AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement")
is entered into this 13th day of October, 1998, by and among
American Fidelity Assurance Company ("American Fidelity"), a
stock life insurance company organized and existing under the
laws of the State of Oklahoma, American Fidelity Variable
Annuity Fund A ("Account A"), a managed separate account
organized under the insurance laws of the State of Oklahoma, and
American Fidelity Dual Strategy Fund, Inc. (the "Fund"), a
corporation organized and existing under the laws of the State of
Maryland.
WHEREAS, Account A is registered with the Securities and
Exchange Commission (the "Commission") as an open-end diversified
management investment company under the Investment Company Act of
1940, as amended (the "1940 Act");
WHEREAS, Account A is managed by a Board of Managers and has
the primary investment objective of long-term capital growth;
WHEREAS, Account A currently funds group variable annuity
contracts ("Contracts") issued by American Fidelity;
WHEREAS, Account A has offered and sold Contracts and
accepted premium payments with respect to outstanding Contracts
pursuant to a registration statement on Form N-3 filed under the
1940 Act and the Securities Act of 1933, as amended (the "1933
Act");
WHEREAS, American Fidelity is the investment adviser to
Account A;
WHEREAS, the Fund is a newly formed Maryland corporation and
is in registration with the Commission as an open-end diversified
management investment company under the 1940 Act;
WHEREAS, the Fund, to the extent permitted by the 1940 Act,
will serve as an investment vehicle for variable annuities issued
by American Fidelity;
WHEREAS, pursuant to this Agreement, Account A will transfer
its portfolio assets to the Fund and be converted into a unit
investment trust ("Continuing Account A") (the "Reorganization");
WHEREAS, following the Reorganization, Continuing Account A
will be a passive investment vehicle with no Board of Managers,
no investment adviser and no active portfolio of investments, but
will invest exclusively in shares of the Fund;
WHEREAS, following the Reorganization, the Fund will have
the same investment objectives, substantially the same investment
policies and restrictions, the same Board membership, and the
same investment adviser and sub-advisers as Account A had prior
to the Reorganization;
WHEREAS, the Board of Managers of Account A (the "Board"),
including those members who are not "interested persons" within
the meaning of Section 2(a)(19) of the 1940 Act, has considered
and approved the participation of Account A in the Reorganization
contemplated by this Agreement, based on its finding that such
participation would be in the best interests of Account A and
would not result in the dilution of the interests of owners of
Contracts ("Contract Owners");
WHEREAS, the Board of Directors of the Fund, including those
directors who are not "interested persons" within the meaning of
Section 2(a)(19) of the 1940 Act, has considered and approved the
participation of the Fund in the Reorganization, based on its
finding that such participation would be in the best interests of
the Fund and would not result in the dilution of the interests of
any Contract Owners; and
WHEREAS, this Agreement is conditioned upon approval of the
Reorganization by majority vote, as defined in the 1940 Act and
rules thereunder, of the Contract Owners of Account A at a
meeting 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 shall be effective on
January 1, 1999, or at such other 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 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, American Fidelity,
on behalf of Account A, will sell, assign and transfer all cash,
securities and other investments held or in transit, receivables
for sold investments and dividend and interest receivables
("portfolio assets") of Account A to the Fund, the portfolio
assets to be held as the property of the Fund.
Section 2.02 In exchange for the portfolio assets of
Account A, the Fund will issue shares to American Fidelity for
the account of Continuing Account A and will assume any
unsatisfied liabilities incurred by Account A before the
Effective Time, including obligations to pay for securities or
other investments purchased and to pay accrued management and
investment advisory fees. The number of full and fractional
shares of the Fund to be issued in the exchange shall be determined
by dividing the value of the net assets of Account A to be trans-
ferred, as of the close of trading on the first business day
preceding the Closing Date, by the initial share value assigned to
the shares of the Fund.
Section 2.03 As of the Effective Time, American Fidelity
shall cause the shares it receives from the Fund, pursuant to
Section 2.02 above, to be duly and validly recorded and held on
its records as assets of Continuing Account A, such that the
Contract Owners' interests in Continuing Account A after the
Closing Date will then be equivalent to their interests in
Account A immediately prior to the Reorganization. American
Fidelity shall take all action necessary to ensure such interests
in Continuing Account A, immediately following the Effective
Time, are duly and validly recorded on the Contract Owners'
and participants' individual account records.
Section 2.04 The Fund shares to be issued hereunder shall
be issued in open account form by book entry without the issuance
of certificates. Each share that is issued pursuant to Section
2.02 above will be issued for a consideration equal to the
initial value of Fund shares.
Section 2.05 If, at any time after the Closing Date,
Continuing Account A, the Fund or American Fidelity shall
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.
Section 2.06 Following the Closing Date, American Fidelity
shall make available to the Account A Contract Owners a contract
endorsement which shall provide for investments in the Fund.
This endorsement shall be made available to Contract Owners as
regulatory authority is obtained.
Section 2.07 Following the Closing Date, American Fidelity
shall reimburse Contract Owners to the extent that they are
charged indirectly Fund expenses (investment management fees plus
other operating expenses) at a rate that exceeds the rate at
which such expenses would have been charged to them by Account A
had there been no Reorganization. Such reimbursement shall not
apply to any federal income tax if the Fund fails to qualify as a
"regulated investment company" under the applicable provisions of
the Internal Revenue Code, or to any charge for American
Fidelity's federal income taxes attributable to the Contracts,
provided American Fidelity has reserved in the Contracts the
right to charge Contract Owners for such taxes.
ARTICLE III
Warranties and Conditions
Section 3.01 Account A, American Fidelity and the Fund, as
appropriate, make the following representations and warranties,
which shall survive the Closing Date and bind their respective
successors and assigns, including Continuing Account A:
(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;
(b) There are no investigations or administrative
proceedings by the Commission 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 paragraph (a)
or (b) above, instituted or commenced against it, it
shall immediately notify and advise all other parties
to this Agreement;
(d) Immediately prior to the Effective Time,
American Fidelity, on behalf of Account A, shall have
valid and unencumbered title to the portfolio assets of
Account A, except with respect to those assets for
which payment has not yet been made;
(e) 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 Fund,
American Fidelity or Account A, 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
of their 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; and
(f) Other than with respect to contracts entered
into in connection with the portfolio management of
Account A which shall terminate on or prior to the
Closing Date, no party is currently engaged, and the
execution, delivery and performance of this Agreement
by each party will 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 this Agreement will 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 may be a party or to which it is
bound.
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, including an order pursuant to Section 17(b)
of the 1940 Act, and shall have made all necessary
filings, if any, with, and received all necessary
approvals from, state securities or insurance
authorities;
(d) Account A and the Fund 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 for the registration of the
shares issued by the Fund to Continuing Account A in
exchange for Account A's investment portfolio and for
the registration of the separate account interests in
Continuing Account A to Contract Owners in exchange for
the outstanding securities of Account A held by the
Contract Owners, thereby effecting the purposes of the
Reorganization; provided, however, such filing shall not
be required if counsel to Account A and the Fund determine
that registration on Form N-14 is not necessary in
accordance with advice of the staff of the Commission with
respect to conversion transactions similar to the
Reorganization.
(e) The Fund 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 effect the purposes of the
Reorganization;
(f) On behalf of Account A, American Fidelity
shall have filed on Form N-4 a post-effective amendment
to the registration statement of Account A under the
1933 Act and the 1940 Act, and such 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 Contract Owners' meeting called for such
purpose (or any adjournments thereof), a majority of
the outstanding voting securities (as defined in the
1940 Act and the rules thereunder) of Account A shall
have voted in favor of approving this Agreement and the
Reorganization;
(i) The Board of Directors of the Fund shall have
taken the following actions:
(1) approve this Agreement and the
Reorganization;
(2) approve the investment advisory
agreement between the Fund and American
Fidelity;
(3) approve the investment sub-advisory
agreements with each of Xxxxxxxx X. Xxxxx &
Associates, Inc. and Xxxx Investment Advisors,
Inc. with respect to sub-advisory services for
the Fund;
(4) approve investment objectives,
policies and restrictions for the Fund that
are substantially identical to the investment
objectives, policies and restrictions of
Account A as in effect immediately prior to
the Reorganization (which may include changes
approved at the Contract Owners' meeting
referred to above); and
(5) authorize the issuance on the
Closing Date by the Fund of its shares at the
initial net asset value per share in exchange
for the portfolio assets of Account A, as
contemplated by this Agreement;
(j) American Fidelity and Account A shall have
received an opinion of counsel to the Fund (who may be
the same as counsel to American Fidelity and Account A)
in form and substance reasonably satisfactory to them
to the effect that, as of the Closing Date:
(1) the Fund is duly incorporated and
in good standing under the laws of the State
of Maryland;
(2) the Fund is authorized to issue
shares for the purposes contemplated by this
Agreement and is duly registered as an
investment company under the 1940 Act;
(3) the shares of the Fund 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;
(4) all corporate and other proceedings
necessary and required to be taken by or on
the part of the Fund to authorize and carry
out this Agreement and effect the
Reorganization have been duly and properly
taken; and
(5) this Agreement is a valid
obligation of the Fund and legally binding
upon it in accordance with its terms;
(k) The Fund and Account A shall have received an
opinion from counsel to American Fidelity (who may be
the same as counsel to the Fund and Account A) in form
and substance reasonably satisfactory to them to the
effect that, as of the Closing Date:
(1) American Fidelity is duly
incorporated and in good standing under the
laws of the State of Oklahoma and is fully
empowered and qualified to carry out its
business in all jurisdictions where it does
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 Account A and American Fidelity
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 American Fidelity and Account A
and legally binding upon them in accordance
with its terms;
(l) American Fidelity shall have received an
opinion of counsel that the Reorganization will have no
adverse tax consequences on any of the parties or on
Contract Owners; and
(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 American Fidelity shall bear all expenses in
connection with effecting the Reorganization contemplated by this
Agreement, including, without limitation, preparation and filing
of registration statements and applications and amendments 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 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; and
(c) by any of the parties if the Reorganization
does not occur as of March 31, 1999, 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 the
Contract Owners.
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 Chairman and attested
by its Secretary, all thereunto duly authorized.
ATTEST: AMERICAN FIDELITY ASSURANCE
COMPANY
By XXXXXXX X. XXXXXXX By XXXX X. XXX
Xxxxxxx X. Xxxxxxx, Secretary Xxxx X. Xxx, President
ATTEST: AMERICAN FIDELITY VARIABLE
ANNUITY FUND A
By XXXXXX X. XXXXX, XX. By XXXX X. XXX
Xxxxxx X. Xxxxx, Xx., Secretary Xxxx X. Xxx, Chairman
ATTEST: AMERICAN FIDELITY DUAL
STRATEGY FUND, INC.
By XXXXXX X. XXXXX, XX. By XXXX X. XXX
Xxxxxx X. Xxxxx, Xx., Secretary Xxxx X. Xxx, President
