AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Plan"), is
made as of this 10th day of November, 2008, by and between
Franklin Tax-Free Trust, a statutory trust created under the laws
of the State of Delaware ("Tax-Free Trust"), with its principal
place of business at Xxx Xxxxxxxx Xxxxxxx, Xxx Xxxxx, XX
00000-0000, on behalf of its series, Franklin Federal
Limited-Term Tax-Free Income Fund ("Acquiring Fund"), and
Franklin New York Tax-Free Trust, a statutory trust created under
the laws of the State of Delaware ("Target Trust"), with its
principal place of business at Xxx Xxxxxxxx Xxxxxxx, Xxx Xxxxx,
XX 00000-0000, on behalf of its series, Franklin New York
Limited-Term Tax-Free Income Fund ("Target Fund").
PLAN OF REORGANIZATION
The reorganization (hereinafter referred to as the "Plan of
Reorganization") will consist of (i) the acquisition by Tax-Free
Trust, on behalf of Acquiring Fund, of substantially all of the
property, assets and goodwill of Target Fund in exchange solely
for full and fractional shares of beneficial interest, with no
par value, of Acquiring Fund ("Acquiring Fund Shares"); (ii) the
distribution of Acquiring Fund Shares to the holders of shares of
beneficial interest of Target Fund (the "Target Fund Shares")
according to their respective interests in Target Fund in
complete liquidation of Target Fund; and (iii) the dissolution of
Target Fund as soon as is practicable after the closing (as
defined in Section 3, hereinafter called the "Closing"), all upon
and subject to the terms and conditions of the Plan hereinafter
set forth.
AGREEMENT
In order to consummate the Plan of 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
TARGET FUND.
(a) Subject to the terms and conditions of the Plan, and in
reliance on the representations and warranties of Tax-Free Trust,
on behalf of Acquiring Fund, herein contained, and in
consideration of the delivery by Tax-Free Trust of the number of
Acquiring Fund Shares hereinafter provided, Target Trust on
behalf of Target Fund agrees that, at the time of Closing, it
will convey, transfer and deliver to Tax-Free Trust, for the
benefit of Acquiring Fund, all of Target Fund's then existing
assets, including any interest in pending or future legal claims
in connection with past or present portfolio holdings, whether in
the form of class action claims, opt-out or other direct
litigation claims, or regulator or government-established
investor recovery fund claims, and any and all resulting
recoveries, free and clear of all liens, encumbrances, and claims
whatsoever (other than shareholders' rights of redemption),
except for cash, bank deposits, or cash equivalent securities in
an estimated amount necessary to: (i) pay 25% of the costs and
expenses of carrying out the Plan (including, but not limited to,
fees of counsel and accountants, and expenses of its liquidation
and dissolution contemplated hereunder), in accordance with
Section 9 of the Plan, which costs and expenses shall be
established on Target Fund'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 (iii) pay such contingent
liabilities as the Board of Trustees of Target Trust shall
reasonably deem to exist against Target Fund, if any, at the
Closing Date, for which contingent and other appropriate
liability reserves shall be established on Target Fund's books
(hereinafter "Net Assets"). Neither Tax-Free Trust nor Acquiring
Fund shall assume any liability of Target Fund or Target Trust,
and Target Fund shall use its reasonable best efforts to
discharge all of its known liabilities, so far as may be
possible, from the cash, bank deposits and cash equivalent
securities described above.
(b) Subject to the terms and conditions of the Plan, and in
reliance on the representations and warranties of Target Trust,
on behalf of Target Fund, herein contained, and in consideration
of such sale, conveyance, transfer, and delivery, Tax-Free Trust
agrees at the Closing to deliver to Target Trust the number of
Acquiring Fund Shares, determined by dividing the net asset value
per share of each share of Target Fund by the net asset value per
share of each share of Acquiring Fund, and multiplying the result
thereof by the number of outstanding shares of Target Fund, as of
1:00 p.m., Pacific Time, on the Closing Date. Acquiring Fund
Shares delivered to Target Trust at the Closing shall have an
aggregate net asset value equal to the value of Target Fund's Net
Assets, all determined as provided in Section 2 of the Plan and
as of the date and time specified herein.
(c) Immediately following the Closing, Target Trust shall
dissolve Target Fund and distribute pro rata to Target Fund's
shareholders of record as of the close of business on the Closing
Date, Acquiring Fund Shares received by Target Fund pursuant to
this Section 1. Such dissolution and distribution shall be
accomplished by the establishment of accounts on the share
records of Acquiring Fund in the amounts due such shareholders
based on their respective holdings as of the close of business on
the Closing Date. Fractional Acquiring Fund Shares shall be
carried to the third decimal place. Certificates for Acquiring
Fund Shares shall not be issued, unless specifically requested by
the shareholders.
(d) At the Closing, each shareholder of record of Target Fund
as of the record date (the "Distribution Record Date") with
respect to any unpaid dividends and other distributions that were
declared prior to the Closing, including any dividend or
distribution declared pursuant to Section 8(e) hereof, shall have
the right to receive such unpaid dividends and distributions with
respect to the shares of Target Fund that such person had on the
Distribution Record Date.
(e) All books and records relating to Target Fund, including
all books and records required to be maintained under the
Investment Company Act of 1940, as amended (the "1940 Act"), and
the rules and regulations thereunder, shall be available to
Tax-Free Trust from and after the date of the Plan, and shall be
turned over to Tax-Free Trust on or prior to the Closing.
2. VALUATION.
(a) The net asset value of Acquiring Fund Shares and Target
Fund Shares and the value of Target Fund's Net Assets to be
acquired by Acquiring Fund hereunder shall in each case be
computed as of 1:00 p.m., Pacific Time, on the Closing Date,
unless on such date: (a) the New York Stock Exchange ("NYSE") is
not open for unrestricted trading; or (b) the reporting of
trading on the NYSE is disrupted; or (c) any other extraordinary
financial event or market condition occurs (all such events
described in (a), (b) or (c) are each referred to as a "Market
Disruption"). The net asset value per share of Acquiring Fund
Shares and Target Fund Shares and the value of Target Fund's Net
Assets shall be computed in accordance with the valuation
procedures set forth in the most recent respective prospectuses
of Acquiring Fund and Target Fund, or amendments thereto.
(b) In the event of a Market Disruption on the proposed
Closing Date, so that an accurate appraisal of the net asset
value of Acquiring Fund Shares or Target Fund Shares or the value
of Target Fund's Net Assets is impracticable, the Closing Date
shall be postponed until the first business day when regular
trading on the NYSE shall have been fully resumed and reporting
shall have been restored and other trading markets are otherwise
stabilized.
3. CLOSING AND CLOSING DATE.
The Closing Date shall be November 12, 2008 or such later date
as the parties may mutually agree. The Closing shall take place
at the principal office of Tax-Free Trust at 2:00 p.m., Pacific
Time, on the Closing Date. Target Trust on behalf of Target Fund
shall have provided for delivery as of the Closing of those Net
Assets of Target Fund to be transferred to the account of
Acquiring Fund's Custodian, The Bank of New York Mellon, Mutual
Funds Division, 000 Xxxxxx Xxxxxx, Xxx Xxxx, XX 00000. Also,
Target Trust, on behalf of Target Fund, shall deliver at the
Closing a list of names and addresses of the shareholders of
record of Target Fund Shares and the number of full and
fractional shares of beneficial interest owned by each such
shareholder 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. Tax-Free Trust on behalf of
Acquiring Fund shall provide evidence satisfactory to Target
Trust that such Acquiring Fund Shares have been registered in an
account on the books of Acquiring Fund in such manner as the
officers of Target Trust on behalf of Target Fund may reasonably
request.
4. REPRESENTATIONS AND WARRANTIES BY TAX-FREE TRUST ON BEHALF OF
ACQUIRING FUND.
Tax-Free Trust, on behalf of Acquiring Fund, represents and
warrants to Target Trust that:
(a) Acquiring Fund is a series of Tax-Free Trust, a statutory
trust organized originally as a Massachusetts business trust in
September 1984 and converted into a Delaware statutory trust
effective July 1, 2007. Tax-Free Trust is duly registered under
the 1940 Act as an open-end, management investment company and
all of Acquiring Fund Shares sold 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 purposes
of raising initial capital or obtaining any required initial
shareholder approvals.
(b) Tax-Free Trust is authorized to issue an unlimited number
shares of beneficial interest, without par value, of Acquiring
Fund, each outstanding share of which is, and each share of which
when issued pursuant to and in accordance with the Plan will be,
fully paid, non-assessable, and has or will have full voting
rights. Tax-Free Trust currently issues shares of ten
(10) series, including Acquiring Fund. Acquiring Fund issues one
class of shares. No shareholder of Tax-Free Trust shall have any
preemptive or other right to subscribe for Acquiring Fund Shares.
(c) The financial statements appearing in Acquiring Fund's
Annual Report to Shareholders for the fiscal year ended February
29, 2008, audited by PricewaterhouseCoopers LLP, copies of which
have been delivered to Target Trust, and any interim unaudited
financial statements, copies of which may be furnished to Target
Trust, fairly present the financial position of Acquiring Fund as
of their respective dates and the results of Acquiring Fund's
operations for the period indicated in conformity with Generally
Accepted Accounting Principles applied on a consistent basis.
(d) The books and records of Acquiring Fund accurately
summarize the accounting data represented and contain no material
omissions with respect to the business and operations of
Acquiring Fund.
(e) Tax-Free Trust, on behalf of Acquiring Fund, is not a
party to or obligated under any provision of its Agreement and
Declaration of Trust or By-laws, 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 the Plan, and no consent, approval, authorization or order
of any court or governmental authority is required for the
consummation by Acquiring Fund or Tax-Free Trust of the
transactions contemplated by the Plan, except for the
registration of Acquiring Fund Shares under the 1933 Act, the
1940 Act, or as may otherwise be required under the federal and
state securities laws or the rules and regulations thereunder.
(f) Tax-Free Trust has elected to treat Acquiring Fund 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"). Acquiring Fund is a "fund"
as defined in Section 851(g)(2) of the Code, has qualified as a
RIC for each taxable year since its inception, and intends to
continue to qualify as a RIC as of the Closing Date, and
consummation of the transactions contemplated by the Plan will
not cause it to fail to be qualified as a RIC as of the Closing
Date.
(g) Acquiring 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.
(h) Acquiring Fund does not have any unamortized or unpaid
organizational fees or expenses.
(i) Acquiring Fund does not have any known liabilities, costs
or expenses of a material amount, contingent or otherwise, other
than those incurred in the ordinary course of business as an
investment company.
(j) There is no intercorporate indebtedness existing between
Target Fund and Acquiring Fund that was issued, acquired, or will
be settled at a discount.
(k) Acquiring Fund does not own, directly or indirectly, nor
has it owned during the past five (5) years, directly or
indirectly, any shares of Target Fund.
(l) Tax-Free Trust has no plan or intention to issue
additional shares of Acquiring Fund following the Plan of
Reorganization except for shares issued in the ordinary course of
Acquiring Fund's business as a series of an open-end investment
company; nor does Tax-Free Trust have any plan or intention to
redeem or otherwise reacquire any shares of Acquiring Fund issued
pursuant to the Plan of Reorganization, either directly or
through any transaction, agreement, or arrangement with any other
person, other than in the ordinary course of its business or to
the extent necessary to comply with its legal obligation under
Section 22(e) of the 1940 Act.
(m) Acquiring Fund is in the same line of business as Target
Fund before the Plan of Reorganization and did not enter into
such line of business as part of the Plan of Reorganization.
Acquiring Fund will actively continue Target Fund's business in
substantially the same manner that Target Fund conducted that
business immediately before the Plan of Reorganization and has no
plan or intention to change such business. On the Closing Date,
Acquiring Fund expects that at least 33 (1)/3% of Target Fund's
portfolio assets will meet the investment objectives, strategies,
policies, risks and restrictions of Acquiring Fund. Acquiring
Fund has no plan or intention to change any of its investment
objectives, strategies, policies, risks and restrictions after
the Plan of Reorganization. Acquiring Fund has no plan or
intention to sell or otherwise dispose of any of the former
assets of Target Fund, except for dispositions made in the
ordinary course of its business or dispositions necessary to
maintain its qualification as a RIC, although in the ordinary
course of its business, Acquiring Fund will continuously review
its investment portfolio (as Target Fund did before the Closing)
to determine whether to retain or dispose of particular
securities, including those included among the former assets of
Target Fund.
(n) The registration statement on Form N-14 referred to in
Section 7(g) hereof (the "Registration Statement"), and any
prospectus or statement of additional information of Acquiring
Fund contained or incorporated therein by reference, and any
supplement or amendment to the Registration Statement or any such
prospectus or statement of additional information, on the
effective and clearance dates of the Registration Statement, on
the date of the Special Meeting of Target Fund shareholders, and
on the Closing Date: (i) shall comply in all material respects
with the provisions of the 1933 Act, the Securities Exchange Act
of 1934, as amended (the "1934 Act"), the 1940 Act, the rules and
regulations thereunder, and all applicable state securities laws
and the rules and regulations thereunder; and (ii) shall not
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under
which the statements were made, not misleading.
5. REPRESENTATIONS AND WARRANTIES BY TARGET TRUST ON BEHALF OF
TARGET FUND.
Target Trust, on behalf of Target Fund, represents and
warrants to Tax-Free Trust that:
(a) Target Fund is a series of Target Trust, a statutory trust
organized originally as a Massachusetts business trust in July,
1986, and reorganized into a Delaware statutory trust effective
February 1, 2008. Target Trust is duly registered under the 1940
Act as an open-end, management investment company and all of
Target Trust's Target Fund 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 purposes of raising the required initial capital or
obtaining any required initial shareholder approvals.
(b) Target Trust is authorized to issue an unlimited number of
shares of beneficial interest, without par value, of Target Fund,
each outstanding share of which is fully paid, non-assessable,
and has full voting rights. Target Trust issues shares of four
(4) series, including Target Fund. Target Fund has one class of
shares and an unlimited number of shares of beneficial interest
of Target Trust have been allocated and designated to the Target
Fund. No shareholder of Target Trust has or will have any
option, warrant, or preemptive rights of subscription or purchase
with respect to Target Fund Shares.
(c) The financial statements appearing in Target Fund's Annual
Report to Shareholders for the fiscal year ended September 30,
2007, audited by PricewaterhouseCoopers LLP, and unaudited
Semi-Annual Report to Shareholders for the period ended March 31,
2008, copies of which have been delivered to Tax-Free Trust, and
any interim financial statements for Target Fund that may be
furnished to Tax-Free Trust, fairly present the financial
position of Target Fund as of their respective dates and the
results of Target Fund's operations for the periods indicated in
conformity with generally accepted accounting principles applied
on a consistent basis.
(d) Target Trust, on behalf of Target Fund, is not a party to
or obligated under any provision of its Agreement and Declaration
of Trust or Bylaws, as amended, 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 the Plan. Target Fund has no material contracts or other
commitments (other than the Plan or agreements for the purchase
of securities entered into in the ordinary course of business and
consistent with its obligations under the Plan) which will not be
terminated by Target Fund in accordance with their terms at or
prior to the Closing Date, or which will result in a penalty or
additional fee to be due or payable by Target Fund.
(e) Target Trust has elected to treat Target Fund as a RIC for
federal income tax purposes under Part I of Subchapter M of the
Code. Target Fund is a "fund" as defined in Section 851(g)(2) of
the Code, 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 the Plan will
not cause it to fail to be qualified as a RIC as of the Closing
Date.
(f) Target 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.
(g) Target Fund does not have any unamortized or unpaid
organization fees or expenses.
(h) Target Fund does not have any known liabilities, costs or
expenses of a material amount, contingent or otherwise, other
than those reflected in the financial statements referred to in
Section 5(c) hereof and those incurred in the ordinary course of
business as an investment company and of a nature and amount
similar to, and consistent with, those shown in such financial
statements since the dates of those financial statements.
(i) Since March 31, 2008, there has not been any material
adverse change in Target Fund's financial condition, assets,
liabilities, or business other than changes occurring in the
ordinary course of its business.
(j) No consent, approval, authorization, or order of any court
or governmental authority is required for the consummation by
Target Fund or Target Trust of the transactions contemplated by
the Plan, except the necessary Target Fund shareholder approval,
or as may otherwise be required under the federal or state
securities laws or the rules and regulations thereunder.
(k) There is no intercorporate indebtedness existing between
Target Fund and Acquiring Fund that was issued, acquired, or will
be settled at a discount.
(l) During the five-year period ending on the Closing Date,
(i) Target Fund has not acquired, and will not acquire, Target
Fund Shares with consideration other than Acquiring Fund Shares
or Target Fund Shares, except for redemptions in the ordinary
course of Target Fund's business or to the extent necessary to
comply with its legal obligation under Section 22(e) of the 1940
Act, and (ii) no distributions have been made with respect to
Target Fund Shares (other than regular, normal dividend
distributions made pursuant to Target Fund's historic dividend
paying practice), either directly or through any transaction,
agreement, or arrangement with any other person, except for
distributions described in Sections 852 and 4982 of the Code.
(m) As of the Closing Date, Target Fund will not have
outstanding any warrants, options, convertible securities, or any
other type of rights pursuant to which any person could acquire
shares of Target Fund, except for the right of investors to
acquire its shares at the applicable stated offering price in the
normal course of its business as an open-end management
investment company operating under the 0000 Xxx.
(n) Throughout the five year period ending on the Closing
Date, Target Fund will have conducted its historic business
within the meaning of Section 1.368-1(d) of the Income Tax
Regulations under the Code. Target Fund did not enter into (or
expand) a line of business as part of the Plan of
Reorganization. Target Fund will not alter its investment
portfolio in connection with the Plan of Reorganization.
6. REPRESENTATIONS AND WARRANTIES BY TARGET TRUST AND TAX-FREE
TRUST.
Target Trust, on behalf of Target Fund, and Tax-Free Trust, on
behalf of Acquiring 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 Acquiring Fund Shares to be
issued pursuant to Section 1 of the Plan, will accurately reflect
Target Fund's Net Assets and outstanding shares, 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 its currently effective prospectus
relating to Target Fund, in the case of Target Trust, and
Acquiring Fund, in the case of Tax-Free Trust, there is no
material suit, judicial action, or legal or administrative
proceeding pending or threatened against it. Neither Tax-Free
Trust nor Target Trust is a party to or subject to the provisions
of any order, decree or judgment of any court or governmental
body which materially and adversely affects Acquiring Fund's or
Target Fund'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 the Plan have
been duly authorized by all necessary action of its Board of
Trustees and the Plan, subject to the approval of Target Fund's
shareholders in the case of Target Trust, constitutes a valid and
binding obligation enforceable in accordance with its terms,
subject as to enforcement to bankruptcy, insolvency,
reorganization arrangement, moratorium, and other similar laws of
general applicability relating to or affecting creditors' rights
and to general equity principles.
(f) It anticipates that consummation of the Plan will not
cause either Target Fund, in the case of Target Trust, or
Acquiring Fund, in the case of Tax-Free Trust, to fail to conform
to the requirements of Subchapter M of the Code for federal
income taxation qualification as a RIC at the end their
respective fiscal years.
7. COVENANTS OF TARGET TRUST AND TAX-FREE TRUST.
(a) Target Trust, on behalf of Target Fund, and Tax-Free
Trust, on behalf of Acquiring Fund, each covenants to operate its
respective business as presently conducted between the date
hereof and the Closing, it being understood that such ordinary
course of business will include the distribution of customary
dividends and distributions and any other distribution necessary
or desirable to minimize federal income or excise taxes.
(b) Target Trust, on behalf of Target Fund, undertakes that it
will not acquire Acquiring Fund Shares for the purpose of making
distributions thereof to anyone other than Target Fund's
shareholders.
(c) Target Trust, on behalf of Target Fund, undertakes that,
if the Plan is consummated, it will liquidate and dissolve Target
Fund.
(d) Target Trust, on behalf of Target Fund, and Tax-Free
Trust, on behalf of Acquiring 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,
and to the best of their knowledge no such tax return is
currently under audit and no tax deficiency or liability has been
asserted with respect to such tax returns or reports by the
Internal Revenue Service or any state or local tax authority.
(e) At the Closing, Target Trust, on behalf of Target Fund,
will provide Acquiring Fund with a copy of the shareholder ledger
accounts, certified by Target Fund's transfer agent or its
President to the best of its or his knowledge and belief, for all
the shareholders of record of Target Fund Shares as of 1:00 p.m.,
Pacific Time, on the Closing Date who are to become shareholders
of Acquiring Fund as a result of the transfer of assets that is
the subject of the Plan.
(f) As of the Closing, the Board of Target Trust shall have
called, and Target Trust shall have held, a Special Meeting of
Target Fund's shareholders to consider and vote upon the Plan
(the "Special Meeting") and Target Trust shall have taken all
other actions reasonably necessary to obtain approval of the
transactions contemplated herein. Target Trust shall have mailed
to each shareholder of record of Target Fund entitled to vote at
the Special Meeting at which action on the Plan 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 the 1933 Act, Section 14(a) of the 1934 Act and Section 20(a)
of the 1940 Act, and the rules and regulations thereunder.
(g) Tax-Free Trust has filed the Registration Statement with
the SEC and used its best efforts to provide that the
Registration Statement became effective as promptly as
practicable. At the time it became effective, the Registration
Statement: (i) complied in all material respects with the
applicable provisions of the 1933 Act and the rules and
regulations promulgated thereunder; and (ii) did 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 became effective, at the time of the Special Meeting,
and at the Closing Date, the prospectus and statement of
additional information included in the Registration Statement did
not and 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) Subject to the provisions of the Plan, Tax-Free Trust and
Target Trust each shall take, or cause to be taken, all action,
and do or cause to be done, all things reasonably necessary,
proper or advisable to consummate the transactions contemplated
by the Plan.
(i) Target Trust shall deliver to Tax-Free Trust at the
Closing Date confirmation or other adequate evidence as to the
tax costs and holding periods of the assets and property of
Target Fund transferred to Tax-Free Trust in accordance with the
terms of the Plan.
8. CONDITIONS PRECEDENT TO BE FULFILLED BY TARGET TRUST AND
TAX-FREE TRUST.
The consummation of the Plan 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 the Plan 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 and by the 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 the Plan adopted and approved
by the appropriate action of the Board of Trustees certified by
its Secretary or equivalent officer of each of the Trusts.
(c) That the SEC shall have declared effective the
Registration Statement and not have issued an unfavorable
management report under Section 25(b) of the 1940 Act or
instituted or threatened to institute any proceeding seeking to
enjoin consummation of the Plan 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 the Plan and the Plan of Reorganization contemplated
hereby shall have been adopted and approved by the appropriate
action of the shareholders of Target Fund at a meeting or any
adjournment thereof.
(e) That a distribution or distributions shall have been
declared for Target Fund 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 prior 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 all required consents of other parties and all other
consents, orders, and permits of federal, state and local
authorities (including those of the SEC and of state Blue Sky
securities authorities, including any necessary "no-action"
positions or exemptive orders from such federal and state
authorities) to permit consummation of the transaction
contemplated hereby shall have been obtained, except where
failure to obtain any such consent, order, or permit would not
involve a risk of material adverse effect on the assets and
properties of Target Fund or Acquiring Fund.
(g) That there shall be delivered to Target Trust, on behalf
of Target Fund, and Tax-Free Trust, on behalf of Acquiring Fund,
an opinion in form and substance satisfactory to them from the
law firm of Xxxxxxxx Ronon Xxxxxxx & Xxxxx, LLP, counsel to
Tax-Free Trust and Target Trust, to the effect that, provided the
transaction contemplated hereby is carried out in accordance with
the Plan, the laws of the State of Delaware, and based upon
certificates of the officers of Target Trust and Tax-Free Trust
with regard to matters of fact:
(1) The acquisition by Acquiring Fund of substantially all
the assets of Target Fund, as provided for herein, in exchange
for Acquiring Fund Shares followed by the distribution by
Target Fund to its shareholders of Acquiring Fund Shares in
complete liquidation of Target Fund will qualify as a
reorganization within the meaning of Section 368(a)(1) of the
Code, and Target Fund and Acquiring 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 Target Fund upon
the transfer of substantially all of its assets to Acquiring
Fund in exchange solely for voting shares of Acquiring Fund
(Sections 361(a) and 357(a) of the Code);
(3) Acquiring Fund will recognize no gain or loss upon the
receipt of substantially all of the assets of Target Fund in
exchange solely for voting shares of Acquiring Fund (Section
1032(a) of the Code);
(4) No gain or loss will be recognized by Target Fund upon
the distribution of Acquiring Fund Shares to its shareholders
in liquidation of Target Fund, in pursuance of the Plan
(Section 361(c)(1) of the Code);
(5) The basis of the assets of Target Fund received by
Acquiring Fund will be the same as the basis of such assets to
Target Fund immediately prior to the Plan of Reorganization
(Section 362(b) of the Code);
(6) The holding period of the assets of Target Fund
received by Acquiring Fund will include the period during
which such assets were held by Target Fund (Section 1223(2) of
the Code);
(7) No gain or loss will be recognized by the shareholders
of Target Fund upon the exchange of their shares in Target
Fund for voting shares of Acquiring Fund including fractional
shares to which they may be entitled (Section 354(a) of the
Code);
(8) The basis of Acquiring Fund Shares received by the
shareholders of Target Fund shall be the same as the basis of
Target Fund Shares exchanged therefor (Section 358(a)(1) of
the Code);
(9) The holding period of Acquiring Fund Shares received
by shareholders of Target Fund (including fractional shares to
which they may be entitled) will include the holding period of
Target Fund Shares surrendered in exchange therefor, provided
that Target Fund Shares were held as a capital asset on the
effective date of the exchange (Section 1223(1) of the Code);
and
(10) Acquiring 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 Target
Fund 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.
(h) That there shall be delivered to Tax-Free Trust, on behalf
of Acquiring Fund, an opinion in form and substance satisfactory
to it from Xxxxxxxx Ronon Xxxxxxx & Xxxxx, LLP, counsel to Target
Trust, on behalf of Target Fund, 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) Target Fund is a series of Target Trust and that
Target Trust is a validly existing statutory trust in good
standing under the laws of the State of Delaware;
(2) Target Trust is an open-end investment company of the
management type registered as such under the 1940 Act;
(3) The execution and delivery of the Plan and the
consummation of the transactions contemplated hereby have been
duly authorized by all necessary statutory trust action on the
part of Target Trust on behalf of Target Fund; and
(4) The Plan is the legal, valid and binding obligation of
Target Trust, on behalf of Target Fund, and is enforceable
against Target Trust, on behalf of Target Fund, 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 Target
Trust with regard to matters of fact, and certain certifications
and written statements of governmental officials with respect to
the good standing of Target Trust.
(i) That there shall be delivered to Target Trust, on behalf
of Target Fund, an opinion in form and substance satisfactory to
it from the law firm of Xxxxxxxx Ronon Xxxxxxx & Xxxxx, LLP,
counsel to Tax-Free Trust, on behalf of Acquiring Fund, 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) Acquiring Fund is a series of Tax-Free Trust and
Tax-Free Trust is a validly existing statutory trust in good
standing under the laws of the State of Delaware;
(2) Tax-Free Trust is authorized to issue an unlimited
number of shares of beneficial interest, without par value, of
Acquiring Fund;
(3) Tax-Free Trust is an open-end investment company of
the management type registered as such under the 1940 Act;
(4) Acquiring Fund Shares to be issued pursuant to the
terms of the Plan have been duly authorized and, when issued
and delivered as provided in the Plan and the Registration
Statement, will have been validly issued and fully paid and
will be non-assessable by Tax-Free Trust, on behalf of
Acquiring Fund;
(5) The execution and delivery of the Plan and the
consummation of the transactions contemplated hereby have been
duly authorized by all necessary statutory trust action on the
part of Tax-Free Trust, on behalf of Acquiring Fund;
(6) The Plan is the legal, valid and binding obligation of
Tax-Free Trust, on behalf of Acquiring Fund, and is
enforceable against Tax-Free Trust, on behalf of Acquiring
Fund, in accordance with its terms; and
(7) The registration statement of Tax-Free Trust, of which
the prospectus dated July 1, 2008, of Acquiring Fund is a part
(the "Prospectus"), is, at the time of the signing of the
Plan, 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.
In giving the opinions set forth above, this counsel may state
that it is relying on certificates of the officers of Tax-Free
Trust with regard to matters of fact, and certain certifications
and written statements of governmental officials with respect to
the good standing of Tax-Free Trust.
(j) That Tax-Free Trust's prospectus contained in the
Registration Statement with respect to Acquiring Fund Shares
delivered to Target Fund's shareholders in accordance with the
Plan shall be 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.
(k) That Acquiring Fund 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 Acquiring
Fund Shares lawfully to be delivered to each holder of Target
Fund Shares.
(l) That, at the Closing, there shall be transferred to
Tax-Free Trust, on behalf of Acquiring Fund, aggregate Net Assets
of Target Fund 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 Target Fund on the
Closing Date.
(m) That there be delivered to Tax-Free Trust, on behalf of
Acquiring Fund, information concerning the tax basis of Target
Fund in all securities transferred to Acquiring Fund, together
with shareholder information including: the names, addresses, and
taxpayer identification numbers of the shareholders of Target
Fund 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
Target Fund with respect to each shareholder.
9. EXPENSES.
The expenses of entering into and carrying out the provisions
of the Plan shall be borne as follows: each of Target Trust, on
behalf of Target Fund, and Tax-Free Trust, on behalf of Acquiring
Fund, will pay 25% of the costs of the Plan of Reorganization,
and Franklin Advisers, Inc., the investment manager for both
Acquiring Fund and Target Fund, will pay 50% of the costs of the
Plan of Reorganization.
10. TERMINATION; POSTPONEMENT; WAIVER; ORDER.
(a) Anything contained in the Plan to the contrary
notwithstanding, the Plan may be terminated and the Plan of
Reorganization abandoned at any time prior (whether before or
after approval thereof by the shareholders of Target Fund) to the
Closing, or the Closing may be postponed as follows:
(1) by mutual consent of Target Trust, on behalf of Target
Fund, and Tax-Free Trust, on behalf of Acquiring Fund;
(2) by Tax-Free Trust, on behalf of Acquiring Fund, if any
condition of its obligations set forth in Section 8 has not
been fulfilled or waived and it reasonably appears that such
condition or obligation will not or cannot be met; or
(3) by Target Trust, on behalf of Target Fund, if any
conditions of its obligations set forth in Section 8 has not
been fulfilled or waived and it reasonably appears that such
condition or obligation will not or cannot be met.
(b) If the transactions contemplated by the Plan have not been
consummated by June 30, 2009, the Plan shall automatically
terminate on that date, unless a later date is agreed to by both
Tax-Free Trust and Target Trust.
(c) In the event of termination of the Plan prior to its
consummation, pursuant to the provisions hereof, the Plan shall
become void and have no further effect, and neither Target Trust,
Tax-Free Trust, Target Fund nor Acquiring Fund, nor their
trustees, officers, or agents or the shareholders of Target Fund
or Acquiring Fund shall have any liability in respect of the
Plan, but all expenses incidental to the preparation and carrying
out of the Plan shall be paid as provided in Section 9 hereof.
(d) At any time prior to the Closing, any of the terms or
conditions of the Plan may be waived by the party who is entitled
to the benefit thereof if, in the judgment of such party, such
action or waiver will not have a material adverse effect on the
benefits intended under the Plan 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
Plan on the Closing Date, and neither Target Trust nor Tax-Free
Trust, nor any of their officers, trustees, agents or
shareholders shall have any liability with respect to such
representations or warranties after the Closing Date.
(f) If any order or orders of the SEC with respect to the Plan
shall be issued prior to the Closing and shall impose any terms
or conditions that are determined by action of the Board of
Trustees of Target Trust, on behalf of Target Fund, or the Board
of Trustees of Tax-Free Trust, on behalf of Acquiring Fund, to be
acceptable, such terms and conditions shall be binding as if a
part of the Plan without a vote or approval of the shareholders
of Target Fund, unless such terms and conditions shall result in
a change in the method of computing the number of Acquiring Fund
Shares to be issued to Target Fund in which event, unless such
terms and conditions shall have been included in the proxy
solicitation material furnished to the shareholders of Target
Fund prior to the meeting at which the transactions contemplated
by the Plan shall have been approved, the Plan shall not be
consummated and shall terminate unless Target Trust shall
promptly call a special meeting of the shareholders of Target
Fund at which such conditions so imposed shall be submitted for
approval.
11. LIABILITY OF TAX-FREE TRUST AND TARGET TRUST.
(a) Each party acknowledges and agrees that all obligations of
Tax-Free Trust under the Plan are binding only with respect to
Acquiring Fund; that any liability of Tax-Free Trust under the
Plan with respect to Tax-Free Trust, or in connection with the
transactions contemplated herein with respect to Acquiring Fund,
shall be discharged only out of the assets of Acquiring Fund;
that no other series of Tax-Free Trust shall be liable with
respect to the Plan or in connection with the transactions
contemplated herein; and that neither Target Trust nor Target
Fund shall seek satisfaction of any such obligation or liability
from the shareholders of Tax-Free Trust, the trustees, officers,
employees or agents of Tax-Free Trust, or any of them.
(b) Each party acknowledges and agrees that all obligations of
Target Trust under the Plan are binding only with respect to
Target Fund; that any liability of Target Trust under the Plan
with respect to Target Fund, or in connection with the
transactions contemplated herein with respect to Target Fund,
shall be discharged only out of the assets of Target Fund; that
no other series of Target Trust shall be liable with respect to
the Plan or in connection with the transactions contemplated
herein; and that neither Tax-Free Trust nor Acquiring Fund shall
seek satisfaction of any such obligation or liability from the
shareholders of Target Trust, the trustees, officers, employees
or agents of Target Trust, or any of them.
12. ENTIRE AGREEMENT AND AMENDMENTS.
The Plan embodies the entire agreement between the parties and
there are no agreements, understandings, restrictions, or
warranties relating to the transactions contemplated by the Plan
other than those set forth herein or herein provided for. The
Plan may be amended only by mutual consent of the parties in
writing. Neither the Plan nor any interest herein may be assigned
without the prior written consent of the other party.
13. COUNTERPARTS.
The Plan 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.
14. NOTICES.
Any notice, report, or demand required or permitted by any
provision of the Plan shall be in writing and shall be deemed to
have been given if delivered or mailed, first class postage
prepaid, addressed to Franklin Federal Limited-Term Tax-Free
Income Fund, at Franklin Tax-Free Trust, Xxx Xxxxxxxx Xxxxxxx,
Xxx Xxxxx, XX 00000-0000, Attention: Secretary, or Franklin New
York Limited-Term Tax-Free Income Fund, at Franklin New York
Tax-Free Trust, Xxx Xxxxxxxx Xxxxxxx, Xxx Xxxxx, XX 00000-0000,
Attention: Secretary, as the case may be.
15. GOVERNING LAW.
The Plan shall be governed by and carried out in accordance
with the laws of the State of Delaware.
IN WITNESS WHEREOF, Target Trust, on behalf of Target Fund,
and Tax-Free Trust, on behalf of Acquiring Fund, have each caused
the Plan to be executed on its behalf by its duly authorized
officers, all as of the date and year first-above written.
FRANKLIN TAX FREE TRUST, on behalf
of FRANKLIN FEDERAL LIMITED-TERM
TAX-FREE INCOME FUND
By:
/s/ XXXXX X. XXXX
Xxxxx X. Xxxx, Vice President
FRANKLIN NEW YORK TAX-FREE TRUST,
on behalf of FRANKLIN NEW YORK
LIMITED-TERM TAX-FREE INCOME FUND
By:
/s/ XXXXX X. XXXX
Xxxxx X. Xxxx, Vice President
