Agreement and Plan of Reorganization
This Agreement and Plan of Reorganization dated as of January 8, 2004 (the
"Agreement") is between IDS Life Series Fund, Inc. (the "Selling Corporation"),
a Minnesota corporation, on behalf of its series, IDS Life Series - Government
Securities Portfolio (the "Selling Fund"), and AXP Variable Portfolio - Income
Series, Inc. (the "Buying Corporation"), a Minnesota corporation, on behalf of
it series, AXP Variable Portfolio - Short Duration U.S. Government Fund (the
"Buying Fund"), and American Express Financial Corporation (solely for the
purposes of Section 3c and 10 of the Agreement).
In consideration of their mutual promises, the parties agree as follows:
1. Contract Holder Approval. The Selling Fund will call a meeting of contract
holders 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, as
amended (the "Code"). At the Closing, the Selling Corporation 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 Corporation. 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 separate account 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
contract holders with respect to 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 American Express Financial
Corporation, the investment manager.
4. Liquidation and Dissolution of the Selling Fund.
a. As soon as practicable after the Valuation Date, the Selling
Corporation 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 Corporation.
The Buying Fund or its transfer agent will establish shareholder
accounts in accordance with instructions from the Selling Corporation.
b. Immediately after the Valuation Date, the share transfer books of the
Selling Corporation 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.
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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 Corporation, 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 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 Corporation. The
Selling Corporation represents and warrants to the Buying Fund as follows:
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a. Organization, Existence, etc. The Selling 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 Selling Fund is a series of the
Selling Corporation, registered under the 1940 Act as an open-end,
management investment company.
c. Capitalization. The Selling 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 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 Corporation 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 Directors of the Selling
Corporation and no other proceedings by the Selling Corporation or the
Selling Fund are necessary.
f. No Violation. The Selling Corporation 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 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 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 Corporation
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 Corporation 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 Corporation or
the Selling Fund for use in the Registration Statement.
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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. Contract Holder 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 Corporation 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
Corporation 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
Corporation, 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
contract holders with respect to the Selling Fund, and other written
representations as an officer of the Selling Corporation will have
verified as of Closing. The opinion of Ropes & Xxxx LLP will be
substantially 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 Corporation, dated as of the
Closing, to the effect that: (i) the Selling Corporation is a
corporation duly organized and validly existing under the laws of the
state of Minnesota; (ii) the Selling Fund is a series of the Selling
Corporation, 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
Corporation and the Selling Fund and this Agreement has been duly
executed by, and is a valid and binding obligation of, the Selling
Corporation.
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 Corporation. The obligations of
the Selling Corporation with respect to the Reorganization are subject to
the satisfaction of the following conditions:
a. Contract Holder 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
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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 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 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
contract holders with respect to 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
substantially 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 Corporation 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 contract holder approval or the requirement to obtain a tax
opinion.
c. The Selling Corporation 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 Corporation if a material
condition to its performance or a material covenant of the Selling
Corporation 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 Corporation 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 contract holders with
respect to the Selling Fund, without any liability on the part of
either party or its respective directors, officers, or the separate
accounts as shareholders, on written notice to the other party, and
shall be terminated without liability as of the close of business on
Dec. 31, 2004, or a later date agreed upon by the parties, if the
Closing is not on or prior to that date.
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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. American Express Financial Corporation will pay the costs of
carrying out the provisions of this Agreement whether or not the
Reorganization is completed.
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 directors
(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.
IDS Life Series Fund, Inc.
on behalf of Government Securities Portfolio
By /s/ Xxxxxxx X. Xxxxxxxx
-------------------------
Xxxxxxx X. Xxxxxxxx
President and Chief Executive Officer
AXP Variable Portfolio - Income Series, Inc.
on behalf of AXP Variable Portfolio - Short Duration U.S. Government 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.
American Express Financial Corporation
By /s/ Xxxxx X. Xxxxx
-------------------------
Xxxxx X. Xxxxx
Senior Vice President and General Manager - Mutual Funds
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