AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Plan"), is made as of this
25th day of February, 2002, by and between FTI Funds ("FTI Trust"), a business
trust created under the laws of The Commonwealth of Massachusetts in 1995 with
its principal place of business at Xxx Xxxxxxxx Xxxxxxx, Xxx Xxxxx, Xxxxxxxxxx
00000, on beha1f of its series, FTI Municipal Bond Fund ("FTI Fund"), and
Franklin Federal Tax-Free Income Fund ("Franklin Fund"), a corporation created
under the laws of the State of California in 1982 with its principal place of
business at Xxx Xxxxxxxx Xxxxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000.
PLAN OF REORGANIZATION
The reorganization (hereinafter referred to as the "Plan of
Reorganization") will consist of (i) the acquisition by Franklin Fund, of
substantially all of the property, assets and goodwill of FTI Fund in exchange
solely for full and fractional shares of common stock, without par value, of
Franklin Fund - Advisor Class ("Franklin Fund Shares"); (ii) the distribution of
Franklin Fund Shares to the shareholders of FTI Fund ("FTI Fund Shares"),
according to their respective interests in FTI Fund in complete liquidation of
FTI Fund; and (iii) the dissolution of FTI 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 this Plan hereinafter set forth.
AGREEMENT
In order to consummate the Plan 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 FTI FUND.
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(a) Subject to the terms and conditions of this Plan, and in reliance on the
representations and warranties of Franklin Fund herein contained, and in
consideration of the delivery by Franklin Fund of the number of Franklin Fund
Shares hereinafter provided, FTI Trust on behalf of FTI Fund agrees that it will
convey, transfer and deliver to Franklin Fund at the Closing all of FTI Fund's
then existing assets, 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 the costs and expenses of carrying out this Plan (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 FTI 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 excluding 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
FTI Trust shall reasonably deem to exist against FTI Fund, if any, at the
Closing Date, for which contingent and other appropriate liability reserves
shall be established on FTI Fund's books (hereinafter "Net Assets"). Franklin
Fund shall not assume any liability of FTI Fund and FTI Fund shall use its
reasonable best efforts to discharge all of its known liabilities, so far as may
be possible, from the cash and bank deposits described above. FTI Fund 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.
(b) Subject to the terms and conditions of this Plan, and in reliance on the
representations and warranties of FTI Trust on behalf of FTI Fund herein
contained, and in consideration of such sale, conveyance, transfer, and
delivery, Franklin Fund agrees at the Closing to deliver to FTI Trust the number
of Franklin Fund Shares, determined by dividing the net asset value per share of
the FTI Fund Shares by the net asset value per share of Franklin Fund Shares,
and multiplying the result thereof by the number of outstanding FTI Fund Shares,
as of 4:00 p.m. Eastern time on the Closing Date. The number of Franklin Fund
Shares delivered to FTI Trust shall have an aggregate net asset value equal to
the value of the FTI Fund's Net Assets, all determined as provided in Section 2
of this Plan and as of the date and time specified therein.
(c) Immediately following the Closing, FTI Trust shall dissolve FTI Fund and
distribute pro rata to its shareholders of record as of the close of business on
the Closing Date, Franklin Fund Shares received by FTI Fund pursuant to this
Section 1. Such dissolution and distribution shall be accomplished by the
establishment of accounts on the share records of FTI 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 Franklin Fund Shares shall be
carried to the third decimal place. As promptly as practicable after the
Closing, each holder of any outstanding certificate or certificates representing
shares of beneficial interest of FTI Fund shall be entitled to surrender the
same to the transfer agent for Franklin Fund in exchange for the number of
Franklin Fund Shares into which the FTI Fund Shares theretofore represented by
the certificate or certificates so surrendered shall have been converted.
Certificates for Franklin Fund Shares shall not be issued, unless specifically
requested by the shareholders. Until so surrendered, each outstanding
certificate which, prior to the Closing, represented shares of beneficial
interest of FTI Fund shall be deemed for all Franklin Fund's purposes to
evidence ownership of the number of Franklin Fund Shares into which the FTI Fund
Shares (which prior to the Closing were represented thereby) have been
converted.
(d) At the Closing, each shareholder of record of FTI 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 FTI Fund that such person had on such Distribution Record Date.
(e) All books and records relating to FTI 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 Franklin Fund from and after the date of this Agreement, and shall
be turned over to Franklin Fund on or prior to the Closing.
2. VALUATION.
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(a) The value of Franklin Fund Shares and FTI Fund's Net Assets to be acquired
by Franklin Fund hereunder shall in each case be computed as of 4:00 p.m.
Eastern 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 or (c)elsewhere is disrupted or 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 the Franklin Fund Shares and the value of the FTI Fund's Net Assets
shall be computed in accordance with the valuation procedures set forth in the
respective prospectuses of Franklin Fund and FTI Fund.
(b) In the event of a Market Disruption on the proposed Closing Date so that
an accurate appraisal of the net asset value of Franklin Fund Shares or the
value of FTI 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.
(c) All computations of value regarding the net asset value of the Franklin
Fund Shares and the value of FTI Fund's Net Assets shall be made by the
investment advisor to Franklin Fund; provided, however, that all computations of
value shall be subject to review by FTI Fund.
3. CLOSING AND CLOSING DATE. The Closing Date shall be March 27, 2002, or such
later date as the parties may mutually agree. The Closing shall take place at
the principal office of FTI Trust at 5:00 p.m., Eastern time, on the Closing
Date. FTI Trust on behalf of FTI Fund shall have provided for delivery as of the
Closing of those Net Assets of FTI Fund to be transferred to the account of
Franklin Fund's custodian, Bank of New York, Mutual Funds Division, 00
Xxxxxxxxxx Xxxxxx, Xxx Xxxx, XX 00000. Also, FTI Trust on behalf of FTI Fund
shall deliver at the Closing a list of names and addresses of the shareholders
of record of FTI Fund Shares and the number of full and fractional shares of
beneficial interest owned by each such shareholder, indicating thereon which
such shares are represented by outstanding certificates and which by book-entry
accounts, all as of 4:00 p.m. Eastern time on the Closing Date, certified by its
transfer agent or by its President to the best of its or his knowledge and
belief. Franklin Fund shall issue and deliver a certificate or certificates
evidencing the shares of beneficial interest of Franklin Fund to be delivered to
the account of FTI Fund at said transfer agent registered in such manner as the
officers of FTI Trust on behalf of FTI Fund may request, or provide evidence
satisfactory to FTI Trust that such Franklin Fund Shares have been registered in
an account on the books of Franklin Fund in such manner as the officers of FTI
Trust on behalf of FTI Fund may request.
4. REPRESENTATIONS AND WARRANTIES BY FRANKLIN FUND.
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Franklin Fund represents and warrants to FTI Trust that:
(a) Franklin Fund is a corporation created under the laws of the State of
California on January 7, 1982, and is validly existing under the laws of that
State. Franklin Fund is duly registered under the 1940 Act, as an open-end,
management investment company and all of the Franklin 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 purpose of raising initial capital as
required by the 1940 Act.
(b) Franklin Fund is authorized to issue 10,000,000,000 shares of beneficial
interest of Franklin Fund, without par value, each outstanding share of which is
fully paid, non-assessable, freely transferable and has full voting rights.
Franklin Fund is further divided into four classes of shares of which Franklin
Fund Shares is one, and 500,000,000 shares of beneficial interest, without par
value, has been allocated and designated to Franklin Fund Shares. No shareholder
of Franklin Fund shall have any option, warrant or preemptive right of
subscription or purchase with respect to Franklin Fund Shares.
(c) The financial statements appearing in the Franklin Fund's Annual Report to
Shareholders for the fiscal year ended April 30, 2001, audited by
PricewaterhouseCoopers LLP, and the financial statements for Franklin Fund for
the six-month period ended October 31, 2001, copies of which have been delivered
to FTI Trust, and any interim unaudited financial statements, copies of which
may be furnished to FTI Trust, fairly present the financial position of Franklin
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 Franklin Fund accurately summarize the accounting
data represented and contain no material omissions with respect to the business
and operations of Franklin Fund.
(e) Franklin Fund has the power to own all of its properties and assets, to
perform its obligations under this Plan and to consummate the transactions
contemplated herein. Franklin Fund is not required to qualify to do business in
any jurisdiction in which it is not so qualified or where failure to qualify
would not subject it to any material liability or disability. Franklin Fund has
all necessary federal, state and local authorizations, consents and approvals
required to own all of its properties and assets and to conduct its business as
such business is now being conducted and to consummate the transactions
contemplated herein.
(f) Franklin Fund is not a party to or obligated under any provision of its
Articles of Incorporation, as amended ("Articles of Incorporation") or Amended
and Restated By-laws ("By-laws"), or any contract or any other commitment or
obligation, is not subject to any order or decree that would be violated by its
execution of or performance under this Plan, and no consent, approval,
authorization or order of any court or governmental authority is required for
the consummation by Franklin Fund of the transactions contemplated by the Plan,
except for the registration of the Franklin 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.
(g) Franklin 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"), Franklin 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 the Plan will not cause it to fail to be qualified as a RIC as of the Closing
Date.
(h) Franklin 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) Franklin Fund does not have any unamortized or unpaid
organizational fees or expenses.
(j) All information to be furnished by Franklin Fund to FTI Trust for use in
preparing any prospectus, proxy materials and other documents which may be
necessary in connection with the transactions contemplated hereby shall be
accurate and complete and shall comply in all material respects with federal
securities and other laws and regulations applicable thereto.
(k) Franklin 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.
(l) There is no intercorporate indebtedness existing between FTI Fund and
Franklin Fund that was issued, acquired or will be settled at a discount.
(m) Franklin Fund does not own, directly or indirectly, nor has it owned
during the past five (5) years, directly or indirectly, any shares of FTI Fund.
(n) Franklin Fund has no plan or intention to issue additional shares
following the reorganization except for shares issued in the ordinary course of
its business as an open-end investment company; nor does Franklin Fund have any
plan or intention to redeem or otherwise reacquire any shares issued pursuant to
the reorganization, 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
0000 Xxx.
(o) Following the Closing Date of the reorganization, Franklin Fund will
actively continue FTI Fund's business in substantially the same manner that FTI
Fund conducted that business immediately before the reorganization. Following
the Closing Date of the reorganization, Franklin Fund will not dispose of assets
acquired from FTI Fund in order to satisfy the investment objective of Franklin
Fund or for any other reason, except for acquisitions and dispositions made in
the ordinary course of its business as a RIC, and any proceeds from the
disposition of securities will be invested in accordance with Franklin Fund's
investment objective.
(p) The Form N-14 Registration Statement referred to in Section 7(g) hereof
(other than the portions of such documents based on information furnished by or
on behalf of FTI Trust for inclusion or incorporation by reference therein), and
any Prospectus or Statement of Additional Information of Franklin Fund contained
or incorporated therein by reference, and any supplement or amendment to the
Form N-14 Registration Statement or any such Prospectus or Statement of
Additional Information, on the effective and clearance dates of the Form N-14
Registration Statement on the date of the Special Meeting of FTI Fund
shareholders, and on the Closing Date: (a) shall comply in all material respects
with the provisions of the Securities Exchange Act of 1934 (the "1934 Act"), the
1940 Act, the rules and regulations thereunder, and all applicable state
securities laws and the rules and regulations thereunder; and (b) 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 FTI TRUST ON BEHALF OF FTI FUND.
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FTI Trust, on behalf of FTI Fund, represents and warrants to Franklin Fund
that:
(a) FTI Fund is a series of FTI Trust, a business trust created under the laws
of The Commonwealth of Massachusetts on October 18, 1995, and is validly
existing under the laws of that Commonwealth. FTI Trust is duly registered under
the 1940 Act as an open-end, management investment company and all of FTI
Trust's FTI 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 purpose of raising the required initial
capital.
(b) FTI Trust is authorized to issue an unlimited number of shares of
beneficial interest of FTI Fund, without par value, each outstanding share of
which is fully paid, non-assessable, freely transferable and has full voting
rights, and currently issues shares of seven (7) series, including FTI Fund. FTI
Fund has one class of shares, and an unlimited number of shares of beneficial
interest of FTI Trust, without par value, has been allocated and designated to
this class of FTI Fund.
(c) The financial statements appearing in the FTI Trust's Annual Report to
Shareholders for the fiscal year ended November 30, 2001, audited by Ernst &
Young LLP, copies of which have been delivered or will be delivered to Franklin
Fund prior to the Closing Date, and any interim financial statements for FTI
Trust which may be furnished to Franklin Fund, fairly present the financial
position of FTI 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 FTI Fund accurately summarize the accounting data
represented and contain no material omissions with respect to the business and
operations of FTI Fund.
(e) FTI Trust has the power to own all of its properties and assets, to
perform its obligations under this Plan and to consummate the transactions
contemplated herein. FTI Trust is not required to qualify to do business in any
jurisdiction in which it is not so qualified or where failure to qualify would
not subject it to any material liability or disability. FTI Trust has all
necessary federal, state and local authorizations, consents and approvals
required to own all of its properties and assets and to conduct FTI Fund's
business as such business is now being conducted and to consummate the
transactions contemplated herein.
(f) FTI Trust on behalf of FTI Fund is not a party to or obligated under any
provision of its Declaration of Trust, as amended ("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 this Plan. FTI Trust has furnished Franklin Fund with copies
or descriptions of all material agreements or other arrangements to which FTI
Fund is a party. FTI Fund has no material contracts or other commitments (other
than this Plan or agreements for the purchase of securities entered into in the
ordinary course of business and consistent with its obligations under this Plan)
which will not be terminated by FTI Fund in accordance with their terms at or
prior to the Closing Date.
(g) FTI Trust has elected to treat FTI Fund as a RIC for federal income tax
purposes under Part I of Subchapter M of the Code, FTI Fund is a "fund" as
defined in Section 851(g)(2) of the Code, FTI 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 the Plan will
not cause it to fail to be qualified as a RIC as of the Closing Date.
(h) FTI 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) FTI Fund does not have any unamortized or unpaid organization
fees or expenses.
(j) The Prospectus of FTI Fund, dated March 31, 2001, and the corresponding
Statement of Additional Information, dated March 31, 2001, do 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, in light of the
circumstances under which they were made, not misleading, and any amended,
revised, or new prospectus or statement of additional information of FTI Fund or
any supplement thereto, that is hereafter filed with the SEC (copies of which
documents shall be provided to Franklin Fund promptly after such filing), shall
not contain any untrue statement of a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.
(k) FTI 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 since the dates of
those financial statements. On the Closing Date, FTI Trust shall advise Franklin
Fund in writing of all FTI Fund's known liabilities, contingent or otherwise,
whether or not incurred in the ordinary course of business, existing or accrued
at such time.
(l) Since November 30, 2001, there has not been any material adverse change in
FTI Fund's financial condition, assets, liabilities, or business other than
changes occurring in the ordinary course of its business.
(m) No consent, approval, authorization, or order of any court or governmental
authority is required for the consummation by FTI Fund or FTI Trust of the
transactions contemplated by this Plan, except as may be required under the
federal or state securities laws or the rules and regulations thereunder.
(n) The information to be furnished by FTI Trust or FTI Fund for use in
preparing the Form N-14 Registration Statement referred to in Section 7(g)
hereof, and the Combined Proxy Statement/Prospectus to be included in the Form
N-14 Registration Statement, proxy materials and other documents which may be
necessary in connection with the transactions contemplated hereby, shall be
accurate and complete and shall comply in all material respects with federal
securities and other laws and regulations thereunder applicable thereto.
(o) There has not been nor will there be any intercorporate indebtedness
existing between FTI Fund and Franklin Fund that was issued, acquired or will be
settled at a discount.
(p) There is no plan or intention of FTI Fund shareholders who individually
own 5% or more of shares of FTI Fund and, to the best knowledge of FTI Fund's
management, there is no plan or intention of the remaining FTI Fund shareholders
to sell, exchange or otherwise dispose of a number of shares of Franklin Fund
received in the reorganization that would reduce the FTI Fund shareholders'
ownership of Franklin Fund shares to a number of shares having a value, as of
the closing date of the reorganization, of less than 50% of the value of all of
the formerly outstanding FTI shares as of the same date. For purposes of this
representation, FTI Fund shares exchanged for cash or other property will be
treated as outstanding FTI Fund shares on the closing date of the
reorganization. Moreover, FTI Fund shares and Franklin Fund shares held by FTI
Fund shareholders sold, redeemed, or disposed of prior to or subsequent to the
closing date of the reorganization will be considered in making this
representation.
(q) Prior to the Closing Date of the reorganization, FTI Fund will not dispose
of and/or acquire any assets in order to satisfy the investment objective of
Franklin Fund or for any other reason, or otherwise change its historic
investment policies, except for acquisitions and dispositions made in the
ordinary course of its business as a RIC.
(r) As of the Closing Date, FTI 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 FTI Fund, except for the right of investors
to acquire its shares at net asset value in the normal course of its business as
an open-end diversified management investment company operating under the 1940
Act.
(s) Throughout the five year period ending on the Closing Date, FTI Fund will
have conducted its historic business within the meaning of Section 1.368-1(d) of
the Income Tax Regulations under the Code ("Treasury Regulations").
6. REPRESENTATIONS AND WARRANTIES BY FTI TRUST AND FRANKLIN FUND.
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FTI Trust, on behalf of FTI Fund, and Franklin Fund, each represents and
warrants to the other that:
(a) The statement of assets and liabilities to be furnished by it as of 4:00
p.m. Eastern time on the Closing Date for the purpose of determining the number
of Franklin Fund Shares to be issued pursuant to Section 1 of this Plan, will
accurately reflect each Fund's Net Assets and outstanding shares of beneficial
interest, 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 FTI
Fund, in the case of FTI Trust, and Franklin Fund, there is no material suit,
judicial action, or legal or administrative proceeding pending or threatened
against it. Neither Franklin Fund nor FTI Trust are 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 Franklin Fund's or FTI 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 this Plan have been duly
authorized by all necessary action of its Board of Trustees, in the case of FTI
Trust, and its Board of Directors, in the case of Franklin Fund, and this Plan,
subject to the approval of FTI Fund's shareholders in the case of FTI 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 this Plan will not cause FTI Fund, in
the case of FTI Trust, and Franklin 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 fiscal year.
7. COVENANTS OF FTI TRUST AND FRANKLIN FUND.
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(a) FTI Trust, on behalf of FTI Fund, and Franklin Fund each covenant to
operate their respective businesses as presently conducted between the date
hereof and the Closing, it being understood that such ordinary course of
business will include customary dividends and distributions and any other
distribution necessary or desirable to minimize federal income or excise taxes.
(b) FTI Trust, on behalf of FTI Fund, undertakes that it will not acquire
Franklin Fund Shares for the purpose of making distributions thereof to anyone
other than FTI Fund's shareholders.
(c) FTI Trust, on behalf of FTI Fund, undertakes that, if this Plan is
consummated, it will liquidate and dissolve FTI Fund.
(d) FTI Trust, on behalf of FTI Fund, and Franklin 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, FTI Trust, on behalf of FTI Fund, will provide Franklin
Fund a copy of the shareholder ledger accounts, certified by FTI Fund's transfer
agent or its President to the best of its or his knowledge and belief, for all
the shareholders of record of FTI Fund Shares as of 4:00 p.m. Eastern time on
the Closing Date who are to become shareholders of Franklin Fund as a result of
the transfer of assets that is the subject of this Plan.
(f) The Board of Trustees of FTI Trust shall call and FTI Trust shall hold, a
Special Meeting of FTI Fund's shareholders to consider and vote upon this Plan
(the "Special Meeting") and FTI Trust shall take all other actions reasonably
necessary to obtain approval of the transactions contemplated herein. FTI Trust
agrees to mail to each shareholder of record of FTI Fund entitled to vote at the
Special Meeting at which action on this Plan is to be considered, in sufficient
time to comply with requirements as to notice thereof, a combined Prospectus and
Proxy Statement that complies in all material respects with the applicable
provisions of Section 14(a) of the 1934 Act, as amended, and Section 20(a) of
the 1940 Act, and the rules and regulations, respectively, thereunder.
(g) Franklin Fund will file with the U.S. Securities and Exchange Commission a
registration statement on Form N-14 under the 1933 Act relating to Franklin Fund
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 Special Meeting, and at the Closing Date, the prospectus 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) Subject to the provisions of this Plan, Franklin Fund and FTI 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 this Plan.
(i) FTI Trust shall furnish to Franklin Fund on the Closing Date a Statement
of Assets and Liabilities of FTI Fund as of the Closing Date, which statement
shall be prepared in accordance with GAAP consistently applied and shall be
certified by FTI Fund's Treasurer or Assistant Treasurer. As promptly as
practicable, but in any case, within forty-five (45) days after the Closing
Date, FTI Trust shall furnish to Franklin Fund, in such form as is reasonably
satisfactory to Franklin Fund, a statement of the earnings and profits of FTI
Fund for federal income tax purposes, and of any capital loss carryovers and
other items that will be carried over to Franklin Fund as a result of Section
381 of the Code, which statement shall be certified by FTI Fund's Treasurer or
Assistant Treasurer. FTI Trust covenants that FTI Fund has no earnings and
profits that were accumulated by it or any acquired entity during a taxable
year when it or such entity did not qualify as a RIC under the Code, or, if it
has such earnings and profits, it shall distribute them to its shareholders
prior to the Closing Date.
(j) FTI Trust shall deliver to Franklin Fund at the Closing Date confirmation
or other adequate evidence as to the tax costs and holding periods of the assets
and property of FTI Fund transferred to Franklin Fund in accordance with the
terms of this Plan.
8. CONDITIONS PRECEDENT TO BE FULFILLED BY FTI TRUST AND FRANKLIN FUND.
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The consummation of this 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 this 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
its Board of Trustees, in the case of FTI Trust, and its Board of Directors, in
the case of Franklin Fund, certified by its Secretary or equivalent officer of
each of the Funds.
(c) That the U.S. Securities and Exchange Commission shall 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 this Plan and the Plan of Reorganization contemplated hereby shall
have been adopted and approved by the appropriate action of the shareholders of
FTI Fund at an annual or special meeting or any adjournment thereof.
(e) That a distribution or distributions shall have been declared for FTI 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 4:00 p.m. Eastern 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 all required consents of other parties and all other consents,
orders, and permits of federal, state and local regulatory 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 FTI Fund or Franklin Fund.
(g) That there shall be delivered to FTI Trust, on behalf of FTI Fund, and
Franklin Fund an opinion, from Messrs. Stradley, Ronon, Xxxxxxx & Xxxxx, LLP,
counsel to Franklin Fund, to the effect that, provided the acquisition
contemplated hereby is carried out in accordance with this Plan and based upon
certificates of the officers of FTI Trust and Franklin Fund with regard to
matters of fact:
(1) The acquisition by Franklin Fund of substantially all the assets
of FTI Fund as provided for herein in exchange for Franklin Fund Shares followed
by the distribution by FTI Fund to its shareholders of Franklin Fund
Shares in complete liquidation of FTI Fund will qualify as a
reorganization within the meaning of Section 368(a)(1) of the Code, and
FTI Fund and Franklin 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 FTI Fund upon the transfer
of substantially all of its assets to Franklin Fund in exchange solely for
voting shares of Franklin Fund (Sections 361(a) and 357(a) of the Code).
No opinion, however, will be expressed as to whether any accrued market
discount will be required to be recognized as ordinary income pursuant to
Section 1276 of the Code;
(3) No gain or loss will be recognized by Franklin Fund upon the
receipt by it of substantially all of the assets of FTI Fund in exchange solely
for voting shares of Franklin Fund (Section 1032(a) of the Code);
(4) No gain or loss will be recognized by FTI Fund upon the
distribution of Franklin Fund Shares to its shareholders in liquidation of FTI
Fund (in pursuance of the Plan) (Section 361(c)(1) of the Code);
(5) The basis of the assets of FTI Fund received by Franklin Fund will
be the same as the basis of such assets to FTI Fund immediately prior to the
exchange (Section 362(b) of the Code);
(6) The holding period of the assets of FTI Fund received by Franklin
Fund will include the period during which such assets were held by FTI Fund
(Section 1223(2) of the Code);
(7) No gain or loss will be recognized to the shareholders of FTI Fund
upon the exchange of their shares in FTI Fund for voting shares of Franklin
Fund including fractional shares to which they may be entitled (Section
354(a) of the Code);
(8) The basis of Franklin Fund Shares received by the shareholders of
FTI Fund shall be the same as the basis of the FTI Fund Shares exchanged
therefor (Section 358(a)(1) of the Code);
(9) The holding period of Franklin Fund Shares received by shareholders
of FTI Fund (including fractional shares to which they may be entitled) will
include the holding period of the FTI Fund Shares surrendered in exchange
therefor, provided that the FTI Fund Shares were held as a capital asset
on the effective date of the exchange (Section 1223(1) of the Code); and
(10) Franklin 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 Treasury
Regulations) the items of FTI 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 Franklin Fund an opinion in form and
substance satisfactory to it from Messrs. Xxxxxxx Xxxxx Xxxxxxx & Xxxxxxxxx,
LLP, counsel to FTI Trust on behalf of FTI 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) FTI Fund is a series of FTI Trust and is a validly existing
business trust in good standing under the laws of The Commonwealth of
Massachusetts;
(2) FTI Trust is authorized to issue an unlimited number of shares of
beneficial interest, without par value, of FTI Fund. One class of shares
of FTI Fund has been designated as FTI Fund Shares, and an unlimited
number of shares of beneficial interest of FTI Trust has been allocated to
FTI Fund Shares. Assuming that the initial shares of beneficial interest
of FTI Fund were issued in accordance with the 1940 Act and the
Declaration of Trust and By-laws of FTI Trust, and that all other
outstanding shares of FTI Fund were sold, issued and paid for in
accordance with the terms of FTI Fund's prospectus in effect at the time
of such sales, each such outstanding share is fully paid, non-assessable,
freely transferable and has full voting rights;
(3) FTI Fund is an open-end investment company of the management type
registered as such under the 1940 Act;
(4) Except as disclosed in FTI Fund's currently effective prospectus,
such counsel does not know of any material suit, action, or legal or
administrative proceeding pending or threatened against FTI Fund, the
unfavorable outcome of which would materially and adversely affect FTI
Trust or FTI Fund;
(5) The execution and delivery of this Plan and the consummation of
the transactions contemplated hereby have been duly authorized by all
necessary trust action on the part of FTI Trust on behalf of FTI Fund; and
(6) Neither the execution, delivery, nor performance of this Plan by
FTI Trust on behalf of FTI Fund violates any provision of its Declaration of
Trust or By-laws, or the provisions of any agreement or other instrument filed
by FTI Trust as an exhibit to its Registration Statement on Form N-1A;
this Plan is the legal, valid and binding obligation of FTI Trust on
behalf of FTI Fund and is enforceable against FTI Trust on behalf of FTI
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 FTI Trust with regard to matters of
fact, and certain certifications and written statements of governmental
officials with respect to the good standing of FTI Trust.
(i) That there shall be delivered to FTI Trust on behalf of FTI Fund an
opinion in form and substance satisfactory to it from Messrs. Stradley, Ronon,
Xxxxxxx & Young, LLP, counsel to Franklin 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) Franklin Fund is a validly existing corporation in good standing
under the laws of the State of California;
(2) Franklin Fund is authorized to issue 10,000,000,000 shares of
beneficial interest, without par value. Franklin Fund is further divided into
four (4) classes of shares of which Franklin Fund Shares is one, and
500,000,000 shares of beneficial interest, without par value, have been
allocated and designated to Franklin Fund Shares. Assuming that the
initial shares of beneficial interest of Franklin Fund were issued in
accordance with the 1940 Act, and the Articles of Incorporation and the
By-laws of Franklin Fund, and that all other outstanding shares of
Franklin Fund were sold, issued and paid for in accordance with the terms
of Franklin Fund's prospectus in effect at the time of such sales, each
such outstanding share of Franklin Fund is fully paid, non-assessable,
freely transferable and has full voting rights;
(3) Franklin Fund is an open-end investment company of the management
type registered as such under the 1940 Act;
(4) Except as disclosed in Franklin Fund's currently effective
prospectus, such counsel does not know of any material suit, action, or legal or
administrative proceeding pending or threatened against Franklin Fund, the
unfavorable outcome of which would materially and adversely affect
Franklin Fund;
(5) Franklin Fund Shares to be issued pursuant to the terms of this
Plan have been duly authorized and, when issued and delivered as provided in
this Plan, will have been validly issued and fully paid and will be
non-assessable by Franklin Fund;
(6) The execution and delivery of this Plan and the consummation of
the transactions contemplated hereby have been duly authorized by all
necessary company action on the part of Franklin Fund;
(7) Neither the execution, delivery, nor performance of this Plan by
Franklin Fund violates any provision of its Articles of Incorporation or
By-laws, or the provisions of any agreement or other instrument filed by
Franklin Fund as an exhibit to its Registration Statement on Form N-1A; this
Plan is the legal, valid and binding obligation of Franklin Fund and is
enforceable against Franklin Fund in accordance with its terms; and
(8) The registration statement of Franklin Fund, of which the
prospectus dated September 1, 2001 (the "Prospectus") is a part, is at the time
of the signing of this 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
U.S. Securities and Exchange Commission 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 time of the signing of
this Plan, 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 Franklin Fund with regard to matters
of fact, and certain certifications and written statements of governmental
officials with respect to the good standing of Franklin Fund.
(j) That FTI Fund shall have received a certificate from the President and
Secretary of Franklin Fund to the effect that the statements contained in the
Prospectus, at the time the Prospectus became effective, at the date of the
signing of this Plan, 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.
(k) That Franklin Fund's Registration Statement with respect to Franklin Fund
Shares to be delivered to FTI Fund's shareholders in accordance with this Plan
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.
(l) That Franklin 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 Franklin Fund Shares lawfully to be delivered to
each holder of FTI Fund Shares.
(m) That, at the Closing, there shall be transferred to Franklin Fund,
aggregate Net Assets of FTI 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 FTI Fund on the Closing Date.
(n) That there be delivered to Franklin Fund information concerning the tax
basis of FTI Fund in all securities transferred to Franklin Fund, together with
shareholder information including the names, addresses, and taxpayer
identification numbers of the shareholders of FTI 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
FTI Fund respect to each shareholder.
9. BROKERAGE FEES AND EXPENSES.
---------------------------
(a) FTI Trust on behalf of FTI Fund and Franklin Fund 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) The expenses of entering into and carrying out the provisions of this Plan
shall be borne one-quarter by Franklin Fund, one-quarter by FTI Fund, and
one-quarter by Franklin Advisers, Inc. and one-quarter by Fiduciary
International, Inc.
10. TERMINATION; POSTPONEMENT; WAIVER; ORDER.
----------------------------------------
(a) Anything contained in this Plan to the contrary notwithstanding, this Plan
may be terminated and the Plan of Reorganization abandoned at any time (whether
before or after approval thereof by the shareholders of FTI Fund) prior to the
Closing, or the Closing may be postponed as follows:
(1) by mutual consent of FTI Trust on behalf of FTI Fund and of
Franklin Fund;
(2) by Franklin 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 FTI Trust on behalf of FTI 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.
An election by Franklin Fund or FTI Trust to terminate this Plan and to
abandon the Plan of Reorganization shall be exercised respectively, by the Board
of Directors of Franklin Fund or the Board of Trustees of FTI Trust.
(b) If the transactions contemplated by this Plan have not been consummated by
November 30, 2002, the Plan shall automatically terminate on that date, unless a
later date is agreed to by both Franklin Fund and FTI Trust.
(c) In the event of termination of this Plan pursuant to the provisions
hereof, the same shall become void and have no further effect, and neither FTI
Trust, FTI Fund nor Franklin Fund, nor their trustees, directors, officers, or
agents or the shareholders of FTI Fund or Franklin Fund shall have any liability
in respect of this Plan, but all expenses incidental to the preparation and
carrying out of this Plan 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
Plan may be waived by the party who is entitled to the benefit thereof by action
taken by that party's Board of Trustees, in the case of FTI Trust, or Board of
Directors, in the case of Franklin Fund, if, in the judgment of such Board, such
action or waiver will not have a material adverse effect on the benefits
intended under this 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 FTI Trust nor Franklin Fund, nor any of their officers, directors,
trustees, 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, agent or shareholder of FTI Trust or Franklin Fund
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, 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 U.S. Securities and Exchange Commission with
respect to this 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
FTI Trust, on behalf of FTI Fund, or Franklin Fund, to be acceptable, such terms
and conditions shall be binding as if a part of this Plan without further vote
or approval of the shareholders of FTI Fund, unless such terms and conditions
shall result in a change in the method of computing the number of Franklin Fund
Shares to be issued to FTI Fund in which event, unless such terms and conditions
shall have been included in the proxy solicitation material furnished to the
shareholders of FTI Fund prior to the meeting at which the transactions
contemplated by this Plan shall have been approved, this Plan shall not be
consummated and shall terminate unless FTI Trust shall promptly call a special
meeting of the shareholders of FTI Fund at which such conditions so imposed
shall be submitted for approval.
11. INDEMNIFICATION.
---------------
(a) Franklin Fund, shall indemnify, defend and hold harmless FTI Fund, FTI
Trust, its Board of Trustees, officers, employees and agents (collectively
"Acquired Fund Indemnified Parties") against all losses, claims, demands,
liabilities and expenses (net of any insurance coverage or enforceable
indemnification agreement for such amounts), including reasonable legal and
other expenses incurred in defending third party claims, actions, suits or
proceedings, whether or not resulting in any liability to such Acquired Fund
Indemnified Parties, including amounts paid by any one or more of the Acquired
Fund Indemnified Parties in a compromise or settlement of any such claim,
action, suit or proceeding, or threatened third party claim, suit, action or
proceeding made with the consent of Franklin Fund, arising from any untrue
statement or alleged untrue statement of a material fact contained in the Form
N-14 Registration Statement, as filed and in effect with the SEC or any
application prepared by Franklin Fund with any state regulatory agency in
connection with the transactions contemplated by this Plan under the securities
laws thereof ("Application"); or which arises out of or is based upon any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided, however, that Franklin Fund shall only be liable in such case to the
extent that any such loss, claim, demand, liability or expense arises out of or
is based upon an untrue statement or alleged untrue statement or omission or
alleged omission about Franklin Fund or the transactions contemplated by this
Plan made in the Form N-14 Registration Statement or any Application.
(b) After the Closing Date, Franklin Fund shall also indemnify and hold
harmless FTI Funds' Board of Trustees and officers (collectively, "Acquired Fund
Covered Persons") against all losses, claims, demands, liabilities and expenses,
including reasonable legal and other expenses incurred in defending third party
claims, actions, suits or proceedings, whether or not resulting in any liability
to such Acquired Fund Covered Person, including amounts paid by any one or more
of the Acquired Fund Covered Persons in a compromise or settlement of any such
claim, suit, action or proceeding, or threatened third party claim, suit, action
or proceeding made with the consent of Franklin Fund, to the extent such
Acquired Fund Covered Person is, or would have been, entitled to indemnification
by FTI Trust prior to the Closing Date pursuant to FTI Trust's Declaration of
Trust and By-Laws.
(c) FTI Trust, on behalf of FTI Fund, until the time of FTI Fund's
liquidation, shall indemnify, defend, and hold harmless Franklin Fund, its Board
of Directors, officers, employees and agents ("Acquiring Fund Indemnified
Parties") against all losses, claims, demands, liabilities, and expenses,
including reasonable legal and other expenses incurred in defending third party
claims, actions, suits or proceedings, whether or not resulting in any liability
to such Acquiring Fund Indemnified Parties, including amounts paid by any one
or more of the Acquiring Fund Indemnified Parties in a compromise or settlement
of any such claim, suit, action, or proceeding, made with the consent of FTI
Trust, arising from any untrue statement or alleged untrue statement of a
material fact contained in the Form N-14 Registration Statement, as filed and
in effect with the SEC or any application; or which arises out of or is based
upon any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading;
provided, however, that FTI Trust and FTI Fund shall only be liable in such case
to the extent that any such loss, claim, demand, liability or expense arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission about FTI Trust and/or FTI Fund or the transactions
contemplated by this Plan made in the Form N-14 Registration Statement or any
Application.
(d) A party seeking indemnification hereunder is hereinafter called the
"Indemnified Party" and the party from whom the indemnified party is seeking
indemnification hereunder is hereinafter called the "Indemnifying Party." Each
Indemnified Party shall notify the Indemnifying Party in writing within ten (10)
days of the receipt by one or more of the Indemnified Parties of any notice of
legal process of any suit brought against or claim made against such Indemnified
Party as to any matters covered by this Section 11, but the failure to notify
the Indemnifying Party shall not relieve the Indemnifying Party from any
liability which it may have to any Indemnified Party otherwise than under this
Section 11. The Indemnifying Party shall be entitled to participate at its own
expense in the defense of any claim, action, suit, or proceeding covered by this
Section 11, or, if it so elects, to assume at its own expense, the defense
thereof with counsel satisfactory to the Indemnified Parties; provided, however,
if the defendants in any such action include both the Indemnifying Party and any
Indemnified Party and the Indemnified Party shall have reasonably concluded that
there may be legal defenses available to it which are different from or
additional to those available to the Indemnifying Party, the Indemnified Party
shall have the right to select separate counsel to assume such legal defense and
to otherwise participate in the defense of such action on behalf of such
Indemnified Party.
Upon receipt of notice from the Indemnifying Party to the Indemnified
Parties of the election by the Indemnifying Party to assume the defense of such
action, the Indemnifying Party shall not be liable to such Indemnified Parties
under this Section 11 for any legal or other expenses subsequently incurred by
such Indemnified Parties in connection with the defense thereof unless (i) the
Indemnified Parties shall have employed such counsel in connection with the
assumption of legal defenses in accordance with the provision of the immediately
preceding sentence (it being understood, however, that the Indemnifying Parties
shall not be liable for the expenses of more than one separate counsel); (ii)
the Indemnifying Parties do not employ counsel reasonably satisfactory to the
Indemnified Parties to represent the Indemnified Parties within a reasonable
amount of time after notice of commencement of the action; or (iii) the
Indemnifying Parties have authorized the employment of counsel for the
Indemnified Parties at its expense.
(e) This Section 11 shall survive the termination of this Plan.
12. LIABILITY OF FRANKLIN FUND AND FTI TRUST.
----------------------------------------
(a) Each party acknowledges and agrees that all obligations of Franklin Fund
under this Plan are binding only with respect to Franklin Fund itself; that any
liability of Franklin Fund, or in connection with the transactions contemplated
herein with respect to Franklin Fund, shall be discharged only out of the assets
of Franklin Fund; and that neither FTI Trust nor FTI Fund shall seek
satisfaction of any such obligation or liability from the shareholders of
Franklin Fund, the directors, officers, employees or agents of Franklin Fund, or
any of them.
(b) Each party acknowledges and agrees that all obligations of FTI Trust under
this Plan are binding only with respect to FTI Fund; that any liability of FTI
Trust under this Plan with respect to FTI Fund, or in connection with the
transactions contemplated herein with respect to FTI Fund, shall be discharged
only out of the assets of FTI Fund; that no other series of FTI Trust shall be
liable with respect to this Plan or in connection with the transactions
contemplated herein; and that Franklin Fund shall not seek satisfaction of any
such obligation or liability from the shareholders of FTI Trust, the trustees,
officers, employees or agents of FTI Trust, or any of them.
13. ENTIRE AGREEMENT AND AMENDMENTS.
-------------------------------
This Plan embodies the entire agreement between the parties and there are
no agreements, understandings, restrictions, or warranties relating to the
transactions contemplated by this Plan other than those set forth herein or
herein provided for. This Plan may be amended only by mutual consent of the
parties in writing. Neither this Plan nor any interest herein may be assigned
without the prior written consent of the other party.
14. COUNTERPARTS.
------------
This 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.
15. NOTICES.
-------
Any notice, report, or demand required or permitted by any provision of
this 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
Tax-Free Income Fund , at Xxx Xxxxxxxx Xxxxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000,
Attention: Secretary, or FTI Funds, at Xxx Xxxxxxxx Xxxxxxx, Xxx Xxxxx,
Xxxxxxxxxx 00000, Attention: Secretary, as the case may be.
16. GOVERNING LAW.
-------------
This Plan shall be governed by and carried out in accordance with the laws
of The Commonwealth of Massachusetts.
IN WITNESS WHEREOF, FTI Trust, on behalf of FTI Fund, and Franklin Fund, have
each caused this Plan to be executed on its behalf by its duly authorized
officers, all as of the date and year first-above written.
FRANKLIN FEDERAL TAX-FREE INCOME FUND
Attest:
/s/ Xxxxxx X. Xxxxxxx By: /s/ Xxxxx X. Xxxx
-------------------------- -------------------
Xxxxxx X. Xxxxxxx Xxxxx X. Xxxx
Secretary Vice President
FTI FUNDS,
ON BEHALF OF
FTI MUNICIPAL BOND FUND
Attest:
/s/ Xxxxxx X. Xxxxxxx By: /s/ Xxxxx X. Xxxx
-------------------------- ------------------
Xxxxxx X. Xxxxxxx Xxxxx X. Xxxx
Secretary Vice President
