EXHIBIT A
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this ____ day of ______ , 1995, by and between MIDAS
FUND, INC. a Maryland corporation (the "Fund") and MIDAS MANAGEMENT CORPORATION,
a Delaware corporation (the "Investment Manager").
WHEREAS the Fund is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company
and proposes to offer for public sale shares of common stock that may be issued
as distinct series ("Series"), each corresponding to a distinct portfolio; and
WHEREAS the Fund desires to retain the Investment Manager to furnish
certain investment advisory and portfolio management services to the Fund and
any Series thereof, and the Investment Manager desires to furnish such services;
NOW THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is hereby agreed between the parties hereto as
follows:
1. The Fund hereby employs the Investment Manager to manage the
investment and reinvestment of the assets of the Fund and any Series thereof,
including the regular furnishing of advice with respect to the Fund's or its
Series' portfolio transactions subject at all times to the control and final
direction of the Fund's Board of Directors, for the period and on the terms set
forth in this Agreement. The Investment Manager hereby accepts such employment
and agrees during such period to render the services and to assume the
obligations herein set forth, for the compensation herein provided. The
Investment Manager shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Fund in any way, or otherwise be deemed an
agent of the Fund.
2. The Fund (or each Series) assumes and shall pay all the expenses (or
such Series' proportionate share of such expenses) required for the conduct of
its business including, but not limited to, (a) salaries of administrative and
clerical personnel; (b) brokerage commissions; (c) taxes and governmental fees;
(d) costs of insurance and fidelity bonds; (e) fees of the transfer agent,
custodian, legal counsel and auditors; (f) association fees; (g) costs of
preparing, printing and mailing proxy materials, reports and notices to
shareholders; (h) costs of preparing, printing and mailing the prospectus and
statement of additional information and supplements thereto; (i) payment of
dividends and other distributions; (j) costs of stock certificates; (k) costs of
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EXHIBIT A
Board and shareholders meetings; (l) fees of the independent directors; (m)
necessary office space rental; (n) all fees and expenses (including expenses of
counsel) relating to the registration and qualification of shares of the Fund
(or its Series) under applicable federal and state securities laws and
maintaining such registrations and qualifications; and (o) such non-recurring
expenses as may arise, including, without limitation, actions, suits or
proceedings affecting the Fund (or its Series) and the legal obligation which
the Fund (or its Series) may have to indemnify its officers and directors with
respect thereto.
3. The Investment Manager may, but shall not be obligated to, pay or
provide for the payment of expenses which are primarily intended to result in
the sale of the Fund's shares or the servicing and maintenance of shareholder
accounts, including, without limitation, payments for: advertising, direct mail
and promotional expenses; compensation to and expenses, including overhead and
telephone and other communication expenses, of the Investment Manager and its
affiliates, the Fund, and selected dealers and their affiliates who engage in or
support the distribution of shares or who service shareholder accounts;
fulfillment expenses including the costs of printing and distributing
prospectuses, statements of additional information, and reports for other than
existing shareholders; the costs of preparing, printing and distributing sales
literature and advertising materials; and, internal costs incurred by the Invest
ment Manager and its affiliates and allocated to efforts to distribute shares of
the Fund such as office rent and equipment, employee salaries, employee bonuses
and other overhead expenses. Such payments may be for the Investment Manager's
own account or may be made on behalf of the Fund pursuant to a written agreement
relating to a plan of distribution adopted pursuant to Rule 12b-1 under the 1940
Act.
4. If requested by the Fund's Board of Directors, the Investment
Manager may provide other services to the Fund (or its Series) such as, without
limitation, the functions of billing, accounting, certain shareholder
communications and services, administering state and Federal registrations,
filings and controls and other administrative services. Any services so
requested and performed will be for the account of the Fund (or its Series) and
the costs of the Investment Manager in rendering such services shall be
reimbursed by the Fund, subject to examination by those directors of the Fund
who are not interested persons of the Investment Manager or any affiliate
thereof.
5. The services of the Investment Manager are not to be deemed
exclusive, and the Investment Manager shall be free to render similar services
to others in addition to the Fund so long as its services hereunder are not
impaired thereby.
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EXHIBIT A
6. The Investment Manager shall create and maintain all necessary books
and records in accordance with all applicable laws, rules and regulations,
including but not limited to records required by Section 31(a) of the 1940 Act
and the rules thereunder, as the same may be amended from time to time,
pertaining to the investment management services performed by it hereunder and
not otherwise created and maintained by another party pursuant to a written
contract with the Fund. Where applicable, such records shall be maintained by
the Investment Manager for the periods and in the places required by Rule 31a-2
under the 1940 Act. The books and records pertaining to the Fund which are in
the possession of the Investment Manager shall be the property of the Fund. The
Fund, or the Fund's authorized representatives, shall have access to such books
and records at all times during the Investment Manager's normal business hours.
Upon the reasonable request of the Fund, copies of any such books and records
shall be provided by the Investment Manager to the Fund or the Fund's authorized
representatives.
7. (a) As compensation for its services, with respect to the Fund (or
its Series) the Investment Manager will be paid by the Fund a fee payable
monthly and computed at the annual rate of 1% of the first $200 million of
average daily net assets of the Fund (or its Series), .95% of such net assets
over $200 million up to $400 million, .90% of such net assets over $400 million
up to $600 million, .85% of such net assets over $600 million up to $800
million, .80% of such net assets over $800 million up to $1 billion, and .75% of
such net assets over $1 billion. The aggregate net assets for each day shall be
computed by subtracting the liabilities of the Fund (or its Series) from the
value of its assets, such amount to be computed as of the calculation of the net
asset value per share on each business day.
(b) For the services provided and the expenses assumed pursuant to
this Agreement with respect to any Series hereafter established, the Investment
Manager will be paid by the Fund from the assets of such Series a fee in an
amount to be agreed upon in a written fee agreement ("Fee Agreement") executed
by the Fund on behalf of such Series and the Investment Manager. The Fee
Agreements shall provide that they are subject to all terms and conditions of
this Agreement.
8. The Investment Manager shall direct portfolio transactions to
broker/dealers for execution on terms and at rates which it believes, in good
faith, to be reasonable in view of the overall nature and quality of services
provided by a particular broker/dealer, including brokerage and research
services and sales of Fund shares and shares of other investment companies or
series thereof for which the Investment Manager or an affiliate thereof serves
as investment adviser. The Investment Manager may also allocate portfolio
transactions to broker/dealers that remit a portion of their commissions as a
credit against Fund expenses. With respect to brokerage and research services,
the Investment Manager may consider in the selection of broker/dealers brokerage
or research provided and payment may be made of a fee higher than that charged
by another broker/dealer which does not furnish brokerage or research services
or which furnishes brokerage or research services deemed to be of lesser value,
so long as the criteria of Section 28(e) of the Securities Exchange Act of 1934,
as amended, or other applicable law are met. Although the Invest ment Manager
may direct portfolio transactions without necessarily obtaining the lowest price
at which such broker/dealer, or another, may be willing to do business, the
Investment Manager shall seek the best value for the Fund (or its Series) on
each trade that circumstances in the market place permit, including the value
inherent in on-going relationships with quality brokers. To the extent any such
brokerage or research services may be deemed to be additional compensation to
the Investment Manager from the Fund, it is authorized by this Agreement. The
Investment Manager may place Fund brokerage through an affiliate of the
Investment Manager, provided that: the Fund not deal with such affiliate in any
transaction in which such affiliate acts as principal; the commissions, fees or
other remuneration received by such affiliate be reasonable and fair compared to
the commissions, fees or other remuneration paid to other brokers in connection
with comparable transactions involving similar securities being purchased or
sold on a securities exchange during a comparable period of time; and such
brokerage be undertaken in compliance with applicable law. The Investment
Manager's fees under this Agreement shall not be reduced by reason of any
commissions, fees or other remuneration received by such affiliate from the
Fund.
9. The Investment Manager shall waive all or part of its fee or
reimburse the Fund (or its Series) monthly if and to the extent the aggregate
operating expenses of the Fund (or its Series) exceed the most restrictive limit
imposed by any state in which shares of the Fund are qualified for sale or such
lesser amount as may be agreed to by the Fund's Board of Directors and the
Investment Manager. In calculating the limit of operating expenses, all expenses
excludable under state regulation or otherwise shall be excluded. If this
Agreement is in effect for less than all of a fiscal year, any such limit will
be applied proportionately.
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Exhibit A
10. Subject to and in accordance with the Articles of Incorporation and
By-laws of the Fund and of the Investment Manager, it is understood that
directors, officers, agents and shareholders of the Fund are or may be
interested in the Fund as directors, officers, shareholders or otherwise, that
the Investment Manager is or may be interested in the Fund as a shareholder or
otherwise and that the effect and nature of any such interests shall be governed
by law and by the provisions, if any, of said Articles of Incorporation or
By-laws.
11. This Agreement shall become effective upon the date hereinabove
written and, unless sooner terminated as provided herein, this Agreement shall
continue in effect for two years from the above written date. Thereafter, if not
terminated, this Agreement shall continue automatically for successive periods
of twelve months each, provided that such continuance is specifically approved
at least annually (a) by the Board of Directors of the Fund or by the holders of
a majority of the outstanding voting securities of the Fund as defined in the
1940 Act (or with respect to any given Series by the holders of a majority of
the outstanding voting securities of such Series as defined in the 1940 Act) and
(b) by a vote of a majority of the Directors of the Fund who are not parties to
this Agreement, or interested persons of any such party. This Agreement may be
terminated without penalty at any time either by vote of the Board of Directors
of the Fund or by vote of the holders of a majority of the outstanding voting
securities of the Fund (or with respect to any given Series by the holders of a
majority of the outstanding voting securities of such Series) on 60 days'
written notice to the Investment Manager, or by the Investment Manager on 60
days' written notice to the Fund. Termination of this Agreement with respect to
any given Series shall in no way affect the continued validity of this Agreement
or the performance thereunder with respect to any other Series. This Agreement
shall immediately terminate in the event of its assignment.
12. The Investment Manager shall not be liable to the Fund or any
Series or any shareholder of the Fund for any error of judgment or mistake of
law or for any loss suffered by the Fund or any Series or the Fund's
shareholders in connection with the matters to which this Agreement relates, but
nothing herein contained shall be construed to protect the Investment Manager
against any liability to the Fund or any Series or the Fund's shareholders by
reason of willful misfeasance, bad faith, or gross negligence in the performance
of its duties or by reason of its reckless disregard of obligations and duties
under this Agreement.
13. As used in this Agreement, the terms "interested person,"
"assignment," and "majority of the outstanding voting securities" shall have the
meanings provided therefor in the 1940 Act, and the rules and regulations
thereunder.
14. This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject hereof
whether oral or written. If any provision of this Agreement shall be held or
made invalid by a court or regulatory agency decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby.
15. This Agreement shall be construed in accordance with and
governed by the laws of the State of New York, provided, however, that nothing
herein shall be construed in a manner inconsistent with the 1940 Act or any rule
or regulation promulgated thereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
MIDAS FUND, INC.
By:____________________________
MIDAS MANAGEMENT CORPORATION
By:____________________________
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EXHIBIT B
SUBADVISORY AGREEMENT
AGREEMENT made this 15th day of May, 1995, by and between MIDAS
MANAGEMENT CORPORATION, a Delaware corporation (the "Investment Manager") and
LION RESOURCE MANAGEMENT LIMITED, an English corporation (the "Subadviser").
WHEREAS the Investment Manager intends to enter into an investment
management agreement (the "Management Agreement") with MIDAS FUND, INC. (the
"Fund") pursuant to which the Investment Manager will furnish the Fund with
investment management and other services; and
WHEREAS the Management Agreement provides that the Investment Manager
may, at its own expense, contract for research and other services as it deems
necessary or desirable to fulfill such obligations; and
WHEREAS, the Subadviser is registered under the Investment Advisers Act
of 1940; and
WHEREAS, the Investment Manager desires to retain the Subadviser to
provide subadvisory and research services in connection with the Fund and the
Subadviser is willing to provide such services;
NOW THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is hereby agreed between the parties hereto as
follows:
1. _______ The Investment Manager will manage the investment and reinvestment of
the assets of Fund including the regular furnishing of advice with respect to
the Fund's portfolio transactions subject at all times to the control and final
direction of the Board of Directors of the Fund, for the period and on the terms
set forth in its Management Agreement with the Fund. The Investment Manager
retains responsibility for selecting brokers, monitoring trade executions,
communicating instructions to the Fund's custodian and other Fund agents, and
all other functions pertaining to the management of the Fund.
2. The Subadviser will make itself available to advise and consult with the
Investment Manager regarding the selection, clearing, and safekeeping of the
Fund's portfolio investments and assist in pricing and generally monitoring such
investments. The
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EXHIBIT B
Subadviser will provide the Investment Manager with advice as to allocation of
the Fund's portfolio assets among (1) various countries, including the United
States and (2) equities, bullion, and/or other types of investments, and within
each such allocation of country and/or type of investment, recommendations of
specific investments. The Subadviser agrees to permit the use of its name and
the names of its personnel and other information about the Subadviser in the
marketing and other literature in connection with the Fund.
3. _______ In consideration of the Subadviser's services, the Investment
Manager, and not the Fund, shall pay to the Subadviser a percentage of the
Investment Manager's Net Fees. "Net Fees" are hereby defined as the actual
amounts received by the Investment Manager as compensation pursuant to paragraph
7(a) of the Management Agreement less reimbursements, if any, pursuant to the
guaranty set forth in paragraph 9 of the Management Agreement and waivers of
such compensation by the Investment Manager. The amount of the percentage and
the timing of the payment shall be determined by the schedule and accompanying
definitions set forth in Appendix A hereto.
4. The Subadviser will pay all expenses incurred by it in connection with this
Subadvisory Agreement.
5. _______ The services of the Subadviser hereunder are not to be deemed
exclusive, and the Subadviser shall be free to render similar services to others
in addition to the Investment Manager and the Fund so long as its services
hereunder are not impaired thereby. The Subadviser shall not render, however,
similar services to any U.S. registered investment company either directly or
indirectly as an adviser, subadviser, or otherwise, other than to the Fund and
other investment companies for which the Investment Manager or its affiliates
provide investment management services. The Subadviser may render similar
services to certain private specialist portfolios, as determined by the
Investment Manager and the Subadviser from time to time.
6. _______ This Subadvisory Agreement shall become effective upon approval by
the directors and shareholders of the Fund as required by the Investment Company
Act of 1940 (the "1940 Act"). Thereafter, if not terminated, this Subadvisory
Agreement shall continue from year to year if approved annually by (a) the Board
of Directors of the Fund or by vote of a majority of the outstanding voting
securities of the Fund as defined in the 1940 Act and (b) by a vote of a
majority of the Directors of the Fund who are not parties to the Subadvisory
Agreement, or interested persons of any such party. This Subadvisory Agreement
may be terminated without penalty at any time either by vote of the Board of
Directors of the Fund or by vote of the holders of a majority of the outstanding
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EXHIBIT B
voting securities of the Fund on 60 days' written notice to the Investment
Manager and the Subadviser, or by the Investment Manager or the Subadviser on 60
days' written notice to the Fund. In the event of termination upon notice as
herein described, the Investment Manager and the Subadviser agree that, subject
to the provisions of the 1940 Act, no party hereto will be entitled to or seek
indemnification or compensation from the other party for expenses incurred in
connection with marketing efforts performed during the term of this Agreement.
This Subadvisory Agreement shall immediately terminate in the event of its
assignment or upon the termination of the Management Agreement.
7. _______ The Subadviser shall not be liable to the Fund or any shareholder of
the Fund for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with the matters to which this Subadvisory Agreement
relates, but nothing herein contained shall be construed to protect the
Subadviser against any liability to the Fund by reason of willful misfeasance,
bad faith, or gross negligence in the performance of its duties or by reason of
its reckless disregard of obligations and duties under this Subadvisory
Agreement.
8. _______ Subject to and in accordance with the Articles of Incorporation and
Bylaws of the Fund, the Investment Manager, and the Subadviser, it is understood
that directors, officers, agents and shareholders of the Fund, the Investment
Manager, or Subadviser are or may be interested in the Fund, the Investment
Manager, or the Subadviser as directors, officers, shareholders or otherwise,
that the Investment Manager or the Subadviser is or may be interested in the
Fund or the Investment Manager or the Subadviser as a shareholder or otherwise
and that the effect and nature of any such interests shall be governed by law
and by the provisions, if any, of said Articles of Incorporation or Bylaws.
9. _______ All notices hereunder shall be in writing and shall be delivered in
person or sent by facsimile transmission that is confirmed by regular,
registered, or certified mail to the following address for the respective
parties:
MIDAS MANAGEMENT CORPORATION
11 Hanover Square
New York, NY 10005
Fax: (212) 785-0400
LION RESOURCE MANAGEMENT LIMITED
7 - 8 Kendrick Mews
London, U.K. SW7 3HG
Fax 01-144-71-591-0535
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EXHIBIT B
Notice shall be deemed given, five days after depositing in a post office,
postage prepaid and if sent by facsimile transmission five days after
confirmation has been mailed.
10. ______ As used in this Subadvisory Agreement, the terms "interested person,"
"assignment," and "vote of a majority of the outstanding voting securities"
shall have the meaning provided therefor in the 1940 Act, as from time to time
amended.
IN WITNESS WHEREOF, the parties hereto have executed this Subadvisory
Agreement on the day and year first above written.
MIDAS MANAGEMENT CORPORATION
By:_______________________
LION RESOURCE MANAGEMENT LIMITED
By:_______________________
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EXHIBIT B
APPENDIX A
MIDAS FUND, INC.
Subadvisory Fee
As a percent of Net Fees
The Investment Manager shall pay to the Subadviser within 30 days of
each Performance Determination Date, as defined in paragraph A below, a
percentage of the Net Fees, as defined in paragraph 3 of this Subadvisory
Agreement, earned since the later of the effective date of this Subadvisory
Agreement or the prior Performance Determination Date, as defined in paragraph A
below. The amount of the percentage shall be determined by reference to the grid
set forth below.
RELATIVE PERFORMANCE
TOTAL NET More than 50 Within 50 More than 50
ASSETS basis points basis points basis points
better than BTR of BTR below BTR
<=$15,000,000 30% 20% 10%
>$15,000,000 and 40% 30% 20%
<=$50,000,000
>$50,000,000 50% 40% 30%
A. "Relative Performance" shall be determined from comparing the total return
performance of the Fund and the total return performance of the "Benchmark
Performance" of the objective category of "precious metals" funds ("BTR") as
determined by Morningstar, Inc., or, if unavailable, other similar service
acceptable to the parties and the Fund. The Relative Performance shall be
determined as of the last calendar day of each month ("Performance Determination
Date") and shall measure the Relative Performance for the most recent 12 month
period ("Measurement Period"), except that for the first 12 months of this
Subadvisory Agreement, Relative Performance shall be based upon annualized
returns, the first three Performance Determination Dates shall be the next three
calendar quarter ends after the effective date of this Subadvisory Agreement,
and the Measurement Periods shall be the most recent three months and the fourth
Performance Determination Date shall be the next calendar quarter end and the
Measurement Period shall be the most recent twelve months.
B. "Total Net Assets" shall be the total net assets of the Fund as of the
Performance Determination Date.
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EXHIBIT C
AGREEMENT AND PLAN OF CONVERSION AND LIQUIDATION
This AGREEMENT AND PLAN OF CONVERSION AND LIQUIDATION ("Agreement") is
made this 30th day of June, 1995, by and between Excel Midas Gold Shares, Inc.
("Midas Gold"), a corporation organized under the laws of the State of
Minnesota, and Midas Fund, Inc. ("Midas Fund"), a corporation organized under
the laws of the State of Maryland (each a "Fund" and collectively "Funds").
WHEREAS, Midas Gold is a diversified, open-end management investment
company registered under the Investment Company Act of 1940, as amended ("1940
Act"); and
WHEREAS, Midas Gold was organized pursuant to Articles of Incorporation
dated April 15, 1985, and presently is authorized to issue 100,000,000 shares of
common stock, $.01 par value ("Midas Gold Shares"); and
WHEREAS, Midas Fund was organized pursuant to Articles of Incorporation
dated June 1, 1995, and presently is authorized to issue 1,000,000,000 shares of
common stock, $.01 par value ("Midas Fund Shares"); and
WHEREAS, Midas Gold desires to change its place of organization from
Minnesota to Maryland (by converting from a Minnesota corporation to a Maryland
corporation) through a reorganization within the meaning of section 368(a)(1)(F)
of the Internal Revenue Code of 1986, as amended ("Code"); and
WHEREAS, Midas Gold desires to accomplish such change by transferring
all of its assets to Midas Fund (which was established solely for the purpose of
acquiring such assets and continuing Midas Gold's business) in consideration for
the assumption by Midas Fund of all of Midas Gold's liabilities and the issuance
to Midas Gold of Midas Fund Shares, which shares Midas Gold will thereupon
distribute pro rata to its shareholders in complete liquidation, all in
accordance with the procedures and subject to the terms and conditions set forth
in this Agreement (which is intended to be, and is adopted as, a "plan of
reorganization" for federal income tax purposes) (all such transactions being
herein referred to as the "Reorganization").
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties agree as follows:
1. Plan of Conversion and Liquidation. (a) Midas Gold will convey,
transfer and deliver to Midas Fund at the Closing (as defined in Section 2
hereof) all of its then existing assets. In consideration therefor, Midas Fund
shall at the Closing (i) assume all of Midas Gold's liabilities and obligations,
whether absolute, accrued, contingent or otherwise, and including all fees and
expenses in connection with the transactions contemplated hereby, including,
without limitation, costs of legal advice, accounting, printing, mailing, proxy
solicitation and transfer taxes, if any, and (ii) deliver to Midas Gold full and
fractional Midas Fund Shares, equal in number to the number of full and
fractional Midas Gold Shares then outstanding.
(b) Upon consummation of the transactions described in paragraph (a) of
this Section 1, the Midas Fund Share acquired by Midas Gold pursuant to Section
4 (e) hereof shall be redeemed by Midas Fund for $1.00 and Midas Gold will
distribute in complete liquidation, pro rata to its shareholders of record as of
the Closing Date, the Midas Fund Shares received by Midas Gold pursuant to
paragraph (a) of this Section 1. Such distribution will be accomplished by the
establishment of an open account on the share records of Midas Fund in the name
of each such shareholder representing the respective pro rata number of Midas
Fund Shares due such shareholder. Fractional Midas Fund Shares will be rounded
to the third decimal place. Certificates representing Midas Fund Shares may
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EXHIBIT C
or may not be issued as determined by the directors of Midas Fund.
Simultaneously with such crediting of Midas Fund Shares to such Midas Gold
shareholders, their Midas Gold Shares shall be canceled.
(c) As soon as practicable after the foregoing transactions, Midas Gold
shall file Articles of Dissolution for record with the State of Minnesota and
shall take, in accordance with the laws of the State of Minnesota, all other
steps as shall be necessary and proper to liquidate and terminate its legal
existence.
2. Closing and Closing Date. The transfer of Midas Gold's assets in
exchange for Midas Fund Shares and Midas Fund's assumption of Midas Gold's
liabilities, as described above, together with related acts necessary to
consummate such transactions ("Closing"), shall take place beginning at 10:00
a.m., local time, on August 25, 1995 ("Closing Date"), at the offices of
Kirkpatrick & Lockhart LLP, 1800 M Street, N.W., South Lobby - 9th Floor,
Washington, D.C. or such other time, date or place as the Funds may mutually
agree.
3. Representations and Warranties. Midas Gold represents and warrants
as follows:
(a) ______ Midas Gold is a corporation duly organized, validly
existing and in good standing under the laws of the State of Minnesota,
and a copy of its Articles of Incorporation is on file with the State
of Minnesota;
(b) Midas Gold is duly registered as an open-end management
investment company under the 1940 Act, and such registration is in full
force and effect;
(c) ______ Midas Gold qualified for treatment as a regulated
investment company under Subchapter M of the Code ("RIC") for each past
taxable year since it commenced operations and will continue to meet
all requirements for such qualification for its current taxable year;
and it has no earnings and profits accumulated in any taxable year in
which the provisions of Subchapter M did not apply to it;
(d) No consideration other than Midas Fund Shares will be
issued in exchange for Midas Gold Shares in the Reorganization;
(e) The liabilities of Midas Gold to be assumed by Midas Fund
were incurred by Midas Gold in the ordinary course of business;
(f) ______ Midas Gold is not under the jurisdiction of a court
in a proceeding under Title 11 of the United States Code or similar
case within the meaning of section 368(a)(3)(A) of the Code;
(g) ______ Not more than 25% of the value of Midas Gold's
total assets (excluding cash and cash items (including receivables) and
U.S. government securities) is invested in the stock or securities of
any one issuer, and not more than 50% of the value thereof is invested
in the stock or securities of five or fewer issuers;
(h) Midas Fund Shares are not being acquired for the purposes
of making any distribution thereof, other than in accordance with the
terms of this Agreement; and
(i) Midas Gold will be liquidated immediately after
consummation of the Reorganization.
Midas Fund represents and warrants as follows:
(a) ______ Midas Fund is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland,
and its Articles of Incorporation are on file with the Department of
Assessments and Taxation of the State of Maryland;
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EXHIBIT C
(b) ______ Midas Fund will be duly registered as an open-end
management investment company under the 1940 Act on or before the
Closing Date, and such registration will be in full force and effect on
the Closing Date;
(c) Midas Fund has not commenced operations and will not
commence operations until after the Closing;
(d) Midas Fund will meet all the requirements to qualify for
treatment as a RIC for its current taxable year;
(e) ______ Prior to the Closing Date, there will be no issued
and outstanding Midas Fund Shares or any other securities issued by
Midas Fund, except as provided for in Section 4(e);
(f) ______ Midas Fund does not have a plan or intention to
issue additional Midas Fund Shares following the Reorganization except
for shares issued in the ordinary course of its business as an open-end
investment company; nor does Midas Fund have any plan or intention to
redeem or otherwise reacquire any Midas Fund Shares issued pursuant to
the Reorganization, other than through redemptions arising in the
ordinary course of such business;
(g) ______ Midas Fund will actively continue the business of
Midas Gold in substantially the same manner that Midas Gold conducted
it immediately before the Reorganization; and Midas Fund has no plan or
intention to sell or otherwise dispose of any of the assets to be
acquired by it in the Reorganization, except for dispositions (i) made
in the ordinary course of its business and (ii) necessary to maintain
its status as a RIC;
(h) ______ There is no plan or intention for Midas Fund to be
dissolved or merged into another corporation or business trust or
"fund" thereof (within the meaning of section 851(h)(2) of the Code)
following the Reorganization; and
(i) ______ Immediately after the Reorganization, (i) not more
than 25% of the value of Midas Fund's total assets (excluding cash and
cash items (including receivables) and U.S. Government securities) will
be invested in the stock or securities of any one issuer, and (ii) not
more than 50% of the value thereof will be invested in the stock or
securities of five or fewer issuers.
Each Fund represents and warrants as follows:
(a) ______ The fair market value of the Midas Fund Shares,
when received by Midas Gold's shareholders, will be equal to the fair
market value of their Midas Gold Shares constructively surrendered in
exchange therefor;
(b) ______ Its management (i) is unaware of any plan or
intention of Midas Gold shareholders to redeem or otherwise dispose of
any portion of the Midas Fund Shares to be received by those
shareholders in the Reorganization and (ii) does not anticipate
dispositions at the time of or soon after the Reorganization to exceed
the usual rate and frequency of redemptions of shares of Midas Gold as
an open-end investment company. Consequently, its management expects
that the percentage of Midas Gold shareholder interests,
if any, that will be redeemed as a result of or at the time of the
Reorganization will be de minimis. Nor does its management anticipate
that there will be extraordinary sales of Midas Fund Shares immediately
following the Reorganization that would cause the percentage of new
shareholders' interests in Midas Fund to exceed 50% of the total
shareholdings in Midas Fund;
-3-
<PAGE>
(c) ______ Immediately following consummation of the
Reorganization, Midas Gold shareholders will own all the Midas Fund
Shares and will own such shares solely by reason of their ownership of
Midas Gold Shares immediately prior to the Reorganization;
(d) Each Midas Gold shareholder will pay his or her own
expenses, if any, incurred in connection with the Reorganization;
(e) ______ Immediately following consummation of the
Reorganization, Midas Fund will hold the same assets and be subject to
the same liabilities that Midas Gold held or was subject to immediately
prior thereto, plus any liabilities and expenses of the parties
incurred in connection with the Reorganization;
(f) ______ The fair market value on a going-concern basis of
the assets to be transferred by Midas Gold to Midas Fund will equal or
exceed Midas Gold's liabilities to be assumed by Midas Fund plus any
liabilities to which the transferred assets are subject; and
(g) There is no intercompany indebtedness between the Funds
that was issued or acquired, or will be settled, at a discount.
4. Conditions Precedent. The obligations of each Fund to effectuate the
transactions contemplated hereby shall be subject to (i) performance by the
other party of all the obligations to be performed by the other party hereunder
on or before the Closing Date, (ii) all representations and warranties of the
other party contained in this Agreement being 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, and (iii) the
further conditions that on or before the Closing Date:
(a) ______ All necessary filings shall have been made with the
Securities and Exchange Commission ("Commission") and state securities
commissions, and no order or directive shall have been received that
any other or further action is required to permit the parties to carry
out the transactions contemplated by this Agreement.
(b) ______ One or more post-effective amendments to Midas
Gold's registration statement on Form N-1A ("Registration Statement")
under the Securities Act of 1933, as amended, and the 1940 Act
containing (i) such amendments to the Registration Statement as are
determined by the directors of each Fund to be necessary and
appropriate as a result of this Agreement and (ii) the adoption by
Midas Fund, as its own, of the Registration Statement, as so amended,
shall have been filed with the Commission, and such post-effective
amendment or amendments to the Registration Statement shall have become
effective.
(c) ______ Each party shall have received an opinion from
Kirkpatrick & Lockhart LLP to the effect that for federal income tax
purposes: (i) no gain or loss will be recognized to Midas Gold on the
transfer of its assets to Midas Fund in exchange solely for Midas Fund
Shares and the assumption by Midas Fund of Midas Gold's liabilities or
on the distribution of those shares to its shareholders in constructive
exchange for their Midas Gold Shares; (ii) no gain or loss will be
recognized to Midas Fund on its receipt of such assets in exchange for
the Midas Fund Shares and its assumption of such liabilities; (iii) the
basis of such assets in the hands of Midas Fund will be the same as the
basis of such assets in the hands of Midas Gold immediately before the
Reorganization; (iv) Midas Fund's holding period for such assets will
include the
period during which such assets were held by Midas Gold; (v) no gain or
loss will be recognized to the shareholders of Midas Gold on the
constructive transfer of their Midas Gold Shares solely in exchange for
the Midas Fund Shares; (vi) the basis of the Midas Fund Shares received
by a shareholder of Midas Gold will be the same as the adjusted basis
of that shareholder's Midas Gold Shares constructively surrendered in
exchange therefor; and (vii) the holding period of the Midas Fund
Shares received by a shareholder of Midas Gold will include that
shareholder's holding period for the Midas Gold Shares constructively
surrendered in exchange therefor, provided such Midas Gold Shares were
held as capital assets on the date of the Reorganization; and as to
such other matters as it may reasonably request.
(d) ______ Midas Gold shall have prepared a proxy statement in
compliance with the Securities Exchange Act of 1934 and the 1940 Act in
connection with a meeting of its shareholders for the purpose, inter
alia, of voting on the Reorganization and this Agreement; and the
Reorganization and this Agreement shall have been adopted and approved
by the affirmative vote of the holders of the requisite number of the
outstanding Midas Gold Shares entitled to vote thereon as required by
law at the time such vote is taken.
(e) ______ Prior to the Closing, the directors of Midas Fund
shall have authorized the issuance of, and Midas Fund shall have
issued, one Midas Fund Share to Midas Gold in consideration of the
payment of $1.00 for the purpose of enabling Midas Gold to vote on the
matters referred to in paragraphs (f), (g) and (h) of this Section 4.
(f) ______ Midas Fund shall have entered into an Investment
Management Agreement with Midas Management Corporation ("MMC"), a
Distribution Agreement with Bull & Bear Service Center, Inc. ("BBSC"),
a Shareholder Administrative Services Agreement with BBSC, a Plan of
Distribution, a Transfer Agency Agreement and an Agency Agreement with
DST Systems, Inc. and a Custodian Agreement and a Service and Agency
Agreement with Investors Bank & Trust Company and shall have approved a
Sub-Advisory Agreement between MMC and Lion Resource Management
Limited. Each such agreement shall have been approved by the directors
of Midas Fund and, to the extent required by law, by the directors of
Midas Fund who are not "interested persons" of Midas Fund as defined in
the 1940 Act, and by Midas Gold as the sole shareholder of Midas Fund.
(g) ______ The directors of Midas Fund who are not "interested
persons" of Midas Fund, as defined in the 1940 Act, shall have selected
Tait, Weller & Baker as independent public accountants for Midas Fund,
and such selection shall have been ratified by Midas Gold as the sole
shareholder of Midas Fund.
(h) Midas Gold as the sole shareholder of Midas Fund shall
have elected the directors of Midas Fund.
At any time prior to the Closing, any of the foregoing conditions except 4 (d)
may be waived by the directors of each Fund if, in their judgment, such waiver
will not have a material adverse effect on the interests of the shareholders of
Midas Gold.
5. Amendment. This Agreement may be amended at any time by action of
the directors of each Fund notwithstanding approval thereof by the shareholders
of Midas Gold, provided that no amendment shall have a material adverse effect
on the interests of such shareholders.
6. Termination. The directors of each Fund may terminate this Agreement
and abandon the Reorganization, notwithstanding approval thereof by the
shareholders of Midas Gold, at any time prior to the Closing, if circumstances
should develop that, in their judgment, make proceeding with the Agreement
inadvisable.
7. Governing Law. This Agreement shall be construed in accordance with
applicable federal law and the laws of the State of Maryland; provided that, in
the case of any conflict between the 1940 Act and Maryland laws, the 1940 Act
shall govern.
IN WITNESS WHEREOF, the parties have caused this Agreement and Plan of
Conversion and Liquidation to be executed and delivered by their duly authorized
officers as of the day and year first written above.
Attest: EXCEL MIDAS GOLD SHARES, INC.
_____________________________ By:_____________________________
Title:___________________________
Attest: MIDAS FUND, INC.
______________________________ By:_____________________________
Title:___________________________
- 4 -
<PAGE>
EXHIBIT D
PLAN OF DISTRIBUTION
WHEREAS MIDAS FUND, INC. (the "Fund") is registered under the
Investment Company Act of 1940, as amended ("1940 Act"), as an open-end
management investment company, and proposes to offer for public sale shares of
common stock; and
WHEREAS the Fund has entered into a Distribution Agreement
("Agreement") with Bull & Bear Service Center, Inc. (the "Distributor") pursuant
to which the Distributor has agreed to serve as the principal distributor for
the Fund;
NOW, THEREFORE, the Fund hereby adopts this plan of distri bution
("Plan") with respect to the Fund in accordance with Rule 12b-1 under the Act.
1. _______ As Distributor for the Fund, the Distributor may spend such
amounts as it deems appropriate on any activities or expenses primarily intended
to result in the sale of the Fund's shares or the servicing and maintenance of
shareholder accounts, including, but not limited to: advertising, direct mail,
and promotional expenses; compensation to the Distributor and its employees;
compensation to and expenses, including overhead and telephone and other
communication expenses, of the Distributor, the Investment Manager, the Fund,
and selected broker/dealers and their affiliates who engage in or support the
distribution of shares or who service shareholder accounts; fulfillment
expenses, including the costs of printing and distributing prospectuses,
statements of additional information, and reports for other than existing
shareholders; the costs of preparing, printing and distributing sales literature
and advertising materials; and internal costs incurred by the Distributor and
allocated by the Distributor to its efforts to distribute shares of the Fund or
service shareholder accounts such as office rent and equipment, employee
salaries, employee bonuses and other overhead expenses.
2. _______ A. _______ The Fund is authorized to pay to the Distributor,
as compensation for the Distributor's distribution and service activities as
defined in paragraph 13 hereof with respect to its shareholders, a fee at the
rate of 0.25% on an annualized basis of its average daily net assets. All or a
portion of such fee may be designated by the Fund's board of directors ("Board")
as a fee for service activities or as a fee for distribution activities. Such
fee shall be calculated and accrued daily and paid monthly or at such other
intervals as the Board shall determine.
B. The Fund may pay fees to the Distributor at a lesser
rate than the fees specified in paragraph 2A of this Plan as
mutually agreed to by the Board and the Distributor.
<PAGE>
EXHIBIT D
3. This Plan shall not take effect until it has been approved by:
A. the vote of at least a majority of the outstanding
voting securities of the Fund and
B. _______ the vote cast in person at a meeting called for the
purpose of voting on this Plan of a majority of both (i) those directors of the
Fund who are not interested persons of the Fund and have no direct or indirect
financial interest in the operation of this Plan or any agreement related to it
(the "Plan Directors"), and (ii) all of the directors then in office.
4. _______ This Plan shall continue in effect for one year from its
execution or adoption and thereafter for so long as such continuance is
specifically approved at least annually in the manner provided for approval of
this Plan in paragraph 3B.
5. _______ The Distributor shall provide to the Board and the Board
shall review, at least quarterly, a written report of the amounts expended under
this Plan and the purposes for which such expenditures were made. A reasonable
allocation of overhead and other expenses of the Distributor related to its
distribution activities and service activities, including telephone and other
communication expenses, may be included in the information regarding amounts
expended for such activities.
6. _______ This Plan may not be amended to increase materially the
amount of fees provided for in paragraphs 2A and 2B hereof unless such amendment
is approved by a vote of a majority of the outstanding voting securities of the
Fund, and no material amendment to this Plan shall be made unless approved by
the Board and the Plan Directors in the manner provided for approval of this
Plan in paragraph 3B.
7. _______ The amount of the fees payable by the Fund to the
Distributor under paragraphs 2A and 2B hereof is not related directly to
expenses incurred by the Distributor on behalf of the Fund in serving as
distributor, and paragraph 2 hereof does not obligate the Fund to reimburse the
Distributor for such expenses. The fees set forth in paragraphs 2A and 2B hereof
will be paid by the Fund to the Distributor unless and until this Plan is
terminated or not renewed. If this Plan is terminated or not renewed, any
expenses incurred by the Distributor on behalf of the Fund in excess of payments
of the fees specified in paragraphs 2A and 2B hereof which the Distributor has
received or accrued through the termination date are the sole responsibility and
liability of the Distributor, and are not obligations of the Fund.
8. _______ Any other agreements related to this Plan shall not take
effect until approved in the manner provided for approval of this Plan in
paragraph 3B.
9. The Distributor shall use its best efforts in rendering
services to the Fund hereunder, but in the absence of willful
misfeasance, bad faith or gross negligence in the performance of
its duties or reckless disregard of its obligations and duties
<PAGE>
EXHIBIT D
hereunder, the Distributor shall not be liable to the Fund, the Fund or to any
shareholder of the Fund for any act or failure to act by the Distributor or any
affiliated person of the Distributor or for any loss sustained by the Fund, the
Fund or the Fund's shareholders.
10. This Plan may be terminated at any time by vote of a majority of
the Plan Directors, or by vote of a majority of the outstanding voting
securities of the Fund.
11. ______ While this Plan is in effect, the selection and nomina tion
of directors who are not interested persons of the Fund shall be committed to
the discretion of the directors who are not interested persons.
12. ______ The Fund shall preserve copies of this Plan and any other
agreements related to this Plan and all reports made pursuant to paragraph 5
hereof, for a period of not less than six years from the date of this Plan, or
the date of any such agreement or of any such report, as the case may be, the
first two years in an easily accessible place.
13. ______ For purposes of this Plan, "distribution activities" shall
mean any activities in connection with the Distributor's performance of its
services under this Plan or the Agreement that are not deemed "service
activities." "Service activities" shall mean activities covered by the
definition of "service fee" contained in amendments to Section 26(b) of the
National Association of Securities Dealers, Inc.'s Rules of Fair Practice.
14. As used in this Plan, the terms: "majority of the out standing
voting securities" and "interested person" shall have the same meaning as those
terms have in the 1940 Act.
IN WITNESS WHEREOF, the Fund has executed this Plan on the day and year
set forth below in the City and State of New York.
DATE:
ATTEST: MIDAS FUND, INC.
_____________________________ By:______________________
