EXHIBIT (H)(8)
AGREEMENT AND PLAN OF REORGANIZATION
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AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (this "Agreement") is made as of
this 15th day of December, 2000, by and between Principal Preservation
Portfolios, Inc., a Maryland corporation ("Principal Preservation"), on behalf
of the Select Value Portfolio, and Nationwide Mutual Funds, an Ohio business
trust ("Nationwide"), acting on behalf of the Nationwide Value Opportunities
Fund (the "Value Opportunities Fund").
R E C I T A L S
WHEREAS, Principal Preservation is registered with the Securities and
Exchange Commission (the "SEC") as an open-end, series, management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
currently has designated nine separate series or investment portfolios,
including the Select Value Portfolio, and offers separate classes of shares of
its series;
WHEREAS, Nationwide is registered with the SEC as an open-end, series,
management investment company under the 1940 Act, currently has designated 37
separate series or investment portfolios, including the Value Opportunities
Fund, and offers separate classes of shares of its series;
WHEREAS, the Board of Directors of Principal Preservation and the Board of
Trustees of Nationwide have each approved this Agreement and the
Reorganization;
WHEREAS, the Select Value Portfolio and the Value Opportunities Fund have
similar investment objectives and principal strategies and currently are managed
by the same investment adviser or sub-adviser;
WHEREAS, the parties desire to provide for the reorganization of the Select
Value Portfolio through the acquisition by Nationwide on behalf of the Value
Opportunities Fund of substantially all of the property, assets and goodwill of
the Select Value Portfolio in exchange for Class A and Class B shares of
beneficial interest of the Value Opportunities Fund; the distribution of such
shares of beneficial interest of the Value Opportunities Fund to the
shareholders of the Select Value Portfolio according to their respective
interests; and the dissolution of the Select Value Portfolio as soon as
practicable thereafter; and
WHEREAS, this Agreement is intended to be, and is adopted as, a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C) of the
Internal Revenue Code of 1986, as amended (the "Code").
AGREEMENT
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings set forth below:
1.1 "AGREEMENT" means this Agreement and Plan of Reorganization,
together with all schedules and exhibits attached hereto, as the same may be
amended from time to time in accordance with the terms hereof.
1.2 "CLOSING" means the closing of the Reorganization and the other
transactions contemplated by this Agreement as defined in Section 3 of this
Agreement.
1.3 "CLOSING DATE" means February 19, 2001, or such other date as the
parties may mutually determine in writing, provided that all of the conditions
precedent to Closing have then been satisfied (or waived).
1.4 "CODE" means the Internal Revenue Code of 1986, as amended.
1.5 "CUSTODIAN" means The Fifth Third Bank, acting in its capacity as
custodian for the Value Opportunities Fund, including the assets of the Select
Value Portfolio being transferred to the Value Opportunities Fund.
1.6 "EFFECTIVE TIME" means 8:00 a.m. Central Time on the Closing
Date.
1.7 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and all of the rules and regulations adopted thereunder by the SEC.
1.8 "EXCLUDED ASSETS" shall have the meaning set forth in Section 2.4
of this Agreement.
1.9 "1940 ACT" means the Investment Company Act of 1940, as amended,
and all of the rules and regulations adopted thereunder by the SEC.
1.10 "NATIONWIDE" means Nationwide Mutual Funds, an Ohio business
trust.
1.11 "NATIONWIDE PROSPECTUS/SAI" means the Prospectus and/or Statement
of Additional Information (as the case may be), each dated January 3, 2000, as
amended on February 9, 2000 and as supplemented on March 27, 2000 (as may be
further supplemented hereafter), of Nationwide relating to the Value
Opportunities Fund.
1.12 "PERSON" means an individual or a corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated
organization, or other entity, as the context requires.
1.13 "PRINCIPAL PRESERVATION" means Principal Preservation Portfolios,
Inc., a Maryland corporation.
1.14 "PRINCIPAL PRESERVATION PROSPECTUS/SAI" means the Prospectus
and/or Statement of Additional Information (as the case may be), each dated May
1, 2000, as supplemented on September 29, 2000 (as may be further supplemented
hereafter), of Principal Preservation relating to the Select Value Portfolio.
1.15 "REORGANIZATION" means the transactions described in and
contemplated by this Agreement, including the transfer of the Select Value
Portfolio Assets (other than the Excluded Assets) to the Value Opportunities
Fund in exchange for, and against delivery to the Select Value Portfolio, of
Value Opportunities Fund Shares and the distribution of the Value Opportunities
Fund Shares to the Select Value Portfolio Shareholders in liquidation of the
Select Value Portfolio.
1.16 "REQUIRED SELECT VALUE PORTFOLIO SHAREHOLDER VOTE" shall have the
meaning specified in Section 7.4 of this Agreement.
1.17 "SEC" means the United States Securities and Exchange Commission.
1.18 "SECURITIES ACT" means the Securities Act of 1933, as amended,
and all rules and regulations adopted thereunder by the SEC.
1.19 "SELECT VALUE PORTFOLIO" means the Select Value Portfolio, a
designated series or investment portfolio of Principal Preservation.
1.20 "SELECT VALUE PORTFOLIO ASSETS" means the portfolio securities,
cash, cash equivalents, dividend and interest receivables, and other properties,
rights and assets owned by the Select Value Portfolio on the close of business
on the Valuation Date.
1.21 "SELECT VALUE PORTFOLIO SHAREHOLDERS" means the holders of record
of the issued and outstanding shares of common stock of the Select Value
Portfolio as of the close of business on the Valuation Date.
1.22 "SELECT VALUE PORTFOLIO SHAREHOLDER MEETING" means a meeting of
the shareholders of the Select Value Portfolio to be convened in accordance with
applicable law and the Articles of Incorporation and Bylaws of Principal
Preservation to consider and vote upon the approval of this Agreement and the
Reorganization contemplated hereby.
1.23 "SELECT VALUE PORTFOLIO SHARES" means the issued and outstanding
shares of common stock of the Select Value Portfolio, including both Class A
shares and Class B shares.
1.24 "VALUE OPPORTUNITIES FUND" means the Nationwide Value
Opportunities Fund, a designated series or investment portfolio of Nationwide.
1.25 "VALUE OPPORTUNITIES FUND SHARES" means the shares of beneficial
interest, without par value, of the Value Opportunities Fund, including both
Class A shares and Class B shares, to be issued pursuant to this Agreement, as
described in Section 2.1 hereof.
1.26 "VALUATION DATE" shall have the meaning set forth in Section
2.2(a) of this Agreement.
1.27 "NORTHPOINTE" means NorthPointe Capital, LLC, the interim
investment adviser to the Select Value Portfolio and the sub-adviser to the
Value Opportunities Fund.
2. REORGANIZATION OF THE SELECT VALUE PORTFOLIO
2.1 TRANSFER OF SELECT VALUE PORTFOLIO ASSETS; ISSUANCE OF VALUE
OPPORTUNITIES FUND SHARES. Subject to the terms and conditions set forth
herein, and in reliance upon the representations and warranties contained
herein, at the Effective Time, Principal Preservation on behalf of the Select
Value Portfolio agrees to sell, convey, transfer and deliver all of the Select
Value Portfolio Assets (except the Excluded Assets) to the Custodian on behalf
of the Value Opportunities Fund in consideration of, in exchange for, and
against delivery to the Select Value Portfolio of, that number of Value
Opportunities Fund Shares (including, if applicable, fractional shares rounded
to the nearest thousandth of one whole share) having an aggregate net asset
value equal to the value of the Select Value Portfolio Assets (exclusive of the
Excluded Assets), all determined as provided in Section 2.2 of this Agreement.
As of the Effective Time and upon delivery of such assets to the Custodian, the
Value Opportunities Fund shall receive good and marketable title to such assets
free and clear of all liens, security interests, pledges, charges, claims or
encumbrances of any and every kind. The Value Opportunities Fund Shares so
delivered to the Select Value Portfolio shall consist of the number of both
Class A and Class B shares of the Value Opportunities Fund determined in
accordance with Section 2.2(c) of this Agreement, based on the relative value of
the Select Value Portfolio Assets (exclusive of the Excluded Assets)
attributable to the Class A and Class B shares of the Select Value Portfolio, in
aggregate, outstanding as of the close of business on the New York Stock
Exchange on the Valuation Date (after processing purchase and redemption
requests received prior to such close of business). Immediately following
receipt of the Value Opportunities Fund Shares, the Select Value Portfolio shall
distribute such shares to the Select Value Portfolio Shareholders in liquidation
of the Select Value Portfolio, with the Select Value Portfolio Shareholders who
owned Class A shares of the Select Value Portfolio receiving Class A shares of
the Value Opportunities Fund and the Select Value Portfolio Shareholders who
owned Class B shares of the Select Value Portfolio receiving Class B shares of
the Value Opportunities Fund.
2.2 COMPUTATION OF NET ASSET VALUE.
(a) When Determined. The net asset value of the Value
Opportunities Fund Shares and the value of the Select Value Portfolio Assets
shall, in each case, be determined as of the close of business on the New York
Stock Exchange on the business day next preceding the Closing Date (the
"Valuation Date").
(b) Valuations. The net asset value of the Value
Opportunities Fund Shares (for each of Class A and Class B) shall be the net
asset value per share of each class, computed in accordance with the practices
and procedures of the Value Opportunities Fund described in the Nationwide
Prospectus/SAI. The value of the Select Value Portfolio Assets shall be
computed in accordance with the practices and procedures of the Value
Opportunities Fund described in the Nationwide Prospectus/SAI; provided,
however, that such computation is consistent with the practices and policies of
the Select Value Portfolio and in the event of any inconsistency the parties
hereto shall confer and mutually agree on the valuation. Based on the value of
the Select Value Portfolio Assets to be delivered to the Custodian pursuant to
Section 2.1 hereof, Principal Preservation shall determine the aggregate value
of each of the Class A and Class B shares of the Select Value Portfolio
outstanding as of the close of business on the New York Stock Exchange on the
Valuation Date. The stock transfer books of the Select Value Portfolio shall be
permanently closed as of the close of business on the Valuation Date, and only
purchase orders and requests for the redemption of shares of the Select Value
Portfolio received in proper form prior to the close of business on the New York
Stock Exchange on the Valuation Date shall be accepted by the Select Value
Portfolio. Purchase orders and redemption requests received thereafter shall be
deemed to be purchase and redemption requests for the Value Opportunities Fund
(assuming that the transactions contemplated by this Agreement have been
consummated).
(c) Value Opportunities Fund Shares. The number of Value
Opportunities Fund Shares (including fractional shares, if any) to be issued
hereunder shall be determined separately for each class. The number of Class A
shares of the Value Opportunities Fund (including fractional shares, if any) to
be issued shall be determined by dividing the aggregate value of the Class A
shares of the Select Value Portfolio determined in accordance with Section
2.2(b) hereof, by the net asset value of a Value Opportunities Fund Class A
share, determined in accordance with Section 2.2(b) hereof. The number of Class
B shares of the Value Opportunities Fund (including fractional shares, if any)
to be issued shall be determined by dividing the value of the Select Value
Portfolio Class B shares determined in accordance with Section 2.2(b) hereof,
by the net asset value of a Value Opportunities Fund Class B share, determined
in accordance with Section 2.2(b) hereof.
(d) Computations. All computations of value shall be made
by NorthPointe (or such other Person as is responsible for regularly pricing the
Value Opportunities Fund's portfolio securities). Nationwide shall cause
NorthPointe (or such other Person) to deliver to Principal Preservation a copy
of its valuation report at or prior to the Closing. Securities for which market
quotes are not available shall be valued as mutually agreed by Nationwide and
Principal Preservation.
(e) Shadow Valuation. Promptly following the date of this
Agreement, Principal Preservation and Nationwide shall each cause a valuation of
the Select Value Portfolio Assets to be conducted in accordance with their
respective valuation policies and practices as of the close of business on a
mutually acceptable date, which in any event shall not be more than 30 days
after the date of this Agreement. This shadow pricing procedure shall be
repeated as of the close of business on a mutually acceptable date which is not
more than 10 days prior to the Valuation Date.
2.3 LIST OF ASSETS.
(a) The Select Value Portfolio Assets shall consist of all
property and rights, including without limitation all cash, cash equivalents,
securities and dividend and interest receivables owned by the Select Value
Portfolio and shown as an asset on the Select Value Portfolio's books as of the
close of business on the Valuation Date.
(b) Promptly following the signing of this Agreement, the
Select Value Portfolio will provide the Value Opportunities Fund and the
Custodian with a list of its assets as of a date agreed upon by the parties. On
the Closing Date, the Select Value Portfolio will provide the Value
Opportunities Fund with a list of the Select Value Portfolio Assets.
2.4 EXCLUDED ASSETS. There shall be deducted from the assets of the
Select Value Portfolio described in Section 2.3 all cash, cash equivalents and
securities in an amount estimated by Principal Preservation to be sufficient to
pay all liabilities of the Select Value Portfolio that have accrued but remain
unpaid as of the close of business on the Valuation Date, including, without
limitation: (a) amounts owed or to be owed to any Select Value Portfolio
Shareholder, including declared but unpaid dividends and capital gains
distributions; and (b) accounts payable, taxes and other accrued and unpaid
expenses, if any, incurred in the normal operation of the business of the Select
Value Portfolio up to and including the Closing Date and estimated to be
incurred after the Closing Date in connection with winding up the affairs of,
and dissolving, the Select Value Portfolio (together the "Excluded Assets").
2.5 DECLARATION OF DIVIDENDS AND CAPITAL DISTRIBUTIONS BY THE SELECT
VALUE PORTFOLIO. On or prior to the Valuation Date, the Select Value Portfolio
will declare a dividend to shareholders of record of the Select Value Portfolio
as of or prior to the Valuation Date so that, for the short taxable year of the
Select Value Portfolio ending on the date on which the Select Value Portfolio is
completely dissolved and discontinued, the Select Value Portfolio will have
declared an aggregate amount of dividends which: (a) is equal to at least the
sum of its net capital gain (within the meaning of Section 852(b)(3) of the
Code) and ninety percent (90%) of its investment company taxable income
(determined under Section 852(b)(2) of the Code, but without regard to Section
852(b)(2)(D) of the Code) for such taxable year; and (b) is sufficient to avoid
any excise tax on the Select Value Portfolio under Section 4982 of the Code for
the calendar year in which the Closing Date occurs, provided that the dividends
that have been so declared but have not been paid on or before such Valuation
Date are in fact paid by the Select Value Portfolio prior to the end of such
calendar year to the shareholders of the Select Value Portfolio as of the record
date for determining shareholders entitled to receive payment of such dividend.
2.6 DISSOLUTION. Contemporaneously with the Closing, the Select
Value Portfolio shall be dissolved and Principal Preservation shall pay or make
provisions for all of the Select Value Portfolio's debts, liabilities, taxes and
obligations of any kind, including those relating to the Excluded Assets as
described in Section 2.4 hereof, and distribute all remaining assets, including
the Value Opportunities Fund Shares received by it in the Reorganization and the
balance, if any, of the Excluded Assets, pro rata to the Select Value Portfolio
Shareholders in accordance with their ownership of Class A or Class B shares of
the Select Value Portfolio, and the Select Value Portfolio shall cease to be a
designated series of shares of Principal Preservation.
2.7 ISSUANCE OF VALUE OPPORTUNITIES FUND SHARES. On the Closing
Date, Principal Preservation shall instruct Nationwide Investors Services, Inc.
("NISI"), the transfer agent of the Value Opportunities Fund, to record on the
books and records of the Value Opportunities Fund the interest of each of the
Select Value Portfolio Shareholders in the Value Opportunities Fund Shares, in
accordance with their pro rata interest in the Class A and Class B shares of the
Select Value Portfolio in the name of such Select Value Portfolio Shareholder.
Upon dissolution of the Select Value Portfolio, all Select Value Portfolio
Shares then issued and outstanding shall thereupon be cancelled on the books of
Principal Preservation. Nationwide or NISI shall forward a confirmation of to
each of the Select Value Portfolio Shareholders of their ownership of the Value
Opportunities Fund Shares. No redemption or repurchase of such Value
Opportunities Fund Shares credited to any Select Value Portfolio Shareholder in
respect of his or her Select Value Portfolio Shares which are represented by an
unsurrendered stock certificate shall be permitted until such certificate has
been surrendered to Nationwide or NISI for cancellation, or if such certificate
is lost or misplaced, until a lost certificate affidavit has been executed and
delivered to Nationwide or NISI.
2.8 LIABILITIES AND EXPENSES. The Select Value Portfolio will use
its best efforts to discharge all of its debts, liabilities, obligations and
taxes when and as due prior to the Closing Date. An unaudited Statement of
Assets and Liabilities of the Select Value Portfolio will be prepared by the
Treasurer of the Select Value Portfolio, as of the close of business on the
Valuation Date. The Statement of Assets and Liabilities of the Select Value
Portfolio will be prepared in conformity with generally accepted accounting
principles consistently applied from the prior audited period (except for year-
end adjustments). The Value Opportunities Fund shall not assume any liability
of the Select Value Portfolio on or after the Closing Date.
2.9 TERMINATION, WINDING UP. After the Closing, the Select Value
Portfolio shall not conduct any business except in connection with the winding
up of its affairs and shall file, or make provision for filing of, all reports
it is required by law to file. After the Closing, the Select Value Portfolio
shall cease to be a designated series of Principal Preservation under Maryland
law and its shares shall be deregistered under the Securities Act and applicable
state securities laws.
2.10 BOOKS AND RECORDS. Copies of all books and records of or
pertaining to the Select Value Portfolio, including those concerning its
obligations under the 1940 Act, the Code, state blue sky laws or otherwise
concerning this Agreement, will at Closing be delivered to the Value
Opportunities Fund. Following the Closing, Select Value Portfolio shall be
entitled to have access to such books and records as necessary to prepare
required reports, tax returns and other documents, and, to the extent required
by applicable laws, to retain copies of such books and records.
3. CLOSING
3.1 CLOSING DATE. The closing of the Reorganization and the other
transactions contemplated hereby (the "Closing") shall take place at the
Effective Time. The Closing Date shall take place no later than ten (10)
calendar days following approval by Principal Preservation shareholders of this
Agreement and the Reorganization and the satisfaction of all conditions
precedent to Closing (except those which by their terms can be satisfied only at
Closing); or such other time as may be agreed to by Nationwide and Principal
Preservation in writing.
3.2 PORTFOLIO SECURITIES. Portfolio securities held by the Select
Value Portfolio and represented by a certificate or written instrument shall be
presented by it or on its behalf to the Custodian for examination no later than
two (2) business days preceding the Valuation Date. Such portfolio securities
(together with any cash or other assets) to be transferred to the Value
Opportunities Fund pursuant to Section 2.1 hereof shall be delivered by the
Select Value Portfolio to the Custodian at or prior to the Effective Time in
conformity with applicable custody provisions under the 1940 Act and duly
endorsed in proper form for transfer in such condition as to constitute good
delivery thereof in accordance with the custom of brokers. The portfolio
securities shall be accompanied by all necessary federal and state stock
transfer stamps or a check for the appropriate purchase price of such stamps.
Portfolio securities and instruments deposited with a securities depository, as
defined in Rule 17f-4 under the 1940 Act, or with a qualified foreign custodian
under Rule 17f-5 of the 1940 Act shall be delivered at or prior to the Effective
Time by book entry in accordance with customary practices of such depositories
and the Custodian. The cash delivered shall be in the form of a Federal Funds
wire, pursuant to the instructions provided prior to the Closing Date by
Nationwide or the Custodian.
3.3 POSTPONEMENT OF VALUATION. In the event that on the Valuation
Date (a) the New York Stock Exchange or the Nasdaq Stock Market shall be closed
to trading or trading thereon shall be restricted or (b) trading or the
reporting of trading on the New York Stock Exchange or the Nasdaq Stock Market
shall be disrupted so that, in the judgment of both Nationwide and Principal
Preservation, accurate appraisal of the value of the net assets of the Value
Opportunities Fund or the Select Value Portfolio is impracticable, the Valuation
Date shall be postponed until the first business day after the day when trading
shall have been fully resumed without restriction or disruption and reporting
shall have been restored and accurate appraisal of the value of the net assets
of the Value Opportunities Fund and the Select Value Portfolio is practicable in
the judgment of Nationwide and Principal Preservation. The Closing Date shall
be postponed as necessary to coordinate with any such postponement of the
Valuation Date.
3.4 THE SELECT VALUE PORTFOLIO SHAREHOLDERS. Principal Preservation
shall deliver to Nationwide (a) at the Closing, a list, certified by its
Secretary, of the names, addresses and taxpayer identification numbers of the
Select Value Portfolio Shareholders of record and the record number and class of
outstanding Select Value Portfolio Shares owned by each shareholder, all as of
the close of business on the Valuation Date (after giving effect to the payment
of dividends and any reinvestment of such dividends, described in Section 2.5 of
this Agreement), and (b) as soon as practicable after the Closing all original
documentation (including Internal Revenue Service forms, certificates,
certifications and correspondence) relating to the Select Value Portfolio
Shareholders' taxpayer identification numbers and their liability for or
exemption from back-up withholding. Nationwide shall cause NISI to issue and
deliver to Select Value Portfolio Shareholders a confirmation evidencing
delivery of Value Opportunities Fund Shares to be credited on the Closing Date
to the Select Value Portfolio Shareholders as provided in Section 2.7 of this
Agreement. At the Closing, each party shall deliver to the other such bills of
sale, assignments, assumption agreements, receipts or other documents as such
other party or its counsel may reasonably request to effect the consummation of
the transactions contemplated by the Agreement.
4. COVENANTS OF PRINCIPAL PRESERVATION AND NATIONWIDE
4.1 REGISTRATION STATEMENT. Principal Preservation will prepare and
Nationwide will file with the SEC a registration statement on Form N-14 under
the Securities Act, relating to the Value Opportunities Fund Shares to be issued
to the Select Value Portfolio shareholders pursuant to the Reorganization
("Registration Statement"). The Registration Statement shall include a combined
proxy statement/prospectus, notice of meeting, form of proxy and statement of
additional information ("Proxy Materials") that complies in all material
respects with the applicable provisions of Section 14(a) of the Exchange Act,
Section 20(a) of the 1940 Act and Section 6 of the Securities Act. Nationwide
will assist Principal Preservation with the preparation of, and will be entitled
to review and revise, the Proxy Materials included in the Registration
Statement. Nationwide will further provide Principal Preservation with such
other information and documents relating to the Value Opportunities Fund as are
reasonably necessary for the preparation of the Registration Statement.
4.2 SHAREHOLDERS MEETING. Principal Preservation will call a meeting
of share holders of the Select Value Portfolio to consider and act upon this
Agreement and take all other action necessary to obtain approval of the
Reorganization contemplated hereby. Principal Preservation will prepare, with
assistance from Nationwide, the Proxy Materials to be used in connection with
such meetings, and Nationwide will furnish Principal Preservation with a current
effective prospectus relating to the Value Opportunities Fund Shares for
inclusion in the Proxy Materials and with such other information relating to the
Value Opportunities Fund as is reasonably necessary for the preparation and
distribution of the Proxy Materials. Promptly following the effective date of
the Registration Statement, Principal Preservation will mail to each shareholder
of record of the Select Value Portfolio entitled to vote at the Select Value
Portfolio Shareholder Meeting the Proxy Materials (other than the statement of
additional information).
4.3 SHAREHOLDER INFORMATION. Prior to the Closing Date, Principal
Preservation will provide Nationwide with such information as Nationwide
reasonably requests concerning the beneficial ownership of the shares of the
Select Value Portfolio.
4.4 COOPERATION. Subject to the provisions of this Agreement,
Nationwide and Principal Preservation will each take, or cause to be taken, all
action, and do or cause to be done, all things reasonably necessary, proper or
advisable to consummate and make effective the Reorganization contemplated by
this Agreement.
4.5 EARNING AND PROFITS. As promptly as practicable, but in any case
within 60 days after the Closing Date, Principal Preservation shall furnish or
cause to be furnished to Nationwide, such information as Nationwide reasonably
requests to enable Nationwide to determine the Select Value Portfolio's earnings
and profits for federal income tax purposes that will be carried over to the
Value Opportunities Fund pursuant to Section 381 of the Code.
4.6 FINAL TAX RETURNS. As soon after the Closing Date as is
reasonably practicable, Principal Preservation shall prepare and file all
federal and other tax returns and reports of the Select Value Portfolio required
by law to be filed with respect to all periods ending through and after the
Closing Date but not theretofore filed and shall deliver copies of the same to
Nationwide.
4.7 AUTHORIZATIONS TO CONTINUE THE VALUE OPPORTUNITIES FUND.
Nationwide agrees to use all reasonable efforts to obtain the approvals and
authorizations required by the Securities Act, the 1940 Act and such of the
state Blue Sky and securities laws as it may deem appropriate to enable it to
continue its operations and the operations of the Value Opportunities Fund after
the Closing Date.
5. REPRESENTATIONS AND WARRANTIES OF PRINCIPAL PRESERVATION
Principal Preservation, on behalf of the Select Value Portfolio, represents
and warrants to Nationwide as follows:
5.1 CAPITALIZATION; SELECT VALUE PORTFOLIO SHARES. The
capitalization of Principal Preservation consists of 1,000,000,000 shares of
capital stock, par value $.001 per share, currently divided into nine separate
series and offering different classes of shares within each series. The Select
Value Portfolio is a diversified separate series of Principal Preservation and
has a total of 55,000,000 shares authorized for issuance, consisting of
25,000,000 authorized shares of Class A Common Stock, 25,000,000 authorized
shares of Class B Common Stock and 5,000,000 shares of Class C Common Stock.
There are no shares of Class C Common Stock of the Select Value Portfolio issued
or outstanding. All issued and outstanding shares of the Select Value Portfolio
are, and at the Closing Date will be, duly and validly issued, fully paid, non-
assessable, fully transferable and entitled to full voting rights. All such
shares will, at the time of Closing, be held by the Persons and in the amounts
and classes set forth in the list of shareholders of record provided to the
Value Opportunities Fund pursuant to Section 3.4 hereof. The Select Value
Portfolio does not have outstanding any options, warrants or other rights to
subscribe for or purchase any of its shares, nor is there outstanding any
security convertible into any of its shares.
5.2 TITLE. The Select Value Portfolio has, and at the Closing Date
will have, good and marketable title to the Select Value Portfolio Assets,
subject to no liens, security interests, pledges, charges, claims or other
encumbrances of any kind, and full right, power and authority to sell, convey,
assign, deliver and otherwise transfer the Select Value Portfolio Assets
hereunder, and upon delivery and payment for the Select Value Portfolio Assets,
the Value Opportunities Fund will acquire clear title thereto, subject to no
restrictions on the full transfer thereof, including such restrictions as might
arise under the Securities Act (other than Rule 144A, privately placed or
illiquid securities, if any). No financing statement covering all or any
portion of assets and naming the Select Value Portfolio, as debtor, has been
filed in any public office, and the Select Value Portfolio has not signed any
financing statement or security agreement as debtor or borrower which financing
statement or security agreement covers all or any portion of the Select Value
Portfolio Assets.
5.3 PROXY MATERIALS. Beginning on the effective date of the
Registration Statement, at the time of the Select Value Portfolio Shareholders
Meeting (and any adjournment thereof) and on the Closing Date, the written
information provided by Principal Preservation for inclusion in the Proxy
Materials shall be accurate and complete in all material respects, shall comply
in all material respects with the provisions of the Securities Act, the Exchange
Act and the 1940 Act, and shall 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 statement therein, in light of the circumstances under which it was
made, not misleading; provided, however, that no representation or warranty is
made with respect to written information regarding Nationwide or the Value
Opportunities Fund included in the Proxy Materials.
5.4 NO DISTRIBUTION. The Select Value Portfolio is not acquiring the
Value Opportunities Fund Shares for the purpose of making any distribution
thereof other than in accordance with the terms of this Agreement.
5.5 AUTHORITY.
(a) Principal Preservation has the full legal power and
authority to enter into and perform this Agreement, and, except for obtaining
the requisite approval of the Select Value Portfolio's shareholders as described
in Section 7.4 hereof, the execution, delivery and performance of this Agreement
and the consummation of the Reorganization contemplated by this Agreement in
accordance with its terms have been duly and validly authorized and will not
violate any provision of law, or the articles of incorporation or bylaws of
Principal Preservation, or result in the forfeiture or cancellation of any
license, permit, consent, approval, accreditation or authorization respecting
the Select Value Portfolio and required in order for the Value Opportunities
Fund to carry on the business of the Select Value Portfolio following the
Closing, or result, or with the passage of time will result, in the violation,
breach, termination, cancellation or acceleration of any provision of or
constitute a default under or result in the creation of any lien, claim or
encumbrance pursuant to any court order, judgment, decree, order or any
indenture, license, permit, authorization, contract or other instrument to which
Principal Preservation is a party or by which any of its properties may be
bound, which would have a material adverse effect on the Select Value Portfolio
Assets or the business of the Select Value Portfolio. Principal Preservation
agrees to obtain, prior to the Closing Date, all consents, approvals,
authorizations or orders of any kind, which shall be required to sell and
transfer to the Value Opportunities Fund the Select Value Portfolio Assets and
to consummate the Reorganization contemplated by this Agreement.
(b) The Board of Directors of Principal Preservation has
taken all necessary action to authorize and approve the execution, delivery and
performance of this Agreement and all of the transactions contemplated hereby
and, when executed and delivered and approved by the requisite number of
shareholders of the Select Value Portfolio as described in Section 7.4 hereof,
this Agreement will constitute the legal, valid and binding obligation of
Principal Preservation, enforceable against Principal Preservation in accordance
with its terms.
5.6 OPERATIONS. Except as disclosed on Schedule 5.6 attached hereto,
there has not been any material adverse change in the business, operations,
financial position and assets of the Select Value Portfolio (other than changes
occurring in the ordinary course of business), and the business of the Select
Value Portfolio has been conducted in the usual, regular and ordinary manner in
material compliance with the requirements of all federal and state laws.
Furthermore, between the date of this Agreement and the Effective Time,
Principal Preservation will continue to operate the business of the Select Value
Portfolio as it is presently conducted. Except as disclosed on Schedule 5.6
attached hereto, the following is true with respect to the Select Value
Portfolio and the operation of the Select Value Portfolio's business:
(a) All transactions involving the Select Value Portfolio
have been accurately and fully recorded in the books and records of the Select
Value Portfolio and will continue to be so recorded until the Effective Time;
(b) The Select Value Portfolio has not sold, exchanged,
conveyed or otherwise disposed, or subjected to lien, pledge, hypothecation,
mortgage, or other encumbrance, any assets or properties other than sales or
other transactions in the ordinary course of business, nor will the Select Value
Portfolio do so from the date of this Agreement until the Effective Time;
(c) The Select Value Portfolio has paid, and will continue
to pay, its debts, obligations and liabilities, including taxes, fees, levies
and assessments in the ordinary course as they have matured and will mature
through the close of business on the Valuation Date;
(d) The Select Value Portfolio has not incurred, and will
not incur from the date hereof until the Effective Time, any material debt,
obligation or liability (other than those incurred in the ordinary course of its
business) which presently subjects, or with the passage of time or upon default
will subject, its assets to any lien, claim, charge, or other encumbrance;
(e) The Select Value Portfolio has not altered, amended,
terminated or discharged and will not alter, amend, terminate or discharge from
the date hereof until the Effective Time, any written or oral contract,
commitment or agreement to which the Select Value Portfolio is presently a party
which is required to be listed on Schedule 5.9 hereto, nor waived, nor will
waive from the date hereof until the Effective Time, any material right with
respect thereto, nor permitted or consented, nor will permit or consent from the
date hereof until the Effective Time, to such alteration, amendment, termination
or discharge, nor committed, nor will commit or cause from the date hereof until
the Effective Time, a breach or default in any of the provisions thereof;
(f) The Select Value Portfolio has not entered, and will
not enter from the date hereof until the Effective Time, into any written or
oral contract except in the ordinary course of business at the prices and upon
the terms consistent with its past practices and which do not violate any
representation, warranty or covenant of this Agreement;
(g) The Select Value Portfolio has materially complied with
all laws applicable to the conduct of its business and will continue to do so
until the Effective Time.
(h) There has not occurred any transaction or event, nor is
any anticipated which does or may adversely affect the Select Value Portfolio's
business or the Select Value Portfolio Assets in any material respect (other
than changes occurring in the ordinary course of business), and Principal
Preservation will immediately notify Nationwide upon the occurrence of any such
event of which it becomes aware prior to the Effective Time.
5.7 RIGHT TO INSPECT THE BOOKS AND RECORDS. Principal Preservation
shall make available and Nationwide and its agents, attorneys, accountants,
employees, contractors and other authorized representatives shall have the
right, during normal business hours and upon reasonable notice, to the extent
that Nationwide reasonably deems appropriate, to examine the books and records
of the Select Value Portfolio, and to make such tests, surveys, investigations
and other inspections in such manner as Nationwide may reasonably deem
necessary, provided that such inspection will not interfere with the conduct of
the Select Value Portfolio's business.
5.8 [Intentionally omitted.]
5.9 MATERIAL AGREEMENTS. Schedule 5.9 attached hereto lists all
material contracts, agreements, understandings or other commitments of the
Select Value Portfolio. The Select Value Portfolio has delivered or made
available to Nationwide complete and accurate copies of all documents referred
to on Schedule 5.9 attached hereto, each of which is in effect and legal, valid
and enforceable against the Select Value Portfolio and, to the knowledge of
Principal Preservation, legal, valid and enforceable against the other party in
accordance with its terms.
5.10 REGULATORY COMPLIANCE. Principal Preservation and the Select
Value Portfolio have all licenses, permits, approvals, authorizations and
registrations required by any federal, state and local laws, authorities and
agencies in connection with the operation of the Select Value Portfolio's
business as presently being conducted and the ownership of its assets ("Select
Value Portfolio's Regulatory Approvals"), the lack of which would have a
material adverse effect on the Select Value Portfolio. All such Select Value
Portfolio's Regulatory Approvals are in full force and effect, and to the
knowledge of Principal Preservation, no suspension or cancellation of any of
them is threatened or pending. Except for the approval of the requisite number
of shareholders of the Select Value Portfolio of the Agreement and the
Reorganization as described in Section 7.4 hereof, there are no approvals or
consents of any third parties necessary or required for Principal Preservation
validly and legally to enter into this Agreement and to perform its obligations
hereunder.
5.11 ORGANIZATION AND QUALIFICATION OF PRINCIPAL PRESERVATION AND THE
SELECT VALUE PORTFOLIO. Principal Preservation is duly organized and validly
existing as a corporation in good standing under the laws of Maryland, has full
corporate power and authority to own its assets and to conduct its business as
it is now being conducted, and is duly qualified or registered to do business
and is in good standing in each jurisdiction which requires such qualification
or registration or is subject to no material liability by reason of its failure
to be so qualified. The Select Value Portfolio is a duly designated series of
capital stock of Principal Preservation. Complete and correct copies as of the
date hereof of the articles of incorporation and bylaws of Principal
Preservation have previously been delivered or made available to Nationwide.
5.12 CERTAIN SEC FILINGS, MATERIALS AND FINANCIAL STATEMENTS.
(a) Principal Preservation has heretofore furnished or made
available to Nationwide complete copies of all proxy statements, registration
statements, prospectuses, supplements, statements of additional information,
reports, documents or other materials relating to the Select Value Portfolio
filed by or on behalf of the Select Value Portfolio with the SEC on or after May
1, 2000, (collectively, the "Select Value Portfolio SEC Materials"). The Select
Value Portfolio SEC Materials (i) were prepared in all material respects in
accordance with the applicable requirements of the Securities Act, the 1940 Act,
the Exchange Act and the rules and regulations under each of them, (ii) as of
their respective dates did not contain any untrue statement of a material fact,
and (iii) as of their respective dates did not omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(b) Principal Preservation has previously furnished or made
available to Nationwide the audited annual and unaudited interim financial
statements listed on Schedule 5.12(b) attached hereto with respect to the Select
Value Portfolio for all such periods on or after November 1, 1999 (the "Select
Value Portfolio Financial Statements"). Such Select Value Portfolio Financial
Statements are true and correct in all material respects and present fairly the
financial position and results of operations of the Select Value Portfolio for
the periods then ended, all in conformity with generally accepted accounting
principles applied on a consistent basis, except for year-end adjustments and as
otherwise noted therein.
5.13 ABSENCE OF CERTAIN CHANGES. Between the date of the latest
Select Value Portfolio Financial Statements and the date hereof: (a) there has
been no material adverse change in the financial condition, results of
operation, business, assets or liabilities of the Select Value Portfolio (other
than changes occurring in the ordinary course of business, including without
limitation changes in the value of the assets of the Select Value Portfolio as a
result of any market correction) or the status of the Select Value Portfolio as
a regulated investment company under the Code; and (b) there has not been any
change in accounting methods, principles or practices of the Select Value
Portfolio having a material adverse effect on the financial condition or results
of operations of the Select Value Portfolio, nor any resignation of the
independent certified public accountants and auditors of the Select Value
Portfolio due to a conflict or disagreement with management of the Select Value
Portfolio or otherwise.
5.14 LITIGATION. No litigation, claim, action, proceeding or
investigation is pending or, to the knowledge of Principal Preservation,
threatened or probable of assertion against or relating to Principal
Preservation or the Select Value Portfolio, before any court or governmental or
regulatory authority or body acting in an investigative or adjudicative capacity
seeking injunctive relief or monetary damages which (a) involves or relates to,
or could otherwise affect, the Select Value Portfolio, and (b) which, if
adversely determined, could have material adverse effect on the Reorganization
or on the business, results of operations or financial position of the Select
Value Portfolio. Neither the directors of Principal Preservation nor any
affiliates of Principal Preservation is subject to any outstanding order, writ,
injunction or decree relating to the Select Value Portfolio or which has had or
could reasonably be expected to have a material adverse effect on the business
or operations of the Select Value Portfolio or the Select Value Portfolio's
compliance with applicable laws. In connection with the Select Value Portfolio,
no person (as defined therein) is disqualified from, or has any investigation
pending which could result in her, him or its being disqualified from, serving
or acting in any capacity that is the subject of Section 9 of the 1940 Act. To
the knowledge of Principal Preservation, neither Principal Preservation nor the
Select Value Portfolio is under investigation for violation of any law or
regulation related to or affecting its business or operations.
5.15 CERTAIN ADDITIONAL REPRESENTATIONS AND WARRANTIES AS TO THE
SELECT VALUE PORTFOLIO.
(a) True and correct copies of all of the investment
advisory or sub-advisory agreements and underwriting agreements to which Select
Value Portfolio is a party and all other material agreements with respect to the
Select Value Portfolio (i) have been delivered or made available to Nationwide
(ii) are and will remain in full force and effect through the Closing Date, and
(iii) were duly approved and comply in all respects with the 1940 Act, the
Exchange Act, the Investment Advisers Act of 1940 (the "Advisers Act"), all
state securities laws, all requirements of the National Association of
Securities Dealers, Inc. (the "NASD"), and the rules and regulations thereunder.
(b) ▇.▇. ▇▇▇▇▇▇▇ and Company ("▇▇▇▇▇▇▇") is the principal
underwriter for the Select Value Portfolio and until September 29, 2000, was
the investment adviser for the Select Value Portfolio. To the knowledge of
Principal Preservation, ▇▇▇▇▇▇▇ is and has been (i) duly registered or licensed
as broker-dealer under the 1934 Act and the securities laws of each state or
other jurisdiction wherein the nature of its activities in connection with such
agreement requires such registration or licensing, (ii) a member in good
standing of the NASD, (iii) a member in good standing in the Securities
Investors Protection Corporation, with all assessments due thereto having been
paid, or is not required to be such a member, and (iv) duly registered as an
investment adviser under the Advisers Act.
(c) There are no judgments, special consent judgments or
SEC orders on or with regard to Principal Preservation or the Select Value
Portfolio or, to the knowledge of Principal Preservation, with regard to its
investment adviser, distributor, transfer agent or custodian currently in effect
which have had or could reasonably be expected to have a material adverse effect
on the business or operations of the Select Value Portfolio as presently
conducted. All orders of exemption issued to Principal Preservation or the
Select Value Portfolio by any regulatory agency, including the SEC and the
Internal Revenue Service, which are necessary for the conduct of the business of
Principal Preservation or the Select Value Portfolio have been obtained and are
currently in full force and effect, no proceeding has been commenced to revoke
any such order and, to the knowledge of Principal Preservation, no such
proceeding is contemplated by any such regulatory agency.
(d) Principal Preservation is and will continue through the
Closing Date to be duly registered with the SEC as a series, open-end management
investment company under the 1940 Act, and since the inception of the Select
Value Portfolio and with respect to the Select Value Portfolio, has been and is
in compliance with the 1940 Act, including the requirements to file semi-annual
or annual reports with the SEC; the prospectuses, statements of additional
information and, as applicable, sales materials of Principal Preservation on
behalf of the Select Value Portfolio have been duly filed with the SEC,
applicable state securities authorities and the NASD (where required to be so
filed); and Principal Preservation on behalf of the Select Value Portfolio has
filed with the SEC and other applicable federal or state agencies or authorities
such notices or reports required under applicable federal or state laws, rules
or regulations for the sale of its shares, the conduct of its business or the
ownership of its assets, except, in each case, where the failure to file any
such notice or report could not reasonably be expected to have a material
adverse effect on the Select Value Portfolio.
(e) Shares of the Select Value Portfolio have been duly
authorized for sale and are, and since inception of the Select Value Portfolio
have been, duly qualified for sale (or exempt from qualification) under the
securities laws of all 50 states and any other jurisdictions in which shares of
the Select Value Portfolio have been offered or sold.
(f) Shares of the Select Value Portfolio have been duly
registered under the Securities Act by means of a registration statement (or
post-effective amendment thereto) on Form N-1A, said registration statement has
become effective under the Securities Act, no stop order suspending the
effectiveness of such registration statement has been issued, no proceedings for
that purpose have been instituted or threatened by the SEC and such registration
statement has remained and continues to remain effective. Such registration
statement has, at all times when a prospectus with respect to the securities to
which such registration statement relates has been required to be delivered,
complied in all material respects with the requirements of the Securities Act
and the 1940 Act, and such registration statement has not included at any time
any untrue statement of a material fact or omitted 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. Copies
of the current prospectus, statement of additional information and registration
statement of Principal Preservation on behalf of the Select Value Portfolio have
been delivered or made available to Nationwide.
(g) The independent public accountants for the Select Value
Portfolio who have certified the financial statements of the Select Value
Portfolio which have been filed with the SEC have been selected and ratified in
accordance with the applicable provisions of the 1940 Act.
(h) The Select Value Portfolio has complied and will
continue to comply through the Closing Date (and thereafter as reasonably
necessary to timely deposit all withheld taxes) in all material respects with
all applicable laws regarding the withholding of taxes, including (without
limitation), if applicable, withholding of federal income taxes under Sections
1441, 1442 and 3406 of the Code.
(i) The Select Value Portfolio has properly prepared,
executed and timely filed, or caused to be timely filed a proper request for
extension with respect to, all federal, state and local tax returns for income,
franchise, sales, withholding, excise and other taxes required to be filed by it
and has paid all taxes, assessments, fees and other governmental charges shown
on said returns or by assessment or otherwise required to be paid by it. All of
such returns are complete and accurate in all material respects and have been
prepared in accordance with all applicable legal requirements. No material tax
liabilities, disallowances or assessments relating to the business or assets of
the Select Value Portfolio have been assessed or proposed and the Select Value
Portfolio is not aware of any reasonable basis for any such assessment. No tax
return filed on behalf of the Select Value Portfolio is currently being audited
by the Internal Revenue Service or by any state or local tax authority. The
reserves and provisions, if any, for taxes on the books of the Select Value
Portfolio are adequate for the payment of all taxes for the purposes and the
periods to which they pertain, including through the Effective Time. Without in
any way limiting the representations and warranties set forth above or in other
Sections of this Agreement, the Select Value Portfolio qualifies as a "regulated
investment company" under Section 851 (Subchapter M) of the Code, and has so
qualified during its entire existence. The Select Value Portfolio will, at the
Closing, satisfy, and consummation of the Reorganization contemplated by this
Agreement will not cause it to fail to satisfy for any period, the requirements
of Subchapter M of the Code. The Select Value Portfolio is not and has not been
liable for tax under Section 4982 of the Code. The Select Value Portfolio has
fully complied in all material respects with all applicable laws regarding all
applicable information reporting requirements, including, but not limited to,
Section 6042 of the Code. The Select Value Portfolio has satisfied the
requirements of Section 852(a) of the Code for each of its tax years during its
entire existence. Principal Preservation will provide to Nationwide at Closing
a statement of the respective tax bases of all Select Value Portfolio Assets
being transferred to the Value Opportunities Fund in the Reorganization,
certified by the Treasurer of Principal Preservation.
(j) The minute books of Principal Preservation contain
complete and accurate records, in all material respects, of all meetings and
other corporate actions of its shareholders and boards of directors where any
matters pertaining to the Select Value Portfolio were addressed or considered,
including all committees thereof. Copies of all such portions of the minute
books shall be made available to Nationwide as reasonably requested and as
necessary to allow for the administration of the Value Opportunities Fund
following the Closing Date.
(k) The portfolio securities of the Select Value Portfolio
have at all times during the Select Value Portfolio's existence been valued in
accordance with Section 2(a)(41) of the 1940 Act, Rule 2a-4 thereunder and
Principal Preservation's valuation procedures with respect to the Select Value
Portfolio. There have been no material miscalculations of the net asset value
of the Select Value Portfolio.
(l) The portfolio securities of the Select Value Portfolio
include only those securities described in the Principal Preservation
Prospectus/SAI and those portfolio securities purchased or disposed of after the
date of the latest Select Value Portfolio Financial Statements in the ordinary
course of business, all of which are consistent with the investment objectives,
policies and restrictions of the Select Value Portfolio.
(m) The Select Value Portfolio does not have any
unamortized or unpaid organizational fees or expenses.
(n) Neither Principal Preservation nor the Select Value
Portfolio is under the jurisdiction of a court in a Title 11 or similar case
within the meaning of Section 368(a)(3)(A) of the Code.
6. REPRESENTATIONS AND WARRANTIES OF NATIONWIDE
Nationwide, on behalf of the Value Opportunities Fund, represents and
warrants to Principal Preservation as follows:
6.1 CAPITALIZATION. The capitalization of Nationwide consists of an
unlimited number of shares of beneficial interest, without par value. The Value
Opportunities Fund offers Class A, Class B and Institutional Service Class
shares. The Value Opportunities Fund Shares to be issued and delivered to the
Select Value Portfolio for the account of the Select Value Portfolio
Shareholders pursuant to the terms of this Agreement will, at the Closing Date,
have been duly authorized and, when so issued and delivered, will be duly and
validly issued, fully paid, non-assessable, fully transferable, entitled to full
voting rights, duly registered with the SEC pursuant to an effective
Registration Statement on Form N-14, and duly registered or qualified for sale
pursuant to the blue sky laws of each state where a Select Value Portfolio
Shareholder resides, except where exempt from such state registration or
qualification requirements. No shareholder of Value Opportunities Fund will
have any preemptive right or right of subscription or purchase in respect of any
such Value Opportunities Fund Shares.
6.2 AUTHORITY OF THE VALUE OPPORTUNITIES FUND.
(a) Nationwide has the full legal power and authority to
enter into and perform this Agreement and the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated by this Agreement in accordance with their terms will not violate
any provision of law, trust instruments or bylaws of Nationwide or result in the
forfeiture or cancellation of any license, permit, consent, approval,
accreditation or authorization respecting the Value Opportunities Fund or its
business, or result in the violation, breach, termination, cancellation or
acceleration of any provision of or constitute a default under or result in the
creation of any lien, claim or encumbrance pursuant to any indenture, license,
permit, authorization, court order, judgment, decree, contract or other
instrument to which the Value Opportunities Fund is a party or by which any of
its properties may be bound.
(b) The trustees of Nationwide have taken all necessary
action to authorize and approve the execution, delivery and performance of this
Agreement and all of the transactions contemplated hereby, and when executed and
delivered this Agreement will constitute the legal, valid and binding obligation
of Nationwide, enforceable against Nationwide in accordance with its terms.
6.3 ORGANIZATION AND QUALIFICATION OF NATIONWIDE AND THE VALUE
OPPORTUNITIES FUND. Nationwide is a duly organized and validly existing
business trust in full force and effect under the laws of Ohio, has full power
and authority to own its assets and to conduct its business as it is now being
conducted, and is duly qualified or registered to do business and is in good
standing in each jurisdiction which requires such qualification or registration
or is subject to no material liability by reason of its failure to be so
qualified. The Value Opportunities Fund is a duly designated series of shares
of beneficial interest of Nationwide, consisting of three classes: Class A,
Class B and Institutional Service Class shares. Complete and correct copies as
of the date hereof of the Declaration of Trust and Bylaws of Nationwide have
previously been delivered or made available to Principal Preservation.
6.4 CERTAIN SEC FILINGS, MATERIALS AND FINANCIAL STATEMENTS OF THE
VALUE OPPORTUNITIES FUND.
(a) Nationwide has heretofore furnished or made available
to Principal Preservation complete copies of all proxy statements, registration
statements, prospectuses, supplements, statements of additional information,
reports, documents or other materials relating to the Value Opportunities Fund,
filed with the SEC on or after December 30, 1999 (collectively, the "Nationwide
SEC Materials"). The Nationwide SEC Materials (i) were prepared in all
materials respects in accordance with the applicable requirements of the
Securities Act, the Exchange Act, the 1940 Act, and the rules and regulations
under each of them, (ii) as of their respective dates did not contain any untrue
statement of a material fact, and (iii) as of their respective dates did not
omit to state a material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(b) Nationwide has previously furnished or made available
to Principal Preservation the audited annual and unaudited interim financial
statements listed on Schedule 6.4 attached hereto with respect to the Value
Opportunities Fund for all such periods on or after January 1, 2000 (the "Value
Opportunities Fund Financial Statements"). Such Value Opportunities Fund
Financial Statements are true and correct and present fairly the financial
position and results of operations of the Value Opportunities Fund for the
periods then ended, all in conformity with generally accepted accounting
principles applied on a consistent basis, except for year-end adjustments and as
otherwise noted therein.
6.5 ABSENCE OF CERTAIN CHANGES OR EVENTS WITH RESPECT TO THE VALUE
OPPORTUNITIES FUND. Between the date of the latest Value Opportunities Fund
Financial Statements and the date hereof: (a) there has been no material
adverse change in the financial condition, results of operations, business,
assets or liabilities of the Value Opportunities Fund (other than changes
occurring in the ordinary course of business, including without limitation
changes in the value of the assets of the Value Opportunities Fund as a result
of any market correction) or the status of the Value Opportunities Fund as a
regulated investment company under the Code; and (b) there has not been any
change in accounting methods, principles or practices of the Value Opportunities
Fund having a material adverse effect on the financial condition or results of
operations of the Value Opportunities Fund, nor any resignation of the
independent certified public accountants and auditors of the Value Opportunities
Fund due to a conflict or disagreement with management of the Value
Opportunities Fund or otherwise.
6.6 LITIGATION. No litigation, claim, action, proceeding or
investigation is pending or, to the knowledge of Nationwide, threatened or
probable of assertion against or relating to Nationwide or the Value
Opportunities Fund, before any court or governmental or regulatory authority or
body acting in an investigative or adjudicative capacity seeking injunctive
relief or monetary damages which (a) involves or relates to, or could otherwise
affect, the Value Opportunities Fund, and (b) which, if adversely determined,
could have material adverse effect on the Reorganization contemplated by this
Agreement or on the business, results of operations or financial position of the
Value Opportunities Fund. Neither trustees of Nationwide nor any affiliates of
Nationwide is subject to any outstanding order, writ, injunction or decree
relating to the Value Opportunities Fund or which has had or could reasonably be
expected to have a material adverse effect on the business or operations of the
Value Opportunities Fund or the Value Opportunities Fund's compliance with
applicable laws. In connection with the Value Opportunities Fund, no person (as
defined therein) is disqualified from, or has any investigation pending which
could result in her, him or its being disqualified from, serving or acting in
any capacity that is the subject of Section 9 of the 1940 Act. To the knowledge
of Nationwide, neither Nationwide nor the Value Opportunities Fund is under
investigation for violation of any law or regulation related to or affecting its
business or operations.
6.7 REGULATORY COMPLIANCE. Nationwide and the Value Opportunities
Fund have all permits, licenses, permits, approvals, authorizations and
registrations required by any federal, state and local laws, authorities and
agencies in connection with the operation of the Value Opportunities Fund's
business as presently conducted and the ownership of its assets ("Value
Opportunities Fund's Regulatory Approvals"), the lack of which would have a
material adverse effect on the Value Opportunities Fund. All such Value
Opportunities Fund's Regulatory Approvals are in full force and effect, and to
the knowledge of Nationwide, no suspension or cancellation of any of them is
threatened.
6.8 INFORMATION IN REGISTRATION STATEMENT ON FORM N-14. The
Registration Statement, including the Proxy Materials, when effective, shall
comply in all material respects with the provisions of the Securities Act, the
Exchange Act, the 1940 Act and the regulations thereunder, and shall 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 statement therein, in
light of the circumstances under which such statement was made, not misleading;
provided however, that no representation or warranty is made with respect to
written information regarding Principal Preservation or the Select Value
Portfolio included in the Proxy Materials.
6.9 CERTAIN ADDITIONAL REPRESENTATIONS AND WARRANTIES AS TO THE VALUE
OPPORTUNITIES FUND.
(a) True and correct copies of all of the investment
advisory or sub-advisory agreements and underwriting agreements to which the
Value Opportunities Fund is a party or is subject and all other material
agreements with respect to the Value Opportunities Fund (i) have been delivered
or made available to Principal Preservation, (ii) are in full force and effect,
and (iii) comply in all respects with the 1940 Act, the Exchange Act, the
Advisers Act, all state securities laws, all requirements of the NASD, and the
rules and regulations thereunder.
(b) Nationwide Advisory Services, Inc. ("NAS") is the
principal underwriter for the Value Opportunities Fund, and has been for all
periods on or after January 3, 2000. To the knowledge of Nationwide, NAS is and
has been (i) duly registered or licensed as broker-dealer under the 1934 Act and
the securities laws of each state or other jurisdiction wherein the nature of
its activities in connection with such agreement requires such registration or
licensing, (ii) a member in good standing of the NASD, and (iii) a member in
good standing in the Securities Investors Protection Corporation, with all
assessments due thereto having been paid, or is not required to be such a
member. Villanova Mutual Fund Capital Trust ("VMFCT") and NorthPointe are the
investment adviser and sub-adviser, respectively, for the Value Opportunities
Fund.
(c) There are no judgments, special consent judgments or
SEC orders on or with regard to Nationwide or the Value Opportunities Fund or,
to the knowledge of Nationwide, with regard to its adviser, sub-adviser,
distributor, administrator, transfer agent or custodian, currently in effect
which have had or could reasonably be expected to have a material adverse effect
on the business or operations of the Value Opportunities Fund as presently
conducted. All orders of exemption issued to Nationwide or the Value
Opportunities Fund, by any regulatory agency, including the SEC and the Internal
Revenue Service, which is necessary for the conduct of the business of
Nationwide or the Value Opportunities Fund have been obtained and are currently
in full force and effect, no proceeding has been commenced to revoke any such
order and, to the knowledge of Nationwide, no such proceeding is contemplated by
any such regulatory agency.
(d) Nationwide is, and will continue to be through the
Closing Date, duly registered with the SEC as a series, open-end management
investment company under the 1940 Act, and since the inception of the Value
Opportunities Fund and with respect to the Value Opportunities Fund, has been
and is in compliance with the 1940 Act, and the SEC regulations promulgated
thereunder, including the requirements to file semi-annual or annual reports
with the SEC; the prospectuses, statements of additional information and, as
applicable, sales materials of Nationwide on behalf of the Value Opportunities
Fund have been duly filed with the SEC, applicable state securities authorities
and the NASD (where required to be so filed); and Nationwide on behalf of the
Value Opportunities Fund has filed with the SEC and other applicable federal or
state agencies or authorities such notices or reports required under applicable
federal or state laws, rules or regulations for the sale of its shares, the
conduct of its business or the ownership of its assets, except, in each case,
where the failure to file any such notice or report could not reasonably be
expected to have a material adverse effect on the Value Opportunities Fund.
(e) Shares of the Value Opportunities Fund have been duly
authorized for sale and are, and for at least all periods on or after January 3,
2000, have been, duly qualified for sale under the securities laws of all 50
states and any other jurisdiction in which shares of the Value Opportunities
Fund have been offered or sold.
(f) Shares of the Value Opportunities Fund have been duly
registered under the Securities Act by means of a registration statement (or
post-effective amendment thereto) on Form N-1A, such registration statement has
become effective under the Securities Act, no stop order suspending the
effectiveness of such registration statement has been issued, no proceedings for
that purpose have been instituted or threatened by the SEC and such registration
statement has remained and continues to remain effective. Such registration
statement has, at all times when a prospectus with respect to the securities to
which such registration statement relates has been required to be delivered,
complied in all material respects with the requirements of the Securities Act
and the 1940 Act, and such registration statement has not included at any time
any untrue statement of a material fact or omitted 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. Copies
of the current prospectus, statement of additional information and registration
statement of Nationwide on behalf of the Value Opportunities Fund have been
delivered or made available to Principal Preservation.
(g) The independent public accountants for the Value
Opportunities Fund who have certified the financial statements of the Value
Opportunities Fund which have been filed with the SEC have been selected and
ratified in accordance with the applicable provisions of the 1940 Act.
(h) The Value Opportunities Fund has fully complied in all
material respects with all applicable laws regarding the withholding of taxes,
including (without limitation), if applicable, withholding of federal income
taxes under Sections 1441, 1442 and 3406 of the Code.
(i) The Value Opportunities Fund has and will have on or
prior to the Closing Date properly prepared, executed and timely filed, or
caused to be timely filed a proper request for extension with respect to, all
federal, state and local tax returns for income, franchise, sales, withholding,
excise and other taxes applicable to it and has paid and will have paid all
taxes, assessments, fees and other governmental charges shown on said returns or
by assessment or otherwise required to be paid by it or on account of its
properties and assets as of or prior to the Closing Date. All of such returns
are complete and accurate in all material respects and have been prepared in
accordance with all applicable legal requirements. No material tax liabilities,
disallowances or assessments relating to the business or assets of any of the
Value Opportunities Fund have been assessed or proposed or will have been
assessed or proposed as of the Closing Date and the Value Opportunities Fund is
not aware of any basis for any such assessment. No tax return filed on behalf
of the Value Opportunities Fund is currently being audited by the Internal
Revenue Service or by any state or local tax authorities. The reserves and
provisions, if any, for taxes on the books of the Value Opportunities Fund are
adequate for the payment of all taxes for the purposes and periods to which they
pertain. Without in any way limiting the representations and warranties set
forth above or in other Sections of this Agreement, the Value Opportunities Fund
qualifies as a "regulated investment company" under Section 851 (Subchapter M)
of the Code, and has so qualified during its entire existence. The Value
Opportunities Fund is not and has not been liable for tax under Section 4982 of
the Code. The Value Opportunities Fund has fully complied in all material
respects with all applicable laws regarding all applicable information reporting
requirements, including, but not limited to, Section 6042 of the Code. The
Value Opportunities Fund has satisfied the requirements of Section 852(a) of the
Code for each of its tax years during its entire existence.
(j) The minute books of Nationwide contain complete and
accurate records, in all material respects, of all meetings and other corporate
actions of its shareholders and board of trustees where any matters pertaining
to the Value Opportunities Fund were addressed or considered, including all
committees thereof.
(k) The portfolio securities of the Value Opportunities
Fund have at all times during the Value Opportunities Fund's existence been
valued in accordance with Section 2(a)(41) of the 1940 Act, Rule 2a-4 thereunder
and Nationwide's valuation procedures for the Value Opportunities Fund. There
have not been any material miscalculations of the net asset value of the Value
Opportunities Fund.
(l) The portfolio securities of the Value Opportunities
Fund include only those securities described in the Nationwide Prospectus/SAI
and those portfolio securities purchased or disposed of after the date of the
latest Value Opportunities Fund Financial Statements in the ordinary course of
business, all of which are consistent with the investment objectives, policies
and restrictions of the Value Opportunities Fund.
(m) Neither Nationwide nor the Value Opportunities Fund is
under the jurisdiction of a court in a Title II or similar case within the
meaning of Section 368(a)(3)(A) of the Code.
6.10 REPRESENTATIONS REGARDING THE REORGANIZATION.
(a) Nationwide has no plan or intention to reacquire any of
the shares of the Value Opportunities Fund issued in the Reorganization, except
to the extent required by the 1940 Act to redeem any of such shares presented
for redemption.
(b) The Value Opportunities Fund has no plan or intention
to sell or otherwise dispose of any of the Select Value Portfolio assets to be
acquired in the Reorganization pursuant to Section 2.1 hereof, other than in the
ordinary course of its business and to the extent necessary to maintain its
status as a "regulated investment company" under the Code.
(c) Following the Reorganization, the Value Opportunities
Fund intends to continue the "historic business" of the Select Value Portfolio
(within the meaning of Section 1.368-1(d) of the Income Tax Regulations under
the Code).
6.11 CONDITION OF VMFCT AND NORTHPOINTE. To the knowledge of
Nationwide:
(a) Each of VMFCT and NorthPointe is registered as an
investment adviser under the Advisers Act and in all states where it is required
to be so registered. Each of VMFCT and NorthPointe is in material compliance
with all laws, rules and regulations applicable to its business of providing
management and other services to Nationwide and the Value Opportunities Fund.
Neither VMFCT nor NorthPointe nor any affiliated person of VMFCT or NorthPointe
is ineligible to serve as an employee, officer, director, member of an advisory
board, investment advisor, depositor or principal underwriter of any registered
investment company by reason of a conviction of a felony or misdemeanor,
described in Section 9(a)(1) of the 1940 Act and is not subject to any order
issued by the SEC under Section 9(b) of the 1940 Act.
(b) No litigation, proceeding or governmental investigation
or inquiry is pending or threatened against VMFCT or NorthPointe that, if
determined against VMFCT or NorthPointe , would be reasonably likely to have a
material adverse effect on Nationwide or the Value Opportunities Fund or on
NorthPointe's ability to provide management and other services to Nationwide or
the Value Opportunities Fund.
6.12 OPERATIONS. There has not been any material adverse change in the
business, operations, financial position, properties or other assets of the
Value Opportunities Fund (other than changes occurring in the ordinary course of
business), and the business of the Value Opportunities Fund has been conducted
in the usual, regular and ordinary manner in material compliance with the
requirements of all applicable federal and state laws. Furthermore, between the
date hereof and the Effective Time, Nationwide will continue to operate the
business of the Value Opportunities Fund as presently conducted, and Nationwide
has no plan or intention to make any significant changes in the business of the
Value Opportunities Fund following the Effective Time. The following is true
with respect to the Value Opportunities Fund and operation of the Value
Opportunities Fund's business:
(a) All transactions involving the Value Opportunities Fund
have been accurately and fully recorded in the books and records of the Value
Opportunities Fund;
(b) The Value Opportunities Fund has not sold, exchanged,
conveyed or otherwise disposed of, or subjected to lien, pledge, hypothecation
or other encumbrance, any assets other than sales or other transactions in the
ordinary course of business;
(c) The Value Opportunities Fund has paid its debts,
obligations and liabilities, including taxes, fees, levies and assessments in
the ordinary course as they have matured;
(d) The Value Opportunities Fund has not incurred any
material debt, obligation or liability (other than those incurred in the
ordinary course of its business) which presently subjects, or with the passage
of time or upon default will subject, its assets to any lien, claim, charge or
other encumbrance;
(e) The Value Opportunities Fund has not altered, amended,
terminated or discharged any written or oral material contract, commitment or
agreement to which the Value Opportunities Fund is presently a party which is
required to be listed on Schedule 6.15 hereto, nor waived any material right
with respect thereto, nor permitted or consented to such alteration, amendment,
termination or discharge, nor committed or caused a breach or default in any of
the provisions thereof;
(f) The Value Opportunities Fund has not entered into any
written or oral contract except in the ordinary course of business at the prices
and upon the terms consistent with its past practices and which do not violate
any representation, warranty or covenant of this Agreement;
(g) The Value Opportunities Fund has materially complied
with all laws applicable to the conduct of its business; and
(h) There has not occurred any transaction or event, nor is
any anticipated, which does or may adversely affect the Value Opportunities
Fund's business or the Value Opportunities Fund's assets in any material respect
(other than changes occurring in the ordinary course of business), and
Nationwide will, immediately notify Principal Preservation upon the occurrence
of any such event of which Nationwide becomes aware prior to the Effective Time.
6.13 RIGHT TO INSPECT THE BOOKS AND RECORDS. Nationwide shall make
available and Principal Preservation and its agents, attorneys, accountants,
employees, contractors and other authorized representatives shall have the
right, during normal business hours and upon reasonable notice to the extent
Principal Preservation reasonably deems appropriate, to examine the books and
records of the Value Opportunities Fund, and to make such tests, surveys,
investigations and other inspections in such manner as Principal Preservation
may reasonably deem necessary, provided that such inspection shall not
interfere with the conduct of the Value Opportunities Fund's business.
6.14 [Intentionally omitted.]
6.15 MATERIAL AGREEMENTS. Schedule 6.15 attached hereto lists all
material contracts, agreements, understandings or other commitments of the Value
Opportunities Fund. The Value Opportunities Fund has delivered or made
available to Principal Preservation complete and accurate copies of all
documents referred to on Schedule 6.15 attached hereto, each of which is in
effect and valid and enforceable against the Value Opportunities Fund and, to
the knowledge of Nationwide, valid and enforceable against the other party in
accordance with its terms.
6.16 THIRD PARTY CONSENTS. Except for the effectiveness of the
Registration Statement and registration with the SEC of the Value Opportunities
Fund Shares to be issued in the Reorganization, there are no approvals or
consents of any third parties necessary or required for Nationwide validly and
legally to enter into this Agreement and to perform its obligations hereunder.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF PRINCIPAL PRESERVATION
The obligations of Principal Preservation under this Agreement are, at the
option of Principal Preservation, subject to the fulfillment at or prior to the
Closing Date of each of the following conditions:
7.1 ACCURACY OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties of Nationwide set forth in Section 6 hereof shall
be true and correct in all material respects as of the date when made and as of
the Closing Date. Nationwide shall have duly performed and complied in all
materials respects with all agreements, covenants and conditions required by
this Agreement to be performed or complied with by it prior to or on the Closing
Date. Nationwide shall have delivered to Principal Preservation a certificate
of its Chairman or Treasurer dated as of the Closing Date to the effect set
forth in this Section 7.1.
7.2 NO ADVERSE CHANGES. There shall have been no material adverse
change since the date hereof in the financial condition, business, operations or
assets of the Value Opportunities Fund (other than those occurring in the
ordinary course of business).
7.3 APPROVAL OF LEGAL MATTERS BY COUNSEL. There shall have been
furnished to counsel for the Principal Preservation, certified copies of such
corporate records of Nationwide relating to the Value Opportunities Fund and
copies of such documents as such counsel may reasonably have requested. All
legal matters and proceedings in connection with this Agreement and the
transactions contemplated hereby shall be reasonably satisfactory to counsel for
Principal Preservation.
7.4 APPROVAL BY SELECT VALUE PORTFOLIO SHAREHOLDERS. All necessary
approvals of the shareholders of the Select Value Portfolio with respect to the
Reorganization under this Agreement shall have been obtained. The Select Value
Portfolio Shareholder Meeting shall have been duly called and held in accordance
with the provisions of the 1940 Act, the Maryland General Corporation Law and
the Articles of Incorporation and Bylaws of Principal Preservation, including
compliance with the notice and quorum requirements thereunder, and at such
meeting this Agreement and the Reorganization contemplated hereby shall have
been approved by the affirmative vote of the lesser of: (a) 67% or more of the
Select Value Portfolio shares present at the Select Value Portfolio Shareholder
Meeting and entitled to vote, provided shareholders who are the owners of more
than 50% of the Select Value Portfolio shares outstanding and entitled to vote
on this Agreement and the Reorganization contemplated hereby at the Select Value
Portfolio Shareholder Meeting are present at such Meeting in person or by proxy;
or (b) more than 50% of the Select Value Portfolio shares outstanding and
entitled to vote on approval of the Agreement at the Select Value Portfolio
Shareholder Meeting (the "Required Select Value Portfolio Shareholder Vote").
7.5 RECEIPT OF CLOSING DOCUMENTS. Principal Preservation shall have
received all of the closing documents referred to in Section 9.2 hereof.
7.6 TAX OPINION. Principal Preservation shall have received a
favorable opinion from ▇▇▇▇▇▇▇ and ▇▇▇▇▇ LLP (based on such representations as
such firm may reasonably request), addressed to Principal Preservation, which
opinion may be relied upon by the shareholders of the Select Value Portfolio,
with respect to the federal income tax consequences of the Reorganization,
substantially in the form attached hereto as Exhibit A.
---------
7.7 LEGAL OPINION. Principal Preservation shall have received an
opinion from counsel to Nationwide, dated as of the Closing Date, substantially
in the form attached hereto as Exhibit B.
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7.8 REGISTRATION STATEMENT. The Registration Statement on Form N-14
shall have become effective under the Securities Act, no stop orders suspending
the effectiveness thereof shall have been issued, and no investigation or
proceeding for that purpose shall have been instituted or threatened under the
Securities Act.
7.9 RELATED AGREEMENT. That certain agreement of even date herewith
between ▇▇▇▇▇▇▇ and Villanova Capital, Inc. shall have been executed and
delivered.
7.10 NO ADVERSE PROCEEDINGS. There shall be no action, suit,
proceeding or claim instituted or threatened by Nationwide or any third party
relating to the transactions contemplated by this Agreement which would delay or
materially adversely affect the consummation of the transactions contemplated
hereby.
7.11 DIFFERENCES IN SHADOW VALUATIONS. The shadow valuations of the
assets of the Select Value Portfolio conducted by Principal Preservation
pursuant to Section 2.2(e) of this Agreement shall not differ by more than 0.05%
from the corresponding valuations conducted by Nationwide, in each case using
the smaller of the two corresponding valuations as the base line for computing
the percentage variation.
7.12 EXEMPTIVE ORDER. The SEC shall have issued an order exempting the
transactions contemplated by this Agreement from Section 17(a) of the 1940 Act.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF NATIONWIDE
The obligations of Nationwide under this Agreement are, at its option,
subject to the fulfillment at or prior to the Closing Date of each of the
following conditions:
8.1 ACCURACY OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties of Principal Preservation set forth in Section 5
hereof shall be true and correct in all material respects as of the date when
made and as of the Closing Date. Principal Preservation shall have duly
performed and complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by it
prior to or on the Closing Date. Principal Preservation shall have delivered to
Nationwide on the Closing Date a certificate of its President or Vice President
dated as of the Closing Date to the effect set forth in this Section 8.1.
8.2 APPROVAL BY SELECT VALUE PORTFOLIO SHAREHOLDERS. The Required
Select Value Portfolio Shareholder Vote shall have been obtained.
8.3 NO ADVERSE CHANGES. There shall have been no material adverse
changes since the date hereof in the financial condition, business, operations
or assets of the Select Value Portfolio (other than changes occurring in the
ordinary course of business).
8.4 APPROVAL OF LEGAL MATTERS BY COUNSEL. There shall have been
furnished to counsel for Nationwide certified copies of such corporate and
business records of the Select Value Portfolio and copies of such documents as
such counsel may reasonably have requested. All legal matters and proceedings
in connection with this Agreement and the transactions contemplated hereby and
thereby shall have been reasonably satisfactory to counsel for Nationwide.
8.5 NO ADVERSE PROCEEDINGS. There shall be no action, suit,
proceeding or claim instituted or threatened by Principal Preservation or any
third party relating to the transactions contemplated by this Agreement which
would delay or materially adversely affect the consummation of the transactions
hereby.
8.6 STATEMENT OF SELECT VALUE PORTFOLIO ASSETS. The Select Value
Portfolio shall have delivered to the Value Opportunities Fund a statement of
Select Value Portfolio Assets and its liabilities, together with a list of the
Select Value Portfolio's securities and other assets showing the respective
adjusted bases and holding periods thereof for income tax purposes, as of the
Valuation Date, certified by the Treasurer of Principal Preservation.
8.7 DIFFERENCES IN SHADOW VALUATIONS. The shadow valuations of the
assets of the Select Value Portfolio conducted by Principal Preservation
pursuant to Section 2.2(e) of this Agreement shall not differ by more than 0.05%
from the corresponding valuations conducted by Nationwide, in each case using
the lower of the two corresponding valuations as the base line for calculating
the percentage difference.
8.8 CERTAIN SELECT VALUE PORTFOLIO ASSETS. At the close of business
on the Valuation Date, the Select Value Portfolio Assets shall include no assets
that the Value Opportunities Fund, by reason of charter limitations or
otherwise, may not legally acquire. Principal Preservation shall provide and
Nationwide shall review a list of the assets of the Select Value Portfolio
promptly following the date hereof and inform Principal Preservation of any
assets which may not be acquired by the Value Opportunities Fund.
8.9 REGISTRATION STATEMENT. The Registration Statement on Form N-14
shall have become effective under the 1933 Act, no stop orders suspending the
effectiveness thereof shall have been issued and no investigation or proceeding
for that purpose shall have been instituted or threatened under the 1933 Act.
8.10 LEGAL OPINION. Nationwide shall have received a legal opinion
from ▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, counsel to Principal Preservation, dated as of the
Closing Date, substantially in the form attached hereto as Exhibit C.
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8.11 TAX OPINION. Nationwide shall have received a favorable opinion
from ▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP (based on such representations as such firm may
reasonably request) addressed to Nationwide, with respect to the federal income
tax consequences of the Reorganization, substantially in the form attached
hereto as Exhibit A.
---------
8.12 SHAREHOLDERS LIST. The Select Value Portfolio shall have
delivered to the Value Opportunities Fund a list of the Select Value Portfolio
Shareholders and the number and class of shares of common stock of the Select
Value Portfolio they held as of the close of business on the Valuation Date,
certified by the Secretary of Principal Preservation.
8.13 DECLARATION OF DIVIDEND. Principal Preservation shall have
declared and paid a dividend or dividends and/or other distributions that,
together with all previous such dividends or distributions, shall have the
effect of distributing to the Select Value Portfolio Shareholders all of Select
Value Portfolio's investment company taxable income (computed without regard to
any deduction for dividends paid) and all of its net capital gain (after
reduction for any capital loss carry-forward and computed without regard to any
deduction for dividends paid) for all taxable years ending on or before the
Closing Date.
8.14 EXEMPTIVE ORDER. The SEC shall have issued an order exempting the
transactions contemplated by this Agreement from Section 17(a) of the 1940 Act.
9. CLOSING DOCUMENTS
9.1 DOCUMENTS TO BE DELIVERED TO NATIONWIDE. Principal Preservation
agrees to deliver to Nationwide on the Closing Date the following:
(a) BILLS OF SALE, ASSIGNMENTS AND TRANSFERS. Good and
sufficient bills of sale, assignments, instruments of conveyance, and other
instruments of transfer, duly executed by Principal Preservation, in the forms
satisfactory to Nationwide and its counsel, with covenants or warranties as
shall be necessary to assign and transfer to and vest in the Value Opportunities
Fund good and merchantable title to all the Select Value Portfolio Assets, free
and clear of any and all liabilities, liens, claims and encumbrances except
those specifically permitted by this Agreement.
(b) OFFICER'S CERTIFICATES. Certificate of the President
or Vice President of Principal Preservation, dated as of the Closing Date,
certifying that the conditions precedent set forth in Section 7.1 have been
fulfilled.
(c) CERTIFICATES OF SECRETARY. Certificate of the
Secretary of Principal Preservation dated as of the Closing Date certifying (i)
the accuracy and effectiveness of articles of incorporation of Principal
Preservation, (ii) the accuracy and effectiveness of bylaws of Principal
Preservation, (iii) the adoption, accuracy and effectiveness of board and
shareholder resolutions contemplated hereby, and (iv) the incumbency of certain
officers of Principal Preservation and the genuineness of the specimen
signatures of those officers of Principal Preservation executing documents.
(d) LIEN SEARCH. Good and sufficient evidence reasonably
satisfactory to counsel for Nationwide that (i) there are no chattel mortgages,
security interests, judgments, claims or other liens outstanding against any of
the Select Value Portfolio Assets except those specifically permitted by this
Agreement and (ii) the Select Value Portfolio has good, marketable title to all
of the Select Value Portfolio Assets.
(e) CERTIFICATE OF GOOD STANDING. Certificate of Good
Standing regarding Principal Preservation issued as of a recent date (within 30
days of the Closing Date) by the Maryland Department of Assessments and
Taxation.
(f) COUNSEL'S OPINIONS. Opinions of counsel, addressed to
Nationwide, dated as of the Closing Date, substantially in the forms attached
hereto as Exhibits A and C.
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(g) OTHER DOCUMENTS. Such other documents and showings as
shall reasonably be required by Nationwide and its counsel.
9.2 DOCUMENTS TO BE DELIVERED TO PRINCIPAL PRESERVATION. Nationwide
agrees to deliver to Principal Preservation on the Closing Date the following:
(a) OFFICER'S CERTIFICATE. Certificate of the Chairman or
Treasurer of Nationwide, dated as of the Closing Date, certifying that the
conditions precedent set forth in Section 8.1 have been fulfilled.
(b) CERTIFICATE OF SECRETARY OF NATIONWIDE. A Certificate
of the Secretary of Nationwide dated as of the Closing Date certifying (i) the
accuracy and effectiveness of Declaration of Trust of Nationwide, (ii) the
accuracy and effectiveness of Bylaws of Nationwide, (iii) the adoption, accuracy
and effectiveness of the trustee resolutions contemplated hereby, and (iv) the
incumbency of certain officers of Nationwide and genuineness of the specimen
signatures of those officers of Nationwide executing documents.
(c) ISSUANCE OF SHARES. The Value Opportunities Fund
Shares to be issued pursuant hereto (or a share deposit receipt representing
such shares).
(d) CERTIFICATE OF FULL FORCE AND EFFECT. Certificate of
Full Force and Effect regarding Nationwide issued as of a recent date by the
Ohio Secretary of State.
(e) COUNSEL'S OPINIONS. Opinions of counsel, addressed to
Principal Preservation, dated as of the Closing Date, substantially in the forms
attached hereto as Exhibits A and B.
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(f) OTHER DOCUMENTS. Such other documents and showings as
shall reasonably be required by Principal Preservation and its counsel.
10. FURTHER AGREEMENTS
10.1 EXPENSES. No costs, fees or expenses will be paid by the Select
Value Portfolio or the Value Opportunities Fund in connection with this
Agreement and the transactions contemplated hereby. Each of the parties hereto
represents and warrants that it has not incurred any obligation or liability,
contingent or otherwise, for broker's, finder's or advisor's fees in connection
with the transactions provided for herein and each agrees to hold the others
harmless from and against all such liability arising out of contracts, express
or implied, which may be asserted against the non-contracting parties.
10.2 RECOMMENDATION AND SOLICITATION OF SHAREHOLDER VOTE. Principal
Preservation will recommend that shareholders of the Select Value Portfolio
approve the Reorganization, and will use its best efforts to solicit the
Required Select Value Portfolio Shareholder Vote.
10.3 INFORMATION TO BE FURNISHED. Nationwide will furnish Principal
Preservation with copies of all written comments or the substance of oral
communications received from the staff of the SEC with regard to the
Registration Statement, and the parties will cooperate with each other in
revising, if necessary, the Registration Statement to comply with such comments.
Nationwide shall not file the Registration Statement or any amendment without
the prior consent of Principal Preservation or its counsel.
10.4 CONDUCT OF BUSINESS OF THE SELECT VALUE PORTFOLIO AND THE VALUE
OPPORTUNITIES FUND. From and after the date of this Agreement and through the
Closing Date, Principal Preservation shall, with regard to the Select Value
Portfolio: (a) maintain its books, accounts and records in accordance with
generally accepted accounting principles and practices consistently applied; (b)
materially comply with all laws applicable to the conduct of its business; (c)
conduct its business only in the usual, regular and ordinary course and in
substantially the same manner as heretofore conducted, and not introduce any
method of operation in respect of such business, except in a manner consistent
with prior practice; (d) without the written consent of Nationwide, make no
change in its bylaws which would materially affect the Select Value Portfolio;
(e) use its best efforts to preserve its business organization intact, and to
preserve the goodwill of the Select Value Portfolio shareholders and others
having business relations with it; (f) not take any action which would, or with
the passage of time could, jeopardize its qualification as a "regulated
investment company" under Section 851 of the Code; and (g) except as
contemplated by this Agreement, not enter into any other transactions other than
in the ordinary course of business.
From and after the date of this Agreement and through the Closing
Date, Nationwide shall with regard to the Value Opportunities Fund: (a)
maintain its books, accounts and records in accordance with generally accepted
accounting principles and practices consistently applied; (b) materially comply
with all laws applicable to the conduct of its business; (c) conduct its
business only in the usual, regular and ordinary course and in substantially the
same manner as heretofore conducted, and not introduce any method of operation
in respect of such business, except in a manner consistent with prior practice;
(d) without the written consent of Principal Preservation, make no change in its
agreement and declaration of trust or bylaws that would materially affect the
Value Opportunities Fund; (e) use its best efforts to preserve its business
organization intact, and to preserve the goodwill of its investors and others
having business relations with it; (f) not take any action which would, or with
the passage of time could, jeopardize its qualification as a "regulated
investment company" under Section 851 of the Code; and (g) except as
contemplated by this Agreement, not enter into any other transactions that may
have a material adverse effect on the Value Opportunities Fund or the
Reorganization, other than in the ordinary course of business.
10.5 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES OR COVENANTS. Except
as set forth below, none of the representations, warranties or covenants in this
Agreement or in any certificate or investment delivered pursuant to this
Agreement shall survive the Closing Date and no party shall, therefore, have any
recourse therefor against any other party in connection therewith. This Section
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Closing Date.
10.6 OBLIGATIONS OF PARTIES.
(a) Nationwide and Principal Preservation hereby
acknowledge and agree that the Value Opportunities Fund is a separate investment
portfolio of Nationwide, that Nationwide is executing this Agreement on behalf
of the Value Opportunities Fund, and that, subject to Section 10.1, any amounts
payable by Nationwide under or in connection with this Agreement shall be
payable solely from the revenues and assets of the Value Opportunities Fund.
(b) Nationwide and Principal Preservation hereby
acknowledge and agree that the Select Value Portfolio is a separate investment
portfolio of Principal Preservation, that Principal Preservation is executing
this Agreement on behalf of the Select Value Portfolio, and that, subject to
Section 10.1, any amounts payable by Principal Preservation under or in
connection with this Agreement shall be payable solely from the revenues and
assets of the Select Value Portfolio.
10.7 UPDATING OF SCHEDULES. The Schedules which have been delivered
by Principal Preservation to Nationwide prior to the execution of this Agreement
have been prepared by Principal Preservation and will be updated by Principal
Preservation to include information as of such date as may be requested by
Nationwide from time to time and delivered to Nationwide with any and all
changes specifically marked so that all such Schedules are true, accurate and
complete in all respects at the time of Closing. The Schedules which have been
delivered by Nationwide to Principal Preservation prior to the execution of this
Agreement have been prepared by Nationwide and will be updated by Nationwide to
include information as of such date as may be requested by Principal
Preservation from time to time and delivered to Principal Preservation with any
and all changes specifically marked so that all such Schedules are true,
accurate and complete in all respects at the time of Closing.
10.8 FINAL TAX RETURNS AND FORMS 1099 OF THE SELECT VALUE PORTFOLIO
(a) After the Closing, Principal Preservation shall
prepare, or shall cause its agents to prepare, any federal, state or local tax
returns, including any Forms 1099, required to be filed by Principal
Preservation with respect to the Select Value Portfolio's final taxable years
and shall further cause such tax returns and Forms 1099 to be duly filed with
the appropriate taxing authorities.
(b) Notwithstanding the provisions hereof, any expenses
incurred by Principal Preservation or the Select Value Portfolio (other than for
payment of taxes) in connection with the preparation and filing of said tax
returns and Forms 1099 after the Closing, shall be borne to the extent such
expenses have been accrued by the Select Value Portfolio in the ordinary course
without regard to the Reorganization contemplated by this Agreement; any excess
expenses shall be borne by the Value Opportunities Fund at the time such tax
returns and Forms 1099 are prepared pursuant to and agreement between Principal
Preservation and Nationwide.
10.9 COOPERATION AND EXCHANGE OF INFORMATION. Nationwide and
Principal Preservation will provide each other and their respective
representatives with such cooperation and information as either of them
reasonably may request of the other in filing any tax returns, amended return or
claim for refund, determining a liability for taxes or a right to a refund of
taxes or participating in or conducting any audit or other proceeding in respect
of taxes. Such cooperation and information shall include providing copies of
relevant tax returns or portions thereof, together with accompanying schedules
and related work papers and documents relating to rulings or other
determinations by taxing authorities. Each party shall make its employees and
officers available on a mutually convenient basis to provide explanations of any
documents or information provided hereunder to the extent, if any, that such
party's employees are familiar with such documents or information. Each party
will retain for a period of six (6) years following the Closing all returns,
schedules and work papers and all material records or other documents relating
to tax matters of the Select Value Portfolio and the Value Opportunities Fund
for its taxable period first ending after the Closing and for all prior taxable
periods. Any information obtained under this Section 10.9 shall be kept
confidential except as may be otherwise necessary in connection with the filing
of returns or claims for refund.
11. TERMINATION
11.1 GENERAL PROVISIONS. This Agreement may not be terminated at any
time prior to the Closing Date by any party, except that this Agreement may be
terminated:
(a) By mutual written consent of the parties hereto:
(b) By either Nationwide, on the one hand, or Principal
Preservation, on the other hand, by written notice to the other, if the Closing
shall not have occurred on or before March 31, 2001, or such later date to which
the parties shall have extended this Agreement by mutual written consent;
(c) By Nationwide, if there has been a misrepresentation,
breach of warranty or failure to perform any agreement or covenant on the part
of Principal Preservation in any of its representations, warranties, agreements
or covenants set forth in this Agreement resulting in the failure of any
condition in Section 8 hereof;
(d) By Principal Preservation, if there has been a
misrepresentation, breach of warranty or failure to perform any agreement or
covenant on the part of Nationwide in any of its representations, warranties,
agreements or covenants set forth in this Agreement resulting in the failure of
any condition in Section 7 hereof: and;
(e) By Nationwide at any time if the Board of Directors of
Principal Preservation changes its recommendations to the shareholders of the
Select Value Portfolio.
Any termination of this Agreement pursuant to this Section 11.1 shall be by
notice in writing to the other party.
11.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 11.1 hereof or if the Closing does not occur by
reason of any of the conditions in Sections 7 and 8 hereof not being satisfied,
then there shall be no other liability on the part of any party (or its
trustees, directors, officers, agents or shareholders) to the other (or its
trustees, directors, officers, agents or shareholders); provided, however, that
such termination shall not preclude liability attaching to a party who has
caused the termination hereof by willful act or willful failure to act in
violation of the terms and provisions of this Agreement.
12. AMENDMENT
This Agreement may not be amended except by an instrument in writing signed
on behalf of each of the parties hereto.
13. WAIVER
Any terms or provisions of this Agreement may be waived in writing at any
time by the party which is entitled to the benefits thereof, or their respective
counsel. The failure of either party at any time or times to require
performance of any provision hereof shall in no manner affect such party's right
at a later time to enforce the same. No waiver by any party of a condition or
of the breach of any term, covenant, representation or warranty of this
Agreement, whether by conduct or otherwise, in any one or more instances shall
be deemed to be or construed as a further or continuing waiver of any such
condition or beach or a waiver of any other condition or of the breach of any
other term, covenant, representation or warranty of this Agreement.
14. MISCELLANEOUS PROVISIONS
14.1 HEADINGS. The Article and Section headings contained in this
Agreement will have reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
14.2 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Wisconsin, except to the extent
affected by the Maryland General Corporate Law and the 1940 Act.
14.3 NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered, telegraphed or mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by such party by like notice):
(a) If to Nationwide or the Nationwide Mutual Funds
Value Opportunities ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
Fund at: ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Treasurer
with a copy to: ▇▇▇▇▇▇▇▇ Ronon ▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
(b) If to Principal Principal Preservation Portfolios, Inc.
Preservation or ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
the Select Value ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Portfolio: Attention: President
with a copy to: ▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Written notice given by any other method shall be deemed effective only when
actually received by the party to whom given.
14.4 FURTHER ASSURANCE. Each of the parties hereto hereby agrees that
after the Closing Date it will from time to time, upon the reasonable request of
another party hereto, take such further action as the other may reasonably
request to carry out the transfer and sale of assets contemplated by this
Agreement, including, without limitation, the execution and delivery of all
further evidences and instruments of transfer and assignment.
14.5 EXECUTION AND COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an original and all of
which shall together constitute one agreement.
14.6 MISCELLANEOUS. This Agreement (a) constitutes the entire
agreement and supersedes all other prior agreements and undertakings, both
written and oral, between the parties, with respect to the subject matter
hereof; (b) is not intended to confer upon any other person any rights or
remedies hereunder, it being expressly agreed that there are no third party
beneficiaries of this Agreement; (c) shall be binding upon and inure to the
benefit of the Value Opportunities Fund and the Select Value Portfolio, and
their respective permitted successors and assigns; and (d) neither this
Agreement nor any interest herein may be assigned by any party without the prior
written consent of the other.
14.7 PUBLICITY. Neither the parties to this Agreement nor their
respective directors, trustees, officers, stockholders, employees or agents
shall issue any press release or other announcement with respect to this
Agreement, or otherwise make any disclosures relating thereto to the press
without the prior consent of the other parties, which consent shall not be
unreasonably withheld; provided, however, that such consent shall not be
required where such release, announcement or disclosure is required by
applicable law or the rules or regulations of a securities exchange, other self-
regulatory authority or governmental agency.
14.8 LIABILITY OF NATIONWIDE BOARD OF TRUSTEES. The obligations of
Nationwide entered into in the name or on behalf thereof by any of Nationwide's
Trustees, representatives, or agents are not made individually, but only in
their capacities with respect to Nationwide. Such obligations are not binding
upon any of the Trustees, shareholders, or representatives of Nationwide
personally, but bind only the assets of Nationwide. All persons dealing with
the Value Opportunities Fund must look solely to the assets of Nationwide
belonging to such series for the enforcement of any claims against Nationwide
hereunder.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the day and year first above written.
PRINCIPAL PRESERVATION PORTFOLIOS, INC.
(On Behalf of the Select Value Portfolio)
By: ---------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇, President and CEO
NATIONWIDE MUTUAL FUNDS
(On Behalf of the Nationwide Value Opportuni ties
Fund)
By: ---------------------------------------------
Title: ------------------------------------------
