Exhibit No. 4
AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION
THIS AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION ("Agreement") is
made as of February 8, 2001, by and among PaineWebber PACE Select Advisors
Trust, a Delaware business trust ("PACE Trust"), on behalf of PACE Global Fixed
Income Investments, a segregated portfolio of assets ("series") thereof
("Acquiring Fund"), PaineWebber Investment Series, a Massachusetts business
trust ("Target Trust"), on behalf of PaineWebber Global Income Fund, a series
thereof ("Target"), and solely for purposes of paragraph 7.2 hereof, Xxxxxxxx
Xxxxxxxx Asset Management Inc. ("Xxxxxxxx Xxxxxxxx"). (Acquiring Fund and Target
are sometimes referred to herein individually as a "Fund" and collectively as
the "Funds," and PACE Trust and Target Trust are sometimes referred to herein
individually as an "Investment Company" and collectively as the "Investment
Companies.") All agreements, representations, actions, and obligations described
herein made or to be taken or undertaken by Acquiring Fund or Target are made
and shall be taken or undertaken by PACE Trust or Target Trust, respectively.
The Investment Companies wish to effect a reorganization described in section
368(a)(1)(D) of the Internal Revenue Code of 1986, as amended ("Code"), and
intend this Agreement to be, and adopt it as, a "plan of reorganization" within
the meaning of the regulations under section 368 of the Code ("Regulations").
The reorganization will involve the transfer of Target's assets to Acquiring
Fund in exchange solely for voting shares of beneficial interest in Acquiring
Fund and the assumption by Acquiring Fund of Target's stated liabilities,
followed by the constructive distribution of those shares PRO RATA to the
holders of shares of beneficial interest in Target ("Target Shares") in exchange
therefor, all on the terms and conditions set forth herein. The foregoing
transactions are referred to herein collectively as the "Reorganization."
The Target Shares are divided into four classes, designated Class A, Class B,
Class C, and Class Y shares ("Class A Target Shares," "Class B Target Shares,"
"Class C Target Shares," and "Class Y Target Shares," respectively). Acquiring
Fund's shares are divided into five classes, four of which also are designated
Class A, Class B, Class C, and Class Y shares ("Class A Acquiring Fund Shares,"
"Class B Acquiring Fund Shares," "Class C Acquiring Fund Shares," and "Class Y
Acquiring Fund Shares," respectively, and collectively "Acquiring Fund Shares").
Each class of Acquiring Fund Shares is substantially similar to the identically
designated class of Target Shares.
In consideration of the mutual promises contained herein, the parties agree
as follows:
1. PLAN OF REORGANIZATION AND TERMINATION
1.1. Target agrees to assign, sell, convey, transfer, and deliver all of
its assets described in paragraph 1.2 ("Assets") to Acquiring Fund. Acquiring
Fund agrees in exchange therefor--
(a) to issue and deliver to Target the number of full and fractional (rounded
to the third decimal place) (i) Class A Acquiring Fund Shares determined
by dividing the net value of Target (computed as set forth in paragraph
2.1) ("Target Value") attributable to the Class A Target Shares by the
net asset value ("NAV") of a Class A Acquiring Fund Share (computed as
set forth in paragraph 2.2), (ii) Class B Acquiring Fund Shares
determined by dividing the Target Value attributable to the Class B
Target Shares by the NAV of a Class B Acquiring Fund Share (as so
computed), (iii) Class C Acquiring Fund Shares determined by dividing the
Target Value attributable to the Class C Target Shares by the NAV of a
Class C Acquiring Fund Share (as so computed), and (iv) Class Y Acquiring
Fund Shares determined by dividing the Target Value attributable to the
Class Y Target Shares by the NAV of a Class Y Acquiring Fund Share (as so
computed), and
(b) to assume all of Target's stated liabilities described in paragraph 1.3
("Liabilities").
Such transactions shall take place at the Closing (as defined in paragraph 3.1).
1.2. The Assets shall include all cash, cash equivalents, securities,
receivables (including interest and dividends receivable), claims and rights of
action, rights to register shares under applicable securities laws, books and
records, deferred and prepaid expenses shown as assets on Target's books, and
other property owned by Target at the Effective Time (as defined in paragraph
3.1).
1.3. The Liabilities shall include all of Target's liabilities, debts,
obligations, and duties of whatever kind or nature, whether absolute, accrued,
contingent, or otherwise, whether or not arising in the ordinary course of
business, and whether or not specifically referred to in this Agreement, but
only to the extent disclosed or provided for in Target Trust's financial
statements referred to in paragraph 4.1.19, or otherwise disclosed in writing to
and accepted by PACE Trust. Notwithstanding the foregoing, Target agrees to use
its best efforts to discharge all its Liabilities before the Effective Time.
1.4. At or immediately before the Effective Time, Target shall declare and
pay to its shareholders a dividend and/or other distribution in an amount large
enough so that it will have distributed substantially all (and in any event not
less than 90%) of its investment company taxable income (computed without regard
to any deduction for dividends paid) and substantially all of its realized net
capital gain, if any, for its current taxable year through the Effective Time.
1.5. At the Effective Time (or as soon thereafter as is reasonably
practicable), Target shall distribute the Acquiring Fund Shares received by it
pursuant to paragraph 1.1 to Target's shareholders of record, determined as of
the Effective Time (each a "Shareholder" and collectively "Shareholders"), in
constructive exchange for their Target Shares. Such distribution shall be
accomplished by PACE Trust's transfer agent's opening accounts on Acquiring
Fund's share transfer books in the Shareholders' names and transferring such
Acquiring Fund Shares thereto. Each Shareholder's account shall be credited with
the respective PRO RATA number of full and fractional (rounded to the third
decimal place) Acquiring Fund Shares due that Shareholder, by class (I.E., the
account for a Shareholder of Class A Target Shares shall be credited with the
respective PRO RATA number of Class A Acquiring Fund Shares due that
Shareholder; the account for a Shareholder of Class B Target Shares shall be
credited with the respective PRO RATA number of Class B Acquiring Fund Shares
due that Shareholder; the account for a Shareholder of Class C Target Shares
shall be credited with the respective PRO RATA number of Class C Acquiring Fund
Shares due that Shareholder; and the account for a Shareholder of Class Y Target
Shares shall be credited with the respective PRO RATA number of Class Y
Acquiring Fund Shares due that Shareholder). All outstanding Target Shares,
including any represented by certificates, shall simultaneously be canceled on
2
Target's share transfer books. Acquiring Fund shall not issue certificates
representing the Acquiring Fund Shares issued in connection with the
Reorganization.
1.6. As soon as reasonably practicable after distribution of the Acquiring
Fund Shares pursuant to paragraph 1.5, but in all events within six months after
the Effective Time, Target shall be terminated as a series of Target Trust and
any further actions shall be taken in connection therewith as required by
applicable law.
1.7. Any reporting responsibility of Target to a public authority is and
shall remain its responsibility up to and including the date on which it is
terminated.
1.8. Any transfer taxes payable on issuance of Acquiring Fund Shares in a
name other than that of the registered holder on Target's books of the Target
Shares constructively exchanged therefor shall be paid by the person to whom
such Acquiring Fund Shares are to be issued, as a condition of such transfer.
2. VALUATION
2.l. For purposes of paragraph 1.1(a), Target's net value shall be (a) the
value of the Assets computed as of the close of regular trading on the New York
Stock Exchange ("NYSE") on the date of the Closing ("Valuation Time"), using the
valuation procedures set forth in Acquiring Fund's then-current prospectus and
statement of additional information ("SAI"), less (b) the amount of the
Liabilities as of the Valuation Time.
2.2. For purposes of paragraph 1.1(a), the NAV of each class of Acquiring
Fund Shares shall be computed as of the Valuation Time, using the valuation
procedures set forth in Acquiring Fund's then-current prospectus and SAI.
2.3. All computations pursuant to paragraphs 2.1 and 2.2 shall be made by
or under the direction of Xxxxxxxx Xxxxxxxx.
3. CLOSING AND EFFECTIVE TIME
3.1. The Reorganization, together with related acts necessary to consummate
the same ("Closing"), shall occur at the Funds' principal office on or about
February 9, 2001, or at such other place and/or on such other date as to which
the Investment Companies may agree. All acts taking place at the Closing shall
be deemed to take place simultaneously as of the close of business on the date
thereof or at such other time as to which the Investment Companies may agree
("Effective Time"). If, immediately before the Valuation Time, (a) the NYSE is
closed to trading or trading thereon is restricted or (b) trading or the
reporting of trading on the NYSE or elsewhere is disrupted, so that accurate
appraisal of the Target Value and the NAV of each class of Acquiring Fund Shares
is impracticable, the Effective Time shall be postponed until the first business
day after the day when such trading shall have been fully resumed and such
reporting shall have been restored.
3.2. Target Trust shall deliver at the Closing a certificate of an authorized
officer verifying that the information (including adjusted basis and holding
period, by lot) concerning the Assets, including all portfolio securities,
transferred by Target to Acquiring Fund, as reflected on Acquiring Fund's books
3
immediately after the Closing, does or will conform to such information on
Target's books immediately before the Closing. Target Trust shall deliver at the
Closing a certificate of its Secretary or a Vice President stating that (a)
Target Trust instructed its custodian to deliver the Assets held by it to
Acquiring Fund at the Effective Time or make arrangements on or before the
Effective Time for the delivery thereof to Acquiring Fund, and (b) Target
Trust's custodian notified Target Trust that it had received the instructions
and that the requested delivery of Assets would be effective as of the Effective
Time or as of the earliest feasible time following the Effective Time.
3.3. Target Trust shall deliver to PACE Trust at the Closing a list of the
names and addresses of the Shareholders and the number of outstanding Target
Shares (by class) owned by each Shareholder (rounded to the third decimal
place), all as of the Effective Time, certified by Target Trust's Secretary or
an Assistant Secretary thereof. PACE Trust's transfer agent shall deliver at the
Closing a certificate as to the opening on Acquiring Fund's share transfer books
of accounts in the Shareholders' names. PACE Trust shall issue and deliver a
confirmation to Target Trust evidencing the Acquiring Fund Shares to be credited
to Target at the Effective Time or provide evidence satisfactory to Target Trust
that such Acquiring Fund Shares have been credited to Target's account on
Acquiring Fund's books. At the Closing, each Investment Company shall deliver to
the other bills of sale, checks, assignments, stock certificates, receipts, or
other documents the other Investment Company or its counsel reasonably requests.
3.4. Each Investment Company shall deliver to the other at the Closing a
certificate executed in its name by its President or a Vice President in form
and substance satisfactory to the recipient and dated the Effective Time, to the
effect that the representations and warranties it made in this Agreement are
true and correct at the Effective Time except as they may be affected by the
transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES
4.1. Target represents and warrants to PACE Trust, on behalf of Acquiring
Fund, as follows:
4.1.1. Target Trust is a trust operating under a written declaration of
trust, the beneficial interest in which is divided into transferable shares
("Business Trust"), that is duly organized and validly existing under the
laws of the Commonwealth of Massachusetts; and a copy of its Amended and
Restated Declaration of Trust ("Declaration of Trust") is on file with the
Secretary of the Commonwealth of Massachusetts;
4.1.2. Target Trust is duly registered as an open-end management
investment company under the Investment Company Act of 1940, as amended
("1940 Act"), and such registration will be in full force and effect at the
Effective Time;
4.1.3. Target is a duly established and designated series of Target
Trust;
4.1.4. At the Closing, Target will have good and marketable title to the
Assets and full right, power, and authority to sell, assign, transfer, and
deliver the Assets free of any liens or other encumbrances (except securities
that are subject to "securities loans" as referred to in section 851(b)(2) of
the Code); and on delivery and payment for the Assets, Acquiring Fund will
acquire good and marketable title thereto;
4
4.1.5. Target's current prospectus and SAI conform in all material
respects to the applicable requirements of the Securities Act of 1933, as
amended ("1933 Act"), and the 1940 Act and the rules and regulations
thereunder and do not include any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading;
4.1.6. Target is not in violation of, and the execution and delivery of
this Agreement and consummation of the transactions contemplated hereby will
not conflict with or violate, Massachusetts law or any provision of the
Declaration of Trust or Target Trust's By-Laws or of any agreement,
instrument, lease, or other undertaking to which Target is a party or by
which it is bound or result in the acceleration of any obligation, or the
imposition of any penalty, under any agreement, judgment, or decree to which
Target is a party or by which it is bound, except as otherwise disclosed in
writing to and accepted by PACE Trust;
4.1.7. Except as otherwise disclosed in writing to and accepted by PACE
Trust, all material contracts and other commitments of or applicable to
Target (other than this Agreement and investment contracts, including
options, futures, and forward contracts) will be terminated, or provision for
discharge of any liabilities of Target thereunder will be made, at or prior
to the Effective Time, without either Fund's incurring any liability or
penalty with respect thereto and without diminishing or releasing any rights
Target may have had with respect to actions taken or omitted or to be taken
by any other party thereto prior to the Closing;
4.1.8. Except as otherwise disclosed in writing to and accepted by PACE
Trust, no litigation, administrative proceeding, or investigation of or
before any court or governmental body is presently pending or (to Target
Trust's knowledge) threatened against Target Trust with respect to Target or
any of its properties or assets that, if adversely determined, would
materially and adversely affect Target's financial condition or the conduct
of its business; and Target Trust knows of no facts that might form the basis
for the institution of any such litigation, proceeding, or investigation and
is not a party to or subject to the provisions of any order, decree, or
judgment of any court or governmental body that materially or adversely
affects its business or its ability to consummate the transactions
contemplated hereby;
4.1.9. The execution, delivery, and performance of this Agreement have
been duly authorized as of the date hereof by all necessary action on the
part of Target Trust's board of trustees, which has made the determinations
required by Rule 17a-8(a) under the 1940 Act; and, subject to approval by
Target's shareholders, this Agreement constitutes a valid and legally binding
obligation of Target, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium, and
laws of general applicability relating to or affecting creditors' rights and
to general principles of equity;
4.1.10. At the Effective Time, the performance of this Agreement shall
have been duly authorized by all necessary action by Target's
shareholders;
4.1.11. No governmental consents, approvals, authorizations, or filings
are required under the 1933 Act, the Securities Exchange Act of 1934, as
amended ("1934 Act"), or the 1940 Act for the execution or performance of
this Agreement by Target Trust, except for (a) the filing with the Securities
and Exchange Commission ("SEC") of a registration statement by PACE Trust on
5
Form N-14 relating to the Acquiring Fund Shares issuable hereunder, and any
supplement or amendment thereto ("Registration Statement"), including therein
a prospectus/proxy statement ("Proxy Statement"), and (b) such consents,
approvals, authorizations, and filings as have been made or received or as
may be required subsequent to the Effective Time;
4.1.12. On the effective date of the Registration Statement, at the time
of the Meeting (as defined in paragraph 5.2), and at the Effective Time, the
Proxy Statement will (a) comply in all material respects with the applicable
provisions of the 1933 Act, the 1934 Act, and the 1940 Act and the rules and
regulations thereunder and (b) not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which such statements were made, not misleading; provided that the foregoing
shall not apply to statements in or omissions from the Proxy Statement made
in reliance on and in conformity with information furnished by PACE Trust for
use therein;
4.1.13. The Liabilities were incurred by Target in the ordinary course of
its business; and there are no Liabilities other than liabilities disclosed
or provided for in Target Trust's financial statements referred to in
paragraph 4.1.19, or otherwise disclosed in writing to and accepted by PACE
Trust, none of which has been materially adverse to the business, assets, or
results of Target's operations;
4.1.14. Target is a "fund" as defined in section 851(g)(2) of the Code; it
qualified for treatment as a regulated investment company under Subchapter M
of the Code ("RIC") for each past taxable year since it commenced operations
and will continue to meet all the requirements for such qualification for its
current taxable year; the Assets will be invested at all times through the
Effective Time in a manner that ensures compliance with the foregoing; and
Target has no earnings and profits accumulated in any taxable year in which
the provisions of Subchapter M did not apply to it;
4.1.15. Target is not under the jurisdiction of a court in a "title 11
or similar case" (within the meaning of section 368(a)(3)(A) of the Code);
4.1.16. Not more than 25% of the value of Target's total assets (excluding
cash, cash items, and U.S. government securities) is invested in the stock
and securities of any one issuer, and not more than 50% of the value of such
assets is invested in the stock and securities of five or fewer issuers;
4.1.17. During the five-year period ending at the Effective Time, (a)
neither Target nor any person "related" (within the meaning of section
1.368-1(e)(3) of the Regulations) to Target will have acquired Target Shares
with consideration other than Acquiring Fund Shares or Target Shares, except
for shares redeemed in the ordinary course of Target's business as a series
of an open-end investment company as required by section 22(e) of the 1940
Act, and (b) no distributions will have been made with respect to Target
Shares (other than normal, regular dividend distributions made pursuant to
Target's historic dividend-paying practice), either directly or through any
transaction, agreement, or arrangement with any other person, except for
6
dividends qualifying for the deduction for dividends paid (as defined in
section 561 of the Code) referred to in sections 852(a)(1) and 4982(c)(1)(A)
of the Code;
4.1.18. Target's federal income tax returns, and all applicable state and
local tax returns, for all taxable years through and including the taxable
year ended October 31, 1999, have been timely filed and all taxes payable
pursuant to such returns have been timely paid;
4.1.19. Target Trust's audited financial statements for the year ended
October 31, 2000, to be delivered to PACE Trust, fairly represent Target's
financial position as of such date and the results of its operations and
changes in its net assets for the period then ended; and
4.1.20. Its management (a) is unaware of any plan or intention of
Shareholders to redeem, sell, or otherwise dispose of (i) any portion of
their Target Shares before the Reorganization to any person "related" (within
the meaning of section 1.368-1(e)(3) of the Regulations) to either Fund or
(ii) any portion of the Acquiring Fund Shares to be received by them in the
Reorganization to any person related (within such meaning) to Acquiring Fund,
(b) does not anticipate dispositions of those Acquiring Fund Shares at the
time of or soon after the Reorganization to exceed the usual rate and
frequency of dispositions of shares of Target as a series of an open-end
investment company, (c) expects that the percentage of Shareholder interests,
if any, that will be disposed of as a result of or at the time of the
Reorganization will be DE MINIMIS, and (d) does not anticipate that there
will be extraordinary redemptions of Acquiring Fund Shares immediately
following the Reorganization.
4.2. Acquiring Fund represents and warrants to Target Trust, on behalf of
Target, as follows:
4.2.1. PACE Trust is a business trust duly organized, validly existing,
and in good standing under the laws of the State of Delaware; and its
Certificate of Trust, including any amendments thereto ("Certificate of
Trust"), has been duly filed in the office of the Secretary of State thereof;
4.2.2. PACE Trust is duly registered as an open-end management
investment company under the 1940 Act, and such registration will be in
full force and effect at the Effective Time;
4.2.3. Acquiring Fund is a duly established and designated series of
PACE Trust;
4.2.4. No consideration other than Acquiring Fund Shares (and Acquiring
Fund's assumption of the Liabilities) will be issued in exchange for the
Assets in the Reorganization;
4.2.5. The Acquiring Fund Shares to be issued and delivered to Target
hereunder will, at the Effective Time, have been duly authorized and, when
issued and delivered as provided herein, including the receipt of
consideration in exchange therefor in excess of the par value thereof, will
be duly and validly issued and outstanding shares of Acquiring Fund, fully
paid and non-assessable;
4.2.6. Acquiring Fund's current prospectus and SAI conform in all material
respects to the applicable requirements of the 1933 Act and the 1940 Act and
the rules and regulations thereunder and do not include any untrue statement
of a material fact or omit to state any material fact required to be stated
7
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
4.2.7. Acquiring Fund is not in violation of, and the execution and
delivery of this Agreement and consummation of the transactions contemplated
hereby will not conflict with or violate, Delaware law or any provision of
PACE Trust's Certificate of Trust, Trust Instrument (including any amendments
thereto) ("Trust Instrument"), or By-Laws or of any provision of any
agreement, instrument, lease, or other undertaking to which Acquiring Fund is
a party or by which it is bound or result in the acceleration of any
obligation, or the imposition of any penalty, under any agreement, judgment,
or decree to which Acquiring Fund is a party or by which it is bound, except
as otherwise disclosed in writing to and accepted by Target Trust;
4.2.8. Except as otherwise disclosed in writing to and accepted by Target
Trust, no litigation, administrative proceeding, or investigation of or
before any court or governmental body is presently pending or (to PACE
Trust's knowledge) threatened against PACE Trust with respect to Acquiring
Fund or any of its properties or assets that, if adversely determined, would
materially and adversely affect Acquiring Fund's financial condition or the
conduct of its business; and PACE Trust knows of no facts that might form the
basis for the institution of any such litigation, proceeding, or
investigation and is not a party to or subject to the provisions of any
order, decree, or judgment of any court or governmental body that materially
or adversely affects its business or its ability to consummate the
transactions contemplated hereby;
4.2.9. The execution, delivery, and performance of this Agreement have
been duly authorized as of the date hereof by all necessary action on the
part of PACE Trust's board of trustees (together with Target Trust's board of
trustees, the "Boards"), which has made the determinations required by Rule
17a-8(a) under the 1940 Act; and this Agreement constitutes a valid and
legally binding obligation of Acquiring Fund, enforceable in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium, and laws of general applicability relating to or
affecting creditors' rights and to general principles of equity;
4.2.10. No governmental consents, approvals, authorizations, or filings
are required under the 1933 Act, the 1934 Act, or the 1940 Act for the
execution or performance of this Agreement by PACE Trust, except for (a) the
filing with the SEC of the Registration Statement and (b) such consents,
approvals, authorizations, and filings as have been made or received or as
may be required subsequent to the Effective Time;
4.2.11. On the effective date of the Registration Statement, at the time
of the Meeting, and at the Effective Time, the Proxy Statement will (a)
comply in all material respects with the applicable provisions of the 1933
Act, the 1934 Act, and the 1940 Act and the rules and regulations thereunder
and (b) not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not misleading; provided that the foregoing shall not apply to
statements in or omissions from the Proxy Statement made in reliance on and
in conformity with information furnished by Target Trust for use therein;
8
4.2.12. Acquiring Fund is a "fund" as defined in section 851(g)(2) of the
Code; it qualified for treatment as a RIC for each past taxable year since it
commenced operations and will continue to meet all the requirements for such
qualification for its current taxable year; Acquiring Fund intends to
continue to meet all such requirements for the next taxable year; and it has
no earnings and profits accumulated in any taxable year in which the
provisions of Subchapter M of the Code did not apply to it;
4.2.13. Acquiring Fund has no plan or intention to issue additional
Acquiring Fund Shares following the Reorganization except for shares issued
in the ordinary course of its business as a series of an open-end investment
company; nor is there any plan or intention for Acquiring Fund, or any person
"related" (within the meaning of section 1.368-1(e)(3) of the Regulations) to
Acquiring Fund, to acquire -- during the five-year period beginning at the
Effective Time, either directly or through any transaction, agreement, or
arrangement with any other person -- with consideration other than Acquiring
Fund Shares, any Acquiring Fund Shares issued to the Shareholders pursuant to
the Reorganization, except for redemptions in the ordinary course of
Acquiring Fund's business as an open-end investment company as required by
section 22(e) of the 1940 Act;
4.2.14. Following the Reorganization, Acquiring Fund (a) will continue
Target's "historic business" (within the meaning of section 1.368-1(d)(2) of
the Regulations) and (b) will use a significant portion of Target's "historic
business assets" (within the meaning of section 1.368-1(d)(3) of the
Regulations) in a business; in addition, Acquiring Fund (c) has no plan or
intention to sell or otherwise dispose of any of the Assets, except for
dispositions made in the ordinary course of that business and dispositions
necessary to maintain its status as a RIC and (d) expects to retain
substantially all the Assets in the same form as it receives them in the
Reorganization, unless and until subsequent investment circumstances suggest
the desirability of change or it becomes necessary to make dispositions
thereof to maintain such status;
4.2.15. There is no plan or intention for Acquiring Fund to be dissolved
or merged into another business trust or a corporation or any "fund" thereof
(within the meaning of section 851(g)(2) of the Code) following the
Reorganization;
4.2.16. Immediately after the Reorganization, (a) not more than 25% of the
value of Acquiring Fund's total assets (excluding cash, cash items, and U.S.
government securities) will be invested in the stock and securities of any
one issuer and (b) not more than 50% of the value of such assets will be
invested in the stock and securities of five or fewer issuers;
4.2.17. Acquiring Fund does not directly or indirectly own, nor at the
Effective Time will it directly or indirectly own, nor has it directly or
indirectly owned at any time during the past five years, any shares of
Target;
4.2.18. During the five-year period ending at the Effective Time, neither
Acquiring Fund nor any person "related" (within the meaning of section
1.368-1(e)(3) of the Regulations) to Acquiring Fund will have acquired Target
Shares with consideration other than Acquiring Fund Shares;
9
4.2.19. Acquiring Fund's federal income tax returns, and all applicable
state and local tax returns, for all taxable years through and including the
taxable year ended July 31, 1999, have been timely filed and all taxes
payable pursuant to such returns have been timely paid; and
4.2.20. PACE Trust's audited financial statements for the year ended July
31, 2000, to be delivered to Target Trust, fairly represent Acquiring Fund's
financial position as of that date and the results of its operations and
changes in its net assets for the year then ended.
4.3. Each Fund represents and warrants to the Trust of which the other Fund
is a series, on behalf of such other Fund, as follows:
4.3.1. The fair market value of the Acquiring Fund Shares received by each
Shareholder will be approximately equal to the fair market value of its
Target Shares constructively surrendered in exchange therefor;
4.3.2. The Shareholders will pay their own expenses, if any, incurred
in connection with the Reorganization;
4.3.3. The fair market value of the Assets on a going concern basis
will equal or exceed the Liabilities to be assumed by Acquiring Fund and
those to which the Assets are subject;
4.3.4. There is no intercompany indebtedness between the Funds that was
issued or acquired, or will be settled, at a discount;
4.3.5. Pursuant to the Reorganization, Target will transfer to Acquiring
Fund, and Acquiring Fund will acquire, at least 90% of the fair market value
of the net assets, and at least 70% of the fair market value of the gross
assets, held by Target immediately before the Reorganization. For the
purposes of this representation, any amounts used by Target to pay its
Reorganization expenses and to make redemptions and distributions immediately
before the Reorganization (except (a) redemptions in the ordinary course of
its business required by section 22(e) of the 1940 Act and (b) regular,
normal dividend distributions made to conform to its policy of distributing
all or substantially all of its income and gains to avoid the obligation to
pay federal income tax and/or the excise tax under section 4982 of the Code)
after the date of this Agreement will be included as assets held thereby
immediately before the Reorganization;
4.3.6. None of the compensation received by any Shareholder who is an
employee of or service provider to Target will be separate consideration for,
or allocable to, any of the Target Shares held by such Shareholder; none of
the Acquiring Fund Shares received by any such Shareholder will be separate
consideration for, or allocable to, any employment agreement, investment
advisory agreement, or other service agreement; and the consideration paid to
any such Shareholder will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arm's-length
for similar services;
4.3.7. Immediately after the Reorganization, the Shareholders will own
shares constituting "control" (within the meaning of section 304(c) of the
Code) of Acquiring Fund;
4.3.8. Neither Fund will be reimbursed for any expenses incurred by it
or on its behalf in connection with the Reorganization unless those
expenses are solely and directly related to the Reorganization (determined
in accordance with the guidelines set forth in Rev. Rul. 73-54, 1973-1
C.B. 187) ("Reorganization Expenses"); and
10
4.3.9. The aggregate value of the acquisitions, redemptions, and
distributions limited by paragraphs 4.1.17, 4.2.13, and 4.2.18 will not
exceed 50% of the value (without giving effect to such acquisitions,
redemptions, and distributions) of the proprietary interest in Target at the
Effective Time.
5. COVENANTS
5.1. Each Fund covenants to operate its respective business in the
ordinary course between the date hereof and the Closing, it being understood
that--
(a) such ordinary course will include declaring and paying customary
dividends and other distributions and changes in operations contemplated
by each Fund's normal business activities, and
(b) each Fund will retain exclusive control of the composition of its
portfolio until the Closing; provided that if Target's shareholders
approve this Agreement (and the transactions contemplated hereby), then
between the date of such approval and the Closing, the Funds shall
coordinate their respective portfolios so that the transfer of the Assets
to Acquiring Fund will not cause it to fail to be in compliance with any
of its investment policies and restrictions immediately after the
Closing.
5.2. Target covenants to call a shareholders' meeting to consider and act on
this Agreement and to take all other action necessary to obtain approval of the
transactions contemplated hereby ("Meeting").
5.3. Target covenants that the Acquiring Fund Shares to be delivered
hereunder are not being acquired for the purpose of making any distribution
thereof, other than in accordance with the terms hereof.
5.4. Target covenants that it will assist PACE Trust in obtaining information
PACE Trust reasonably requests concerning the beneficial ownership of Target
Shares.
5.5. Target covenants that its books and records (including all books and
records required to be maintained under the 1940 Act and the rules and
regulations thereunder) will be turned over to PACE Trust at the Closing.
5.6. Each Fund covenants to cooperate in preparing the Proxy Statement in
compliance with applicable federal and state securities laws.
5.7. Each Fund covenants that it will, from time to time, as and when
requested by the other Fund, execute and deliver or cause to be executed and
delivered all assignments and other instruments, and will take or cause to be
taken further action, the other Fund may deem necessary or desirable in order to
vest in, and confirm to, (a) Acquiring Fund, title to and possession of all the
Assets, and (b) Target, title to and possession of the Acquiring Fund Shares to
be delivered hereunder, and otherwise to carry out the intent and purpose
hereof.
11
5.8. Acquiring Fund covenants to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act, and state
securities laws it deems appropriate to continue its operations after the
Effective Time.
5.9. Subject to this Agreement, each Fund covenants to take or cause to be
taken all actions, and to do or cause to be done all things, reasonably
necessary, proper, or advisable to consummate and effectuate the transactions
contemplated hereby.
6. CONDITIONS PRECEDENT
Each Fund's obligations hereunder shall be subject to (a) performance by the
other Fund of all its obligations to be performed hereunder at or before the
Effective Time, (b) all representations and warranties of the other Fund
contained herein being true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated
hereby, as of the Effective Time, with the same force and effect as if made at
and as of the Effective Time, and (c) the following further conditions that, at
or before the Effective Time:
6.1. This Agreement and the transactions contemplated hereby shall have been
duly adopted and approved by each Board and shall have been approved by Target's
shareholders in accordance with the Declaration of Trust and Target Trust's
By-Laws and applicable law.
6.2. All necessary filings shall have been made with the SEC and state
securities authorities, and no order or directive shall have been received that
any other or further action is required to permit the parties to carry out the
transactions contemplated hereby. The Registration Statement shall have become
effective under the 1933 Act, no stop orders suspending the effectiveness
thereof shall have been issued, and the SEC shall not have issued an unfavorable
report with respect to the Reorganization under section 25(b) of the 1940 Act
nor instituted any proceedings seeking to enjoin consummation of the
transactions contemplated hereby under section 25(c) of the 1940 Act. All
consents, orders, and permits of federal, state, and local regulatory
authorities (including the SEC and state securities authorities) deemed
necessary by either Investment Company to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain same would not involve a risk of a material
adverse effect on either Fund's assets or properties, provided that either
Investment Company may for itself waive any of such conditions.
6.3. At the Effective Time, no action, suit, or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or to obtain damages or other relief in connection with,
the transactions contemplated hereby.
6.4. Target Trust shall have received an opinion of Xxxxxxx Xxxx & Xxxxxxxxx
("Xxxxxxx Xxxx") substantially to the effect that:
6.4.1. Acquiring Fund is a duly established series of PACE Trust, a
business trust duly organized, validly existing, and in good standing under
the laws of the State of Delaware, with power under its Certificate of Trust
and Trust Instrument to own all its properties and assets and, to the
knowledge of Xxxxxxx Xxxx, to carry on its business as presently conducted;
12
6.4.2. This Agreement (a) has been duly authorized, executed, and
delivered by PACE Trust on behalf of Acquiring Fund and (b) assuming due
authorization, execution, and delivery of this Agreement by Target Trust on
behalf of Target, is a valid and legally binding obligation of PACE Trust
with respect to Acquiring Fund, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, and laws of general applicability relating to or affecting
creditors' rights and to general principles of equity;
6.4.3. The Acquiring Fund Shares to be issued and distributed to the
Shareholders under this Agreement, assuming their due delivery as
contemplated by this Agreement and the receipt of consideration in exchange
therefor in excess of the par value thereof, will be duly authorized, validly
issued and outstanding, and fully paid and non-assessable;
6.4.4. The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, materially
violate PACE Trust's Certificate of Trust, Trust Instrument, or By-Laws or
any provision of any agreement (known to Xxxxxxx Xxxx, without any
independent inquiry or investigation) to which PACE Trust (with respect to
Acquiring Fund) is a party or by which it is bound or (to the knowledge of
Xxxxxxx Xxxx, without any independent inquiry or investigation) result in the
acceleration of any obligation, or the imposition of any penalty, under any
agreement, judgment, or decree to which PACE Trust (with respect to Acquiring
Fund) is a party or by which it is bound, except as set forth in such opinion
or as otherwise disclosed in writing to and accepted by Target Trust;
6.4.5. To the knowledge of Xxxxxxx Xxxx (without any independent inquiry
or investigation), no consent, approval, authorization, or order of any court
or governmental authority is required for the consummation by PACE Trust on
behalf of Acquiring Fund of the transactions contemplated herein, except
those obtained under the 1933 Act, the 1934 Act, and the 1940 Act and those
that may be required under state securities laws;
6.4.6. PACE Trust is registered with the SEC as an investment company,
and to the knowledge of Xxxxxxx Xxxx no order has been issued or
proceeding instituted to suspend such registration; and
6.4.7. To the knowledge of Xxxxxxx Xxxx (without any independent inquiry
or investigation), (a) no litigation, administrative proceeding, or
investigation of or before any court or governmental body is pending or
threatened as to PACE Trust (with respect to Acquiring Fund) or any of its
properties or assets attributable or allocable to Acquiring Fund and (b) PACE
Trust (with respect to Acquiring Fund) is not a party to or subject to the
provisions of any order, decree, or judgment of any court or governmental
body that materially and adversely affects Acquiring Fund's business, except
as set forth in such opinion or as otherwise disclosed in writing to and
accepted by Target Trust.
In rendering such opinion, Xxxxxxx Xxxx may (1) rely (i) as to matters governed
by the laws of the State of Delaware, on an opinion of competent Delaware
counsel, and (ii) as to certain factual matters, on a certificate of PACE Trust,
(2) make assumptions regarding the authenticity, genuineness, and/or conformity
of documents and copies thereof without independent verification thereof, (3)
limit such opinion to applicable federal and state law, and (4) define the word
"knowledge" and related terms to mean the knowledge of attorneys then with
13
Xxxxxxx Xxxx who have devoted substantive attention to matters directly related
to this Agreement and the Reorganization.
6.5. PACE Trust shall have received an opinion of Xxxxxxxxxxx & Xxxxxxxx LLP
("K&L") substantially to the effect that:
6.5.1. Target is a duly established series of Target Trust, a Business
Trust duly organized and validly existing under the laws of the Commonwealth
of Massachusetts with power under the Declaration of Trust to own all its
properties and assets and, to the knowledge of K&L, to carry on its business
as presently conducted;
6.5.2. This Agreement (a) has been duly authorized, executed, and
delivered by Target Trust on behalf of Target and (b) assuming due
authorization, execution, and delivery of this Agreement by PACE Trust on
behalf of Acquiring Fund, is a valid and legally binding obligation of Target
Trust with respect to Target, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, and laws of general applicability relating to or affecting
creditors' rights and to general principles of equity;
6.5.3 The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, materially
violate the Declaration of Trust or Target Trust's By-Laws or any provision
of any agreement (known to K&L, without any independent inquiry or
investigation) to which Target Trust (with respect to Target) is a party or
by which it is bound or (to the knowledge of K&L, without any independent
inquiry or investigation) result in the acceleration of any obligation, or
the imposition of any penalty, under any agreement, judgment, or decree to
which Target Trust (with respect to Target) is a party or by which it is
bound, except as set forth in such opinion or as otherwise disclosed in
writing to and accepted by PACE Trust;
6.5.4. To the knowledge of K&L (without any independent inquiry or
investigation), no consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by Target Trust on
behalf of Target of the transactions contemplated herein, except those
obtained under the 1933 Act, the 1934 Act, and the 1940 Act and those that
may be required under state securities laws;
6.5.5. Target Trust is registered with the SEC as an investment
company, and to the knowledge of K&L no order has been issued or
proceeding instituted to suspend such registration; and
6.5.6. To the knowledge of K&L (without any independent inquiry or
investigation), (a) no litigation, administrative proceeding, or
investigation of or before any court or governmental body is pending or
threatened as to Target Trust (with respect to Target) or any of its
properties or assets attributable or allocable to Target and (b) Target Trust
(with respect to Target) is not a party to or subject to the provisions of
any order, decree, or judgment of any court or governmental body that
materially and adversely affects Target's business, except as set forth in
such opinion or as otherwise disclosed in writing to and accepted by PACE
Trust.
In rendering such opinion, K&L may (1) rely, as to certain factual matters, on a
certificate of Target Trust, (2) make assumptions regarding the authenticity,
genuineness, and/or conformity of documents and copies thereof without
14
independent verification thereof, (3) limit such opinion to applicable federal
and state law, and (4) define the word "knowledge" and related terms to mean the
knowledge of attorneys then with K&L who have devoted substantive attention to
matters directly related to this Agreement and the Reorganization.
6.6. Each Investment Company shall have received an opinion of K&L, addressed
to and in form and substance reasonably satisfactory to it, as to the federal
income tax consequences mentioned below ("Tax Opinion"). In rendering the Tax
Opinion, K&L may rely as to factual matters, exclusively and without independent
verification, on the representations made in this Agreement, which K&L may treat
as representations made to it, or in separate letters addressed to K&L and the
certificates delivered pursuant to paragraph 3.4. The Tax Opinion shall be
substantially to the effect that, based on the facts and assumptions stated
therein and conditioned on consummation of the Reorganization in accordance with
this Agreement, for federal income tax purposes:
6.6.1. Acquiring Fund's acquisition of the Assets in exchange solely for
Acquiring Fund Shares and Acquiring Fund's assumption of the Liabilities,
followed by Target's distribution of those shares PRO RATA to the
Shareholders constructively in exchange for their Target Shares, will qualify
as a reorganization within the meaning of section 368(a)(1) of the Code, and
each Fund will be "a party to a reorganization" within the meaning of section
368(b) of the Code;
6.6.2. Target will recognize no gain or loss on the transfer of the Assets
to Acquiring Fund in exchange solely for Acquiring Fund Shares and Acquiring
Fund's assumption of the Liabilities or on the subsequent distribution of
those shares to the Shareholders in constructive exchange for their Target
Shares;
6.6.3. Acquiring Fund will recognize no gain or loss on its receipt of
the Assets in exchange solely for Acquiring Fund Shares and its assumption
of the Liabilities;
6.6.4. Acquiring Fund's basis in the Assets will be the same as Target's
basis therein immediately before the Reorganization, and Acquiring Fund's
holding period for the Assets will include Target's holding period therefor;
6.6.5. A Shareholder will recognize no gain or loss on the constructive
exchange of all its Target Shares solely for Acquiring Fund Shares
pursuant to the Reorganization; and
6.6.6. A Shareholder's aggregate basis in the Acquiring Fund Shares to be
received by it in the Reorganization will be the same as the aggregate basis
in its Target Shares to be constructively surrendered in exchange for those
Acquiring Fund Shares, and its holding period for those Acquiring Fund Shares
will include its holding period for those Target Shares, provided the
Shareholder held them as capital assets at the Effective Time.
Notwithstanding subparagraphs 6.6.2 and 6.6.4, the Tax Opinion may state that no
opinion is expressed as to the effect of the Reorganization on the Funds or any
Shareholder with respect to any Asset as to which any unrealized gain or loss is
required to be recognized for federal income tax purposes at the end of a
taxable year (or on the termination or transfer thereof) under a xxxx-to-market
system of accounting.
15
At any time before the Closing, either Investment Company may waive any of
the foregoing conditions (except that set forth in paragraph 6.1) if, in the
judgment of its Board, such waiver will not have a material adverse effect on
its Fund's shareholders' interests.
7. BROKERAGE FEES AND EXPENSES
7.1. Each Investment Company represents and warrants to the other that there
are no brokers or finders entitled to receive any payments in connection with
the transactions provided for herein.
7.2. The Reorganization Expenses will be borne by Xxxxxxxx Xxxxxxxx.
8. ENTIRE AGREEMENT; NO SURVIVAL
Neither party has made any representation, warranty, or covenant not set
forth herein, and this Agreement constitutes the entire agreement between the
parties. The representations, warranties, and covenants contained herein or in
any document delivered pursuant hereto or in connection herewith shall not
survive the Closing.
9. TERMINATION OF AGREEMENT
This Agreement may be terminated at any time at or before the Effective Time,
whether before or after approval by Target's shareholders:
9.1. By either Fund (a) in the event of the other Fund's material breach of
any representation, warranty, or covenant contained herein to be performed at or
before the Effective Time, (b) if a condition to its obligations has not been
met and it reasonably appears that such condition will not or cannot be met, or
(c) if the Closing has not occurred on or before July 1, 2001; or
9.2. By the parties' mutual agreement.
In the event of termination under paragraphs 9.1(c) or 9.2, there shall be no
liability for damages on the part of either Fund, or the trustees or officers of
either Investment Company, to the other Fund.
10. AMENDMENT
This Agreement may be amended, modified, or supplemented at any time,
notwithstanding approval thereof by Target's shareholders, in any manner
mutually agreed on in writing by the parties; provided that following such
approval no such amendment shall have a material adverse effect on the
Shareholders' interests.
11. MISCELLANEOUS
11.1. This Agreement shall be governed by and construed in accordance with
the internal laws of the State of New York; provided that, in the case of any
conflict between such laws and the federal securities laws, the latter shall
govern.
16
11.2. Nothing expressed or implied herein is intended or shall be construed
to confer upon or give any person, firm, trust, or corporation other than the
parties and their respective successors and assigns any rights or remedies under
or by reason of this Agreement.
11.3. PACE Trust acknowledges that Target Trust is a Business Trust. This
Agreement is executed by Target Trust on behalf of Target and by its trustees
and/or officers in their capacities as such, and not individually. Target
Trust's obligations under this Agreement are not binding on or enforceable
against any of its trustees, officers, or shareholders but are only binding on
and enforceable against Target's assets and property; and a trustee of Target
Trust shall not be personally liable hereunder to PACE Trust or its trustees or
shareholders for any act, omission, or obligation of Target Trust or any other
trustee thereof. PACE Trust agrees that, in asserting any rights or claims under
this Agreement on behalf of Acquiring Fund, it shall look only to Target's
assets and property in settlement of such rights or claims and not to such
trustees, officers, or shareholders.
11.4. A trustee of PACE Trust shall not be personally liable hereunder to
Target Trust or its trustees or shareholders for any act, omission, or
obligation of PACE Trust or any other trustee thereof. Target Trust agrees that,
in asserting any claim against PACE Trust or its trustees, it shall look only to
Acquiring Fund's assets for payment under such claim; and neither the
shareholders nor the trustees of PACE Trust, nor any of their agents, whether
past, present, or future, shall be personally liable therefor.
11.5. This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become effective
when one or more counterparts have been executed by each Investment Company and
delivered to the other party hereto. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, each party has caused this Agreement to be executed and
delivered by its duly authorized officers as of the day and year first written
above.
PAINEWEBBER INVESTMENT SERIES, acting on
behalf of its series, PaineWebber Global
Income Fund
By: /s/ Xxxxxx X. X'Xxxxxxx
----------------------------------------
Xxxxxx X. X'Xxxxxxx
Vice President and Secretary
Attestation By: /s/ Xxxxx X. Xxxxxx
----------------------------
Xxxxx X. Xxxxxx
Vice President and Assistant
Secretary
17
PAINEWEBBER PACE SELECT ADVISORS TRUST,
acting on behalf of its series, PACE Global
Fixed Income Investments
By: /s/ Xxxxxx X. X'Xxxxxxx
----------------------------------------
Xxxxxx X. X'Xxxxxxx
Vice President and Assistant Secretary
Attestation By: /s/ Xxxxx X. Xxxxxx
----------------------------
Xxxxx X. Xxxxxx
Vice President and Assistant
Secretary
Solely with respect to paragraph 7.2 hereof:
XXXXXXXX XXXXXXXX ASSET MANAGEMENT INC.
By: /s/ Xxx X. Doberman
----------------------------------------
Xxx X. Doberman
Senior Vice President and General
Counsel
Attestation By: /s/ Xxxxx X. Xxxxxx
----------------------------
Xxxxx X. Xxxxxx
First Vice President and
Senior Associate General
Counsel
18
