AGREEMENT AND PLAN OF ACQUISITION
THIS AGREEMENT made as of the 10th day of September, 2002 is made by
and among Principal International, Inc., a Maryland corporation (hereinafter
called "International Fund"), Principal Pacific Basin Fund, Inc., a Maryland
corporation (hereinafter called "Pacific Basin 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 Pacific Basin Fund, each an open-end management investment
company, deem it advisable that the International Fund acquire all of the assets
of the Pacific Basin Fund in exchange for the assumption by the International
Fund of all of the liabilities of the Pacific Basin Fund and shares issued by
the International Fund which are thereafter to be distributed by the Pacific
Basin Fund pro rata to its shareholders in complete liquidation and termination
of the Pacific Basin Fund and in exchange for all of the Pacific Basin
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
Pacific Basin 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 for each of the
two years 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 Pacific Basin 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 Pacific Basin Fund hereby represents and warrants to the
International Fund that:
(a) The Pacific Basin 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 Pacific Basin 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
for each of the two years 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 Pacific Basin 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 Pacific
Basin 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 Pacific Basin 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 Pacific Basin 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 Pacific Basin 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 Pacific Basin 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 Pacific Basin Fund does not, and the
consummation of the transactions contemplated hereby will not,
violate or conflict with any provision of the Pacific Basin
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 Pacific Basin Fund and constitutes a valid
and binding agreement of the Pacific Basin Fund, and all
governmental and other approvals required for the Pacific
Basin 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 Pacific Basin 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 Bank of New York, there will be no
material contracts or agreements (other than this Agreement)
outstanding to which the Pacific Basin Fund is a party or to
which it is subject;
(i) On the Closing Date the Pacific Basin 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 Pacific Basin 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 Pacific Basin 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 Pacific Basin Fund to be sold, assigned, transferred
and delivered hereunder and otherwise to carryout the intent
and purpose of this Agreement.
3. Based on the respective representations and warranties, subject
to the terms and conditions contained herein, the Pacific Basin
Fund agrees to transfer to the International Fund and the
International Fund agrees to acquire from the Pacific Basin
Fund, all of the assets of the Pacific Basin Fund on the
Closing Date and to assume from the Pacific Basin Fund all of
the liabilities of the Pacific Basin 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 Pacific Basin Fund in complete
liquidation and termination of the Pacific Basin Fund and in
exchange for all of the Pacific Basin Fund's outstanding
shares. The Pacific Basin Fund shall not issue, sell or
transfer any of its shares after the Closing Date, and only
redemption requests received by the Pacific Basin Fund in
proper form prior to the Closing Date shall be fulfilled by the
Pacific Basin Fund. Redemption requests received by the
Pacific Basin 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
Pacific Basin 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 Pacific Basin Fund. The aggregate value of the net
assets of the Pacific Basin 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 Daylight Time on July 31, 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 week-end 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 Pacific Basin 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 Pacific Basin Fund
shall (a) distribute on a pro rata basis to the shareholders of
record of the Pacific Basin Fund at the close of business on the
Closing Date the shares of the International Fund received by the
Pacfiic Basin Fund at the Closing in exchange for all of the
Pacific Basin 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 Pacific Basin 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 Pacific Basin Fund. The
International Fund will issue a certificate or certificates only
upon request and, in the case of a shareholder of the Pacific
Basin 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
Pacific Basin 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 Pacific Basin Fund as provided
above.
7. Subsequent to the execution of this Agreement and prior to the
Closing Date, the Pacific Basin 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 Pacific Basin 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 Pacific Basin Fund's portfolio securities shall be
delivered by the Pacific Basin 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 Pacific Basin Fund's
account at its custodian to the International Fund's account at
its custodian. If on the Closing Date the Pacific Basin Fund is
unable to make good delivery pursuant to this Section 8 to the
International Fund's custodian of any of the Pacific Basin
Fund's portfolio securities because such securities have not yet
been delivered to the Pacific Basin 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 Pacific Basin 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 Pacific Basin Fund and its shareholders authorizing the
execution of this Agreement by the Pacific Basin Fund and
the transactions contemplated hereunder, certified by the
Secretary or Assistant Secretary of the Pacific Basin Fund;
(b) A certificate of the Secretary or Assistant Secretary of the
Pacific Basin Fund as to the signatures and incumbency of
its officers who executed this Agreement on behalf of the
Pacific Basin Fund and any other documents delivered in
connection with the transactions contemplated thereby on
behalf of the Pacific Basin Fund;
(c) A certificate of an appropriate officer of the Pacific Basin
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 Pacific Basin 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 Pacific Basin Fund under this Agreement
shall be subject to receipt by the Pacific Basin 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
Pacific Basin 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
Pacific Basin 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 Pacific Basin 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
Pacific Basin Fund at any time, except that after approval by
the shareholders of the Pacific Basin Fund no amendment may be
made with respect to the Agreement which in the opinion of the
Board of Directors of the Pacific Basin Fund materially
adversely affects the interests of the shareholders of the
Pacific Basin 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 Pacific Basin 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 Pacific Basin 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 Pacific
Basin Fund (the "Terminating Fund"), if:
(a) The plan described in the Agreement shall not have become
effective by October 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 Pacific Basin Fund and its counsel or it
shall become evident to the Pacific Basin 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 Pacific
Basin Fund of any warranty made by the Pacific Basin Fund
herein or (2) any untrue statement or alleged untrue statement of
a material fact contained in any prospectus or registration
statement for the Pacific Basin Fund, as filed with the SEC or
any state, or any amendment or supplement thereto, or in any
information provided by the Pacific Basin 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 Pacific Basin 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 Pacific Basin 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 Pacific
Basin Fund, its officers, trustees, employees and agents against
any loss, claim, demand, liability or expense arising out of any
information provided by the Pacific Basin Fund included in any
registration statement filed 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 Pacific Basin Fund.
IN WlTNESS 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: /s/A. S. Filean
-------------------------------------------
A. S. Filean
Attest: TITLE: Senior Vice President and Secretary
-------------------------------------------
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------------
Xxxxxx X. Xxxxxx
Title: Vice President and Assistant Secretary
----------------------------------------
PRINCIPAL PACIFIC BASIN FUND, INC.
BY: /s/A. S. Filean
-------------------------------------------
A. S. Filean
Attest: TITLE: Senior Vice President and Secretary
-------------------------------------------
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------------
Xxxxxx X. Xxxxxx
Title: Vice President and Assistant Secretary
----------------------------------------
PRINCIPAL MANAGEMENT CORPORATION
BY: /s/A. S. Filean
-------------------------------------------
A. S. Filean
Attest: TITLE: Senior Vice President and Secretary
-------------------------------------------
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------------
Xxxxxx X. Xxxxxx
Title: Vice President and Assistant Secretary
----------------------------------------
