AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization dated as of Nov. 10, 2005 (the
"Agreement") is between AXP Special Tax-Exempt Series Trust (the "Selling
Trust"), a Massachusetts business trust, on behalf of its series, RiverSource
Insured Tax-Exempt Fund (the "Selling Fund"), and AXP Tax-Exempt Series, Inc.
(the "Buying Corporation"), a Minnesota corporation, on behalf of its series,
RiverSource Tax-Exempt Bond Fund (the "Buying Fund"), and RiverSource
Investments, LLC (solely for the purposes of Section 3c and 10 of the
Agreement).
In consideration of their mutual promises, the parties agree as follows:
1. SHAREHOLDER APPROVAL. The Selling Fund will call a meeting of its
shareholders for the purpose of approving the Agreement and the
transactions it contemplates (the "Reorganization"). The Buying Fund
agrees to furnish data and information, as reasonably requested, for the
proxy statement to be furnished to shareholders of the Selling Fund.
2. REORGANIZATION.
a. Plan of Reorganization. The Reorganization will be a
reorganization within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code"). At the Closing, the
Selling Trust will convey all of the assets of the Selling Fund to
the Buying Fund. The Buying Fund will assume all liabilities of
the Selling Fund. At the Closing, the Buying Corporation will
deliver shares of the Buying Fund, including fractional shares, to
the Selling Trust. The number of shares will be determined by
dividing the value of the net assets of shares of the Selling
Fund, computed as described in paragraph 3(a), by the net asset
value of one share of the Buying Fund, computed as described in
paragraph 3(b). The Selling Fund will not pay a sales charge on
the receipt of Buying Fund shares in exchange for the assets of
the Selling Fund. In addition, the shareholders of the Selling
Fund will not pay a sales charge on distribution to them of shares
of the Buying Fund.
b. Closing and Effective Time of the Reorganization. The
Reorganization and all related acts necessary to complete the
Reorganization (the "Closing") will occur on the first day on
which the New York Stock Exchange (the "NYSE") is open for
business following approval of shareholders of the Selling Fund
and receipt of all necessary regulatory approvals, or such later
date as the parties may agree.
3. VALUATION OF NET ASSETS.
a. The net asset value of shares of the Selling Fund will be computed
as of the close of regular trading on the NYSE on the day of
Closing (the "Valuation Date") using the valuation procedures in
the Buying Fund's prospectus.
b. The net asset value per share of shares of the Buying Fund will be
determined as of the close of regular trading on the NYSE on the
Valuation Date, using the valuation procedures in the Buying
Fund's prospectus.
c. At the Closing, the Selling Fund will provide the Buying Fund with
a copy of the computation showing the valuation of the net asset
value per share of shares of the Selling Fund on the Valuation
Date. The Buying Fund will provide the Selling Fund with a copy of
the computation showing the determination of the net asset value
per share of shares of the Buying Fund on the Valuation Date. Both
computations will be certified by an officer of Ameriprise
Financial, Inc.
4. LIQUIDATION AND DISSOLUTION OF THE SELLING FUND.
a. As soon as practicable after the Valuation Date, the Selling Trust
will liquidate the Selling Fund and distribute shares of the
Buying Fund to the Selling Fund's shareholders of record. The
Buying Fund will establish shareholder accounts in the names of
each Selling Fund shareholder, representing the respective pro
rata number of full and fractional shares of the Buying Fund due
to each shareholder. All issued and outstanding shares of the
Selling Fund will simultaneously be cancelled on the books of the
Selling Trust. The Buying Fund or its transfer agent will
establish shareholder accounts in accordance with instructions
from the Selling Trust.
b. Immediately after the Valuation Date, the share transfer books of
the Selling Trust relating to the Selling Fund will be closed and
no further transfer of shares will be made.
c. Promptly after the distribution, the Buying Fund or its transfer
agent will notify each shareholder of the Selling Fund of the
number of shares distributed to the shareholder and confirm the
registration in the shareholder's name.
d. As promptly as practicable after the liquidation of the Selling
Fund, and in no event later than twelve months from the date of
the Closing, the Selling Fund will be dissolved.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BUYING CORPORATION. The
Buying Corporation represents and warrants to the Selling Fund as
follows:
a. Organization, Existence, etc. The Buying Corporation is a
corporation duly organized, validly existing and in good standing
under the laws of the state of Minnesota and has the power to
carry on its business as it is now being conducted.
b. Registration as Investment Company. The Buying Fund is a series of
the Buying Corporation, registered under the Investment Company
Act of 1940 (the "1940 Act") as an open-end, management investment
company.
c. Capitalization. The Buying Corporation has authorized capital of
10,000,000,000 shares of common stock, par value $0.01 per share.
All of the outstanding shares have been duly authorized and are
validly issued, fully paid and non-assessable. Since the Buying
Fund is engaged in the continuous offering and redemption of its
shares, the number of outstanding shares may vary daily.
d. Financial Statements. The audited financial statements as of the
end of the last fiscal year, and the subsequent unaudited
semi-annual financial statements, if any (the "Buying Fund
Financial Statements"), fairly present the financial position of
the Buying Fund, and the results of its operations and changes in
its net assets for the periods shown.
e. Shares to be Issued Upon Reorganization. The shares to be issued
in connection with the Reorganization will be duly authorized and,
at the time of the Closing, will be validly issued, fully paid and
non-assessable.
f. Authority Relative to the Agreement. The Buying Corporation has
the power to enter into and carry out the obligations described in
this Agreement. The Agreement and the transactions contemplated by
it have been duly authorized by the Board of Directors of the
Buying Corporation and no other proceedings by the Buying
Corporation or the Buying Fund are necessary.
g. No Violation. The Buying Corporation is not in violation of its
Articles of Incorporation or By-Laws (the "Articles") or in
default in the performance of any material agreement to which it
is a party. The execution of this Agreement and the completion of
the transactions contemplated by it will not conflict with, or
constitute a breach of, any material contract or other instrument
to which the Buying Fund is subject. The transactions will not
result in any violation of the provisions of the Articles or any
law, administrative regulation or administrative or court decree
applicable to the Buying Fund.
h. Liabilities. There are no liabilities of the Buying Fund other
than:
o liabilities disclosed in the Buying Fund Financial
Statements,
o liabilities incurred in the ordinary course of business
subsequent to the date of the latest annual or semi-annual
financial statements, or
o liabilities previously disclosed to the Selling Fund, none
of which has been materially adverse to the business, assets
or results of operation of the Buying Fund.
i. Litigation. There is no litigation, administrative proceeding or
investigation before any court or governmental body currently
pending or, to the knowledge of the Buying Fund, threatened, that
would materially and adversely affect the Buying Fund, its
financial condition or the conduct of its business, or that would
prevent or hinder completion of the
transactions contemplated by this Agreement. The Buying Fund knows
of no facts that might form the basis for the institution of any
such litigation, proceeding or investigation and the Buying Fund
is not a party to or subject to the provisions of any order,
decree or judgment.
j. Contracts. Except for contracts and agreements previously
disclosed to the Selling Trust, the Buying Fund is not a party to
or subject to any material contract, debt instrument, plan, lease,
franchise, license or permit.
k. Taxes. The Buying Fund has qualified as a regulated investment
company under the Internal Revenue Code with respect to each
taxable year since commencement of its operations and will qualify
as a regulated investment company at all times through the
Closing. As of the Closing, the Buying Fund will (i) have filed
all federal and other tax returns and reports that have been
required to be filed, (ii) have paid or provided for payment of
all federal and other taxes shown to be due on such returns or on
any assessments received, (iii) have adequately provided for all
tax liabilities on its books, (iv) except as disclosed to the
Selling Fund, not have had any tax deficiency or liability
asserted against it or question with respect thereto raised, and
(v) except as disclosed to the Selling Fund, not be under audit by
the Internal Revenue Service or by any state or local tax
authority for taxes in excess of those already paid.
l. Registration Statement. The Buying Fund will file a registration
statement on Form N-14 (the "Registration Statement") with the
Securities and Exchange Commission under the Securities Act of
1933 (the "1933 Act") relating to the shares to be issued in the
Reorganization. At the time the Registration Statement becomes
effective, at the time of the shareholders' meeting and at the
Closing, the Registration Statement will not contain an untrue
statement of a material fact or omit to state a material fact
necessary to make the statements therein not misleading. However,
none of the representations and warranties in this subsection
apply to statements in, or omissions from, the Registration
Statement made in reliance on information furnished by the Selling
Fund for use in the Registration Statement.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLING TRUST. The
Selling Trust represents and warrants to the Buying Fund as follows:
a. Organization, Existence, etc. The Selling Trust is a corporation
duly organized, validly existing and in good standing under the
laws of the state of Minnesota and has the power to carry on its
business as it is now being conducted.
b. Registration as Investment Company. The Selling Fund is a series
of the Selling Trust, registered under the 1940 Act as an
open-end, management investment company.
c. Capitalization. The Selling Trust has authorized capital of
10,000,000,000 shares of common stock, par value $0.01 per share.
All of the outstanding shares have been duly authorized and are
validly issued, fully paid and non-assessable. Since the Selling
Fund is engaged in the continuous offering and redemption of its
shares, the number of outstanding shares may vary daily.
d. Financial Statements. The audited financial statements as of the
end of the last fiscal year, and the subsequent unaudited
semi-annual financial statements, if any (the "Selling Fund
Financial Statements"), fairly present the financial position of
the Selling Fund, and the results of its operations and changes in
its net assets for the periods shown.
e. Authority Relative to the Agreement. The Selling Trust has the
power to enter into and to carry out its obligations under this
Agreement. The Agreement and the transactions contemplated by it
have been duly authorized by the Board of Trustees of the Selling
Trust and no other proceedings by the Selling Trust or the Selling
Fund are necessary.
f. No Violation. The Selling Trust is not in violation of its
Articles or in default in the performance of any material
agreement to which it is a party. The execution of this Agreement
and the completion of the transactions contemplated by it will not
conflict with or constitute a breach of, any material contract to
which the Selling Fund is subject. The transactions will not
result in any violation of the provisions of the Articles or any
law, administrative regulation or administrative or court decree
applicable to the Selling Fund.
g. Liabilities. There are no liabilities of the Selling Fund other
than:
o liabilities disclosed in the Selling Fund Financial
Statements,
o liabilities incurred in the ordinary course of business
subsequent to the date of the latest annual or semi-annual
financial statements, or
o liabilities previously disclosed to the Buying Fund, none of
which has been materially adverse to the business, assets or
results of operation of the Selling Fund.
h. Litigation. There is no litigation, administrative proceeding or
investigation before any court or governmental body currently
pending or, to the knowledge of the Selling Fund, threatened, that
would materially and adversely affect the Selling Fund, its
financial condition or the conduct of its business, or that would
prevent or hinder completion of the transactions contemplated by
this Agreement. The Selling Fund 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.
i. Contracts. Except for contracts and agreements previously
disclosed to the Buying Corporation, the Selling Fund is not a
party to or subject to any material contract, debt instrument,
plan, lease, franchise, license or permit.
j. Taxes. The Selling Fund has qualified as a regulated investment
company under the Internal Revenue Code with respect to each
taxable year since commencement of its operations and will qualify
as regulated investment company at all times through the Closing.
As of the Closing, the Selling Fund will (i) have filed all
federal and other tax returns and reports that have been required
to be filed, (ii) have paid or provided for payment of all federal
and other taxes shown to be due on such returns or on any
assessments received, (iii) have adequately provided for all tax
liabilities on its books, (iv) except as disclosed to the Buying
Fund, not have had any tax deficiency or liability asserted
against it or question with respect thereto raised, and (v) except
as disclosed to the Buying Fund, not be under audit by the
Internal Revenue Service or by any state or local tax authority
for taxes in excess of those already paid.
k. Fund Securities. All securities listed in the schedule of
investments of the Selling Fund as of the Closing will be owned by
the Selling Fund free and clear of any encumbrances, except as
indicated in the schedule.
l. Registration Statement. The Selling Fund will cooperate with the
Buying Fund and will furnish information relating to the Selling
Trust and the Selling Fund required in the Registration Statement.
At the time the Registration Statement becomes effective, at the
time of the shareholders' meeting and at the Closing, the
Registration Statement, as it relates to the Selling Trust or the
Selling Fund, will not contain an untrue statement of a material
fact or omit to state a material fact necessary to make the
statements therein not misleading. However, the representations
and warranties in this subsection apply only to statements in or
omissions from the Registration Statement made in reliance upon
information furnished by the Selling Trust or the Selling Fund for
use in the Registration Statement.
7. CONDITIONS TO OBLIGATIONS OF THE BUYING CORPORATION. The obligations of
the Buying Corporation with respect to the Reorganization are subject to
the satisfaction of the following conditions:
a. Shareholder Approval. This Agreement will have been approved by
the affirmative vote of the holders of the majority of the voting
power of all Selling Fund shares entitled to vote.
b. Representations, Warranties and Agreements. The Selling Trust and
the Selling Fund will have complied with this Agreement and each
of the representations and warranties in this Agreement will be
true in all material respects as of the Closing. An officer of the
Selling Trust will provide a certificate to the Buying Fund
confirming that, as of the Closing, the representations and
warranties set forth in Section 6 are true and correct and that
there have
been no material adverse changes in the financial condition,
results of operations, business, properties or assets of the
Selling Fund since the date of its last financial statement,
except as otherwise indicated in any financial statements,
certified by an officer of the Selling Trust, and delivered to the
Buying Fund on or prior to the last business day before the
Closing.
c. Regulatory Approvals.
o The Registration Statement referred to in Section 5(l) will
be effective and no stop orders under the 1933 Act will have
been issued.
o All necessary approvals, consents and exemptions from
federal and state regulatory authorities will have been
obtained.
d. Tax Opinion. The Buying Corporation will have received the opinion
of Ropes & Xxxx LLP dated as of the Closing, as to the federal
income tax consequences of the Reorganization to the Buying Fund
and its shareholders. For purposes of rendering their opinion,
Ropes & Xxxx LLP may rely, as to factual matters, upon the
statements made in this Agreement, the proxy statement which will
be distributed to the shareholders of the Selling Fund, and other
written representations as an officer of the Selling Trust will
have verified as of Closing. The opinion of Ropes & Xxxx LLP will
be to the effect that: (i) neither the Selling Fund nor the Buying
Fund will recognize any gain or loss upon the transfer of the
assets of the Selling Fund to, and assumption of its liabilities
by, the Buying Fund in exchange for shares of the Buying Fund and
upon the distribution of the shares to the Selling Fund
shareholders in exchange for their shares of the Selling Fund;
(ii) the shareholders of the Selling Fund who receive shares of
the Buying Fund in the Reorganization will not recognize any gain
or loss on the exchange of their shares of the Selling Fund for
the shares of the Buying Fund; (iii) the holding period and the
basis of the shares received by the Selling Fund shareholders will
be the same as the holding period and the basis of the shares of
the Selling Fund surrendered in the exchange; (iv) the holding
period and the basis of the assets acquired by the Buying Fund
will be the same as the holding period and the basis of the assets
to the Selling Fund immediately prior to the Reorganization.
e. Opinion of Counsel. The Buying Corporation will have received an
opinion of counsel for the Selling Trust, dated as of the Closing,
to the effect that: (i) the Selling Trust is a business trust duly
organized and validly existing under the laws of the state of
Massachusetts; (ii) the Selling Fund is a series of the Selling
Trust, an open-end investment company registered under the 1940
Act; (iii) this Agreement and the Reorganization have been duly
authorized and approved by all requisite action of the Selling
Trust and the Selling Fund and this Agreement has been duly
executed by, and is a valid and binding obligation of, the Selling
Trust.
f. Declaration of Dividend. The Selling Fund, prior to the Closing,
has declared a dividend or dividends, which, together with all
previous such dividends, shall have the effect of distributing to
the Selling Fund shareholders (i) all of the excess of (x) the
Selling Fund's investment income excludable from gross income
under Section 103 of the Code over (y) the Selling Fund's
deductions disallowed under Sections 265 and 171 of the Code, (ii)
all of the Selling Fund's investment company taxable income as
defined in Section 852 of the Code (in each case computed without
regard to any deduction for dividends paid) and (iii) all of the
Selling Fund's net capital gain realized (after reduction for any
capital loss carryover), in each case for the current taxable year
(which will end on the Closing date) and any preceding taxable
years for which such a dividend is eligible to be made under
Section 855 of the Code.
8. CONDITIONS TO OBLIGATIONS OF THE SELLING TRUST. The obligations of the
Selling Trust with respect to the Reorganization are subject to the
satisfaction of the following conditions:
a. Shareholder Approval. This Agreement will have been approved by
the affirmative vote of the holders of the majority of the voting
power of all Selling Fund shares entitled to vote.
b. Representations, Warranties and Agreements. The Buying Fund will
have complied with this Agreement and each of the representations
and warranties in this Agreement will be true in all material
respects as of the Closing. An officer of the Buying Corporation
will provide a certificate to the Selling Fund confirming that, as
of the Closing, the representations and warranties set forth in
Section 5 are true and correct and that there have been no
material adverse changes in the financial condition, results of
operations, business, properties or assets of the Buying Fund
since the date of its last financial statement, except as
otherwise indicated in any financial statements, certified by an
officer of the Buying Corporation, and delivered to the Selling
Fund on or prior to the last business day before the Closing.
c. Regulatory Approvals.
o The Registration Statement referred to in Section 5(l) will
be effective and no stop orders under the 1933 Act will have
been issued.
o All necessary approvals, consents and exemptions from
federal and state regulatory authorities will have been
obtained.
d. Tax Opinion. The Selling Trust will have received the opinion of
Ropes & Xxxx LLP dated as of the Closing, as to the federal income
tax consequences of the Reorganization to the Selling Fund and its
shareholders. For purposes of rendering their opinion, Ropes &
Xxxx LLP may rely, as to factual matters, upon the statements made
in this Agreement, the proxy statement which will be distributed
to the shareholders of the Selling Fund, and other written
representations as an officer of the Buying Corporation will have
verified as of Closing. The
opinion of Ropes & Xxxx LLP will be to the effect that: (i)
neither the Selling Fund nor the Buying Fund will recognize any
gain or loss upon the transfer of the assets of the Selling Fund
to, and assumption of its liabilities by, the Buying Fund in
exchange for shares of the Buying Fund and upon the distribution
of the shares to the Selling Fund shareholders in exchange for
their shares of the Selling Fund; (ii) the shareholders of the
Selling Fund who receive shares of the Buying Fund in the
Reorganization will not recognize any gain or loss on the exchange
of their shares of the Selling Fund for the shares of the Buying
Fund; (iii) the holding period and the basis of the shares
received by the Selling Fund shareholders will be the same as the
holding period and the basis of the shares of the Selling Fund
surrendered in the exchange; (iv) the holding period and the basis
of the assets acquired by the Buying Fund will be the same as the
holding period and the basis of the assets to the Selling Fund
immediately prior to the Reorganization; and (v) the Buying Fund
will succeed to and take into account the items of the Selling
Fund described in Section 381(c) of the Code, subject to the
conditions and limitations specified in Sections 381, 382, 383,
and 384 of the Code and the regulations thereunder.
e. Opinion of Counsel. The Selling Trust will have received the
opinion of counsel for the Buying Corporation, dated as of the
Closing, to the effect that: (i) the Buying Corporation is a
corporation duly organized and validly existing under the laws of
the state of Minnesota; (ii) the Buying Fund is a series of the
Buying Corporation, an open-end investment company registered
under the 1940 Act; (iii) this Agreement and the Reorganization
have been authorized and approved by all requisite action of the
Buying Corporation and the Buying Fund and this Agreement has been
duly executed by, and is a valid and binding obligation of, the
Buying Corporation; and (iv) the shares to be issued in the
Reorganization are duly authorized and upon issuance in accordance
with this Agreement will be validly issued, fully paid and
non-assessable shares of the Buying Fund.
9. AMENDMENT; TERMINATION; NON-SURVIVAL OF COVENANTS, WARRANTIES AND
REPRESENTATIONS.
a. This Agreement may be amended in writing if authorized by the
respective Boards of Directors. The Agreement may be amended at
any time before or after approval by the shareholders of the
Selling Fund, but after shareholder approval, no amendment shall
be made that substantially changes the terms of paragraphs 2 or 3.
b. At any time prior to the Closing, any of the parties may waive in
writing (i) any inaccuracies in the representations and warranties
made to it and (ii) compliance with any of the covenants or
conditions made for its benefit. However, neither party may waive
the requirement to obtain shareholder approval or the requirement
to obtain a tax opinion.
c. The Selling Trust may terminate this Agreement at any time prior
to the Closing by notice to the Buying Corporation if a material
condition to its performance or a material covenant of the Buying
Corporation on behalf of the Buying Fund is not fulfilled on or
before the date
specified for its fulfillment or a material breach of this
Agreement is made by the Buying Corporation on behalf of the
Buying Fund and is not cured.
d. The Buying Corporation may terminate this Agreement at any time
prior to the Closing by notice to the Selling Trust if a material
condition to its performance or a material covenant of the Selling
Trust on behalf of the Selling Fund is not fulfilled on or before
the date specified for its fulfillment or a material breach of
this Agreement is made by the Selling Trust on behalf of the
Selling Fund and is not cured.
e. This Agreement may be terminated by any party at any time prior to
the Closing, whether before or after approval by the shareholders
of the Selling Fund, without any liability on the part of either
party or its respective Board members, officers, or shareholders,
on written notice to the other party, and shall be terminated
without liability as of the close of business on Dec. 31, 2006, or
a later date agreed upon by the parties, if the Closing is not on
or prior to that date.
f. The representations, warranties and covenants contained in this
Agreement, or in any document delivered in connection with this
Agreement, will survive the Reorganization.
10. EXPENSES. RiverSource Investments, LLC will pay all solicitation
expenses in order to achieve shareholder approval of the Reorganization
whether or not the Reorganization is completed and will bear the other
costs of effecting the Reorganization.
11. GENERAL.
a. Headings. The headings contained in this Agreement are for
reference purposes only and will not affect the meaning or
interpretation of this Agreement. Nothing in this Agreement is
intended to confer upon any other person any rights or remedies by
reason of this Agreement.
b. Governing Law. This Agreement will be governed by the laws of the
state of Minnesota.
12. INDEMNIFICATION.
Each party will indemnify and hold the other and its officers and Board
members (each an "Indemnitee") harmless from and against any liability
or other cost and expense, in connection with the defense or disposition
of any action, suit, or other proceeding, before any court or
administrative or investigative body in which the Indemnitee may be
involved as a party, with respect to actions taken under this Agreement.
However, no Indemnitee will be indemnified against any liability or
expense arising by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct
of the Indemnitee's position.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
signed.
AXP Special Tax-Exempt Series Trust
on behalf of RiverSource Insured Tax-Exempt Fund
By /s/ Xxxxxx X. Xxx
---------------------
Xxxxxx X. Xxx
Vice President
AXP Tax-Exempt Series, Inc.
on behalf of RiverSource Tax-Exempt Bond Fund
By /s/ Xxxxxx X. Xxx
---------------------
Xxxxxx X. Xxx
Vice President
The undersigned is a party to this Agreement for purposes of Section 3c and 10
only.
RiverSource Investments, LLC
By /s/ Xxxxx X. Xxxxx
---------------------
Xxxxx X. Xxxxx
Senior Vice President - Mutual Funds
