AGREEMENT AND PLAN OF ACQUISITION
THIS AGREEMENT made as of the 25th day of January, 1999 is made by and
among Principal Cash Management Fund, Inc., a Maryland corporation (hereinafter
called "Cash Management"), Principal Tax-Exempt Cash Management Fund, Inc., a
Maryland corporation (hereinafter called "Tax-Exempt Cash Management"), and
Principal Management Corporation, an Iowa corporation (hereinafter called
"Principal Management").
WITNESSETH:
Whereas the Board of Directors of Cash Management and the Board of
Directors of Tax-Exempt Cash Management, each an open-end management investment
company, deem it advisable that Cash Management acquire all of the assets of
Tax-Exempt Cash Management in exchange for the assumption by Cash Management of
all of the liabilities of Tax-Exempt Cash Management and shares issued by Cash
Management which are thereafter to be distributed by Tax-Exempt Cash Management
pro rata to its shareholders in complete liquidation and termination of
Tax-Exempt Cash Management and in exchange for all of Tax-Exempt Cash
Management'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. Cash Management hereby represents and warrants to Tax-Exempt Cash
Management that:
(a) Cash Management 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) Cash Management's statement of assets and liabilities as of October
31,1998 and the related statements of operations and changes in net
assets for the fiscal year ended October 31, 1998, all as certified by
Ernst & Young LLP, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis. Such
statement of assets and liabilities fairly presents the financial
position and net assets of Cash Management as of such date and such
statements of operations and changes in net assets fairly present the
results of its operations for the period covered thereby,
(c) There are no claims, actions, suits or proceedings pending or, to its
knowledge, threatened against or affecting Cash Management 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 Cash Management'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) Cash Management 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) Cash Management 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. Cash Management 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 Cash Management does not, and the consummation of the transactions
contemplated hereby will not, violate or conflict with any provision
of Cash Management'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
Cash Management and constitutes a valid and binding agreement of Cash
Management and all governmental and other approvals required for Cash
Management 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) Cash Management is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end, diversified
management investment company. Cash Management is currently in
compliance with the 1940 Act and the rules of the Securities and
Exchange Commission promulgated thereunder. Neither Cash Management
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, Cash Management will own its assets free and
clear of all liens, claims, charges, options and encumbrances;
(j) Cash Management 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 Cash Management to be delivered to
Tax-Exempt Cash Management 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 Cash
Management 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. Tax-Exempt Cash Management hereby represents and warrants to Cash
Management that:
(a) Tax-Exempt Cash Management 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) Tax-Exempt Cash Management's statement of assets and liabilities as of
October 31, 1998 and the related statements of operations and changes
in net assets for the fiscal year ended October 31,1998, all as
certified by Ernst & Young LLP, have been prepared in accordance with
generally accepted accounting principles applied on a consistent
basis. Such statement of assets and liabilities fairly presents the
financial position and net assets of Tax-Exempt Cash Management as of
that date and such statements of operations and changes in net assets
fairly present the results of its operations for the periods covered
thereby.
(c) There are no claims, actions, suits or proceedings pending or, to its
knowledge, threatened against or affecting Tax-Exempt Cash Management
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 Tax-Exempt Cash
Management'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) Tax-Exempt Cash Management 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) Tax-Exempt Cash Management 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. Tax-Exempt
Cash Management 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 Tax-Exempt Cash Management does not, and the consummation of the
transactions contemplated hereby will not, violate or conflict with
any provision of Tax-Exempt Cash Management'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
Tax-Exempt Cash Management and constitutes a valid and binding
agreement of Tax-Exempt Cash Management, and all governmental and
other approvals required for Tax-Exempt Cash Management 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 Tax-Exempt Cash Management 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 Tax-Exempt Cash Management
is a party or to which it is subject;
(i) On the Closing Date Tax-Exempt Cash Management will have full right,
power and authority to sell, assign and deliver the assets to be sold,
assigned, transferred and delivered to Cash Management hereunder, and
upon delivery and payment for such assets, Cash Management will
acquire good, marketable title thereto free and clear of all liens,
claims, charges, options and encumbrances;
(j) Tax-Exempt Cash Management 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) Tax-Exempt Cash Management will, from time to time, as and when
requested by Cash Management, 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 Cash
Management may deem necessary or desirable in order to vest in and
confirm to Cash Management title to and possession of all the assets
of Tax-Exempt Cash Management 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, Tax-Exempt Cash Management agrees to
transfer to Cash Management and Cash Management agrees to acquire from
Tax-Exempt Cash Management, all of the assets of Tax-Exempt Cash Management
on the Closing Date and to assume from Tax-Exempt Cash Management all of
the liabilities of Tax-Exempt Cash Management in exchange for the issuance
of the number of shares of Cash Management provided in Section 4 which will
be subsequently distributed pro rata to the shareholders of Tax-Exempt Cash
Management in complete liquidation and termination -------- of Tax-Exempt
Cash Management and in exchange for all of Tax-Exempt Cash Management's
outstanding shares. Tax-Exempt Cash Management shall not issue, sell or
transfer any of its shares after the Closing Date, and only redemption
requests received by Tax-Exempt Cash Management in proper form prior to the
Closing Date shall be fulfilled by Tax-Exempt Cash Management. Redemption
requests received by Tax-Exempt Cash Management thereafter shall be treated
as requests for redemption of those shares of Cash Management allocable to
the shareholder in question as provided in Section 6 of this Agreement.
4. On the Closing Date, Cash Management will issue to Tax-Exempt Cash
Management a number of full and fractional shares of Cash Management, taken
at their then net asset value, having an aggregate net asset value equal to
the aggregate value of the net assets of Tax-Exempt Cash Management. The
aggregate value of the net assets of Tax-Exempt Cash Management and Cash
Management shall be determined in accordance with the then current
Prospectus of Cash Management 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 April 8, 1999 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 Cash Management or
Tax-Exempt Cash Management 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, Tax-Exempt Cash Management shall
(a) distribute on a pro rata basis to the shareholders of record of
Tax-Exempt Cash Management at the close of business on the Closing Date the
shares of Cash Management received by Tax-Exempt Cash Management at the
Closing in exchange for all of Tax-Exempt Cash Management'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 Cash Management to
shareholders of Tax-Exempt Cash Management, Cash Management shall credit on
the books of Cash Management an appropriate number of shares of Cash
Management to the account of each shareholder of Tax-Exempt Cash
Management. Cash Management will issue a certificate or certificates only
upon request and, in the case of a shareholder of Tax-Exempt Cash
Management whose shares are represented by certificates, only upon
surrender of such certificates. No certificates will be issued for
fractional shares of Cash Management. After the Closing Date and until
surrendered, each outstanding certificate which, prior to the Closing Date,
represented shares of Tax-Exempt Cash Management, shall be deemed for all
purposes of Cash Management's Articles of Incorporation and Bylaws to
evidence the appropriate number of shares of Cash Management to be credited
on the books of Cash Management in respect of such shares of Tax-Exempt
Cash Management as provided above.
7. Subsequent to the execution of this Agreement and prior to the Closing
Date, Tax-Exempt Cash Management shall deliver to Cash Management a list
setting forth the assets to be assigned, delivered and transferred to Cash
Management, including the securities then owned by Tax-Exempt Cash
Management and the respective federal income tax bases (on an identified
cost basis) thereof, and the liabilities to be assumed by Cash Management
pursuant to this Agreement.
8. All of Tax-Exempt Cash Management's portfolio securities shall be delivered
by Tax-Exempt Cash Management's custodian on the Closing Date to Cash
Management 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 Cash Management or its custodian with said
depository. All cash to be delivered pursuant to this Agreement shall be
transferred from Tax-Exempt Cash Management's account at its custodian to
Cash Management's account at its custodian. If on the Closing Date
Tax-Exempt Cash Management is unable to make good delivery pursuant to this
Section 8 to Cash Management's custodian of any of Tax-Exempt Cash
Management's portfolio securities because such securities have not yet been
delivered to Tax-Exempt Cash Management'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
Tax-Exempt Cash Management shall deliver to Cash Management'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
Cash Management, 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 Cash Management.
9. The obligations of Cash Management under this Agreement shall be subject to
receipt by Cash Management on or prior to the Closing Date of:
(a) Copies of the resolutions adopted by the Board of Directors of
Tax-Exempt Cash Management and its shareholders authorizing the
execution of this Agreement by Tax-Exempt Cash Management and the
transactions contemplated hereunder, certified by the Secretary or
Assistant Secretary of Tax-Exempt Cash Management;
(b) A certificate of the Secretary or Assistant Secretary of Tax-Exempt
Cash Management as to the signatures and incumbency of its officers
who executed this Agreement on behalf of Tax-Exempt Cash Management
and any other documents delivered in connection with the transactions
contemplated thereby on behalf of Tax-Exempt Cash Management;
(c) A certificate of an appropriate officer of Tax-Exempt Cash Management
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 Tax-Exempt Cash
Management 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 Cash
Management may reasonably request to show fulfillment of the purposes
and conditions of this Agreement.
10. The obligations of Tax-Exempt Cash Management under this Agreement shall be
subject to receipt by Tax-Exempt Cash Management on or prior to the Closing
Date of:
(a) Copies of the resolutions adopted by the Board of Directors of Cash
Management authorizing the execution of this Agreement and the
transactions contemplated hereunder, certified by the Secretary or
Assistant Secretary of Cash Management,
(b) A certificate of the Secretary or Assistant Secretary of Cash
Management as to the signatures and incumbency of its officers who
executed this Agreement on behalf of Cash Management and any other
documents delivered in connection with the transactions contemplated
thereby on behalf of Cash Management,
(c) A certificate of an appropriate officer of Cash Management 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 Cash Management 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 Tax-Exempt
Cash Management 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 Tax-Exempt Cash Management 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 Tax-Exempt Cash Management or Cash Management 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 Cash Management and Tax-Exempt Cash Management at
any time, except that after approval by the shareholders of Tax-Exempt Cash
Management no amendment may be made with respect to the Agreement which in
the opinion of the Board of Directors of Tax-Exempt Cash Management
materially adversely affects the interests of the shareholders of
Tax-Exempt Cash Management. 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 Tax-Exempt Cash Management
and notwithstanding favorable action by such shareholders, by mutual
consent of the Board of Directors of Cash Management and the Board of
Directors of Tax-Exempt Cash Management. This Agreement may also be
terminated by action of the Board of Directors of Cash Management or the
Board of Directors of Tax-Exempt Cash Management (the "Terminating Fund"),
if:
(a) The plan described in the Agreement shall not have become effective by
August 6, 1999 (hereinafter called the "Final Date") unless such Final
Date shall have been changed by mutual agreement; or
(b) Cash Management 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 Cash Management contained in this Agreement shall not
be fulfilled to the reasonable satisfaction of Tax-Exempt Cash
Management and its counsel or it shall become evident to Tax-Exempt
Cash Management 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 Cash
Management 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 Cash Management Fund, its
officers, directors, employees or agents, arising out of (1) breach by the
Tax-Exempt Fund of any warranty made by the Tax-Exempt Fund herein or (2)
any untrue statement or alleged untrue statement of a material fact
contained in any prospectus or registration statement for the Tax-Exempt
Fund, as filed with the SEC or any state, or any amendment or supplement
thereto, or in any information provided by the Tax-Exempt Fund included in
any registration statement filed by the Cash Management 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. Cash Management shall indemnify, defend and hold harmless Tax-Exempt Cash
Management, 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 Tax-Exempt Cash Management,
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 Cash Management, as filed with the
SEC or any state, or any amendment or supplement thereto, or any
application prepared by or on behalf of Cash Management and filed with any
state regulatory agency in order to register or qualify shares of Cash
Management 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, Cash Management shall not be required to
indemnify Tax-Exempt Cash Management, its officers, trustees, employees and
agents against any loss, claim,demand, liability or expense arising out of
any information provided by Tax-Exempt Cash Management included in any
registration statement filed by Cash Management 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 Cash Management and by the Board of Directors of Tax-Exempt
Cash Management.
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 CASH MANAGEMENT FUND, INC.
Attest: By: /s/ A. S. Filean
By: /s/ Xxxxxx X. Xxxxxx Title: Vice President and Secretary
Title: Assistant Secretary
PRINCIPAL TAX-EXEMPT CASH MANAGEMENT FUND, INC.
Attest: By: /s/ A. S. Filean
By: /s/ Xxxxxx X. Xxxxxx Title: Vice President and Secretary
Title: Assistant Secretary
PRINCIPAL MANAGEMENT CORPORATION
Attest: By: /s/ A. S. Filean
By: /s/ Xxxxxx X. Xxxxxx Title: Vice President
Title: Vice President
