Agreement and Plan of Reorganization
This Agreement and Plan of Reorganization dated as of March 10, 2000 (the
"Agreement") is between Strategist Tax-Free Income Fund, Inc. (the "Strategist
Corporation"), a Minnesota corporation, on behalf of Strategist Tax-Free High
Yield Fund (the "Acquired Fund"), a series of capital stock of the Strategist
Corporation, and AXP High Yield Tax-Exempt Fund, Inc. (the "AXP Corporation" or
the "Acquiring Fund"), a Minnesota corporation. The Acquired Fund and the
Acquiring Fund are feeder funds investing in a single master trust.
In consideration of the mutual promises, the parties agree as follows:
1. Shareholder Approval
The Acquired Fund will call a meeting of its shareholders for the purpose
of approving the Agreement and the transactions it contemplates (the
"Reorganization"). The Acquiring Fund agrees to furnish data and
information, as reasonably requested, for the proxy statement to be
furnished to shareholders of the Acquired Fund.
2. Reorganization
a. Plan of Reorganization. At the closing, the Strategist Corporation will
convey all of the assets of the Acquired Fund to the Acquiring Fund.
The Acquiring Fund will assume all liabilities of the Acquired Fund,
reflected on an unaudited statement of assets and liabilities, as of
the Closing. At the Closing, the AXP Corporation will deliver Class A
shares of the Acquiring Fund, including fractional shares, to the
Strategist Corporation. The number of shares will be determined by
dividing the value of the net assets of the Acquired Fund, computed as
described in paragraph 3(a), by the net asset value of one share of the
Acquiring Fund, computed as described in paragraph 3(b). The Acquired
Fund will not pay a sales charge on the receipt of Acquiring Fund
shares in exchange for the assets of the Acquired Fund. In addition,
the shareholders of the Acquired Fund will not pay a sales charge on
distribution to them of Class A shares of the Acquiring 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 Acquired Fund and receipt of all necessary
regulatory approvals, or such later date as the parties may agree.
3. Valuation of Net Assets
a. The value of the net assets of the Acquired 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 Acquiring
Fund's prospectus.
b. The net asset value per share of Class A shares of the Acquiring Fund
will be determined as of the close of regular trading on the NYSE on
the Valuation Date, using the valuation procedures in the Acquiring
Fund's prospectus.
c. At the Closing, the Acquired Fund will provide the Acquiring Fund with
a copy of the computation showing the valuation of the Acquired Fund's
net assets on the Valuation Date. The Acquiring Fund will provide the
Acquired Fund with a copy of the computation showing the determination
of the net asset value per share of Class A shares of the Acquiring
Fund on the Valuation Date. Both computations will be certified by an
officer of American Express Financial Corporation.
4. Liquidation and Dissolution of the Acquired Fund
a. As soon as practicable after the Valuation Date, the Strategist
Corporation will liquidate the Acquired Fund and distribute Class A
shares of the Acquiring Fund to the Acquired Fund's shareholders of
record. The Acquiring Fund will establish shareholder accounts in the
names of each Acquired Fund shareholder, representing the respective
pro rata number of full and fractional shares of the Acquiring Fund
due to each shareholder. All issued and outstanding shares of the
Acquired Fund will simultaneously be cancelled on the books of the
Strategist Corporation. Shareholder accounts will be established by
the Acquiring Fund or its transfer agent in accordance with
instructions from the Strategist Corporation.
b. Immediately after the Valuation Date, the share transfer books of the
Strategist Corporation relating to the Acquired Fund will be closed
and no further transfer of shares will be made.
c. Promptly after the distribution, the Acquiring Fund or its transfer
agent will notify each shareholder of the Acquired Fund of the number
of Class A shares distributed to the shareholder and confirm the
registration in the shareholder's name.
d. As promptly as practicable after the liquidation of the Acquired Fund,
and in no event later than twelve months from the date of the Closing,
the Acquired Fund will be dissolved.
5. Representations, Warranties and Covenants of the AXP Corporation on behalf
of the Acquiring Fund
The AXP Corporation represents and warrants to the Strategist Corporation
as follows:
a. Organization, Existence, etc. The AXP 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 Acquiring Fund is a series of
the AXP Corporation, registered under the Investment Company Act of
1940 (the "1940 Act") as an open-end, management investment company.
c. Capitalization. The Acquiring Fund 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 Acquiring 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 "Acquiring Fund Financial
Statements"), fairly present the financial position of the Acquiring
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 AXP 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 and no other proceedings
by the AXP Corporation or the Acquiring Fund are necessary.
g. No Violation. The AXP 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 Acquiring Fund
is subject. Nor will the transactions result in any violation of the
provisions of the Articles or any law, administrative regulation or
administrative or court decree applicable to the Acquiring Fund.
h. Liabilities. There are no liabilities of the Acquiring Fund other than:
o liabilities disclosed in the Acquiring 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 Strategist Corporation,
none of which has been materially adverse to the business, assets or
results of operation of the Acquiring 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 Acquiring Fund, threatened, that would
materially and adversely affect the Acquiring 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 Acquiring 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.
j. Contracts. Except for contracts and agreements previously disclosed to
the Strategist Corporation, the Acquiring Fund is not a party to or
subject to any material contract, debt instrument, plan, lease,
franchise, license or permit.
k. Taxes. The federal tax returns of the Acquiring Fund have been filed
for all taxable years since commencement of its operations. The
Acquiring Fund has qualified and will qualify as a regulated investment
company under the Internal Revenue Code with respect to each taxable
year since commencement of its operations.
l. Registration Statement. The Acquiring 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 Strategist Corporation for use in the Registration
Statement.
6. Representations, Warranties and Covenants of the Strategist Corporation on
behalf of the Acquired Fund
The Strategist Corporation represents and warrants to the AXP Corporation
as follows:
a. Organization, Existence, etc. The Strategist 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 Acquired Fund is a series of
the Strategist Corporation, registered under the 1940 Act as an
open-end, management investment company.
c. Capitalization. The Acquired Fund 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 Acquired 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 "Acquired Fund Financial
Statements") fairly present the financial position of the Acquired
Fund, and the results of its operations and changes in its net assets
for the periods shown.
e. Authority Relative to the Agreement. The Strategist 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 and no other
proceedings by the Strategist Corporation or the Acquired Fund are
necessary.
f. No Violation. The Strategist 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
Acquired Fund is subject. Nor will the transactions result in any
violation of the provisions of the Articles or any law, administrative
regulation or administrative or court decree applicable to the
Acquired Fund.
g. Liabilities. There are no liabilities of the Acquired Fund other than:
o liabilities disclosed in the Acquired 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 AXP Corporation,
none of which has been materially adverse to the business, assets or
results of operation of the Acquired 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 Acquired Fund, threatened, that would
materially and adversely affect the Acquired 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 Acquired 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 AXP Corporation, the Acquired Fund is not a party to or subject to
any material contract, debt instrument, plan, lease, franchise,
license or permit.
j. Taxes. The federal tax returns of the Acquired Fund have been filed
for all taxable years since commencement of its operations. The
Acquired Fund has qualified and will qualify as a regulated investment
company under the Internal Revenue Code with respect to each taxable
year since commencement of its operations.
k. Fund Securities. All securities listed in the schedule of investments
of the Acquired Fund as of the Closing will be owned by the Acquired
Fund free and clear of any encumbrances, except as indicated in the
schedule.
l. Registration Statement. The Acquired Fund will cooperate with the
Acquiring Fund and will furnish information relating to the Strategist
Corporation and the Acquired 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 Strategist Corporation or
the Acquired 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 Strategist Corporation for use in the Registration Statement.
7. Conditions to Obligations of the AXP Corporation
The obligations of the AXP 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 outstanding
shares of common stock of the Acquired Fund.
b.
Representations, Warranties and Agreements. The Strategist Corporation
and the Acquired 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
Strategist Corporation will provide a certificate to the AXP
Corporation 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 Acquired Fund since the date of its last financial statement,
except as otherwise indicated in any financial statements, certified
by an officer of the Strategist Corporation, and delivered to the AXP
Corporation 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 AXP Corporation will have received the opinion of
Ropes & Xxxx dated as of the Closing, as to the federal income tax
consequences of the Reorganization to the Acquiring Fund and its
shareholders. For purposes of rendering their opinion, Ropes & Xxxx
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 Acquired Fund, and other written representations
as an officer of the Strategist Corporation and the AXP Corporation,
respectively will have verified as of Closing. The opinion of Ropes &
Xxxx will be to the effect that: (i) neither the Acquired Fund nor the
Acquiring Fund will recognize any gain or loss upon the transfer of
the assets of the Acquired Fund to, and assumption of its liabilities
by, the Acquiring Fund in exchange for shares of the Acquiring Fund
and upon the distribution of the shares to the Acquired Fund
shareholders in exchange for their shares of the Acquired Fund; (ii)
the shareholders of the Acquired Fund who receive shares of the
Acquiring Fund in the Reorganization will not recognize any gain or
loss on the exchange of their shares of the Acquired Fund for the
shares of the Acquiring Fund; (iii) the holding period and the basis
of the shares received by the Acquired Fund shareholders will be the
same as the holding period and the basis of the shares of the Acquired
Fund surrendered in the exchange; (iv) the holding period and the
basis of the assets acquired by the Acquiring Fund will be the same as
the holding period and the basis of the assets to the Acquired Fund
immediately prior to the Reorganization.
e. Opinion of Counsel. The AXP Corporation will have received an opinion
of counsel for the Acquired Fund, dated as of the Closing, to the
effect that: (i) the Strategist Corporation is a corporation duly
organized and validly existing under the laws of the state of
Minnesota; (ii) the Acquired Fund is a series of the Strategist
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 Strategist
Corporation and the Acquired Fund and this Agreement has been duly
executed by, and is a valid and binding obligation of, the Acquired
Fund.
f. Declaration of Dividend. The Strategist Corporation will have declared
a dividend with respect to the Acquired Fund which, together with all
previous dividends, will have the effect of distributing to the
Acquired Fund's shareholders all of the Acquired Fund's investment
company taxable income for the taxable years ending on or prior to the
Closing (computed without regard to deduction for dividends paid) and
all of its net capital gain realized in taxable years ending on or
prior to the Closing (after reduction for capital loss carry forward).
8. Conditions to Obligations of the Strategist Corporation
The obligations of the Strategist 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 outstanding
shares of common stock of the Acquired Fund.
b. Representations, Warranties and Agreements. The Acquiring 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 AXP Corporation will provide a
certificate to the Strategist Corporation 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 Acquiring Fund since the date of its last
financial statement, except as otherwise indicated in any financial
statements, certified by an officer of the AXP Corporation, and
delivered to the Strategist Corporation 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 Strategist Corporation will have received the opinion
of Ropes & Xxxx dated as of the Closing, as to the federal income tax
consequences of the Reorganization to the Acquired Fund and its
shareholders. For purposes of rendering their opinion, Ropes & Xxxx
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 Acquired Fund, and other written representations
as an officer of the Strategist Corporation and the AXP Corporation,
respectively will have verified as of Closing. The opinion of Ropes &
Xxxx will be to the effect that: (i) neither the Acquired Fund nor the
Acquiring Fund will recognize any gain or loss upon the transfer of
the assets of the Acquired Fund to, and assumption of its liabilities
by, the Acquiring Fund in exchange for shares of the Acquiring Fund
and upon the distribution of the shares to the Acquired Fund
shareholders in exchange for their shares of the Acquired Fund; (ii)
the shareholders of the Acquired Fund who receive shares of the
Acquiring Fund in the Reorganization will not recognize any gain or
loss on the exchange of their shares of the Acquired Fund for the
shares of the Acquiring Fund; (iii) the holding period and the basis
of the shares received by the Acquired Fund shareholders will be the
same as the holding period and the basis of the shares of the Acquired
Fund surrendered in the exchange; (iv) the holding period and the
basis of the assets acquired by the Acquiring Fund will be the same as
the holding period and the basis of the assets to the Acquired Fund
immediately prior to the Reorganization.
e. Opinion of Counsel. The Strategist Corporation will have received the
opinion of counsel for the Acquiring Fund, dated as of the Closing, to
the effect that: (i) the AXP Corporation is a corporation duly
organized and validly existing under the laws of the state of
Minnesota; (ii) the Acquiring Fund is a series of the AXP 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 AXP Corporation and the
Acquiring Fund and this Agreement has been duly executed by, and is a
valid and binding obligation of, the AXP 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 Acquiring 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 Acquired
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.
c. The Strategist Corporation may terminate this Agreement at any time
prior to the Closing by notice to the AXP Corporation if a material
condition to its performance or a material covenant of the AXP
Corporation is not fulfilled on or before the date specified for its
fulfillment or a material breach of this Agreement is made by the AXP
Corporation and is not cured.
d. The AXP Corporation may terminate this Agreement at any time prior to
the Closing by notice to the Strategist Corporation if a material
condition to its performance or a material covenant of the Strategist
Corporation is not fulfilled on or before the date specified for its
fulfillment or a material breach of this Agreement is made by the
Strategist Corporation 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
Acquired Fund, without any liability on the part of either party or
its respective directors, officers, or shareholders, on written notice
to the other party, and shall be terminated without liability as of
the close of business on December 31, 2000, 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
The expenses of the reorganization, whether or not the Reorganization is
completed, will be borne by American Express Financial Corporation.
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.
Strategist Tax-Free Income Fund, Inc.
on behalf of Strategist Tax-Free High Yield Fund
By /s/ Xxxxx X. Xxxxxxxx
Xxxxx X. Xxxxxxxx
President
AXP High Yield Tax-Exempt Fund, Inc.
By /s/ Xxxxxx X. Xxx
Xxxxxx X. Xxx
Vice President
The undersigned is a party to this Agreement for the purposes of Sections 3c and
10 only.
American Express Financial Corporation
By /s/ Xxxxxx X. Xxxxx
Xxxxxx X. Xxxxx
Senior Vice President
