Exhibit No. 4
AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION
THIS AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION ("Agreement") is
made as of March 23, 2001, by and among PaineWebber Investment Trust, a
Massachusetts business trust ("Acquiring Trust"), on behalf of PaineWebber
Tactical Allocation Fund, a segregated portfolio of assets ("series") thereof
("Acquiring Fund"), PaineWebber Master Series, Inc., a Maryland corporation
("Target Corporation"), on behalf of PaineWebber Balanced Fund, a series thereof
("Target"), and solely for purposes of paragraph 7.2 hereof, Xxxxxxxx Xxxxxxxx
Asset Management Inc. ("Xxxxxxxx Xxxxxxxx"). (Acquiring Fund and Target are
sometimes referred to herein individually as a "Fund" and collectively as the
"Funds," and Acquiring Trust and Target Corporation are sometimes referred to
herein individually as an "Investment Company" and collectively as the
"Investment Companies.") All agreements, representations, actions, and
obligations described herein made or to be taken or undertaken by Acquiring Fund
or Target are made and shall be taken or undertaken by Acquiring Trust or Target
Corporation, respectively.
The Investment Companies wish to effect a reorganization described in
section 368(a)(1)(C) of the Internal Revenue Code of 1986, as amended ("Code"),
and intend this Agreement to be, and adopt it as, a "plan of reorganization"
within the meaning of the regulations under section 368 of the Code
("Regulations"). The reorganization will involve the transfer of Target's assets
to Acquiring Fund in exchange solely for voting shares of beneficial interest in
Acquiring Fund ("Acquiring Fund Shares") and the assumption by Acquiring Fund of
Target's stated liabilities, followed by the constructive distribution of those
shares pro rata to the holders of shares of common stock in Target ("Target
Shares") in exchange therefor, all on the terms and conditions set forth herein.
The foregoing transactions are referred to herein collectively as the
"Reorganization."
The Target Shares are divided into four classes, designated Class A, Class
B, Class C, and Class Y shares ("Class A Target Shares," "Class B Target
Shares," "Class C Target Shares," and "Class Y Target Shares," respectively).
The Acquiring Fund Shares also are divided into four classes designated Class A,
Class B, Class C, and Class Y shares ("Class A Acquiring Fund Shares," "Class B
Acquiring Fund Shares," "Class C Acquiring Fund Shares," and "Class Y Acquiring
Fund Shares," respectively). Each class of Acquiring Fund Shares is
substantially similar to the identically designated class of Target Shares.
In consideration of the mutual promises contained herein, the parties
agree as follows:
1. PLAN OF REORGANIZATION AND TERMINATION
1.1. Target agrees to assign, sell, convey, transfer, and deliver all of
its assets described in paragraph 1.2 ("Assets") to Acquiring Fund. Acquiring
Fund agrees in exchange therefor--
(a) to issue and deliver to Target the number of full and fractional
(rounded to the third decimal place) (i) Class A Acquiring Fund
Shares determined by dividing the net value of Target (computed
as set forth in paragraph 2.1) ("Target Value") attributable to
the Class A Target Shares by the net asset value ("NAV") of a
Class A Acquiring Fund Share (computed as set forth in paragraph
2.2), (ii) Class B Acquiring Fund Shares determined by dividing
the Target Value attributable to the Class B Target Shares by the
NAV of a Class B Acquiring Fund Share (as so computed), (iii)
Class C Acquiring Fund Shares determined by dividing the Target
Value attributable to the Class C Target Shares by the NAV of a
Class C Acquiring Fund Share (as so computed), and (iv) Class Y
Acquiring Fund Shares determined by dividing the Target Value
attributable to the Class Y Target Shares by the NAV of a Class Y
Acquiring Fund Share (as so computed), and
(b) to assume all of Target's stated liabilities described in
paragraph 1.3 ("Liabilities").
Such transactions shall take place at the Closing (as defined in paragraph 3.1).
1.2. The Assets shall include all cash, cash equivalents, securities,
receivables (including interest and dividends receivable), claims and rights of
action, rights to register shares under applicable securities laws, books and
records, deferred and prepaid expenses shown as assets on Target's books, and
other property owned by Target at the Effective Time (as defined in paragraph
3.1).
1.3. The Liabilities shall include all of Target's liabilities, debts,
obligations, and duties of whatever kind or nature, whether absolute, accrued,
contingent, or otherwise, whether or not arising in the ordinary course of
business, and whether or not specifically referred to in this Agreement, but
only to the extent disclosed or provided for in Target Corporation's financial
statements referred to in paragraph 4.1.19, or otherwise disclosed in writing to
and accepted by Acquiring Trust. Notwithstanding the foregoing, Target agrees to
use its best efforts to discharge all its Liabilities before the Effective Time.
1.4. At or immediately before the Effective Time, Target shall declare and
pay to its shareholders a dividend and/or other distribution in an amount large
enough so that it will have distributed substantially all (and in any event not
less than 90%) of its investment company taxable income (computed without regard
to any deduction for dividends paid) and substantially all of its realized net
capital gain, if any, for its current taxable year through the Effective Time.
1.5. At the Effective Time (or as soon thereafter as is reasonably
practicable), Target shall distribute the Acquiring Fund Shares it receives
pursuant to paragraph 1.1 to Target's shareholders of record, determined as of
the Effective Time (each a "Shareholder" and collectively "Shareholders"), in
constructive exchange for their Target Shares. Such distribution shall be
accomplished by Acquiring Trust's transfer agent's opening accounts on Acquiring
Fund's share transfer books in the Shareholders' names and transferring such
Acquiring Fund Shares thereto. Each Shareholder's account shall be credited with
the respective pro rata number of full and fractional (rounded to the third
decimal place) Acquiring Fund Shares due that Shareholder, by class (i.e., the
account for a Shareholder of Class A Target Shares shall be credited with the
respective pro rata number of Class A Acquiring Fund Shares due that
Shareholder; the account for a Shareholder of Class B Target Shares shall be
credited with the respective pro rata number of Class B Acquiring Fund Shares
due that Shareholder; the account for a Shareholder of Class C Target Shares
shall be credited with the respective pro rata number of Class C Acquiring Fund
Shares due that Shareholder; and the account for a Shareholder of Class Y Target
Shares shall be credited with the respective pro rata number of Class Y
Acquiring Fund Shares due that Shareholder). All outstanding Target Shares,
including any represented by certificates, shall simultaneously be canceled on
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Target's share transfer books. Acquiring Fund shall not issue certificates
representing the Acquiring Fund Shares issued in connection with the
Reorganization.
1.6. As soon as reasonably practicable after distribution of the Acquiring
Fund Shares pursuant to paragraph 1.5, but in all events within six months after
the Effective Time, Target shall be terminated as a series of Target Corporation
and any further actions shall be taken in connection therewith as required by
applicable law.
1.7. Any reporting responsibility of Target to a public authority is and
shall remain its responsibility up to and including the date on which it is
terminated.
1.8. Any transfer taxes payable on issuance of Acquiring Fund Shares in a
name other than that of the registered holder on Target's books of the Target
Shares constructively exchanged therefor shall be paid by the person to whom
such Acquiring Fund Shares are to be issued, as a condition of such transfer.
2. VALUATION
2.l. For purposes of paragraph 1.1(a), Target's net value shall be (a) the
value of the Assets computed as of the close of regular trading on the New York
Stock Exchange ("NYSE") on the date of the Closing ("Valuation Time"), using the
valuation procedures set forth in Acquiring Fund's then-current prospectus and
statement of additional information ("SAI"), less (b) the amount of the
Liabilities as of the Valuation Time.
2.2. For purposes of paragraph 1.1(a), the NAV of each class of Acquiring
Fund Shares shall be computed as of the Valuation Time, using the valuation
procedures set forth in Acquiring Fund's then-current prospectus and SAI.
2.3. All computations pursuant to paragraphs 2.1 and 2.2 shall be made by
or under the direction of Xxxxxxxx Xxxxxxxx.
3. CLOSING AND EFFECTIVE TIME
3.1. The Reorganization, together with related acts necessary to
consummate the same ("Closing"), shall occur at the Funds' principal office on
or about April 27, 2001, or at such other place and/or on such other date as to
which the Investment Companies may agree. All acts taking place at the Closing
shall be deemed to take place simultaneously as of the close of business on the
date thereof or at such other time as to which the Investment Companies may
agree ("Effective Time"). If, immediately before the Valuation Time, (a) the
NYSE is closed to trading or trading thereon is restricted or (b) trading or the
reporting of trading on the NYSE or elsewhere is disrupted, so that accurate
appraisal of the Target Value and the NAV of each class of Acquiring Fund Shares
is impracticable, the Effective Time shall be postponed until the first business
day after the day when such trading shall have been fully resumed and such
reporting shall have been restored.
3.2. Target Corporation shall deliver at the Closing a certificate of an
authorized officer verifying that the information (including adjusted basis and
holding period, by lot) concerning the Assets, including all portfolio
securities, transferred by Target to Acquiring Fund, as reflected on Acquiring
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Fund's books immediately after the Closing, does or will conform to such
information on Target's books immediately before the Closing. Target Corporation
shall deliver at the Closing a certificate of its Secretary or a Vice President
stating that (a) Target Corporation instructed its custodian to deliver the
Assets held by it to Acquiring Fund at the Effective Time or make arrangements
on or before the Effective Time for the delivery thereof to Acquiring Fund, and
(b) Target Corporation's custodian notified Target Corporation that it had
received the instructions and that the requested delivery of Assets would be
effective as of the Effective Time or as of the earliest feasible time following
the Effective Time.
3.3. Target Corporation shall deliver to Acquiring Trust at the Closing a
list of the names and addresses of the Shareholders and the number of
outstanding Target Shares (by class) owned by each Shareholder (rounded to the
third decimal place), all as of the Effective Time, certified by Target
Corporation's Secretary or an Assistant Secretary thereof. Acquiring Trust's
transfer agent shall deliver at the Closing a certificate as to the opening on
Acquiring Fund's share transfer books of accounts in the Shareholders' names.
Acquiring Trust shall issue and deliver a confirmation to Target Corporation
evidencing the Acquiring Fund Shares to be credited to Target at the Effective
Time or provide evidence satisfactory to Target Corporation that such Acquiring
Fund Shares have been credited to Target's account on Acquiring Fund's books. At
the Closing, each Investment Company shall deliver to the other bills of sale,
checks, assignments, stock certificates, receipts, or other documents the other
Investment Company or its counsel reasonably requests.
3.4. Each Investment Company shall deliver to the other at the Closing a
certificate executed in its name by its President or a Vice President in form
and substance satisfactory to the recipient and dated the Effective Time, to the
effect that the representations and warranties it made in this Agreement are
true and correct at the Effective Time except as they may be affected by the
transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES
4.1. Target represents and warrants to Acquiring Trust, on behalf of
Acquiring Fund, as follows:
4.1.1. Target Corporation is a corporation that is 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 Maryland;
4.1.2. Target Corporation is duly registered as an open-end
management investment company under the Investment Company Act of 1940, as
amended ("1940 Act"), and such registration will be in full force and
effect at the Effective Time;
4.1.3. Target is a duly established and designated series of Target
Corporation;
4.1.4. At the Closing, Target will have good and marketable title to
the Assets and full right, power, and authority to sell, assign, transfer,
and deliver the Assets free of any liens or other encumbrances (except
securities that are subject to "securities loans" as referred to in
section 851(b)(2) of the Code); and on delivery and payment for the
Assets, Acquiring Fund will acquire good and marketable title thereto;
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4.1.5. Target's current prospectus and SAI conform in all material
respects to the applicable requirements of the Securities Act of 1933, as
amended ("1933 Act"), and the 1940 Act and the rules and regulations
thereunder and do not include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading;
4.1.6. Target is not in violation of, and the execution and delivery
of this Agreement and consummation of the transactions contemplated hereby
will not conflict with or violate, Maryland law or any provision of Target
Corporation's Restated Articles of Incorporation ("Articles of
Incorporation") or Restated By-Laws or of any agreement, instrument,
lease, or other undertaking to which Target is a party or by which it is
bound or result in the acceleration of any obligation, or the imposition
of any penalty, under any agreement, judgment, or decree to which Target
is a party or by which it is bound, except as otherwise disclosed in
writing to and accepted by Acquiring Trust;
4.1.7. Except as otherwise disclosed in writing to and accepted by
Acquiring Trust, all material contracts and other commitments of or
applicable to Target (other than this Agreement and investment contracts,
including options, futures, and forward contracts) will be terminated, or
provision for discharge of any liabilities of Target thereunder will be
made, at or prior to the Effective Time, without either Fund's incurring
any liability or penalty with respect thereto and without diminishing or
releasing any rights Target may have had with respect to actions taken or
omitted or to be taken by any other party thereto prior to the Closing;
4.1.8. Except as otherwise disclosed in writing to and accepted by
Acquiring Trust, no litigation, administrative proceeding, or
investigation of or before any court or governmental body is presently
pending or (to Target Corporation's knowledge) threatened against Target
Corporation with respect to Target or any of its properties or assets
that, if adversely determined, would materially and adversely affect
Target's financial condition or the conduct of its business; and Target
Corporation knows of no facts that might form the basis for the
institution of any such litigation, proceeding, or investigation and is
not a party to or subject to the provisions of any order, decree, or
judgment of any court or governmental body that materially or adversely
affects its business or its ability to consummate the transactions
contemplated hereby;
4.1.9. The execution, delivery, and performance of this Agreement
have been duly authorized as of the date hereof by all necessary action on
the part of Target Corporation's board of directors, which has made the
determinations required by Rule 17a-8(a) under the 1940 Act; and, subject
to approval by Target's shareholders, this Agreement constitutes a valid
and legally binding obligation of Target, enforceable in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium, and laws of general applicability relating to
or affecting creditors' rights and to general principles of equity;
4.1.10. At the Effective Time, the performance of this Agreement
shall have been duly authorized by all necessary action by Target's
shareholders;
4.1.11. No governmental consents, approvals, authorizations, or
filings are required under the 1933 Act, the Securities Exchange Act of
1934, as amended ("1934 Act"), or the 1940 Act for the execution or
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performance of this Agreement by Target Corporation, except for (a) the
filing with the Securities and Exchange Commission ("SEC") of a
registration statement by Acquiring Trust on Form N-14 relating to the
Acquiring Fund Shares issuable hereunder, and any supplement or amendment
thereto ("Registration Statement"), including therein a prospectus/proxy
statement ("Proxy Statement"), and (b) such consents, approvals,
authorizations, and filings as have been made or received or as may be
required subsequent to the Effective Time;
4.1.12. On the effective date of the Registration Statement, at the
time of the Meeting (as defined in paragraph 5.2), and at the Effective
Time, the Proxy Statement will (a) comply in all material respects with
the applicable provisions of the 1933 Act, the 1934 Act, and the 1940 Act
and the rules and regulations thereunder and (b) not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which such statements were made, not misleading;
provided that the foregoing shall not apply to statements in or omissions
from the Proxy Statement made in reliance on and in conformity with
information furnished by Acquiring Trust for use therein;
4.1.13. The Liabilities were incurred by Target in the ordinary
course of its business; and there are no Liabilities other than
liabilities disclosed or provided for in Target Corporation's financial
statements referred to in paragraph 4.1.19, or otherwise disclosed in
writing to and accepted by Acquiring Trust, none of which has been
materially adverse to the business, assets, or results of Target's
operations;
4.1.14. Target is a "fund" as defined in section 851(g)(2) of the
Code; it 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 the requirements for
such qualification for its current taxable year; the Assets will be
invested at all times through the Effective Time in a manner that ensures
compliance with the foregoing; and Target has no earnings and profits
accumulated in any taxable year in which the provisions of Subchapter M
did not apply to it;
4.1.15. Target is not under the jurisdiction of a court in a "title
11 or similar case" (within the meaning of section 368(a)(3)(A) of the
Code);
4.1.16. Not more than 25% of the value of Target's total assets
(excluding cash, cash items, and U.S. government securities) is invested
in the stock and securities of any one issuer, and not more than 50% of
the value of such assets is invested in the stock and securities of five
or fewer issuers;
4.1.17. During the five-year period ending at the Effective Time,
(a) neither Target nor any person "related" (within the meaning of section
1.368-1(e)(3) of the Regulations) to Target will have acquired Target
Shares with consideration other than Acquiring Fund Shares or Target
Shares, except for shares redeemed in the ordinary course of Target's
business as a series of an open-end investment company as required by
section 22(e) of the 1940 Act, and (b) no distributions will have been
made with respect to Target Shares (other than normal, regular dividend
distributions made pursuant to Target's historic dividend-paying
practice), either directly or through any transaction, agreement, or
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arrangement with any other person, except for dividends qualifying for the
deduction for dividends paid (as defined in section 561 of the Code)
referred to in sections 852(a)(1) and 4982(c)(1)(A) of the Code;
4.1.18. Target's federal income tax returns, and all applicable
state and local tax returns, for all taxable years through and including
the taxable year ended August 31, 2000, have been timely filed and all
taxes payable pursuant to such returns have been timely paid;
4.1.19. Target Corporation's audited financial statements for the
year ended August 31, 2000, and unaudited financial statements for the six
months ended February 28, 2001, to be delivered to Acquiring Trust, fairly
represent Target's financial position as of such date and the results of
its operations and changes in its net assets for the period then ended;
and
4.1.20. Its management (a) is unaware of any plan or intention of
Shareholders to redeem, sell, or otherwise dispose of (i) any portion of
their Target Shares before the Reorganization to any person "related"
(within the meaning of section 1.368-1(e)(3) of the Regulations) to either
Fund or (ii) any portion of the Acquiring Fund Shares to be received by
them in the Reorganization to any person related (within such meaning) to
Acquiring Fund, (b) does not anticipate dispositions of those Acquiring
Fund Shares at the time of or soon after the Reorganization to exceed the
usual rate and frequency of dispositions of shares of Target as a series
of an open-end investment company, (c) expects that the percentage of
Shareholder interests, if any, that will be disposed of as a result of or
at the time of the Reorganization will be de minimis, and (d) does not
anticipate that there will be extraordinary redemptions of Acquiring Fund
Shares immediately following the Reorganization.
4.2. Acquiring Fund represents and warrants to Target Corporation, on
behalf of Target, as follows:
4.2.1. Acquiring Trust is a trust operating under a written
declaration of trust, the beneficial interest in which is divided into
transferable shares ("Business Trust"), that is duly organized and validly
existing under the laws of the Commonwealth of Massachusetts; and a copy
of its Amended and Restated Declaration of Trust ("Declaration of Trust")
is on file with the Secretary of the Commonwealth of Massachusetts;
4.2.2. Acquiring Trust is duly registered as an open-end management
investment company under the 1940 Act, and such registration will be in
full force and effect at the Effective Time;
4.2.3. Acquiring Fund is a duly established and designated series of
Acquiring Trust;
4.2.4. No consideration other than Acquiring Fund Shares (and
Acquiring Fund's assumption of the Liabilities) will be issued in exchange
for the Assets in the Reorganization;
4.2.5. The Acquiring Fund Shares to be issued and delivered to
Target hereunder will, at the Effective Time, have been duly authorized
and, when issued and delivered as provided herein, including the receipt
of consideration in exchange therefor in excess of the par value thereof,
will be duly and validly issued and outstanding shares of Acquiring Fund,
fully paid and non-assessable;
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4.2.6. Acquiring Fund's current prospectus and SAI conform in all
material respects to the applicable requirements of the 1933 Act and the
1940 Act and the rules and regulations thereunder and do not include any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
4.2.7. Acquiring Fund is not in violation of, and the execution and
delivery of this Agreement and consummation of the transactions
contemplated hereby will not conflict with or violate, Massachusetts law
or any provision of the Declaration of Trust or Acquiring Trust's Restated
By-Laws or of any provision of any agreement, instrument, lease, or other
undertaking to which Acquiring Fund is a party or by which it is bound or
result in the acceleration of any obligation, or the imposition of any
penalty, under any agreement, judgment, or decree to which Acquiring Fund
is a party or by which it is bound, except as otherwise disclosed in
writing to and accepted by Target Corporation;
4.2.8. Except as otherwise disclosed in writing to and accepted by
Target Corporation, no litigation, administrative proceeding, or
investigation of or before any court or governmental body is presently
pending or (to Acquiring Trust's knowledge) threatened against Acquiring
Trust with respect to Acquiring Fund or any of its properties or assets
that, if adversely determined, would materially and adversely affect
Acquiring Fund's financial condition or the conduct of its business; and
Acquiring Trust knows of no facts that might form the basis for the
institution of any such litigation, proceeding, or investigation and is
not a party to or subject to the provisions of any order, decree, or
judgment of any court or governmental body that materially or adversely
affects its business or its ability to consummate the transactions
contemplated hereby;
4.2.9. The execution, delivery, and performance of this Agreement
have been duly authorized as of the date hereof by all necessary action on
the part of Acquiring Trust's board of trustees (together with Target
Corporation's board of directors, the "Boards"), which has made the
determinations required by Rule 17a-8(a) under the 1940 Act; and this
Agreement constitutes a valid and legally binding obligation of Acquiring
Fund, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium, and laws of
general applicability relating to or affecting creditors' rights and to
general principles of equity;
4.2.10. No governmental consents, approvals, authorizations, or
filings are required under the 1933 Act, the 1934 Act, or the 1940 Act for
the execution or performance of this Agreement by Acquiring Trust, except
for (a) the filing with the SEC of the Registration Statement and (b) such
consents, approvals, authorizations, and filings as have been made or
received or as may be required subsequent to the Effective Time;
4.2.11. On the effective date of the Registration Statement, at the
time of the Meeting, and at the Effective Time, the Proxy Statement will
(a) comply in all material respects with the applicable provisions of the
1933 Act, the 1934 Act, and the 1940 Act and the rules and regulations
thereunder and (b) not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
such statements were made, not misleading; provided that the foregoing
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shall not apply to statements in or omissions from the Proxy Statement
made in reliance on and in conformity with information furnished by Target
Corporation for use therein;
4.2.12. Acquiring Fund is a "fund" as defined in section 851(g)(2)
of the Code; it qualified for treatment as a RIC for each past taxable
year since it commenced operations and will continue to meet all the
requirements for such qualification for its current taxable year;
Acquiring Fund intends to continue to meet all such requirements for the
next taxable year; and it has no earnings and profits accumulated in any
taxable year in which the provisions of Subchapter M of the Code did not
apply to it;
4.2.13. Acquiring Fund has no plan or intention to issue additional
Acquiring Fund Shares following the Reorganization except for shares
issued in the ordinary course of its business as a series of an open-end
investment company; nor is there any plan or intention for Acquiring Fund,
or any person "related" (within the meaning of section 1.368-1(e)(3) of
the Regulations) to Acquiring Fund, to acquire -- during the five-year
period beginning at the Effective Time, either directly or through any
transaction, agreement, or arrangement with any other person -- with
consideration other than Acquiring Fund Shares, any Acquiring Fund Shares
issued to the Shareholders pursuant to the Reorganization, except for
redemptions in the ordinary course of Acquiring Fund's business as a
series of an open-end investment company as required by section 22(e) of
the 1940 Act;
4.2.14. Following the Reorganization, Acquiring Fund (a) will
continue Target's "historic business" (within the meaning of section
1.368-1(d)(2) of the Regulations) and (b) will use a significant portion
of Target's "historic business assets" (within the meaning of section
1.368-1(d)(3) of the Regulations) in a business; in addition, Acquiring
Fund (c) has no plan or intention to sell or otherwise dispose of any of
the Assets, except for dispositions made in the ordinary course of that
business and dispositions necessary to maintain its status as a RIC, and
(d) expects to retain substantially all the Assets in the same form as it
receives them in the Reorganization, unless and until subsequent
investment circumstances suggest the desirability of change or it becomes
necessary to make dispositions thereof to maintain such status;
4.2.15. There is no plan or intention for Acquiring Fund to be
dissolved or merged into another business trust or a corporation or any
"fund" thereof (within the meaning of section 851(g)(2) of the Code)
following the Reorganization;
4.2.16. Immediately after the Reorganization, (a) not more than 25%
of the value of Acquiring Fund's total assets (excluding cash, cash items,
and U.S. government securities) will be invested in the stock and
securities of any one issuer and (b) not more than 50% of the value of
such assets will be invested in the stock and securities of five or fewer
issuers;
4.2.17. Acquiring Fund does not directly or indirectly own, nor at
the Effective Time will it directly or indirectly own, nor has it directly
or indirectly owned at any time during the past five years, any shares of
Target;
4.2.18. During the five-year period ending at the Effective Time,
neither Acquiring Fund nor any person "related" (within the meaning of
section 1.368-1(e)(3) of the Regulations) to Acquiring Fund will have
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acquired Target Shares with consideration other than Acquiring Fund
Shares;
4.2.19. Acquiring Fund's federal income tax returns, and all
applicable state and local tax returns, for all taxable years through and
including the taxable year ended August 31, 2000 have been timely filed
and all taxes payable pursuant to such returns have been timely paid; and
4.2.20. Acquiring Trust's audited financial statements for the year
ended August 31, 2000, and unaudited financial statements for the six
months ended February 28, 2001, to be delivered to Target Corporation,
fairly represent Acquiring Fund's financial position as of that date and
the results of its operations and changes in its net assets for the year
then ended.
4.3. Each Fund represents and warrants to the Investment Company of which
the other Fund is a series, on behalf of such other Fund, as follows:
4.3.1. The fair market value of the Acquiring Fund Shares received
by each Shareholder will be approximately equal to the fair market value
of its Target Shares constructively surrendered in exchange therefor;
4.3.2. The Shareholders will pay their own expenses, if any,
incurred in connection with the Reorganization;
4.3.3. The fair market value of the Assets on a going concern basis
will equal or exceed the Liabilities to be assumed by Acquiring Fund and
those to which the Assets are subject;
4.3.4. There is no intercompany indebtedness between the Funds that
was issued or acquired, or will be settled, at a discount;
4.3.5. Pursuant to the Reorganization, Target will transfer to
Acquiring Fund, and Acquiring Fund will acquire, at least 90% of the fair
market value of the net assets, and at least 70% of the fair market value
of the gross assets, held by Target immediately before the Reorganization.
For the purposes of this representation, any amounts used by Target to pay
its Reorganization expenses and to make redemptions and distributions
immediately before the Reorganization (except (a) redemptions in the
ordinary course of its business required by section 22(e) of the 1940 Act
and (b) regular, normal dividend distributions made to conform to its
policy of distributing all or substantially all of its income and gains to
avoid the obligation to pay federal income tax and/or the excise tax under
section 4982 of the Code) will be included as assets held thereby
immediately before the Reorganization;
4.3.6. None of the compensation received by any Shareholder who is
an employee of or service provider to Target will be separate
consideration for, or allocable to, any of the Target Shares held by such
Shareholder; none of the Acquiring Fund Shares received by any such
Shareholder will be separate consideration for, or allocable to, any
employment agreement, investment advisory agreement, or other service
agreement; and the consideration paid to any such Shareholder will be for
services actually rendered and will be commensurate with amounts paid to
third parties bargaining at arm's-length for similar services;
10
4.3.7. Immediately after the Reorganization, the Shareholders will
not own shares constituting "control" (within the meaning of section
304(c) of the Code) of Acquiring Fund;
4.3.8. Neither Fund will be reimbursed for any expenses incurred by
it or on its behalf in connection with the Reorganization unless those
expenses are solely and directly related to the Reorganization (determined
in accordance with the guidelines set forth in Rev. Rul. 73-54, 1973-1
C.B. 187) ("Reorganization Expenses"); and
4.3.9. The aggregate value of the acquisitions, redemptions, and
distributions limited by paragraphs 4.1.17, 4.2.13, and 4.2.18 will not
exceed 50% of the value (without giving effect to such acquisitions,
redemptions, and distributions) of the proprietary interest in Target at
the Effective Time.
5. COVENANTS
5.1. Each Fund covenants to operate its respective business in the
ordinary course between the date hereof and the Closing, it being understood
that--
(a) such ordinary course will include declaring and paying
customary dividends and other distributions and changes in
operations contemplated by each Fund's normal business
activities, and
(b) each Fund will retain exclusive control of the composition of
its portfolio until the Closing; provided that if Target's
shareholders approve this Agreement (and the transactions
contemplated hereby), then between the date of such approval
and the Closing, the Funds shall coordinate their respective
portfolios so that the transfer of the Assets to Acquiring Fund
will not cause it to fail to be in compliance with any of its
investment policies and restrictions immediately after the
Closing.
5.2. Target covenants to call a shareholders' meeting to consider and act
on this Agreement and to take all other action necessary to obtain approval of
the transactions contemplated hereby ("Meeting").
5.3. Target covenants that the Acquiring Fund Shares to be delivered
hereunder are not being acquired for the purpose of making any distribution
thereof, other than in accordance with the terms hereof.
5.4. Target covenants that it will assist Acquiring Trust in obtaining
information Acquiring Trust reasonably requests concerning the beneficial
ownership of Target Shares.
5.5. Target covenants that its books and records (including all books and
records required to be maintained under the 1940 Act and the rules and
regulations thereunder) will be turned over to Acquiring Trust at the Closing.
5.6. Each Fund covenants to cooperate in preparing the Proxy Statement in
compliance with applicable federal and state securities laws.
11
5.7. Each Fund covenants that it will, from time to time, as and when
requested by the other Fund, execute and deliver or cause to be executed and
delivered all assignments and other instruments, and will take or cause to be
taken further action, the other Fund may deem necessary or desirable in order to
vest in, and confirm to, (a) Acquiring Fund, title to and possession of all the
Assets, and (b) Target, title to and possession of the Acquiring Fund Shares to
be delivered hereunder, and otherwise to carry out the intent and purpose
hereof.
5.8. Acquiring Fund covenants to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act, and state
securities laws it deems appropriate to continue its operations after the
Effective Time.
5.9. Subject to this Agreement, each Fund covenants to take or cause to be
taken all actions, and to do or cause to be done all things, reasonably
necessary, proper, or advisable to consummate and effectuate the transactions
contemplated hereby.
6. CONDITIONS PRECEDENT
Each Fund's obligations hereunder shall be subject to (a) performance by
the other Fund of all its obligations to be performed hereunder at or before the
Effective Time, (b) all representations and warranties of the other Fund
contained herein being true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated
hereby, as of the Effective Time, with the same force and effect as if made at
and as of the Effective Time, and (c) the following further conditions that, at
or before the Effective Time:
6.1. This Agreement and the transactions contemplated hereby shall have
been duly adopted and approved by each Board and shall have been approved by
Target's shareholders in accordance with the Articles of Incorporation and
Target Corporation's Restated By-Laws and applicable law.
6.2. All necessary filings shall have been made with the SEC and state
securities authorities, and no order or directive shall have been received that
any other or further action is required to permit the parties to carry out the
transactions contemplated hereby. The Registration Statement shall have become
effective under the 1933 Act, no stop orders suspending the effectiveness
thereof shall have been issued, and the SEC shall not have issued an unfavorable
report with respect to the Reorganization under section 25(b) of the 1940 Act
nor instituted any proceedings seeking to enjoin consummation of the
transactions contemplated hereby under section 25(c) of the 1940 Act. All
consents, orders, and permits of federal, state, and local regulatory
authorities (including the SEC and state securities authorities) deemed
necessary by either Investment Company to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain same would not involve a risk of a material
adverse effect on either Fund's assets or properties, provided that either
Investment Company may for itself waive any of such conditions.
6.3. At the Effective Time, no action, suit, or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or to obtain damages or other relief in connection with,
the transactions contemplated hereby.
6.4. Target Corporation shall have received an opinion of Xxxxxxxxxxx &
Xxxxxxxx LLP ("K&L") substantially to the effect that:
12
6.4.1. Acquiring Fund is a duly established series of Acquiring
Trust, a Business Trust duly organized and validly existing under the laws
of the Commonwealth of Massachusetts, with power under the Declaration of
Trust to own all its properties and assets and, to the knowledge of K&L,
to carry on its business as presently conducted;
6.4.2. This Agreement (a) has been duly authorized, executed, and
delivered by Acquiring Trust on behalf of Acquiring Fund and (b) assuming
due authorization, execution, and delivery of this Agreement by Target
Corporation on behalf of Target, is a valid and legally binding obligation
of Acquiring Trust with respect to Acquiring Fund, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium, and laws of general applicability
relating to or affecting creditors' rights and to general principles of
equity;
6.4.3. The Acquiring Fund Shares to be issued and distributed to the
Shareholders under this Agreement, assuming their due delivery as
contemplated by this Agreement and the receipt of consideration in
exchange therefor in excess of the par value thereof, will be duly
authorized, validly issued and outstanding, and fully paid and
non-assessable;
6.4.4. The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, materially
violate the Declaration of Trust or Acquiring Trust's Restated By-Laws or
any provision of any agreement (known to K&L, without any independent
inquiry or investigation) to which Acquiring Trust (with respect to
Acquiring Fund) is a party or by which it is bound or (to the knowledge of
K&L, without any independent inquiry or investigation) result in the
acceleration of any obligation, or the imposition of any penalty, under
any agreement, judgment, or decree to which Acquiring Trust (with respect
to Acquiring Fund) is a party or by which it is bound, except as set forth
in such opinion or as otherwise disclosed in writing to and accepted by
Target Corporation;
6.4.5. To the knowledge of K&L (without any independent inquiry or
investigation), no consent, approval, authorization, or order of any court
or governmental authority is required for the consummation by Acquiring
Trust on behalf of Acquiring Fund of the transactions contemplated herein,
except those obtained under the 1933 Act, the 1934 Act, and the 1940 Act
and those that may be required under state securities laws;
6.4.6. Acquiring Trust is registered with the SEC as an investment
company, and to the knowledge of K&L no order has been issued or
proceeding instituted to suspend such registration; and
6.4.7. To the knowledge of K&L (without any independent inquiry or
investigation), (a) no litigation, administrative proceeding, or
investigation of or before any court or governmental body is pending or
threatened as to Acquiring Trust (with respect to Acquiring Fund) or any
of its properties or assets attributable or allocable to Acquiring Fund
and (b) Acquiring Trust (with respect to Acquiring Fund) is not a party to
or subject to the provisions of any order, decree, or judgment of any
court or governmental body that materially and adversely affects Acquiring
Fund's business, except as set forth in such opinion or as otherwise
disclosed in writing to and accepted by Target Corporation.
13
In rendering such opinion, K&L may (1) rely, as to certain factual matters, on a
certificate of Acquiring Trust, (2) make assumptions regarding the authenticity,
genuineness, and/or conformity of documents and copies thereof without
independent verification thereof, (3) limit such opinion to applicable federal
and state law, and (4) define the word "knowledge" and related terms to mean the
knowledge of attorneys then with K&L who have devoted substantive attention to
matters directly related to this Agreement and the Reorganization.
6.5. Acquiring Trust shall have received an opinion of K&L substantially
to the effect that:
6.5.1. Target is a duly established series of Target Corporation, a
corporation duly organized, validly existing, and in good standing under
the laws of the State of Maryland, with power under the Articles of
Incorporation to own all its properties and assets and, to the knowledge
of K&L, to carry on its business as presently conducted;
6.5.2. This Agreement (a) has been duly authorized, executed, and
delivered by Target Corporation on behalf of Target and (b) assuming due
authorization, execution, and delivery of this Agreement by Acquiring
Trust on behalf of Acquiring Fund, is a valid and legally binding
obligation of Target Corporation with respect to Target, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium, and laws of general applicability
relating to or affecting creditors' rights and to general principles of
equity;
6.5.3. The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, materially
violate the Articles of Incorporation or Target Corporation's Restated
By-Laws or any provision of any agreement (known to K&L, without any
independent inquiry or investigation) to which Target Corporation (with
respect to Target) is a party or by which it is bound or (to the knowledge
of K&L, without any independent inquiry or investigation) result in the
acceleration of any obligation, or the imposition of any penalty, under
any agreement, judgment, or decree to which Target Corporation (with
respect to Target) is a party or by which it is bound, except as set forth
in such opinion or as otherwise disclosed in writing to and accepted by
Acquiring Trust;
6.5.4. To the knowledge of K&L (without any independent inquiry or
investigation), no consent, approval, authorization, or order of any court
or governmental authority is required for the consummation by Target
Corporation on behalf of Target of the transactions contemplated herein,
except those obtained under the 1933 Act, the 1934 Act, and the 1940 Act
and those that may be required under state securities laws;
6.5.5. Target Corporation is registered with the SEC as an
investment company, and to the knowledge of K&L no order has been issued
or proceeding instituted to suspend such registration; and
6.5.6. To the knowledge of K&L (without any independent inquiry or
investigation), (a) no litigation, administrative proceeding, or
investigation of or before any court or governmental body is pending or
threatened as to Target Corporation (with respect to Target) or any of its
properties or assets attributable or allocable to Target and (b) Target
Corporation (with respect to Target) is not a party to or subject to the
provisions of any order, decree, or judgment of any court or governmental
14
body that materially and adversely affects Target's business, except as
set forth in such opinion or as otherwise disclosed in writing to and
accepted by Acquiring Trust.
In rendering such opinion, K&L may (1) rely (i) as to matters governed by the
laws of the State of Maryland, on an opinion of competent Maryland counsel, and
(ii) as to certain factual matters, on a certificate of Target Corporation, (2)
make assumptions regarding the authenticity, genuineness, and/or conformity of
documents and copies thereof without independent verification thereof, (3) limit
such opinion to applicable federal and state law, and (4) define the word
"knowledge" and related terms to mean the knowledge of attorneys then with K&L
who have devoted substantive attention to matters directly related to this
Agreement and the Reorganization.
6.6. Each Investment Company shall have received an opinion of K&L,
addressed to and in form and substance reasonably satisfactory to it, as to the
federal income tax consequences mentioned below ("Tax Opinion"). In rendering
the Tax Opinion, K&L may rely as to factual matters, exclusively and without
independent verification, on the representations made in this Agreement, which
K&L may treat as representations made to it, or in separate letters addressed to
K&L and the certificates delivered pursuant to paragraph 3.4. The Tax Opinion
shall be substantially to the effect that, based on the facts and assumptions
stated therein and conditioned on consummation of the Reorganization in
accordance with this Agreement, for federal income tax purposes:
6.6.1. Acquiring Fund's acquisition of the Assets in exchange solely
for Acquiring Fund Shares and Acquiring Fund's assumption of the
Liabilities, followed by Target's distribution of those shares pro rata to
the Shareholders constructively in exchange for their Target Shares, will
qualify as a reorganization within the meaning of section 368(a)(1)(C) of
the Code, and each Fund will be "a party to a reorganization" within the
meaning of section 368(b) of the Code;
6.6.2. Target will recognize no gain or loss on the transfer of the
Assets to Acquiring Fund in exchange solely for Acquiring Fund Shares and
Acquiring Fund's assumption of the Liabilities or on the subsequent
distribution of those shares to the Shareholders in constructive exchange
for their Target Shares;
6.6.3. Acquiring Fund will recognize no gain or loss on its receipt
of the Assets in exchange solely for Acquiring Fund Shares and its
assumption of the Liabilities;
6.6.4. Acquiring Fund's basis in the Assets will be the same as
Target's basis therein immediately before the Reorganization, and
Acquiring Fund's holding period for the Assets will include Target's
holding period therefor;
6.6.5. A Shareholder will recognize no gain or loss on the
constructive exchange of all its Target Shares solely for Acquiring Fund
Shares pursuant to the Reorganization; and
6.6.6. A Shareholder's aggregate basis in the Acquiring Fund Shares
to be received by it in the Reorganization will be the same as the
aggregate basis in its Target Shares to be constructively surrendered in
exchange for those Acquiring Fund Shares, and its holding period for those
15
Acquiring Fund Shares will include its holding period for those Target
Shares, provided the Shareholder held them as capital assets at the
Effective Time.
Notwithstanding subparagraphs 6.6.2 and 6.6.4, the Tax Opinion may state that no
opinion is expressed as to the effect of the Reorganization on the Funds or any
Shareholder with respect to any Asset as to which any unrealized gain or loss is
required to be recognized for federal income tax purposes at the end of a
taxable year (or on the termination or transfer thereof) under a xxxx-to-market
system of accounting.
At any time before the Closing, either Investment Company may waive any of
the foregoing conditions (except that set forth in paragraph 6.1) if, in the
judgment of its Board, such waiver will not have a material adverse effect on
its Fund's shareholders' interests.
7. BROKERAGE FEES AND EXPENSES
7.1. Each Investment Company represents and warrants to the other that
there are no brokers or finders entitled to receive any payments in connection
with the transactions provided for herein.
7.2. Xxxxxxxx Xxxxxxxx will bear the Reorganization Expenses.
8. ENTIRE AGREEMENT; NO SURVIVAL
Neither party has made any representation, warranty, or covenant not set
forth herein, and this Agreement constitutes the entire agreement between the
parties. The representations, warranties, and covenants contained herein or in
any document delivered pursuant hereto or in connection herewith shall not
survive the Closing.
9. TERMINATION OF AGREEMENT
This Agreement may be terminated at any time at or before the Effective
Time, whether before or after approval by Target's shareholders:
9.1. By either Fund (a) in the event of the other Fund's material breach
of any representation, warranty, or covenant contained herein to be performed at
or before the Effective Time, (b) if a condition to its obligations has not been
met and it reasonably appears that such condition will not or cannot be met, or
(c) if the Closing has not occurred on or before August 31, 2001; or
9.2. By the parties' mutual agreement.
In the event of termination under paragraphs 9.1(c) or 9.2, there shall be no
liability for damages on the part of either Fund, or the trustees/directors or
officers of either Investment Company, to the other Fund.
10. AMENDMENT
This Agreement may be amended, modified, or supplemented at any time,
notwithstanding approval thereof by Target's shareholders, in any manner
mutually agreed on in writing by the parties; provided that following such
16
approval no such amendment shall have a material adverse effect on the
Shareholders' interests.
11. MISCELLANEOUS
11.1. This Agreement shall be governed by and construed in accordance with
the internal laws of the State of New York; provided that, in the case of any
conflict between such laws and the federal securities laws, the latter shall
govern.
11.2. Nothing expressed or implied herein is intended or shall be
construed to confer upon or give any person, firm, trust, or corporation other
than the parties and their respective successors and assigns any rights or
remedies under or by reason of this Agreement.
11.3. The parties acknowledge that Acquiring Trust is a Business Trust.
Notice is hereby given that this instrument is executed by Acquiring Trust on
behalf of Acquiring Fund and by its trustees and/or officers solely in their
capacities as trustees and/or officers, and not individually, and that Acquiring
Trust's obligations under this instrument are not binding on or enforceable
against any of its trustees, officers, or shareholders but are only binding on
and enforceable against Acquiring Fund's assets and property. Target Corporation
agrees that, in asserting any rights or claims under this Agreement, it shall
look only to Acquiring Fund's assets and property in settlement of such rights
or claims and not to such trustees, officers or shareholders.
11.4. This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become effective
when one or more counterparts have been executed by each Investment Company and
delivered to the other party hereto. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, each party has caused this Agreement to be executed
and delivered by its duly authorized officers as of the day and year first
written above.
PAINEWEBBER MASTER SERIES, INC., acting
on behalf of its series, PaineWebber
Balanced Fund
By:/s/ Xxxxxx X. X'Xxxxxxx
--------------------------------------
Xxxxxx X. X'Xxxxxxx
Vice President and Secretary
Attestation By:/s/ Xxxxx X. Xxxxxx
--------------------------
Xxxxx X. Xxxxxx
Vice President and
Assistant Secretary
17
PAINEWEBBER INVESTMENT TRUST, acting on
behalf of its series, PaineWebber
Tactical Allocation Fund
By:/s/ Xxxxxx X. X'Xxxxxxx
--------------------------------------
Xxxxxx X. X'Xxxxxxx
Vice President and Secretary
Attestation By:/s/ Xxxxx X. Xxxxxx
--------------------------
Xxxxx X. Xxxxxx
Vice President and
Assistant Secretary
Solely with respect to paragraph 7.2
hereof:
XXXXXXXX XXXXXXXX ASSET MANAGEMENT INC.
By:/s/ Xxx X. Doberman
--------------------------------------
Xxx X. Doberman
Senior Vice President and
General Counsel
Attestation By:/s/ Xxxxx X. Xxxxxx
--------------------------
Xxxxx X. Xxxxxx
First Vice President
and Senior Associate
General Counsel
18
