SUB-ITEM 77Q1(g): COPY OF MERGER OR CONSOLIDATION
AGREEMENT REGARDING SUB-ITEM 77M
The Agreement and Plan of Reorganization between The Nevis Fund, Inc., Forum
Funds on behalf of ▇▇▇▇▇ Advisory Opportunity Fund, and ▇▇▇▇▇ Investment
Advisory Incorporated, dated December 31, 2005 follows.
AGREEMENT AND PLAN OF CONVERSION AND TERMINATION
THIS AGREEMENT AND PLAN OF CONVERSION AND TERMINATION ("AGREEMENT") is made
as of December 29, 2005, among FORUM FUNDS, a Delaware statutory trust
("TRUST"), on behalf of ▇▇▇▇▇ Advisory Opportunity Fund, a segregated portfolio
of assets ("SERIES") thereof ("NEW FUND"), THE NEVIS FUND, INC., a Maryland
corporation ("OLD FUND"), and, solely for purposes of paragraph 6, ▇▇▇▇▇
INVESTMENT ADVISORY INCORPORATED, New Fund's investment adviser ("ADVISER").
(Each of New Fund and Old Fund is sometimes referred to herein as a "FUND," and
each of Trust and Old Fund is sometimes referred to herein as an "INVESTMENT
COMPANY.") All agreements, covenants, representations, actions, and obligations
described herein made or to be taken or undertaken by New Fund are made and
shall be taken or undertaken by Trust on its behalf, and all rights and benefits
created hereunder in favor of New Fund shall inure to, and shall be enforceable
by, Trust on its behalf.
Each Investment Company desires to effect a reorganization described in
section 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended ("CODE"),
and intends this Agreement to be, and adopts it as, a "plan of reorganization"
within the meaning of the regulations under the Code ("REGULATIONS"). The
reorganization will involve Old Fund's changing its identity, form, and place of
organization -- by converting from Old Fund to a series of Trust -- by (1)
transferring all its assets to New Fund (which is being established solely for
the purpose of acquiring such assets and continuing Old Fund's business) in
exchange solely for voting shares of beneficial interest in New Fund and New
Fund's assumption of all Old Fund's liabilities, (2) distributing those shares
PRO RATA to Old Fund's shareholders in exchange for their shares of common stock
therein and in complete liquidation thereof, and (3) terminating Old Fund (all
the foregoing transactions being referred to herein collectively as the
"REORGANIZATION"), all on the terms and conditions set forth herein.
Each Investment Company's Board of Trustees/Directors (each, a "BOARD"),
including a majority of its members who are not "interested persons" (as that
term is defined in the Investment Company Act of 1940, as amended ("1940 ACT"))
thereof, (1) has duly adopted and approved this Agreement and the transactions
contemplated hereby and (2) has determined that participation in the
Reorganization is in the best interests of its Fund and that the interests of
the existing shareholders of its Fund will not be diluted as a result of the
Reorganization.
Old Fund offers a single class of voting shares of common stock ("OLD FUND
SHARES"). New Fund will offer two classes of voting shares of beneficial
interest, designated Class A Shares and Institutional Shares, but only New
Fund's Institutional Shares will be involved in the Reorganization (and thus
included in the term "NEW FUND SHARES"). The rights, powers, privileges, and
obligations of the New Fund Shares will be substantially identical to those of
the Old Fund Shares.
In consideration of the mutual promises contained herein, the Investment
Companies agree as follows:
1. PLAN OF CONVERSION AND TERMINATION
1.1 Subject to the requisite approval of Old Fund's shareholders and the terms
and conditions set forth herein, Old Fund shall assign, sell, convey, transfer,
and deliver all of its assets described in paragraph 1.2 ("ASSETS") to New Fund.
In exchange therefor, New Fund shall --
(a) issue and deliver to Old Fund the number of full and fractional New Fund
Shares equal to the number of full and fractional Old Fund Shares then
outstanding (all references herein to "FRACTIONAL" shares meaning fractions
rounded to the third decimal place), and
(b) assume all of Old Fund's liabilities described in paragraph 1.3
("LIABILITIES").
Such transactions shall take place at the CLOSING (as defined in paragraph 2.1).
1.2 The Assets shall consist of all assets and property -- including all cash,
cash equivalents, securities, commodities, futures interests, receivables
(including interest and dividends receivable), claims and rights of action,
rights to register shares under applicable securities laws, books and records,
and deferred and prepaid expenses shown as assets on Old Fund's books -- Old
Fund owns at the EFFECTIVE TIME (as defined in paragraph 2.1).
1.3 The Liabilities shall consist of all of Old Fund's liabilities, debts,
obligations, and duties of whatever kind or nature existing at the Effective
Time, whether absolute, accrued, or otherwise, whether or not arising in the
ordinary course of business, whether or not determinable at that time, and
whether or not specifically referred to in this Agreement. Notwithstanding the
foregoing, Old Fund shall endeavor to discharge all its known liabilities,
debts, obligations, and duties before the Effective Time.
1.4 At or immediately before the Closing, New Fund shall redeem the INITIAL
SHARE (as defined in paragraph 5.6) for $10.00. At the Effective Time (or as
soon thereafter as is reasonably practicable), Old Fund shall distribute the New
Fund Shares it receives pursuant to paragraph 1.1(a) to its shareholders of
record determined as of the Effective Time (each, a "SHAREHOLDER"), in
proportion to their Old Fund Shares then held of record and in exchange for
their Old Fund Shares, and will completely liquidate. That distribution shall be
accomplished by Trust's transfer agent's opening accounts on New Fund's
shareholder records in the Shareholders' names and transferring those New Fund
Shares thereto. Pursuant to such transfer, each Shareholder's account shall be
credited with the number of full and fractional New Fund Shares equal to the
number of full and fractional Old Fund Shares that Shareholder holds at the
Effective Time. All issued and outstanding Old Fund Shares, including any
represented by certificates, shall simultaneously be canceled on Old Fund's
shareholder records. New Fund shall not issue certificates representing the New
Fund Shares issued in connection with the Reorganization.
1.5 As soon as reasonably practicable after distribution of the New Fund Shares
pursuant to paragraph 1.4, but in all events within six months after the
Effective Time, Old Fund shall be dissolved, liquidated, and terminated, and any
further actions shall be taken in connection therewith as required by applicable
law.
1.6 Any reporting responsibility of Old Fund to a public authority, including
the responsibility for filing regulatory reports, tax returns, and other
documents with the Securities and Exchange Commission ("COMMISSION"), any state
securities commission, any federal, state, and local tax authorities, and any
other relevant regulatory authority, is and shall remain its responsibility up
to and including the date on which it is terminated.
1.7 Any transfer taxes payable on issuance of New Fund Shares in a name other
than that of the registered holder on Old Fund's shareholder records of the Old
Fund Shares actually or constructively exchanged therefor shall be paid by the
person to whom those New Fund Shares are to be issued, as a condition of that
transfer.
2. CLOSING AND EFFECTIVE TIME
2.1 The Reorganization, together with related acts necessary to consummate the
same ("CLOSING"), shall occur at the Investment Companies' offices on December
30, 2005, or at such other place and/or on such other date as to which the
Investment Companies may agree. All acts taking place at the Closing shall be
deemed to take place simultaneously immediately after the close of business
(I.E., 4:00 p.m., Eastern time) on the date thereof ("EFFECTIVE TIME").
2.2 Old Fund shall direct the custodian for its assets ("CUSTODIAN") to deliver
at the Closing a certificate of an authorized officer stating that (a) the
Assets have been delivered in proper form to New Fund within two business days
before or at the Effective Time and (b) all necessary taxes in connection with
the delivery of the Assets, including all applicable federal and state stock
transfer stamps, if any, have been paid or provision for payment has been made.
Each of Old Fund's portfolio securities represented by a certificate or other
written instrument shall be transferred and delivered by Old Fund as of the
Effective Time for New Fund's account duly endorsed in proper form for transfer
in such condition as to constitute good delivery thereof. The Custodian shall
deliver as of the Effective Time by book entry, in accordance with the customary
practices of the Custodian and any securities depository (as defined in Rule
17f-4 under the ▇▇▇▇ ▇▇▇) in which any Assets are deposited, the Assets that are
deposited with such depositories. The cash to be transferred by Old Fund shall
be delivered by wire transfer of federal funds at the Effective Time.
2.3 Old Fund shall deliver to Trust at the Closing a certificate of an
authorized officer of Old Fund setting forth information (including adjusted
basis and holding period, by lot) concerning the Assets, including all portfolio
securities, on Old Fund's books immediately before the Effective Time.
2.4 Each Investment Company shall deliver to the other at the Closing a
certificate executed in its name by its President or a Vice President in form
and substance reasonably satisfactory to the recipient and dated the date of the
Closing, to the effect that the representations and warranties it made in this
Agreement are true and correct at the Effective Time except as they may be
affected by the transactions contemplated by this Agreement.
3. REPRESENTATIONS AND WARRANTIES
3.1 Old Fund represents and warrants to Trust, on New Fund's behalf, as follows:
(a) Old Fund is a corporation that is duly incorporated, validly existing, and
in good standing under the laws of the State of Maryland; and its Articles of
Incorporation ("ARTICLES") are on file with that state's Department of
Assessments and Taxation;
(b) Old Fund is duly registered as an open-end management investment company
under the 1940 Act, and such registration will be in full force and effect at
the Effective Time;
(c) At the Effective Time, Old Fund will have good and marketable title to the
Assets and full right, power, and authority to sell, assign, transfer, and
deliver the Assets hereunder free of any liens or other encumbrances (except
securities that are subject to "securities loans" as referred to in section
851(b)(2) of the Code or that are restricted to resale by their terms); and on
delivery and payment for the Assets, Trust, on New Fund's behalf, will acquire
good and marketable title thereto;
(d) Old Fund is not engaged currently, and Old Fund's execution, delivery, and
performance of this Agreement will not result, in (1) a material violation of
the Articles or Old Fund's By-Laws (collectively, "OLD FUND GOVERNING
DOCUMENTS") or of any agreement, indenture, instrument, contract, lease, or
other undertaking to which Old Fund is a party or by which it is bound or (2)
the acceleration of any obligation, or the imposition of any penalty, under any
agreement, indenture, instrument, contract, lease, judgment, or decree to which
Old Fund is a party or by which it is bound;
(e) All material contracts and other commitments of Old Fund (other than this
Agreement and certain investment contracts, including options, futures, and
forward contracts) will terminate, or provision for discharge of any liabilities
of Old Fund thereunder will be made, at or before the Effective Time, without
either Fund's incurring any liability or penalty with respect thereto and
without diminishing or releasing any rights Old Fund may have had with respect
to actions taken or omitted or to be taken by any other party thereto before the
Closing;
(f) No litigation, administrative proceeding, or investigation of or before any
court or governmental body is presently pending or, to its knowledge, threatened
against Old Fund or any of its properties or assets that, if adversely
determined, would materially and adversely affect its financial condition or the
conduct of its business; and Old Fund knows of no facts that might form the
basis for the institution of such proceedings and is not a party to or subject
to the provisions of any order, decree, or judgment of any court or governmental
body that materially and adversely affects its business or its ability to
consummate the transactions herein contemplated, except as otherwise disclosed
to Trust;
(g) Old Fund's Statement of Assets and Liabilities, Statements of Operations and
Changes in Net Assets, and Portfolio of Investments at and for the year ended on
May 31, 2005, have been audited by ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, an
independent registered public accounting firm, and present fairly, in all
material respects, Old Fund's financial condition as of such date in accordance
with generally accepted accounting principles consistently applied ("GAAP"); and
to Old Fund's management's best knowledge and belief, there are no known
contingent liabilities, debts, obligations, or duties of Old Fund required to be
reflected on a balance sheet (including the notes thereto) in accordance with
GAAP as of such date that are not disclosed therein;
(h) Since May 31, 2005, there has not been any material adverse change in Old
Fund's financial condition, assets, liabilities, or business, other than changes
occurring in the ordinary course of business, or any incurrence by Old Fund of
indebtedness maturing more than one year from the date such indebtedness was
incurred; for purposes of this subparagraph, a decline in net asset value per
Old Fund Share due to declines in market values of securities Old Fund holds,
the discharge of Old Fund liabilities, or the redemption of Old Fund Shares by
its shareholders shall not constitute a material adverse change;
(i) At the Effective Time, all federal and other tax returns, dividend reporting
forms, and other tax-related reports of Old Fund required by law to have been
filed by such date (including any extensions) shall have been filed and are or
will be correct in all material respects, and all federal and other taxes shown
as due or required to be shown as due on such returns and reports shall have
been paid or provision shall have been made for the payment thereof, and to the
best of Old Fund's knowledge, no such return is currently under audit and no
assessment has been asserted with respect to such returns;
(j) For each taxable year of its operation, Old Fund has met (or, for its
current taxable year, will meet) the requirements of Subchapter M of Chapter 1
of the Code for qualification as a regulated investment company ("RIC") and has
been (or will be) eligible to and has computed (or will compute) its federal
income tax under section 852 of the Code; from the time Old Fund's Board
approved the transactions contemplated by this Agreement through the Effective
Time, Old Fund has invested and will invest its assets in a manner that ensures
its compliance with the foregoing; and Old Fund has no earnings and profits
accumulated in any taxable year in which the provisions of Subchapter M did not
apply to it;
(k) All issued and outstanding Old Fund Shares are, and at the Effective Time
will be, duly and validly issued and outstanding, fully paid, and non-assessable
by Old Fund and have been offered and sold in every state and the District of
Columbia in compliance in all material respects with applicable registration
requirements of the Securities Act of 1933, as amended ("1933 ACT"), and state
securities laws; all issued and outstanding Old Fund Shares will, at the
Effective Time, be held by the persons and in the amounts set forth in Old
Fund's transfer agent's records, as provided in paragraph 2.3; and Old Fund does
not have outstanding any options, warrants, or other rights to subscribe for or
purchase any Old Fund Shares, nor is there outstanding any security convertible
into any Old Fund Shares;
(l) Old Fund incurred the Liabilities, which are associated with the Assets, in
the ordinary course of its business;
(m) Old Fund is not under the jurisdiction of a court in a "title 11 or similar
case" (as defined in section 368(a)(3)(A) of the Code);
(n) During the five-year period ending at the Effective Time, (1) neither Old
Fund nor any person "related" (within the meaning of section 1.368-1(e)(3) of
the Regulations) to it will have acquired Old Fund Shares, either directly or
through any transaction, agreement, or arrangement with any other person, with
consideration other than New Fund Shares or Old Fund Shares, except for shares
redeemed in the ordinary course of Old Fund's business as an open-end investment
company as required by section 22(e) of the 1940 Act, and (2) no distributions
will have been made with respect to Old Fund Shares, other than normal, regular
dividend distributions made pursuant to Old Fund's historic dividend-paying
practice and other distributions that qualify for the deduction for dividends
paid (within the meaning of section 561 of the Code) referred to in sections
852(a)(1) and 4982(c)(1)(A) of the Code;
(o) Not more than 25% of the value of Old Fund's total assets (excluding cash,
cash items, and U.S. government securities) is invested in the stock and
securities of any one issuer, and not more than 50% of the value of such assets
is invested in the stock and securities of five or fewer issuers;
(p) Old Fund's current prospectus and statement of additional information
including Old Fund, and each prospectus and statement of additional information
including Old Fund used at all times prior to the date hereof, (1) 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 (2) as
of the date on which they were issued did not contain, and as supplemented by
any supplement thereto dated before or at the Effective Time do not 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 under which they were made, not misleading except with respect
to certain findings made in the U.S. Securities and Exchange Commission's Order
Making Findings, and Imposing Remedial Sanctions and Cease-and-Desist Order
dated February 9, 2004, Investment Advisers Act of 1940 Release No. 2214.
(q) The PROXY STATEMENT (as defined in paragraph 4.5) (other than written
information Trust provided for inclusion therein) will, on its effective date,
at the Effective Time, and at the time of the SHAREHOLDERS MEETING (as defined
in paragraph 4.1), 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; and
(r) The New Fund Shares are not being acquired for the purpose of any
distribution thereof, other than in accordance with the terms hereof.
3.2 Trust, on New Fund's behalf, represents and warrants to Old Fund as follows:
(a) Trust is a statutory trust that is duly organized, validly existing, and in
good standing under the laws of the State of Delaware; and its Certificate of
Trust has been duly filed in the office of the Secretary of State thereof;
(b) Trust is duly registered as an open-end management investment company under
the 1940 Act, and such registration will be in full force and effect at the
Effective Time;
(c) Before the Effective Time, New Fund will be a duly established and
designated series of Trust;
(d) New Fund has not commenced operations and will not do so until after the
Closing;
(e) Before the Closing, there will be no (1) issued and outstanding New Fund
Shares, (2) options, warrants, or other rights to subscribe for or purchase any
New Fund Shares, (3) securities convertible into any New Fund Shares, or (4) any
other securities issued by New Fund, except the Initial Share;
(f) No consideration other than New Fund Shares (and New Fund's assumption of
the Liabilities) will be issued in exchange for the Assets in the
Reorganization;
(g) New Fund is not engaged currently, and Trust's execution, delivery, and
performance of this Agreement will not result, in (1) a material violation of
Trust's Trust Instrument or By-Laws (collectively, "TRUST GOVERNING DOCUMENTS")
or of any agreement, indenture, instrument, contract, lease, or other
undertaking to which Trust, on New Fund's behalf, is a party or by which it is
bound or (2) the acceleration of any obligation, or the imposition of any
penalty, under any agreement, indenture, instrument, contract, lease, judgment,
or decree to which Trust, on New Fund's behalf, is a party or by which it is
bound;
(h) No litigation, administrative proceeding, or investigation of or before any
court or governmental body is presently pending or, to its knowledge, threatened
against Trust with respect to New Fund or any of its properties or assets that,
if adversely determined, would materially and adversely affect its financial
condition or the conduct of its business; and Trust, on New Fund's behalf, 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 herein contemplated;
(i) New Fund will be a "fund" as defined in section 851(g)(2) of the Code; it
will meet the requirements of Subchapter M of Chapter 1 of the Code for
qualification as a RIC for its taxable year in which the Reorganization occurs;
and it intends to continue to meet all such requirements for the next taxable
year;
(j) New Fund has no plan or intention to issue additional New Fund Shares
following the Reorganization except for shares issued in the ordinary course of
its business as a series of an open-end investment company; nor does New Fund,
or any person "related" (within the meaning of section 1.368-1(e)(3) of the
Regulations) to it, have any plan or intention to acquire -- during the
five-year period beginning at the Effective Time, either directly or through any
transaction, agreement, or arrangement with any other person -- with
consideration other than New Fund Shares, any New Fund Shares issued to the
Shareholders pursuant to the Reorganization, except for redemptions in the
ordinary course of such business as required by section 22(e) of the 1940 Act;
(k) There is no plan or intention for New Fund to be dissolved or merged into
another statutory or business trust or a corporation or any "fund" thereof (as
defined in section 851(g)(2) of the Code) following the Reorganization;
(l) During the five-year period ending at the Effective Time, neither New Fund
nor any person "related" (within the meaning of section 1.368-1(e)(3) of the
Regulations) to it will have acquired Old Fund Shares with consideration other
than New Fund Shares;
(m) The New Fund Shares to be issued and delivered to Old Fund, for the
Shareholders' account, pursuant to the terms hereof, (1) will at the Effective
Time have been duly authorized and duly registered under the federal securities
laws (and appropriate notices respecting them will have been duly filed under
applicable state securities laws) and (2) when so issued and delivered, will be
duly and validly issued and outstanding New Fund Shares and will be fully paid
and non-assessable by Trust;
(n) The Proxy Statement (only with respect to written information Trust provided
for inclusion therein) will, on its effective date, at the Effective Time, and
at the time of the Shareholders Meeting, 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; and
(o) Trust's Trust Instrument permits Trust to vary its shareholders' investment;
and Trust does not have a fixed pool of assets -- each series thereof (including
New Fund after it commences operations) is (will be) a managed portfolio of
securities, and its investment advisers (including the Adviser with respect to
New Fund) have the authority to buy and sell securities for it.
3.3 Trust, on New Fund's behalf, and Old Fund each represents and warrants to
the other Investment Company (in Trust's case, on New Fund's behalf), as
follows:
(a) No governmental consents, approvals, authorizations, or filings are required
under the 1933 Act, the Securities Exchange Act of 1934, as amended ("1934
ACT"), the 1940 Act, or state securities laws for its execution or performance
of this Agreement, except for such consents, approvals, authorizations, and
filings as have been made or received or as may be required subsequent to the
Effective Time;
(b) The fair market value of the New Fund Shares each Shareholder receives will
be approximately equal to the fair market value of its Old Fund Shares it
actually or constructively surrenders in exchange therefor;
(c) Its management (1) is unaware of any plan or intention of the Shareholders
to redeem, sell, or otherwise dispose of (i) any portion of their Old Fund
Shares before the Reorganization to any person "related" (within the meaning of
section 1.368-1(e)(3) of the Regulations) to either Fund or (ii) any portion of
the New Fund Shares they receive in the Reorganization to any person "related"
(within such meaning) to New Fund, (2) does not anticipate dispositions of those
New Fund Shares at the time of or soon after the Reorganization to exceed the
usual rate and frequency of dispositions of shares of Old Fund as an open-end
investment company, (3) expects that the percentage of shareholder interests, if
any, that will be disposed of as a result of or at the time of the
Reorganization will be DE MINIMIS, and (4) does not anticipate that there will
be extraordinary redemptions of New Fund Shares immediately following the
Reorganization;
(d) The Shareholders will pay their own expenses (such as fees of personal
investment or tax advisers for advice regarding the Reorganization), if any,
incurred in connection with the Reorganization;
(e) The fair market value of the Assets on a going concern basis will equal or
exceed the Liabilities to be assumed by New Fund and those to which the Assets
are subject;
(f) None of the compensation received by any Shareholder who is an employee of
or service provider to Old Fund will be separate consideration for, or allocable
to, any of the Old Fund Shares that Shareholder held; none of the New Fund
Shares any such Shareholder receives will be separate consideration for, or
allocable to, any employment agreement, investment advisory agreement, or other
service agreement; and the compensation paid to any such Shareholder will be for
services actually rendered and will be commensurate with amounts paid to third
parties bargaining at arm's-length for similar services;
(g) No expenses incurred by Old Fund or on its behalf in connection with the
Reorganization will be paid or assumed by New Fund or any third party unless
those expenses are solely and directly related to the Reorganization (determined
in accordance with the guidelines set forth in Rev. Rul. 73-54, 1973-1 C.B. 187)
("REORGANIZATION EXPENSES"), and no cash or property other than New Fund Shares
will be transferred to Old Fund or any of its shareholders with the intention
that such cash or property be used to pay any expenses (even Reorganization
Expenses) thereof;
(h) The aggregate value of the acquisitions, redemptions, and distributions
limited by paragraphs 3.1(n), 3.2(j), and 3.2(l) will not exceed 50% of the
value (without giving effect to such acquisitions, redemptions, and
distributions) of the proprietary interest in Old Fund at the Effective Time;
(i) Immediately following consummation of the Reorganization, the Shareholders
will own all the New Fund Shares and will own such shares solely by reason of
their ownership of the Old Fund Shares immediately before the Reorganization;
and
(j) Immediately following consummation of the Reorganization, New Fund will hold
the same assets -- except for assets used to pay the Fund's expenses incurred in
connection with the Reorganization -- and be subject to the same liabilities
that Old Fund held or was subject to immediately before the Reorganization, plus
any liabilities for such expenses; and such excepted assets, together with the
amount of all redemptions and distributions (other than regular, normal
dividends) Old Fund makes immediately preceding the Reorganization, will, in the
aggregate, constitute less than 1% of its net assets.
4. COVENANTS
4.1 Old Fund covenants to call a meeting of Old Fund's shareholders to consider
and act on this Agreement and to take all other action necessary to obtain
approval of the transactions contemplated herein ("SHAREHOLDERS MEETING").
4.2 Old Fund covenants that the New Fund Shares to be delivered hereunder are
not being acquired for the purpose of making any distribution thereof, other
than in accordance with the terms hereof.
4.3 Old Fund covenants that it will assist Trust in obtaining information Trust
reasonably requests concerning the beneficial ownership of Old Fund Shares. 4.4
Old Fund covenants that it will turn over its books and records (including all
books and records required to be maintained under the 1940 Act and the rules and
regulations thereunder) to Trust at the Closing.
4.5 Each Investment Company covenants to cooperate in preparing, in compliance
with applicable federal securities laws, a proxy statement relating to the
Reorganization to be furnished in connection with Old Fund's Board's
solicitation of proxies for use at the Shareholders Meeting and a prospectus, on
Form N-14 (collectively, "PROXY STATEMENT").
4.6 Each Investment Company covenants that it will, from time to time, as and
when requested by the other Investment Company, execute and deliver or cause to
be executed and delivered all assignments and other instruments, and will take
or cause to be taken further action, the other Investment Company deems
necessary or desirable in order to vest in, and confirm to, (a) New Fund, title
to and possession of all the Assets, and (b) Old Fund, title to and possession
of the New Fund Shares to be delivered hereunder, and otherwise to carry out the
intent and purpose hereof.
4.7 Trust covenants to use all reasonable efforts to obtain the approvals and
authorizations required by the 1933 Act, the 1940 Act, and state securities laws
it deems appropriate to continue its operations after the Effective Time.
4.8 Subject to this Agreement, each Investment Company covenants to take or
cause to be taken all actions, and to do or cause to be done all things,
reasonably necessary, proper, or advisable to consummate and effectuate the
transactions contemplated hereby.
5. CONDITIONS PRECEDENT
Each Investment Company's obligations hereunder shall be subject to (a)
performance by the other Investment Company of all its obligations to be
performed hereunder at or before the Closing, (b) all representations and
warranties of the other Investment Company contained herein being true and
correct in all material respects as of the date hereof and, except as they may
be affected by the transactions contemplated hereby, as of the Effective Time,
with the same force and effect as if made at and as of such time, and (c) the
following further conditions that, at or before such time:
5.1 All necessary filings shall have been made with the Commission and state
securities authorities, and no order or directive shall have been received that
any other or further action is required to permit the parties to carry out the
transactions contemplated hereby. The Commission shall not have issued an
unfavorable report with respect to the Reorganization under section 25(b) of the
1940 Act nor instituted any proceedings seeking to enjoin consummation of the
transactions contemplated hereby under section 25(c) of the 1940 Act. All
consents, orders, and permits of federal, state, and local regulatory
authorities (including the Commission and state securities authorities) either
Investment Company deems necessary to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain same would not involve a risk of a material
adverse effect on either Fund's assets or properties;
5.2 At the Effective Time, no action, suit, or other proceeding shall be pending
before any court or governmental agency in which it is sought to restrain or
prohibit, or to obtain damages or other relief in connection with, the
transactions contemplated hereby;
5.3 Old Fund shall have received an opinion of ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ LLP ("TRUST COUNSEL") substantially to the effect that:
(a) New Fund is a duly established series of Trust, a trust that is validly
existing as a statutory trust under the laws of the State of Delaware;
(b) Trust has duly authorized and adopted this Agreement on New Fund's behalf;
(c) The New Fund Shares to be issued and distributed to the Shareholders under
this Agreement have been duly authorized and, on their issuance and delivery in
accordance with this Agreement, will be validly issued, fully paid, and
non-assessable;
(d) The execution and delivery of this Agreement did not, and the consummation
of the transactions contemplated hereby will not, materially violate any
provision of the Trust Governing Documents or, to Trust Counsel's knowledge,
violate any obligation of Trust under the express terms of any court order that
names Trust and is specifically directed to it or its property, except as set
forth in such opinion;
(e) To Trust Counsel's knowledge (without any independent inquiry or
investigation), no consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by Trust, on New Fund's
behalf, of the transactions contemplated herein, except any that have been
obtained and are in effect and exclusive of any required under state securities
laws;
(f) Trust is registered with the Commission as an investment company, and to
Trust Counsel's knowledge no order has been issued or proceeding instituted to
suspend either such registration; and
(g) To Trust Counsel's knowledge (without any independent inquiry or
investigation), as of the date of the opinion, there is no action or proceeding
pending before any court or governmental agency, or overtly threatened in
writing against Trust (with respect to New Fund) or any of its properties or
assets attributable or allocable to New Fund that seeks to enjoin the
performance or affect the enforceability of this Agreement, except as set forth
in such opinion.
In rendering such opinion, Trust Counsel need not undertake any independent
investigation, examination, or inquiry to determine the existence or absence of
any facts, need not cause a search to be made of court records or liens in any
jurisdiction with respect to Trust or New Fund, and may (1) rely, as to matters
governed by the laws of the State of Delaware, on an opinion of competent
Delaware counsel, (2) make assumptions that the execution, delivery, and
performance of any agreement, instrument, or document by any person or entity
other than Trust have been duly authorized, (3) make assumptions regarding the
authenticity, genuineness, and/or conformity of documents and copies thereof
without independent verification thereof and other assumptions customary for
opinions of this type, (4) limit such opinion to applicable federal and state
law, (5) define the word "knowledge" and related terms to mean the actual
knowledge of attorneys then with Trust Counsel who have devoted substantive
attention to matters directly related to this Agreement and the Reorganization
and not to include matters as to which such attorneys could be deemed to have
constructive knowledge, and (6) rely as to matters of fact on certificates of
public officials and statements contained in officers' certificates;
5.4 Trust shall have received an opinion of ▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP ("OLD
FUND COUNSEL") substantially to the effect that:
(a) Old Fund is a corporation that is validly existing and in good standing
under the laws of the State of Maryland;
(b) Old Fund has duly authorized and adopted this Agreement;
(c) The execution and delivery of this Agreement did not, and the consummation
of the transactions contemplated hereby will not, materially violate any
provision of the Old Fund Governing Documents or, to Old Fund Counsel's
knowledge, violate any obligation of Old Fund under the express terms of any
court order that names Old Fund and is specifically directed to it or its
property, except as set forth in such opinion;
(d) To Old Fund Counsel's knowledge (without any independent inquiry or
investigation), no consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by Old Fund of the
transactions contemplated herein, except any that have been obtained and are in
effect and exclusive of any required under state securities laws;
(e) Old Fund is registered with the Commission as an investment company, and to
Old Fund Counsel's knowledge no order has been issued or proceeding instituted
to suspend either such registration; and
(f) To Old Fund Counsel's knowledge (without any independent inquiry or
investigation), as of the date of the opinion, there is no action or proceeding
pending before any court or governmental agency, or overtly threatened in
writing against Old Fund or any of its properties or assets that seeks to enjoin
the performance or affect the enforceability of this Agreement, except as set
forth in such opinion.
In rendering such opinion, Old Fund Counsel need not undertake any independent
investigation, examination, or inquiry to determine the existence or absence of
any facts, need not cause a search to be made of court records or liens in any
jurisdiction with respect to Old Fund, and may (1) rely, as to matters governed
by the laws of the State of Maryland, on an opinion of competent Maryland
counsel, (2) make assumptions that the execution, delivery, and performance of
any agreement, instrument, or document by any person or entity other than Old
Fund have been duly authorized, (3) make assumptions regarding the authenticity,
genuineness, and/or conformity of documents and copies thereof without
independent verification thereof and other assumptions customary for opinions of
this type, (4) limit such opinion to applicable federal and state law, (5)
define the word "knowledge" and related terms to mean the actual knowledge of
attorneys then with Old Fund Counsel who have devoted substantive attention to
matters directly related to this Agreement and the Reorganization and not to
include matters as to which such attorneys could be deemed to have constructive
knowledge, and (6) rely as to matters of fact on certificates of public
officials and statements contained in officers' certificates;
5.5 The Investment Companies shall have received an opinion of Trust Counsel as
to the federal income tax consequences mentioned below ("TAX OPINION"). In
rendering the Tax Opinion, Trust Counsel may rely as to factual matters,
exclusively and without independent verification, on the representations and
warranties made in this Agreement, which Trust Counsel may treat as
representations and warranties made to it, and in separate letters addressed to
it. The Tax Opinion shall be substantially to the effect that, based on the
facts and assumptions stated therein and conditioned on consummation of the
Reorganization in accordance with this Agreement, for federal income tax
purposes:
(a) New Fund's acquisition of the Assets in exchange solely for New Fund Shares
and its assumption of the Liabilities, followed by Old Fund's distribution of
those shares PRO RATA to the Shareholders actually or constructively in exchange
for their Old Fund Shares, will qualify as a "reorganization" (as defined in
section 368(a)(1)(F) of the Code), and each Fund will be "a party to a
reorganization" within the meaning of section 368(b) of the Code;
(b) Old Fund will recognize no gain or loss on the transfer of the Assets to New
Fund in exchange solely for New Fund Shares and New Fund's assumption of the
Liabilities or on the subsequent distribution of those shares to the
Shareholders in exchange for their Old Fund Shares;
(c) New Fund will recognize no gain or loss on its receipt of the Assets in
exchange solely for New Fund Shares and its assumption of the Liabilities;
(d) New Fund's basis in each Asset will be the same as Old Fund's basis therein
immediately before the Reorganization, and New Fund's holding period for each
Asset will include Old Fund's holding period therefor;
(e) A Shareholder will recognize no gain or loss on the exchange of all its Old
Fund Shares solely for New Fund Shares pursuant to the Reorganization;
(f) A Shareholder's aggregate basis in the New Fund Shares it receives in the
Reorganization will be the same as the aggregate basis in its Old Fund Shares it
actually or constructively surrenders in exchange for those New Fund Shares, and
its holding period for those New Fund Shares will include, in each instance, its
holding period for those Old Fund Shares, provided the Shareholder holds them as
capital assets at the Effective Time; and
(g) For purposes of section 381 of the Code, New Fund will be treated as if
there had been no Reorganization. Accordingly, the Reorganization will not
result in the termination of Old Fund's taxable year, Old Fund's tax attributes
enumerated in section 381(c) of the Code will be taken into account by New Fund
as if there had been no Reorganization, and the part of Old Fund's taxable year
before the Reorganization will be included in New Fund's taxable year after the
Reorganization.
Notwithstanding subparagraphs (b) and (d), the Tax Opinion may state that no
opinion is expressed as to the effect of the Reorganization on the Funds or any
Shareholder with respect to any Asset as to which any unrealized gain or loss is
required to be recognized for federal income tax purposes at the end of a
taxable year (or on the termination or transfer thereof) under a ▇▇▇▇-to-market
system of accounting;
5.6 Before the Closing, Trust's Board shall have authorized the issuance of, and
New Fund shall have issued, one New Fund Share ("INITIAL SHARE") to Foreside
Fund Services, LLC, Trust's distributor ("DISTRIBUTOR"), or an affiliate thereof
in consideration of the payment of $10.00 to take whatever action it may be
required to take as New Fund's sole shareholder pursuant to paragraph 5.7;
5.7 Trust (on behalf of and with respect to New Fund) shall have entered into,
or adopted, as appropriate, an investment advisory contract and other agreements
and plans necessary for New Fund's operation as a series of an open-end
investment company. Each such contract and agreement shall have been approved by
Trust's Board and, to the extent required by law (as interpreted by Commission
staff positions), by its trustees who are not "interested persons" (as defined
in the ▇▇▇▇ ▇▇▇) thereof and by the Distributor or its affiliate as New Fund's
sole shareholder; and
5.8 At any time before the Closing, either Investment Company may waive any of
the foregoing conditions (except those set forth in paragraphs 5.1, 5.5, 5.6 and
5.7) if, in the judgment of its Board, such waiver will not have a material
adverse effect on its Fund's shareholders' interests.
6. EXPENSES
Subject to complying with the representation contained in paragraph 3.3(g),
the Adviser shall pay the Reorganization Expenses other than the premiums for
tail insurance for members of Old Fund's Board. The Reorganization Expenses
include costs associated with obtaining any necessary order of exemption from
the 1940 Act, preparation of the Proxy Statement, printing and distributing New
Fund's prospectus and Old Fund's proxy materials, soliciting proxies, legal
fees, accounting fees, securities registration fees, and expenses of holding
shareholders meetings. Notwithstanding the foregoing, expenses shall be paid by
the party directly incurring them if and to the extent that the payment thereof
by another person would result in such party's disqualification as a RIC or
would prevent the Reorganization from qualifying as a tax-free reorganization.
7. ENTIRE AGREEMENT; NO SURVIVAL
Neither Investment Company has made any representation, warranty, or
covenant not set forth herein, and this Agreement constitutes the entire
agreement among the Investment Companies and the Adviser. The representations,
warranties, and covenants contained herein or in any document delivered pursuant
hereto or in connection herewith shall not survive the Closing.
8. TERMINATION
This Agreement may be terminated at any time at or before the Closing:
8.1 By either Investment Company (a) in the event of the other Investment
Company's material breach of any representation, warranty, or covenant contained
herein to be performed at or before the Closing, (b) if a condition to its
obligations has not been met and it reasonably appears that such condition will
not or cannot be met, (c) if a governmental body issues an order, decree, or
ruling having the effect of permanently enjoining, restraining, or otherwise
prohibiting consummation of the Reorganization, or (d) if the Closing has not
occurred on or before April 30, 2006, or such other date as to which the
Investment Companies agree; or
8.2 By the Investment Companies' mutual agreement.
In the event of termination under paragraphs 8.1(c) or 8.2, neither Investment
Company (nor its trustees/directors, officers, or shareholders) shall have any
liability to the other Investment Company.
9. AMENDMENTS
The Investment Companies may amend, modify, or supplement this Agreement at
any time in any manner they mutually agree on in writing, notwithstanding Old
Fund's shareholders' approval thereof; provided that, following such approval no
such amendment, modification, or supplement shall have a material adverse effect
on the Shareholders' interests.
10. SEVERABILITY
Any term or provision of this Agreement that is invalid or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement or affecting the validity
or enforceability of any of the terms and provisions of this Agreement in any
other jurisdiction.
11. MISCELLANEOUS
11.1 This Agreement shall be construed and interpreted in accordance with the
internal laws of the State of Delaware; provided that, in the case of any
conflict between those laws and the federal securities laws, the latter shall
govern.
11.2 Nothing expressed or implied herein is intended or shall be construed to
confer on or give any person, firm, trust, or corporation other than each
Investment Company (in Trust's case, on New Fund's behalf) and its respective
successors and assigns any rights or remedies under or by reason of this
Agreement.
11.3 Notice is hereby given that this instrument is executed and delivered on
behalf of Trust's trustees solely in their capacities as trustees and not
individually. Each Investment Company's obligations under this instrument are
not binding on or enforceable against any of its trustees/directors, officers,
or shareholders or, in Trust's case, any series thereof other than New Fund but
are only binding on and enforceable against Old Fund's or New Fund's property,
respectively. Each Investment Company, in asserting any rights or claims under
this Agreement (in Trust's case, on New Fund's behalf), shall look only to the
other Fund's property in settlement of such rights or claims and not, in Trust's
case, to the property of any other series thereof other than New Fund or to such
trustees/directors, officers, or shareholders.
11.4 This Agreement may be executed in one or more counterparts, all of which
shall be considered one and the same agreement, and shall become effective when
one or more counterparts have been executed by each Investment Company and
delivered to the other Investment Company. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, each party has caused this Agreement to be executed and
delivered by its duly authorized officer as of the day and year first written
above.
FORUM FUNDS, on behalf of its series ▇▇▇▇▇ Advisory
Opportunity Fund
By:
------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
President
THE NEVIS FUND, INC.
By:
------------------------------
[name]
[title]
Solely for purposes of paragraph 6, ▇▇▇▇▇
INVESTMENT ADVISORY INCORPORATED
By:
-------------------------------
[name]
[title]
