Agreement and Plan of Reorganization
This Agreement and Plan of Reorganization dated as of July 11, 2002 (the
"Agreement") is between AXP Total Stock Market Index Fund (the "Acquired Fund"),
a series of capital stock of AXP Market Advantage Series, Inc. (the
"Corporation"), a Minnesota corporation and AXP S&P 500 Index Fund (the
"Acquiring Fund"), a series of capital stock of the same Corporation.
In consideration of their 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 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 Corporation will deliver Class D and Class E shares of the
Acquiring Fund, including fractional shares, to the Corporation. The number
of shares will be determined by dividing the value of the net assets of
Class D and Class E shares of the Acquired Fund, computed as described in
paragraph 3(a), by the net asset value of one share of Class D and Class E
shares, respectively, 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 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 net asset value of Class D and Class E shares 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 D and Class E 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 net asset value per
share of Class D and Class E shares of the Acquired Fund 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 D and Class E shares of the Acquiring 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 Acquired Fund
a. As soon as practicable after the Valuation Date, the Corporation will
liquidate the Acquired Fund and distribute Class D and Class E 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 Corporation. The Acquiring Fund or its
transfer agent will establish shareholder accounts in accordance with
instructions from the Corporation.
b. Immediately after the Valuation Date, the share transfer books of the
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 D or Class E 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 Corporation on behalf of
the Acquiring Fund
The Corporation represents and warrants to the Acquired Fund as follows:
a. Organization, Existence, etc. The 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 Corporation, registered under the Investment Company Act of 1940 (the
"1940 Act") as an open-end, management investment company.
c. Capitalization. The 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 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 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 Corporation or
the Acquiring Fund are necessary.
g. No Violation. The 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 Acquired Fund, 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 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 Acquired Fund for use in the Registration
Statement.
6. Representations, Warranties and Covenants of the Corporation on behalf of
the Acquired Fund
The Corporation represents and warrants to the Acquiring Fund as follows:
a. Organization, Existence, etc. The 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
Corporation, registered under the 1940 Act as an open-end, management
investment company.
c. Capitalization. The 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 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 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 Corporation or
the Acquired Fund are necessary.
f. No Violation. The 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 Acquiring Fund, 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 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 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 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 Corporation or the Acquired Fund for use in the Registration Statement.
7. Conditions to Obligations of the Corporation with Respect to the Acquired
Fund
The obligations of the 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 voted at the meeting.
b. Representations, Warranties and Agreements. The 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 Corporation will
provide a
certificate to the Acquiring 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
Acquired Fund since the date of its last financial statement, except as
otherwise indicated in any financial statements, certified by an officer of
the Corporation, and delivered to the Acquiring 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 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 Corporation 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 Corporation will have received an opinion of
counsel for the Acquired Fund, dated as of the Closing, to the effect that:
(i) the 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 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 Corporation and the
Acquired Fund and this Agreement has been duly executed by, and is a valid
and binding obligation of, the Corporation.
f. Declaration of Dividend. The 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 Corporation with Respect to the Acquiring
Fund
The obligations of the 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 voted at the meeting.
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 Corporation will provide a certificate to the Acquired
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 Acquiring Fund since the date of its
last financial statement, except as otherwise indicated in any financial
statements, certified by an officer of the Corporation, and delivered to
the Acquired 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 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 Corporation 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 Corporation will have received the opinion of
counsel for the Acquiring Fund, dated as of the Closing, to the effect
that: (i) the 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 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 Corporation and the
Acquiring Fund and this Agreement has been duly executed by, and is a valid
and binding obligation of, the 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. However, neither party may waive the requirement to obtain
shareholder approval or the requirement to obtain a tax opinion.
c. The Corporation may terminate this Agreement at any time prior to the
Closing by notice to the Acquiring Fund if a material condition to its
performance or a material covenant of the Corporation on behalf of the
Acquiring Fund is not fulfilled on or before the date specified for its
fulfillment
or a material breach of this Agreement is made by the Corporation on behalf
of the Acquiring Fund and is not cured.
d. The Corporation may terminate this Agreement at any time prior to the
Closing by notice to the Acquired Fund if a material condition to its
performance or a material covenant of the Corporation on behalf of the
Acquired Fund is not fulfilled on or before the date specified for its
fulfillment or a material breach of this Agreement is made by the
Corporation on behalf of the Acquired 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
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 March 31, 2003, 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
Each party will pay its respective expenses of entering into and carrying
out the provisions of this Agreement whether or not the Reorganization is
completed, provided, however, that American Express Financial Corporation
will pay the costs of any resolicitation over and above the initial
solicitation necessary to achieve shareholder approval.
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.
AXP Market Advantage Series, Inc.
on behalf of AXP Total Stock Market Index Fund
By /s/ Xxxxxx X. Xxx
------------------------
Xxxxxx X. Xxx
Vice President
AXP Market Advantage Series, Inc.
on behalf of AXP S&P 500 Index Fund
By /s/ Xxxxxx X. Xxx
------------------------
Xxxxxx X. Xxx
Vice President
