
Closing Date, as follows:
(a) The Acquiring Fund is a newly formed shell series of the Acquiring
Trust. The Acquiring Fund has not commenced operations and will not do so until
the Closing. The Acquiring Trust is a statutory trust duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
Acquiring Trust has the power to own all of its properties and assets and to
perform the obligations under this Agreement. The Acquiring Fund is not required
to qualify to do business in any jurisdiction in which it is not so qualified or
where failure to qualify would subject it to any material liability or
disability. Each of the Acquiring Trust and the Acquiring Fund has all necessary
federal, state and local authorizations to own all of its properties and assets
and to carry on its business as now being conducted;
10
(b) The Acquiring Trust is a registered investment company classified
as a management company of the open-end type, and its registration with the
Commission as an investment company under the Investment Company Act is in full
force and effect;
(c) The Acquiring Fund's registration statement on Form N-1A that will
be in effect on the Closing Date, and the prospectus and statement of additional
information of the Acquiring Fund included therein, will conform in all material
respects with the applicable requirements of the Securities Act and the
Investment Company Act and the rules and regulations of the Commission
thereunder, and did not as of the effective date thereof and will not as of the
Closing Date contain 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 in which they were made, not
misleading;
(d) The Registration Statement dated October 10, 2006, and the Proxy
Statement and statement of additional information with respect to the Acquiring
Fund, each dated October 9, 2006, and any amendments or supplements to the
Registration Statement (other than written information furnished by the Acquired
Fund for inclusion therein, as covered by the Acquired Fund's warranty in
Section 4.1(o) hereof), on the date thereof and at all times prior to the
conclusion of the shareholder meeting with respect to the Acquired Fund to which
the Proxy Statement relates, will (i) not contain any statement which, at the
time and in the light of the circumstances under which it is made, is false or
misleading with respect to any material fact, or which omits to state any
material fact necessary in order to make the statements therein not false or
misleading and (ii) comply in all material respects with the provisions of the
Securities Act, the Exchange Act and the Investment Company Act and the rules
and regulations thereunder;
(e) The Acquiring Trust is not in violation of, and the execution and
delivery of this Agreement and performance of its obligations under this
Agreement will not result in (i) a material violation of, any provisions of the
Trust Instrument or Bylaws of the Acquiring Trust or any material agreement,
indenture, instrument, contract, lease or other undertaking with respect to the
Acquiring Fund to which the Acquiring Trust is a party or by which the Acquiring
Fund or any of its assets is bound or (ii) the acceleration of any obligation,
or the imposition of any penalty, under any agreement, indenture, instrument,
contract, lease, judgment or decree to which the Acquiring Trust, on behalf of
the Acquiring Fund, is a party or by which it is bound;
(f) No litigation or administrative proceeding or investigation of or
before any court or governmental body is currently pending or to its knowledge
threatened against the Acquiring Fund or any of the Acquiring Fund's properties
or assets. The Acquiring Fund knows of no facts that might form the basis for
the institution of such proceedings. Neither the Acquiring Trust nor the
Acquiring Fund is 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 the Acquiring Fund's business or its ability to consummate the
transactions contemplated herein;
(g) The Acquiring Fund has no actual or potential liability for any Tax
obligation of any taxpayer other than itself. The Acquiring Fund is not and has
never been a member of a group of corporations with which it has filed (or been
required to file) consolidated, combined or unitary Tax Returns. The Acquiring
Fund is not a party to any Tax allocation, sharing, or indemnification
agreement;
(h) The Acquiring Fund has not taken or agreed to take any action, and
is not aware of any agreement, plan or other circumstance, that is inconsistent
with the representations set forth in the Acquiring Fund Tax Representation
Certificate to be delivered pursuant to Section 6.5;
(i) The authorized capital of the Acquiring Fund consists of an
unlimited number of shares of beneficial interest, $0.01 par value per share.
The Acquiring Fund has no assets or liabilities
11
and has carried on no business activities prior to the date first shown above.
Prior to the Closing Date, the Acquiring Fund will not have any assets or
liabilities or have carried on any business activities. As of the Closing Date,
the Acquiring Fund will be authorized to issue an unlimited number of shares of
beneficial interest, $0.01 par value per share. The Acquiring Fund Shares to be
issued and delivered to the Acquired Fund for the account of the Acquired Fund
Shareholders pursuant to the terms of this Agreement will have been duly
authorized on the Closing Date and, when so issued and delivered, will be
legally issued and outstanding, fully paid and non-assessable by the Acquiring
Trust;
(j) Upon consummation of the Reorganization, all issued and outstanding
Acquiring Fund Shares are, and on the Closing Date will have been offered and
sold in every state and the District of Columbia in compliance in all material
respects with all applicable federal and state securities laws. 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;
(k) The Acquiring Trust has the trust power and authority to enter into
and perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement have been duly authorized by all necessary action
on the part of the Acquiring Trust's Board of Trustees, and, assuming due
authorization, execution and delivery by the Acquired Fund, this Agreement will
constitute a valid and binding obligation of the Acquiring 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;
(l) The information to be furnished in writing by the Acquiring Fund or
the Acquiring Fund Adviser for use in applications for orders, registration
statements, proxy materials and other documents which may be necessary in
connection with the transactions contemplated hereby shall be accurate and
complete in all material respects and shall comply in all material respects with
federal securities and other laws and regulations applicable thereto or the
requirements of any form for which its use is intended, and shall not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the information provided not misleading;
(m) No consent, approval, authorization or order of or filing with any
court or governmental authority is required for the execution of this Agreement
or the consummation of the transactions contemplated by the Agreement by the
Acquiring Fund, except such as may be required under the Securities Act, the
Exchange Act, the Investment Company Act and state securities laws;
(n) The Acquiring Fund is a separate fund of the Acquiring Trust within
the meaning of Section 851(g) of the Code.
(o) The Acquiring Trust currently complies in all material respects
with, and since its organization has complied in all material respects with, the
requirements of, and the rules and regulations under, the Investment Company
Act, the Securities Act, the Exchange Act, state "Blue Sky" laws and all other
applicable federal and state laws or regulations. The Acquiring Trust currently
complies in all material respects with, and since its organization has complied
in all material respects with, all investment objectives, policies, guidelines
and restrictions and any compliance procedures established by the Acquiring
Trust. All advertising and sales material used by the Acquiring Trust complies
in all material respects with and has complied in all material respects with the
applicable requirements of the Securities Act, the Investment Company Act, the
rules and regulations of the Commission, and, to the extent applicable, the
Conduct Rules of the NASD and any applicable state regulatory authority. All
registration statements, prospectuses, reports, proxy materials or other filings
required to be made or filed with the Commission, the NASD or any state
securities authorities by the Acquiring Trust have been duly filed
12
and have been approved or declared effective, if such approval or declaration of
effectiveness is required by law. Such registration statements, prospectuses,
reports, proxy materials and other filings under the Securities Act, the
Exchange Act and the Investment Company Act (i) are or were in compliance in all
material respects with the requirements of all applicable statutes and the rules
and regulations thereunder and (ii) do not or did 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 in which they were made, not false or misleading;
(p) Neither the Acquiring Fund nor, to the knowledge of the Acquiring
Fund, any "affiliated person" of the Acquiring Fund has been convicted of any
felony or misdemeanor, described in Section 9(a)(1) of the Investment Company
Act, nor, to the knowledge of the Acquiring Fund, has any affiliated person of
the Acquiring Fund been the subject, or presently is the subject, of any
proceeding or investigation with respect to any disqualification that would be a
basis for denial, suspension or revocation of registration as an investment
adviser under Section 203(e) of the Investment Advisers Act or Rule 206(4)-4(b)
thereunder or of a broker-dealer under Section 15 of the Exchange Act, or for
disqualification as an investment adviser, employee, officer or director of an
investment company under Section 9 of the Investment Company Act;
(q) For the taxable year that includes the Closing Date and for
subsequent taxable periods, the Acquiring Trust reasonably expects that the
Acquiring Fund will meet the requirements of Subchapter M of the Code for
qualification as a regulated investment company and will be eligible to, and
will, compute its Federal income tax under Section 852 of the Code; and
(r) The tax representation certificate to be delivered by the Acquiring
Fund to the Acquired Fund and Xxxxxx Xxxxxx Xxxxxxxxx Xxxx and Xxxx LLP at
Closing pursuant to Section 6.5 ("ACQUIRING FUND TAX REPRESENTATION
CERTIFICATE") will not on the Closing Date contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein not misleading.
5. COVENANTS OF THE FUNDS
5.1 The Acquired Fund will operate the Acquired Fund's business in the
ordinary course of business and shall comply in all material respects with all
applicable laws, rules and regulations between the date hereof and the Closing
Date. It is understood that such ordinary course of business will include the
declaration and payment of customary dividends and other distributions and any
other dividends and other distributions necessary or advisable (except to the
extent dividends or other distributions that are not customary may be limited by
representations made in connection with the issuance of the tax opinion
described in Article 8 hereof), in each case payable either in cash or in
additional shares.
5.2 The Acquired Trust will call a special meeting of the Acquired
Fund's shareholders to consider approval of this Agreement and act upon the
matters set forth in the Proxy Statement.
5.3 The Acquiring Fund will prepare the notice of meeting, form of
proxy and Proxy Statement (collectively, "PROXY MATERIALS") to be used in
connection with such meeting, and will promptly prepare and file with the
Commission the Proxy Materials. The Acquired Fund will provide the Acquiring
Fund with information reasonably requested for the preparation of the Proxy
Materials in compliance with the Securities Act, the Exchange Act, and the
Investment Company Act.
5.4 The Acquired Fund covenants that the Acquiring Fund Shares to be
issued hereunder are not being acquired by the Acquired Fund for the purpose of
making any distribution thereof other than in accordance with the terms of this
Agreement.
13
5.5 The Acquired Fund will assist the Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requires concerning the beneficial
ownership of the Acquired Fund Shares.
5.6 Subject to the provisions of this Agreement, each Fund will take,
or cause to be taken, all actions, and do or cause to be done, all things
reasonably necessary, proper or advisable to consummate the transactions
contemplated by this Agreement.
5.7 The Acquired Fund shall furnish to the Acquiring Fund on the
Closing Date a statement of assets and liabilities of the Acquired Fund
("STATEMENT OF ASSETS AND LIABILITIES") as of the Closing Date setting forth the
NAV (as computed pursuant to Article 2) of the Acquired Fund as of the Valuation
Time, which statement shall be prepared in accordance with GAAP consistently
applied and certified by the Acquired Fund's Treasurer or Assistant Treasurer.
As promptly as practicable, but in any case within 30 days after the Closing
Date, the Acquired Fund shall furnish to the Acquiring Fund, in such form as is
reasonably satisfactory to the Acquiring Fund, a statement of the earnings and
profits of the Acquired Fund for federal income tax purposes, and of any capital
loss carryovers and other items that will be carried over to the Acquiring Fund
under the Code, and which statement will be certified by the Treasurer of the
Acquired Fund.
5.8 Neither Fund shall take any action that is inconsistent with the
representations set forth in, with respect to the Acquired Fund, the Acquired
Fund Tax Representation Certificate and, with respect to the Acquiring Fund, the
Acquiring Fund Tax Representation Certificate.
5.9 From and after the date of this Agreement and until the Closing
Date, each of the Trusts and the Acquired Fund and the Acquiring Fund shall use
its commercially reasonable efforts to cause the Reorganization to qualify, and
will not knowingly take any action, cause any action to be taken, fail to take
any action or cause any action to fail to be taken, which action or failure to
act could prevent the Reorganization from qualifying, as a reorganization under
the provisions of Section 368(a) of the Code. The parties hereby adopt this
Agreement as a "plan of reorganization" within the meaning of Sections
1.368-2(g) and 1.368-3(a) of the income tax regulations promulgated under the
Code. Unless otherwise required pursuant to a "determination" within the meaning
of Section 1313(a) of the Code, the parties hereto shall treat and report the
transactions contemplated hereby as a reorganization within the meaning of
Section 368(a)(1)(F) of the Code and shall not take any position inconsistent
with such treatment.
5.10 From and after the date of this Agreement and through the time of
the Closing, each Fund shall use its commercially reasonable efforts to cause it
to qualify, and will not knowingly take any action, cause any action to be
taken, fail to take any action or cause any action to fail to be taken, which
action or failure to act could prevent it from qualifying as a regulated
investment company under the provisions of Subchapter M of the Code.
5.11 The Acquired Fund shall prepare, or cause to be prepared, all Tax
Returns of the Acquired Fund for taxable periods that end on or before the
Closing Date and shall timely file, or cause to be timely filed, all such Tax
Returns. The Acquired Fund shall make any payments of Taxes required to be made
by it with respect to any such Tax Returns.
5.12 The Acquiring Trust, on behalf of the Acquiring Fund, and the
Acquired Trust, on behalf of the Acquired Fund, will use its reasonable best
efforts to fulfill or obtain the fulfillment of the conditions precedent to
effect the transactions contemplated by this Agreement as promptly as
practicable.
5.13 The Acquired Trust, on behalf of the Acquired Fund, will, from
time to time, as and when reasonably requested by the Acquiring Trust, execute
and deliver or cause to be executed and delivered
14
all such assignments and other instruments and will take or cause to be taken
such further actions as the Acquiring Trust, on behalf of the Acquiring Fund,
may reasonably deem necessary or desirable in order to vest in and confirm (a)
the Acquired Trust's title to and possession of the Acquiring Fund Shares to be
delivered hereunder and (b) the Acquiring Trust's title to and possession of all
of the Acquired Assets and to otherwise carry out the intent and purpose of this
Agreement.
5.14 The Acquiring Trust, on behalf of the Acquiring Fund, will, from
time to time, as and when reasonably requested by the Acquired Trust, execute
and deliver or cause to be executed and delivered all such assumptions and other
instruments and will take or cause to be taken such further actions as the
Acquired Trust, on behalf of the Acquired Fund, may reasonably deem necessary or
desirable in order to carry out the intent and purpose of this Agreement.
5.15 The Acquiring Trust, on behalf of the Acquiring Fund, will use all
reasonable efforts to obtain the approvals and authorizations required by the
Securities Act, the Investment Company Act and such of the state blue sky or
securities laws as may be necessary in order to operate after the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to complete the transactions
provided for herein shall be, at its election, subject 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, unless waived by the Acquired Fund in writing:
6.1 All representations and warranties by the Acquiring Trust, on
behalf of the Acquiring Fund, contained in this Agreement shall be true and
correct in all material respects as of the date hereof (in each case, as such
representations and warranties would read as if all qualifications as to
materiality were deleted therefrom) and, except as they may be affected by the
transactions contemplated by this Agreement, as of the Closing Date with the
same force and effect as if made on and as of the Closing Date;
6.2 The Acquiring Trust, on behalf of the Acquiring Fund, shall have
performed all of the covenants and complied with all of the provisions required
by this Agreement to be performed or complied with by the Acquiring Trust, on
behalf of the Acquiring Fund, on or before the Closing Date. The Acquiring
Trust, on behalf of the Acquiring Fund, shall have executed and delivered an
assumption of the Assumed Liabilities and all such other agreements and
instruments as the Acquired Trust may reasonably deem necessary or desirable in
order to vest in and confirm (a) such Acquired Fund's title to and possession of
the Acquiring Fund Shares to be delivered hereunder and (b) the Acquiring
Trust's assumption of the Assumed Liabilities and to otherwise carry out the
intent and purpose of this Agreement.
6.3 The Acquiring Trust shall have delivered to the Acquired Trust on
the Closing Date a certificate of the Acquiring Trust, on behalf of the
Acquiring Fund, executed in its name by its President or Vice President and its
Treasurer or Assistant Treasurer, in form and substance satisfactory to the
Acquired Trust and dated as of the Closing Date, to the effect that the
representations and warranties of the Acquiring Trust made in this Agreement are
true and correct in all material respects at and as of the Closing Date, except
as they may be affected by the transactions contemplated by this Agreement, that
each of the conditions to Closing in this Article 6 have been met, and as to
such other matters as the Acquired Trust shall reasonably request;
15
6.4 The Acquiring Trust, on behalf of the Acquiring Fund, and the
Acquired Trust, on behalf of the Acquired Fund, shall have agreed on the number
of full and fractional Acquiring Fund Shares to be issued by the Acquiring Fund
in connection with the Reorganization after such number has been calculated in
accordance with paragraph 1.1.
6.5 The Acquiring Trust, on behalf of the Acquiring Fund, shall have
delivered to the Acquired Trust and Xxxxxx Xxxxxx Xxxxxxxxx Xxxx and Xxxx LLP an
Acquiring Fund Tax Representation Certificate, satisfactory to the Acquiring
Fund and Xxxxxx Xxxxxx Xxxxxxxxx Xxxx and Xxxx LLP, in a form mutually
acceptable to the Acquiring Trust and the Acquired Trust, concerning certain
tax-related matters with respect to the Acquiring Fund; and
6.6 With respect to the Acquiring Fund, the Board of Trustees of the
Acquiring Trust shall have determined that the Reorganization is in the best
interests of the Acquiring Fund and, based upon such determination, shall have
approved this Agreement and the transactions contemplated hereby.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to complete the transactions
provided for herein shall be, at its election, subject to the performance by the
Acquired 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, unless waived by the Acquiring Fund in writing:
7.1 All representations and warranties of the Acquired Trust, on behalf
of the Acquired Fund, contained in this Agreement shall be true and correct in
all material respects as of the date hereof (in each case, as such
representations and warranties would read as if all qualifications as to
materiality were deleted therefrom) and, except as they may be affected by the
transactions contemplated by this Agreement, as of the Closing Date with the
same force and effect as if made on and as of the Closing Date;
7.2 The Acquired Trust shall have delivered to the Acquiring Fund the
Statement of Assets and Liabilities of the Acquired Fund pursuant to Section
5.7, together with a list of its portfolio securities showing the federal income
tax bases and holding periods of such securities, as of the Closing Date,
certified by the Acquired Trust's Treasurer or Assistant Treasurer. The Acquired
Trust, on behalf of the Acquired Fund, shall have executed and delivered all
such assignments and other instruments of transfer as the Acquiring Trust may
reasonably deem necessary or desirable in order to vest in and confirm (a) the
Acquired Fund's title to and possession of the Acquiring Fund Shares to be
delivered hereunder and (b) the Acquiring Fund's title to and possession of all
the Acquired Assets and to otherwise carry out the intent and purpose of this
Agreement. The Acquiring Trust, on behalf of the Acquiring Fund, shall have
executed and delivered all such assumptions and other instruments of transfer as
the Acquired Trust may reasonably deem necessary or desirable in order to carry
out the intent and purpose of this Agreement;
7.3 The Acquired Trust shall have delivered to the Acquiring Trust on
the Closing Date a certificate of the Acquired Trust, on behalf of the Acquired
Fund, executed in its name by its President or Vice President and a Treasurer or
Assistant Treasurer, in form and substance reasonably satisfactory to the
Acquiring Trust and dated as of the Closing Date, to the effect that the
representations and warranties of the Acquired Trust contained in this Agreement
are true and correct in all material respects at and as of the Closing Date,
except as they may be affected by the transactions contemplated by this
Agreement, that each of the conditions to Closing in this Article 7 have been
met, and as to such other matters as the Acquiring Trust shall reasonably
request;
16
7.4 The Acquired Trust, on behalf of the Acquired Fund, shall have
delivered to the Acquiring Trust and Xxxxxx Xxxxxx Xxxxxxxxx Xxxx and Xxxx LLP
an Acquired Fund Tax Representation Certificate, satisfactory to the Acquiring
Fund and Xxxxxx Xxxxxx Xxxxxxxxx Xxxx and Xxxx LLP, in a form mutually
acceptable to the Acquiring Trust and the Acquired Trust, concerning certain
tax-related matters with respect to the Acquired Fund;
7.5 The Board of Trustees of the Acquired Fund shall have determined
that the Reorganization is in the best interests of the Acquired Fund and, based
upon such determination, shall have approved this Agreement and the transactions
contemplated hereby;
7.6 The Acquiring Trust, on behalf of the Acquiring Fund, shall have
performed all of the covenants and complied with all of the provisions required
by this Agreement to be performed or complied with by the Acquiring Trust, on
behalf of the Acquiring Fund, on or before the Closing Date.
7.7 The Acquiring Trust, on behalf of the Acquiring Fund, and the
Acquired Trust, on behalf of the Acquired Fund, shall have agreed on the number
of full and fractional Acquiring Fund Shares to be issued by the Acquiring Fund
in connection with the Reorganization after such number has been calculated in
accordance with Section 1.1.
8. FURTHER CONDITIONS PRECEDENT
If any of the conditions set forth below does not exist on or before
the Closing Date with respect to either party hereto, 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 Acquired Fund's shareholders in
accordance with the provisions of the Acquired Trust's Declaration of Trust and
By-Laws, applicable Massachusetts law and the Investment Company Act, and
certified copies of the resolutions evidencing such approval by the Acquired
Fund's shareholders shall have been delivered by the Acquired Fund to the
Acquiring Fund. Notwithstanding anything herein to the contrary, neither party
hereto may waive the conditions set forth in this Section 8.1;
8.2 On the Closing Date, no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein;
8.3 All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky and securities authorities) deemed
necessary by either party hereto to permit consummation, in all material
respects, 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
either party hereto, provided that either party may waive any such conditions
for itself;
8.4 The Registration Statement shall have become effective under the
Securities Act and no stop orders suspending the effectiveness of the
Registration 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 Securities Act;
8.5 The parties shall have received the opinion of Xxxxxx Xxxxxx
Xxxxxxxxx Xxxx and Xxxx LLP, dated the Closing Date, satisfactory to the
Acquired Trust and the Acquiring Trust and subject to customary assumptions and
qualifications, substantially to the effect that for federal income tax purposes
17
the acquisition by the Acquiring Fund of the Acquired Assets in exchange for the
issuance of Acquiring Fund Shares to the Acquired Fund and the assumption of the
Assumed Liabilities by the Acquiring Fund, followed by the distribution by the
Acquired Fund, in liquidation of the Acquired Fund, of Acquiring Fund Shares to
the Acquired Fund Shareholders in exchange for their Acquired Fund Shares and
the termination of the Acquired Fund, will constitute a "reorganization" within
the meaning of Section 368(a) of the Code.
9. INDEMNIFICATION
9.1 The Acquiring Trust, out of the Acquiring Fund's assets and
property (including any amounts paid to the Acquiring Fund pursuant to any
applicable liability insurance policies or indemnification agreements) agrees to
indemnify and hold harmless the Acquired Trust and its Trustees and officers
from and against any and all losses, claims, damages, liabilities or expenses
(including, without limitation, the payment of reasonable legal fees and
reasonable costs of investigation) to which the Acquired Fund may become
subject, insofar as such loss, claim, damage, liability or expense (or actions
with respect thereto) arises out of or is based on (a) any breach by the
Acquiring Trust, on behalf of the Acquired Fund, of any of its representations,
warranties, covenants or agreements set forth in this Agreement or (b) any act,
error, omission, neglect, misstatement, materially misleading statement, breach
of duty or other act wrongfully done or attempted to be committed by the
Acquiring Trust or its Trustees or officers prior to the Closing Date, provided
that such indemnification by the Acquiring Trust (or the Acquiring Fund) is not
(i) in violation of applicable law or (ii) otherwise prohibited as a result of
any applicable order or decree issued by any governing regulatory authority or
court of competent jurisdiction.
9.2 The Acquired Trust, out of the Acquired Fund's assets and property
(including any amounts paid to the Acquired Fund pursuant to any applicable
liability insurance policies or indemnification agreements) agrees to indemnify
and hold harmless the Acquiring Trust and its Trustees and officers from and
against any and all losses, claims, damages, liabilities or expenses (including,
without limitation, the payment of reasonable legal fees and reasonable costs of
investigation) to which the Acquiring Fund may become subject, insofar as such
loss, claim, damage, liability or expense (or actions with respect thereto)
arises out of or is based on (a) any breach by the Acquired Trust, on behalf of
the Acquired Fund, of any of its representations, warranties, covenants or
agreements set forth in this Agreement or (b) any act, error, omission, neglect,
misstatement, materially misleading statement, breach of duty or other act
wrongfully done or attempted to be committed by the Acquired Trust or its
Trustees or officers prior to the Closing Date, provided that such
indemnification by the Acquired Trust (or the Acquired Fund) is not (i) in
violation of applicable law or (ii) otherwise prohibited as a result of any
applicable order or decree issued by any governing regulatory authority or court
of competent jurisdiction.
9.3 For avoidance of doubt, the foregoing indemnification obligations
are expressly subject to the provisions of Section 15.5 of this Agreement.
10. BROKERAGE FEES AND EXPENSES
10.1 Each party hereto represents and warrants to the other party
hereto that there are no brokers or finders entitled to receive any payments in
connection with the transactions provided for herein.
10.2 The expenses relating to the Reorganization will be borne by
E*TRADE Financial Corporation. The costs of the Reorganization shall include,
but not be limited to, costs associated with preparing, printing and
distributing the Registration Statement, the Proxy Statement, legal fees,
18
accounting fees, securities registration fees and expenses of holding
shareholders' meetings. Notwithstanding any of the foregoing, expenses will in
any event be paid by the party directly incurring such expenses if and to the
extent that the payment by another person of such expenses would result in the
disqualification of such party as a "regulated investment company" within the
meaning of Section 851 of the Code.
11. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
11.1 The Acquiring Trust and the Acquired Trust each agrees that
neither party has made any representation, warranty or covenant not set forth
herein or referred to in Sections 4.1 or 4.2 hereof and that this Agreement
constitutes the entire agreement between the parties.
11.2 The covenants to be performed after the Closing by both the
Acquiring Trust and the Acquired Trust, and the obligations of the Acquiring
Trust, on behalf of the Acquiring Fund, in Section 9.1, shall survive the
Closing. All other representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant thereto or in connection
herewith shall not survive the consummation of the transactions contemplated
hereunder and shall terminate on the Closing.
12. TERMINATION
12.1 This Agreement may be terminated by the mutual agreement of the
Acquiring Trust and the Acquired Trust. In addition, either party may at its
option terminate this Agreement at or prior to the Closing Date:
(a) because of a material breach by the other of any representation,
warranty, covenant or agreement contained herein to be performed at or prior to
the Closing Date;
(b) because of a condition herein expressed to be precedent to the
obligations of the terminating party which has not been met and which reasonably
appears will not or cannot be met;
(c) by resolution of the Acquiring Trust's Board of Trustees if
circumstances should develop that, in the good faith opinion of such Board, make
proceeding with the Agreement not in the best interests of the Acquiring Fund's
shareholders;
(d) by resolution of the Acquired Trust's Board of Trustees if
circumstances should develop that, in the good faith opinion of such Board, make
proceeding with the Agreement not in the best interests of the Acquired Fund's
shareholders; or
(e) if the transactions contemplated by this Agreement shall not have
occurred on or prior to December 31, 2006 or such other date as the parties may
mutually agree upon in writing.
12.2 In the event of any such termination, there shall be no liability
for damages on the part of the Acquiring Trust, the Acquiring Fund, the Acquired
Trust or the Acquired Fund, or the trustees or officers of the Acquired Trust or
the Acquiring Trust, but, subject to Section 10.2, each party shall bear the
expenses incurred by it incidental to the preparation and carrying out of this
Agreement.
13. AMENDMENTS
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
Acquired Trust and the Acquiring Trust; provided, however, that following the
meeting of the Acquired Fund's shareholders called by the
19
Acquired Trust pursuant to Section 5.2 of this Agreement, no such amendment may
have the effect of changing the provisions regarding the method for determining
the number of Acquiring Fund Shares to be received by the Acquired Fund
Shareholders under this Agreement to their detriment without their further
approval; provided that nothing contained in this Section 13 shall be construed
to prohibit the parties from amending this Agreement to change the Closing Date.
14. NOTICES
Any notice, report, statement or demand required or permitted by any
provision of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy or certified mail addressed to the Acquired Fund at its
address set forth in the first paragraph of this Agreement and the Acquiring
Fund at its address set forth in the first paragraph of this Agreement.
15. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT
15.1 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.
15.2 This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
15.3 This Agreement shall be governed by and construed in accordance
with the internal laws of the State of Delaware, without giving effect to
conflict of laws principles (other than Delaware Code Title 6 ss. 2708);
provided that, in the case of any conflict between those laws and the federal
securities laws, the latter shall govern.
15.4 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
either party without the prior written consent of the other party hereto.
Nothing herein expressed or implied is intended or shall be construed to confer
upon or give any person, firm or corporation, or other entity, other than the
parties hereto and their respective successors and assigns, any rights or
remedies under or by reason of this Agreement.
15.5 It is expressly agreed that the obligations of the Acquiring Trust
and the Acquired Trust shall not be binding upon any of their respective
trustees, shareholders, nominees, officers, agents or employees personally, but
bind only to the property of the Acquiring Fund or the Acquired Fund, as the
case may be, as provided in the trust instruments of the Acquiring Trust and the
Declaration of Trust of the Acquired Trust, respectively. The execution and
delivery of this Agreement have been authorized by the trustees of the Acquiring
Trust and of the Acquired Trust and this Agreement has been executed by
authorized officers of the Acquiring Trust and the Acquired Trust, acting as
such, and neither such authorization by such trustees nor such execution and
delivery by such officers shall be deemed to have been made by any of them
individually or to imposed any liability on any of them personally, but shall
bind only the property of the Acquiring Fund and the Acquired Fund, as the case
may be, as provided in the trust instruments of the Acquiring Trust and the
Declaration of Trust of the Acquired Trust, respectively. The debts,
liabilities, obligations, and expenses incurred, contracted for or otherwise
existing with respect to any particular series of either the Acquired Trust or
the Acquiring Trust, including without limitation the Acquired Fund and the
Acquiring Fund, shall be enforceable against the assets of such series only, and
not against the assets of any other series of the Acquired Trust or the
Acquiring Trust, as applicable, or the Acquired Trust or the Acquiring Trust, as
applicable, generally.
* * * * *
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed as of the date first set forth above by its President
or Vice President and attested by its Secretary or Assistant Secretary.
Attest: E*TRADE Funds on behalf of its series,
E*TRADE Delphi Value Fund
By: ________________________________ By: /s/ Xxxxxxxxx Gottfried______________
Name: Name: Xxxxxxxxx Xxxxxxxxx
Title: Title: President
Attest: Kobren Insight Funds on behalf of its
series, Delphi Value Fund
By: ________________________________ By: /s/Xxxx Godes________
Name: Name: Xxxx Xxxxx
Title: Title: Vice President
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SCHEDULE 4.1
None
22
SCHEDULE 4.2
None
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