AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement"), entered into as
of the 8th day of April, 2004, by and among IDS Life Insurance Company ("IDS
Life"), a stock life insurance company organized and existing under the laws of
the State of Minnesota, IDS Life Variable Annuity Fund A ("Fund A") and IDS Life
Variable Annuity Fund B ("Fund B," Fund A and Fund B, each a "Current Fund" and
together, the "Current Funds"), each a managed separate account established and
existing under the insurance laws of the State of Minnesota, AXP(R) Variable
Portfolio - Select Series, Inc. (the "VP Corporation"), a corporation organized
and existing under the laws of the State of Minnesota, on behalf of AXP(R)
Variable Portfolio - Core Equity Fund (the "New VP Fund"), and American Express
Financial Corporation ("AEFC"), a corporation organized and existing under the
laws of the State of Delaware (for the purposes of Article IV only), WITNESSETH,
that
WHEREAS, the Current Funds are registered with the Securities and Exchange
Commission (the "Commission") as open-end, diversified management investment
companies under the Investment Company Act of 1940 (the "1940 Act"), are each
managed by a Board of Managers comprised of the same individuals, have identical
investment objectives of long-term capital appreciation, and hold assets that
are materially similar; and
WHEREAS, the Current Funds currently support interests under variable annuity
contracts (the "Contracts") that were registered under the Securities Act of
1933 (the "1933 Act"), and while those registration statements remain in effect
and additional purchase payments are accepted under certain of those Contracts,
new sales of the Contracts have been terminated; and
WHEREAS, AEFC serves as investment adviser to the Current Funds; and
WHEREAS, the VP Corporation is registered with the Commission as an open-end,
management investment company and the New VP Fund is a diversified series
thereof; and
WHEREAS, the Board of Managers of Fund A has approved the transfer of assets
of Fund A to the New VP Fund in exchange for shares of the New VP Fund and the
restructuring of Fund A as a unit investment trust (the "New UIT A"), and the
Board of Managers of Fund B has approved the transfer of assets of Fund B to the
New VP Fund in exchange for shares of the New VP Fund and the restructuring of
Fund B as a unit investment trust (the "New UIT B," New UIT A and New UIT B,
each a "New UIT"), and each New UIT shall be registered with the Commission
under the 1940 Act as a unit investment trust (the "Reorganization"); and
WHEREAS, following the Reorganization, each New UIT shall be a passive
investment vehicle with no Board of Managers, no investment adviser and no
managed portfolio of investments, but shall invest exclusively in shares of the
New VP Fund; and
WHEREAS, following the Reorganization, the New VP Fund shall have a
substantially similar investment objective and substantially similar investment
policies and the same investment adviser as the Current Funds; and
WHEREAS, the Board of Managers of each Current Fund has considered and
approved the actions contemplated by this Agreement; and
WHEREAS, the Boards of Directors of IDS Life and of the VP Corporation have
each considered and approved the actions contemplated by this Agreement; and
WHEREAS, this Agreement is conditioned upon approval of the Reorganization
described herein by vote of a majority of the outstanding voting securities of
Fund A and by vote of a majority of the outstanding voting securities of Fund B,
as defined in the Minnesota Business Corporations Act, at a meeting of the
owners of the Contracts (the "Contract Owners") called for that purpose, or any
adjournments thereof;
NOW THEREFORE, in consideration of the mutual promises made herein, the
parties hereto agree as follows:
ARTICLE I
CLOSING DATE
SECTION 1.01. The Reorganization contemplated by this Agreement shall be
effective on such date as may be mutually agreed upon by all parties to this
Agreement (the "Closing Date"). The time on the Closing Date as of which the
Reorganization is consummated is referred to hereinafter as the "Effective
Time."
SECTION 1.02. The parties agree to use their best efforts to obtain all
necessary regulatory and Contract Owner approvals and perform all other acts
necessary or desirable to complete the Reorganization as of the Closing Date.
ARTICLE II
REORGANIZATION TRANSACTIONS
SECTION 2.01. As of the Effective Time, IDS Life, on behalf of the Current
Funds, shall sell, assign, and transfer all cash (except, if required, for a
minimal amount needed to keep bank accounts open), all securities and other
investments held or in transit, all accounts receivable for sold investments,
and all dividends and interest receivable (collectively, "portfolio assets") of
the Current Funds to be held as the property of the New VP Fund.
SECTION 2.02. In exchange for the portfolio assets of the Current Funds, the
New VP Fund shall issue to IDS Life for allocation to each New UIT, shares of
the New VP Fund, and the New VP Fund shall assume any unsatisfied liability
incurred by the Current Funds before the Effective Time (other than liabilities
associated with insurance obligations that will be assumed by the New UITs). For
each Current Fund, the number of shares of the New VP Fund to be issued in the
exchange shall be determined by dividing the value of the net assets of that
Current Fund to be transferred, as of the close of trading on the Closing Date,
by the initial per share value assigned to the shares of the New VP Fund.
SECTION 2.03. As of the Effective Time, IDS Life shall cause the shares of
the New VP Fund it receives pursuant to Section 2.02 above to be duly and
validly recorded and held on its records as assets of each New UIT, such that
the Contract Owners' interests in each New UIT after the Closing Date shall then
be equivalent to their former interests in the Current Funds. IDS Life shall
take all action necessary to ensure that such interests in each New UIT,
immediately following the Effective Time, are duly and validly recorded on the
Contract Owners' individual account records.
SECTION 2.04. The shares of the New VP Fund to be issued hereunder shall be
issued in open account form by book entry without the issuance of certificates.
Each such share that is issued pursuant to Section 2.02 above shall be issued
for a consideration equal to the initial value of shares of the New VP Fund.
SECTION 2.05. If, at any time after the Closing Date, New UIT A, New UIT B,
the New VP Fund, or IDS Life determine that any further conveyance, assignment,
documentation, or action is necessary or desirable to complete the
Reorganization contemplated by this Agreement or to confirm full title to the
assets transferred, the appropriate party or parties shall execute and deliver
all such instruments and take all such actions.
ARTICLE III
WARRANTIES AND CONDITIONS
SECTION 3.01. IDS Life, the Current Funds, and the New VP Fund, as
appropriate, make the following representations and warranties, which shall
survive the Closing Date and bind their respective successors and assigns (e.g.,
New UIT A and New UIT B):
(a) IDS Life, the Current Funds and the VP Corporation are validly organized
and established, and in good standing under the laws of the State of Minnesota,
and are fully empowered and qualified to carry out their business in all
jurisdictions where they do so, including entering into this Agreement and to
effect the Reorganization contemplated hereby (provided that all necessary
approvals referred to in Section 3.02 of this Agreement are obtained);
(b) Each Current Fund and the VP Corporation are duly registered as open-end,
management investment companies under the 1940 Act;
(c) The Contracts are validly issued and non-assessable, and all of the
Contracts issued through each Current Fund have been offered and sold in
material compliance with applicable requirements of the federal securities laws;
(d) All corporate and other proceedings necessary and required to be taken by
IDS Life, the Current Funds and the VP Corporation to authorize and carry out
this Agreement and to effect the Reorganization have been duly and properly
taken;
(e) There are no suits, actions, or proceedings pending or threatened against
the Current Funds or the New VP Fund which, to its knowledge, if adversely
determined, would materially and adversely affect its financial condition or the
conduct of its business -- further, there are no suits, actions, or proceedings
pending or threatened against any party to this Agreement which, to its
knowledge, if adversely determined, would materially and adversely affect its
ability to carry out its obligations hereunder;
(f) There are no investigations or administrative proceedings by the
Commission or by any insurance or securities regulatory body of any state or
territory or the District of Columbia pending against the Current Funds or the
New VP Fund which, to its knowledge, would lead to any suit, action, or
proceeding that would materially and adversely affect its financial condition or
the conduct of its business -- further, there are no investigations or
administrative proceedings by the Commission or by any insurance or securities
regulatory body of any state or territory or the District of Columbia pending
against any party to this Agreement, to its knowledge, that would lead to any
suit, action, or proceeding that would materially and adversely affect its
ability to carry out its obligations hereunder;
(g) Should any party to this Agreement become aware, prior to the Effective
Time, of any suit, action, or proceeding, of the types described in paragraphs
(e) or (f) above, instituted or commenced against it, such party shall
immediately notify and advise all other parties to this Agreement;
(h) Immediately prior to the Effective Time, IDS Life shall have valid and
unencumbered title to the portfolio assets of each Current Fund, except with
respect to those assets for which payment has not yet been made;
(i) Each party shall make available all information concerning itself which
may be required in any application, registration statement, or other filing with
a governmental body to be made by the New VP Fund, IDS Life, or each Current
Fund, or any or all of them, in connection with any of the transactions
contemplated by this Agreement and shall join in all such applications or
filings, subject to reasonable approval by its counsel. Each party represents
and warrants that all of such information so furnished shall be correct in all
material respects and that it shall not omit any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading;
(j) Other than with respect to contracts entered into in connection with the
portfolio management and custody of assets of the Current Funds which shall
terminate on or prior to the Closing Date, no party is currently engaged, and
the execution, delivery and performance of the Agreement by each party shall not
result, in a material violation of any such party's charter, by-laws, or any
material agreement, indenture, instrument, contract, lease or other undertaking
to which such party is bound, and to such party's knowledge, the execution,
delivery and performance of the Agreement shall not result in the acceleration
of any obligation, or the imposition of any penalty, under any material
agreement, indenture, instrument, contract, lease, judgment or decree to which
any such party is bound; and
(k) This Agreement is a valid obligation of IDS Life, the Current Funds and
the VP Corporation and is legally binding upon them in accordance with its
terms.
SECTION 3.02. The obligations of the parties hereunder shall be subject to
satisfaction of each of the following conditions:
(a) The representations contained herein shall be true as of and at the
Effective Time with the same effect as though made at such time, and such
parties shall have performed all obligations required by this Agreement to be
performed by each of them prior to such time;
(b) The Commission shall not have issued an unfavorable advisory report under
Section 25(b) of the 1940 Act nor instituted any proceeding seeking to enjoin
consummation of the Reorganization contemplated hereby;
(c) The appropriate parties shall have received orders from the Commission
providing such exemptions and approvals as they and their counsel reasonably
deem necessary, and shall have made all necessary filings, if any, with, and
received all necessary approvals from, state securities or insurance
authorities;
(d) The VP Corporation shall have filed with the Commission a registration
statement on Form N-14 under the 1933 Act and such amendments thereto as may be
necessary or desirable to effect the purposes of the Reorganization;
(e) The VP Corporation shall have filed a notification of registration on
Form N-8A under the 1940 Act, a registration statement on Form N-1A under the
1933 Act and the 1940 Act, and such amendments thereto as may be necessary or
desirable to register the New VP Fund and its shares;
(f) Each Current Fund shall have filed on Form N-4 a post-effective amendment
to its registration statement under the 1933 Act and the 1940 Act, and such
additional post-effective amendments thereto as may be necessary or desirable to
effect the purposes of the Reorganization;
(g) The appropriate parties shall have taken all actions necessary for the
filings required by paragraphs 3.02(d) through (f) to become effective, and no
reason shall be known by the parties which would prevent such filings from
becoming effective in a timely manner;
(h) At a meeting of the Contract Owners called for such purpose (or any
adjournments thereof), a majority of the outstanding voting securities (as
defined in the Minnesota Business Corporations Act) of the Current Funds shall
have voted in favor of approving this Agreement and the Reorganization
contemplated hereby, and shall also have voted to direct IDS Life to vote to:
(1) elect a Board of Directors of the VP Corporation;
(2) ratify the independent auditors of the New VP Fund;
(3) approve the investment advisory agreement for the New VP Fund with
AEFC; and
(4) authorize AEFC, subject to VP Corporation board approval, to retain and
replace subadvisers, or to modify subadvisory agreements, without
shareholder approval.
(i) The Board of Directors of the VP Corporation shall have taken the
following action at a meeting duly called for such purposes:
(1) approve this Agreement and adopted it as a valid obligation of the VP
Corporation on behalf of the New VP Fund and legally binding upon it,
(2) approve the investment advisory agreement between the VP Corporation on
behalf of the New VP Fund and AEFC,
(3) approve investment objectives, policies and restrictions for the New
VP Fund that are substantially similar to the investment objectives,
policies and restrictions of each Current Fund as in effect
immediately prior to the Reorganization (which may include changes
approved at the Contract Owner's meetings referred to above), and
(4) authorize the issuance by the New VP Fund on the Closing Date of
shares of the New VP Fund at their initial net asset value per share
in exchange for the portfolio assets of each Current Fund as
contemplated by this Agreement.
(j) IDS Life and each Current Fund shall have received an opinion of counsel
to the New VP Fund (who may be the same as counsel to IDS Life and the Current
Funds) in form and substance reasonably satisfactory to IDS Life and the Current
Funds to the effect that, as of the Closing Date:
(1) the New VP Fund has been duly organized, is existing in good standing,
and is authorized to issue its shares for the purposes contemplated by
this Agreement and the VP Corporation is duly registered as an
investment company under the 1940 Act,
(2) the shares of the New VP Fund to be issued pursuant to the terms of
this Agreement have been duly authorized and, when issued and
delivered as provided herein, shall be validly issued, fully paid, and
non-assessable,
(3) all corporate and other proceedings required to be taken by or on the
part of the New VP Fund to authorize and carry out this Agreement and
effect the Reorganization have been duly and properly taken, and
(4) this Agreement is a valid obligation of the New VP Fund and legally
binding upon it in accordance with its terms;
(k) The New VP Fund shall have received an opinion from counsel to IDS Life
(who may be the same as counsel to the New VP Fund and the Current Fund) in form
and substance reasonably satisfactory to the New VP Fund to the effect that, as
of the Closing Date:
(1) IDS Life and the Current Funds are validly organized and in good
standing under the laws of the State of Minnesota and are fully
empowered and qualified to carry out their business in all
jurisdictions where they do so, including to enter into this Agreement
and effect the transactions contemplated hereby,
(2) all corporate and other proceedings necessary and required to be taken
by or on the part of IDS Life and the Current Funds to authorize and
carry out this Agreement and to effect the Reorganization have been
duly and properly taken, and
(3) this Agreement is a valid obligation of IDS Life and the Current Funds
and legally binding upon them in accordance with its terms;
(l) IDS Life, the Current Funds and the New VP Fund shall have received an
opinion of Xxxxxxxxxx Xxxxxx & Xxxxxxx LLP as to the federal income tax
consequences of the Reorganization in form and substance reasonably satisfactory
to IDS Life, the Current Funds and the New VP Fund to the effect that, as of the
Closing Date:
(1) IDS Life (including the Current Funds) will not recognize any gain or
loss as a result of the restructuring of the Current Funds as New
UITs,
(2) IDS Life (including the Current Funds) will not recognize any gain or
loss as a result of the transfer of the Current Funds' assets to the
New VP Fund in exchange for shares of the New VP Fund and the
assumption by the New VP Fund of the Current Funds' liabilities (other
than liabilities associated with insurance obligations that will be
assumed by the New UITs),
(3) no gain or loss will be recognized by the New VP Fund upon the receipt
of the Current Funds' assets solely in exchange for the issuance of
New VP Fund shares and the assumption of the Current Funds'
liabilities (other than liabilities associated with insurance
obligations that will be assumed by the New UITs),
(4) the New VP Fund's basis in the Current Funds' assets received will be
the same as IDS Life's basis in those assets immediately prior to the
Reorganization,
(5) the New VP Fund's holding period for the transferred assets will
include IDS Life's holding period therefor,
(6) IDS Life's aggregate basis in the shares of the New VP Fund received
in the Reorganization will be the same as the aggregate adjusted basis
of the assets surrendered in exchange therefor reduced by the amount
of any liabilities of the Current Funds assumed by the New VP Fund,
(7) IDS Life's holding period in the shares of the New VP Fund received in
the Reorganization will include its holding period for the assets
surrendered in exchange therefor, provided such assets were held as
capital assets on the Closing Date, and
(8) no gain or loss will be recognized by the Contract Owners as a result
of the Reorganization;
(m) Each party shall have furnished, as reasonably requested by any other
party, other legal opinions, officers' certificates, incumbency certificates,
certified copies of board and committee resolutions, good standing certificates,
and other closing documentation as may be appropriate for a transaction of this
type.
ARTICLE IV
COSTS
SECTION 4.01. AEFC shall bear all expenses in connection with effecting the
Reorganization contemplated by this Agreement including, without limitation,
preparation and filing of registration statements, applications, and amendments
thereto on behalf of any and all parties hereto; and all legal, accounting, and
data processing services necessary to effect the Reorganization.
ARTICLE V
TERMINATION
SECTION 5.01. This Agreement may be terminated and the Reorganization
abandoned at any time prior to the Effective Time, notwithstanding approval by
the Contract Owners:
(a) by mutual consent of the parties hereto;
(b) by any of the parties if any condition set forth in Section 3.02 has not
been fulfilled by the other parties; or
(c) by any of the parties if the Reorganization does not occur on or before
Dec. 31, 2004 and no subsequent date can be mutually agreed upon.
SECTION 5.02. At any time prior to the Effective Time, any of the terms or
conditions of this Agreement may be waived by the party or parties entitled to
the benefit thereof if such waiver shall not have a material adverse effect on
the interests of Contract Owners.
ARTICLE VI
GENERAL
SECTION 6.01. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which shall constitute one
and the same instrument.
SECTION 6.02. This Agreement shall be governed by and construed and enforced
in accordance with the laws of Minnesota, without regard to its principles of
conflicts of law.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01. 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, as of the day and year first above written, each of the
parties has caused this Agreement to be executed on its behalf.
IDS LIFE INSURANCE COMPANY
By: /s/ Xxxxxxx X. Xxxxxxxx
-------------------------
Xxxxxxx X. Xxxxxxxx
President
IDS LIFE VARIABLE ANNUITY FUND A
By: /s/ Xxxxxxx X. Xxxxxxxx
-------------------------
Xxxxxxx X. Xxxxxxxx
President
IDS LIFE VARIABLE ANNUITY FUND B
By: /s/ Xxxxxxx X. Xxxxxxxx
-------------------------
Xxxxxxx X. Xxxxxxxx
President
AXP(R) VARIABLE PORTFOLIO - SELECT SERIES, INC. ON BEHALF OF AXP(R) VARIABLE
PORTFOLIO - CORE EQUITY FUND
By: /s/ Xxxxxx X. Xxx
-------------------------
Xxxxxx X. Xxx
Vice President
The undersigned is a party to this Agreement for purposes of Article IV only.
AMERICAN EXPRESS FINANCIAL CORPORATION
By: /s/ Xxxxx X. Xxxxx
-------------------------
Xxxxx X. Xxxxx
Senior Vice President and General Manager - Mutual Funds
