AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made
as of this 28th day of February, 2005, by and between Franklin Multi-Income
Trust ("Multi-Income Trust"), a Massachusetts business trust and a closed-end
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"), with its principal place of business at Xxx
Xxxxxxxx Xxxxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000, and Franklin Custodian Funds,
Inc. ("Custodian Funds"), a Maryland corporation and an open-end management
investment company registered under the 1940 Act, with its principal place of
business at Xxx Xxxxxxxx Xxxxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000, on behalf of its
series, Franklin Income Fund ("Income Fund").
PLAN OF REORGANIZATION
The reorganization (hereinafter referred to as the "Reorganization")
will consist of (i) the acquisition by Income Fund of substantially all of the
property, assets and goodwill of Multi-Income Trust in exchange solely for full
and fractional shares, par value $0.01 per share, of Income Fund - Class A
("Income Fund Class A Shares"); (ii) the distribution of Income Fund Class A
Shares to the holders of shares of beneficial interest, par value $0.01 per
share, of Multi-Income Trust ("Multi-Income Trust Shares"), according to their
respective interests in Multi-Income Trust in complete liquidation of
Multi-Income Trust; and (iii) the dissolution of Multi-Income Trust as soon as
is practicable after the closing (as described in Section 3, hereinafter called
the "Closing"), all upon and subject to the terms and conditions of this
Agreement hereinafter set forth.
AGREEMENT
In order to consummate the Reorganization and in consideration of the
premises and of the covenants and agreements hereinafter set forth, and
intending to be legally bound, the parties hereto covenant and agree as follows:
1. SALE AND TRANSFER OF ASSETS, LIQUIDATION AND DISSOLUTION OF MULTI-INCOME
TRUST.
(a) Subject to the terms and conditions of this Agreement, and in reliance
on the representations and warranties of Custodian Funds, on behalf of Income
Fund, herein contained, and in consideration of the delivery by Custodian Funds,
on behalf of Income Fund, of the number of Income Fund Class A Shares
hereinafter provided, Multi-Income Trust agrees that it will convey, transfer
and deliver to Custodian Funds, on behalf of Income Fund, at the Closing, all of
Multi-Income Trust's then existing assets, free and clear of all liens,
encumbrances, and claims whatsoever, except for cash, bank deposits, or cash
equivalent securities in an estimated amount reasonably necessary to: (i) pay
its costs and expenses of carrying out this Agreement (including, but not
limited to, fees of counsel and accountants, and expenses of its liquidation and
dissolution contemplated hereunder), which costs and expenses shall be
established on Multi-Income Trust's books as liability reserves; (ii) discharge
its unpaid liabilities on its books at the closing date (as defined in Section
3, hereinafter called the "Closing Date"), including, but not limited to, its
income dividends and capital gains distributions, if any, payable for the period
prior to, and through, the Closing Date and those liabilities that would
otherwise be discharged at a later date in the ordinary course of business; and
(iii) pay such contingent liabilities as the Board of Trustees of Multi-Income
Trust shall reasonably deem to exist against Multi-Income Trust, if any, at the
Closing Date, for which contingent and other appropriate liability reserves
shall be established on Multi-Income Trust's books (hereinafter "Net Assets").
Multi-Income Trust shall also retain any and all rights that it may have over
and against any person that may have accrued up to and including the close of
business on the Closing Date. Neither Custodian Funds nor Income Fund will
assume any liabilities of Multi-Income Trust, whether absolute or contingent.
(b) Subject to the terms and conditions of this Agreement, and in reliance
on the representations and warranties of Multi-Income Trust herein contained,
and in consideration of such sale, conveyance, transfer, and delivery, Custodian
Funds, on behalf of Income Fund, agrees at the Closing to deliver to
Multi-Income Trust the number of Income Fund Class A Shares, determined by: (i)
dividing the net asset value per share of the Multi-Income Trust Shares by the
net asset value per share of Income Fund Class A Shares; and (ii) multiplying
the result thereof by the number of outstanding Multi-Income Trust Shares, all
as of 1:00 p.m., Pacific time, on the Closing Date. All such values shall be
determined in the manner and as of the time set forth in Section 2 hereof.
(c) Immediately following the Closing, Multi-Income Trust shall distribute
pro rata to its shareholders of record as of the close of business on the
Closing Date, Income Fund Class A Shares received by Multi-Income Trust pursuant
to this Section 1. Such distribution shall be accomplished by the establishment
of accounts on the share records of Income Fund of the type and in the amounts
due such shareholders, based on their respective holdings as of the close of
business on the Closing Date. Fractional Income Fund Class A Shares shall be
carried to the fourth decimal place. As promptly as is practicable after the
Closing, each holder of any outstanding certificate or certificates representing
shares of beneficial interest of Multi-Income Trust shall be entitled to
surrender the same to the transfer agent for Income Fund in exchange for the
number of Income Fund Class A Shares into which the Multi-Income Trust Shares
theretofor represented by the certificate or certificates so surrendered shall
have been converted. Until so surrendered, each outstanding certificate which,
prior to the Closing, represented shares of beneficial interest of Multi-Income
Trust shall be deemed for all Custodian Funds' purposes to evidence ownership of
the number of Income Fund Class A Shares into which the Multi-Income Trust
Shares (which, prior to the Closing, were represented thereby) have been
converted. Certificates for Income Fund Class A Shares shall not be issued,
unless specifically requested by the shareholders. Promptly following the
Closing and the liquidating distribution of the Income Fund Class A Shares,
Multi-Income Trust shall be dissolved.
2. VALUATION.
(a) The value of Multi-Income Trust's Net Assets to be acquired by
Custodian Funds, on behalf of Income Fund hereunder, shall in each case be
computed as of 1:00 p.m., Pacific time, on the Closing Date, in a manner
consistent with the valuation procedures described in Multi-Income Trust's
registration statement on Form N-2, as filed with the U.S. Securities and
Exchange Commission (the "SEC") on August 25, 1989, as such disclosures have
been amended to date by any: (i) amendments to Multi-Income Trust's Registration
Statement on Form N-2 as filed with the SEC; (ii) press releases issued on
behalf of Multi-Income Trust; and (iii) Multi-Income Trust's annual or
semi-annual reports sent to shareholders pursuant to Section 30 of the 1940 Act
(collectively, the "Multi-Income Trust Disclosure Documents").
(b) The per-share net asset value of Multi-Income Trust Shares shall be
determined as of 1:00 p.m., Pacific time, on the Closing Date, in a manner
consistent with the valuation procedures described in the Multi-Income Trust
Disclosure Documents.
(c) The per-share net asset value of Income Fund Class A Shares shall be
determined as of 1:00 p.m., Pacific time, on the Closing Date, in a manner
consistent with the valuation procedures described in Income Fund's currently
effective prospectus.
3. CLOSING AND CLOSING DATE.
The Closing Date shall be July 28, 2005, or such later date as the parties
may mutually agree. The Closing shall take place at the principal office of
Custodian Funds at 2:00 p.m., Pacific time, on the Closing Date. Multi-Income
Trust shall have provided for delivery as of the Closing those Net Assets of
Multi-Income Trust to be transferred to the account of Income Fund's custodian,
Bank of New York, Mutual Funds Division, 000 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000. Also, Multi-Income Trust shall deliver at the Closing a list of names and
addresses of the shareholders of record of its Multi-Income Trust Shares and the
number of full and fractional Multi-Income Trust Shares owned by each such
shareholder, indicating thereon which such shares are represented by outstanding
certificates and which by book-entry accounts, all as of 1:00 p.m., Pacific
time, on the Closing Date, certified by its transfer agent or by its President
to the best of its or his knowledge and belief. Custodian Funds, on behalf of
Income Fund, shall provide evidence satisfactory to Multi-Income Trust that the
Income Fund Class A Shares to be delivered to the account of Multi-Income Trust
hereunder have been registered in an account on the books of Income Fund in such
manner as the officers of Multi-Income Trust may request.
4. REPRESENTATIONS AND WARRANTIES BY CUSTODIAN FUNDS, ON BEHALF OF INCOME FUND.
Custodian Funds, on behalf of Income Fund, represents and warrants to
Multi-Income Trust that:
(a) Income Fund is a series of Custodian Funds, a corporation created under
the laws of Maryland pursuant to Articles of Incorporation dated October 9,
1979, and filed, accepted and recorded by the Maryland State Department of
Assessment and Taxation on October 16, 1979 ("Charter"), and validly exists
under the laws of the State of Maryland. Custodian Funds is duly registered
under 1940 Act as an open-end management investment company, and all of the
Income Fund Class A Shares sold to date were sold pursuant to an effective
registration statement filed under the Securities Act of 1933, as amended (the
"1933 Act"), except for those shares sold pursuant to the private offering
exemption for the purpose of raising initial capital as required by the 1940 Act
or obtaining any necessary approvals of the initial shareholder of a newly
created series.
(b) Custodian Funds is authorized to issue 32 billion shares of common
stock, par value $0.01 per share, each outstanding share of which is fully paid,
non-assessable, freely transferable and has full voting rights, and currently
issues shares of five series, including Income Fund. Income Fund is further
divided into six classes of shares and the number of shares of stock, par value
$0.01 per share, and, as of February 28, 2005, has been allocated and designated
to each of these classes of shares as follows: (i) Class A-7,600,000,000 shares;
(ii) Class B-2,000,000,000 shares; (iii) Class B1-1,000,000,000 shares; (iv)
Class C-3,600,000,000 shares; (v) Class R-1,000,000,000 shares; and (vi) Advisor
Class-1,000,000,000 shares.
(c) The audited financial statements appearing in Custodian Funds' Annual
Report to Shareholders for the fiscal year ended September 30, 2004, audited by
PricewaterhouseCoopers LLP, including the financial statements for Income Fund
for the fiscal year then ended, copies of which have been delivered to
Multi-Income Trust, fairly present the financial position of Income Fund as of
such date and the results of its operations for the period indicated in
conformity with generally accepted accounting principles applied on a consistent
basis.
(d) The books and records of Income Fund accurately summarize the
accounting data represented and contain no material omissions with respect to
the business and operations of Income Fund.
(e) Custodian Funds has the necessary corporate power and authority to
conduct Income Fund's business as such business is now being conducted.
(f) Custodian Funds, on behalf of Income Fund, is not a party to or
obligated under any provision of its Charter or By-laws, each as amended to
date, or any contract or any other commitment or obligation, and is not subject
to any order or decree, that would be violated by its execution of or
performance under this Agreement.
(g) Income Fund has elected to be treated as a regulated investment company
("RIC") for federal income tax purposes under Part I of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), Income Fund has
qualified as a RIC for each taxable year since its inception and will qualify as
a RIC as of the Closing Date, and consummation of the transactions contemplated
by this Agreement will not cause it to fail to be qualified as a RIC as of the
Closing Date.
(h) Income Fund is not under jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
(i) Income Fund does not have any unamortized or unpaid organizational fees
or expenses.
5. REPRESENTATIONS AND WARRANTIES BY MULTI-INCOME TRUST.
Multi-Income Trust represents and warrants to Custodian Funds, on behalf of
Income Fund, that:
(a) Multi-Income Trust is a business trust created under the laws of the
Commonwealth of Massachusetts pursuant to an Agreement and Declaration of Trust
dated August 22, 1989, and recorded by the Commonwealth of Massachusetts on
September 3, 1989 ("Declaration of Trust"), and validly exists under the laws of
that Commonwealth. Multi-Income Trust is duly registered under the 1940 Act as a
closed-end, management investment company and all of the Multi-Income Trust
Shares sold were sold pursuant to an effective registration statement filed
under the 1933 Act, except for those shares sold pursuant to the private
offering exemption for the purpose of raising the required initial capital.
(b) Multi-Income Trust is authorized to issue an unlimited number of shares
of beneficial interest, par value $0.01 per share, without class designation,
each outstanding share of which is fully paid, nonassessable, and has full
voting rights.
(c) The audited financial statements appearing in Multi-Income Trust's
Annual Report to Shareholders for the fiscal year ended March 31, 2004, audited
by PricewaterhouseCoopers, LLP, copies of which have been delivered to Custodian
Funds on behalf of Income Fund, fairly present the financial position of
Multi-Income Trust as of such date and the results of its operations for the
period indicated in conformity with generally accepted accounting principles
applied on a consistent basis.
(d) The financial statements (unaudited) appearing in Multi-Income Trust's
Semi-Annual Report to Shareholders for the six-month period ended September 30,
2004, copies of which have been delivered to Custodian Funds on behalf of Income
Fund, fairly present the financial position of Multi-Income Trust as of such
date and the results of its operations for the period indicated in conformity
with generally accepted accounting principles applied on a consistent basis.
(e) The books and records of Multi-Income Trust accurately summarize the
accounting data represented and contain no material omissions with respect to
the business and operations of Multi-Income Trust.
(f) Multi-Income Trust has the necessary trust power and authority to
conduct its business as such business is now being conducted.
(g) Multi-Income Trust is not a party to or obligated under any provision
of its Declaration of Trust or By-laws, each as amended to date, or any contract
or any other commitment or obligation, and is not subject to any order or
decree, that would be violated by its execution of or performance under this
Agreement.
(h) Multi-Income Trust has elected to be treated as a RIC for federal
income tax purposes under Part I of Subchapter M of the Code, Multi-Income Trust
is a "fund" as defined in Section 851(g)(2) of the Code, Multi-Income Trust has
qualified as a RIC for each taxable year since its inception and will qualify as
a RIC as of the Closing Date, and consummation of the transactions contemplated
by this Agreement will not cause it to fail to be qualified as a RIC as of the
Closing Date.
(i) Multi-Income Trust is not under jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the Code.
(j) Multi-Income Trust does not have any unamortized or unpaid organization
fees or expenses.
6. REPRESENTATIONS AND WARRANTIES BY MULTI-INCOME TRUST AND CUSTODIAN FUNDS ON
BEHALF OF INCOME FUND.
Multi-Income Trust and Custodian Funds, on behalf of Income Fund, each
represents and warrants to the other that:
(a) The statement of assets and liabilities to be furnished by it as of
1:00 p.m., Pacific time, on the Closing Date for the purpose of determining the
number of Income Fund Class A Shares to be issued pursuant to Section 1 of this
Agreement, will accurately reflect each such party's Net Assets and outstanding
shares of beneficial interest or common stock, respectively, as of such date, in
conformity with generally accepted accounting principles applied on a consistent
basis.
(b) At the Closing, it will have good and marketable title to all of the
securities and other assets shown on the statement of assets and liabilities
referred to in (a) above, free and clear of all liens or encumbrances of any
nature whatsoever, except such imperfections of title or encumbrances as do not
materially detract from the value or use of the assets subject thereto, or
materially affect title thereto.
(c) Except as disclosed in the Multi-Income Trust Disclosure Documents or
in Income Fund's currently effective prospectus, there is no material suit,
judicial action, or legal or administrative proceeding pending or threatened
against Multi-Income Trust or Income Fund, respectively. Neither Custodian
Funds, on behalf of Income Fund, nor Multi-Income Trust is a party to or subject
to the provisions of any order, decree or judgment of any court or governmental
body that materially and adversely affects Income Fund's or Multi-Income Trust's
business or their ability to consummate the transactions herein contemplated.
(d) There are no known actual or proposed deficiency assessments with
respect to any taxes payable by it.
(e) The execution, delivery, and performance of this Agreement have been
duly authorized by all necessary action of its Board of Trustees or Board of
Directors, as the case may be, and this Agreement, subject to the approval of
Multi-Income Trust's shareholders, constitutes a valid and binding obligation
enforceable in accordance with its terms.
(f) It anticipates that consummation of this Agreement will not cause
Multi-Income Trust or Custodian Funds, with respect to Income Fund, to fail to
conform to the requirements of Subchapter M of the Code for federal income
taxation qualification as a RIC at the end of its current fiscal year.
7. COVENANTS OF MULTI-INCOME TRUST AND CUSTODIAN FUNDS ON BEHALF OF INCOME FUND.
(a) Custodian Funds, on behalf of Income Fund, and Multi-Income Trust each
covenant to operate their respective businesses as presently conducted between
the date hereof and the Closing.
(b) Multi-Income Trust undertakes that it will not acquire Income Fund
Class A Shares for the purpose of making distributions thereof to anyone other
than Multi-Income Trust's shareholders.
(c) Multi-Income Trust undertakes that, if this Agreement is consummated,
it will liquidate and dissolve, file an application pursuant to Section 8(f) of
the 1940 Act for an order declaring that it has ceased to be an investment
company and take the necessary actions, including making the necessary filings,
to withdraw its shares from listing on those stock exchanges on which
Multi-Income Trust Shares are listed as of the Closing Date.
(d) Multi-Income Trust and Custodian Funds, on behalf of Income Fund, each
agree that, by the Closing, all of their federal and other tax returns and
reports required by law to be filed on or before such date shall have been
filed, and all federal and other taxes shown as due on said returns shall have
either been paid or adequate liability reserves shall have been provided for the
payment of such taxes.
(e) At the Closing, Multi-Income Trust will provide Income Fund a copy of
the shareholder ledger accounts, certified by Multi-Income Trust's transfer
agent or its President to the best of its or his knowledge and belief, for all
the shareholders of record of Multi-Income Trust Shares as of 1:00 p.m., Pacific
time, on the Closing Date who are to become shareholders of Income Fund as a
result of the transfer of assets that is the subject of this Agreement.
(f) The Board of Trustees of Multi-Income Trust shall call and Multi-Income
Trust shall hold, a meeting of Multi-Income Trust's shareholders to consider and
vote upon this Agreement (the "Shareholders' Meeting") and Multi-Income Trust
shall take all other actions reasonably necessary to obtain approval of the
transactions contemplated herein. Multi-Income Trust agrees to mail to each
shareholder of record entitled to vote at the Shareholders' Meeting at which
action on this Agreement is to be considered, in sufficient time to comply with
requirements as to notice thereof, a combined Prospectus/Proxy Statement that
complies in all material respects with the applicable provisions of Section
14(a) of the Securities Exchange Act of 1934, as amended, and Section 20(a) of
the 1940 Act, and the rules and regulations, respectively, thereunder.
(g) Custodian Funds, on behalf of Income Fund will file with the SEC a
registration statement on Form N-14 under the 1933 Act relating to Income Fund
Class A Shares issuable hereunder ("Registration Statement"), and will use its
best efforts to provide that the Registration Statement becomes effective as
promptly as is practicable. At the time it becomes effective, the Registration
Statement will (i) comply in all material respects with the applicable
provisions of the 1933 Act, and the rules and regulations promulgated
thereunder; and (ii) not contain any untrue statement of material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading. At the time the Registration Statement
becomes effective, at the time of the Shareholders' Meeting, and on the Closing
Date, the Prospectus/Proxy Statement and statement of additional information
included in the Registration Statement will not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(h) Prior to the Closing, Multi-Income Trust will effect an optional
prepayment of the Franklin Multi-Income Trust 4.13% Senior Notes due September
15, 2009 (the "Notes") in accordance with the terms of that certain Note
Agreement dated as of September 15, 2004 (the "Note Agreement") in an amount
equal to 100% of the principal amount of the Notes then outstanding, together
with interest accrued thereon to the date of prepayment and the Make Whole
Premium (as defined in the Note Agreement), if any, applicable thereto (the
"Prepayment").
8. CONDITIONS PRECEDENT TO BE FULFILLED BY MULTI-INCOME TRUST AND CUSTODIAN
FUNDS, ON BEHALF OF INCOME FUND.
The consummation of this Agreement and the Reorganization contemplated
hereunder shall be subject to the following respective conditions:
(a) That: (i) all the representations and warranties of the other party
contained herein shall be true and correct as of the Closing with the same
effect as though made as of and at such date; (ii) the other party shall have
performed all obligations required by this Agreement to be performed by it prior
to the Closing; and (iii) the other party shall have delivered to such party a
certificate signed by the President or any Vice President and by the Secretary
or any Assistant Secretary or equivalent officer to the foregoing effect.
(b) That each party shall have delivered to the other party a copy of the
resolutions approving this Agreement, adopted and approved by the appropriate
action of its Board of Trustees or Board of Directors, as the case may be,
certified by its Secretary, any Assistant Secretary or equivalent officer.
(c) That the SEC shall not have issued an unfavorable advisory report under
Section 25(b) of the 1940 Act or instituted or threatened to institute any
proceeding seeking to enjoin consummation of the Reorganization under Section
25(c) of the 1940 Act. And, further, no other legal, administrative or other
proceeding shall have been instituted or threatened that would materially affect
the financial condition of either party or would prohibit the transactions
contemplated hereby.
(d) That this Agreement and the Reorganization contemplated hereby shall
have been adopted and approved by the appropriate action of the shareholders of
Multi-Income Trust at the Shareholders' Meeting or any adjournment thereof.
(e) That a distribution or distributions shall have been declared for
Multi-Income Trust prior to the Closing Date that, together with all previous
distributions, shall have the effect of distributing to its shareholders: (i)
all of its ordinary income and all of its capital gain net income, if any, for
the period from the close of its last fiscal year to 1:00 p.m., Pacific time, on
the Closing Date; and (ii) any undistributed ordinary income and capital gain
net income from any period to the extent not otherwise declared for
distribution. Capital gain net income has the meaning given such term by Section
1222(9) of the Code.
(f) That Multi-Income Trust shall, prior to the Closing, effect a
prepayment of the Notes in accordance with the terms of the Note Agreement, in
an amount equal to 100% of the principal amount of the Notes then outstanding,
together with interest accrued thereon to the date of prepayment and the Make
Whole Premium (as defined in the Note Agreement), if any, applicable thereto.
(g) That as of the Closing, there shall be no Persons (as defined in the
Note Agreement) that shall be deemed and treated as the owner and holder of one
or more Notes for any and all purposes of the Note Agreement and that
Multi-Income Trust shall have delivered to Custodian Funds, on behalf of Income
Fund, a certificate signed by the Multi-Income Trust President or any Vice
President and by the Secretary or any Assistant Secretary or equivalent officer
to the foregoing effect.
(h) That there shall be delivered to Multi-Income Trust, and Custodian
Funds, on behalf of Income Fund, an opinion from Stradley, Ronon, Xxxxxxx &
Xxxxx, LLP, counsel to Multi-Income Trust, to the effect that, provided the
Reorganization contemplated hereby is carried out in accordance with this
Agreement, the laws of the State of Maryland and the laws of the Commonwealth of
Massachusetts and based upon certificates of the officers of Multi-Income Trust
and Custodian Funds, on behalf of Income Fund, with regard to matters of fact:
(1) The acquisition by Income Fund of substantially all
the assets of Multi-Income Trust as provided for herein in exchange for
Income Fund Class A Shares followed by the distribution by Multi-Income
Trust to its shareholders of such Income Fund Class A Shares in
complete liquidation of Multi-Income Trust will qualify as a
reorganization within the meaning of Section 368(a)(1) of the Code, and
Multi-Income Trust and Income Fund will each be a "party to the
reorganization" within the meaning of Section 368(b) of the Code;
(2) No gain or loss will be recognized by Multi-Income
Trust upon the transfer of substantially all of its assets to Income
Fund in exchange solely for voting shares of Income Fund (Sections
361(a) and 357(a) of the Code);
(3) No gain or loss will be recognized by Income Fund
upon the receipt by it of substantially all of the assets of
Multi-Income Trust in exchange solely for voting shares of Income Fund
(Section 1032(a) of the Code);
(4) No gain or loss will be recognized by Multi-Income
Trust upon the distribution of Income Fund Class A Shares to its
shareholders in liquidation of Multi-Income Trust (in pursuance of the
Reorganization) (Section 361(c)(1) of the Code);
(5) The basis of the assets of Multi-Income Trust
received by Income Fund will be the same as the basis of such assets to
Multi-Income Trust immediately prior to the exchange (Section 362(b) of
the Code);
(6) The holding period of the assets of Multi-Income
Trust received by Income Fund will include the period during which such
assets were held by Multi-Income Trust (Section 1223(2) of the Code);
(7) No gain or loss will be recognized by the
shareholders of Multi-Income Trust upon the exchange of their shares in
Multi-Income Trust for voting shares of Income Fund, including
fractional shares to which they may be entitled (Section 354(a) of the
Code);
(8) The basis of Income Fund Class A Shares received by
the shareholders of Multi-Income Trust shall be the same as the basis
of the Multi-Income Trust Shares exchanged therefor (Section 358(a)(1)
of the Code);
(9) The holding period of Income Fund Class A Shares
received by shareholders of Multi-Income Trust (including fractional
shares to which they may be entitled) will include the holding period
of the Multi-Income Trust Shares surrendered in exchange therefor,
provided that the Multi-Income Trust Shares were held as a capital
asset on the effective date of the exchange (Section 1223(1) of the
Code); and
(10) Income Fund will succeed to and take into account
as of the date of the transfer (as defined in Section 1.381(b)-1(b) of
the regulations issued by the United States Treasury ("Treasury
Regulations")) the items of Multi-Income Trust described in Section
381(c) of the Code, subject to the conditions and limitations specified
in Sections 381, 382, 383 and 384 of the Code and the Treasury
Regulations.
(i) That there shall be delivered to Custodian Funds, on behalf of Income
Fund, an opinion in form and substance satisfactory to it from Stradley, Ronon,
Xxxxxxx & Young, LLP, counsel to Multi-Income Trust, to the effect that, subject
in all respects to the effects of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, and other laws now or hereafter affecting
generally the enforcement of creditors' rights:
(1) Multi-Income Trust is a business trust organized
under the laws of the Commonwealth of Massachusetts and is a validly
existing business trust and in good standing under the laws of that
Commonwealth;
(2) Multi-Income Trust is authorized to issue an
unlimited number of shares of beneficial interest, par value $0.01 per
share. Multi-Income Trust currently issues shares of one class.
(3) Multi-Income Trust is a closed-end investment company of
the management type registered as such under the 1940 Act;
(4) Except as disclosed in Multi-Income Trust's
Disclosure Documents, such counsel does not know of any material suit,
action, or legal or administrative proceeding pending or threatened
against Multi-Income Trust, the unfavorable outcome of which would
materially and adversely affect Multi-Income Trust;
(5) The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by all necessary trust action on the part of Multi-Income
Trust; and
(6) Neither the execution, delivery, nor performance of
this Agreement by Multi-Income Trust violates any provision of its
Declaration of Trust or By-laws, each as amended to date, or the
provisions of any agreement or other instrument known to such counsel,
to which Multi-Income Trust is a party, or by which Multi-Income Trust
is otherwise bound; and this Agreement is the legal, valid and binding
obligation of Multi-Income Trust and is enforceable against
Multi-Income Trust in accordance with its terms.
In giving the opinions set forth above, this counsel may state that it is
relying on certificates of the officers of Multi-Income Trust with regard to
matters of fact, and certain certifications and written statements of
governmental officials with respect to the good standing of Multi-Income Trust.
(j) That there shall be delivered to Multi-Income Trust an opinion in form
and substance satisfactory to it from Bleakley Xxxxx & Xxxxxxx, LLP, counsel to
Custodian Funds, to the effect that, subject in all respects to the effects of
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and
other laws now or hereafter affecting generally the enforcement of creditors'
rights:
(1) Custodian Funds is a corporation organized under
the laws of the State of Maryland, and is a validly existing
corporation and in good standing under the laws of that State;
(2) Custodian Funds is authorized to issue 32 billion
shares of stock, par value $0.01 per share, each outstanding share of
which is fully paid, non-assessable, freely transferable and has full
voting rights, and currently issues shares of five series, including
Income Fund. Income Fund is further divided into six classes of shares
and the number of shares of stock, par value $0.01 per share, and, as
of February 28, 2005 has been allocated and designated to each of these
classes of shares as follows (i) Class A-7,600,000,000 shares; (ii)
Class B-2,000,000,000 shares; (iii) Class B1-1,000,000,000 shares;
(iv) Class C-3,600,000,000 shares; (v) Class R-1,000,000,000 shares;
and (vi) Advisor Class-1,000,000,000 shares.
(3) Custodian Funds is an open-end investment company of the
management type registered as such under the 1940 Act;
(4) Except as disclosed in Income Fund's currently
effective prospectus, such counsel does not know of any material suit,
action, or legal or administrative proceeding pending or threatened
against Income Fund, the unfavorable outcome of which would materially
and adversely affect Income Fund;
(5) Income Fund Class A Shares to be issued pursuant to
the terms of this Agreement have been duly authorized and, when issued
and delivered as provided in this Agreement and the Registration
Statement, will have been validly issued and fully paid and will be
non-assessable by Custodian Funds, on behalf of Income Fund;
(6) The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Custodian
Funds, on behalf of Income Fund;
(7) Neither the execution, delivery, nor performance of this
Agreement by Custodian Funds, on behalf of Income Fund, violates any
provision of its Charter or By-laws, each as amended to date, or the
provisions of any agreement or other instrument known to such counsel,
to which Custodian Funds, on behalf of Income Fund, is a party, or by
which Custodian Funds, on behalf of Income Fund, is otherwise bound;
and this Agreement is the legal, valid and binding obligation of
Custodian Funds, on behalf of Income Fund, and is enforceable against
Custodian Funds, on behalf of Income Fund, in accordance with its
terms; and
(8) The registration statement of Custodian Funds, with
respect to Income Fund, of which the prospectus dated February 1, 2005,
as supplemented to date (the "Prospectus"), is a part, is effective
under the 1933 Act, and, to the best knowledge of such counsel, no
stop order suspending the effectiveness of such registration statement
has been issued, and no proceedings for such purpose have been
instituted or are pending before or threatened by the SEC under the
1933 Act, and nothing has come to counsel's attention that causes it
to believe that, at the time the Prospectus became effective or at the
Closing, such Prospectus (except for the financial statements and
other financial and statistical data included therein, as to which
counsel need not express an opinion), contained any untrue statement
of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading; and such counsel knows of no legal or government
proceedings required to be described in the Prospectus, or of any
contract or document of a character required to be described in the
Prospectus that is not described as required.
In giving the opinions set forth above, this counsel may state that it is
relying on certificates of the officers of Custodian Funds with regard to
matters of fact, and certain certifications and written statements of
governmental officials with respect to the good standing of Custodian Funds.
(k) That Multi-Income Trust shall have received a certificate from the
Presidentor any Vice President and Secretary or any Assistant Secretary of
Custodian Funds to the effect that the statements contained in the Prospectus,
at the time the Prospectus became effective and at the Closing, did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
(l) That Custodian Funds' Registration Statement with respect to Income
Fund Class A Shares to be delivered to Multi-Income Trust's shareholders in
accordance with this Agreement shall have become effective, and no stop order
suspending the effectiveness of the Registration Statement or any amendment or
supplement thereto, shall have been issued prior to the Closing Date or shall
be in effect at Closing, and no proceedings for the issuance of such an order
shall be pending or threatened on that date.
(m) That Income Fund Class A Shares to be delivered hereunder shall be
eligible for sale with each state commission or agency with which such
eligibility is required in order to permit Income Fund Class A Shares lawfully
to be delivered to each holder of Multi-Income Trust Shares.
(n) That, at the Closing, there shall be transferred to Custodian Funds, on
behalf of Income Fund, aggregate Net Assets of Multi-Income Trust comprising at
least 90% in fair market value of the total net assets and 70% of the fair
market value of the total gross assets recorded on the books of Multi-Income
Trust on the Closing Date.
(o) That there be delivered to Custodian Funds, on behalf of Income Fund,
information concerning the tax basis of Multi-Income Trust in all securities
transferred to Custodian Funds, on behalf of Income Fund, together with
shareholder information including the names, addresses, and taxpayer
identification numbers of the shareholders of Multi-Income Trust as of the
Closing Date, the number of shares held by each shareholder, the dividend
reinvestment elections applicable to each shareholder, and the backup
withholding and nonresident alien withholding certifications, notices or records
on file with Multi-Income Trust respect to each shareholder.
(p) That all consents of other parties, and all other consents, orders and
permits of federal, state and local regulatory and self-regulatory authorities
(including those of the SEC, any stock exchanges upon which Multi-Income Trust
Shares or Income Fund Class A Shares may be listed, and of state Blue Sky
securities authorities, including any necessary "no-action" positions or
exemptive order from such authorities), required to permit consummation of the
Reorganization contemplated hereby shall have been obtained, except where
failure to obtain such consent, order or permit would not involve a risk of a
material adverse effect on the assets or properties of Multi-Income Trust or
Income Fund.
9. BROKERAGE FEES AND EXPENSES.
(a) Custodian Funds, on behalf of Income Fund, and Multi-Income Trust each
represents and warrants to the other that there are no broker or finders' fees
payable by it in connection with the transactions provided for herein.
(b) Other than the amount necessary for the Prepayment, which shall be paid
by Multi-Income Trust, the expenses of entering into and carrying out the
provisions of this Agreement shall be borne one-quarter by Income Fund,
one-quarter by Multi-Income Trust, and one-half by Franklin Advisers, Inc.
10. TERMINATION; POSTPONEMENT; WAIVER; ORDER.
(a) Anything contained in this Agreement to the contrary notwithstanding,
this Agreement may be terminated and the Reorganization abandoned at any time
(whether before or after approval thereof by the shareholders of Multi-Income
Trust) prior to the Closing, or the Closing may be postponed as follows:
(1) by mutual consent of Custodian Funds, on behalf of
Income Fund, and of Multi-Income Trust;
(2) by Custodian Funds, on behalf of Income Fund, if
any conditions of its obligations set forth in Section 8 have not been
fulfilled or waived; or
(3) by Multi-Income Trust, if any conditions of its
obligations set forth in Section 8 have not been fulfilled or waived.
An election by Custodian Funds or Multi-Income Trust to terminate this
Agreement and to abandon the Reorganization shall be exercised, respectively, by
the Board of Directors of Custodian Funds or the Board of Trustees of
Multi-Income Trust.
(b) If the transactions contemplated by this Agreement have not been
consummated by December 31, 2005, this Agreement shall automatically terminate
on that date, unless a later date is agreed to by both Custodian Funds and
Multi-Income Trust.
(c) In the event of termination of this Agreement pursuant to the
provisions hereof, the same shall become void and have no further effect, and
neither Multi-Income Trust, nor Custodian Funds, nor their trustees, officers,
or agents, nor the shareholders of Multi-Income Trust or Income Fund shall have
any liability in respect of this Agreement, but all expenses incidental to the
preparation and carrying out of this Agreement shall be paid as provided in
Section 9(b) hereof.
(d) At any time prior to the Closing, any of the terms or conditions of
this Agreement may be waived by the party who is entitled to the benefit thereof
by action taken by that party's Board of Trustees/Directors if, in the judgment
of such Board, such action or waiver will not have a material adverse effect on
the benefits intended under this Agreement to its shareholders, on behalf of
whom such action is taken.
(e) The respective representations and warranties contained in Sections 4
to 6 hereof shall expire with and be terminated by the Reorganization on the
Closing Date, and neither Multi-Income Trust nor Custodian Funds, nor any of
their officers, trustees, directors, agents or shareholders shall have any
liability with respect to such representations or warranties after the Closing
Date. This provision shall not protect any officer, trustee, director, agent or
shareholder of Multi-Income Trust or Custodian Funds against any liability to
the entity for which that officer, trustee, agent or shareholder so acts or to
its shareholders to which that officer, trustee, director, agent or shareholder
would otherwise be subject, by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties in the conduct of such office.
(f) If any order or orders of the SEC with respect to this Agreement shall
be issued prior to the Closing and shall impose any terms or conditions that are
determined by action of the Board of Directors of Custodian Funds, on behalf of
Income Fund and the Board of Trustees of Multi-Income Trust to be acceptable,
such terms and conditions shall be binding as if a part of this Agreement
without further vote or approval of the shareholders of Multi-Income Trust,
unless such terms and conditions shall result in a change in the method of
computing the number of Income Fund Class A Shares to be issued to Multi-Income
Trust. In which event, unless such terms and conditions shall have been included
in the proxy solicitation material furnished to the shareholders of Multi-Income
Trust prior to the Shareholders' Meeting at which the transactions contemplated
by this Agreement shall have been approved, this Agreement shall not be
consummated and shall terminate, unless Multi-Income Trust shall promptly call a
meeting of the shareholders of Multi-Income Trust at which such conditions so
imposed shall be submitted for approval.
(g) It is acknowledged that the Declaration of Trust of Multi-Income Trust
is on file with the Secretary of The Commonwealth of the Commonweal of
Massachusetts and that this Agreement is executed on behalf of Multi-Income
Trust by the undersigned as officers and not individually, and that the
obligations of this Agreement are not binding upon any of them, the Trustees or
the shareholders of Multi-Income Trust individually but are binding only upon
the assets and property belonging to Multi-Income Trust for the benefit of which
the Trustees have caused this Agreement to be made.
11. ENTIRE AGREEMENT AND AMENDMENTS.
This Agreement embodies the entire agreement between the parties and there
are no agreements, understandings, restrictions, or warranties relating to the
transactions contemplated by this Agreement other than those set forth herein or
herein provided for. This Agreement may be amended only by mutual consent of the
parties in writing. Neither this Agreement nor any interest herein may be
assigned without the prior written consent of the other party.
12. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all such counterparts together shall
constitute but one instrument.
13. NOTICES.
Any notice, report, or demand required or permitted by any provision of
this Agreement shall be in writing and shall be deemed to have been given if
delivered or mailed, first class postage prepaid, addressed to the appropriate
Fund, at Xxx Xxxxxxxx Xxxxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000, Attention:
Secretary.
14. GOVERNING LAW.
This Agreement shall be governed by and carried out in accordance with the
laws of the State of Maryland.
IN WITNESS WHEREOF, Custodian Funds, on behalf of Income Fund, and
Multi-Income Trust have each caused this Agreement to be executed on its behalf
by its duly authorized officers, all as of the date and year first-above
written.
FRANKLIN CUSTODIAN FUNDS, INC.,
ON BEHALF OF FRANKLIN INCOME FUND
Attest:
/s/XXXXXX X. XXXXXXX /s/XXXXX X. XXXX
------------------------------------ --------------------------------
Xxxxxx X. Xxxxxxx By: Xxxxx X. Xxxx
Secretary Vice President
FRANKLIN MULTI-INCOME TRUST
Attest:
/s/XXXXXX X. XXXXXXX /s/XXXXX X. XXXX
------------------------------------ --------------------------------
Xxxxxx X. Xxxxxxx By: Xxxxx X. Xxxx
Secretary Vice President
