APPENDIX A:
AGREEMENT AND PLAN OF ACQUISITION
THIS AGREEMENT made as of the 10th day of September, 2002 is made by and among
Principal International Fund, Inc., a Maryland corporation (hereinafter called
"International Fund"), Principal European Equity Fund, Inc., a Maryland
corporation (hereinafter called "European Equity Fund"), and Principal
Management Corporation, an Iowa corporation (hereinafter called "Principal
Management").
WITNESSETH:
Whereas the Board of Directors of the International Fund and the Board of
Directors of the European Equity Fund, each an open-end management investment
company, deem it advisable that the International Fund acquire all of the assets
of the European Equity Fund in exchange for the assumption by the International
Fund of all of the liabilities of the European Equity Fund and shares issued by
the International Fund which are thereafter to be distributed by the European
Equity Fund pro rata to its shareholders in complete liquidation and termination
of the European Equity Fund and in exchange for all of the European Equity
Fund's outstanding shares;
NOW, THEREFORE, in consideration of the mutual promises herein contained, each
of the parties hereto represents and warrants to, and agrees with each of the
other parties as follows:
1.The International Fund hereby represents and warrants to the European
Equity Fund that:
(a) The International Fund is a corporation with transferable shares duly
organized and validly existing under the laws of Maryland and has full
power to own its properties and assets and to carry on its business as
such business is now being conducted;
(b) The International Fund's statement of assets and liabilities as of
October 31, 2001 and the related statements of operations for the year
then ended, changes in net assets each of the two years in the period
then ended and its financial highlights for each of the five years in
the period then ended, all audited by Ernst & Young LLP as set forth
in their report, have been prepared in accordance with accounting
principles generally accepted in the United States. Such financial
statements fairly present the financial position of the International
Fund as of such date and the results of its operations, changes in net
assets and financial highlights for the periods covered thereby;
(c) There are no claims, actions, suits or proceedings pending or, to its
knowledge, threatened against or affecting the International Fund or
its properties or business or its right to issue and sell shares, or
which would prevent or hinder consummation of the transactions
contemplated hereby, and it is not charged with, or to the
International Fund's knowledge, threatened with, any charge or
investigation of any violation of any provision of any federal, state
or local law or any administrative ruling or regulation relating to
any aspect of its business or the issuance or sale of its shares;
(d) The International Fund is not a party to or subject to any judgment
or decree or order entered in any suit or proceeding brought by any
governmental agency or by any other person enjoining it in respect of,
or the effect of which is to prohibit, any business practice or the
acquisition of any property or the conduct of business by it or the
issuance or sale of its shares in any area;
(e) The International Fund has filed all tax returns required to be
filed, has no liability for any unpaid taxes and has made a proper
election to be treated as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986 (the "Code") for
each of its taxable years. The International Fund has not committed
any action or failed to perform any necessary action that would render
invalid its election to be treated as a regulated investment company
for any of its taxable years;
(f) The authorization, execution and delivery of this Agreement on behalf
of the International Fund does not, and the consummation of the
transactions contemplated hereby will not, violate or conflict with
any provision of the International Fund's Articles of Incorporation or
Bylaws, or any provision of, or result in the acceleration of any
obligation under, any mortgage, lien, lease, agreement, instrument,
order, arbitration award, judgment or decree to which it is party or
by which it or any of its assets is bound, or violate or conflict with
any other material contractual or statutory restriction of any kind or
character to which it is subject;
(g) This Agreement has been duly authorized, executed, and delivered by
the International Fund and constitutes a valid and binding agreement
of the International Fund and all governmental and other approvals
required for the International Fund to carry out the transactions
contemplated hereunder have been or on or prior to the Closing Date
(as herein after defined) will have been obtained;
(h) The International Fund is registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), as an open-end, diversified
management investment company. The International Fund is currently in
compliance with the 1940 Act and the rules of the Securities and
Exchange Commission promulgated thereunder. Neither the International
Fund nor its affiliates have violated Section 9 of the 1940 Act, are
currently subject to an exemptive order of the Securities and Exchange
Commission pursuant to Section 9(c) of the 1940 Act, or are currently
subject to any current or threatened investigation or enforcement
action by the Securities and Exchange Commission or any other federal
or state authority which could result in a violation of Section 9(a)
of the 1940 Act;
(i) On the Closing Date, the International Fund will own its assets free
and clear of all liens, claims, charges, options and encumbrances;
(j) The International Fund will declare to shareholders of record on or
prior to the Closing Date a dividend or dividends which, together with
all previous such dividends, shall have the effect of distributing to
its shareholders all of its income (computed without regard to any
deduction for dividends paid) and all of its net realized capital
gains, if any, as of the Closing Date;
(k) On the Closing Date the shares of the International Fund to be
delivered to the European Equity Fund hereunder shall have been
registered under the Securities Act of 1933, as amended (the "1933
Act") and duly authorized, and, when issued and delivered pursuant to
this Agreement, will be validly issued, fully paid and nonassessable;
and the International Fund will comply with all applicable laws in
connection with the issuance of such shares and shall not be subject
to a stop-order of the Securities and Exchange Commission in
connection therewith.
2.The European Equity Fund hereby represents and warrants to the
International Fund that:
(a) The European Equity Fund is a corporation with transferable shares
duly organized and validly existing under the laws of Maryland and has
full power to own its properties and assets and to carry on its
business as such business is now being conducted;
(b) The European Equity Fund's statement of assets and liabilities as of
October 31, 2001 and the related statements of operations for the year
then ended, changes in net assets and its financial highlights for the
year ended October 31, 2001 and the period from May 1, 2000 (date
operations commenced) to October 31, 2000, all audited by Ernst &
Young LLP as set forth in their report, have been prepared in
accordance with accounting principles generally accepted in the United
States. Such financial statements fairly present the financial
position of the European Equity Fund as of that date and the results
of its operations, changes in net assets and financial highlights for
the periods covered thereby;
(c) There are no claims, actions, suits or proceedings pending or, to its
knowledge, threatened against or affecting the European Equity Fund or
its properties or business or its tight to issue and sell shares, or
which would prevent or hinder consummation of the transactions
contemplated hereby, and it is not charged with, or to the European
Equity Fund's knowledge, threatened with, any charge or investigation
of any violation of any provision of any federal, state or local law
or any administrative ruling or regulation relating to any aspect of
its business or the issuance or sale of its shares;
(d) The European Equity Fund is not party to or subject to any judgment
or decree or order entered in any suit or proceeding brought by any
governmental agency or by any other persons enjoining it in respect
of, or the effect of which is to prohibit, any business practice or
the acquisition of any property or the conduct of business by it or
the issuance or sale of its shares in any area;
(e) The European Equity Fund has filed all tax returns required to be
filed, has no liability for any unpaid taxes and has made a proper
election to be treated as a regulated investment company under
Subchapter M of the Code for each of its taxable years. The European
Equity Fund has not committed any action or failed to perform any
necessary action that would render invalid its election to be treated
as a regulated investment company for any of its taxable years;
(f) The authorization, execution and delivery of this Agreement on behalf
of the European Equity Fund does not, and the consummation of the
transactions contemplated hereby will not, violate or conflict with
any provision of the European Equity Fund's Articles of Incorporation
or Bylaws, or any provision of, or result in the acceleration of any
obligation under, any mortgage, lien, lease, agreement, instrument,
order, arbitration award, judgment or decree to which it is party or
by which it or any of its assets is bound, or violate or conflict with
any other material contractual or statutory restriction of any kind or
character to which it is subject;
(g) This Agreement has been duly authorized, executed, and delivered by
the European Equity Fund and constitutes a valid and binding agreement
of the European Equity Fund, and all governmental and other approvals
required for the European Equity Fund to carry out the transactions
contemplated hereunder have been or on or prior to the Closing Date
will have been obtained;
(h) On the Closing Date the European Equity Fund will own its assets free
and clear of all liens, claims, charges, options, and encumbrances
and, except for the Management Agreement, Investment Service
Agreement, Distribution Agreement, Distribution and Shareholder
Servicing Agreement and the Custodian Agreement with XX Xxxxxx Xxxxx
Bank, there will be no material contracts or agreements (other than
this Agreement) outstanding to which the European Equity Fund is a
party or to which it is subject;
(i) On the Closing Date the European Equity Fund will have full right,
power and authority to sell, assign and deliver the assets to be sold,
assigned, transferred and delivered to the International Fund
hereunder, and upon delivery and payment for such assets, the
International Fund will acquire good, marketable title thereto free
and clear of all liens, claims, charges, options and encumbrances;
(j) The European Equity Fund will declare to shareholders of record on or
prior to the Closing Date a dividend or dividends which, together with
all previous such dividends, shall have the effect of distributing to
the shareholders all of its income (computed without regard to any
deduction for dividends paid) and all of its net realized capital
gains, if any, as of the Closing; and
(k) The European Equity Fund will, from time to time, as and when
requested by the International Fund, execute and deliver or cause to
be executed and delivered all such assignments and other instruments,
and will take and cause to be taken such further action, as the
International Fund may deem necessary or desirable in order to vest in
and confirm to the International Fund title to and possession of all
the assets of the European Equity Fund to be sold, assigned,
transferred and delivered hereunder and otherwise to carrot the intent
and purpose of this Agreement.
3.Based on the respective representations and warranties, subject to the
terms and conditions contained herein, the European Equity Fund agrees to
transfer to the International Fund and the International Fund agrees to
acquire from the European Equity Fund, all of the assets of the European
Equity Fund on the Closing Date and to assume from the European Equity
Fund all of the liabilities of the European Equity Fund in exchange for
the issuance of the number of shares of the International Fund provided
in Section 4 which will be subsequently distributed pro rata to the
shareholders of the European Equity Fund in complete liquidation and
termination of the European Equity Fund and in exchange for all of the
European Equity Fund's outstanding shares. The European Equity Fund shall
not issue, sell or transfer any of its shares after the Closing Date, and
only redemption requests received by the European Equity Fund in proper
form prior to the Closing Date shall be fulfilled by the European Equity
Fund. Redemption requests received by the European Equity Fund thereafter
shall be treated as requests for redemption of those shares of the
International Fund allocable to the shareholder in question as provided
in Section 6 of this Agreement.
4.On the Closing Date, the International Fund will issue to the European
Equity Fund a number of full and fractional shares of the International
Fund, taken at their then net asset value, having an aggregate net asset
value equal to the aggregate value of the net assets of the European
Equity Fund. The aggregate value of the net assets of the European Equity
Fund and the International Fund shall be determined in accordance with
the then current Prospectus of the International Fund as of closing of
the New York Stock Exchange on the Closing Date.
5.The closing of the transactions contemplated in this Agreement (the
"Closing") shall be held at the offices of Principal Management, 000 0xx
Xxxxxx, Xxx Xxxxxx, Xxxx 00000-0000 (or at such other place as the
parties hereto may agree) at 3:00 p.m. Central Standard Time on October
29, 2002 or on such earlier or later date as the parties hereto may
mutually agree. The date on which the Closing is to be held as provided
in this Agreement shall be known as the "Closing Date."
In the event that on the Closing Date (a) the New York Stock Exchange is
closed for other than customary weekend and holiday closings or (b)
trading on said Exchange is restricted or (c) an emergency exists as a
result of which it is not reasonably practicable for the International
Fund or the European Equity Fund to fairly determine the value of its
assets, the Closing Date shall be postponed until the first business day
after the day on which trading shall have been fully resumed.
6.
As soon as practicable after the Closing, the European Equity Fund shall
(a) distribute on a pro rata basis to the shareholders of record of the
European Equity Fund at the close of business on the Closing Date the
shares of the International Fund received by the International Fund at
the Closing in exchange for all of the European Equity Fund's outstanding
shares, and (b) be liquidated and dissolved in accordance with applicable
law and its Articles of Incorporation.
For purposes of the distribution of shares of the International Fund to
shareholders of the European Equity Fund, the International Fund shall
credit on the books of the International Fund an appropriate number of
shares of the International Fund to the account of each shareholder of
the European Equity Fund. The International Fund will issue a certificate
or certificates only upon request and, in the case of a shareholder of
the European Equity Fund whose shares are represented by certificates,
only upon surrender of such certificates. No certificates will be issued
for fractional shares of the International Fund. After the Closing Date
and until surrendered, each outstanding certificate which, prior to the
Closing Date, represented shares of the European Equity Fund, shall be
deemed for all purposes of the International Fund's Articles of
Incorporation and Bylaws to evidence the appropriate number of shares of
the International Fund to be credited on the books of the International
Fund in respect of such shares of the European Equity Fund as provided
above.
7.Subsequent to the execution of this Agreement and prior to the Closing
Date, the European Equity Fund shall deliver to the International Fund a
list setting forth the assets to be assigned, delivered and transferred
to the International Fund, including the securities then owned by the
European Equity Fund and the respective federal income tax bases (on an
identified cost basis) thereof, and the liabilities to be assumed by the
International Fund pursuant to this Agreement.
8.
All of the European Equity Fund's portfolio securities shall be delivered
by the European Equity Fund's custodian on the Closing Date to the
International Fund or its custodian, either endorsed in proper form for
transfer in such condition as to constitute good delivery thereof in
accordance with the practice of brokers or, if such securities are held
in a securities depository within the meaning of Rule 17f-4 under the
1940 Act, transferred to an account in the name of the International Fund
or its custodian with said depository. All cash to be delivered pursuant
to this Agreement shall be transferred from the European Equity Fund's
account at its custodian to the International Fund's account at its
custodian. If on the Closing Date the European Equity Fund is unable to
make good delivery pursuant to this Section 8 to the International Fund's
custodian of any of the European Equity Fund's portfolio securities
because such securities have not yet been delivered to the European
Equity Fund's custodian by its brokers or by the transfer agent for such
securities, then the delivery requirement of this Section 8 with respect
to such securities shall be waived, and the European Equity Fund shall
deliver to the International Fund's custodian on or by said Closing Date
with respect to said undelivered securities executed copies of an
agreement of assignment in a form satisfactory to the International Fund,
and a due xxxx or due bills in form and substance satisfactory to the
custodian, together with such other documents including brokers'
confirmations, as may be reasonably required by the International Fund.
9.The obligations of the International Fund under this Agreement shall be
subject to receipt by the International Fund on or prior to the Closing
Date of:
(a) Copies of the resolutions adopted by the Board of Directors of the
European Equity Fund and its shareholders authorizing the execution of
this Agreement by the European Equity Fund and the transactions
contemplated hereunder, certified by the Secretary or Assistant
Secretary of the European Equity Fund;
(b) A certificate of the Secretary or Assistant Secretary of the European
Equity Fund as to the signatures and incumbency of its officers who
executed this Agreement on behalf of the European Equity Fund and any
other documents delivered in connection with the transactions
contemplated thereby on behalf of the European Equity Fund;
(c) A certificate of an appropriate officer of the European Equity Fund
as to the fulfillment of all agreements and conditions on its part to
be fulfilled hereunder at or prior to the Closing Date and to the
effect that the representations and warranties of the European Equity
Fund are true and correct in all material respects at and as of the
Closing Date as if made at and as of such date; and
(d) Such other documents, including an opinion of counsel, as the
International Fund may reasonably request to show fulfillment of the
purposes and conditions of this Agreement.
10.
The obligations of the European Equity Fund under this Agreement shall be
subject to receipt by the European Equity Fund on or prior to the Closing
Date of:
(a) Copies of the resolutions adopted by the Board of Directors of the
International Fund authorizing the execution of this Agreement and the
transactions contemplated hereunder, certified by the Secretary or
Assistant Secretary of the International Fund;
(b) A certificate of the Secretary or Assistant Secretary of the
International Fund as to the signatures and incumbency of its officers
who executed this Agreement on behalf of the International Fund and
any other documents delivered in connection with the transactions
contemplated thereby on behalf of the International Fund;
(c) A certificate of an appropriate officer of the International Fund as
to the fulfillment of all agreements and conditions on its part to be
fulfilled hereunder at or prior to the Closing Date and to the effect
that the representations and warranties of the International Fund are
true and correct in all material respects at and as of the Closing
Date as if made at and as of such date; and
(d) Such other documents, including an opinion of counsel, as the
European Equity Fund may reasonably request to show fulfillment of the
purposes and conditions of this Agreement.
11.
The obligations of the parties under this Agreement shall be subject to:
(a) Any required approval, at a meeting duly called for the purpose, of
the holders of the outstanding shares of the European Equity Fund of
this Agreement and the transactions contemplated hereunder; and
(b) The right to abandon and terminate this Agreement, if either party to
this Agreement believes that the consummation of the transactions
contemplated hereunder would not be in the best interests of its
shareholders.
12. Except as expressly provided otherwise in this Agreement, Principal
Management will pay or cause to be paid all out-of-pocket fees and
expenses incurred by the European Equity Fund or the International Fund
in connection with the transactions contemplated under this Agreement,
including, but not limited to, accountants' fees, legal fees,
registration fees, printing expenses, transfer taxes (if any) and the
fees of banks and transfer agents. This obligation shall survive the
termination or expiration of this Agreement regardless of the
consummation of the transactions contemplated hereunder.
13.
This Agreement may be amended by an instrument executed by both the duly
authorized officers of the International Fund and the European Equity
Fund at any time, except that after approval by the shareholders of the
European Equity Fund no amendment may be made with respect to the
Agreement which in the opinion of the Board of Directors of the European
Equity Fund materially adversely affects the interests of the
shareholders of the European Equity Fund. At any time either party hereto
may by written instrument signed by it (i) waive any inaccuracies in the
representations and warranties made to it contained herein and (ii) waive
compliance with any of the covenants or conditions made for its benefit
contained herein.
14. In addition to the right to terminate this Agreement described in
paragraph 11, this Agreement may be terminated and the plan described in
the Agreement abandoned at any time prior to the Closing Date, whether
before or after action thereon by the shareholders of the European Equity
Fund and notwithstanding favorable action by such shareholders, by mutual
consent of the Board of Directors of the International Fund and the Board
of Directors of the European Equity Fund. This Agreement may also be
terminated by action of the Board of Directors of the International Fund
or the Board of Directors of the European Equity Fund (the "Terminating
Fund"), if:
(a) The plan described in the Agreement shall not have become effective
by December 31, 2002 (hereinafter called the "Final Date") unless such
Final Date shall have been changed by mutual agreement; or
(b) The International Fund shall, at the Final Date, have failed to
comply with any of its agreements; or
(c) Prior to the Final Date any one or more of the conditions to the
obligations of the International Fund contained in this Agreement
shall not be fulfilled to the reasonable satisfaction of the European
Equity Fund and its counsel or it shall become evident to the European
Equity Fund that any of such conditions are incapable of being
fulfilled.
15.
This Agreement shall bind and inure to the benefit of the parties hereto
and is not intended to confer upon any other person any rights or
remedies hereunder.
16.
The parties hereto represent and warrant that they have not employed any
broker, finder or intermediary in connection with this transaction who
might be entitled to a finder's fee or other similar fee or commission.
17.
All prior or contemporaneous agreements and representations are hereby
merged into this Agreement, which constitutes the entire contract between
the parties hereto.
18.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Iowa.
19.
This Agreement maybe executed in one or more counterparts, all of which
shall be considered one and the same agreement, and shall become
effective when one or more of the counterparts has been signed by all
parties hereto.
20. Principal Management shall indemnify, defend and hold harmless the
International Fund, its officers, directors, employees and agents against
all losses, claims, demands, liabilities and expenses, including
reasonable legal and other expenses incurred in defending claims or
liabilities, whether or not resulting in any liability to the
International Fund, its officers, directors, employees or agents, arising
out of (1) breach by the European Equity Fund of any warranty made by the
European Equity Fund herein or (2) any untrue statement or alleged untrue
statement of a material fact contained in any prospectus or registration
statement for the European Equity Fund, as filed with the SEC or any
state, or any amendment or supplement thereto, or in any information
provided by the European Equity Fund included in any registration
statement filed by the International Fund with the SEC or any state or
any amendment or supplement thereto; or which shall arise out of or be
based upon any omission or alleged omission to state therein a material
fact required to be stated in any such prospectus, registration statement
or application necessary to make the statements therein not misleading.
This indemnity provision shall survive the termination of this Agreement.
21. The International Fund shall indemnify, defend and hold harmless the
European Equity Fund, its officers, trustees, employees and agents
against all losses, claims, demands, liabilities and expenses, including
reasonable legal and other expenses incurred in defending claims or
liabilities, whether or not resulting in any liability to the European
Equity Fund, its officers, trustees, employees or agents, arising out of
any untrue statement or alleged untrue statement of a material fact
contained in any prospectus or registration statement for the
International Fund, as filed with the SEC or any state, or any amendment
or supplement thereto, or any application prepared by or on behalf of the
International Fund and filed with any state regulatory agency in order to
register or qualify shares of the International Fund under the securities
laws thereof; or which shall arise out of or be based upon any omission
or alleged omission to state therein a material fact required to be
stated in any such prospectus, registration statement or application
necessary to make the statements therein not misleading; provided,
however, the International Fund shall not be required to indemnify the
European Equity Fund, its officers, trustees, employees and agents
against any loss, claim, demand, liability or expense arising out of any
information provided by the International Fund with the SEC or any state,
or any amendment or supplement thereto. This indemnity provision shall
survive the termination of this Agreement.
22. The execution of this Agreement has been authorized by the Board of
Directors of the International Fund and by the Board of Directors of the
European Equity Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and attested by their officers thereunto duly authorized, as of the date first
written above.
PRINCIPAL INTERNATIONAL FUND, INC.
BY:
__________________________________________
Attest:
A. S. Filean, Senior Vice President and Secretary
By:__________________________________________
Xxxxxx X. Xxxxxx, Vice President & Secretary
PRINCIPAL EUROPEAN EQUITY FUND, INC.
BY:
__________________________________________
Attest:
A. S. Filean, Senior Vice President and Secretary
By:__________________________________________
Xxxxxx X. Xxxxxx, Vice President & Secretary
PRINCIPAL MANAGEMENT CORPORATION
BY:
__________________________________________
Attest:
A. S. Filean, Senior Vice President and Secretary
By:__________________________________________
Xxxxxx X. Xxxxxx, Vice President & Secretary