FIRSTHAND MEDICAL SPECIALISTS FUND
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement")
is made as of this 3rd day of January, 2000, by and between INGENUITY CAPITAL
TRUST ("Ingenuity Capital Trust"), a Delaware business trust, for itself and on
behalf of the Ingenuity Medical Specialists Fund (the "Acquiring Fund"), a
series of Ingenuity Capital Trust, and FIRSTHAND FUNDS ("Firsthand Funds"), a
Delaware business trust, for itself and on behalf of the Firsthand Medical
Specialists Fund (the "Acquired Fund"), a series of Firsthand Funds. Other than
the Acquired Fund, no other series of Firsthand Funds is a party to thisAgreement.
In accordance with the terms and conditions set forth in this
Agreement, the parties desire that all of the assets of the Acquired Fund be
transferred to the Acquiring Fund, and that the Acquiring Fund assume the Stated
Liabilities (as defined in paragraph 1.3) of the Acquired Fund, in exchange for
shares of the Acquiring Fund ("Acquiring Fund Shares"), and that such Acquiring
Fund Shares be distributed immediately after the Closing, as defined in this
Agreement, by the Acquired Fund to its shareholders in liquidation of the
Acquired Fund. This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1) of the
Internal Revenue Code of 1986, as amended (the "Code").
In consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto, intending to be legally
bound hereby, covenant and agree as follows:
1. REORGANIZATION OF ACQUIRED FUND
1.1 Subject to the terms and conditions herein set forth, and on the
basis of the representations and warranties contained herein, the Acquired Fund
shall assign, deliver and otherwise transfer its assets as set forth in
paragraph 1.2 (the "Fund Assets") to the Acquiring Fund and the Acquiring Fund
shall assume the Acquired Fund's Stated Liabilities. The Acquiring Fund shall,
as consideration therefor, on the Closing Date (as defined in paragraph 3.1),
deliver to the Acquired Fund full and fractional Acquiring Fund Shares, the
number of which shall be determined by dividing (a) the value of the Acquired
Fund Assets, net of the Acquired Fund's Stated Liabilities, computed in the
manner and as of the time and date set forth in paragraph 2.1, by (b) the net
asset value of one share of the Acquiring Fund computed in the manner and as of
the time and date set forth in paragraph 2.2. Such transfer, delivery and
assumption shall take place at the closing provided for in paragraph 3.1
(hereinafter sometimes referred to as the "Closing"). Immediately following the
Closing, the Acquired Fund shall distribute the Acquiring Fund Shares to the
shareholders of the Acquired Fund in liquidation of the Acquired Fund as
provided in paragraph 1.4 hereof. Such transactions are hereinafter sometimes
collectively referred to as the "Reorganization."
1.2 (a) With respect to the Acquired Fund, the Fund Assets shall
consist of all property and assets of any nature whatsoever, including, without
limitation, all cash, cash equivalents, securities, claims and receivables
(including dividend and interest receivables) owned by the Acquired Fund, and
any prepaid expenses shown as an asset on the Acquired Fund's books on the
Closing Date.
(b) Before the Closing Date, the Acquired Fund will provide
the Acquiring Fund with information regarding its assets and its known
liabilities. The Acquired Fund reserves the right to sell or otherwise dispose
of any of the securities or other assets shown on the list of the Acquired
Fund's Assets prior to the Closing Date but will not, without the prior approval
of the Acquiring Fund, acquire any additional securities other than securities
which the Acquiring Fund is permitted to purchase in accordance with its stated
investment objective and policies.
1.3 The Acquired Fund will endeavor to discharge all of its known
liabilities and obligations prior to the Closing Date. The Acquiring Fund will
assume all liabilities and obligations reflected on an unaudited statement of
assets and liabilities of the Acquired Fund prepared by the Administrator of the
Acquired Fund as of the Applicable Valuation Date (as defined in paragraph 2.1),
in accordance with generally accepted accounting principles consistently applied
from the prior audited period ("Stated Liabilities"). The Acquiring Fund shall
assume only the Stated Liabilities of the Acquired Fund, and no other
liabilities or obligations, whether absolute or contingent, known or unknown,
accrued or unaccrued.
1.4 Immediately following the Closing, the Acquired Fund will
distribute the Acquiring Fund Shares received by the Acquired Fund pursuant to
paragraph 1.1 pro rata to its shareholders of record determined as of the close
of business on the Closing Date ("Acquired Fund Investors") in complete
liquidation of the Acquired Fund. Such distribution will be accomplished by an
instruction, signed by an appropriate officer of Ingenuity Capital Trust, to
transfer the Acquiring Fund Shares then credited to the Acquired Fund's account
on the books of the Acquiring Fund to open accounts on the books of the
Acquiring Fund established and maintained by the Acquiring Fund's transfer agent
in the names of record of the Acquired Fund Investors and representing the
respective pro rata number of shares of the Acquiring Fund due such Acquired
Fund Investor. All issued and outstanding shares of the Acquired Fund will be
canceled simultaneously therewith on the Acquired Fund's books, and any
outstanding share certificates representing interests in the Acquired Fund will
represent only the right to receive such number of Acquiring Fund Shares after
the Closing as determined in accordance with paragraph 1.1.
1.5 If any request shall be made for a change of the registration of
shares of the Acquiring Fund to another person from the account of the
stockholder in which name the shares are registered in the records of the
Acquired Fund, it shall be a condition of such registration of shares that there
be furnished to the Acquiring Fund an instrument of transfer properly endorsed,
accompanied by appropriate signature guarantees and otherwise in proper form for
transfer and that the person requesting such registration shall pay to the
Acquiring Fund any transfer or other taxes required by reason of such
registration or establish to the reasonable satisfaction of the Acquiring Fund
that such tax has been paid or is not applicable.
1.6 Following the transfer of assets by the Acquired Fund to the
Acquiring Fund, the assumption of the Acquired Fund's Stated Liabilities by the
Acquiring Fund, and the distribution by the Acquired Fund of the Acquiring Fund
Shares received by it pursuant to paragraph 1.4, the Administrator of the
Acquired Fund shall terminate the qualification, classification and registration
of the Acquired Fund with all appropriate federal and state agencies. Any
reporting or other responsibility of the Acquired Fund is and shall remain the
responsibility of the Acquired Fund and its Administrator up to and including
the date on which the Acquired Fund is terminated and deregistered, subject to
any reporting or other obligations described in paragraph 4.9.
2 VALUATION
2.1 The value of the Acquired Fund's Fund Assets shall be the value of
such assets computed as of the time at which its net asset value is calculated
pursuant to the valuation procedures set forth in the Acquiring Fund's then
current Prospectus and Statement of Additional Information (which are expected
to be similar in all material respects to the valuation procedures utilized by
the Acquired Fund) on the business day immediately preceding the Closing Date,
or at such time on such earlier or later date as may mutually be agreed upon in
writing among the parties hereto (such time and date being herein called the
"Applicable Valuation Date").
2.2 The net asset value of each share of the Acquiring Fund shall be
the net asset value per share computed on the Applicable Valuation Date, using
the market valuation procedures set forth in the Acquiring Fund's then current
Prospectus and Statement of Additional Information.
2.3 All computations of value contemplated by this Article 2 shall be
made by the Acquired Fund's Custodian in accordance with its regular practice as
pricing agent and reviewed by its independent auditors. The Acquired Fund shall
cause its Administrator to deliver a copy of its valuation report to the
Acquiring Fund at the Closing.
3 CLOSING(S) AND CLOSING DATE
3.1 The Closing for the Reorganization shall occur on February 29, 2000
and/or on such other date(s) as may be mutually agreed upon in writing by the
parties hereto (each, a "Closing Date"). The Closing(s) shall be held at the
offices of Ingenuity Capital Trust or at such other location as is mutually
agreeable to the parties hereto. All acts taking place at the Closing(s) shall
be deemed to take place simultaneously as of 10:00 a.m., local time on the
Closing Date unless otherwise provided.
3.2 The Acquiring Fund's custodian shall deliver at the Closing a
certificate of an authorized officer stating that: (a) the Fund Assets have been
delivered in proper form to the Acquiring Fund on the Closing Date and (b) all
necessary taxes including all applicable federal and state stock transfer
stamps, if any, have been paid, or provision for payment shall have been made,
by the Acquired Fund in conjunction with the delivery of portfolio securities.
3.3 Notwithstanding anything herein to the contrary, in the event that
on the Applicable Valuation Date (a) the New York Stock Exchange shall be closed
to trading or trading thereon shall be restricted or (b) trading or the
reporting of trading on such exchange or elsewhere shall be disrupted so that,
in the judgment of either Ingenuity Capital Trust or Firsthand Funds, accurate
appraisal of the value of the net assets of the Acquiring Fund or the Acquired
Fund is impracticable, the Applicable 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.
4 COVENANTS WITH RESPECT TO THE ACQUIRING FUND AND THE ACQUIRED FUND
4.1 With respect to the Acquired Fund, Firsthand Funds has called or
will call a meeting of Acquired Fund shareholders to consider and act upon this
Agreement and to take all other actions reasonably necessary to obtain the
approval of the transactions contemplated herein, including approval for the
Acquired Fund's liquidating distribution of Acquiring Fund Shares contemplated
hereby, and for Firsthand Funds to terminate the Acquired Fund's qualification,
classification and registration if requisite approvals are obtained with respect
to the Acquired Fund. Firsthand Funds, on behalf of the Acquired Fund, shall
prepare the notice of meeting, form of proxy and proxy statement (collectively,
"Proxy Materials") to be used in connection with such meeting. The Proxy
Materials prepared by Firsthand Funds shall not be deemed to include any
disclosure concerning Ingenuity Capital Trust. Each of Firsthand Funds and
Ingenuity Capital Trust have cooperated and shall continue to cooperate with the
other, and have furnished and shall continue to furnish the other with the
information relating to itself, and respectively, the Acquired Fund and the
Acquiring Fund, that is required by the 1933 Act, the Securities Exchange Act of
1934 (the "1934 Act"), the 1940 Act and the rules and regulations thereunder, to
be included in the proxy statement.
4.2 Firsthand Funds, on behalf of the Acquired Fund, covenants that the
Acquiring Fund Shares to be issued hereunder are not being acquired for the
purpose of making any distribution thereof, other than in accordance with the
terms of this Agreement.
4.3 Firsthand Funds, on behalf of the Acquired Fund, will assist the
Acquiring Fund in obtaining such information as the Acquiring Fund reasonably
requests concerning the beneficial ownership of shares of the Acquired Fund.
4.4 Subject to the provisions hereof, Ingenuity Capital Trust, Trust on
its own behalf and on behalf of the Acquiring Fund, and Firsthand Funds, on its
own behalf and on behalf of the Acquired Fund, will take, or cause to be taken,
all actions, and do, or cause to be done, all things reasonably necessary,
proper or advisable to consummate and make effective the transactions
contemplated herein.
4.5 Firsthand Funds, on behalf of the Acquired Fund, shall furnish to
the Acquiring Fund on the Closing Date, a final statement of the total amount of
the Acquired Fund's assets and liabilities as of the Closing Date.
4.6 Ingenuity Capital Trust, on behalf of the Acquiring Fund, has
prepared and filed with the Securities and Exchange Commission (the "SEC") a
registration statement or an amendment to an existing registration statement on
Form N-1A and a registration statement on Form N-14 under the Securities Act of
1933, as amended (the "1933 Act") and the Investment Company Act of 1940 (the
"1940 Act"), as applicable, relating to the Acquiring Fund Shares.
4.7 As soon after the Closing Date as is reasonably practicable,
Firsthand Funds, on behalf of the Acquired Fund: (a) shall prepare and file all
federal and other tax returns and reports of the Acquired Fund required by law
to be filed with respect to all periods ending on or before the Closing Date but
not theretofore filed and (b) shall pay all federal and other taxes shown as due
thereon and/or all federal and other taxes that were unpaid as of the ClosingDate.
4.8 Following the transfer of assets by the Acquired Fund to the
Acquiring Fund and the assumption of the Stated Liabilities of the Acquired Fund
in exchange for Acquiring Fund Shares as contemplated herein, Firsthand Funds
will file any final regulatory reports, including but not limited to any Form
N-SAR and Rule 24f-2 filings with respect to the Acquired Fund, after the
Closing Date but prior to the date of any applicable statutory or regulatory
deadlines and also will take all other steps as are necessary and proper to
effect the termination or declassification of the Acquired Fund in accordance
with the laws of the State of Delaware and other applicable requirements.
5 REPRESENTATIONS AND WARRANTIES
5.1 Ingenuity Capital Trust, on behalf of the Acquiring Fund,
represents and warrants to Firsthand Funds and the Acquired Fund as follows:
(a) Ingenuity Capital Trust was duly created pursuant to its Agreement and
Declaration of Trust by its Trustees (the "Ingenuity Trustees") for the purpose
of acting as a management investment company under the 1940 Act and is validly
existing and in good standing under the laws of the State of Delaware, and the
Agreement and Declaration of Trust directs the Ingenuity Trustees to manage the
affairs of Ingenuity Capital Trust and grants them all powers necessary or
desirable to carry out such responsibility, including administering Ingenuity
Capital Trust's business as currently conducted by Ingenuity Capital Trust and
as described in the current Prospectuses of Ingenuity Capital Trust. Ingenuity
Capital Trust is registered as an investment company classified as an open-end
management company, under the 1940 Act and its registration with the SEC as an
investment company is in full force and effect;
(b) The Acquiring Fund is not in violation of, and the execution, delivery and
performance of this Agreement by Ingenuity Capital Trust for itself and on
behalf of the Acquiring Fund does not and will not (i) violate Ingenuity Capital
Trust's Agreement and Declaration of Trust or By-Laws, or (ii) result in a
breach or violation of, or constitute a default under, any material agreement or
material instrument, to which Ingenuity Capital Trust is a party or by which its
properties or assets are bound.
(c) Except as previously disclosed in writing to the Acquired Fund, no
litigation or administrative proceeding or investigation of or before any court
or governmental body is presently pending or, to Ingenuity Capital Trust's
knowledge, threatened against Ingenuity Capital Trust or its business, the
Acquiring Fund or any of its properties or assets, which, if adversely
determined, would materially and adversely affect Ingenuity Capital Trust or the
Acquiring Fund's financial condition or the conduct of their business, Ingenuity
Capital Trust knows of no facts that might form the basis for the institution of
any such proceeding or investigation, and the Acquiring Fund is not a party to
or subject to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects, or is reasonably
likely to materially and adversely affect, its business or its ability to
consummate the transactions contemplated herein;
(d) All issued and outstanding shares, including shares to be issued in
connection with the Reorganization, of the Acquiring Fund will, as of the
Closing Date, be duly authorized and validly issued and outstanding, fully paid
and nonassessable; the shares of each class of the Acquiring Fund issued and
outstanding prior to the Closing Date were offered and sold, and all shares to
be issued in connection with the Reorganization will be offered and sold, in
compliance with the applicable registration requirements, or exemptions
therefrom, of the 1933 Act, and all applicable state securities laws, and the
regulations thereunder; and the Acquiring Fund does not have outstanding any
option, 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;
(e) The execution, delivery and performance of this Agreement on behalf of the
Acquiring Fund will have been duly authorized prior to the Closing Date by all
necessary action on the part of Ingenuity Capital Trust, the Ingenuity Trustees
and the Acquiring Fund, and this Agreement will constitute a valid and binding
obligation of Ingenuity Capital Trust and the Acquiring Fund enforceable in
accordance with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, arrangement, moratorium and other similar laws of general
applicability relating to or affecting creditors, rights and to general equityprinciples;
(f) On the effective date of the proxy statement, at the time of the meeting of
the Acquired Fund shareholders and on the Closing Date, any written information
furnished by Ingenuity Capital Trust with respect to the Acquiring Fund for use
in the proxy statement or any other materials provided in connection with the
Reorganization does not and will not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the information provided
not misleading; and
(g) No governmental consents, approvals, authorizations or filings are required
under the 1933 Act, the 1934 Act, the 1940 Act or Delaware law for the execution
of this Agreement by Ingenuity Capital Trust, for itself and on behalf of the
Acquiring Fund, or the performance of the Agreement by Ingenuity Capital Trust
for itself and on behalf of the Acquiring Fund, except for such consents,
approvals, authorizations and filings as have been made or received, and except
for such consents, approvals, authorizations and filings as may be required
subsequent to the Closing Date.
5.2 Firsthand Funds, on behalf of the Acquired Fund, represents and
warrants to Ingenuity Capital Trust and the Acquiring Fund as follows:
(a) Firsthand Funds was duly created pursuant to its Declaration of Trust by the
Trustees (the "Firsthand Trustees") for the purpose of acting as a management
investment company under the 1940 Act and is validly existing and in good
standing under the laws of the State of Delaware, and the Agreement and
Declaration of Trust directs the Firsthand Trustees to manage the affairs of
Firsthand Funds and grants them all powers necessary or desirable to carry out
such responsibility, including administering Firsthand Funds' business as
currently conducted by Firsthand Funds and as described in the current
Prospectuses of Firsthand Funds. Firsthand Funds is registered as an investment
company classified as an open-end management company under the 1940 Act and its
registration with the SEC as an investment company is in full force and effect;
(b) Until September 9, 1999, all of the issued and outstanding shares of the
Acquired Fund have been offered and sold in compliance in all material respects
with applicable registration requirements of the 1933 Act and state securities
laws; on September 9, 1999, all issued and outstanding shares of each class of
the Acquired Fund were duly authorized and validly issued and outstanding, and
fully paid and non-assessable, and the Acquired Fund did not have outstanding
any options, warrants or other rights to subscribe for or purchase any of its
shares, nor was there outstanding any security convertible into any of itsshares;
(c) The Acquired Fund is not in violation of, and the execution, delivery and
performance of this Agreement by Firsthand Funds for itself and on behalf of the
Acquired Fund does not and will not (i) violate Firsthand Funds' Agreement and
Declaration of Trust or By-Laws, or (ii) result in a breach or violation of, or
constitute a default under, any material agreement or material instrument to
which Firsthand Funds is a party or by its properties or assets are bound;
(d) Except as previously disclosed in writing to the Acquiring Fund, to
Firsthand Funds' knowledge, until September 9, 1999, no litigation or
administrative proceeding or investigation of or before any court or
governmental body was pending or threatened against the Acquired Fund or any of
its properties or assets which, if adversely determined, would materially and
adversely affect the Acquired Fund's financial condition or the conduct of its
business; on September 9, 1999, Firsthand Funds knew of no facts that might form
the basis for the institution of any such proceeding or investigation, and until
September 9, 1999 the Acquired Fund was not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental body
that materially and adversely affected, or is, reasonably likely to materially
and adversely affect, its business or its ability to consummate the transactions
contemplated herein;
(e) To Firsthhand Funds' knowledge, the Statement of Assets and Liabilities,
Statements of Operations and Statements of Changes in Net Assets of the Acquired
Fund as of and for the period ended December 31, 1998, audited by Tait, Weller &
Baker (copies of which have been or will be furnished to the Acquiring Fund)
fairly present, in all material respects, the Acquired Fund's financial
condition as of such date and its results of operations for such period in
accordance with generally accepted accounting principles consistently applied,
and as of such date there were no liabilities of the Acquired Fund (contingent
or otherwise) known to Firsthand Funds that were not disclosed therein but that
would be required to be disclosed therein in accordance with generally accepted
accounting principles;
(f) Until September 9, 1999, all federal and other tax returns and reports of
Firsthand Funds and the Acquired Fund required by law to be filed have been
filed, and all taxes owed by Firsthand Funds or the Acquired Fund have been paid
so far as due, and, to Firsthand Funds' knowledge, no such return is currently
under audit and no assessment has been asserted with respect to any such return;
(g) To Firsthand Funds' knowledge, for each full and partial taxable year from
its inception through September 9, 1999, the Acquired Fund has qualified as a
separate regulated investment company under the Code and has taken all necessary
and required actions to maintain that status;
(h) To Firsthand Funds' knowledge, at September 9, 1999, the Acquired Fund had
good and marketable title to the Fund Assets and full right, power and authority
to assign, deliver and otherwise transfer such Fund Assets hereunder;
(i) The execution, delivery and performance of this Agreement on behalf of the
Acquired Fund has been duly authorized by all necessary action on the part of
Firsthand Funds and the Firsthand Trustees (other than approval of shareholders
of the Acquired Fund), and this Agreement will constitute a valid and binding
obligation of Firsthand Funds and the Acquired Fund enforceable in accordance
with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, arrangement, moratorium and other similar laws of general
applicability relating to or affecting creditors, rights and to general equityprinciples;
(j) From the effective date of the Proxy Materials, through the time of the
meeting of the Acquired Fund Investors, and on the Closing Date: (i) the Proxy
Materials will comply in all material respects with the applicable provisions of
the 1933 Act, the 1934 Act and the 1940 Act and the regulations thereunder and
(ii) any written information furnished by Firsthand Funds, on behalf of the
Acquired Fund, for use in the Proxy Materials or in any other manner that may be
necessary in connection with the transactions contemplated hereby does not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the information provided not misleading; and
(k) No governmental consents, approvals, authorizations or filings are required
under the 1933 Act, the 1934 Act, the 1940 Act or Delaware law for the execution
of this Agreement by Firsthand Funds, for itself and on behalf of the Acquired
Fund, or the performance of the Agreement by Firsthand Funds for itself and on
behalf of the Acquired Fund, except for such consents, approvals, authorizations
and filings as have been made or received, and except for such consents,
approvals, authorizations and filings as may be required subsequent to the
Closing Date.
(l) The phrase "to Firsthand Funds' knowledge" means the actual, present
knowledge of the officers of Firsthand Funds, excluding Kendrick W. Kam.
6 CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIRED FUND
The obligations of Firsthand Funds to consummate the
Reorganization with respect to the Acquired Fund shall be subject to the
performance by Ingenuity Capital Trust, for itself and on behalf of the
Acquiring Fund, of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions with
respect to the Acquiring Fund (except as may be waived in writing by FirsthandFunds):
6.1 All representations and warranties of Ingenuity Capital Trust with
respect to the Acquiring Fund contained herein shall be true and correct in all
material respects as of the date hereof and, except as they may be affected by
the transactions contemplated herein, as of the Closing Date with the same force
and effect as if made on and as of the Closing Date.
6.2 Ingenuity Capital Trust, on behalf of the Acquiring Fund, shall
have delivered to the Acquired Fund at the Closing a certificate executed on
behalf of the Acquiring Fund by Ingenuity Capital Trust's President, Secretary
or Assistant Secretary in a form reasonably satisfactory to the Acquired Fund
and dated as of the Closing Date, to the effect that, to the best of such
officer's knowledge and belief, the factual representations and warranties of
Ingenuity Capital Trust with respect to the Acquiring Fund made herein are true
and correct in all material respects at and as of the Closing Date, except as
they may be affected by the transactions contemplated herein, and as to such
other matters as the Acquired Fund shall reasonably request.
6.3 As of the Closing Date, there shall have been no material change in
the investment objective, policies and restrictions nor any material change in
the investment management fees, other fees payable for services provided to the
Acquiring Fund, fee waiver or expense reimbursement undertakings, or sales loads
of the Acquiring Fund from those fee amounts, undertakings and sales load
amounts described in the Prospectus of the Acquiring Fund included as part of a
registration statement specified in paragraph 4.6.
6.4 The Acquired Fund shall have received at the Closing a favorable
opinion of Roy W. Adams, Jr., counsel to Ingenuity Capital Trust, dated as of
the Closing Date, in a form reasonably satisfactory to the Acquired Fund,
substantially to the effect that:
(a) Ingenuity Capital Trust is a duly registered, open-end, management
investment company, and its registration with the SEC as an investment company
under the 1940 Act is in full force and effect; (b) Ingenuity Capital Trust is a
business trust duly created pursuant to its Agreement and Declaration of Trust,
is validly existing and in good standing under the laws of the State of
Delaware, and the Agreement and Declaration of Trust directs the Ingenuity
Trustees to manage the affairs of Ingenuity Capital Trust and grants them all
powers necessary or desirable to carry out such responsibility, including
administering the Acquiring Fund's business as described in the current
Prospectus of the Acquiring Fund; (c) the Acquiring Fund is a validly
established separate series of Ingenuity Capital Trust, (d) this Agreement has
been duly authorized, executed and delivered by Ingenuity Capital Trust on
behalf of the Acquiring Fund and, assuming due authorization, execution and
delivery of this Agreement on behalf of the Acquired Fund, is a valid and
binding obligation of Ingenuity Capital Trust, enforceable against Ingenuity
Capital Trust in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, arrangement, moratorium and other
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles; (e) the Acquiring Fund Shares to be issued to
the Acquired Fund and then distributed to the Acquired Fund Investors pursuant
to this Agreement are duly registered under the 1933 Act on the appropriate
form, and are duly authorized and upon such issuance will be validly issued and
outstanding, fully paid and non-assessable; and (f) a Registration Statement of
Ingenuity Capital Trust has been filed with the SEC with respect to the
Acquiring Fund and has become effective and, to the best of such counsel's
knowledge, no stop order suspending the effectiveness thereof has been issued
and no proceedings for that purpose have been instituted or are pending orthreatened.
7 CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIRING FUND
The obligations of Ingenuity Capital Trust to consummate the
Reorganization with respect to the Acquiring Fund shall be subject to the
performance by Firsthand Funds of all the obligations to be performed by it
hereunder, with respect to the Acquired Fund, on or before the Closing Date and,
in addition thereto, the following conditions (except as may be waived in
writing by Ingenuity Capital Trust):
7.1 All representations and warranties of Firsthand Funds with respect
to the Acquired Fund contained herein shall be true and correct in all material
respects as of the date hereof and, except as they may be affected by the
transactions contemplated by this Agreement, as of the Closing Date, with the
same force and effect as if made on and as of the Closing Date (except to the
extent a different date is specified in the representation).
7.2 Firsthand Funds, on behalf of the Acquired Fund, shall have
delivered to the Acquiring Fund at the Closing a certificate executed on behalf
of the Acquired Fund, by Firsthand Funds' President, Secretary or Assistant
Secretary, in form and substance reasonably satisfactory to the Acquiring Fund
and dated as of the Closing Date, to the effect that the representations and
warranties of Firsthand Funds with respect to the Acquired Fund made herein are
true and correct at and as of the Closing Date except to the extent a different
date is specified in the representations, and except as they may be affected by
the transactions contemplated herein and as to such other matters as the
Acquiring Fund shall reasonably request.
7.3 With respect to the Acquired Fund, the Board of Trustees of
Firsthand Funds shall have determined that the Reorganization is in the best
interests of the Acquired Fund and shall have made all the determinations
required by Rule 17a-8 under the 1940 Act.
8 FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND THE
ACQUIRED FUND.
The obligations of the Acquiring Fund and of the Acquired Fund
herein are each subject to the further conditions that on or before the Closing
Date with respect to the Acquiring Fund and the Acquired Fund:
8.1 This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
the Acquired Fund in accordance with the provisions of Firsthand Funds'
Declaration of Trust and the requirements of the 1940 Act, and certified copies
of the resolutions evidencing such approval shall have been delivered to the
Acquiring Fund.
8.2 On the Closing Date, no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or any of the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders,
approvals and permits of federal, state and local regulatory authorities
(including, without limitation, those of the SEC) deemed necessary by Ingenuity
Capital Trust, on behalf of the Acquiring Fund, or Firsthand Funds, on behalf of
the Acquired Fund, to permit consummation, in all material respects, of the
transactions contemplated herein shall have been obtained, except where failure
to obtain any such consent, order or permit would not, in the opinion of the
party asserting that the condition to closing has not been satisfied, involve a
risk of a material adverse effect on the assets or properties of the Acquiring
Fund or the Acquired Fund.
8.4 The registration statement of Ingenuity Capital Trust registering
shares of the Acquiring Fund shall have become effective under the 1933 Act and
the 1940 Act, no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no investigation
or proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act or the 1940 Act.
8.5 The Acquired Fund shall have declared and paid a dividend or
dividends which, together with all previous such dividends, shall have the
effect of distributing to the Acquired Fund's shareholders substantially all of
the Acquired Fund's investment company taxable income for all taxable years
ending on or prior to the Closing Date (computed without regard to any deduction
for dividends paid) and substantially all of its net capital gain realized in
all taxable years ending on or prior to the Closing Date (after reduction for
any capital loss carryover).
8.6 Firsthand Funds shall have received the opinion of legal counsel to
Firsthand Funds (based on customary certificates and representations from
Ingenuity Capital Trust, the Acquiring Fund and the Acquired Fund) substantially
to the effect that, for federal income tax purposes:
(a) The transfer of substantially all of the Acquired Fund's assets to the
Acquiring Fund in exchange for the Acquiring Fund Shares, as described above,
will constitute a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code");
(b) No gain or loss will be recognized by the Acquired Fund upon the transfer of
its assets to the Acquiring Fund in exchange for Acquiring Fund Shares or upon
the distribution of Acquiring Fund Shares to the Acquired Fund's shareholders in
exchange for their shares;
(c) No gain or loss will be recognized by the Acquired Fund's shareholders upon
exchange of their shares of the Acquired Fund for the Acquiring Fund Shares;
(d) The tax basis of the Acquiring Fund Shares received by each Acquired Fund
shareholder pursuant to the Reorganization will be the same as the tax basis of
the Acquired Fund shares held by that shareholder immediately before theReorganization;
(e) The holding period of the Acquiring Fund Shares to be received by each
Acquired Fund shareholder will include the period during which shares of the
Acquired Fund exchanged therefor were held by that shareholder.
Notwithstanding anything herein to the contrary, neither the
Acquiring Fund, nor the Acquired Fund may waive the condition set forth in this
paragraph 8.6.
8.7 Prior to the Closing, the unamortized organization expenses of the
Acquired Fund as of the Applicable Valuation Date shall have been removed from
the books of the Acquired Fund.
9 INDEMNIFICATION
9.1 Ingenuity Capital Management and Ingenuity Capital Trust each agree
severally to indemnify Firsthand Funds, its officers, trustees and their agents
(the "Firsthand indemnified parties"), and Firsthand Funds agrees to indemnify
Ingenuity Capital Trust, its officers, trustees and their agents (the "Ingenuity
indemnified parties") from any and all claims, losses, judgments, liabilities,
fines, penalties and interest (including all reasonable attorneys' fees and
disbursements) that directly result from any actual breach or, in the case of
claims by a third party only, any alleged breach by the other party of any
representation, warranty or covenant set forth in this Agreement. No party shall
be entitled to indemnification under this Agreement unless written notice of the
events or circumstances giving rise to such claim for indemnification has been
provided to the indemnifying party or parties not later than two (2) years after
the date of the Closing. Notwithstanding the above, no indemnification is hereby
given for any act occurring after the Closing for which notice is not given
within one (1) year after the date of such Closing.
10 EXPENSES
10.1 The Acquiring Fund and the Acquired Fund shall each be reimbursed
for any expenses incurred in connection with entering into and carrying out of
the provisions of this Agreement, whether or not the transactions contemplated
are consummated. Ingenuity Capital Management LLC has agreed to bear all
expenses incurred in connection with the transactions contemplated in this
Agreement, regardless whether or not the transactions contemplated areconsummated.
11 ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
11.1 This Agreement constitutes the entire agreement between the
parties and supersedes any prior or contemporaneous understanding or
arrangement with respect to the subject matter hereof.
11.2 The representations, warranties, covenants, indemnifications and
agreement as to expenses contained in this Agreement or in any document
delivered pursuant hereto or in connection herewith shall survive the
consummation and termination of this Agreement.
12 TERMINATION
12.1 This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time before the Closing by the mutual written
consent of Acquiring Fund and the Acquired Fund.
12.2 This Agreement may be terminated and the transactions contemplated
hereby abandoned if approval of the Reorganization is revoked before the Closing
by the Firsthand Trustees who are not interested persons of Firsthand Funds
within the meaning of Section 2(a)(19) of the 1940 Act.
13 AMENDMENTS
This Agreement may be amended, modified or supplemented in
such manner as may be mutually agreed upon in writing by the authorized officers
of Firsthand Funds, acting on behalf of the Acquired Fund and the authorized
officers of Ingenuity Capital Trust, acting on behalf of the Acquiring Fund;
provided, however, that following the meeting of the shareholders of the
Acquired Fund, no such amendment may have the effect of changing the provisions
for determining the number of shares of the Acquiring Fund to be issued to the
Acquired Fund Investors under this Agreement to the detriment of such Acquired
Fund Investors, or otherwise materially and adversely affecting the Acquired
Fund, without the Acquired Fund obtaining the Acquired Fund Investors' further
approval except that nothing in this paragraph 13 shall be construed to prohibit
the Acquiring Fund and the Acquired Fund from amending this Agreement to change
the Closing Date or Applicable Valuation Date by mutual agreement.
14 NOTICES
Any notice, report, statement or demand required or permitted
by any provision of this Agreement shall be in writing and shall be given by
prepaid telegraph, telecopy, certified mail or overnight express courier
addressed to:
For Ingenuity Capital Trust, on behalf of itself and the Acquiring Fund:
Ingenuity Capital Trust, LLC
26888 Almaden Court
Los Altos, California 94022
Attention: Kendrick W. Kam
Fax: (650) 649-2651
With copies to:
Roy W. Adams, Jr., Esq.
1024 Country Club Drive, Suite 135
Moraga, California 94556
Fax: (925) 631-0999
For Firsthand Funds, on behalf of itself and the Acquired Fund:
Interactive Research Advisers, Inc.
101 Park Center Plaza, Suite 1300
San Jose, California 95113
Attention: Kevin M. Landis
Omar N. Billawala
Fax: (408) 490-0291
15 HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY
15.1 The article and paragraph headings contained herein are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. All references herein to Articles, paragraphs,
subparagraphs or Exhibits shall be construed as referring to Articles,
paragraphs or subparagraphs hereof or Exhibits hereto, respectively. Whenever
the terms "hereto", "hereunder", "herein" or "hereof" are used in this
Agreement, they shall be construed as referring to this entire Agreement, rather
than to any individual Article, paragraph, subparagraph or sentence.
15.2 This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
15.3 This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
15.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other parties. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of thisAgreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed by its authorized officer, and attested by itsSecretary.
INGENUITY CAPITAL TRUST,
for itself and on behalf of
Ingenuity Medical Specialists Fund
By: __________________________________
Title: _______________________________
FIRSTHAND FUNDS,
for itself and on behalf of
Firsthand Medical Specialists Fund
By: _________________________________
Title: ______________________________
Consented to (regarding Sections 9 and 10 only) by:
INGENUITY CAPITAL MANAGEMENT LLC
By: ______________________________
Title: ___________________________
