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Exhibit 1.3
AGREEMENT AND PLAN OF
REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement"), dated this __
day of _________, 1989, is entered into by and among Xxxxxx Investors Life
Insurance Company ("KILICO"), a stock life insurance company organized under the
laws of the State of Illinois, KILICO on behalf of KILICO Variable Separate
Account, organized under the insurance laws of the State of Illinois, KILICO
Money Market Separate Account ("Money Market Account") KILICO Total Return
Separate Account" ("Total Return Account"), KILICO Income Separate Account
("Income Accounts"), KILICO Equity Separate Account ("Equity Account")
(collectively, the "Accounts"), all organized under the insurance laws of the
State of Illinois, Xxxxxx Investors Fund ("KINF"), a business trust organized
under the laws of the Commonwealth of Massachusetts, and Xxxxxx Financial
Services, Inc. ("KFS"), a corporation organized under the laws of the State of
Delaware.
WHEREAS, KINF is a series-type mutual fund consisting of the following
portfolios: money market, total return, high yield, equity, and government
securities (individually and collectively referred to as the "Existing
Portfolio(s)"), and is registered with the Securities and Exchange Commission
("SEC") as an open-end, diversified management investment company under the
Investment Company Act of 1940 (the "1940 Act");
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WHEREAS, KFS is the investment adviser and principal underwriter of KINF,
and the principal underwriter of KILICO Variable Separate Account and the
Accounts;
WHEREAS, KILICO is the investment adviser of the Accounts;
WHEREAS, the Money Market Account is registered with the SEC as an
open-end, diversified management investment company and invests primarily in
high quality short-term money market instruments in seeking to provide maximum
current income to the extent consistent with stability of principal;
WHEREAS, the Total Return Account is registered with the SEC as an
open-end, diversified management investment company and invests in a
combination of debt securities and common stock in seeking to provide a high
total return, through a combination of income and capital appreciation;
WHEREAS, the Income Account is registered with the SEC as an open-end,
diversified management investment company and invests in fixed-income
securities in seeking to provide a high level of current income;
WHEREAS, the Equity Account is registered with the SEC as an open-end,
diversified management investment company and normally invests in common stocks
and securities convertible into common stocks in seeking to provide maximum
appreciation of capital;
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WHEREAS, KILICO Variable Separate Account is registered with the SEC as an
unit investment trust investment company under the 1940 Act and has the
following sub-accounts: money market, total return, high yield, equity and
government securities;
WHEREAS, KILICO is the depositor of and currently provides
administrative and contract owner recordkeeping services for the Accounts and
KILICO Variable Separate Account;
WHEREAS, the respective Board of Managers (the "Board" or "Boards") of
each Account has approved the reorganization of the Accounts into a single unit
investment trust with sub-accounts investing in shares of a corresponding
portfolio of KINF;
WHEREAS, the respective Boards have determined that the Money Market
Account shall be the continuing unit investment trust separate account (the
"KILICO Variable Annuity Separate Account"), that the Total Return, Income and
Equity Accounts shall be combined with the Money Market Account and shall
continue as sub-accounts of the KILICO Variable Annuity Separate Account
("Sub-Accounts"), and that the separate registrations of the Total Return,
Income and Equity Accounts with the SEC shall be withdrawn;
WHEREAS, the Existing Portfolios currently serve as investment vehicles
for KILICO Variable Separate Account funding variable life insurance policies;
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WHEREAS, the Existing Portfolios of KINF will serve as investment vehicles
for the KILICO Variable Annuity Separate Account funding variable annuity
contracts;
WHEREAS, KINF will act as an investment vehicle for KILICO Variable
Separate Account and KILICO Variable Annuity Separate Account and may in the
future act as an investment vehicle for other separate accounts funding variable
annuities, variable life insurance or other insurance products offered by KILICO
or other insurance companies;
WHEREAS, the Board of Directors of KILICO, the Boards of Managers of the
Accounts, and the Board of Trustees of KINF have each considered and approved
the actions contemplated by this Agreement; and
WHEREAS, this Agreement is conditioned upon approval of the reorganization
contemplated by this Agreement, by majority vote, as defined in the 1940 Act and
rules thereunder, of the contract owners in each of the Accounts ("Contract
Owner") at meetings called for that purpose, or any adjournments thereof.
NOW, THEREFORE, in consideration of the mutual promises made herein, the
parties hereto agree as follows:
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ARTICLE I
CLOSING DATE
SECTION 1.01. The reorganization contemplated by this Agreement shall be
effective on September 1, 1989 or on such other date as may be mutually agreed
upon by all parties to this Agreement (the "Closing Date"). The time of 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
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, KILICO, on behalf of the Accounts,
will sell, assign and transfer to KINF all of each Account's cash, securities
and other investments held or in transit, receivables for investments sold,
dividends, interest receivables and any other assets of each Account
("portfolio assets"). The portfolio assets of the Money Market Account will be
held as the property of the Money Market portfolio, the portfolio assets of the
Total Return Account as the property of the Total Return portfolio, the
portfolio assets of the Income Account as the property of the High Yield
portfolio, and the portfolio assets of the Equity Account as the property of
the Equity portfolio.
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SECTION 2.02. In exchange for the portfolio assets of each Account, KINF
will issue full and fractional shares of its corresponding Existing Portfolio
to KILICO, as depositor for the KILICO Variable Annuity Separate Account, and
will assume any unsatisfied liabilities incurred by each Account before the
Effective Time. The number of shares of the corresponding Existing Portfolio to
be issued in the exchange shall be that number which, based upon the relative
net asset values per share of each Existing Portfolio, has an aggregate net
asset value equal to the portfolio assets minus the liabilities of the
respective Account. The value of the portfolio assets less the liabilities of
each Account shall be determined as of the close of business on the business
day preceding the Closing Date, as determined by the method or methods set
forth in the prospectuses and statements of additional information of the
Accounts, dated May 1, 1989.
SECTION 2.03. As of the Effective Time, KILICO shall cause the shares it
receives from KINF pursuant to Section 2.02 above to be duly and validly
recorded and held on its records as assets of newly-created Sub-Accounts of the
KILICO Variable Annuity Separate Account, such that the Contract Owners'
interests in the Money Market Sub-Account will then be equivalent to their
former interests in the Money Market Account, the Contract Owners' interests in
the Total Return Sub-Account will then be equivalent to their former interests
in the Total Return Account, the Contract Owners' interests in the High Yield
Sub-Account will then be equivalent to their former interests in the Income
Account and the Contract Owners' interests in the Equity Sub-Account will then
be equivalent to their former interests in the Equity Account. KILICO shall
take all action necessary to ensure that such
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interests in the Sub-Accounts, immediately following the Effective Time, are
duly and validly recorded on the Contract Owners' account records. The Accounts
other than the KILICO Variable Annuity Separate Account shall thereafter file
with the SEC applications to deregister under Section 8(f) of the
1940 Act.
SECTION 2.04. The net asset value per share of the shares of each of the
Existing Portfolios shall be determined as of the close of business on the
business day preceding the Closing Date, by the method or methods set forth in
the prospectus and statement of information of KINF, dated May 1, 1989.
SECTION 2.05. KINF shares to be issued hereunder shall be issued in open
account form by book entry without the issuance of certificates.
SECTION 2.06. If, at any time after the Closing Date, the Accounts, KINF,
KFS or KILICO shall determine that any further conveyance, assignment,
documentation or action is necessary or desirable to complete the
reorganization contemplated by this Agreement or confirm full title to the
assets transferred, the appropriate party or parties shall execute and deliver
all such instruments and take all such actions.
SECTION 2.7. Following the Closing Date, KILICO shall provide
administrative and contract owner recordkeeping services to the KILICO Variable
Annuity Separate Account, either directly or through other
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entitles, substantially identical to the administrative and contract owner
recordkeeping services currently provided by KILICO to the Accounts.
SECTION 2.8. Following the Closing Date, KILICO shall cease to charge the
Accounts for investment advisory services and, with respect to contracts issued
prior to the Effective Time, no investment advisory or other expenses shall be
charged against the Existing Portfolios of a type or in an amount that could
not have been charged against the Accounts had the reorganization not occurred
unless such expenses are reimbursed, with respect to such contracts or
certificates, by KILICO. The requirement to make such reimbursement shall not
apply, however, to any federal income tax payable if KINF fails to qualify as a
"regulated investment company" under the applicable provisions of the Internal
Revenue Code.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND CONDITIONS
SECTION 3.01. Each Account, KFS, KILICO and KINF, as appropriate, make the
following representations and warranties, which shall survive the closing of
the reorganization:
(a) 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
financial condition, the conduct of its business or its ability to
carry out its obligations hereunder;
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(b) There are no investigations or administrative proceedings by the SEC
or by any insurance or securities regulatory body of any state
territory or the District of Columbia pending against any party to
this Agreement which, to its knowledge, would lead to any suit, action
or proceeding that would materially and adversely affect its financial
condition, the conduct of its business or its ability to carry
out its obligations hereunder;
(c) 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 (a) or (b) above, instituted or commenced
against it, such party shall immediately notify and advise all other
parties to this Agreement;
(d) Immediately prior to the Effective Time, KILICO shall have valid and
unencumbered title to the portfolio assets of the Accounts, except
with respect to those assets for which payment has not yet been made;
and
(e) All information provided by each party concerning itself required in
any application, registration statement or other filing with a
governmental body to be made by KINF, by KILICO, by KILICO Variable
Separate Account, by KFS, by the Accounts or by the KILICO Variable
Annuity Separate Account, or any or all of them, in connection with
any of the transactions contemplated by this Agreement shall be
correct in all material respects and shall not
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omit any material fact required to be stated therein or necessary in
order to make the statements therein not misleading.
SECTION 3.02. The obligations of the parties hereunder shall be Subject to
satisfaction of each of the following conditions:
(a) The representations and warranties 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 SEC 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) Each party shall have made 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 KINF, by KILICO,
by KILICO Variable Separate Account, by KFS, by the Accounts or by the
KILICO Variable Annuity Separate Account, or any or all of them, in
connection with any of the transactions contemplated by this Agreement
and has joined in such applications or filings, subject to reasonable
approval of its counsel;
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(d) The appropriate parties shall have received orders from the SEC
providing such exemptions and approvals as they and their counsel
reasonably deem necessary, including exemptions from or approvals
under Sections 17(a) and 17(d) of the 1940 Act and Rule 17d-1
thereunder, and made all necessary filings with and received all
necessary approvals from state securities or insurance authorities;
(e) KILICO Variable Annuity Separate Account shall have filed with the
Commission one or more post-effective amendments to their registration
statements under the Securities Act of 1933 (the "1933 Act") as are
necessary or desirable in connection with the reorganization
contemplated by this Agreement; KINF shall have filed one or more
post-effective amendments to its registration statement under the 1933
Act as may be necessary or desirable to effect the purposes of the
reorganization; and the appropriate parties shall take all action
necessary for such filings to become effective as soon as possible
following the Closing Date, and no known reason shall exist for such
filings not to become effective within a reasonable period;
(f) At Contract Owners meetings called for such purposes (or any
adjournments thereof), a majority in interest, as defined in the 1940
Act and the rules thereunder, of the Contract Owners in each Account
shall have voted in favor of approving this Agreement and the
reorganization contemplated hereby, and the Contract Owners
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in the Accounts and the policy owners of the KILICO Variable Separate
Account shall have voted (by an affirmative vote of more than 50% of
the total eligible votes) to direct KILICO to vote, at a shareholders
meeting following the Contract Owners' meeting, the KINF shares held
by it to:
(1) ratify the election of the Board of Trustees of KINF;
(2) ratify the selection of Peat Marwick Main & Co. as KINF's
independent accountants for the fiscal year ending December 31,
1989.
(g) The Board of Trustees of KINF shall have taken the necessary action
at a meeting duly called for such purposes to approve this Agreement
and adopt it as a valid obligation of KINF and legally binding upon
it;
(h) KILICO and the Accounts shall have received an opinion of counsel to
KINF in form and substance reasonably satisfactory to them to the
effect that, as of Closing Date:
(1) KINF has been duly organized, is existing in good standing and is
authorized to issue shares of its Existing Portfolios for the
purposes contemplated by this Agreement and is duly registered and
in good standing as an open-end, management investment company
under the 1940 Act;
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(2) the shares of the Existing Portfolios to be issued pursuant
to the terms of this Agreement have been duly authorized and, when
issued and delivered as provided herein, will be validly issued,
fully paid and non-assessable;
(3) all actions required to be taken by or on the part of KINF 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 KINF and legally binding
upon it in accordance with its terms.
(1) KINF and the Accounts shall have received an opinion from counsel to
KILICO (who may be the same as counsel to KINF) in form and substance
reasonably satisfactory to them to the effect that, as of the Closing
Date:
(1) KILICO, KILICO Variable Separate Account, and the Accounts are
validly organized, KILICO is in good standing under the laws of
the State of Illinois and all such entities are fully empowered
and qualified to carry out their businesses in all jurisdictions
where they do so, including to enter into this Agreement and
effect the transactions contemplated hereby;
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(2) all corporate and other proceedings necessary and required to be
taken by or on the part of KILICO, KILICO Variable Separate
Account, and the Accounts 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 KILICO, KILICO Variable
Separate Account and the Accounts and legally binding upon them in
accordance with its terms.
(j) Each party shall have furnished, as reasonably requested by any other
party, such 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. KILICO shall bear all expenses incurred in connection with
effecting the reorganization contemplated by this Agreement including, without
limitation, any expenses in connection with actions taken pursuant to Section
2.06 herein, preparation and filing of necessary registration statements, proxy
statements and applications and amendments on behalf of any and all parties
hereto, expenses of KINF and all legal, accounting and data processing
services.
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ARTICLE V
TERMINATION
SECTION 5.01. This Agreement may be terminated and the reorganization
abandoned as follows at any time prior to the Effective Time, notwithstanding
approvals by Contract Owners .
(1) by mutual consent of the parties hereto;
(2) by any of the parties if any condition set forth in Section 3.02 has
not been fulfilled by the other parties; or
(3) by any of the parties if the reorganization does not occur by December
31, 1989 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 will 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.
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SECTION 6.02. A copy of the Declaration of Trust of KINF, as amended, is
on file with the Secretary of the Commonwealth of Massachusetts; and notice is
hereby given that this Agreement is executed on behalf of the Trustees of KINF
as Trustees and not individually and that the obligations of this instrument
are not personally binding upon any shareholder of KINF or on any of the
Trustees, officers, employees or agents of KINF, but are binding only upon the
assets and property of KINF.
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 by its
President or a Vice President or Chairman and attested by its Secretary or
Assistant Secretary, all thereunto duly authorized.
ATTEST: XXXXXX INVESTORS LIFE
INSURANCE COMPANY
___________________________ By:____________________________
Title Title
ATTEST: KILICO VARIABLE SEPARATE ACCOUNT
By: XXXXXX INVESTORS LIFE
INSURANCE COMPANY
___________________________ By:____________________________
Title Title
ATTEST: KILICO MONEY MARKET SEPARATE ACCOUNT
___________________________ By:____________________________
Title Title
ATTEST: KILICO TOTAL RETURN SEPARATE ACCOUNT
___________________________ By:____________________________
Title Title
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ATTEST: KILICO INCOME SEPARATE ACCOUNT
___________________________ By:____________________________
Title Title
ATTEST: KILICO EQUITY SEPARATE ACCOUNT
___________________________ By:____________________________
Title Title
ATTEST: XXXXXX FINANCIAL SERVICES, INC.
___________________________ By:____________________________
Title Title
ATTEST: XXXXXX INVESTORS FUND
___________________________ By:____________________________
Title Title
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