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EXHIBIT I
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, made as of this the 27th day of
September, 1995, by and between Vanguard Institutional Portfolios, Inc., a
Maryland corporation, with its principal place of business at 000 Xxxxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxxxxxx 00000 and Vanguard Money Market Reserves, Inc.,
a Maryland corporation, with its principal place of business at 000 Xxxxxxxx
Xxxxxxxxx, Xxxxxxx, Xxxxxxxxxxxx 00000.
PLAN OF REORGANIZATION
The reorganization (hereinafter referred to as the "Plan of
Reorganization") will consist of (i) the acquisition by the Prime Portfolio of
Vanguard Money Market Reserves (hereinafter called the "Prime Portfolio")
substantially all of the property, assets and goodwill of the Institutional
Money Market Portfolio of Vanguard Institutional Portfolios, Inc. (hereinafter
called the "Institutional Portfolio") in exchange solely for shares of an
institutional class of the common stock, $.001 par value per share, of the Prime
Portfolio ("Prime Institutional Shares"), (ii) the distribution of such Prime
Institutional shares to the stockholders of the Institutional Portfolio
according to their respective interests, and (iii) the dissolution of the
Vanguard Institutional Portfolios, Inc. and the Institutional Portfolio as soon
as practicable after the closing provided for in Section 3, all upon and subject
to the terms and conditions of the Agreement hereinafter set forth.
AGREEMENT
In order to consummate the Plan of Reorganization and in consideration of
the premises and of the covenants and agreements hereinafter set forth, the
parties hereto covenant and agree as follows:
1. SALE AND TRANSFER OF ASSETS, LIQUIDATION AND DISSOLUTION OF THE INSTITUTIONAL
PORTFOLIO
a. The Institutional Portfolio agrees that it will convey, transfer and
deliver to the Prime Portfolio at the closing provided for in Section 3
(hereinafter called the "Closing") all of its then existing assets free and
clear of all liens, encumbrances and claims whatsoever, except for cash or bank
deposits in an amount necessary to pay: (1) its costs and expenses of carrying
out this Agreement (including but not limited to fees of counsel and
accountants, its income dividend payable prior to the Closing Date, and expenses
of its liquidation and dissolution contemplated hereunder); (2) to discharge its
unpaid liabilities on its books at the Closing Date; and (3) to pay such
contingent liabilities as the directors shall reasonably deem to exist against
the Institutional Portfolio, if any, at the Closing Date, for which contingent
and other appropriate liability reserves shall be established on the
Institutional Portfolio's books. Any unspent portion of such funds retained
shall be delivered to the Prime Portfolio upon dissolution of the Institutional
Portfolio.
b. Subject to the terms and conditions of this Agreement and in reliance on
the representations and warranties of the Institutional Portfolio herein
contained, and in consideration of such sale, conveyance, transfer and delivery,
the Prime Portfolio agrees at the Closing to deliver to the Institutional
Portfolio the number of Prime Institutional Shares ($.001 par value) determined
as set forth in Section 2 hereof.
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c. Immediately following the Closing Date, Vanguard Institutional
Portfolios, Inc. and the Institutional Portfolio will liquidate and distribute
pro rata to its stockholders of record as of the close of business on the
Closing Date, the Prime Institutional Shares received by the Institutional
Portfolio pursuant to this Section 1. Such liquidation and distribution will be
accompanied by the establishment of open accounts on the stock records of the
Prime Portfolio in the names of such stockholders of the Institutional Portfolio
representing the respective pro rata number of Prime Institutional Shares due
such stockholders. Fractional Prime Institutional Shares will be carried to the
third decimal place. As promptly as practicable after the Closing Date, each
holder of any outstanding certificate or certificates theretofore representing
shares of common stock of the Institutional Portfolio may surrender the same to
a Transfer Agent designated by the Prime Portfolio and request in exchange
therefore a certificate or certificates representing the number of whole and
fractional Prime Institutional Shares into which the shares of common stock of
the Institutional Portfolio theretofore represented by the certificate or
certificates so surrendered shall have been converted. Certificates for
fractional shares of Prime Institutional Shares will not be issued, however, but
shall continue to be carried for the open account of such stockholder. Until so
surrendered, each outstanding certificate which, prior to the Closing Date,
represented common stock of the Institutional Portfolio shall be deemed for all
corporate purposes to evidence ownership of the number of Prime Institutional
Shares into which the common stock of the Institutional Portfolio (which, prior
to the Closing Date, were represented thereby) have been so converted.
d. As promptly as practicable after the liquidation of the Institutional
Portfolio as aforesaid, the Vanguard Institutional Portfolios, Inc. and
Institutional Portfolio shall be dissolved pursuant to the provisions of the
General Laws of the State of Maryland and its legal existence shall be
terminated as provided therein.
2. EXCHANGE RATIO
a. The value of the Institutional Portfolio's assets to be acquired by the
Prime Portfolio hereunder shall be the net asset value computed as of the close
of business (close of the New York Stock Exchange) on the Closing Date, using
the valuation procedures set forth in Vanguard Money Market Reserves, Inc.'s
("Vanguard Money Market Reserves") registration statement under the Securities
Act of 1933.
b. The total net assets of the Institutional Portfolio determined under (a)
shall be divided by the number of shares of its outstanding common stock,
excluding treasury shares, to determine the Institutional Portfolio's net asset
value per share as of the close of business on the Closing Date.
c. The net asset value of a Prime Institutional Share shall be determined
to the nearest full cent as of the close of business on the Closing Date, using
the valuation as set forth in Vanguard Money Market Reserves' registration
statement under the Securities Act of 1933.
d. The net asset value per share for the Institutional Portfolio as
determined in (b) shall then be divided by the net asset value of a Prime
Institutional Share as determined in (c) to determine the exchange ratio. See
Appendix A to this Agreement for an example of how to determine the exchange
ratio.
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3. CLOSING AND CLOSING DATE
The Closing shall be October 27, 1995 or such later date as the parties may
mutually agree. The Closing shall take place at the principal office of Vanguard
Money Market Reserves, 000 Xxxxxxxx Xxxxxxxxx, Xxxxxxx, Xxxxxxxxxxxx 00000, at
4:30 p.m., Eastern time. The Institutional Portfolio shall have provided for
delivery at the Closing all of its assets to CoreStates Bank, N.A.,
Philadelphia, Pennsylvania, as Custodian for Vanguard Money Market Reserves. The
Institutional Portfolio shall deliver at the Closing a list of names and
addresses of the stockholders of the Institutional Portfolio and the number of
shares owned by each such stockholder, indicating thereon which such shares are
represented by outstanding certificates and which by open accounts, all as of
the close of business on the Closing Date, certified by its Transfer Agent.
Vanguard Money Market Reserves shall issue and deliver a certificate or
certificates evidencing the Prime Institutional Shares to be delivered at the
Closing to said Transfer Agent registered in such manner as the Institutional
Portfolio may request, or provide evidence satisfactory to the Institutional
Portfolio that such Prime Institutional Shares have been registered in an open
account on the books of Vanguard Money Market Reserves in such manner as the
Institutional Portfolio may request. Simultaneous with the Closing, the parties
shall cause the filing of Articles of Transfer with respect to the sale and
transfer of assets contemplated hereunder with the Department of Assessments and
Taxation of the State of Maryland.
4. REPRESENTATIONS AND WARRANTIES BY THE INSTITUTIONAL PORTFOLIO
The Institutional Portfolio represents and warrants that:
a. The Institutional Portfolio is a series of shares of a corporation duly
organized, validly existing and in good standing under the laws of the State of
Maryland and has all corporate power and authority to conduct its business as
such business is now being conducted.
b. The Institutional Portfolio has a duly authorized capital consisting of
20,000,000,000 shares of common stock ($.001 par value) of which approximately
667,006,000 shares were issued and outstanding on the date hereof. All of its
presently outstanding shares are validly issued, fully paid and non-assessable
by it.
c. Vanguard Institutional Portfolios, Inc. is duly registered as a
diversified, open-end management company under the Investment Company Act of
1940.
d. There has been mailed to each stockholder of record of the Institutional
Portfolio entitled to vote at the meeting of stockholders, at which action on
this Agreement is to be considered, a Combined Proxy Statement and Prospectus
which complies in all material respects with the applicable provisions of the
federal securities laws and the rules and regulations thereunder.
e. The financial statements appearing in the Institutional Portfolio's
annual report for the year ended November 30, 1994, audited by Price Waterhouse
LLP, a copy of which has been delivered to Vanguard Money Market Reserves, and
similar unaudited financial statements and other financial data as of August 31,
1995, and for the period then ended, which will be delivered to Vanguard Money
Market Reserves by the principal financial officer of the Institutional
Portfolio prior to Closing, fairly present the financial position of the
Institutional Portfolio as of the respective dates indicated and the results of
its operations and
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changes in net assets for the respective periods indicated, in conformity with
generally accepted accounting principles applied on a consistent basis.
5. REPRESENTATIONS AND WARRANTIES BY VANGUARD MONEY MARKET RESERVES
Vanguard Money Market Reserves represents and warrants that:
a. Vanguard Money Market Reserves is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland and has
all corporate power and authority to conduct its business as such business is
presently being conducted.
b. Vanguard Money Market Reserves has a duly authorized capital consisting
of 37,000,000,000 shares of common stock ($.001 par value), 27,000,000,000 of
which are allocated to the Prime Portfolio. On the date of this Agreement
Vanguard Money Market Reserves had issued and outstanding approximately
23,228,386 shares of common stock. All of its presently outstanding shares are
validly issued, fully paid and non-assessable by it.
c. Vanguard Money Market Reserves is duly registered as a diversified,
open-end investment company under the Investment Company Act of 1940 and is
authorized to offer and sell shares of common stock of its two series.
d. Vanguard Money Market Reserves will file with the United States
Securities and Exchange Commission a Registration Statement on Form N-14 under
the Securities Act of 1933 relating to the Prime Institutional Shares issuable
hereunder. Appropriate portions of such Registration Statement after
effectiveness will be delivered to stockholders of the Institutional Portfolio
as proxy materials in connection with the solicitation of proxies approving the
proposed transaction, and other portions will be available upon request by
stockholders. The Registration Statement will note, on its facing page, that the
securities proposed to be distributed thereunder have previously been registered
in accordance with Rule 24f-2 under the Investment Company Act of 1940. At the
time such Registration Statement becomes effective, it (i) will comply in all
material respects with the provisions of the Securities Act of 1933 and the
rules and regulations promulgated thereunder, and (ii) will not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated herein or necessary to make the statements therein not misleading; and
at the time the Registration Statement becomes effective, at the time of the
Institutional Portfolio's stockholders' meeting and at the Closing Date, the
prospectus included therein will not contain an untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
e. The common stock of Vanguard Money Market Reserves is duly qualified for
offering to the public in all states of the United States, and there are a
sufficient number or value of shares of such stock so qualified and a sufficient
number of shares registered under the Securities Act of 1933 pursuant to the
Investment Company Act of 1940 Rule 24f-2 to permit the transfers contemplated
by this Agreement to be consummated.
f. The financial statements appearing in the Vanguard Money Market Reserves
Annual Report for the year ended November 30, 1994, audited by Price Waterhouse
LLP, copies of which have been delivered to the Institutional Portfolio, and
similar unaudited financial statements and other financial data as of August 31,
1995 and for the period then ended, which will be delivered to the Institutional
Portfolio prior to the Closing
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by the principal financial officer of Vanguard Money Market Reserves, fairly
present the financial position of Vanguard Money Market Reserves, as of the
respective dates indicated and the results of its operations and changes in its
net assets for the respective periods indicated, in conformity with generally
accepted accounting principles applied on a consistent basis.
6. REPRESENTATIONS AND WARRANTIES BY THE INSTITUTIONAL PORTFOLIO AND VANGUARD
MONEY MARKET RESERVES
The Institutional Portfolio and Vanguard Money Market Reserves each
represents and warrants to the other that:
a. The statement of assets and liabilities to be furnished by it as of the
close of business on the Closing Date for the purpose of determining the number
of shares of Prime Institutional common stock to be issued pursuant to Section 1
of this Agreement will accurately reflect its net assets and outstanding shares
of common stock as of such date in conformity with generally accepted accounting
principles applied on a consistent basis.
b. On the Closing Date it will have good and marketable title to all of the
securities and other assets shown on the statement of assets and liabilities
referred to in (a) above free and clear of all liens or encumbrances of any
nature whatever except such imperfections of title or encumbrances as do not
materially detract from the value or use of the assets subject thereto, or
materially affect title thereto.
c. There is no material suit, action or legal or administrative proceeding
pending or threatened against it, other than as disclosed in the Combined Proxy
Statement and Prospectus prepared in connection with the meeting at which action
on this Agreement will be taken.
d. By Closing Date, all of its Federal and other tax returns and reports
required by law to be filed shall have been filed, and all Federal and other
taxes shown due on said returns shall have been paid.
e. The execution, delivery and performance of this Agreement will have been
duly authorized prior to the Closing Date by all necessary corporate action on
the part of each corporation and this Agreement constitutes the valid and
binding obligation of each corporation enforceable in accordance with its terms.
7. COVENANTS OF THE INSTITUTIONAL PORTFOLIO AND VANGUARD MONEY MARKET RESERVES
a. The Institutional Portfolio and Vanguard Money Market Reserves each
covenant to operate its business in the ordinary course between the date hereof
and the Closing Date.
b. The Institutional Portfolio undertakes that it will not acquire the
Prime Institutional shares for the purpose of making any distribution thereof
other than to its own stockholders.
c. The Institutional Portfolio undertakes that it will at its own expense
prepare and file with the Securities and Exchange Commission a Report on Form
N-SAR pursuant to the requirements of the Investment Company Act of 1940 for the
period November 30, 1994 through the Closing Date.
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8. CONDITIONS PRECEDENT TO BE FULFILLED BY INSTITUTIONAL PORTFOLIO AND VANGUARD
MONEY MARKET RESERVES
The obligations of each of the parties to effectuate the Plan of
Reorganization hereunder shall be subject to the following conditions:
a. The representations and warranties of each Party contained herein shall
be true as of and at the Closing Date with the same effect as though made at
such date; each Party shall have performed all obligations required by this
Agreement to be performed by it prior to the Closing Date; and each Party shall
have delivered to it a certificate dated the Closing Date signed by its Chairman
of the Board or President and by its Secretary or Assistant Secretary to the
foregoing effect.
b. Each Party shall have delivered a certified copy of the resolution
approving this Agreement adopted by at least a majority vote of its directors,
including a majority of its directors who are not "interested persons" as
defined in the Investment Company Act of 1940.
c. The Securities and Exchange Commission shall not have issued an
unfavorable advisory report under Section 25(b) of the Investment Company Act of
1940 nor instituted any proceeding seeking to enjoin consummation of the
reorganization under Section 25(c) of the Investment Company Act of 1940.
d. The holders of at least a majority of the outstanding shares of common
stock of the Institutional Portfolio shall have voted in favor of the adoption
of this Agreement and the reorganization contemplated hereby at an annual or
special meeting.
e. The Institutional Portfolio shall have declared a distribution or
distributions prior to the Closing Date which, together with all previous
distributions, shall have the effect of distributing to its stockholders all of
its net investment income and capital gains since the close of its last fiscal
year.
f. That there shall be delivered to the Fund an opinion from Messrs.
Stradley, Ronon, Xxxxxxx & Xxxxx, counsel to the Fund, to the effect that
provided the acquisition contemplated hereby is carried out in accordance with
this Plan:
(1) Provided the acquisition is carried out in accordance with the
applicable laws of Maryland, the acquisition by the Prime Portfolio of
substantially all of the assets of the Institutional Portfolio as provided
for herein in exchange for Prime Institutional shares will qualify as a
reorganization within the meaning of Section 368(a)(1)(C) of the Code, and
the Institutional Portfolio and the Prime Portfolio will each be a party to
the respective reorganization within the meaning of Section 368(b) of the
Code; for purposes of this opinion, "substantially all" means at least 70%
of the fair market of the gross assets and at least 90% of the fair market
value of the net assets;
(2) No gain or loss will be recognized by the Institutional Portfolio
upon the transfer of substantially all of its assets to the Prime Portfolio
in exchange solely for voting shares of Prime Institutional (Code Section
361(a));
(3) No gain or loss will be recognized by the Prime Portfolio upon the
receipt of substantially all of the assets of the Institutional Portfolio
in exchange solely for voting shares of Prime Institutional (Code Section
1032(a));
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(4) The basis of the assets of the Institutional Portfolio received by
Vanguard Money Market Reserves will be the same as the basis of such assets
to the Prime Portfolio immediately prior to the exchange (Code Section
362(b));
(5) The holding period of the assets of the Institutional Portfolio
received by the Prime Portfolio will include the period during which such
assets were held by the Institutional Portfolio (Code Section 1223(2));
(6) No gain or loss will be recognized to the shareholders of the
Institutional Portfolio upon the exchange of their shares in the
Institutional Portfolio for voting of Prime Institutional Shares (including
fractional shares to which they may be entitled) (Code Section 354(a)(1));
(7) The basis of Prime Institutional Shares received by the
Institutional Portfolio shareholders (including fractional shares to which
they may be entitled) will be the same as the basis of the shares of the
Institutional Portfolio surrendered in exchange therefor (Code Section
358(a)(1));
(8) The holding period of Prime Institutional Shares received by the
Institutional Portfolio shareholders (including fractional shares to which
they may be entitled) will include the holding period of the Institutional
Portfolio shares surrendered in exchange therefor, provided that the
Institutional Portfolio shares were held as a capital asset on the date of
the exchange (Code Section 1223(1)); and
(9) Pursuant to Section 381(a) of the Code and Treasury Regulation
Section 1.381-1(a), the Prime Portfolio will succeed to and take into
account as of the date of the proposed transfer (as defined in Treasury
Regulation sec. 1.381 (b)-1(b)) the items of the Institutional Portfolio
described in Section 381(c) of the Code, including any "pre-change capital
loss" of the Institutional Portfolio within the meaning of Treasury
Regulation sec. 1.383-1(c)(2), subject to the conditions and limitations
specified in Sections 381(b) and (c), 382, 383 and 384 of the Code.
(10) Where a dissenting shareholder of the Institutional Portfolio
receives cash solely in exchange for his or her stock, such cash will be
treated as having been received by the shareholder as a distribution in
redemption of his or her stock subject to the provisions and limitations of
Section 302 of the Code.
9. BROKERAGE FEES AND EXPENSES
a. The Institutional Portfolio and Vanguard Money Market Reserves each
represent and warrant to the other that there are no brokers or finders fees
payable in connection with the transactions provided for herein.
The Institutional Portfolio and Vanguard Money Market Reserves shall each
bear such expenses of entering into and carrying out the provisions of this
Agreement as have been separately incurred by it. No Party shall pay any
expenses, if any, of its stockholders arising out of the reorganization.
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10. TERMINATION; WAIVER; ORDER
a. Anything contained in this Agreement to the contrary notwithstanding,
this Agreement may be terminated and the reorganization abandoned at any time
whether before or after adoption hereof by the stockholders of the Institutional
Portfolio prior to the Closing Date.
(1) by mutual consent of the Parties;
(2) by either of the Parties if any condition set forth in Section 8
hereof has not been fulfilled or waived by it;
b. An election by a Party to terminate this Agreement and abandon the
reorganization shall be exercised by its Board of Directors.
c. In the event of termination of this Agreement pursuant to the provisions
hereof the same shall become void and have no effect without any liability on
the part of either of the Parties or persons who are its directors, officers or
stockholders in respect of this Agreement, provided that this provision shall
not protect any director or officer of either of the Parties against any
liability to such Party or its stockholders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
d. At any time prior to the filing of the Articles of Transfer with the
State of Maryland any of the terms or conditions of this Agreement may be waived
by the Party entitled to the benefit thereof by action taken by its Board of
Directors, or its Chairman of the Board, if, in the judgment of the Board of
Directors or Chairman of the Board taking such action, such waiver will not have
material adverse effect on the benefits intended under this Agreement to the
stockholders of the Party on behalf of which such action is taken.
e. The respective representations and warranties of the Parties contained
in Sections 4 through 7 hereof shall expire with, and be terminated by, the
reorganization contemplated by this Agreement, and neither the respective
Parties nor any of their directors shall be under any liability with respect to
any such representations or warranties after the Closing Date. This provision
shall not protect any director or officer of a corporation against any liability
to such corporation or to its stockholders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
f. If any order or orders of the Securities and Exchange Commission with
respect to this Agreement shall impose any terms or conditions which are
acceptable to both the Institutional Portfolio and Vanguard Money Market
Reserves, such terms and conditions shall be binding as if a part of this
Agreement without further vote or approval of the stockholders of the
Institutional Portfolio, unless such terms and conditions shall result in a
change in the method of computing the number of shares of Prime Institutional to
be issued to the Institutional Portfolio, in which event, unless such terms and
conditions shall have been included in the Combined Proxy Statement and
Prospectus solicitation material furnished to the stockholders of the
Institutional Portfolio prior to the meeting at which the transactions
contemplated by this Agreement shall have been approved, this Agreement shall
not be consummated and shall terminate unless the Institutional Portfolio shall
promptly call a special meeting of stockholders at which conditions so imposed
shall be submitted for approval.
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11. ENTIRE AGREEMENT AND AMENDMENTS
This Agreement embodies the entire agreement between the parties and there
are no agreements, understandings, restrictions or warranties among the parties
other than those set forth herein or herein provided for.
12. COUNTERPARTS
This Agreement may be executed in any number of counterparts each of which
shall be deemed to be an original but all such counterparts together shall
constitute but one instrument.
13. NOTICES
Any notice, report or demand required or permitted by any provision of this
Agreement shall be in writing and shall be deemed to have been given if
delivered or mailed, first class postage postpaid, addressed to the
Institutional Portfolio or Vanguard Money Market Reserves, as the case may be,
at 000 Xxxxxxxx Xxxxxxxxx, Xxxxxxx, Xxxxxxxxxxxx 00000.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement and Plan
of Reorganization to be executed on its behalf by its President or a Vice
President and its corporate seal to be affixed hereto and attested by its
Secretary or Assistant Secretary, all as of the day and year first above
written.
Attest: VANGUARD INSTITUTIONAL PORTFOLIOS, INC.
/s/ XXXXXXX X. XXXXXXXXX By: /s/ XXXX X. XXXXXXX
--------------------------------------------- ---------------------------------------------
Secretary President
(Corporate Seal)
Attest: VANGUARD MONEY MARKET RESERVES, INC.
/s/ XXXXXXX X. XXXXXXXXX By: /s/ XXXX X. XXXXXXX
--------------------------------------------- ---------------------------------------------
Secretary President
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APPENDIX A
INSTITUTIONAL PORTFOLIO AND PRIME
PRO FORMA COMPUTATION OF EXCHANGE RATIO
AS OF SEPTEMBER 27, 1995
PRIME INSTITUTIONAL
PORTFOLIO PORTFOLIO PRO FORMA
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Net assets........................... $ 18,224,029,000 $ 667,006,000 $ 18,891,035,000
================= ============== =================
Percent of combined assets........... 96.5% 3.5% 100.0%
================= ============== =================
Issued and outstanding shares........ 18,223,896,622 667,010,441 18,890,907,063
================= ============== =================
Net asset value per share............ $ 1.00 $ 1.00 $ 1.00
================= ============== =================
Prime Institutional shares to be
issued for each Institutional
Portfolio share.................... 1
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