AGREEMENT AND PLAN OF ACQUISITION
THIS AGREEMENT made as of the ______ day of June, 2002 is made by and among
Principal Growth, Inc., a Maryland corporation (hereinafter called "Growth
Fund"), Principal Partners LargeCap Growth Fund, Inc., a Maryland corporation
(hereinafter called "Partners Growth Fund"), and Principal Management
Corporation, an Iowa corporation (hereinafter called "Principal Management").
WITNESSETH:
Whereas the Board of Directors of the Growth Fund and the Board of Directors of
the Partners Growth Fund, each an open-end management investment company, deem
it advisable that the Growth Fund acquire all of the assets of the Partners
Growth Fund in exchange for the assumption by the Growth Fund of all of the
liabilities of the Partners Growth Fund and shares issued by the Growth Fund
which are thereafter to be distributed by the Partners Growth Fund pro rata to
its shareholders in complete liquidation and termination of the Partners Growth
Fund and in exchange for all of the Partners Growth 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 Growth Fund hereby represents and warrants to the Partners Growth
Fund that:
(a) The Growth 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 Growth Fund's statement of assets and liabilities as of October
31, 2001 and the related statements of operations for the year then
ended, changes in net assets each of the two years in the period then
ended and its financial highlights for each of the five years in the
period then ended, all audited by Ernst & Young LLP as set forth in
their report, have been prepared in accordance with accounting
principles generally accepted in the United States. Such financial
statements fairly present the financial position of the Growth 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 Growth 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 Growth 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 Growth 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 Growth 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 Growth 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 Growth Fund does not, and the consummation of the transactions
contemplated hereby will not, violate or conflict with any provision
of the Growth 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 Growth Fund and constitutes a valid and binding agreement of the
Growth Fund and all governmental and other approvals required for the
Growth 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 Growth Fund is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end, diversified
management investment company. The Growth Fund is currently in
compliance with the 1940 Act and the rules of the Securities and
Exchange Commission promulgated thereunder. Neither the Growth 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 Growth Fund will own its assets free and
clear of all liens, claims, charges, options and encumbrances;
(j) The Growth 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 Growth Fund to be delivered to
the Partners Growth 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 Growth
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 Partners Growth Fund hereby represents and warrants to the Growth
Fund that:
(a) The Partners Growth 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 Partners Growth Fund's statement of assets and liabilities as of
October 31, 2001 and the related statements of operations for the year
then ended, changes in net assets and financial highlights for the
year ended October 31, 2001 and the period from February 24, 2000
(date operations commenced) to October 31, 2000, all audited by Ernst
& Young LLP as set forth in their report, have been prepared in
accordance with accounting principles generally accepted in the United
States. Such financial statements fairly present the financial
position of the Partners Growth Fund as of that date and the results
of its operations, changes in net assets and financial highlights for
the periods covered thereby;
(c) There are no claims, actions, suits or proceedings pending or, to its
knowledge, threatened against or affecting the Partners Growth 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 Partners
Growth 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 Partners Growth 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 Partners Growth 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 Partners
Growth 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 Partners Growth Fund does not, and the consummation of the
transactions contemplated hereby will not, violate or conflict with
any provision of the Partners Growth 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 Partners Growth Fund and constitutes a valid and binding agreement
of the Partners Growth Fund, and all governmental and other approvals
required for the Partners Growth 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 Partners Growth 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 Partners Growth Fund is a party or
to which it is subject;
(i) On the Closing Date the Partners Growth Fund will have full right,
power and authority to sell, assign and deliver the assets to be sold,
assigned, transferred and delivered to the Growth Fund hereunder, and
upon delivery and payment for such assets, the Growth Fund will
acquire good, marketable title thereto free and clear of all liens,
claims, charges, options and encumbrances;
(j) The Partners Growth 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 Partners Growth Fund will, from time to time, as and when
requested by the Growth 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 Growth
Fund may deem necessary or desirable in order to vest in and confirm
to the Growth Fund title to and possession of all the assets of the
Partners Growth Fund to be sold, assigned, transferred and delivered
hereunder and otherwise to carrot the intent and purpose of this
Agreement.
3.Based on the respective representations and warranties, subject to the
terms and conditions contained herein, the Partners Growth Fund agrees to
transfer to the Growth Fund and the Growth Fund agrees to acquire from
the Partners Growth Fund, all of the assets of the Partners Growth Fund
on the Closing Date and to assume from the Partners Growth Fund all of
the liabilities of the Partners Growth Fund in exchange for the issuance
of the number of shares of the Growth Fund provided in Section 4 which
will be subsequently distributed pro rata to the shareholders of the
Partners Growth Fund in complete liquidation and termination of the
Partners Growth Fund and in exchange for all of the Partners Growth
Fund's outstanding shares. The Partners Growth Fund shall not issue, sell
or transfer any of its shares after the Closing Date, and only redemption
requests received by the Partners Growth Fund in proper form prior to the
Closing Date shall be fulfilled by the Partners Growth Fund. Redemption
requests received by the Partners Growth Fund thereafter shall be treated
as requests for redemption of those shares of the Growth Fund allocable
to the shareholder in question as provided in Section 6 of this
Agreement.
4.On the Closing Date, the Growth Fund will issue to the Partners Growth
Fund a number of full and fractional shares of the Growth 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 Partners Growth Fund. The
aggregate value of the net assets of the Partners Growth Fund and the
Growth Fund shall be determined in accordance with the then current
Prospectus of the Growth 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 October
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 Growth Fund or
the Partners Growth 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.
0.Xx soon as practicable after the Closing, the Partners Growth Fund shall
(a) distribute on a pro rata basis to the shareholders of record of the
Partners Growth Fund at the close of business on the Closing Date the
shares of the Growth Fund received by the Growth Fund at the Closing in
exchange for all of the Partners Growth 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 Growth Fund to
shareholders of the Partners Growth Fund, the Growth Fund shall credit on
the books of the Growth Fund an appropriate number of shares of the
Growth Fund to the account of each shareholder of the Partners Growth
Fund. The Growth Fund will issue a certificate or certificates only upon
request and, in the case of a shareholder of the Partners Growth Fund
whose shares are represented by certificates, only upon surrender of such
certificates. No certificates will be issued for fractional shares of the
Growth Fund. After the Closing Date and until surrendered, each
outstanding certificate which, prior to the Closing Date, represented
shares of the Partners Growth Fund, shall be deemed for all purposes of
the Growth Fund's Articles of Incorporation and Bylaws to evidence the
appropriate number of shares of the Growth Fund to be credited on the
books of the Growth Fund in respect of such shares of the Partners Growth
Fund as provided above.
7.Subsequent to the execution of this Agreement and prior to the Closing
Date, the Partners Growth Fund shall deliver to the Growth Fund a list
setting forth the assets to be assigned, delivered and transferred to the
Growth Fund, including the securities then owned by the Partners Growth
Fund and the respective federal income tax bases (on an identified cost
basis) thereof, and the liabilities to be assumed by the Growth Fund
pursuant to this Agreement.
8.All of the Partners Growth Fund's portfolio securities shall be delivered
by the Partners Growth Fund's custodian on the Closing Date to the Growth
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 Growth Fund or its custodian
with said depository. All cash to be delivered pursuant to this Agreement
shall be transferred from the Partners Growth Fund's account at its
custodian to the Growth Fund's account at its custodian. If on the
Closing Date the Partners Growth Fund is unable to make good delivery
pursuant to this Section 8 to the Growth Fund's custodian of any of the
Partners Growth Fund's portfolio securities because such securities have
not yet been delivered to the Partners Growth 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 Partners Growth Fund shall deliver to the Growth 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 Growth 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 Growth Fund.
9.The obligations of the Growth Fund under this Agreement shall be subject
to receipt by the Growth Fund on or prior to the Closing Date of:
(a) Copies of the resolutions adopted by the Board of Directors of the
Partners Growth Fund and its shareholders authorizing the execution of
this Agreement by the Partners Growth Fund and the transactions
contemplated hereunder, certified by the Secretary or Assistant
Secretary of the Partners Growth Fund;
(b) A certificate of the Secretary or Assistant Secretary of the Partners
Growth Fund as to the signatures and incumbency of its officers who
executed this Agreement on behalf of the Partners Growth Fund and any
other documents delivered in connection with the transactions
contemplated thereby on behalf of the Partners Growth Fund;
(c) A certificate of an appropriate officer of the Partners Growth 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 Partners Growth
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 Growth
Fund may reasonably request to show fulfillment of the purposes and
conditions of this Agreement.
10.The obligations of the Partners Growth Fund under this Agreement shall be
subject to receipt by the Partners Growth Fund on or prior to the Closing
Date of:
(a) Copies of the resolutions adopted by the Board of Directors of the
Growth Fund authorizing the execution of this Agreement and the
transactions contemplated hereunder, certified by the Secretary or
Assistant Secretary of the Growth Fund;
(b) A certificate of the Secretary or Assistant Secretary of the Growth
Fund as to the signatures and incumbency of its officers who executed
this Agreement on behalf of the Growth Fund and any other documents
delivered in connection with the transactions contemplated thereby on
behalf of the Growth Fund;
(c) A certificate of an appropriate officer of the Growth 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 Growth 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
Partners Growth 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 Partners Growth 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 Partners Growth Fund or the Growth 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 Growth Fund and the Partners Growth Fund at
any time, except that after approval by the shareholders of the Partners
Growth Fund no amendment may be made with respect to the Agreement which
in the opinion of the Board of Directors of the Partners Growth Fund
materially adversely affects the interests of the shareholders of the
Partners Growth 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 Partners Growth
Fund and notwithstanding favorable action by such shareholders, by mutual
consent of the Board of Directors of the Growth Fund and the Board of
Directors of the Partners Growth Fund. This Agreement may also be
terminated by action of the Board of Directors of the Growth Fund or the
Board of Directors of the Partners Growth Fund (the "Terminating Fund"),
if:
(a) The plan described in the Agreement shall not have become effective
by December 31, 2002 (hereinafter called the "Final Date") unless such
Final Date shall have been changed by mutual agreement; or
(b) The Growth 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 Growth Fund contained in this Agreement shall not
be fulfilled to the reasonable satisfaction of the Partners Growth
Fund and its counsel or it shall become evident to the Partners Growth
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 Growth
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 Growth Fund, its officers,
directors, employees or agents, arising out of (1) breach by the Partners
Growth Fund of any warranty made by the Partners Growth Fund herein or
(2) any untrue statement or alleged untrue statement of a material fact
contained in any prospectus or registration statement for the Partners
Growth Fund, as filed with the SEC or any state, or any amendment or
supplement thereto, or in any information provided by the Partners Growth
Fund included in any registration statement filed by the Growth 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 Growth Fund shall indemnify, defend and hold harmless the Partners
Growth 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 Partners Growth 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 Growth 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 Growth Fund and filed with
any state regulatory agency in order to register or qualify shares of the
Growth 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 Growth Fund shall not be required to
indemnify the Partners Growth Fund, its officers, trustees, employees and
agents against any loss, claim, demand, liability or expense arising out
of any information provided by the Growth 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 Growth Fund and by the Board of Directors of the
Partners Growth Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and attested by their officers thereunto duly authorized, as of the date first
written above.
PRINCIPAL GROWTH FUND, INC.
BY:___________________________________
A. S. Filean
Attest: TITLE: Senior Vice President and Secretary
By:_______________________________________...
Xxxxxx X. Xxxxxx
Title: Vice President and Assistant Secretary
PRINCIPAL PARTNERS LARGECAP GROWTH FUND, INC.
BY:___________________________________
A. S. Filean
Attest: TITLE: Senior Vice President and Secretary
By:_______________________________________...
Xxxxxx X. Xxxxxx
Title: Vice President and Assistant Secretary
PRINCIPAL MANAGEMENT CORPORATION
BY:__________________________________
A. S. Filean
Attest: TITLE: Senior Vice President and Secretary
By:_______________________________________...
Xxxxxx X. Xxxxxx
Title: Vice President and Assistant Secretary
